The Executive must be more open about its long-term borrowings and Private Finance Initiative commitments, the Northern Ireland Audit Office has stated.
Under current rules, the Executive can borrow £200 million per year under the Reinvestment and Reform Initiative, which was set up in 2002. £2 billion has been borrowed to date. Annual repayments have doubled in the past five years to £100 million and are expected to peak at £140 million a year from 2016 to 2022.
Auditor-General Kieran Donnelly noted that borrowing and PFI have helped deliver better public services and infrastructure but “both give rise to long-term commitments.” He added: “It is important that the wider Assembly, including statutory committees, are made aware of their impact on departmental budgets and that they remain within affordable and sustainable limits.”
Thirty-nine PFI contracts are currently operational and these will result in an estimated £7 billion of commitments in future resource budgets: £245 million each year until 2030. Despite the large sums involved, the information is not directly given to the Assembly or its committees.
Instead, OFMDFM arranges for PFI statistics to be returned to the Treasury in London. These are then published online at www.gov.uk/hm-treasury
The Department of Finance and Personnel forwards its financial returns to the Treasury for the UK-wide Whole of Government Accounts series. Senior officials give high-level information about borrowing to the Finance Minister and other ministers in the Budget Review Group.
“It is important that the affordability of the long-term spending implications of RRI borrowing is taken into account by the Executive and made visible to the Assembly,” the report states, identifying DFP as the department that needs to take action. “In our view, both the Budget and Investment Strategy for Northern Ireland documents should be underpinned with a borrowing strategy that is transparent to the Assembly.”
Auditors also recommended a strategic programme for testing the cost and quality of services to ensure that value for money has been achieved during the life of a PFI contract. This is in place in other UK regions but not in Northern Ireland.
Some public bodies (e.g. Invest NI) have identified efficiency savings. These are commended in the report but this scrutiny should be carried out by all departments.
The report also calls for a code of conduct for public-private partnerships. The UK Government published a code for its PPPs in June 2013 but this has not yet been adopted by OFMDFM.
“A co-ordinated efficiency review programme of operational PFI contracts will maximise the opportunities to realise value for money savings,” Donnelly concluded. “This needs to be started with regular reporting of outcomes and savings to the Assembly.”
Budget Review Group
|First Minister||Peter Robinson MLA|
|Deputy First Minister||Martin McGuinness MLA|
|Finance Minister||Simon Hamilton MLA|
|Alliance representative||Stephen Farry MLA|
|SDLP representative||Mark H Durkan MLA|
|UUP representative||Danny Kennedy MLA|