I welcome the opportunity to present the 2012 Estimates for my Department’s Group of Votes. If I may, I will begin by making some general comments in relation to the major developments in my Department’s field of responsibility, in order that the committee can better understand the changes in the format of the Estimate and the reasons for cyclical/temporary changes in funding requirements.
The budget for my Department has increased by some €11.5m (or 39%) compared to the 2011 Outturn or €6.9m (20%) compared to the 2011 Estimate. The increase is required to enable my Department to meet its commitment to formulate and promote policies which drive efficiency, effectiveness and reform across the public service and to manage public expenditure at more sustainable levels.
The increased funding requirement is expected to be temporary in nature, tailing off over the period to 2015 as various reform projects are completed. However, in view of the fact that the increase is substantial in percentage terms, I would like to set out for the Committee the reasons for the increase.
Under the new format, my Department’s outputs are divided across two programmes. The first, entitled “Public Expenditure and Sectoral Policy” has responsibility for the delivery of major public expenditure reviews, both in the capital and current areas. The Comprehensive Review of Expenditure set the scene for the full delivery of our expenditure consolidation objectives, coupled with a range of major structural reform initiatives. By any standard, 2011 must be seen as a successful and productive year in terms of upholding Ireland’s reputation as a country that has the capacity to manage its public expenditure commitments, while driving forward with bold new reform measures.
Expenditure on this Programme, has increased by circa €3.8m.
· Some €2.3 million of this arises on Peace/Interreg funding which is cyclical in nature and represents a commitment we have given under a multi-annual plan. This funding is a matter for cross-governmental deliberation.
· A further €0.550 million arises from a change in accounting treatment whereby my Department bears accommodation and facilities costs that would previously have been borne on the Department of Finance vote. This is therefore Exchequer-neutral.
· The remainder of the increase is accounted for by once-off funding of EU Presidency, Procurement training and National lottery retendering costs.
The second programme is entitled “Public Service Management and Reform”. The new Reform and Delivery Office has a key role to play in driving, co-ordinating and supporting the implementation of the reform programme. For this reason, the Reform Agenda Fund (formerly the Change Management Fund) has been allocated a total of €1.730m for 2012. I am sure that the Committee will appreciate that there is sometimes a need to invest in change, in order to support increased efficiency and effectiveness, and to reduce costs in the medium to longer term, and that is the purpose of this funding.
Expenditure on this Programme has increased by some 8 million euro. This is primarily driven by:
· A carryover of €800k of pay bill savings from 2011 which will be used to cover temporary staffing capacity required during the progression of certain reform projects.
· An increase of €1m on the non-pay administrative budget arising from the change in accounting treatment mentioned previously.
· A provision of €4.63m in respect of the development of a HR Shared Services Centre. This is a short term “spend to save” project which will see certain HR functions centralised in my Department.
· An increased provision of €1.4m for the Reform and Delivery Office. Provision had been made for some of this work in the 2011 Estimate but work was deferred pending critical reassessment of the merits of each project and development and publication of the Public Service Reform Plan.
Performance Budgeting and Dáil Oversight
Moving on to the revised format of the Estimates presented to you in 2012 and to touch briefly on performance budgeting. The Estimates before Committees this year are delivered in a new format that brings together an unprecedented amount of information so that members of the Oireachtas, members of the public and decision makers can see at a glance the financial and human resource input costs, the key outputs and the impact indicators for each Programme.
Financial information is set out in Strategic Programmes – which mirror the Key Objectives set out in the Statements of Strategy. For each Programme, there is a clear presentation of the financial resources allocated to that area, broken down by subhead. This presentation also makes clear the administrative spend going towards each area, and the level of staff resources involved.
Beneath this, the public service activities are shown, with key outputs in each case. The intention is to give the Committees a clear sense of what exactly public funds are being spent on.
At the end of each Estimates page is a section showing the “Context and Impact Indicators”. These indicators are intended to give a sense of whether the public service outputs are having an impact, in terms of better outcomes that are being seen and experienced by citizens.
For my Department this means that there are two Strategic Programmes – Public Expenditure & Sectoral Policy and Public Service Management & Reform. The administration heading from the old Estimates is included for illustrative purposes but all of the expenditure detailed in Part II of the Revised Estimate for my Vote under roman numerals is included in the financial resources allocated to the Strategic Programmes.
In summary then – this year’s Estimates represent an important structural reform that is intended to assist you as Dáil Committee members in your task of scrutiny and holding the Government to account.
Medium Term Expenditure Framework
But the new Estimates are just one part of a broader project of reform in the area of accountability, performance and Dáil oversight. I wrote to the Chairs of all of the Oireachtas Committees in January to advise them of the new arrangements and the opportunities for greater engagement by public representatives in the Estimates formation process. In last December’s Comprehensive Expenditure Report, I announced a move to a modern Medium Term Expenditure Framework, which involves the setting of expenditure ceilings for each Government Department over a three year period. Therefore, the overall allocations available to each Department for 2013 are already known, and the process of debate and engagement can get underway at an early stage with Departments on how to prioritise within these allocations. In other words, Dáil Committees should not feel constrained to wait until Estimates are produced later at the end of the year, or until the Revised Estimates are formally submitted, before engaging in the policy debate.
New Value for Money Code
For 2012, the objective is to maintain this momentum of achievement and of reform. We will meet all of our public expenditure targets. We will drive forward with further reform measures. For example, a new Value for Money Code has already been put in place, and teams of evaluators are conducting targeted analyses of various public expenditure areas, while Departments conduct more general VFM & Policy Reviews. I envisage that all of these analyses will come before Committees in due course, to aid your work in scrutinising Departmental allocations, and indeed contribute to your new role in engaging in the Estimates deliberations at an earlier stage.
I should add that the types of indicators included in the new Estimate are ones which my Department considered might be of most interest to the Committee members. As indicated in my letter to Committee Chairpersons in January, I am more than happy to receive any constructive feedback from Committees about how the process can be improved, and whether the indicators – both for Outputs and for Impacts – can be refined to give a clearer sense of what is being achieved. My sense is that a close engagement with the Oireachtas on this matter can only improve the quality of scrutiny, and improve the levels of accountability both for Ministers and for public service managers regarding what is being achieved and delivered with public funds.
Public Service Reform
Numbers Reduction and Public Sector Pay
I now wish to turn to the subject of public service reform. Ireland is committed under the EU-IMF programme to reducing the overall size of the public service. This is also a key element of the Programme for Government. The total net cost of the public service pay bill will be reduced from 2008 to 2015 by some €3.5 billion, or €3.8 billion from the pay bill’s peak in 2009. Delivering this reduction will require continued implementation of the moratorium on recruitment, with exceptions being limited to only essential posts and the utilization of redeployment as the primary mechanism to fill posts which have been approved.
Already, significant progress is being made in reducing the numbers employed in the Public Service. The outturn for end-2011 stood at 296,900 and numbers have fallen to approximately 292,000 at the end of Q1 2012. The Government is on track to meet its ceiling for 2012 of 294,400, exceeding the target set by the previous
Government by two years. This is no small achievement and I recognize the impact this has had on public service workers and their families. I would also like to salute the many people in our public services who are striving daily to deliver a first class service within reduced resources and increased demands. In this context, I would like to refer to the widespread concern expressed about the ending of the ‘grace period’ at the end of February. I am pleased that the considerable work undertaken in all areas of the public service has ensured that the pessimistic scenarios depicted by some have not materialised. The work done by Transition Teams, local managements and particularly frontline staff have ensured that service delivery has been protected as staff have co-operated with widespread workplace change and greater efficiency.
The chief public concern before the termination of the grace period was the fate of frontline services. In order to protect those services, the Government is committed to keeping control public service pay costs. The Financial Emergency Measures in the Public Interest (No 2) Act of 2009 and the Croke Park Agreement set the overall framework for public service pay policy. These instruments remain crucial to reducing the overall public service paybill in line with the commitments made in the Memorandum of Understanding with the EU/IMF. I am required before end June each year to carry out a review of the operation, effectiveness and impact of this Act, having regard to the overall economic conditions in the State and national competitiveness. The Review will be completed by the end of June and will be laid before each House of the Oireachtas.
Croke Park Agreement
Of course, the Government’s overriding objective is not merely to control public service pay costs but also to have a more customer focused, leaner, more efficient and better-integrated public service which delivers value for money. In that regard, the Croke Park Agreement continues to serve as a key strategic framework for underpinning stability and economic recovery. Reports published by that Body in the past year have provided evidence of “solid and measurable” progress under Croke Park. That said, we know that there is much more that must be done under the Agreement in every part of the public service, given the ongoing difficult economic and fiscal environment we face. The Croke Park Implementation Body is currently carrying out its second annual review of savings and progress under the Agreement and will publish its assessment in the coming weeks. I look forward to the outcome of that review which, I hope, will be able to point to significant further progress on delivery in every sector of the public service.
However, it is not only on the numbers and pay fronts that the public service must change. Given the challenges that we face as a country, we need to achieve the most ambitious reform of our Public Service in the history of the State. The reality is that the difficult situation we are in means that reduced costs, innovation, flexibility and the delivery of streamlined services must be at the heart of a reformed Public Service.
Public Service Reform Plan
Late last year, I launched the Government’s Public Service Reform Plan. The Reform Plan represents a comprehensive and integrated approach to reform, with clear timelines set down for the implementation of the 200 or so actions. The Plan is based around 5 key commitments to change, namely:
· Placing Customer Service at the core of everything we do;
· Maximising new and innovative service delivery channels;
· Radically reducing our costs to drive better value for money;
· Leading, organising and working in new ways; and
· Maintaining a strong focus on implementation and delivery.
I have established a dedicated Reform and Delivery Office led by a Programme Director within my Department to oversee and drive this reform programme. We have also put in place effective governance and other support structures to ensure a strong focus on delivering reform across all sectors of the Public Service.
We are reforming how people are managed – for example through performance management, with a far greater emphasis than before on detecting underperformance and taking steps to rectify it, and the introduction of the Senior Public Service, with the objective of strengthening the senior management and leadership capacity of the public service and supporting a greater degree of mobility across the public service.
We are reforming how we are organised – for example through implementing shared services; evaluating options for external service delivery; restructuring and reorganisation; online delivery and greater use of ICT; and rationalising State Agencies.
Shared Services
My Department will drive the reform agenda during 2012. It will continue to introduce shared services models in areas such as HR, Payroll, Banking and Pensions. Shared Services will provide significant benefits through a reduction in duplication, streamlining of business processes and reduced transaction times. To lead this initiative, a Shared Services Transformation Manager with significant international experience in the shared services area has been appointed. Significant progress is already being made on a HR Shared Service for the Civil Service and payroll and pensions shared services projects are also being initiated in the Civil Service. Sector-specific shared services implementation plans will be in place for all sectors by the end of June.
Business Process Improvement and Performance Measurement
The Business Consulting Unit in the Office will lead business process improvement in Departments and Offices, with a renewed focus on administrative and service level improvements across the Civil Service. The same Unit is also designing a pilot for a Government-level performance measurement system - GovStat for short. It is intended that GovStat will give online access to the public into the performance measures used by the Government to demonstrate the success (or otherwise) of public policies and what the administration does in order to deliver on them.
In addition, the new Baselining Unit in the Office will provide leadership of baselining across the Public Service, as well as to provide overall co-ordination, aggregation and analysis of baseline data and feed it into the development of business cases. The baselining of administrative/back-office functions across the Public Service to ascertain the current level of performance will be an important step in developing a comprehensive business case in support of shared services.
We will also identify and evaluate innovative and alternative models for delivering non-core public services, so as to reduce costs, increase flexibility and allow public service organisations to focus on their core valued-added activities. There are opportunities for the best of the public and private sectors to come together, to learn from each other and to present new models for delivering services efficiently and effectively.
Transparent and Better Government
I wish to conclude by drawing the Committee’s attention to my Department’s work in facilitating more transparent and better government. This includes policy and legislative changes covering:
· Freedom of Information;
· Protected Disclosures (i.e. “Whistleblowing”);
· Regulation of Lobbyists; and
· Ministerial and Civil Service Accountability.
Freedom of Information and Whistleblower Legislation
My Department is at an advanced stage in the preparation of the General Scheme of a Freedom of Information Bill and I expect to be in a position to introduce a Bill later this year to give effect to the FOI commitments in the Programme for Government. The Government has recently approved the draft General Scheme of the Protected Disclosures in the Public Interest Bill 2012. This Bill will provide for an overarching legislative framework for good faith reporting and protected disclosure on a uniform basis for all sectors of the economy covering the public and private spheres, including An Garda Síochána and the Defence Forces. It represents the first step in fulfilling the commitment in the Programme for Government in relation to the introduction of whistleblower legislation.
Regulation of Lobbyists
Work is also progressing on the introduction of a legislative framework for the regulation of lobbyists. My Department is currently studying the submissions received, as part of the consultation process, and is developing a policy paper on this issue. In addition, the nature of the accountability relationship between Ministers and civil servants is under review by the Government. A position paper is being developed to identify the necessary and other legislative changes to deliver on the Programme for Government commitments.
Conclusion
To sum up, since it was established in July of last year, my Department has been involved in a very wide-ranging series of public service and political reform, within the perimeters of the public expenditure constraints on the Government and the commitments in the Programme for Government. I am happy to record my appreciation of the work of the Department’s staff. A lot remains to be done in the years but I have every confidence in their continued
ability to respond effectively to all demands placed on them.
Presentation of 2012 Estimates
In that regard, I hereby present the 2012 Estimate for Votes 11, 12, 14, 15, 16, 17, 18 and 19 which are summarised on page 3 of your brief. The committee will note that the proposed Vote Group allocation has increased by €87.625m (or 22%) compared to 2011 Outturn. I have already spoken in detail about the increase on my own Vote.
The remaining increase is driven largely by an additional provision of €73m on the Superannuation Vote. The Superannuation and Retired Allowances Vote for 2012 is under my aegis and provides for pension and lump sum costs for civil servants. This year’s estimate for Vote 12 proposes a net provision of €418m, an increase of €73m or 21% on the 2011 provisional outturn.
This increased provision is to cover the additional pension and lump sum costs of civil service retirements arising this year with the expiry of the pension “grace period” on 29 February – 1,424 people retired from the Civil Service before this date on the basis of pre-cut pay. Staff who retired before the end of the period are subject to the Public Service Pension Reduction, on average a cut in pension of 4%, and those who retire after this date have pensions based on reduced pay levels, on average reducing pensions by 7%. The Government is committed to getting our public finances back in order but doing this in a fair manner - that is why I increased the Public Service Pension Reduction to 20% on element of pensions over €100,000.
I would also like to take this opportunity to dispel some myths about civil servant pensioners and in particular those retirees during the grace period. The 2012 Estimate assumes an average pension for civil servants retiring this year of €29,000 with a corresponding average once off lump sum of €87,000.
Clearly, these numbers show that pensions for the huge majority of Civil Service retirees are modest. There is a lot of focus on the top end of pensions in the public service but it is important to note the figures I have just quoted. These large pensions are not representative. It must be stressed that 38% of civil servants are on occupational pensions of €10,000 or less and 25% have pensions paid from Vote of €5,000 or less – some people may of course have other pension income, but these numbers show that commentators should be very cautious about claiming that pensions are excessive.
Some, quite hysterical, media reporting claimed that the youngest and brightest would leave on big redundancies. The fact is that there were no redundancies. The grace period provided for people to retire on a pension based on pre-cut salary calculated on the actual duration of service. There were no special benefits - where staff were retiring before normal pension age retired on an actuarial reduced pension. In the Civil Service 13 of those retiring were under the age of 50.
There are one-off costs relating to people retiring, particularly with the payment of lump sums. But it must be remembered that significant savings in the Government’s paybill will result, especially with the non replacement of staff and the consequent reduction in numbers. Once the pension lump sum is paid in the year of retirement, the continuing pension cost is 50% of the original pay cost – a saving which will have been achieved without redundancies.
Over the period 2009 to 2015, it is expected that the Exchequer pay bill will reduce from €17.5bn to €13.7bn. That amounts to a saving of €3.8bn from the peak of the public pay bill. Even when the inevitable increase in public service pension costs over that period are included (and this increase represents a liability which has been maturing over the past 40 years), there will still be a €3.3bn or nearly 19% reduction, which, by any measure, is very significant.
In Quarter 1 2012 7,897 individuals have retired from the public service. This and the fact that we entered 2012 below our target means that I am confident that we will comfortably meet our 294,400 target for end 2012.
As regards the other Votes in the Public Expenditure and Reform Group, the Committee has been supplied with background briefing by my Department’s officials on all the Estimates being presented for its approval today.
I thank the Chairman and members for their attention. I commend the Estimates to the Committee. I will be happy to answer any questions which may arise.