HOUSE OF COMMONS
Sixth Standing Committee on Statutory Instruments, &c.
DRAFT FINANCIAL PROVISIONS (NORTHERN IRELAND) ORDER 1991
Thursday 14 March 1991
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The Committee consisted of the following Members:
Chairman: SIR ANTHONY MEYER
ARCHER., Mx. PETER (Worley, West)
Bell, Mr. Stuart (Middlesbrough)
Churchill, Mr. (Davyhulme)
Gardiner, Sir George (Reigate)
George, Mr. Bruce (Walsall, South)
Greenway, Mr. Harry (Ealing, North)
Hamilton, Mr. Neil (Tatton)
Hargeaves, Mr. Ken (Hyndburn)
Hind, Mr. Kenneth (Lancashire, West)
Kellett-Bowman, Dame Elaine (Lancaster)
McNair-Wilson, Sir Patrick (New Forest)
Madden, Mr. Max (Bradford, West)
Mawhinney, Dr. Brian (Minister of State, Northern Ireland Office)
Mullin, Mr. Chris (Sunderland, South)
Nicholls, Mr. Patrick (Teignbridge)
Ross, Mr. William (Londonderry, East)
Stanbrook, Mr. Ivor (Orpington)
Stott, Mr. Roger (Wigan)
Mr. N. P. Walker, Committee Clerk2 3 Sixth Standing Committee on Statutory Instruments, &c. Thursday 14 March 1991
[SIR ANTHONY MEYER in the Chair]
The Minister of State, Northern Ireland Office (Dr. Brian Mawhinney): I beg to move, That the Committee has considered the draft Financial Provisions (Northern Ireland) Order 1991. The order was laid on 27 February 1991. The main purpose of the orders, which are required at intervals of two or three years, is to adjust various financial limits imposed by statute and to deal with other routine financial matters, including the simplification and rationalisation of accounting procedures. It may be helpful to the Committee if I describe briefly the purpose of the various articles in the order. As the Committee knows, my right hon. Friend the Secretary of State announced to the House on 1 November 1990 the establishment of a Government owned company which will take over the water and sewerage functions with effect from 1 October 1992. As a preliminary administrative step article 3 will enable part of the regional rate to be paid to the Department of the Environment water service instead of being paid into the Consolidated Fund. The Department of the Environment will account for those receipts as appropriations in aid of vote 3—the vote which provides for expenditure in the Province on water and sewerage services. The change will enable the accounts of the water service to record both income and expenditure. Artice 4 increases the ceiling on the amount of Government loans to the Northern Ireland Consolidated Fund to include loans to the Northern Ireland Housing Executive. Advances to the Housing Executive were previously issued first to the Department of the Environment for on-lending to the Housing Executive but article 25 of the Housing (Northern Ireland) Order 1988 empowered the Housing Executive, subject to the approval of the Department of the Environment to borrow directly from the Consolidated Fund. The revised arrangement, which is administratively more efficient, treats advances to the Housing Executive as Government loans, so we need to increase the overall statutory limit on those loans. Article 5 will enable the interest rate on a Government loan to a district council to be fixed on the day on which the loan application is received by the Department of Finance and Personnel. At present it can take two or more working days to process a loan application, and during that period it is not unusual for the interest rate on the loan to change. Since these are generally fixed rate loans which may be taken out for periods of 25 years or more, it is clearly unsatisfactory that neither the lender nor the borrower knows for certain the rate of interest that will be applied. The change will let borrowers know where they stand and 4 will also bring arrangements in Northern Ireland into line with those operated in Great Britain by the Public Works Loan Board. Article 6 repeals the Loans Guarantee and Borrowing Regulation Act (Northern Ireland) 1946, which has become obsolete. The Act was originally intended to regulate borrowing in the capital markets in order to facilitate post-war reconstruction and to control outflows of foreign exchange. These controls have fallen into disuse over a prolonged period and the removal of the last of them was announced in the 1989 Budget. The equivalent Great Britain legislation was repealed recently by order under the Government Trading Act 1990. Article 7 removes the need for the Department of Agriculture to obtain the approval of the Department of Finance and Personnel before carrying out emergency drainage works, subject to a limit of £25,000. The Drainage (Northern Ireland) Order 1973 waives the need in a case of emergency for the Department of Agriculture to publish a scheme, provided that the prior approval of the Department of Finance and Personnel has been obtained. Clearly in cases of emergency, for example the occurrence of widespread flooding, it is not sensible for corrective action to be delayed while two Government Departments correspond on the matter. I am sure that hon. Members will welcome the removal of this rather bureaucratic anomaly. Article 8 changes the funding arrangements of the Northern Ireland Sports Council from deficit grant to that of grant in aid. When I was responsible for the Department of Education for Northern Ireland, I agreed this at the request of the Sports Council. Under the present arrangements the Government must take into account the council's likely income from all sources before deciding on the level of deficit grant required, and at the end of the financial year any grant not spent must be surrendered. By switching to grant in aid we are giving the council more flexibility in the use of its resources and enabling it to plan ahead by carrying over surplus cash from one financial year to the next. The change should also encourage the council to maximise its income from non-governmental sources because the level of grant will not suffer as a consequence. All the counterparts in Great Britain of the Northern Ireland Sports Council are already financed by grant in aid.
Mr. Roger Stott (Wigan): The order contains minor, sensible and non-contentious changes. I shall not impede the Committee's discussion of the order. The hon. Member for Londonderry, East (Mr. Ross) wants to comment on the Minister's speech.
Mr. William Ross (Londonderry, East): Like many orders, this one is bland and appears to be minor and inconsequential. However, one or two important matters are concealed in it. One could not tell from reading the order or the explanatory memoranda that article 3 lays the foundation for the privatisation of Northern Ireland's water and sewerage systems. In his speech the Minister confirmed that proposed privatisation. Going down that road would have considerable consequences for the people of Northern Ireland. For example, the cost of pumping water from Lough Neagh to Belfast differs greatly from the cost of sending water to other areas of Northern Ireland from 5 high-level reservoirs. The Minister can rest assured that those of us who live in areas such as Londonderry—where water does need to be pumped but flows naturally downhill —will not take kindly to having to pay for pumping water to the city of Belfast. The Minister said that a single company would take over the water and sewerage system. The Government will not have as smooth a ride as they may be expecting. Many of us want to continue to enjoy cheap water. Perhaps that cheapness is diluted because the Government are now running the show. We wish to retain our geographical advantages. I hope that the consequences of the proposals will be considered. The Minister said that such orders appear about once every two or three years. However, we had one last year. I welcome the general thrust of such orders, which help to make the system of government simpler, more flexible and cheaper. If water is privatised why cannot other Government responsibilities such as roads and education also be privatised? They would benefit if money was paid to them directly rather than through the Consolidated Fund. Changes to the method of funding the Northern Ireland Housing Executive were made in last year's order. The explanatory memorandum for that order said that those changes would increase funding for the Housing Executive. In the past year, which I realise is not that long a period, how effective has that funding process been? How much extra money was the Housing Executive given? Was that money swallowed up by a cut in the basic sums granted for the current and future financial years? Has the executive had a real benefit compared with previous years? What will be the practical effects of the order? Government loans are involved, so I assume that some sort of interest charge will be levied. Will that charge be beneficial to the executive? I welcome change in the loans under article 5, which deals with the interest rate and the time from which it will apply for a given loan. The Minister spoke as if it would always be beneficial; but in two days interest rates can go up as well as down. If the Minister hears about changes in interest rates from his right hon. Friend the Chancellor I hope that he will ensure that loans are processed in under two days so that councils will reap the benefit of the low interest rate rather than be clobbered with the higher one. Article 6 seeks to repeal the Loans Guarantee and Borrowing Regulation Act (Northern Ireland) 1946. Will there be any residual sums from that Act? If so, how much will the residual sums be and will they be transferred to another area of Government? Article 7 refers to "minor drainage schemes", which I assume means work that is carried out only on designated watercourses. A year or two ago we had a massive problem at Ballykelly when the sea banks—or rather the bank of a stream—broke. That demanded large-scale work. The sum involved was far more than £25,000 but it was a designated watercourse. Is that sort of activity caught by the £25,000 rules or could urgent work costing more than that be carried out? Article 8 changes the funding of the Sports Council, and I welcome that. As the Minister said, it will reap the benefit of funding other than from Government. The article aslo provides for carrying receipts into the following financial year. Will the Minister give an assurance that there will be no clawback in Government funding and will he ensure a rolling programme of expenditure? I hope that the Government will not say that because the Sports Council 6 did so well in one or two years with thousands of pounds coming in from industry, Government money should be saved and placed elsewhere. I do not want to see that happen. I want real encouragement to outside bodies to support the Sports Council in its valuable work. Matters may not be as simple as the bland words in the article suggest. Major important consequences will stem from these measures. I hope that the Government will provide more information about the potential downstream consequences of the intentions embodied in the order.
Dr. Mawhinney: The hon. Member for Londonderry, East (Mr. Ross) raised a number of issues and I shall seek to respond to them. He warned us of the view that he would take when substantive legislation on Government-owned companies is brought forward. I look forward to hearing or reading about his contributions at a later stage, but some of his comments are beyond the scope of the order, which is an administrative step. He asked whether roads and education could be treated similarly. The problem about roads is that they have no income—
Mr. William Ross: What about the roads fund?
Dr. Mawhinney: As the hon. Gentleman knows, the roads fund is not an income in the sense that I meant. It is part of general taxation. It is therefore difficult to understand how roads could be treated in the way that the hon. Gentleman suggests. Education is more properly related to the legislative and administrative arrangements for governing Northern Ireland. I noted with interest the suggestion by the hon. Member for Londonderry, East that a company along the lines of those suggested for water and sewerage might be appropriate for education. I shall bring that to the attention of my colleagues. The hon. Gentleman asked whether, 12 months on, there had been any financial advantage to the Housing Executive as a consequence of the last order. I hope that he will accept that I am not being evasive in saying that that question goes slightly wider than I had anticipated for this morning, so with his permission, I shall write to him. The order does not provide for financial advantage or otherwise to the Housing Executive. It streamlines the administrative arrangements by allowing the money to go directly to the Housing Executive rather than routing it through the Department of Agriculture. The hon. Gentleman was right to say that interest rates do not always move in a beneficial way. I did not suggest that the idea was to take advantage of beneficial movement. I said that it would give some certainty to arrangements so that both borrower and lender would know the basis on which they do business. I agree that in the two days during which applications are being processed rates may go up, or down, but at least when an application is made a prospective borrower will know the rate and will be able to make his calculations—bearing in mind that, for the most part, these are 25-year fixed loan applications. The hon. Gentleman asked whether resources resided in the fund which article 6 would be abolish. The answer is no. Article 7 relates to emergency works such as major flooding or something similar that would make it necessary for the Dept of Agriculture to respond immediately. At 7 present, the Department technically has to seek approval from the Department of Finance and Personnel before responding. It makes no sense for bureaucrats to pass letters to each other when people are suffering from flooding. There have been six such circumstances in the past five years necessitating immediate emergency activity. Costs ranged from £2,000 to about £18,000, hence the £25,000 limit, and recent experience has shown that amount to be just about sufficient to allow emergency works to go ahead. The example that the hon. Gentleman gave—other than the emergency aspect—is a planned part of capital works and would be subject to the usual arrangements. The hon. Gentleman mentioned finances for the Sports Council under article 8. Everyone recognises that the advantage of grant-in-aid status is that it allows flexibility. I made it clear that there is no question of clawback. The hon. Gentleman ought to be encouraged by the incentive that this status gives bodies in their quest for outside resources. The Arts Council, for example, has had grant-in-aid status for some time. It has benefitted by setting up the business sponsorship of the arts programme that I initiated a few years ago. and that has resulted in considerable extra resources for the arts in Northern Ireland. Contrary to suggestion, the Government did not use that extra money to reduce arts funding. The hon. Gentleman will recall that during the past couple of years, for the first time ever in Northern Ireland, I was able to raise the 8 Government's commitment to the arts per capita to put it on a par with that for England. The Government's record and intentions are clear by sideways reference to our treatment of the Sports Council's sister body, the Arts Council. That is also how we intend to treat the Sports Council.
Mr. Stott: Earlier, I said that I did not wish to impede the progress of the order because it contained sensible tidying-up measures. I understand that what the Minister has proposed is an administrative adjustment in respect of the privatisation of the water industry in Northern Ireland. However, when the more substantive legislation on privatisation of the water industry in Northern Ireland comes before the House, my party and, I suspect, the party of the hon. Member for Londonderry, East (Mr. Ross) will oppose it in principle. I do not want there to be any misunderstanding about that.
Question put and agreed to.
Resolved, That the Committee has considered the draft Financial Provisions (Northern Ireland) Order 1991.
Committee rose at ten minutes to Eleven o'clock.
THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:
Meyer, Sir Anthony (Chairman)
Greenway, Mr. Harry
Hamilton, Mr. Neil
Hargreaves, Mr. Ken
McNair-Wilson, Sir Patrick
Ross, Mr. William