Introduction

Thank you Chairman.

I would also like to thank the Committee for giving me the opportunity to make a short opening statement.

I am here in my capacity as Secretary General of the Department of Public Expenditure and Reform.   As you know, the Department and the Committee share the same objectives – to manage public expenditure efficiently and to deliver value for money for the taxpayer.

Before I go on, I would just like to express my appreciation for the staff of the Department.  Appended to this statement is a list of key achievements, delivered thanks to the hard work and commitment of those officials.

I would also like to thank my colleagues in the Department of Finance, with whom we work closely across a range of issues.

Minute of the Minister

Previously there were some issues with delays in responding to PAC recommendations.  I should say that the Department makes every effort to provide the Committee with an early response to its reports.  As such, there are no issues currently outstanding for the Minister of Public Expenditure and Reform.

Public Expenditure

I would like to very briefly touch on some of the work of the Department.

One of our key goals is to ensure that spending targets are set and delivered, and that the fiscal deficit is reduced.

We are meeting our Troika commitments.

In each of the years 2011 and 2012, Departmental spending has been managed tightly.  In 2011, gross Departmental spending was €57.4 billion, at variance of 0.3 per cent with profile.  In 2012, gross spending was 0.2 per cent at variance.

Gross voted spending has been reduced from its peak of €63.1 billion in 2009 to €55.9 billion last year.  Estimated gross expenditure for this year is €54.6 billion.  This represents a reduction of 14½ per cent between 2009 and 2013; an 8 per cent reduction in current spending and a 50 per cent reduction in capital spending.

Better Budgeting

In meeting our targets, we have introduced a series of reforms to the way in which we manage public money.  Public spending is now subject to greater openness, within a more coherent and integrated planning and performance management framework.

The introduction of a Multi-annual Expenditure Framework allows for transparency about the allocations available to each Department over the coming three-year period.  The legislation to put this Framework on a legislative footing has completed report stage in the Dáil and is today at Second Stage in the Seanad.

We have greatly enhanced the amount of output level information we provide in the annual Estimates of Public Expenditure and the Minister has been working to encourage greater engagement by the Dáil in the Estimates formation process.

Last October, Minister of State Hayes launched Ireland Stat – a new website setting out whole of Government performance statistics.

The new Public Spending Code aims to ensure that both current and capital expenditure are subject to more rigorous value for money appraisal in advance of public moneys being spent.

All purchase orders over €20,000 are now published on Departmental websites.

Last year, we established the Irish Government Economic and Evaluation Service to support better policy-making across the system, through enhanced economic and policy analysis expertise.

Public Service Pay and Pensions

A key part of fiscal consolidation is reducing the Public Service paybill and managing the service delivery and IR consequences of this.

From its peak of €17.5 billion in 2009, the Public Service Pay Bill was reduced to €14.4 billion last year, net of the Pension Related Deduction.  This is a reduction of almost 17.7 per cent.

The numbers employed in the Public Service have fallen by almost 10 per cent.

Public servants have already had two pay reductions, totalling an average of 14%.  Those earning over €65,000 have had a further cut from the start of July. 

Public Service pensions have been reduced, saving over €100 million annually.

The new single public service pension scheme significantly reduces future pension costs.

The Croke Park Agreement facilitated significant cost savings, while also enabling reform across the Public Service.

The new Haddington Road Agreement will deliver further reforms and savings.

Reforming the Public Service

Radical and sustainable change to the Public Service is being implemented, based on the Government’s Public Service Reform Plan, which was published by Minister Howlin in November 2011.

In an environment of significantly reduced budgets and staff numbers, and increased demands, we are continuing to deliver services thanks to a number of measures, for example, more effective redeployment and changes to rosters and work practices.

Public Service staff numbers are continuing to fall and will be reduced to around 287,000 by end 2013.  This represents a reduction of some 33,000 from the 2008 peak of 320,000.  We plan to reduce this number further by the end of 2014.

The Haddington Road Agreement will deliver an unprecedented increase in productivity, through the provision of almost 15 million additional working hours.

We are changing the way Departments are organised.  The Civil Service HR and Pensions Shares Services Centre was launched by Minister Howlin and Minister of State Hayes earlier this year.   Once fully operational, the savings will be substantial, estimated at €12.5 million annually, with a reduction of 17% in staff numbers in HR across the Civil Service.

We are establishing a single Civil Service Payroll Shared Service Centre.  Other shared services projects are also being developed.

We are bringing a more structured and efficient approach to public procurement.  A Chief Procurement Officer was appointed earlier this year to lead the new Office of Government Procurement and to deliver the changes identified in the external review of the central procurement function, undertaken last year.  The target is €500 million in savings over the next three years, from an identified addressable spend of €7 billion.

We need to have contestability and competition in the delivery of services.  To this end, all new services must now first be tested for external delivery suitability before any approval to deliver the service internally will be granted.

Other functions and services are being assessed to establish if they can be delivered more effectively.  For example, we are now examining ways in which the processes around recovery of debts can be made cheaper and more efficient.

A Chief Information Officer was appointed recently to lead implementation of the eGovernment strategy and to deliver greater use of on-line services and data consolidation.  We are building on our successful delivery to date and must take full advantage of the potential that ICT has to make services more accessible, customer-driven and efficient.  This is an area in which we need to do much better as a system.

Leadership

We have made progress in improving how the Civil Service is led and managed.

A more strategic approach to Human Resources is being driven by the Civil Service Directorate in our Department.

Workforce planning is now being coordinated to ensure that staff are positioned and equipped to meet business and service priorities.

We are enhancing leadership capacity across the system, including through the Senior Public Service, and we are bringing in expertise from outside the Public Service where required.

We are working to strengthen our management and delivery skills.  In doing this, we have introduced a Staff Exchange Scheme between the Civil Service and the private sector.  Also, the Civil Service Career Break Scheme permits civil servants on career break to take up paid employment for a period of up to three years, subject to the normal protections.  The experience gained will benefit the Public Service.

Last year, we introduced new sick leave arrangements.  For most employees, the new arrangements will mean that the amount of paid sick leave which they may be granted has been halved.

We have also introduced a standardised annual leave system across the Public Service with reduced leave benefits for promotees and new entrants.  As well as reducing costs, these measures bring greater uniformity and integration across the system.

Political / Government Reforms

Another key objective of Minister Howlin is to rebuild public trust in the State, through a programme of political and legislative reforms.  Decision making must be more open and transparent.  Decision makers must be more accountable.

Progress in this area commenced with the Ombudsman Act 2012, which came into effect in October last year.  This resulted in the most significant expansion in the jurisdiction of the Ombudsman in the 30 years since the original legislation.

An Inquiries, Privileges and Procedures Bill was published by Minister Howlin in May. This will establish a comprehensive statutory framework for the Oireachtas to conduct inquiries within the current constitutional framework.

We are introducing legislation to deal with whistleblowing for all sectors of the economy.  This legislation will ensure best practice, where whistleblowing will be encouraged and promoted and the whistle-blower will be protected.

A Freedom of Information (Amendment) Bill will ensure that Ireland’s FOI regime is restored to the top tier of legal frameworks internationally for facilitating access to official information.

We are making provision for the statutory regulation of lobbying.  This will shine a light on interaction with those who seek to shape and influence policy across all sections of society.

An integrated Ethics Bill is being introduced.  This will be a key part of a much improved anti-corruption system which will both control and regulate conflicts of interest in public life in Ireland.

Minister Howlin recently announced Ireland’s participation in the Open Government Partnership, which will promote transparency, empower citizens and harness new technologies to strengthen governance through the publication of Public Service information.

Other Areas of Reform

There are other areas where the Department is delivering on its commitments.

The State Agency rationalisation programme is well underway at this stage.  Measures involving 25 bodies had been fully implemented.  Measures involving a further 83 bodies are at advanced legislative or administrative stages.  The critical review process undertaken in 2012 also identified further measures, involving 107 bodies, the majority of which will be implemented this year.

Significant progress has been made on the State Asset disposal programme.  For example, in February, the ESB announced its intention to sell its 50 per cent shareholding in each of its international tolling plants, in the UK and Spain.  And in May, BGE launched the sale process for its energy business, Bord Gais Energy. 

Minister Howlin announced in April that there would be a competition for the next National Lottery licence.  The new 20 year licence is expected to come into operation in 2014.

Legislation

The Department has prepared and published 8 pieces of legislation in the last 12 months.  In addition to the political reform measures I have already mentioned, legislation has been brought forward on:

enactment of the new single Public Service Pensions Bill;

a Public Service Management Amendment Bill to enable redeployment and mobility within the Public Service;

legislation for voted expenditure;

amending the Oireachtas Commission Act 2003, agreeing expenditure limits and related matters;

revision of Public Servants pay and conditions; and

providing a legislative framework for the operation of the National Lottery.

Administrative Duties

In 2012, we answered 1,980 Parliamentary Questions and 1,932 Representations. 

In the first six months of this year, we have responded to almost 1,200 Parliamentary Questions and dealt with more than 900 Representations from members of the public and their representatives.  While it is often overlooked, this sort of administrative work is significant and should be acknowledged.

There are further details of our work programme at the back of this statement.

Items on the Agenda

I would now like to turn to the items on the agenda today.

Vote 7 – Superannuation and Retired Allowances

Vote 7 provides primarily for pension benefits for civil servants and pension payments to their dependents.  It is a Vote that is particularly difficult to estimate as the majority of persons covered by the Vote may, once they reach the age of 60, opt to retire at any stage before reaching compulsory retirement age.  Indeed, eligible persons may opt to retire even earlier and there will be retirements due to ill health.

The Outturn under Vote 7 for 2011 was €432.5 million gross, or €345.2 million net when account is taken of receipts and appropriations-in-aid.  Members will note that net expenditure was some €22.5 million below estimate, due primarily to expenditure on retirement lump sums being under estimate.  This arose due to the extension of the “grace period” to end February 2012, which facilitated people in delaying their retirement until early 2012.

At end 2011, some 18,600 persons (including spouses) were in receipt of pensions from Vote 7.  This had increased to almost 20,000 at end December 2012 owing to a combination of high retirement levels in 2012 and – I am glad to say – persons generally living longer.

The regular preparation and publication of actuarial assessments of Public Service pension provision is an important part of policy formation.  Following discussions with the C&AG, the Department has now commenced a major exercise with the intention of updating the accrued liability figure.   This will take into account the relevant changes in Public Service pay and pensions in recent years.

A new Single Public Service Pension Scheme for new entrants to the Public Service has been introduced.  This sees pension benefits based on career-average earnings rather than final salary, for all new entrants since January 2013.   For these new joiners, there is a new minimum Public Service pension age of 66 and this will increase in line with any future changes in the State pension age.  In recent weeks, we have further reduced Public Service pensions by between 2 and 5 per cent for those in receipt of more than €32,500. 

Vote 42 – Office of the Minister for Public Expenditure and Reform

The second item on the agenda today is the 2011 Appropriation Accounts for the Department of Public Expenditure and Reform.  As you are aware, the Department was newly formed in July 2011 and the Estimate for that year represented an allocation from the Department of Finance Estimate to reflect the functions transferring to the new Department.

The Department had an outturn of €30 million, compared to an estimate of almost €35 million.  There were two key variances:

A €2.1 million saving on Administrative Budget pay; and

A €1 million saving on the allocation for the Referendum Commission.

Savings on pay were driven by the decision to defer both recruitment and project investment, pending critical assessment of the merits of each project and development of the Public Service Reform Plan.  In addition, despite centralisation of the Civil Service Employee Assistance Service in 2011, the bulk of the staff did not transfer until 2012.

On the second main area of variance, communications costs for the Referendum Commission were lower than they had anticipated in their original submission.

Although not specifically under review today, I should also say that the allocation for the Department in the 2012 Estimates – the Department’s first full year of operation – was just over €41.7 million.  The provisional outturn for 2012 indicates a saving of some €4.6 million on this figure. 

The Vote allocation for the Department in the 2013 Estimates amounts to €36.4 million.

Chapter 6 – Financial Commitments under Public-Private Partnerships

Ireland has 17 operational Public Private Partnerships.  Expenditure prior to 2011 was almost €1.4 billion.  

In July last year, Minister Howlin announced plans for additional investment in public infrastructure projects in Ireland, which included the new PPP programme.  This investment is additional to the exchequer public capital programme, as it is primarily funded by the private sector.

Chapter 12 – Vote Accounting

The Comptroller and Auditor General’s Report Annual Report 2011 shows that net Departmental expenditure for the State as a whole fell from a high of €49.3 billion in 2008 to €45.6 billion in 2011, a reduction of €3.7 billion. 

Each Vote stayed within the allocation appropriated by Dáil Éireann for 2011, with Departments returning over €700 million to the Exchequer at the end of the year.

Also of note in relation to the 2011 Estimates was the introduction of Performance Budgeting on a pilot basis.  It has since been introduced to every Department. 

With regard to government accounting policy, my Department is currently examining the steps involved in the transition to accrual accounting for the Appropriation Accounts.

With effect from the 2011 Appropriation Accounts, all Departments are producing balance sheets.  The transition to accrual based accounting involves a wide range of issues including legislative change, accounting standards, training and development and resources and systems issues.  My Department will be in consultation with stakeholders, including this Committee, on this issue.

My Department has also established a joint working group with the Office of the Comptroller and Auditor to review the control and accountability framework for the administration of grant funding by public bodies.

Chapter 13 – Procurement without a Competitive Performance

I welcome the analysis carried out by  the Comptroller  and  Auditor General  of   the  Circular  40/02  public  procurement  returns  for  2011.

Last year’s Review of Central Procurement identified the need for further work on procurement data in order to more accurately categorise all State procurement spend by type, location and vendor.  The recently established Office of Government Procurement has prioritised this analysis and its completion will allow the Circular 40/02 returns to be placed in context.  For example, non-competitive procurement as a percentage of total procurement will be used as a metric to identify if there are areas where particular attention may be required.

In the 10 years that Circular 40/02 has been in place, public procurement has been the subject of a number of important national and EU reforms.  It would seem appropriate, therefore, to review the operation of the Circular to ensure it continues to provide useful and relevant information.

Conclusion

I think it is fair to say that we have achieved much in our new Department over a short period of time.  Once again, I would like to acknowledge the hard work and commitment of officials in the Department.

I look forward to working with the Committee as we continue our work.

Thank you.

ENDS

Appendix A

 Department of Public Expenditure and Reform

 Key Achievements

Introduction

Brendan Howlin, TD, was appointed as Ireland’s first ever Minister for Public Expenditure and Reform in March 2011.

Minister Howlin is a member of the Government’s Economic Management Council.

The Department of Public Expenditure and Reform was formally established by statute in July 2011.

In addition to undertaking the expenditure evaluation functions for both current and capital expenditure, the Department is responsible for both public service and political reform.

Robert Watt was appointed as the first Secretary General of the Department.

Department

Major legislative work was undertaken in establishing the Department.

A new website was launched – this is being radically overhauled by our IT unit at no cost and will be re-launched by Autumn.

Twitter feed and a blog have been launched.

All minutes and agendas of Management Board meetings are published.

Expenditure – high level achievements

Ireland has met all and exceeded many expenditure targets under the EU/IMF programme. In total, spending adjustments designed to yield over €15 billion have been implemented during this crisis.  This represents the vast bulk of the required total adjustment. 2012’s General Government deficit is estimated at just under €13½ billion or 8.2% of GDP.  This is within the 8.6% of GDP limit set by the ECOFIN Council in December, 2010.

The Comprehensive Review of Expenditure initiated in 2011 was completed and all background documentation published.

Comprehensive Expenditure Report 2012 – 2014 was published on Estimates Day 2012.

A review of capital priorities was published leading to the publication of the ‘Infrastructure and Capital Investment Plan 2012-2106.

Budget day now consists of speeches by both the Minister for Public Expenditure and the Minister for Finance.

On 6 February 2013, IBRC was liquidated and the promissory note deal restructured.

Expenditure Reform

The Budgetary process has been radically reformed, with the adoption of a multi annual budgetary framework, with expenditure ceilings for future years.  Performance based budgeting was introduced across the public service.

The Budget will now take place on October 15 2013.

A new value for money code for capital and current projects has been introduced.

Performance budgeting for all Departments – for the first time matching expenditure inputs with policy goals has been introduced for all Government Departments.

The Irish Government Economic and Evaluation Service (IGEES) was established to prove analytical skills across the public service.

An expenditure databank, allowing researchers access to Irish Government Expenditure data has been published on the Department website.

All purchase orders to a value of over €20,000 are published on the Department website.

The Department launched the new Internal Audit Standards for the Central in November 2012.

Stimulus

Minister Howlin successfully negotiated with the Troika that half of the funds from the sale of assets can be used for productive investment measures in the domestic economy. The other half will be used for leverage for stimulus and eventually used to pay down debt.

The sale of the National Lottery Licence has been initiated.

In July 2012, Minister Howlin announced a €2.25bn stimulus package including roads, school bundles, primary care centres and the Grangegorman Campus.

In June 2013, it was announced that the NTMA (Amendment) Bill 2013 will provide for the establishment of the Ireland Strategic Investment Fund (ISIF) by reorienting the National Pension Reserve Fund and making the €6.4 billion in the Fund’s discretionary portfolio available for commercial investment in Ireland. The Bill will also formally establish NewERA which will identify new investment opportunities and will take a commercial approach with an emphasis on return on capital to the oversight of the Semi State Sector.

Public Service Reform – high level achievements

Establishment of the Public Service Reform and Delivery Office within the Department and a strong governance model to drive the delivery of reform.

Publication of the Government’s Public Service Reform Plan in November, 2011.

Publication of a Progress Report on the Implementation of the Public Service Reform Plan in September 2012.

Reduced public service numbers from a high of 320,000 in 2008 to 290,000 by end 2012. Government is seeking to further reduce this number to 282,500 by end 2014.

We are reducing duplication and waste through greater use of Shared Services for a range of back-office functions.  For example, PeoplePoint, the new HR Shared Service Centre for the Civil Service will reduce HR headcount by 17% and costs by 26%, with annual net savings of €12.5 million and we are establishing a single Civil Service Payroll Shared Service Centre, which will achieve savings of €5.6 million per annum when fully operational.Appointed a Commercial Delivery Manager. All new services must now first be tested for external delivery suitability before any approval to deliver the service internally will be granted.

Established a new Office of Government Procurement and appointed a Chief Procurement Officer from outside the public sector.

Launched a new eGovernment and Cloud Computing strategies and appointed a Chief Information Officer.

Established Senior Public Service to support leadership development and collaboration at top management levels.

Ireland Stat website launched.

Public Service Reform – specific changes

Produced significant programme of agency rationalisation.

Cancelled many parts of the ill-conceived decentralisation programmes.

Standardised annual leave arrangements for serving and new public servants.

Halved sick leave entitlements across the public service.

Reduced pay rates applicable to retired public servants on interview boards.

Reformed the PMDS system and issued guidelines on management of underperformance.

Reduced the number of Oireachtas Committees.

Progressing the Constructions Contract Bill to protect sub contractors. 

Set up a Data Sharing Clearing House to promote better data sharing across the public service.

Introduced a mobility programme between the public service and the private sector.

Launched www.gov.ie – a portal to over 400 services online.

Political Reform

The Ombudsman Amendment Bill enacted on 31 October 2012 strengthens the Ombudsman’s powers and will extend the Ombudsman’s remit to at least another 140 public bodies including, for example, all third level institutions. 

Published Protected Disclosures in the Public Interest Bill 2012.

Enacted the Statute Law Revision Act 2012 to modernise the statue book by removing obsolete legislation.

Published discussion paper on the Regulation of Lobbying.  Heads of a Bill have been published.

Freedom of Information Bill published.

Oireachtas Inquiries legislation to Government Bill to be enacted shortly.

Minister Howlin issued letter of intent for Ireland to participate in the global Open Government Partnership.

Pay and Pensions

Concluded  discussions on the Haddington Road Agreement which will deliver a substantial additional saving of €1 billion to the public service pay and pensions bill by 2016Enacted the Public Service Pension Single Scheme Act to reduce the future cost of public service pensions.

Increased the pension reduction to 20% for elements of public service pensions over €100,000.

Reduced the allocation for overtime by 10% for 2012.

Abolished severance payments for Ministers and TDs.

Reduced the pay of the Taoiseach and Ministers.

Reduced allowances and secretarial supports for former Taoisigh.

Reformed Ministerial transport arrangements.

Reformed the membership of TLAC including an external chair and reformed TLAC terms for future Secretaries General.

Reduced staffing arrangements for Ministerial Offices.

Reduced the pay for the Judiciary in line with other public servants.

Introduced a general pay cap of €200,000 for public service and €250,000 for CEOs of commercial semi states.