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Draft Budget (No. 2) (Northern Ireland) Order 2004

Northern Ireland Grand Committee

Thursday 8 July 2004


[Mr. James Cran in the Chair]

Draft Budget (No. 2) (Northern Ireland) Order 2004

2.30 pm

The Chairman: I remind hon. Members that, as they probably already know, the debate will last two and a half hours. I always say this, but I will say it again: brief contributions will allow me to call many more Members.

The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Ian Pearson): I beg to move,

    That the Committee has considered the draft Budget (No. 2) (Northern Ireland) Order 2004.

It is a pleasure to serve under your chairmanship, Mr. Cran.

While the Northern Ireland Assembly remains suspended, the approval of Parliament is required for the use of resources by, and the associated cash needs of, the Northern Ireland Departments. I continue to hope that it will not be long before devolved government is restored and locally elected representatives to the Northern Ireland Assembly are again considering these matters. However, as I have said before, as long as direct rule continues, we are determined to govern in an open and fair way, in order to improve the delivery of public services for the people of Northern Ireland.

The main purpose of the draft order is to authorise the balance of the 2004–05 main estimates, which are in addition to the vote on account that Parliament approved in March. The vote on account amounted to approximately 45 per cent. of the total voting provision for the previous financial year. It enabled funds to continue to flow to public services during the early months of this financial year until the main estimates, which are before us today, could be presented and considered.

The balance of the requirements for 2004–05 amounts to some £6.1 billion in resources and £5.5 billion cash. When that is added to the vote on account, the total amount authorised for 2004–05 increases to some £11.3 billion in resources and £9.9 billion cash. The 2004–05 main estimates volume gives further detail of the sums sought. Copies of it have been circulated to members of the Committee and have been placed in the Libraries.

The draft budget order also seeks Parliament's authority for the use of resources arising from excess votes in 2001–02 and 2002–03. For the 2001–02 financial year, the order seeks approval for a token excess of £1,000 in the Office of the First and Deputy First Minister. For 2002–03, approval is sought for some £4.5 million in respect of excess votes in two Northern Ireland Departments: an excess of

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£4.2 million in the Department of Agriculture and Rural Development, and an excess of £300,000 in the Department of Enterprise, Trade and Investment. Details are to be found in the statement of excesses, with which Committee members have already been provided.

The excesses in both years have already been subject to scrutiny and report by the Public Accounts Committee. The report, published on 25 May, recommended that the excesses be authorised by Parliament by means of excess votes.

Before I outline some of the detail in the main estimates, I would like briefly to highlight the Government's key objectives for the use of the expenditure. In 2004–05, we will continue to focus on improving the delivery of public services by ensuring that progress on reform and modernisation is accelerated so as to provide better public services. We will also continue to take forward the significant programme of infrastructure developments, initiated under the reinvestment and reform initiative.

Northern Ireland is currently undertaking a challenging reform agenda that reflects local circumstances. Reforms are already under way on a number of key issues, including water and sewerage services, the ratings system, post-primary education, welfare services, acute hospitals and the planning service.

The decision to move the Water Service to fully self-financing status will provide a secure funding basis for a sustainable change in the level of capital investment in infrastructure. However, water reform also means focusing on improving efficiency and reducing operating costs, and not least bearing down on the level of charges. A radical efficiency programme has been developed to deliver savings in projected operating costs of about 25 per cent. by the end of the decade.

The reform of the rating system in Northern Ireland is one of the Government's top priorities, and much progress has already been made. Legislation is in place for two key changes to the non-domestic sector, and we will soon be publishing detailed policy proposals for the reform of the domestic sector. Those proposals will expand on the decision to move from rental to capital values, which I announced in December 2002, and bring us closer to establishing a modern and fairer rating system in Northern Ireland, which is in everyone's interests.

Mr. Andrew Hunter (Basingstoke) (Ind Con): Have the Government, since the Committee last debated rates, recalculated or re-estimated the cost to the manufacturing industry of the proposed changes?

Mr. Pearson: We are talking about two reforms: rating vacant property, and the gradual phasing-in of rating for manufacturing businesses. Both were the subject of extensive debate and detailed analysis in formulating the policy. We will continue to monitor the situation. It is a little premature to talk about the costs to business, given that the phased introduction of industrial rating will not take place until April 2005, but, as I have said to the hon. Gentleman previously,

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we will continue to keep the situation under close review.

Mr. David Trimble (Upper Bann) (UUP): I welcome the fact that the Minister says that he will keep the matter under close review. He refers to the analysis, but he must recall that the manufacturing industry in Northern Ireland is firmly of the view that the analysis that the Department relies on was not reliable. It has been urging the Department to look at the analysis again. Rather than keep the matter under review, there is a case for examining some of the premises on which that analysis was based.

Mr. Pearson: I thank the right hon. Gentleman for that intervention. I understand that the manufacturing focus group claimed that our analysis was based on a single source. That claim is wrong. We looked at the situation extremely broadly, and other studies were undertaken at the time. The rationale for the policy on industrial rating remains clear. We are talking about a blanket subsidy that applies to one sector of the business community and is not directed at need. As a respected local commentator, John Simpson, said in the Belfast Telegraph only last week, it is

    ''an expensive way of offering a poorly targeted subsidy to manufacturers''.

There are better ways to support our manufacturing industry in Northern Ireland. I have argued that previously in the Committee when we have discussed the legislation. As I have said, we will keep the situation under review.

Lady Hermon (North Down) (UUP): I am delighted to serve under your chairmanship this afternoon, Mr. Cran, and I am grateful to the Minister for taking an intervention.

One of the largest employers in North Down is Denman International, which is world renowned for the manufacturer of hairdressing products. Can the Minister broaden his review by accepting an invitation to visit its premises in North Down? The company fears that people will be made unemployed as a result of the proposals on de-rating that he endorses and is trying to persuade the Committee are a good thing for Northern Ireland.

Mr. Pearson: As the hon. Lady knows, both Assembly Committees for the Department of Finance and Personnel and the Department of Enterprise, Trade and Investment considered the policy of industrial de-rating, and recommended that it should be phased out, and more quickly than the Government propose. If the company that the hon. Lady mentioned wants me to visit, I will be delighted to, subject to diary pressures.

The challenge for all of us in the public service is to reform and to modernise services to provide greater flexibility, responsiveness, equality and choice. We need to secure real improvements in the quality and effectiveness of public service delivery in Northern Ireland—not simply incremental change, but real change in attitudes and culture and in our focus on the delivery of services.

Efficient administration is essential to delivering public services that meet the needs and expectations of

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citizens. The efficiency review in Northern Ireland will be a key element in the forthcoming priorities and budget process, and is integral to our reform agenda. It reflects the Government's commitment to improving public services. Achieving greater efficiency will enable the Government to continue to improve standards by releasing additional resources for reallocation to front-line public services.

Rev. Martin Smyth (Belfast, South) (UUP): The Minister is speaking about flexibility and redistribution in public services. Will he consider the question of the Department of Health, Social Services and Public Safety and the Department of Education coming together in a community where there is great concern about under-age sex, children under 12 bearing children and the decision not to continue to finance Love for Life, which has been doing such a wonderful job in many of our schools? The schools cannot cope with the budget, and the Department of Health, Social Services and Public Safety says that that project is not its business. Frankly, that Department will have to carry larger expenditure later if we do not curb the problem in the earlier stages.

Mr. Pearson: I note what the hon. Gentleman has said. I do not have the details to hand. I will consider that situation and write to him.

The proposals for the estimates demonstrate the continuing emphasis on improving infrastructure. The reinvestment and reform initiative is providing the central drive to ensure that modern public services are provided in the most cost-effective way for Northern Ireland. The strategic investment programme that underpins the initiative now exceeds £2.7 billion, and reflects the priority placed by the Government on investment in the public service infrastructure.

I turn to the main estimates and remind the Committee that the draft budget order does not cover Northern Ireland Office expenditure on law and order and other services. The proposed allocations within the main estimates reflect the positions set out in the Northern Ireland budget that I announced on 13 January. That provided for total spending on public services in Northern Ireland to rise by nearly 14 per cent. across the budget period. Key elements of that announcement included an almost 8 per cent. rise in education provision for 2004–05, including an increase in capital investment of more than 40 per cent. Spending on health will rise by 7.2 per cent. in 2004–05 and 8.4 per cent. in 2005–06.

Total provision for the Department for Regional Development will increase by more than 23 per cent. in 2004–05, reflecting our commitment to making improvements in the key infrastructure bases of roads and water. The main estimates before us add detail to that early announcement on the 2004–05 financial year. However, I do not propose to go through them in great detail because the estimates booklet, which Committee members have copies of, contains significant information about every Department.

However, for the record, I will attempt to draw out some of the key issues. The Department of Education requires resources of £1.7 billion in 2004–05. That will

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allow for substantially increased investment in the education estate, ongoing support for schools and other services and the costs arising from teachers' pay progression. The Department for Employment and Learning requires resources of £705 million, and that includes additional resource provision of £56 million for further and higher education, vocational training schemes, student support and essential skills.


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