Oireachtas Joint and Select Committees
Wednesday, 12 February 2014
Committee on Finance, Public Expenditure and Reform: Select Sub-Committee on Public Expenditure and Reform
Finance Act 2004 (Section 91) (Deferred Surrender to the Central Fund) Order 2014: Motion
Apologies have been received from Deputies Heather Humphreys and Arthur Spring.
The purpose of the meeting is to consider the motion referred by the Dáil regarding the draft Capital Carryover Order for 2014 re Finance Act 2004 (Section 91) (Deferred Surrender to the Central Fund) Order 2014, copies of which were laid in draft form before Dáil Éireann on 27 January 2014. The order of referral requires the Select Sub-Committee on Public Expenditure and Reform when it has completed its consideration to send a message to that effect to the Dáil not later than 20 February.
I welcome the Minister of State at the Department of Public Expenditure and Reform, Deputy Brian Hayes and his officials and thank them for assisting in our consideration of the motion. A briefing note has been provided by the Department. If we adhere to a reasonably strict schedule, following the Minister of State's address to the select sub-committee, each of the Opposition spokespersons can respond and an open discussion will follow. I call on the Minister of State to make his opening statement.
I thank the Chairman and members for the opportunity.
The five-year Exchequer capital framework published in November 2011 sets out a programme of Exchequer capital investment of €17 billion between its initiation and 2016. This significant level of investment will address critical infrastructure deficits, aid economic growth and job creation and provide much-needed social infrastructure. The Exchequer capital plan has, by necessity, been reduced in recent years to contribute to fiscal consolidation. However, it is important to note that since the publication of the 2012-16 capital framework no further cuts have been made to the capital programme. The overall capital budget for 2014 is €3.3 billion and is focused on the sectors prioritised in the 2011 capital review, namely, health, education and jobs.
Through the use of proceeds from the sale of State assets and the recovering public private partnership market, the Government is progressing additional projects which were not included in the original five-year framework. The Exchequer capital programme will be augmented by a €2.25 billion infrastructure stimulus package announced by the Minister for Public Expenditure and Reform, Deputy Brendan Howlin in July 2012. While the main emphasis of the package will be on a €1.5 billion public private partnership programme, €850 million from the proceeds of the sale of State assets and the national lottery licence will also be invested through the Exchequer in other growth enhancing projects.
In June 2013, as a follow-on from the 2012 package, the Minister for Public Expenditure and Reform, Deputy Howlin announced an additional Exchequer investment of €150 million to fund school development projects, local and regional road maintenance and retrofitting of local authority homes. In budget 2014, the Minister announced that €200 million from the proceeds of the national lottery licence transaction will be used for capital projects and programmes in 2014.
The Department of Public Expenditure and Reform will undertake a review of the public capital programme in 2014 which will culminate in the setting of the Government's capital investment framework for the period ahead. This will be done in parallel with the comprehensive review of current expenditure. Alongside setting a new capital investment framework, the review will also examine the scope for the utilisation of other non-traditional funding sources to augment investment in employment intensive projects that can help promote economic growth.
The ministerial order before the committee is a technical instrument. Its purpose is to allow the Dáil to approve formally the expenditure by Departments and agencies in the current financial year of capital moneys carried over from the previous year. The capital carryover facility forms an integral part of the five-year rolling multi-annual capital envelopes introduced in 2004. The multi-annual system is designed to improve the efficiency and effectiveness of the management by Departments and agencies of capital programmes and projects. It recognises the difficulties inherent in the planning and profiling of capital expenditure and acknowledges that for a myriad of reasons, capital projects may be subject to delays The carryover facility allows for a portion of unspent moneys which would have been lost to the capital programmes and projects concerned, under the annual system of allocating capital, to be made available for spending on programme priorities in the subsequent year.
The introduction of the multi-annual capital investment system has been a major positive factor in the roll-out of the capital programme. It will ensure that resources that would otherwise have been surrendered to the Exchequer are now available for spending by Departments in the following year. The multi-annual capital system has given greater medium term financial security to Department and implementing agencies. This in turn has facilitated better medium term planning of programmes and projects. It has also helped to eliminate the potential for wasteful spending on non-essential works in order to ensure that the full capital allocations were spent before the end of the calendar year.
The Exchequer and Audit Departments Act 1866 generally requires the surrender of unspent Exchequer moneys to the Central Fund at the end of each financial year. Section 91 of the Finance Act 2004 gives legal effect to capital carryover and allows the carryover of unspent voted Exchequer capital to the following year of up to 10% of the capital by Vote, by deferring the surrender requirement, subject to certain conditions. Among those conditions are that the amounts of capital carryover by Vote be specified in the annual Appropriation Act of the year from which the carryover is proposed. The actual decision in principle on the amounts of carryover by Vote are therefore determined in the Appropriation Act.
The Dáil again has the opportunity to endorse the amounts in its decision on the Revised Estimates volume which shows the capital carryover amounts separately in the relevant Votes.
The carryover amounts provided for in the Appropriation Act are required to be confirmed in an order to be made by the Minister for Public Expenditure and Reform by 31 March of the following year, after approval of the order by the Dáil, to allow expenditure to take place. The order sets out the amounts by subhead consistent with the amount by Vote specified in the Appropriation Act.
Capital carryover within a Vote does not have to be spent on the same subhead or programmes where the savings occurred. It may be spent on a different programme depending on progress and priorities.
The committee will be aware that the old annual Estimates process has been replaced with a modern, multiannual framework. The new framework allows for full transparency about the allocations available to each Department over the coming three-year period. It has opened the way for structural, medium-term planning and prioritisation within each area, across all programmes, with full public input and parliamentary oversight. It also makes it easier to assess what exactly Departments have achieved, and what they are aiming to achieve, with the public funds that are granted to them by the Dáil. It is not enough to know how much Departments are looking to spend. We need to know, and the public needs to know, what exactly is being delivered for that expenditure.
The Government is determined that every area of public service should be accountable for performance and results. This will apply to Ministers and their Departments, as well as to all offices and agencies.
The 2014 draft order sets out the subheads or programmes under which Departments and agencies propose to spend in 2014 the capital carryover amounts specified by Vote in the 2013 Appropriation Act. The total amount proposed in the draft order for 2014 is €132.596 million, which amounts to 3.9% of the 2013 forecast outturn. The total 2014 gross Exchequer capital provision allocated in budget 2014 amounts to €3.339 billion. The capital carryover of €132.596 million will bring the total Exchequer capital available for spending in 2014 to €3.472 billion.
The main priority areas for spending of the capital carryover of €132.596 million are as follows. The Department of the Environment, Community and Local Government is allocating €72 million in total: €50 million to support the quality of life measures under the Leader axes of the Rural Development Programme 2007-2013; €15 million for local authority housing provision; and €7 million to support the continued implementation of the mortgage to rent scheme. The Department of Jobs, Enterprise and Innovation is allocating €23 million in total: €17 million for the science and technology development programme; €3 million to Enterprise Ireland for grants to client companies; and €3 million to the IDA to help it to meet its extended remit. Also, €16.8 million will be spent by Department of Agriculture, Food and the Marine on afforestation premia as well as funding new forest planting. The Department of Communications, Energy and Natural Resources will spend €8.5 million to provide continued funding for the better energy programme. The Department of Transport, Tourism and Sport will spend €4.8 million on the maritime transport area, in particular on harbour improvement works. The Department of Children and Youth Affairs will allocate €2.576 million for continued works on the Oberstown project which the Minister, Deputy Fitzgerald, announced late last year. The Prison Service will allocate €2.4 million on the new Cork Prison and other capital building works. A total of €2.52 million will be spent by the Departments of Social Protection, Defence and Foreign Affairs and Trade on the roll-out of the new Intreo offices, Defence Forces building and the upgrading of ICT equipment regarding the Passport Service.
Departments and agencies have delegated responsibility to manage their capital programmes and projects within the terms of the delegated capital sanction as set down by the Department of Public Expenditure and Reform. The availability of these capital carryover amounts in 2014 will assist them within this framework in tackling economic and social infrastructural priorities in their areas.
I commend the order to the select sub-committee and thank members for their attention.
I thank the Minister of State. I always say at this stage that everybody supports the principle behind the motion. I agree that this motion is a good idea because it provides that funds available for a variety, and in some cases, good reasons that were not spent in 2013 can be carried over into 2014 for expenditure.
Rather than make a speech I shall ask some questions in response to the rider provided. We agree with the principle behind the motion. I accept that funding forms part of the appropriations account that we approved during Christmas week and that it was referred to in the Revised Estimates. All of the figures have been built into everything that we have seen up to now. To an extent these are not new figures but we must go through this legal procedure in order to finalise the issue.
I shall take a quick look through the voluminous amount of charts supplied. I thank the Minister of State for the information. Does he have a figure for the amount of money that was surrendered by the Departments because it could not be carried over? On reading the documentation I can see that €10 million was surrendered by the Department of Agriculture, Food and the Marine which could not be carried over; €11 million was surrendered by the Department of Communications, Energy and Natural Resources; and youth justice surrendered €7.8 million. A significant amount of moneys was unspent and, under different subheadings, only 10% can be carried forward. Some of the amounts unspent were more than 10% of the 2014 expenditure and, therefore, could not be carried forward. Some of it was surrendered to the Department and so could not to be carried forward here today.
I read through the charts as quickly as I could when the Minister of State was speaking. Let me give more examples. The Department of the Environment, Community and Local Government surrendered €2.5 million that was for landfill remediation, €7.5 million that was for farm grants and €375,000 that was for the Marine Institute; the Department of Agriculture, Food and the Marine surrendered about €10 million in total; the Department of Communications, Energy and Natural Resources surrendered about €12 million; the Department of Transport, Tourism surrendered less than €1 billion; youth justice surrendered €7.8 million; and the Prison Service surrendered approximately €4 million. I apologise for not getting my homework done sufficiently in advance. Definitely, some €50 million was surrendered. I ask the Minister of State to give us the figure for the amount of money that was not carried forward.
The forecast outturn was €3.3 billion, as I understand, and the variation here is €34 million. I shall just read out my note. Of the moneys unspent but not carried - these mostly represent a number of small underspends across a range of Votes as outlined by the Deputy - some Departments have unspent capital in excess of the 10% limit for carry over.
Unlike current expenditure, capital tends to be lumpy in nature. It is difficult to predict precisely when capital moneys will need to be drawn down of which there are many examples in my Department. Let me give a flood defence scheme as an example. If the profiling for capital expenditure is €21 million for a three-year period, such a scheme may not be consistent with three years and may take longer periods to complete. It is all based on when contracts come in. One could be in dispute with a contractor. For instance, something could happen at the end of a contract while working on a snag list.
The figures related to capital expenditure in 2013 demonstrate that carryover is working. Departments are able to retain a small but reasonable amount to help progress within the year. It very much depends when the bills come in. It is not a question of those being lost, as I understand, when the total amount of carryover, from last year to this year, is only 3.5% in total. That is well within the 10% maximum provided for in the original legislation.
I shall go with that figure. The sum of €34 million was not carried forward. I do not dispute the figure but it is somewhere in that ballpark. That sum has been surrendered and returned to the Department of Finance.
Exactly. I have two technical questions before I move on to my substantive question. In the Department of Transport, Tourism and Sport there is a carry-forward of €1.8 million for a payment for the SAR helicopter contract. There is a related question in respect of the Department of the Environment, Community and Local Government, as shown on page 9 of the notes received. On page 10 of the notes some €7 million will be allocated to support the continued implementation of the mortgage-to-rent scheme. Wearing my public expenditure hat, will the Minister of State please explain the reason these are considered capital expenditure as opposed to current expenditure? I would have thought the mortgage-to-rent scheme was current expenditure. The reason I ask about the payment, in respect of the Department of Transport, Tourism and Sport, for a helicopter contract is that I understand in normal Government accounting practice that Garda cars are always taken as current expenditure even though the Minister of State and I may think they should be capital because they could last five years and yet could be crashed the first morning one goes out. Effectively, the full amount has to be provided in current expenditure in the year it is spent. Will the Minister of State explain why the helicopter contract is capital expenditure?
The definition of the asset, so far as the Department of Public Expenditure and Reform is concerned, is an important question. A capital asset is defined as "an asset intended for use on a continuing basis with an expected life of more than one year." Capital expenditure also covers capital funding grants, for example, the forestry premiums are grants to enhance the productivity capacity of the economy. I will get the information on the helicopter question for the Deputy. I know a little about the mortgage-to-rent scheme. The €7 million supports the continued implementation of the mortgage-to-rent scheme. That, presumably, is a system that is being put in place. Is it not the case that the local authorities are being asked to run this scheme?
It is set up on the basis that there are approved housing bodies, be they local authorities, an agency such as Clúid or Respond or another agency that meets the criteria or code of conduct. What would happen is that a capital acquisition would come to the approved housing body and take ownership of the property and the resident would move to become a tenant.
Yes. The detailed question is on the Department of the Environment, Community and Local Government. More than half of the carry-forward of €132, some €72 million, comes from the Department of the Environment, Community and Local Government. I think my figures are correct. The appropriation account for 2012 was a total of €107 million and again, more than €43 million, 40%, came from the Department of the Environment, Community and Local Government. We are finding, year in, year out, that the Department is not using the money. The standard answer is that if is not easy to time contracts and work. However, there must be some reason this is happening in the Department. On one occasion the Minister, Deputy Brendan Howlin, expressed unease, following the difficulty in securing the funding, that it was not properly drawn down. Some 12 months ago we were told that the €43 million was for water services schemes that had not progressed as quickly as they might. In the note provided in respect of one of charts, it is stated that of the €72 million, €44.868 million of the carry-over is under heading B3 - water services investment, major public water supply. The note states that the savings on the water investment programme of €48 million were due, in part, to the slow drawn-down of activity in the water programme. Will the Minister of State ask the Department of the Environment, Community and Local Government to forward to the committee a list of what works were expected to be carried but were not completed and the reason €45 million allocated for water services was not spent in 2013? The reason I raise the issue is that the same thing happened the previous year.
There is a systemic problem in the Department. It may be that some schemes were budgeted to proceed but did not proceed or it may be that Irish Water was coming on board and some of the local authorities did not want to have to provide matching funding to the Government grant and, perhaps, held back. Given that it is a recurring theme, I would appreciate a breakdown of the €44 million which is made up of individual amounts for various projects which did not go ahead and which had been built into the water services investment programme for the year.
The Deputy is right. Clearly it appears the lion's share of the carryover is in that Department. He is also right in saying that the amount of carryover in the Department of the Environment, Community and Local Government is greater this year than last year, at €72 million as opposed to €43 million the previous year. Clearly, the profile of the areas last year vis-à-visthis year is totally different. Does the Deputy have the note on Vote 25?
The €43 million of carry-over was allocated to local authority housing, voluntary co-operative housing, landfill remediation, fire and emergency. The leader was only €9 million last year whereas this year the amount is €50 million. Even though the amount is greater, the actual subheads within each capital spend is different. My understanding, although we will try to get greater clarity, is that one of the reasons on the capital side this year is the savings on the water services investment programme of €44.8 million were due in part to a slowdown activity on the water programme, largely because of the-----
In respect of the projects which were not completed under the Department of the Environment, Community and Local Government, due to a slowdown, will the Minister of State supply the list to the committee? I am sure the Chairman and members of the committee would like to raise the issue with Irish Water to ensure it does those works that should have been done in 2013.
I should also point out that the Department of the Environment, Community and Local Government has one of the largest capital budgets, of €726 million. The turnover on €73 million is 10%. The Deputy is correct in pointing out that it is a large sum of money but the global amount of money the Department spends on capital also has to be borne in mind.
The only note we have on the housing side shows that more than 4,000 households were transferred from rent supplement to the rental accommodation scheme and other social housing. That is in its totality.
The reason I ask is that representatives from the banks will be appearing before us in April to discuss the target figures that have been put in place for them. I refer to the examination of the various options under the Keane report, one of which is the mortgage-to-rent scheme. Is there a target figure for the money? Could the Minister of State explain the methodology? Is it the case that the housing section in the Department of the Environment, Community and Local Government has the money an account and deals with mortgage-to-rent approaches on a case-by-case basis? For instance, an individual who is with a particular bank might seek this option and go to the Department to determine whether the money can be drawn down.
I ask that we postpone the completion of our consideration of the motion until we receive the relevant information. There is a history of our not receiving promised information. There is an opportunity to give it to us on this occasion because we have enough time. We have until the end of the month to report to the Dáil, as the Chairman has already stated. I propose that we have a one-minute discussion on this at our meeting next week. When we have received the information, I will be the first to propose that we will have completed our consideration of the motion. There are unanswered questions. I was caught once this year and I will not be caught a second time. It would just take two minutes.
The information I seek is so tied. I asked about the €45 million in the Department of the Environment, Community and Local Government in respect of the slowdown associated with schemes. This is the main item in the moneys carried forward. It will take only a minute or two to discuss it at our next meeting. It is a way of ensuring the committee will receive the relevant information. I was promised the exact same information last year but I did not receive what I sought.
We will play a very straight line on this. I am keen to have relevant information provided when dealing with these matters. We have the headline figure. Can we agree that if a deadline is provided for the provision of the information by a specified date, we can sign off this afternoon? I have no difficulty with revisiting this issue. If we get a commitment from a line Department or Minister, we will have met our responsibility at this committee. That would protect the integrity of the committee in addition to acceding to Deputy Fleming’s request. If we could have a commitment from the Minister of State this afternoon that the information will be forwarded to us within a certain timeframe-----
That allows us to conclude this evening. If we do not have the information by the specified date, I will reopen the debate in spite of our concluding it this evening. I offer the Deputy that commitment.
With regard to time management, we should bear in mind that this committee has two separate Departments to deal with, or two and a half if one includes the Office of Public Works, and also the fact that at least three meetings have already been scheduled for next week. I can understand spokesmen on public expenditure and reform, and finance, seeking information but I must accommodate them all. I do not want to be in circumstances in which I must schedule a fourth or fifth meeting next week. If on concluding today the Department fails to provide the requested information, I will call in its representatives to deal with how information is being presented to us.
We will conclude and I will discuss the matter with the Deputy at the end of the meeting. Is that agreed? Agreed. On behalf of members, I thank the Minister of State and his officials for attending.
We have completed our consideration of the motion. In accordance with Standing Order 87, the clerk to the committee will convey a message to that effect to the Clerk of the Dáil. Under Standing Order 86(2), the message is deemed to be the report of the committee.