HL Deb 27 April 1993 vol 545 cc219-26

7.27 p.m.

The Parliamentary Under-Secretary of State, Northern Ireland Office (The Earl of Arran) rose to move, That the draft order laid before the House on 11th February be approved.

The noble Earl said: My Lords, this is the latest in a series of such orders, which have been presented at intervals of approximately two to three years to deal with various routine financial matters. The most recent previous order in the series was the Financial Provisions (Northern Ireland) Order 1991. The main purpose of the orders is to increase, as necessary, statutory limits imposed by Northern Ireland legislation on certain financial transactions and to deal with other routine matters with a financial content.

I shall deal briefly with the substance of each of the main articles. Articles 3 to 11 are associated and, taken together, they provide enabling powers for the establishment and management of trading funds in Northern Ireland. To a large extent the articles simply replicate the corresponding GB legislation, which is the Government Trading Funds Act 1973 as amended by the Government Trading Act 1990. They are an extension of the reforms introduced some years ago in Civil Service financial management and continued with the Next Steps initiative which created the first executive agencies.

Article 3 provides the general power to establish a trading fund where its revenue would consist principally of receipts in respect of goods and services provided and where it would lead to improved management efficiency and effectiveness. Candidates for trading fund status would be considered on a case-by-case basis and no advance list can be set out at this stage.

Article 4 deals with how the originating debt of a trading fund is to be determined and the circumstances in which this originating debt may be varied to take account of subsequent changes in the assets and liabilities of the fund.

Article 5 deals with the issue and repayment of public dividend capital; and Article 6 with borrowing by funds. In particular, Article 6 allows funds to borrow from Votes as an alternative to borrowing from the Northern Ireland Consolidated Fund. It is expected that the majority of borrowing by trading funds will be from Votes.

Article 7 describes how the income and expenditure arising from the routine activities of a fund should be treated and provides for a trading fund to reimburse the Consolidated Fund in respect of accruing liabilities for employees pensions and so on.

Article 8 requires that a trading fund should be entirely self-financing and provides for the handling of temporary surpluses. It also describes the accounting and auditing arrangements to be put in place and there is an important provision relating to the production and publication of annual reports.

Article 9 deals with the winding-up of funds and the distribution of the assets and liabilities. Perhaps I should make it clear that this article refers only to cases where a fund's activities are to cease altogether. Examples would be where two funds are merged, or where it is decided that the activities of a fund would be better financed by other means within the public sector. There is no intention to deal here with privatisation candidates. Such cases would in every instance, be pursued by quite separate legislative measures.

Articles 10 and 11 deal largely with minor consequential matters.

Article 12 deals with a separate matter which may conveniently be associated with the previous articles. It extends Section 22 of the Exchequer and Audit Act (Northern Ireland) 1921 to give the Department of Finance and Personnel powers to require any agency to produce commercial-style accounts, including balance sheets. The aim is to ensure that agencies which are not trading funds would supplement the appropriation accounts by producing commercial-type accounts on an accruals basis and by so doing increase the information available to Parliament and the general public. This measure will bring the position in Northern Ireland into line with that in Great Britain.

Article 13 would enable a Northern Ireland Comptroller and Auditor General, in his corporate capacity, to purchase property leasehold. The only effect of this provision will be to place the Northern Ireland Comptroller and Auditor General in the same position as his Great Britain counterpart who already has such a power. I understand the intention is for the Northern Ireland Audit Office, in keeping with its independent status, to move from its present location in a government building to its own office accommodation.

Article 14 amends Article 3 of the Financial Provisions (Northern Ireland) Order 1986 by raising the statutory limit on the net amount which the Consolidated Fund may lend to the Housing Executive to finance its capital.

Article 15 provides that fees paid to the Registrar of Companies in respect of his functions under the various companies orders should be paid into the Consolidated Fund. At present the Department of Finance and Personnel must direct how these fees are to be handled. Recent legal advice suggests that the legislation, as presently drafted could prevent the Registrar of Companies from recovering the full cost of his services for which he levies fees or charges. The amendment will remove this difficulty and simplify procedures generally. I commend the order to the House.

Moved, That the draft order laid before the House on 11th February be approved.—(The Earl of Arran.)

Lord Prys-Davies

My Lords, the Minister proceeded at an extremely fast pace indeed. I was just able to follow him. I wish to thank the noble Earl for his explanation of an extremely short order which is dry, technical and, in part, not easy to grasp.

However, as the Minister says, its main thrust is in Articles 3 to 11 which set up the financial framework for trading fund agencies. The Minister confirmed that it mirrors the Great Britain next steps agencies legislation. I am particularly glad that the Minister made the very clear statement towards the end of his speech that the order does not pave the way for privatisation. For that reassurance my noble friend Lord Morris and I are predictably grateful. Privatisation will require its own separate legislation.

However, to return to the order, will the Minister explain whether it will be necessary to obtain parliamentary approval for the setting up of an individual funding agency? The Minister referred to the Government Trading Funds Act 1973. If I have correctly understood that legislation, no trading fund can be set up in Great Britain without an affirmative resolution of Parliament. That is an important principle which, on my reading of Articles 10 and 11, appears to be missing from the order. If that is so, that is a safeguard which Northern Ireland, under direct rule, is denied. The Minister may say that there is another safeguard in its place.

I am sure that the significance of this short and dry order should not be underestimated. As the noble Earl explained so clearly, his purpose is to provide a new framework for more efficient and effective public services for the benefit of customers and taxpayers, although they were not named by the Minister. This side of the House heartily endorses that objective provided that there are the necessary safeguards. I have a few reservations on that point.

Again, the funding agencies are, in a sense, a form of devolution as the day-to-day management of the service will be devolved from the Secretary of State or the Minister to an executive head of an agency which is itself external to the department. I recognise that the imposition of direct rule on Northern Ireland means that Ministers in the Northern Ireland department such as the noble Earl, Lord Arran, shoulder particularly heavy burdens of responsibility in addition to the punishment of extremely heavy travelling to and from Northern Ireland several times per week and also travelling within Northern Ireland itself. Therefore, to my way of thinking, it makes sense to devolve the day-to-day control and management of the provision of services in Northern Ireland so that Ministers are not overloaded with detail and can devote more time to policy formulation.

That leads me to a line of questioning. Perhaps the Minister can help by giving an indication of how many civil servants are currently employed by the Northern Ireland Office and other central government departments in Northern Ireland. Will he also give us an indication of how many are likely to be transferred to executive agencies over the next five years?

I noted that the Minister was careful to say in his speech that he did not believe that it was possible to produce a list of likely candidates for the status of a funding agency. He said that it is a step-by-step procedure which must be decided at a particular time. However, I find it difficult to believe that the Government have not set their sights upon some ripe services which they see as candidates for funding agency status. Notwithstanding what the Minister said, I press him to give a list of possible candidates. If he says that he cannot do that, I ask him to identify what will be the criteria and tests for determining whether a particular enterprise is a candidate for funding agency status. For example, do the criteria relate to matters of administration? If so, to which matters of administration do they relate? Do they relate to the nature of the service to be provided by the enterprise? Such an indication would be helpful.

Turning now to Article 6, can the Minister explain how the department decided upon the figure of £50 million as the borrowing limit for a trading fund? That might possibly give us an indication of the scope of the order. I see that under paragraph 7 of the article the borrowing limit may be increased to £100 million by order to be approved by "the Assembly". But in the absence of the Assembly, will it be necessary to obtain parliamentary approval? Alternatively, will that be a decision of the head of the department? If parliamentary approval is not required, it seems to me that that omission would be another illustration of the inadequacy of direct government.

My second main line of questioning relates to the relationship between the Minister and the Next Steps Agency. That obviously raises the question of accountability to Ministers and, ultimately, to Parliament. I note that the order provides that the agency will be under a statutory duty to submit accounts to the Comptroller and Auditor General for Northern Ireland in a form to be agreed by the Department of Finance and Personnel under this awfully complex Article 8. As I see it, I welcome the article because it provides at least two important safeguards which are appreciated: first, that the accounts have to be in a form to be approved by the Department of Finance and Personnel; and, secondly, that the accountants themselves have to be approved by the Comptroller General.

But as I am not an accountant and I do not have an understanding of the details of Article 8, can the Minister confirm that the provisions of the article follow the corresponding GB provisions? I have a feeling that he said in his opening speech that they do, but could he go just a little beyond that and tell us that in fact they are the best accounting practices known to man? That would be helpful.

Apart from the two safeguards that I have just mentioned, can the noble Earl tell us whether the Minister himself can intervene in the affairs of the agency if he has good ground for believing that things are going wrong? If that is so, can he say where in the order is the power to intervene? In addressing the last couple of questions to the noble Earl, I am very conscious that he is the Minister to whom the Social Benefit Agency in Northern Ireland is accountable. I should be most grateful if he could explain to the House how the relationship in practice between himself and the agency works.

There is yet one other aspect which is especially important in the Northern Ireland context. What assurances can the Minister give the House that the agency will act fairly, with integrity and with impartiality towards its customers in receipt of its goods and services or, indeed, to its staff in terms of promotion within the agency; that is, whether the customers or the staff come from the Nationalist and the Catholic community or the Loyalists and Protestant community? I am sure that we are right to ask the Minister for those assurances in the Northern Ireland setting.

I turn now to my final point. Can the Minister tell us what happens to the people employed by the funding agency when the agency is wound up? Article 9 deals clearly with the trading funds on cessation of the service. The order is much concerned, and quite rightly so, about customers and taxpayers. But we are also concerned about the employees. That is why I conclude by asking a few questions about the staff whose contracts will be transferred from the Civil Service to the agency. What happens when the agency is wound up? Will their present terms and conditions of employment within the Civil Service be protected? Further, upon cessation and winding up of the agency, will they be transferred back to the Northern Ireland Civil Service upon suitable terms and conditions?

Those are the questions that seem to me to be relevant in considering the order. Subject to the few reservations that I made, we support the order. However, we would welcome the Minister's assurance on the matters that I raised.

7.45 p.m.

Lord Holme of Cheltenham

My Lords, we have before us an order of daunting technicality. Although the Minister's clear and kindly light—for which we are most grateful—led us at the beginning, the gloom still encircles my own understanding. However, in so far as I do understand it, I should like to ask the Minister one or two other questions. The fundamental question that I have bears on the remarks made by the noble Lord, Lord Prys-Davies. How arm's length are the trading agencies? For example, are they directly comparable to the seven Northern Ireland Civil Service agencies? Are they to be directly accountable in their status, in their arm's length relationship, to the Minister and to the Government? The accountability of any hived-off agency must be a matter of public interest. That must be particularly so where public money is concerned, as it is with the trading funds.

As I read the order, under Article 7, it appears that receipts and payments are not to be treated as part of public income and expenditure. But can the Minister say what that actually means for the process of Estimates and for the appropriation orders and debates that we have to deal with in this House and in Parliament? If we are to say that the trading fund is a Next Steps Agency, then the issues which have been raised frequently in this House about such agencies come into play. For example, will the trading fund set annual objectives, as it is hoped that Next Steps Agencies will? Further, will there be an annual report which is not simply a financial report but one which reports on the variations of performance against those objectives? If that sort of management system, is not available, it means that the release of those agencies from—as I am sure they would see it—the tyranny of the parliamentary Question becomes licensed because there is no way of judging how well or badly they are performing the functions for which they were set up to perform in this semi-detached way. That is a particular problem in Northern Ireland where we have a move from the ideal of democratic rule to direct rule to, in this instance and in the Next Steps Agencies, indirect rule.

My final point concerns Article 14. It is a very specific point. I notice that the article increases the limits on housing issues from the Consolidated Fund to the Northern Ireland Housing Executive. The noble Earl will know better than I how close upon the existing limits the Housing Executive already is. Is that provision in the order with the intention of increasing the headroom for funding to the Housing Executive? If that is the purpose, it will come as very welcome news to the executive and to people generally in Northern Ireland. With the exception of those queries, I have nothing to add. I wait with interest to hear the noble Earl's reply.

Lord Lyell

My Lords, before my noble friend replies, I hope he can clear up a point that I have in mind. It seems to me that Article 3 is the key article as regards the establishment of the trading funds. Article 3(1)(b) states that the whole object of the trading funds is to improve the, efficiency and effectiveness of the management of those operations". I am sure my noble friend will be in the vanguard of that. I hope he can confirm a point I have in mind, if not tonight then at a later stage. It occurs to me that some of the services that are performed by the excellent agriculture department might well fall into the category of a trading fund. The order we are discussing would assist in promoting the efficiency of the management of that department. My noble friend could therefore obtain considerably better value for money and assistance from that department. I believe that is what the order, and in particular Article 3, seek to achieve.

Everything said by my noble friend the Minister tonight reiterates the benefit of the order. The Comptroller and Auditor General for Northern Ireland is well known to many of us here. He will ensure, with his vigilance and efficiency, that this order, and in particular Article 3, engender the efficiency and improvement in management that it is designed to achieve. I thank my noble friend for explaining the order so clearly. I look forward to hearing his reply to other noble Lords who have spoken, if not necessarily to myself.

The Earl of Arran

My Lords, I thank the noble Lords, Lord Prys-Davies and Lord Holme of Cheltenham, for their questions and the points they have made. I am sorry if I spoke somewhat too quickly for the noble Lord, Lord Prys-Davies. Judging by the penetration of his questions, I believe that he probably understood the order all too well. For that reason I hope to give both he and the noble Lord, Lord Holme of Cheltenham, some illuminating answers.

I shall deal first with the questions which the noble Lord, Lord Prys-Davies, with his usual courtesy, gave me advance notice of. I appreciate that the order is technical. There are approximately 31,600 staff in the Northern Ireland Civil Service and the Northern Ireland Office, of whom approximately 26,000 come from the Northern Ireland Civil Service. It is expected that around 75 per cent. of them will be in agencies when all launches are completed in 1996. I can confirm that the establishment of trading funds would be subject to negative rather than affirmative resolution. While the Government recognise that this procedure is not ideal, in the circumstances of direct rule it is the only practical way to deal with the majority of Northern Ireland legislation.

If it were possible to create a local administration in Northern Ireland with legislative powers, local politicians would have greater scope to debate and to decide legislation for the people of Northern Ireland. However, I can confirm that there are no immediate candidates for trading fund status. The major test for trading fund status is that a specific government activity must have the capability of becoming self financing. That is to say, it must be able to meet its costs out of its receipts without receiving support from votes. Capital expenditure is financed by borrowing from the Exchequer. Trading fund status will therefore make possible a much more businesslike and efficient approach to the delivery of government services.

The noble Lord, Lord Prys-Davies, referred to the £50 million limit stated in Article 6. That is an aggregate figure and, in the absence of any specific determining factor in Northern Ireland, it has been set by the drafting convention at one-fortieth of the corresponding figure in the GB legislation of £2 billion. Extensions up to the £100 million limit will be subject to negative resolution.

In Article 8 the provisions on management and accounting are identical to those in GB legislation. The article also states that a trading fund will be under the control and management of the responsible department. In other words, funds remain part of the government service and Ministers as heads of departments are ultimately responsible and would take appropriate action if they felt it necessary. The powers of the responsible Minister to intervene with the respective agency in the Northern Ireland Civil Service are no less than for any other part of the government service.

In addition, agency chief executives, such as the chief executive of the social security agency, have especially formulated and direct accountability to the Minister for the achievement of targets. I realise that this matter also slightly concerned the noble Lord, Lord Holme of Cheltenham. In addition, the relationship is set out in the agency document and the key targets are announced to Parliament each year. For example, I set the targets for the social security agency and the new child support agency. I regularly monitor those targets.

On much the same subject, it should be undeistood that staff employed by an executive agency remain civil servants. Their terms and conditions remain the same unless the chief executive negotiates changes to them. In the event of an agency being wound up, the aim would be to redeploy staff in the Northern Ireland Civil Service.

Finally, the noble Lord, Lord Prys-Davies, referred to the need to ensure that agencies treat their staff and clients fairly and with integrity irrespective of their religious background. I am sure that the noble Lord, Lord Prys-Davies, realises that agencies are bound by the same fair employment laws as other organisations. In addition they have behind them the strong determination of the Government to ensure fair treatment for all. Indeed, the citizen's charters published since February 1992 are further evidence of the Government's intention to deliver services of a high standard.

As regards staff, the agencies will continue to be subject to the equal opportunities policies of the Northern Ireland Civil Service, the monitoring of which is undertaken centrally by the service's equal opportunities unit. The noble Lord, Lord Holme of Cheltenham, asked to what extent the trading fund agencies were held at arm's length. They are not really at arm's length at all as such. The accounting officer for each trading fund is directly responsible to Parliament for the fund's activities. The relevant Minister will continue as usual to be answerable for all policy matters relating to the particular fund. In addition, the usual government accounting and audit controls will continue to apply to the fund's activities. The chief executive certainly has the authority to get on with executive tasks within the framework document which I set.

My noble friend Lord Lyell raised a rather technical point. Rather than give him an incorrect answer, I would prefer to write to him.

On Question, Motion agreed to.

Viscount Long

My Lords, I beg to move that the House do now adjourn during pleasure until 8.30 p.m.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 7.59 to 8.30 p.m.]