My Lords, with the leave of the House I shall speak to all three Motions standing in my name on the Order Paper.
The UK Government take seriously our responsibility to uphold our commitment to govern in the interests of all parts of the community in Northern Ireland. To that end, there are three Bill before the House that represent a series of necessary steps now required to protect and preserve public services, ensure good governance and increase public confidence in Northern Ireland’s political institutions. We have deferred action on these measures for as long as possible in the hope that a restored Executive could take this legislation forward. That is now not possible. So, with the greatest reluctance, it is important that we proceed with the Bills.
With the leave of the House, I will discuss each Bill in turn, starting with the Northern Ireland Budget (Anticipation and Adjustments) Bill. Members of the House will recall that, last November, Parliament approved the Northern Ireland Budget Act 2017. This was a step we took reluctantly. This Act gave the Northern Ireland Civil Service the clear legal basis required to manage resources and perform the important work it continues to do in the absence of an Executive. The Northern Ireland Civil Service has continued since then to assess where pressures lie across the system, taking decisions to reallocate resources as required. It has also requested since then to draw down £20 million in 2017-18—of the £50 million of support arising from the financial annexe to the confidence and supply agreement—which the Government committed to releasing for 2017-18 to help address immediate health and education pressures. The remainder of that £50 million will form part of the resource totals available in 2018-19.
Noble Lords will want to be reassured that the additional funding for 2017-18 was confirmed in the Supply and Appropriation (Anticipation and Adjustments) Act 2018, which received Royal Assent on 15 March. These changes to the financial position approved in the Northern Ireland Budget Act 2017 in November must now be placed on a legal footing for the Northern Ireland Administration as we approach the end of the financial year, and that is what this Bill does.
In addition, the Bill will provide for a vote on account in the early months of next year to give legal authority for managing day-to-day spending in the run-up to the estimates process. This will avoid the unorthodox need for the Northern Ireland Civil Service to rely on emergency powers set out in Section 59 of the Northern Ireland Act and Section 7 of the Government Resources and Accounts Act (Northern Ireland) 2001 to issue cash and resources. For 2018-19, we do not consider it would be appropriate if we did not provide the usual vote on account facility to the Northern Ireland Civil Service—a facility provided to the UK Government departments through our own spring supplementary estimates process.
To be very clear, this is not a forward-looking budget for the year ahead. The Bill does not seek to set out in legislation the departmental allocations of the Secretary of State’s Budget Statement on 8 March, nor does it seek to vote any new moneys for Northern Ireland. The totals to which it is related are either locally raised or have been subject to previous votes in Parliament, most recently in the Supply and Appropriation (Anticipation and Adjustments) Bill.
Instead, the Bill looks back to confirm spending totals for 2017-18 to ensure that the Northern Ireland Civil Service has a secure legal basis for its spending in the past year. As such, it formally allocates the £20 million of confidence and supply funding already committed for 2017-18; it is not concerned with any of the £410 million set out in the 2018-19 Budget Statement, which will be a matter for the UK estimates in the summer and for a Northern Ireland budget Bill thereafter.
I will turn briefly to the content of the Bill, as it largely rehearses what I set out to your Lordships in November when bringing forward the Northern Ireland Budget Act 2017. In short, it authorises Northern Ireland departments and certain other bodies to incur expenditure and use resources for the financial year ending 31 March 2018.
Clause 1 of the Northern Ireland Budget (Anticipation and Adjustments) Bill authorises the issue of £16.1 billion out of the Consolidated Fund of Northern Ireland. The allocation levels for each Northern Ireland department and the other bodies in receipt of these funds are set out in Schedule 1, which also states the purposes for which these funds are to be used.
Clause 2 authorises the use of resources amounting to £18 billion in the year ending 31 March 2018 by the Northern Ireland departments and other bodies listed in Clause 2(2).
Clause 3 sets revised limits on the accruing resources, including both operating and non-operating accruing resources in the current financial year. These are all largely as they appeared in the Northern Ireland Budget Act 2017, and the revised totals for departments appear in Schedules 1 and 2 to the Bill.
Clause 4 does not have a parallel in that Act. It sets out the power for the Northern Ireland Civil Service to issue out of the Northern Ireland Consolidated Fund some £7.35 billion in cash for the forthcoming financial year. This is the vote on account provision that I have already outlined. It is linked to Clause 6, which does the same in terms of resources. The value is set, as is standard, at around 45% of the sums available in both regards in the previous financial year. Schedules 3 and 4 operate on the same basis, with each departmental allocation simply set at 45% of the previous year.
Clause 5 permits some temporary borrowing powers for cash management purposes. As I have already noted, there is no new money contained within the Bill; there is simply the explicit authority to spend in full the moneys that have already been allocated and locally raised.
This Bill would ordinarily have been taken through the Assembly. As such, at Clause 7, there are a series of adaptations that ensure that, once approved by Parliament, the Bill will be treated as though it were an Assembly Budget Act, enabling Northern Ireland public finances to continue to function notwithstanding the absence of an Executive.
Noble Lords may already be aware from the Library that, alongside the Bill, a set of supplementary estimates for the departments and bodies covered by the budget Bill have also been laid as a Command Paper. These estimates, which have been prepared by the Northern
Ireland Department of Finance, set out the breakdown of their resource allocation in greater detail. This is a different process from that which we might ordinarily see for estimates at Westminster, where the estimates document precedes the formal budget legislation and is separately approved. That would also be the case at the Assembly, but as was the case in November, the Bill provides that the laying of the Command Paper takes the place of an estimates document laid and approved before the Assembly, again to enable public finances to flow smoothly.
This Bill is very much a technical step as we approach the end of the financial year to provide a secure legal footing for the Northern Ireland Civil Service. It looks backwards rather than forward, although it avoids the use of emergency powers for the forthcoming financial year. It is on that platform that the Secretary of State’s 2018-19 Budget Statement of 8 March builds. It is worth making it clear that the 2018-19 Budget Statement will need to be the subject of formal legislation later in year. I am sure that noble Lords will share the hope that this will be taken forward by a restored Executive. However, I should highlight to your Lordships that this is something that the UK Government would be prepared to progress if required as we uphold our responsibilities to the people of Northern Ireland.
Before we reach such a point and in addition to the technical steps of this Bill there are some further pressing steps proposed in the Northern Ireland (Regional Rates and Energy) Bill that need to be taken now to build on the Government’s efforts to safeguard public services and finances in Northern Ireland. I ask the House also to give a Second Reading to the Northern Ireland (Regional Rates and Energy) Bill.
Clause 1 of the Northern Ireland (Regional Rates and Energy) Bill addresses the collection of the regional rate, which represents more than 5% of the total revenue available to the Northern Ireland Executive. With a devolved Government in place, this would be set via an affirmative rates order in the Assembly, enabling bills to be issued in 10 instalments, providing certainty to ratepayers and allowing various payment reliefs to be applied. It would not be acceptable to allow uncertainty to linger in the absence of an Executive to set its own rates and begin collection from ratepayers. So while we are clear that this is a devolved matter, we are also clear that only the UK Government and Parliament can take this action to secure the interests of individuals and businesses in Northern Ireland.
This Bill therefore sets out rates, in pence per pound terms, for both domestic and non-domestic properties. For non-domestic properties, this reflects a 1.5% inflationary increase. For domestic properties, the rate will be raised by inflation plus 3%, as set out in the Secretary of State’s 2018-19 Budget Statement on 8 March. In deciding on these levels we have reflected on conversations with the parties and stakeholders more broadly; considered the budget consultation launched by the Northern Ireland Civil Service in December, which discusses rises in regional rates of as much as 10% above inflation; considered the pressures on key services and the need to balance any increase to rates at the right level.
We have concluded that it is fair that we ask households to pay a little more—less than £1 per week for the average household—to help address pressures in health, education and elsewhere. In order to keep a focus on the growth that Northern Ireland needs to see, holding business rates in line with inflation is the right approach. This rates income, along with the flexibilities set out in the Secretary of State’s Statement, will represent an important contribution to delivering a sustainable budget picture for 2018-19, upholding the UK Government’s responsibilities to uphold good governance in Northern Ireland. Yet the Bill also makes clear that nothing we do cuts across the continuing right of a restored Executive to set a rate by order in the usual way.
The second element of the Bill concerns the administration of Northern Ireland’s renewable heat incentive scheme. The scheme was established in 2012 to support efforts to increase the uptake in the use of renewable energy. However, errors in the administration of the scheme led to substantial excess payments. Over the 20-year lifespan of the scheme, the projected overspends were well over £500 million, with £27 million of overspend in the 2016-17 year alone, putting the sustainable finances of the Northern Ireland Executive at significant risk. The administration of the scheme and the circumstances which led to the errors in its administration are subject to an ongoing public inquiry.
One of the last acts of the previous Executive was to make regulations in January 2017 that put robust cost controls in place. These made sure that the costs were sustainable, but they were put in place for one year only, to allow for a longer-term consideration of the scheme as a whole. They are now due to expire. If they are allowed to expire, there will be no legal basis not only for maintaining the current cost cap but also for paying all those who receive payments under the scheme and whose installations were accredited before November 2015. Neither of these would be acceptable outcomes. Nor would it be suitable for the Northern Ireland Civil Service to administer payments on an extra-statutory basis, which would create unnecessary legal uncertainty for all concerned. That is why Clause 2 will ensure that the present cost controls and the legal basis for payments can continue for the 2018-19 financial year. These are sunsetted for a year, as it is right that the longer-term approach is one for a restored Executive to decide. In the meantime, I am assured that the Northern Ireland Civil Service will undertake the detailed analysis to enable a new Executive to consider the right course for the future.
I hope noble Lords will agree that this is a modest Bill, doing two very discrete but necessary things in the interests of safeguarding public finances: setting a regional rate and extending the cost controls of the RHI scheme.
The third and final Bill before the House today is the Northern Ireland Assembly Members (Pay) Bill. Where the other Bills focus on increasing clarity and confidence in Northern Ireland’s finances, this Bill looks to increase public confidence in Northern Ireland’s political institutions. The continued payment of full salaries for Members of the Northern Ireland Assembly, when the Assembly has not met for over a year and there has been no Executive for 14 months, is a matter of considerable public concern in Northern Ireland
and there is a broad desire for action. The Bill will grant the Secretary of State the power to vary pay and allowances for Members of the Northern Ireland Assembly, the MLAs.
MLAs’ salaries and allowances are rightly a devolved matter. In 2011, the Assembly appointed an independent body, the Independent Financial Review Panel, to set MLA pay and allowances by means of determinations. Its last determination was made in March 2016, before the election in May that year. As no members have been appointed since the first panel’s term of office ended in 2016, however, there is presently nobody with the power to change MLA pay to reflect the current extraordinary circumstances. The Bill would allow the Secretary of State to do that; that is, to vary the pay and allowances of MLAs by means of a determination. One important difference from the panel’s powers is that, while the panel also makes determinations on pensions, the Bill includes an explicit protection for MLAs’ pensions so that they are not affected by any changes to pay under this Bill.
Under the panel’s most recent determination, an automatic £500 per year inflationary increase in MLAs’ salaries is due on 1 April. It is simply not appropriate for this increase to apply in the present circumstances, and my right honourable friend the Secretary of State intends—if granted the power by this Bill—to stop that increase from being applied. Support for this action comes in the advice on MLA pay and allowances that Trevor Reaney, a former Clerk to the Northern Ireland Assembly, gave to the then Secretary of State in December 2017. It also comes from the Assembly Commission, whose chair, the Speaker of the Assembly, wrote to the Secretary of State earlier this month. There was also widespread support for it in the other place when this Bill was debated there last week. I hope that noble Lords across the House will agree that this is a suitable step to take in the current circumstances.
More broadly, Mr Reaney’s advice provided an independent assessment of what action should be taken on MLA pay and allowances in the current circumstances, taking account of all of the important work that many Members continue to do in the absence of an Assembly. These recommendations included a 27.5% reduction in MLAs’ salaries. The Secretary of State has been clear that she is minded to follow Mr Reaney’s recommendations, with the exception of the proposed cut to the staff costs allowance. As the Secretary of State has said,
“The position of”,
MLAs’ staff,
“should not be prejudiced by what is happening with their political masters”.—[Official Report, Commons, 21/3/18; col. 339.]
Before making her final decision, however, she has asked for final representations from the political parties. This is a sensible approach that I hope noble Lords will support.
This Bill would not itself alter MLAs’ pay or allowances. It simply creates the power to make a determination during the current period without an Executive. Once an Executive is formed, the power to make a determination would return to being entirely a devolved matter. A future panel would, of course, be free to make a new determination as it sees fit, including to cover periods without an Executive. This determination
would supersede any made by the Secretary of State under this Bill. To ensure that we do not again find ourselves in the situation where MLAs remain on full pay when there is no Executive and no panel determination covering the situation, the Bill allows a determination made by the Secretary of State in the current period to apply again should that situation arise. To be clear, it is the determination that would apply again: the power to make a new determination would in that situation remain devolved.
Overall, the focus of this Bill is narrow, and I consider that taking the power to set MLA pay is a necessary step to uphold public confidence in Northern Ireland in the absence of an Executive and sitting Assembly.
I recognise the extent of the ask of the House in considering all three Bills in one day. As I conclude, I would like to reaffirm that the Government have considered very carefully the necessity of and timing required for this legislation. We are doing this reluctantly in order to put Northern Ireland finances on a legal footing for the financial year 2017-18; to provide more certainty and a sustainable footing for the financial year 2018-19, in the interests of protecting public services; and to ensure good governance and uphold public confidence in Northern Ireland. I believe that these Bills reflect our approach of intervening only as necessary, and only at a point when it is critical that the measures are taken forward. I hope noble Lords will agree that it is important we now make progress to see the measures of each Bill passed into law. I beg to move.
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