Public Accounts Committee – 19 November 2015
Introduction
Thank you Mr Chairman,
I would like to thank the committee for the opportunity to make a short opening statement. I propose to set out the Department’s strategic objectives and our performance in meeting those objectives over the last number of years.
Strategic Objectives
The Department of Public Expenditure and Reform has two broad strategic objectives:
- To support economic and social progress by managing public expenditure on a long term, sustainable basis and;
- To introduce and support reform of the civil and public service, ensuring public administration and governance structures are citizen focused, efficient and cost-effective.
Linking these two objectives is an overarching focus on value for money for the taxpayer. Achieving value for money in how public services are delivered is central to the work of the Department and a key concern for this Committee.
Overall Spending Reductions – Expenditure Consolidation 2009 – 2014
The Department’s key function has been the control of public expenditure. As the Committee is aware Ireland has met its deficit target in each of the years since the Department’s inception and we are on track to do so again. We have sought to do so by shifting resources to where they are needed most and to protect the most vulnerable in our society. I might add that much of our capacity to do this has arisen directly from the sacrifices made by public servants in their terms of employment.
As we return to more normal times, our function will not be to determine the level of spending – other than to advise Government on what we believe is appropriate – but to ensure that broad budgetary targets are met and that expenditure delivers the best possible value for the taxpayer. I believe that many of the reforms we have put in place during the recession years will continue to bear fruit as the economy continues to grow.
What are those reforms?
Firstly we are seeking to remove the duplication of services and to apply common standards.
The provision of HR functionality by a myriad of Government Departments is more expensive and feeds into the silo driven nature of Government. Shared services is an obvious example of our response to this challenge but so are public service wide pay agreements, sick leave and annual leave reform and the single pension scheme. The Civil Service Management Board and the Accountability Board are deliberate attempts to break down a culture that has evolved over time. One of its first tasks will be to see how Government Departments can cooperate better on shared tasks. This is ultimately not only about costs – though that is important – but it will also improve the range of data available to Government to take decisions.
Secondly we are seeking to encourage the development of policy making on a more open and considered basis.
Examples I will touch on later include more measurement of outcomes, more varied commissioning models, more use of specialists, an aggressive attitude to open data and reform of the budgetary process. Similarly we are trying to broaden recruitment channels into the system.
We have enacted a series of Acts aimed at opening up our system. FoI has been restored and being used more extensively. Over the next year we will see the first impacts of the lobbying legislation. The Banking Inquiry is operating under the terms of the Oireachtas Inquiries Act of 2012. The Ombudsman has increased powers and is set to see his powers extended further into the health arenas. Whistleblowers now have a common framework to report under and public bodies have been offered standardised procedures on how to proceed. We have come a long way but I recognise that we have some way to go.
And finally we are opposed to inertia. Through our reform and delivery office we act as the prodders of reform in other Government Departments. Our system has been under extreme pressure in recent years. In the private sector activity slows when recession hits, in the public sector demand increases. I think in time our response will be seen to have been particularly effective but it has undoubtedly been difficult to endure. But we cannot go back to the old ways. We need to continue to innovate.
I might add that these tasks will become particularly challenging as we exit the excessive deficit arm of the Stability and Growth Pact and move to the preventive arm.
I might remind the committee of the broad budgetary context we have experienced in recent years as it is the appropriate backdrop to discuss the reforms we have introduced.
- In 2014, Gross voted expenditure was €54 billion. This is a reduction of over €9 billion from the peak in 2009.
- Current expenditure was reduced by 9.5% and Capital by 51.9% over this period.
By identifying savings, driving efficiencies and working with Departments to better manage their cost base, the Department has made a very significant contribution to the improved fiscal environment and enhanced value for money.
Pay Reform
One source of significant Exchequer savings was in the area of public sector pay. As a result of financial emergency legislation, savings in the public sector pay and pension’s bill amounted to €2.2 billion annually. This year, the Government decided to begin to unwind some of these measures under the Lansdowne Road Agreement. The Agreement will provide for a continuation of enhanced productivity measures while securing an Industrial Relations framework that will foster and support industrial peace.
Other reforms include the new Public Service Sick Leave Scheme, introduced to reduce the cost and incidence of sick leave for the Public Service. The scheme has had an immediate and positive impact. Approximately 260,000 extra days were worked by public servants in 2014 in comparison to 2013, saving an estimated €51.5 million.
Between 2008 and end 2014, the number of staff working in the Public Service was reduced by 10%. Happily, as a result our success on expenditure consolidation and driving public service reforms we can now consider on a strategic basis the allocation of extra staff to critical public services. Since 2014, there has been increased staffing in the following areas:
- An additional 3,000 teachers
- Over 1,300 new special needs assistants
- The HSE have hired 1,000 nurses, and
- At Budget 2016, the Government announced it would recruit an additional 600 Gardaí. That brings the total recruited since 2014 to 1,150.
Without public service reform and the savings it produced, including those underpinned by agreements negotiated with staff, it would have been impossible to increase staff levels in these key areas.
Budget Reforms
Minister Howlin has introduced a number of significant reforms to ensure that taxpayer money is allocated to the maximum benefit of society.
The wide-ranging reforms to the budgetary architecture support the efficient use of public funds to deliver effective services for citizens. The implementation of a medium term budgetary framework, and the introduction of comprehensive reviews of public expenditure allow for greater debate about key expenditure challenges.
The revised Public Spending Code, which sets out the economic appraisal requirements for new current and capital expenditure proposals, brings together in one place all the elements of the value-for-money framework. Departments and Agencies proposing expenditure are responsible for undertaking the required appraisal for each new spending proposal or project. The Public Spending Code provides that appraisals and detailed assessments should be carried out before Exchequer resources are committed.
In July 2015, the Government agreed a new three-year Value for Money Review Programme for each Department. Under the programme, Departments will review expenditure across a number of programme areas. This Programme, which is reviewing 40 topics, is aligned with the multi-annual budgetary cycle and the Comprehensive Review of Expenditure process.
The Oireachtas itself and its Committees play a central role in overseeing expenditure of State resources. Last week the Houses of the Oireachtas Commission launched an OECD report, Review of Budget oversight by Parliament: Ireland. The report takes account of the parliamentary and budgetary environment within which we all operate. Its recommendations have the potential to engender more meaningful and constructive dialogue around the efficient and effective use of public resources and the role of the Oireachtas in overseeing these issues, a core concern of this Committee.
The OECD’s report is of course a matter for the Oireachtas in the first instance. We stand ready to assist in any way we can in augmenting Oireachtas oversight of the Irish budgetary process.
Enhanced Capacity
Of critical importance to implementing budgetary and expenditure management reform is building the institutional capacity to do so. Our Department has been enhancing capability within the public and civil service to effectively appraise, evaluate and monitor public expenditure, ensuring the focus remains on value for money.
Of particular note is the establishment of the Irish Government Economic and Evaluation Service, or IGEES. IGEES is an integrated cross-Government service which enhances the role of economics and value for money analysis in public policy making. IGEES members have a particular skill set which has improved the analytical capacity of the civil service. They operate in designated economic evaluation units and engage widely with other Government Departments. Their expertise further strengthens the focus on evidence based policy making within the public service.
The effective use of data is also critical to a more integrated and efficient public service. The publication of official non-personal data in open format has the potential for significant economic, social and political impact. Our Open Data initiative aims to enhance the value and utility of public service data. Such data can be shared within and between public bodies and with the general public as a whole. Open data can become the raw materials to drive more effective decision-making and efficient service delivery within public and private bodies. It can spur economic activity in the development of new products and services, and empower citizens to take an active role in improving their own communities.
Reform, Renewal and Accountability
A better trained, more integrated and more effective civil service will support better delivery of services and a better return to the tax payer.
Published in October 2014, the Civil Service Renewal Plan sets out a Vision and a 3 year action plan to achieve it. It outlines practical actions that will create a more unified, professional, responsive and accountable Civil Service.
Since its publication significant progress has been made including;
- The establishment of an Accountability Board – to oversee Civil Service performance and develop a better framework for holding senior civil servants to account for performance.
- The establishment of a Civil Service Management Board to create a more integrated and cohesive whole-of-Government executive management team.
- A performance review process for Secretaries General to ensure high standards are maintained.
- Open recruitment campaigns have been held for positions across different grades. This will ensure there is a consistent stream of talented professionals with different backgrounds and experiences entering the civil service at every level.
The new structures are helping to strengthen accountability and performance by introducing greater oversight over delivery across the Civil Service.
Progress has also being made in relation to other actions in the Plan. This week, a Corporate Governance Standard for the Civil Service was announced. This is the first time that such a Standard has been produced for the Civil Service. The Governance standard will set out how each Department and Office does its work and how it operates to deliver on its mandate and functions.
To bring greater individual accountability, we will also ensure that the statutory official assignment of responsibilities in each Department – down to the level of Principal Officer – are publically available.
Effective leadership is crucial to deliver civil and public service reform. The Senior Public Service has been established, initially within the civil service, to support high performance and a more integrated approach to leadership development at senior levels. It supports executive coaching and provides for mobility at senior levels in the civil service.
Shared Services
Shared Services is one of the largest cross-cutting change programmes the Civil Service has experienced. The National Shared Services Office (NSSO) in our Department is responsible for establishing and providing Shared Services to the Civil Service, and as part of its wider leadership role for setting standards for shared services to other Public Service sectors. Earlier this year, the Government approved the drafting of a Bill to establish the NSSO as a separate Civil Service Office and work on the Bill is being advanced with the Office of the Attorney General.
I would like to thank Ms Hilary Murphy-Fagan and all her staff for their hard work in bringing this about.
Established in March 2013, PeoplePoint is now providing HR and pensions administration services for 35 organisations with approximately 30,000 employees. By end-2016 it will be fully established, servicing 33,500 employees across 40 departments.
The Payroll Shared Service Centre is in 3 locations and administers payroll for 34 organisations with 43,000 employees and pensioners. This will rise to 80,000 by the end of this year. In addition, the evaluation of tenders for a single financial management solution for the Civil Service is now nearing completion and we expect to return to Government shortly to proceed to implementation.
Strong oversight and governance frameworks exist to oversee and monitor the performance of these centres against service level targets and customer satisfaction. Cost savings and significant improvements in service delivery in PeoplePoint have been made throughout this year and we are striving to improve service delivery for our clients.
Better Delivery
ICT has a critical role in delivering more effective public services.
Earlier this year the Office of Government Chief Information Officer published the new Public Service ICT strategy. The strategy will create a new model for ICT delivery. The central aim of the strategy is to deliver better value for taxpayers by creating efficiencies through integration, consolidation and data sharing. The strategy will ensure that ICT infrastructure and systems are shared across the public service, achieving greater efficiencies in the use of resources.
Progress has also continued on introducing more external delivery of services. Examples include the use of private call centres for administration of the Water Conservation Grant and Local Property Tax. These contracts leverage private sector expertise and innovation to deliver cost savings and better services for citizens. Jobpath – the new employment activation programme – also uses private sector expertise to assist the long term unemployed back into the labour force.
Our Department is also working with other Departments on the issue of “Commissioning” within an Irish context. The Commissioning model will embody a more strategic approach to the delivery of services by the Community and Voluntary Sector than the traditional block-grant funding model. This model aims to assess and identify the needs of a population and release funding in return for achieving the identified outcomes on foot of evidence-based evaluations.
Management of Government Grants
Another example of how the Department is driving a culture of value for money is around the issue of Government Grants. I know that is the subject of a separate Chapter – Chapter 5 – in the C&AG’s most recent report.
In September 2014, our Department issued new a circular setting out a revised framework for management and accountability arrangements for grants. The overarching principle of the new circular is that there should be transparency and accountability in the management of public money. There is also a new ‘Statement of Principles’ for grantees. The Statement outlines four principles that apply to those in receipt of grant funding – clarity, fairness, governance and, value for money.
A related initiative has been the establishment of Benefacts. Benefacts will provide a single repository of regulatory data on the entire not-for-profit sector. The sector is estimated to encompass 20,000 not-for-profit entities that receive €4.4 billion in Government funding annually.
The key objectives of Benefacts are to:
- Deliver a single view of every not-for-profit entity in Ireland.
- To facilitate better decision-making in the Government’s funding of the non-for profit-sector.
- To re-build donor confidence and provide for increased investment in the sector.
Procurement Reform – Office of Government Procurement
Another key aspect to the comprehensive package of reform has been in the area of public procurement. Over many years there have been concerns about weak procurement practices. We have sought to address them.
The Office of Government Procurement, or “OGP”, now procures common goods and services across the public sector. The Procurement Reform Programme is gaining increasing traction in delivering a more ‘joined-up’ model for government procurement of goods and services. The OGP is progressively putting into place sectoral or whole-of-government arrangements in areas such as professional services, ICT, facilities, travel and HR Services.
Some expenditure areas, such as legal costs and insurance have never been procured at a whole-of-government level. For the first time, the OGP is now looking at such services across the public service and is putting in place professional commercial arrangements that leverage scale, bring consistency and manage risk.
The OGP is also committed to ensuring that SMEs are fully engaged with Public Sector procurement. In March 2015, the Office produced a detailed analysis of non-pay expenditure in the public service – the first of its kind in the Irish State. The findings indicate that 66% of the State’s procurement is with SMEs.
I would like to commend Paul Quinn and his team for their hard work in the delivery of this programme.
Property Asset Management
Value for money is also important in our management of the State’s property portfolio. The OPW led the development and implementation of the Property Asset Management Delivery Plan “Accommodating Change – Measuring Success. Significant progress has been achieved in areas such as intra-State property transactions, communications and the civil service estate. More work is required, so we will continue to support the OPW in driving the implementation of the plan as part of the Government’s overall Reform Programme.
I have set some of the changes we have introduced to improve the effectiveness of public spending. Of course, given total voted spend of over €55 billion it is inevitable that there will be errors, omissions and inefficiencies that do not meet the high standards that we are setting. We are dealing in a world of uncertainty and increasing complexity.
However, it is critical that we continue with, and improve on, these reforms. Specifically, we need to embed a very strong value for money culture which does not tolerate outdated practices or inertia. Achieving this will require a significant improvement in our leadership capacity across the system. This is, to my mind, the single most important challenge we face.
Items on the Agenda
I would now like to turn to some specific items on the agenda today.
Chapter 4 – Vote Accounting and Budget Management
Since the Department was established in 2011, significant progress has been made in reducing the fiscal deficit and bringing stability to the public finances. In 2011, the budget deficit stood at 12.5% of GDP. This year it will be below 2.1%. In 2016, it is forecast to reduce further to 1.2%. The Department’s two key objectives of managing public expenditure and driving reform of the public services, have made a major contribution to this improved fiscal environment.
In 2014, Gross Voted expenditure amounted to €54.1bn which is €1.1bn or 2.1% ahead of profile, and €0.3bn or 0.5% lower than in 2013. In net terms, Net Voted expenditure amounted to €42.2bn in 2014 and was €1.1bn (2.6%) ahead of profile.
9 out of 16 Ministerial Vote Groups were at or below profile. Ministerial Vote Groups requiring Supplementary Estimates, were in most instances able to obtain savings to offset or partially offset the Supplementary Estimate from within their Vote Groups.
Vote 11 – Office of the Minister for Public Expenditure and Reform
Turning to our own Vote, the Estimate for 2014 was set at €35.9m, a slight increase on 2013 levels. This reflected the addition of funds to provide for the establishment of the Office of the National Lottery Regulator, and to provide for a widening of responsibilities in the Office of the Government Chief Information Officer. The audited surplus to be surrendered in 2014 is €3.8million. The surplus mainly arose due to slower than expected progress on recruitment and spend on North-South projects.
Vote 12 – Superannuation and Retired Allowances
The second item on the agenda is Vote 12 – Superannuation and Retired Allowances. The 2014 Appropriation Accounts for the Vote show a net outturn of €368.7 million compared to an estimate plus supplementary estimate of €384.8 million, giving a surplus of €16.1 million. The surplus arose due to the timing of receipts from the Single Public Service Pension Scheme.
Vote 18 – Shared Services
Turning now to Vote 18, Shared Services. The 2014 Estimate of
€30.6 million represents a net increase of €9.6 million compared to 2013 Estimate. This increase is largely driven by the migration of existing payroll functions from originating Departments to the centre. The Net Outturn for 2014 was €20.3 million, giving a surplus to surrender of some €10 million. The underspend primarily arose because of later than anticipated transitioning of staff to Peoplepoint and Payroll Shared Services.
Vote 41 – Office of Government Procurement
The Estimate for 2014 was set at €12.4 million. The outturn was
€6.2 million, leaving a surplus to be surrendered of €6.3 million.
This surplus arose mainly;
- Due to slower than anticipated recruitment – only two-thirds of expected staff were on board at the end of 2014, and;
- Knock-on savings in non-pay spend
Conclusion
Before concluding, I would like to take this opportunity to express my appreciation to the staff of the Department for their ongoing hard work. Since being established in 2011, the Department has achieved many things, none of which would have been possible without their commitment and dedication. As the country enters the next phase of our recovery, the Department will continue to make a substantial contribution to public policy, budgetary management and the management and reform of the public service. I look forward to working with this Committee on these issues in the future.
Thank you.
ENDS