Draft Budget (Northern Ireland) Order 2004

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Mr. Geoffrey Clifton-Brown (Cotswold) (Con): The Under-Secretary has already alluded to the fact that we shall be debating the rating order on Monday, which, among other things, levies water charges on businesses and potentially on domestic consumers as well. Would the Under-Secretary say something about the antiquated water and sewerage systems that exist in Northern Ireland? If both domestic ratepayers and industrial ratepayers are going to pay more for water, it is unreasonable for them to do so when they have a system that is more archaic than in many parts of the mainland.

Mr. Pearson: If I may, I shall correct the hon. Gentleman. The order we shall be debating on Monday relates to the rating of vacant property and industrial derating. It does not relate to the introduction of water charges. As he will be aware, businesses already pay water rates in Northern Ireland. He is right to point out the massive infrastructural problems that exist in the water industry, which is why my right hon. Friend, the Minister of State is driving forward a major programme for reform and investment in water services in Northern Ireland. That is badly needed and we are getting on with the job.

Mr. Roy Beggs (East Antrim) (UUP): Does the Under-Secretary accept that much of the annoyance in Northern Ireland about the introduction of water charges separate from rating is a result of the underinvestment that there has been for nearly three decades in Northern Ireland? There is a strong feeling that if money that had to be used to replace bombed-out buildings and damage caused by terrorism had been spent on infrastructure, Northern Ireland ratepayers would not have had to face huge increases to comply with modernisation.

Mr. Pearson: As the hon. Gentleman will appreciate, the Government will not take responsibility for the actions of previous Governments of different political persuasions. In our plans we are currently proposing investment in the water industry of something in excess of £1 billion. That is a major investment the Government are making in the industry, which is in the best interests of the citizens of Northern Ireland.

Lady Hermon (North Down) (UUP): I am most grateful to the Under-Secretary for taking a second intervention so quickly. Will he give an assurance that the investment of his Government in Northern Ireland's water and sewage system is sufficient to stave off infraction proceedings from Europe? Has he considered siting the sewage treatment works in

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Donaghadee and revisited that decision? It needs to be revisited.

Mr. Pearson: I must disappoint the hon. Lady in replying to her latter point about the siting of a facility in her constituency. My right hon. Friend the Secretary of State for Northern Ireland will have heard her point and will undoubtedly want to reflect on it.

The hon. Lady is absolutely right, though, about EU infraction proceedings. We should not be in a situation where, because we do not have water of sufficiently high quality, Northern Ireland faces such proceedings. We need to reverse that situation, which is why we have a major programme of investment and are taking it forward with extreme urgency.

Mr. Beggs: I take it that the Under-Secretary acknowledges that there is at least £1 billion under-investment and that that had occurred over successive Governments. Will £1 billion be sufficient to modernise our antiquated water and sewage disposal services?

Mr. Pearson: I believe that the water industry will require in excess of that amount if it is to get to the standard that we want. We are where we are; the hon. Gentleman will be aware of how we got there. The focus must be on moving forward and making the necessary investment in the industry to the benefit of businesses and citizens alike in Northern Ireland.

It is important to say that our plans for investing in water and other services in 2004–05 and beyond are possible only because of the action that we are taking on rating reform, on securing access to borrowing under the reinvestment and reform initiative and on seeking opportunities for public-private partnership deals that provide real value for money. I give a commitment to make the water industry self-financing, which is a European requirement. The result will be a dramatic increase in the quality of public services in Northern Ireland and visible and direct benefits to the local community.

Rev. Martin Smyth (Belfast, South) (UUP): I appreciate the Under-Secretary's giving way. I welcome the developments in PPP and the private finance initiative and the commitment on water services. I recognise that it will cost billions to regenerate the old Victorian sewerage system in Belfast alone.

How far have we learned from the experience of PFI and PPP in the light of, for example, the Royal Victoria hospital debacle regarding car parking? The hospital is paying far more to the firm that did the project than it would have done had it had the money to erect the car park itself. Have we learned anything from our experience that will make savings in the public purse in the future?

Mr. Pearson: The hon. Gentleman is clearly referring to a recent Northern Ireland Audit Office report on some early PFI deals. It is fair to say that there has been a learning process in that area. That is one reason why we set up the Strategic Investment Board: to bring in people with the highest calibre, advice and expertise on how to procure public-private

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partnership projects. They are already making a tremendous difference to future procurement of PPP projects across the region.

The funds provided for in the vote of account will allow Departments to begin to plan and implement the substantial programme of reinvestment and reform that I have been referring to.

Finally, on a point of detail, from 1 April 2004, the Northern Ireland branch of the Food Standards Agency will be treated as a minor Department. That requires a restructuring of its accounting and accountability arrangements, and it will receive funding direct from the Northern Ireland Consolidated Fund. Until 2003–04 the FSA was contained within the estimate for the Department of Health, Social Services and Public Safety. As a temporary measure, pending the next financial provisions order, the Budget (Northern Ireland) Order 2004 provides the initial statutory funding authority for the agency for 2004–05.

There will be an opportunity for a further and fuller debate on the detail of the main estimates early in the summer, I hope by the Assembly. In the meantime I commend this budget order to the Committee and look forward to what I am sure will be an interesting debate.

3.31 pm

Mr. Lidington: I thank the Minister for his statement. I share his opinion that it would be in everyone's interests if the devolved institutions could be restored at the earliest opportunity, not least because the way in which we scrutinise the finances of the Northern Ireland Departments during suspension is profoundly unsatisfactory, especially for members of this House and members of the legislative Assembly who are elected to represent the interests of their constituents in Northern Ireland. We are presented in a time-limited debate with a detailed set of documents covering expenditure by and public service agreements in respect of a number of different Northern Ireland Departments and agencies, each of which would merit a session of scrutiny and detailed examination in its own right. I hope, therefore, that the institutional arrangements will be in place before too long, so that detailed scrutiny can be resumed.

I want to say a brief word about the supplementary estimates. I intervened on the Minister earlier to ask about the superannuation schemes, which account for large sums of money—a reduction of £386 million of resource in the teachers' scheme and a reduction of £129 million of resource in the civil service scheme. I understood from the Minister's response that it was the result of a re-evaluation by actuaries of the Government's liabilities, so it was a one-off reduction that was unlikely to be repeated in future financial years. I am still puzzled about the exact methodology employed and why the national health service scheme in Northern Ireland was not affected in the same way. However, as I do not want to detain the Committee, it might be for the convenience of us all if the Minister were to write to me and other members of the Committee with that more detailed information.

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I welcome the Minister's words about securing greater efficiency and directing expenditure away from the back office towards front-line services, but I want to express a hint of moderate scepticism that the Government's fine words have not always been translated into effective action. For example, I welcome the statement in the priorities and budget document published by the Minister earlier this year that the Government planned to reduce the costs of departmental administration in Northern Ireland by 2 per cent. However, when one looked at the wording, one found that it was a 2 per cent. reduction compared with the plans envisaged in the draft budget document, not necessarily a 2 per cent. reduction on existing administrative costs. Therefore, it will be interesting to explore whether they are real reductions. If we look at the current financial year, we find that there is cause for concern.

If we compare the figures for administrative departmental costs listed in the main estimate with those listed in the supplementary estimate, we find some interesting variations. Some Departments, such as the Department for Agriculture and Rural Development and the Department for Regional Development, appear to have reduced their administrative costs during the current financial year. However, the converse has applied in other Departments, including the Department of Education, the Department for Employment and Learning, the Department of Health and the Department for Social Development.

I raise my eyebrows at the figures for two Departments in particular. The administrative costs for the Department of the Environment have apparently risen by £14 million during this financial year, from £67 million to £81 million. The Department of Finance and Personnel has seen an increase of no less than £29 million, from £147 million to £176 million. When I explored the estimates in a little more detail in search of reasons for the DFP's big increase in administrative costs, I found that the three main items listed were central management of the civil service, the Northern Ireland Statistics and Research Agency, and office estates and buildings.

I do not want to argue that the figures for administrative costs seem, in the context of the Government's entire programme of public expenditure in Northern Ireland, to amount to a very large share of the overall pattern of expenditure, but we should press Ministers to justify why administrative costs for some Departments have gone up—in some cases, significantly—against a background of clear pledges from Northern Ireland Office Ministers that they were committed to seeing funds directed to front-line services rather than administrative support.

I have two suggestions and I should be delighted if the Government took them up. First, Ministers should make a more energetic commitment to bring down the costs of Government and governance in Northern Ireland. The review of public administration has been going on for about two years, and it is time that it came to fruition and we began to see results. A few days ago, the newspapers gave us tantalising

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glimpses—if they were accurate—of policy directions that those of us in the Conservative party would warmly welcome and encourage the Government to adopt.

We also need a review of the costs and structure of Government, as the hon. Member for North Antrim (Rev. Ian Paisley) and his party have been advocating. In Northern Ireland, there is a large number of Departments, agencies and local authorities. I have no fixed view yet as to what the optimum pattern might be, but Northern Ireland is over-governed for the size of its population, and a Government committed to reducing the costs of administration and protecting front-line services should be focusing on that.

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Prepared 26 February 2004