Tackling an underspend myth.

Underspend blues

You may recall that the Task Force on Resourcing the Voluntary and Community Sector recommended a community investment fund of £25m per year to support local community development. By our calculation we could pay the fund for 14 years from the money departments and public bodies failed to spend. Politicians have called for the money to be variously divided up, invested in pyramid schemes, given to people who shout loudest, or put into schools. This article contends that planned spending on areas of assessed need must prevail over the race to zero in government spending plans.

One slightly bemusing aspect of the controversy is the way in which one press statement was used by Minister Hanson to simultaneously announce a £385m increase in NI budget, and a £366m underspend. Now the dust seems to be settling, it is important to put the under spend in some sort of perspective.

£366 millions represents some 1.9% of the overall current budget of Northern Ireland departments, proving that funding is at least essentially efficiently planned. How many of us can say we get within 1.9% of our planned spend for the week, let alone a financial year?

Imagine the discussion one might have after a trip to the supermarket:

You: “Well, I got the milk, the eggs, the jaffa cakes, the potatoes and a bag of flour, and here’s your change”

Them: “What do you mean, change? I gave you a fiver, now go back and spend it immediately.”

You: “But you could spend the 30 pence tomorrow.”

Them: “This is a disgrace! I’m writing to the Telegraph.”

The idea of spending inside a budget is a good one; spending to a budget is, more often than not, stressful, wasteful and inefficient.

Many have pointed to the capital underspend for the period, rubbed their eyes and gnashed their teeth, as if the world would be a better place if things would just cost a bit more. Again, some perspective ought to be had here.

Capital investment projects include the bidding, construction, finishing and equipping processes of new builds and refurbishments and any capital equipment to be purchased. Over-runs, under-runs, delayed invoices, on-site re-specification and builders being cautious in their costs all contribute to the possibility of an apparent under spend in the first week of April. It’s not as if projects which have under spent then simply stop costing any money; completion after the due date for returns is expenditure in a new financial year, preferably with the money held over, already allocated.

So, the newspapers cry, ‘why don’t we just bundle up the money and pay for…’ the schools, the hospitals, whatever our individual interest is? People here have to realise that government can’t simply spend all the money it has, simply because it’s lying around. Capital spending is allocated well in advance, new spending takes time, and throwing under-planned money at a problem is wasteful in the extreme.

The reliance on inputs-based statistics in presenting data to the population, whilst strictly necessary in terms of governmental accountability, results in under-spends being interpreted as some type of catastrophe. An untested assumption that everyexpenditure item results in a benefit to society is a peculiar concept. An assumption that government should always spend to the limits of its budget every year, and continue to build a budget empire, shows scant regard to the principle of value for money.

Clearly, reliance on simply spending to budget is a bad idea, not least since it tends to obscure the real needs of the community at large. One important issue emerging from the rumpus over the underspend is whether government is putting enough money into some areas which clearly do benefit society. NICVA has ample evidence of voluntary and community organisations that are doing valuable work for disadvantaged people all over Northern Ireland losing staff, ending some of their activities or closing up shop altogether.

It is no consolation to them that underspent money can be carried over to the following year. They need the money now and the £25m community investment fund would be a valuable start.