Chapter 1.1 — Financial Outturn; Contingency Fund Deposit Account; Finance Accounts 2005.

Mr. D. Doyle (Secretary General, Department of Finance) called and examined.

Witnesses should be aware that they do not enjoy absolute privilege and should be apprised as follows. The attention of members and witnesses is drawn to the fact that as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 grants certain rights to persons identified in the course of the committee's proceedings. These rights include: the right to give evidence; the right to produce or send documents to the committee; the right to appear before the committee, either in person or through a representative; the right to make a written or oral submission; the right to request the committee to direct the attendance of witnesses and the production of documents; and the right to cross-examine witnesses. For the most part, these rights may be exercised only with the consent of the committee. Persons invited before the committee are made aware of these rights and any person identified in the course of proceedings who is not present may have to be made aware of them and provided with a transcript of the relevant part of the committee's proceedings, if the committee considers it appropriate in the interests of justice.

Notwithstanding this provision in the legislation, I remind members of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions within Standing Order 156 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I welcome Mr. David Doyle, Secretary General of the Department of Finance, who is here for the first time in that position. I ask him to introduce his colleagues.

Mr. David Doyle

I thank the Vice Chairman for his welcome. I accompanied by Mr. Derek Moran, assistant secretary in the budget and economic division, Ms Áine Stapleton, principal officer in the public service management division, as well as Mr. Tom Heffernan, principal officer in the sectoral policy division.

Mr. Purcell shall introduce Votes 1, 6, 7 and 12 and Chapter 1.1, the Contingency Fund Deposit Account 2005 and the Finance Accounts 2005. Chapter 1.1 reads:

1.1 Financial Outturn

The publication Audited Appropriation Accounts of Departments and Offices for 2005 (Prn. A6/0430) includes a summary which shows the amount to be surrendered as €774.84m. This is arrived at as shown inTable 1.

Table 1 Outturn for the year 2005




Estimated Gross Expenditure

Original Estimates


Supplementary Estimates


Deferred Surrender 2004



Deduct: -

Estimated Appropriations-in-Aid

Original Estimates


Supplementary Estimates



Estimated Net Expenditure


Actual Gross Expenditure


Deduct: -

Actual Appropriations-in-Aid


Net Expenditure


Surplus for the Year


Deferred Surrender 2005


Amount to be Surrendered


The amount to be surrendered represents 2.12% of Estimated Net Expenditure as compared with 1.72% in 2004.

Extra Exchequer Receipts

Extra Receipts payable to the Exchequer as recorded in the Appropriation Accounts amounted to €252,052,839.

Surrender of Balances of 2004 Votes

The balances due to be surrendered out of Votes for Public Services for the year ended 31 December 2004 amounted to €568m. I hereby certify that these balances have been duly surrendered.

Stock and Store Accounts

The stock and store accounts of the Departments have been examined with generally satisfactory results.

Mr. John Purcell

I shall start with Chapter 1. I normally reserve that particular chapter in my annual report for recording the overall financial outturn and other standard items. The net estimate provision for the year was €36.5 billion and the net expenditure was €35.4 billion. That is a surplus of around €1 billion, of which €289 million was retained by Departments and offices for deferred capital expenditure, in line with the provisions of the governing legislation enacted in 2004. That left an overall surrender figure of €775 million, which represented 2.12% of the amount provided.

Vote 1 covers the President's Establishment, with an outturn of €2.2 million for the year. The full operating cost is about €7.4 million, when account is taken of expenditure from other Votes and from the Central Fund. Note 7 to the account gives the details.

Vote 6 is for the Office of the Minister for Finance. There is a large surplus of €13.67 million to be surrendered on the Vote, representing over 13% of the Estimate. The main savings arose under subhead A3, which is incidental expenses, subhead E, Ordnance Survey and subhead J1, structural funds and technical assistance. Appropriations-in-aid came in at €9.7 million, almost all of which was classified as miscellaneous. That classification is not all that helpful. In reality, €8.8 million of the appropriations-in-aid arises from a refund from the special EU programmes body of moneys advanced in the previous year to meet cashflow difficulties. That is a North-South body and it would be funded by the EU. However, EU moneys are sometimes slow in materialising.

Vote 7 is for superannuation and retired allowances to civil servants. There was a substantial net surplus of €40 million on a net estimate of €257 million. The underlying reason was the overestimation of the numbers retiring during 2005. Vote 12 is for the Secret Service and the outturn for 2005 was €358,000. That was almost identical with the outturn for the previous year. In accordance with long-established procedure, I accept the veracity of the expenditure on the basis of certificates that are furnished to me by the relevant Ministers.

Members will recall the purpose of the contingency fund deposit account, which is used to fund urgent expenditure pending receipt of statutory authority. The fund was topped up in 2005 from the Finance Vote to bring it up to a more realistic €1.2 million. The committee was consulted on this and agreed to it. Incidentally, there was no call on the fund in 2005.

The Finance Accounts 2005 record all receipts and payments going through the Central Fund in the year. The supporting financial statements and schedules are in part 1 and the accounts of the national debt are in part 2. The accounts in part 2 also form part of the NTMA set of annual accounts. Overall, the Exchequer was in a healthy position at the end of 2005, showing a modest deficit of €0.5 billion on its transactions for the year. That is after paying €1.32 billion into the National Pensions Reserve Fund. The national debt at the end of 2005 stood at just under €38.2 billion.

Mr. Doyle

I thank the committee for giving me the opportunity to make an opening statement. I wish to refer to the headings listed on the agenda today. While there was an underspend on the President's Establishment, all the needs of that office were met. The bigger expenditures are in other Votes, mainly the OPW and the security area. Significant funds have been invested in the past few years in maintenance renewal of the facilities at the OPW, which have been done to a very high standard. The Comptroller and Auditor General has commented on the outturn of the Minister's office, in which savings rose for a number of headings. We can go into them later if necessary.

The net outturn on the superannuation Vote 7 was about €40 million less than originally provided. There has been a pattern of over-provision in recent years. The provisions under this heading are somewhat uncertain because there are different issues such as longevity and the proportion of people over 60 that may retire. There is a cohort of about 2,500 that could apply at any time. In fact, about 600 to 800 people retire every year. My preference is to see the Estimates under that heading much more closely related to actual requirements. That has been addressed in the current year. The original Estimate presented for 2007 was a bit too tight and we will propose its revision in the Estimates coming out next week.

It would be useful for the committee and the public to note some overall facts on pensions which do not pertain to the Vote, but arise in that context. About 14,000 Civil Service pensioners are paid from the Vote, but there are 75,000 further pensioners right across the public service, such as retired gardaí, teachers, Army members and so on. Therefore, there are already about 90,000 pensioners on the Exchequer payroll, with a bill close to €2 billion. That bill is set to double in real terms over the next 20 years, before any real increase in pay. That is because of the expansion in the public service in the 1970s, 1980s and early 1990s. The number of pensioners coming through will increase dramatically.

A number of initiatives were taken following the report of the Commission on Public Service Pensions to address some of those costs in the long term. One of the main initiatives was that the minimum pension age would be 65 for new entrants in the public service from 2004. At present it is 60 years but a staff member may continue until 65, which is the maximum pension age. That change was achieved after negotiation and consultation with the public service unions. In addition, there are approximately 400,000 people of pension age on the books of the Department of Social and Family Affairs, either through the non-contributory or contributory schemes. The gross cost of their pensions is close to €3 billion.

Looking to the future, in what is a major strategic issue with regard to public services and society as a whole, the number of persons over 65 in the population will increase dramatically — from approximately 500,000 now to approximately 800,000 in 20 years, and will be well over 1 million by 2050. This will have serious implications for social welfare pensions in particular and for the health services.

The National Pensions Reserve Fund, which the Government established some years ago in anticipation of this demographic bulge, contains approximately €19 billion and is increasing at a rate of 1% of GNP in contributions annually, plus earnings on investments. It will meet part of the bill associated with the costs arising from the significant expansion in the elderly population.

The Comptroller and Auditor General has dealt adequately with the Secret Service Vote, including summarising the key points of the financial outturn. Traditionally, Votes as a whole are not so tightly drawn that every one must come back to the House for a Supplementary Estimate. A margin is included to cope with the unexpected. Invariably, there is some underspend at the end of the year. The margin is 3% overall or closer to 2% if one takes account of the capital carryover to which the Comptroller and Auditor General referred.

On the contingency fund deposit account, close to €1.2 million is available, which has not been drawn on since the fund was put in place. The committee will recall from previous contact between it and the Department that the purpose of the fund is to meet urgent or pressing issues that might arise when the Dáil is not sitting and which are not specifically provided for in individual Votes. They must be of a non-controversial category and the Department and the Minister for Finance must be satisfied that the House would approve them in due course, when a Supplementary Estimate is brought before it. Both the Minister for Finance and myself would have to approve the use of this fund. When a decision is made to do so, it is standing practice that the Chairman of this committee and the Opposition finance spokesmen in the House are notified that it will be used.

The finance accounts cover a wide range of headings, and I will refer to the tax revenue heading. The original forecast was that tax receipts would grow by approximately 5.5% over 2004 and net borrowing would be approximately €3 billion in 2005. The outturn for tax receipts was a total of approximately €39 billion, which was an increase of 10.3% or €1.75 billion more than forecast. The net borrowing for the year turned out to be €500 million, which was an improvement of €2.5 billion on the original forecast. There are other miscellaneous receipts and the underspending to which I referred would account for the balance.

Turning to the basis of the forecasts, they are initially prepared by the Department of Finance on the basis of estimates prepared by the Revenue Commissioners, who largely operate based on the pattern in the current year and taking account of the Department of Finance forecasts for the economy and the various elements in that regard. There is a wide range of variable factors feeding into the forecasts.

Comments have been made inside and outside the House with regard to the conservative nature of the forecasting record. We would prefer to regard it as realistic forecasting but it is understandably cautious given that forecasts are inevitably fraught with difficulty as there are so many uncertainties and variables. The "big four" taxes — VAT, income tax, corporation tax and excise duties — account for almost 87% of total taxes and track movements in the economy. When the economy is doing well, there will usually be a surplus above the forecast and vice versa. The most significant reason for the difference in recent years has been exceptionally strong growth in capital taxes and stamp duty. This reflects, among other things, very strong growth in the property market, both in terms of throughput and value, which have both escalated strongly in recent years. However, we have not planned, nor would it be prudent to do so, decisions on the public finances based on an assumption that these receipts will continue to grow in line with growth experienced in the recent past. This is a prudent and sensible approach, which has been endorsed by the external scrutineers of the IMF and other commentators.

I emphasise there is no deliberate under-projecting of taxes to put downward pressure on expenditure or for any other reason. Since 2001, total voted expenditure has grown by an average of 10% per year. Historically, there have been years when tax receipts were significantly short of the forecasts and, to note two recent instances — there are others — in 2001, the tax outturn was some €2.5 billion less than the original projection, and in 2002, the shortfall was €1 billion. The shortfalls in those years were of particular concern to the committee at the time.

Notwithstanding this, the Department aims to provide the best forecasts it can to assist the Minister and the Government with regard to the economy and tax in order to facilitate the Government's decision-making. Due to the pattern which has emerged in recent years, which is one of significant surpluses in tax revenue beyond those expected, we have set up a group, chaired by a Central Bank economist and involving participation with the ESRI and the European Commission, which has a particular expertise in cross-euro zone forecasting. That group is conducting a root and branch assessment of our approach to tax forecasting methodology. In the middle of the year, I would hope to receive the recommendations of the group, which we will take into account. Even allowing that the group may identify improvements in approach, this will never be an exact science — a forecast is a forecast, not a firm prediction on which one can bet one's money. There will always be variables.

I will conclude by dealing with two items that pertain to the Department's activities and which are not referred to on today's agenda, namely, the public construction contracts approach and changes in the Estimates presentations to the House. The traditional approach to construction in the public sector has three principal drawbacks. First, the consultants, including architects, quantity surveyors, engineers and so on, were remunerated on the basis of a percentage of the total contract cost. In the case of a contract initially costed at €20 million but ultimately running to €30 million, for example, the consultants would receive the agreed percentage of 10% of €30 million rather than 10% of €20 million. This arrangement did not incentivise external facilitators in project management. Under the new approach, consultants will bid for contracts that have a far greater fixed price element than was the case heretofore.

The second disadvantage of the existing system is that contracts have, on occasion, gone to the market with underdeveloped scoping of the work specifications. In such cases additional requirements must be picked up as the contract progresses, which may lead to increased costs. The fixed price element of contracts will mean the instructing client must be meticulous in going through every facet of a contract and specify exactly what the builder is expected to deliver.

The third drawback of the traditional process is that the contracts are open-ended as far as the builder is concerned. The successful bidder is at the starting point to the end zone. Specifications might subsequently change, as might wages, material costs and so on. The initial contract price is only the starting price and major efforts are put into maximising additions to it. The builder has no incentive to deliver the project within budget or a particular timeframe. The longer it continues, the more the builder will make.

Under the new arrangements, a builder will bid to a greater degree for fixed priced contracts. The client will specify what is required and the builder must make provision in the contract price for future anticipated price changes. The contract will not be totally fixed but as fixed as possible. This means the builder will be incentivised to deliver ahead of budget and maximise the speed of delivery, while ensuring quality. There will be an incentive to avoid cost increases because a project not delivered on time and within budget will not remunerate the builder. The client and the taxpayer will enjoy the benefit of far greater certainty in project costs and delivery, while the builder will be incentivised to ensure a more efficient timescale and cost basis. That is the practice in the private sector.

We have had ongoing contact with representatives of the building industry in recent years to negotiate the introduction of these new arrangements. Although there was not total consensus within the industry, most of the issues have been resolved and we are pressing ahead with implementation. From next Monday, contracts going to the market will be awarded under the new contractual arrangements. However, it will take some time for the process to feed through because many ongoing contracts were agreed under the old regime.

The first phase of budgetary and Estimates reform was implemented last autumn when the economic review and outlook was replaced with the new annual pre-budget outlook. The economic review and outlook was of limited usefulness because, despite its title, it contained no outlook data but simply reviewed what happened in the preceding year. The new pre-budget outlook will review the performance of the budget and the economy in the preceding year but will also present a forecast for the following two years. This will facilitate the committees of the House, the Government and the public in anticipating developments on the budgetary and economic front into the future.

Another element of the reform process is the effort to make presentations to committees of the House more meaningful. The Estimates for the public service are an impressive collection of financial information. However, this information is limited, as it does not tell Members and the public what is delivered for the funding allocated. Under the new approach, each Minister will present to the relevant select committee an analysis of the output to be delivered for the year by the resources the taxpayer is being asked to approve via the Oireachtas. The following year, he or she must present an output statement outlining what was delivered as against the planned expenditure for that year. This new process will make the Estimates process far more meaningful both for the committees of the House and the public.

For the moment, this new approach will not give rise to any changes in the content of the Estimates. In time, however, as we gain experience of the output statements, there will have to be a fundamental review of the Estimates presentation. They are currently structured as a series of expense headings, many of which are not related to programmes. This imparts little information other than indicating that a particular programme cost X last year and will cost Y next year. We will examine how the nature and content of these presentations might be enhanced. Any changes we contemplate in this regard, after the Government has considered them, would be brought to the attention of the committee in the traditional way.

May we publish Mr. Doyle's statement?

Mr. Doyle


I welcome Mr. Doyle. I do not recall whether he attended a meeting of the committee in his former capacity in the Department of Education and Science. I wish to discuss the issue of inaccurate forecasting but begin by admiring Mr. Doyle's statement that there was not total consensus within the building industry on the new approach to contracts. That takes the cup when it comes to understatements. Could Mr. Doyle tell me if this argument has settled down? I will revisit it later because I want to find out if the arguments with the Construction Industry Federation and various other bodies have settled down with acceptance of the new methodology for contracts?

Mr. Doyle

Yes, it has. Initially, there was a yearning to retain the existing system for many obvious reasons. The industry was comfortable with the approach. It knew the outcome and possibly wanted to retain it unchanged. However, over time, it accepted that it was going to be implemented, given that the Government had made a policy decision and was determined to press ahead with a modern approach. The industry engaged in a very constructive way with the Department over a long series of meetings. It got to the point where a significant number of issues were outstanding. There was a series of contacts and formal meetings between representatives of the industry, the Department and the Minister. A number of issues were resolved to the point where the issues with which the industry was somewhat uncomfortable became relatively minor by the end.

The industry is happy to go along with the new approach. It is a bit nervous, but it is happy to work on this new approach. As the negotiations moved on, it could see that the client was determined to get this greater certainty and that the industry had the potential to apply in the public sector what it must apply in the private sector. It will be good for the industry, as hopefully it will be for the taxpayer.

I welcome this because we have campaigned long and hard in this committee for the accountability of Ministers to committees on the question of inaccurate forecasting. By coincidence, we discussed a report in private a while ago, during which I raised an item on which Mr. Doyle might be able to enlighten us, namely, the scoping, which is the second item referred to by him in respect of contracts. One area where we run into costs nationally is the area of archaeology. I made the point that if one is doing a forecast for a major road project, for example, one would almost need to treat it like a bit of string. It could be an inch or a mile long with the cost equating to that.

I had hoped this committee could have issued some kind of rider in our recommendations regarding this issue. It seems we must always issue an open cheque on projects where archaeology is involved. Has Mr. Doyle any views on this?

Mr. Doyle

Even with the best ground surveys in the world, one will never be absolutely certain that in cutting through a new roadway or building a Government office, one will not stumble on the unexpected. Given that there could be significant issues of cultural and historical heritage, one must envisage that additional costs will arise in those areas and that there may be time delays for the builder. To some extent, they can be accommodated in the contracts, but this may not be possible in other areas. It is not a black and white situation. It is one of these grey areas. We have seen in certain areas where the unexpected has been found and had significant implications in terms of bringing in archaeological teams to survey what has been found.

We like to make recommendations where errors have been made and recommend that certain practices be followed. I would like this to be considered in the scoping of projects.

Is the changed approach to major contracts reflected in the last ten or 12 major road projects which have come in within budget and as forecast? Were they undertaken under the new tendering approach or the old one? Will the new approach apply to other areas, such as schools and hospitals? Does Mr. Doyle expect to see an improvement because we had overruns going back four or five years? There were huge overruns on certain projects.

Mr. Doyle

Some of those huge overruns going back five or six years related to a construction industry which does not compare with the one we have now, whose capacity in terms of the labour force, engineering techniques and approaches and management ability is much expanded. The industry has changed.

The National Roads Authority, to some extent, blazed the trail for some of the initiatives that have now been taken. It was an early mover in moving towards a greater degree of fixed pricing. Its changes have been reflected in some of the work that has been done. The new contracts will, hopefully, be an enhancement of what it has done. The experience the authority has recently gained of delivering projects on budget and ahead of schedule is something we are confident the new contract arrangements will bring about across public construction contracts, be they in schools or hospitals.

I have a few specific questions. I appreciate that the Comptroller and Auditor General gave a clean bill of health to the finance accounts for 2005. Tax revenues under all headings, including VAT, have increased. On non-tax revenue, I noticed that the Central Bank surplus, which was €323 million in 2004, had decreased to €103 million, less than one third. Was there a specific reason for this? Why did it differ from so many other headings?

Mr. Doyle

The surplus is down. The surplus in 2003 was €660 million, €360 million in 2004 and approximately €150 million in 2005. From those figures, the Central Bank made a number of significant surplus surrenders and there were some earlier special surrenders. The bank's account reserves have gone down so the profits it is making on its account reserves are decreasing in light of that change in its retained capital.

Some of those earlier figures I mentioned reflected a change in surrender practices in respect of coin in the context of the introduction of the euro. Surplus income arising from the proceeds of coin were retained at one stage by the bank and are now handed over, so there was a retrospective element to that. That particular surrender has reduced as the rate of new coin issue has reduced so that is the main explanation.

I take it that it is not a cause for concern that we are going down the tubes. Under the same heading——

Mr. Doyle

On the contrary.

I accept that. We dealt extensively with an item which appeared for the first time under the same heading. This was the education fund for CORI receipts, which is valued at €2.5 million. From our discussions, I presume this refers to the education aspect that was to be provided for victims of abuse. Certain figures the State would get were given over a number of years. Is this the first of the figures, is the €2.5 million as forecast and will it increase? I am referring to page 12, non-taxed revenue.

Mr. Doyle

The receipt from the religious congregations. The €2.5 million——

As Mr. Doyle knows, we struck an overall deal including €100 million in property and many other bits and pieces, but we were concerned about having this matter in particular delivered on.

Mr. Doyle

I am painfully aware of that deal because my colleagues from the Department of Education and Science and I were subjected to a severe examination by the committee some years ago. The original deposit account held approximately €13 million, constituting the cash portion due to the educational programmes put in place by a number of the former residential institutes under the 2002 indemnity agreement. Of that amount, €10.4 million was transferred to the NTMA, representing the net amount to be transferred to the educational fund under the Commission to Inquire into Child Abuse (Amendment) Act 2005. The Deputy is referring to the remaining €2.5 million, which was equivalent to the amount paid by the Department of Education and Science under its administrative scheme. The money was recouped by the Government.

Perhaps we could get a note on it.

Mr. Doyle


We wish to monitor the situation. I appreciate that the Department of Education and Science may answer in time, but could we get a note on how the educational element of the deal is working and how much the State is getting?

Mr. Doyle

I will give the committee the note I have with me, but we will write an expanded note on the whole context.

On the EU budget and a number of confusing payments, I note on page 15 that we are paying €1.5 billion. While we knew this day would come sooner or later, we are still receiving money from the regional development fund and a number of other headings, as detailed in Vote 6. For how much longer can we expect to receive European funding and how much will Ireland pay?

Mr. Doyle

Regarding projected cash flows, I can reply in the broad context and follow up with a detailed note. On foot of various contributions, we are paying almost €2 billion, but we are getting more than that in return. We are still to the good to the tune of several hundred million euro. In the next seven years, the flow will change into a deficit in Exchequer terms and our contributions will significantly exceed direct cash transfers to Ireland. The days of net EU transfers to Ireland are almost over and we are moving into significant depositive territory.

In the next seven years, the agriculture sector will receive approximately €2 billion per year through direct payment and some indirect aid and more than €1 billion per year in Exchequer investment. The agriculture sector will continue to receive considerable funds, but the amount will be less than our overall transfers to Europe. I will supply the committee with a separate note on this matter.

I would appreciate that. Some people have referred to lazy forecasting, which arises in a few areas, including the office of the Minister and Chapter 1.1 on the financial outturn. Mr. Doyle stated that a new group on tax forecasting methodology will be established. Is this an acceptance that forecasting has not been done well to date?

Mr. Doyle


Regarding Chapter 1.1, the surplus to be surrendered is large. In the Minister for Finance's office, the net estimate provision was €101 million and the outturn was €91 million. In 2004, the surplus was €37 million whereas the surplus of €14 million in 2005 was a vast improvement. The surplus was €23 million in 2003, €21 million in 2002 and €22 million in 2001. Those of us who are not accountants ask why such a large surplus must be surrendered every year. The Department of Finance should get it right more than any other Department. Will the change to multiannual budgets prevent large surrenders occurring? Going by the forecasted tax revenue, the figures are crazy.

The Department has experts to help it, including Revenue. In Mr. Doyle's presentation, he stated: "I should explain that the tax forecasts prepared by the Department of Finance take account of the estimates prepared by the Revenue Commissioners". Everyone is in the mix, but would Mr. Doyle agree that the matter has been handled badly? For example, while people may be out sick, the Department is aware of the dates of birth of all of its employees, yet the figure in respect of superannuation was wrong. Other examples include the Minister's office and the overruns. In light of the billions of euro in question, these figures might appear to be the stuff of micro-economics, but they comprise macro-economics in the final output. Would Mr. Doyle accept that there has been a lazy approach to forecasting?

Mr. Doyle

The Deputy made a number of points and I shall deal with them in turn. He listed various savings of approximately €20 million per year on the Finance Vote.

It is described as "surplus to be surrendered". It reads as if someone got the Estimate wrong.

Mr. Doyle

Yes. The language used is historic. "Savings for the taxpayer" has a better connotation than "surplus to be surrendered". In the Finance Vote, the practice has been to be more cautious than I would be. We are aiming for a tighter approach to the Estimate.

With regard to the €1 billion surplus to be surrendered, it is 2% to 3% of the overall amount provided. While the total was out by 2%, it was 98% accurate. If one can achieve this target in business forecasts, it is not too bad. There is major anxiety on the part of Accounting Officers to avoid an excess in the Vote when one must attend the House and bring proposals to committees seeking additional funds. A comfort zone is included by Departments. Our objective is for the Vote to be as close as possible to the outturn. People are naturally cautious and seek to avoid the fatal problem of an excess Vote. One must undergo a grilling by the Comptroller and Auditor General and present the Estimate to this committee, which will examine it before deciding if it should be recommended to the Minister for Finance. He may then approve it. I agree that Estimates should be drawn tighter on the spending side.

Regarding the superannuation Vote, I arrived at my approach after examining the record of recent years. We know everyone's date of birth but not when they will die or apply for retirement. The Estimate should be tighter. With regard to tax forecasts, we were short €2.5 billion in 2001. I read the Official Report of this committee's proceedings and this shortfall led to greater angst on the part of the committee than one would expect from a surplus, which is good news. That the economy is performing better than expected and greater receipts are accruing to the Government is a good sign. Over the past five years there were two bad years and three good years. In 2005 taxes were forecast to increase by 5% but the outturn was 10%, partly because of the degree of caution in the Estimate and partly because the economy grew more quickly than expected. I would prefer to be criticised for a significant tax surplus rather than a shortfall. Some commentators believe our forecasts for 2007 are too optimistic.

As a Government Deputy I prefer to see a €4 billion surplus than a deficit. A report in the UK last month forecast savings of €2 billion through procurement management. Does centralised buying refer to this?

Mr. Doyle

It refers to two primary headings. The change of public construction contracts involved hiring specialist expertise from quantity surveying firms and legal firms. The rest refers to increasing gains from smart purchasing. An example is the pooled purchasing of electricity across Departments and the public service. Steps have been taken in this regard for telecommunications and computer deals. The objective is to inculcate a smarter approach to procurement, buying with the degree of professionalism of the private sector. There is no central purchasing point for the Civil Service, the health system or local authorities. This must be addressed and we seek to build an organisation with excellent procurement skills to deliver significant savings for the taxpayer. The objective is to reduce the cost of purchasing to allow Departments to re-invest in frontline services rather than surrendering a surplus.

There have been significant changes in baskets of taxes. VAT is the highest collection, followed by income tax, excise duty, stamp duty, corporation tax and capital gains tax. Does Mr. Doyle envisage a change in the hierarchy over the next three years?

Mr. Doyle

On the basis of the current policy of taxation I do not see dramatic shifts in this composition. Our expectation is that price increases in the housing market will cool off and output will reduce to equilibrium levels. This will lead to a slowdown in stamp duty, which could lead to a shift in composition. The four main tax headings — VAT, income tax, excise duty and corporation tax — will continue to be the main source of revenue to meet the cost of public services.

I wish to ask specific questions on the accounts before moving on to other areas. Servicing the national debt increased slightly by approximately €15 million which I imagine we can put down to interest rate rises. It was €1.7 billion in 2004 and in 2005 it was €1.76 billion.

Proceeds from the sale of State property were almost half in 2005 what they were in 2004, amounting to €86.5 million in 2004 and €48.4 million in 2005. The sale of State property is meant to be one of the engines for purchasing or leasing new properties for the decentralisation programme. Is this one of the reasons the decentralisation programme has slowed down?

A receipt is listed from the Department of the Environment, Heritage and Local Government for a €63,000 grant for Trim Town Council. Money was given by the OPW to build a car park. A hotel was built on the site subsequently and the grant money had to be repaid. Does the Department internally investigate the circumstances of the payment of such grants even when the repayment had an alternative use?

Will Mr. Doyle comment on the guaranteed liabilities included in the Finance accounts? I understand it to be the State's credit card system as opposed to the national debt. It stands at €3.33 billion, most of which relates to the Housing Finance Agency. Is the amount rising and is it sustainable?

Mr. Doyle

The change under the interest heading is the net outcome of a series of multiple factors, including the marginal borrowing requirement that existed in 2005, the change in the composition of the debt portfolio and various accounts. Our esteemed colleague, Dr. Somers, will come before the committee and this is his area. I cannot go into the details of it but he will share his knowledge with the committee. If the committee wishes, I will ask him to send in a further explanation of the change.

Regarding the sale of property, the decentralisation programme does not wait to receive proceeds from any particular property sales.

It has slowed down significantly.

Mr. Doyle

My colleague from the OPW, Mr. Benton, is the spender in this area. The question asked was whether it was contingent on sales and the answer is no. Sales receipts are lumpy and I expect the 2006 figures will show change. During the past two years, disposal of property in the Dublin area has generated in excess of €300 million. From the broad information I recall, the targeted sales programme is running significantly ahead of the expectations that existed at the outset of the programme. It is not a factor in the pace of the programme.

Does Mr. Purcell wish to comment on this?

Mr. Purcell

The amounts showing for the sales of properties are Exchequer extra receipts. Within certain Votes, such as Defence, sales of properties are entered as appropriations-in-aid because it was Government policy in that particular case to use those moneys to re-equip the armed forces. It does not show the totality of property sale activity by the State.

Was that change made in 2004 or 2005?

Mr. Purcell

It can be somewhat arbitrary. When the Estimates are drawn up, if it is foreseen a certain amount can be used it will be dealt with in the Vote. Historically, Exchequer extra receipts were windfall receipts. It was felt to be inappropriate to use them to support the Vote. It is a technical matter and a history exists for it. I wish to make the point that it does not necessarily reflect the entire activity.

Mr. Doyle

To clarify the clarification, some receipts under the OPW heading are not windfall but planned. These are mainly disposals. The provision of resources for the decentralisation programme or other programmes is not contingent on this performance. Total receipts from sale of property in 2006 were more than €230 million.

Although I am a Meath man I am not familiar with the issue regarding Trim Castle car park. Returning to its origin, a proposal was made to complete major conservation works at the castle. The then Department of Arts, Heritage, Gaeltacht and the Islands agreed to make a contribution of £50,000, amounting to €63,000, to the urban district council for the provision of a car park. The payment was made in 2000. The council invited expressions of interest for the development of a car park and as a result the site was sold to a local hotel developer. In 2003, the council granted planning permission for the development.

The Deputy knows far more about this than I do because I am learning as I go. The key point is the grant received by the authority from the Department for a carpark linked to the castle was not used for that purpose. The notes indicate the hotel has 200 car park spaces. We seem to have a car park and a hotel instead of a car park only. The local authority was asked to return the grant as it was not used for its stated purpose, which is why the receipt is there. To answer the Deputy's question, general experience suggests it is common that grants disbursed for a purpose and not used for that purpose are followed up by the system.

Guaranteed liabilities do not amount to a credit card. At one time, a great deal of borrowing by State bodies was completely guaranteed by the State. This became a competition issue as the EU correctly considered an organisation going to the financial market with a guarantee from a Government could access funds at a significantly better margin than a private sector operation. This was considered an unfair advantage and the programme of guarantees had to be curtailed to recognise this reality. Some of the guarantees listed are run-offs of old guarantees. Unless I am mistaken one can see deposits of the ACC Bank from way back, which were guaranteed by the State. Those guarantees are being run down as deposits in that institution mature.

The principal residual amount pertains to the Housing Finance Agency, which has replaced the Exchequer funded local loans fund as the supplier of the money used by local authorities to enable individuals to buy their houses with public money. It has been accepted by Europe that such assistance from a public organisation is appropriate and, in return for its financing, the HFA seeks guarantees to ensure it gets the maximum value on its borrowing terms. The National Treasury Management Agency facilitates the HFA in going to the market to enhance returns and ensure real borrowing costs are kept to a minimum, so local authorities and their clients benefit.

One of the windfalls from the annual accounts for 2005 was €9 million that was not spent on benchmarking, presumably because the criteria were not met by the Department of Enterprise, Trade and Employment or one of the agencies within its remit. Is this the only example of benchmarking payments that were not made? In 2005, nothing was spent on the public service benchmarking group under that subhead. Given that we are entering a new cycle of benchmarking, does Mr. Doyle envisage a significant increase to that fund?

Mr. Doyle

I understand that the €9 million in question pertains to a particular institution, which drew funds in the expectation that a significant benchmarking liability would mature for payment. That did not transpire, so the money was recouped by the Exchequer under that subhead.

The provision under the subhead for the public service benchmarking body is for the expenses of the body rather than for the benchmarking process. The body was not fully operational in 2005 because it had just been established, so only minor expenses will be incurred in meeting its costs from this and last year. However, the direct expenses it incurs on accommodation and fees for professional advice on the cases made by public sector groups will give rise to costs under that subhead. The principal factor with regard to future costs will be the outcome of the process.

The body has been asked by the Government to carry out a close evaluation of two public service employment categories in order to assess the extent to which pay in the public service is adequate compared to similar private sector categories. The Government has asked the public service benchmarking body and the review body on higher pay to have particular regard for the value of public service pensions, which is significant. It is anticipated that the benchmarking and review bodies will present their reports on the evaluation to the Government towards the end of this year. The evaluations are being carried out with the assistance of independent expertise, members of the committees and submissions from trade unions and interested parties such as IBEC, which has a particular opinion of the process.

It is anyone's guess whether significant costs will arise. The outcome of the last round was criticised as being expensive but the conclusion of the body appointed to conduct the review was that public service pay had fallen behind the private sector. I do not know the current situation in that regard and we will have to wait for the bodies to report on their review of the evidence.

There are two instances of additional remuneration in the accounts, €1.1 million in additional salaries and a reference to five civil servants under superannuation and retired allowances, but I am unsure whether both refer to the same funds. The accounts do not mention whether the civil servants concerned are serving or retired. Can it be presumed they used to work in the Civil Service and were re-appointed on a consultancy basis because the Government was unable to replace their expertise? In terms of the additional salaries and costs, did pension contributions also accrue?

Mr. Doyle

To which Votes does Deputy Boyle refer?

The additional remuneration is set out under Vote 7, superannuations and retired allowances, and Vote 6, the Office of the Minister. Vote 7 does not refer to a specific amount, so I wonder whether the two instances are separate.

Mr. Doyle

There would be separate amounts. With regard to superannuation, a limited number of former retirees are hired to address a shortage of particular skills. Fewer than 150 out of a total of 14,000 retired staff are employed in a remunerative role across the Civil Service. Some of the more significant costs arise from the drafting of legislation.

What is the position in respect of the five people referred to under Vote 7 and how much is accrued in respect of them?

Mr. Doyle

I will supply the Deputy a separate note on that matter.

In his response to Deputy Dennehy, Mr. Doyle noted that new contracts are in hand and the NRA has reported early and within budget. How many of the old contracts remain and what mechanism is in place to monitor them in order to avoid overspends? While the committee was in private session, we discussed flood relief schemes. I would not like to see the construction project in my county for extending a ring-road going over budget simply because it is based on an old contract.

Rent for storage of electronic voting machines was €450,000 in 2004 and €750,000 in 2005. Will it be possible to get out of the contracts and move the machines to a central location? Has the Department of Finance become involved in terms of assessing the exposure to the State from ending the contracts? What is the cost involved in that and how would it compare with continuing to rent storage space?

Finally, has the Department assessed the costs to the State, present and future, of commissions, inquiries and tribunals, listed under note 13? Is a forecast available for each and what is the approach for assessing it?

Mr. Doyle

I will take the three headings in sequence. Existing contracts will have to expire over many years and any currently in train will come under the old regime. I cannot hazard a guess as to how many there are but I am sure there are thousands. Each local authority will have multiple contracts, as will the National Roads Authority, schools, hospitals, Garda stations, courthouses, etc. Each spending manager in the institution concerned is expected to monitor the situation and use his or her best endeavours under the existing system to ensure the projects are delivered in accordance with the requirements and that cost increases are avoided. There are cases where cost increases emerge, whether because the original contract did not anticipate future increases in wages, materials, energy or supplies, because the specifications in the original contracts were seriously inadequate and the people concerned had failed to think through what was required, or because of an unanticipated geological structure. A contract used to be signed with a minimum price and the cost increases to which I referred would have been considered legitimate. Under the new system, however, those additional costs will be taken into account up-front in the contract price. The new arrangements will be gradually introduced and the old ones gradually phased out.

Due to the thousands of old contracts in the system, there is a need for the Department of Finance to insist that whoever is accountable for them sits on them and keeps them within cost. While I accept that wages and other costs will go up, other factors are argued over, often resulting in arbitration. I mentioned a project in my own constituency but there are many more. I am anxious to learn what role the Department of Finance plays in insisting that those who account for such projects sit on them until such time as they are completed. This committee has encountered many examples of cost overruns, particularly on roads, though the newer projects are coming in within budget and on time.

Mr. Doyle

Our role is to set out best practice in the manner in which contracts are brought forward. We have set out a framework for project management and for cost preparations for contracts. The individual Departments, agencies or consultants are charged under those guidelines with responsibility for, as the Vice Chairman called it, sitting on the contracts. In reality, although there are many problem areas, many projects are also handled well. Where projects are not handled well it is unacceptable, which is why we embarked on a new approach. Management in line Departments and agencies must do their utmost to sit on existing projects if problems arise.

The figures for electronic voting, contracts, storage and centralisation, which appear in the Central Fund, relate to policy decisions taken by the Minister for the Environment, Heritage and Local Government, and by the Government generally. We do not have a role in those decisions so the relevant expert cannot necessarily deal with it. Mr. Niall Callan, Secretary General of the Department of the Environment, Heritage and Local Government, will come before the committee shortly. His Department, along with the Minister concerned, is responsible for initiating Bills in this area. The Government took the decision that centralised storage should be pursued and the Department of the Environment, Heritage and Local Government is working with the Department of Defence on one particular location. Hopefully Mr. Callan will be able to give much more assistance than I on the subject of some of the expensive storage arrangements mentioned by the Vice Chairman.

I can give general information on tribunals but cannot go into detail on any one in particular as I am not the Accounting Officer of any of them. Of the tribunals that have been completed so far, namely the beef, McCracken, Finlay, Lindsay and Dunne tribunals, the total cost to the end of 2006 was approximately €97 million. The cost of the administrative system behind those operations and the tribunals' own legal costs were approximately €33 million. Third party legal costs were approximately €64 million, approximately 66% of the total legal costs. Many tribunals are in train at the moment and, as at the end of December 2006, costs incurred were approximately €180 million. The bulk of this went on administration, at €70 million, and the tribunals' legal costs of €96 million. Third party legal costs awarded to that point were €16 million. There are major costs and these have been mentioned in the media and the House over the past 24 hours. I could not guess what third party legal costs will be but third party legal costs of previous tribunals came to 66% of the total cost, twice the cost of running the tribunals. If this ratio was to stay the same, which I do not think will happen, third party legal costs would now come to €340 million. I suspect this is an underestimate because some of the tribunals that are in progress have been in progress for far longer than previous tribunals and are more complex.

The Moriarty tribunal has spent €26 million to date but, to the end of December, has not awarded a penny in third party legal costs. I expect third party legal costs will be substantial in that case. The mobile licence module, for example, was a long and complicated affair with high-powered representation from a wide range of participants and observers under many headings. There were other references to the Mahon tribunal, which has run over the same period, and the extent of its investigations.

It may be that the individual accounting officers, who have the task of paying for these costs from their Votes, could assist in giving an estimate of third party legal costs, though I doubt it. The basis on which the tribunals were set up and the orders made by the Legislature did not impose any obligation or budget on them. The tribunals have the full powers of the High Court and it has emerged that parties appearing before them are regarded as entitled to have their good name and reputation preserved and to have full representation. I am not aware that the tribunals have tracked the sum of what they have allowed.

If a person requested representation at a tribunal in 1997 it would have been given it and there is, to my knowledge, no system at the tribunals that notes on a daily basis the representation delivered by senior counsel, junior counsel, solicitors and so on. Nor is there a system noting the costs of the various discovery orders made so all of these costs will be brought to bear.

There was a suggestion some years ago that an estimate of these costs should be prepared and while this was pursued with the Office of the Attorney General there was no positive outcome. There were reservations about approaching the tribunals seeking to know costs that had been incurred because it was felt that the tribunals could interpret such an approach as an unwarranted intervention affecting their independence. I do not know whether this is right or wrong but when the committee meets the Accounting Officers they may be able to give an estimate. Mr. Callan will be able to give the committee a good start, when he comes here, regarding the Mahon tribunal. I do not know whether the estimate he gives under this heading will reflect those seen in the media in recent days.

Is it not the responsibility of the tribunals to keep an account of what has been awarded and advise the Department of Finance of this, which is then covered by an open cheque when the tribunal ends?

Mr. Doyle

To my knowledge, that is not the system they have in place. The tribunals do not report costs to the Department of Finance but to the individual Department responsible for the establishment of each tribunal. That is the Department of the Taoiseach in the case of the Moriarty tribunal, the Department of Justice, Equality and Law Reform in the case of the Barron tribunal and the inquiry into the Dublin-Monaghan bombings, the Department of the Environment, Heritage and Local Government in the case of the Mahon tribunal, the Department of Health and Children in the cases of the Madden, Ferns and Neary inquiries, the Department of Education and Science in the case of the Commission to Inquire into Child Abuse and the Department of Justice, Equality and Law Reform in the cases of the Morris, Barr, Breen and Buchanan, Dean Lyons and Dublin Archdiocese inquiries. The tribunals report to the relevant Departments and give their bills to them but the orders on which they were established did not specify a requirement under this heading in the terms of reference.

The Minister for Justice, Equality and Law Reform has before the House a Bill that would affect new tribunals and new modules of existing tribunals. This would involve specifying, in the terms of reference, a cost estimate of the operation of tribunals. They would be required to keep tabs on those costs and, if the costs emerging exceeded the original estimates, would be compelled to report to the Minister and the House.

Will Mr. Doyle supply a list?

On the question of tribunal costs, the figure of €1 billion was mentioned before the committee in recent months. The matter may have been underestimated and, from what Mr. Doyle has described, it sounds as though we are faced with a shambles. I am disappointed that this is the first time I have heard it stated on the record that there is no record of who has been awarded legal representation, that no daily record was kept.

Mr. Doyle

Just to clarify, I did not say no list was kept by the tribunals of who was granted representation. Such a list is kept, but there is not a record of how many days that representation was used, both at the tribunals and in the background. I am not aware that a daily record is being submitted by people awarded representation detailing daily costs. The traditional approach in the tribunals is for parties awarded representation to submit costs to the tribunal and Taxing Master for adjudication when proceedings conclude.

Mr. Doyle is Accounting Officer for the Department of Finance, which ultimately calls the shots on behalf of the Exchequer for all Departments. Is it possible, through Mr. Doyle or the relevant Accounting Officers, to obtain the list of people awarded legal representation as this is being done in public session and it is a matter of administrative convenience? Mr. Doyle suggests such a list is being kept on a daily basis. Is there at least a list of people who have submitted claims?

Mr. Doyle made reference to part of the problem when he referred to the independence of tribunals. They are not independent; they are set up by the Houses of the Oireachtas to inquire and are no different from some Oireachtas committees. A body is set up by the Oireachtas to report to it through the Ceann Comhairle or the relevant Minister. Tribunals are not independent courts and there is no constitutional separation of powers.

We must remain on topics that do not concern policy matters. We can address the issue costs but must be careful not to stray into other areas.

I am asking about the reference to the independence of tribunals. The courts are independent but I thought tribunals were creatures of the Houses of the Oireachtas. Mr. Doyle need not respond if he so chooses.

We are expressing concern about costs, including hidden costs and the recording of costs.

On that basis, where is the reference to contingent liability to the State of tribunals? Should this not be included as part of normal accounting practice?

Mr. Doyle

I am not the Accounting Officer for the tribunals; I am facilitating the committee in listing the Accounting Officers concerned. It can access more details in this manner; I can provide their details for the Chairman. The tribunals have lists of parties appearing before them, to whom they have awarded representation. I do not know if they have kept a daily list of costs incurred under these headings. The tradition in the judicial system is that this is done at the end of proceedings.

Tribunals have the status of the High Court in their operation. This engenders a degree of independence and respect.

There is no presentation of contingent liability in the finance accounts. Appropriate financial information for the appropriation accounts relates to the Departments I have mentioned. I am not aware that each Department and tribunal knows what its contingent liabilities are. On the basis of the tribunals that have more or less completed proceedings, third party legal costs amount to approximately twice the amount for other costs that amount to €170 million. If the ratio remains the same, the bill will be a minimum of €340 million. We must bear in mind the complexity of the Moriarty and Mahon tribunals. The bill for the Barr tribunal, in which the Houses were involved at one stage, could be more than €20 million.

The Accounting Officer for the Department of Education and Science has included a paragraph on contingent liability in respect of the redress board. She described the figure of €950 million as tentative, given that the board had approximately 10,000 applications to process at the end of 2005 and the level of award in the remaining cases may vary substantially. Will Mr. Doyle assist us in his role at the Department of Finance rather than specifically as an Accounting Officer in determining if there should be an obligation on all Accounting Officers to report in a consistent manner? If the Accounting Officer for the Department of Education and Science can provide us with a figure for contingent liability, albeit with a caveat, why have other Departments not done so? Does the Department of Finance have a role in ensuring a consistent approach to Exchequer accounts, as well as the appropriation accounts? It was very helpful for the committee to see that figure but it is not reflected in the overall picture.

Mr. Doyle

In that instance there is an information base available, through the board, to the Accounting Officer that allows the latter to assess the overall exposure. In this way it was possible to quantify the figure. Members will not find an estimate of contingent liability in respect of nursing home payments attached to the Estimates of the Department of Health and Children for 2005. An estimate of more than €1 billion was in the public domain but it is far too early to quantify the actual liability.

The question of whether the format of the appropriation accounts should be enhanced is the responsibility of the Minister for Finance. One must also consider if there should be an accrual accounting system with a full accrual analysis. Some interested parties are keen to make progress in this direction but others are not. Following considerable investment, the financial systems in place in Departments have been enhanced and modernised. The priority is to produce basic accounting systems, using the traditional approach, in a modern form. When the Department is satisfied that the accounting systems have been modernised, one could develop an accrual accounting system, requiring Departments to recognise contingent liabilities. During the past year the Comptroller and Auditor General set out to quantify major contingent liabilities in a number of organisations that had accrual accounting systems in respect of pensions. If one examines the major bodies, one will see significant figures for contingent liabilities on pensions which have never been presented before. Carrying this through to the traditional appropriation accounts deserves consideration. Pensions represent the main contingent liabilities and amount to an enormous figure when presented in net value terms.

As a member of the Committee of Public Accounts, I wish to comment on the tribunals of inquiry that are sitting, although I appreciate Mr. Doyle is not their Accounting Officer. The third party costs are known. Perhaps they are not collated in the information flowing to Accounting Officers. I will be specific about what I mean by this. Everybody awarded legal representation at a tribunal has solicitors and senior or junior counsel working for him or her. Members of the legal profession do not work for free or pro bono for such clients. In reality, many present their clients with bills to be paid on account. They must live too and have an estimate of their costs. No professional firm works at a tribunal without keeping a record of its costs. The issue to be decided is whether those costs will be awarded by the tribunal or borne by the client. My point is that all it takes is for someone to make a simple inquiry of the people who have been awarded legal representation of the costs incurred to date. That would represent the maximum third party costs incurred to date that could be met by the State if the tribunal were to award them, which it may not do. It is a far simpler exercise than people appreciate.

I want to debunk the notion that it would be difficult to obtain the information required. It would only need someone to ask. Every legal firm knows well the costs incurred for years but not awarded. I guarantee it is a source of pain for many. The costs are well known within the profession. I appreciate it is not Mr. Doyle's affair but as we were discussing the tribunals, all it would take is somebody to ask for and collate the information.

Mr. Callan, the Accounting Officer for the Department of the Environment, Heritage and Local Government, will appear before the committee next week and members will be able to put the questions directly to him.

I want to ask Mr. Doyle about the comments he made on the tribunals. I understood him to state the administration costs of the tribunals amounted to €70 million, the legal costs were €96 million and third party expenses met to date amounted to €16 million. By administration costs, does he mean civil servants allocated to the tribunal offices or Civil Service time allocated to dealing with tribunal issues? One of the problems many of us have is that we hear mega figures — telephone number money — and do not know exactly what they mean. Starting with administration costs, will Mr. Doyle tell us what they comprise?

Mr. Doyle

To the best of my knowledge, they are the direct running costs of the tribunals, including accommodation costs, routine expenses and the costs of staff engaged to help carry out the work involved, as well as the chairman's salary. To clarify the figures Deputy Burton quoted, they relate to the tribunals currently sitting, not those that have concluded.

Yes. I jotted down the figures as they were stated.

Mr. Doyle

The Deputy got them exactly right. Does that clarify the matter for her?

Yes. My next query concerns a matter that I find difficult to understand. Mr. Doyle has correctly stated third party costs can amount to approximately 66% of total tribunal costs. Third party costs arise not only when somebody must be advised by a solicitor or lawyer in the course of the tribunal, as Deputy Fleming outlined, but also when people decide to go to court. People such as the late Mr. Lawlor went to court regularly. Others who feature also do so. Are the cost and numbers of those court challenges that each tribunal engenders elements of the likely total costs and included in the figure of 66%?

Mr. Doyle

To be honest with the Chairman, I do not have sufficient information to clarify whether the third party legal costs included in the simple table I have with me includes those costs. When I share this table with the Chairman, I will clarify it.

As a follow-up, I understand the cost of discovery of documents is extremely significant. Is it true banks must be paid a lot of money in the discovery of documents? Given the ultimate banking implications of documents dealt with by a number of tribunals, the cost of discovering such documents accounts for a significant percentage of the total cost.

Mr. Doyle

Total third party legal costs will include the cost of complying with discovery orders. I do not know whether the banks' costs will be included in what the Taxing Master or tribunals will allow as eligible costs under that heading. I read that the banks levy a cost to their clients in dealing with such queries. I will include it as an information note in material for the Chairman.

Are taxpayers, through the medium of the Committee of Public Accounts, entitled to a breakdown of costs and to know who gets paid? It would be helpful for their understanding of costs.

My next point is not for Mr. Doyle. However, if we at least knew in detail the items on which the money was spent, we might be able to decide whether spending money on future tribunals in that way was particularly useful.

Returning to the issue of third party legal costs, is there a mechanism of communication between the Department of Finance as manager of the public purse and the tribunals, which would give indicative advice on ballpark acceptability? If the chairman of a tribunal on taking up office states he or she needs 5,100 or 200 staff, is there a mechanism whereby the Department can state what cost would be reasonable?

Mr. Doyle

Regarding the breakdown of legal costs, I do not know the extent to which costs can be published as they are incurred. I will ask our colleagues in the Attorney General's office for an information note and incorporate it in the material for the Chairman.

In support of Deputy Burton, will Mr. Doyle clarify whether he will provide us with information on our inquiries relative to his Department or will he obtain the information relevant to the inquiries being made of every Department or ask them to assist the Committee of Public Accounts by making the material available to us as soon as possible?

Mr. Doyle

I intimated that I would circulate a summary of the costs. I will do my best to answer in general terms the series of questions put by the Vice Chairman on the information that can be published. However, I will not be answering on behalf of Accounting Officers of Departments with regard to individual tribunals. The committee will be given a list of the Departments concerned and the costs incurred, so it may be able to seek more detailed information from the relevant Accounting Officers. Through our expert colleagues in the Office of the Attorney General, we can endeavour to assist the committee with regard to general inquiries on the costs which may be published or the discovery costs allowed by the Taxing Master.

To clarify Mr. Doyle's reply, he will supply the information requested by Deputy Burton that is relevant to his Department and we will indicate to other Departments that her questions will be raised when we meet them.

Mr. Doyle

Deputy Burton made a point on administration. Under the current process, a tribunal chairman enters discussions with the relevant Department after making an assessment of the tasks assigned by the Legislature and having come to a view on the support required. Such support usually evolves as the chairman becomes more familiar with the tasks. The Department concerned consults the Department of Finance and, in some cases, the Office of the Attorney General to reach agreement on providing the administrative support required by tribunals. The level of co-operation on administrative support is very high for the most part and, while not all requests from a tribunal are provided, we pull out all the stops to facilitate tribunal chairmen.

This committee is conscious of the additional tax collected as a consequence of the work of tribunals. In terms of cost benefit analysis, it would be useful if the figures supplied to the committee indicated whether tribunals generated higher levels of tax compliance or payments of arrears. I suspect, however, that no tribunal will equal the value for money delivered by the DIRT inquiry.

Reference is made in the accounts to election postal charges of €10.5 million in 2004, which was an election year. As we are all aware, 2007 is also an election year. An issue that bedevils voters and politicians is the entitlement of a Member to send letters free of charge to every voter in his or her constituency during the course of an election. Is there any way we can reduce costs by sending letters to households rather than individual voters? Negotiations with An Post have yielded little success and, given that most of us hope to become more environmentally friendly, it is wasteful to send identical canvassing material to several people living in the same house. That is an obvious reform in terms of increasing environmental consciousness and I hope it is not too late to act before the election. The cost could be cut by a third or even a half if one letter were sent per household. Will Mr. Doyle make inquiries of An Post on the issue? What is the estimated cost of election postage for this year's election?

Mr. Doyle

Assuming one election is held, the cost will be approximately €10 million. Reductions in the entitlements for candidates is not a matter on which I can express an opinion.

A number of candidates have told An Post they would prefer to send one letter per household to reduce the amount of material posted. The register of voters in my constituency contains 57,000 names, whereas there are approximately 32,000 households in the area. Reducing the amount of material posted could bring significant savings.

I understand the OECD, which offers advice to the Department of Finance, has recently published proposals on increasing efficiency by expanding individualisation of the tax code. The OECD suggested that the home carer's credit, which is about €1,000 less than the PAYE tax credit, should be scrapped and that child benefit payments should be paid at a higher rate where both spouses are employed and thereby reducing benefits for one-income families. I am aware that the Department relies heavily on the advice of the OECD and that individualisation is a difficult subject. One-income households with incomes of more than €68,000 pay approximately €5,000 per year in additional tax payments.

How does the Department commission this type of study and what opportunities exist to examine and debate the recommendations made? The Department is often closely involved with the OECD in the advisory process and most countries rely on the OECD to provide independent advice. Would Mr. Doyle care to comment on the relationship between the Department and the OECD?

Mr. Doyle

I cannot enter any policy discussions on the merits or otherwise of OECD advice. I have not seen the report to which the Deputy referred because it arrived while work was ongoing on the Finance Bill. I am sure the issues she raised can be discussed on Committee Stage of that Bill. I will ask Mr. Derek Moran to comment on the relationship between the Department and the OECD. OECD reports are available for the Joint Committee on Finance and the Public Service, rather than this committee, to consider.

Mr. Derek Moran

Our main participation is in the Economic Development Review Committee, EDRC, which meets regularly. Every two years it carries out an evaluation of the Irish economy and policies. It often concentrates on specific areas and the academics within the secretariat have particular views on certain policies, on which we engage in dialogue with them. As the Secretary General said, these are issues of policy and are not appropriate to this forum. In addition to our permanent representation in the shape of the ambassador, a member of the Department is present to deal with such issues on a regular basis.

The annual competitiveness report, to which Deputy Burton referred, contains a small section on Ireland. The issues referred to will, in the view of the authors, have a positive impact on the labour market. Engagement also takes place in the form of various committees to deal with issues such as the relationship of taxation to budgetary policy. They act in an advisory role and we listen to what they say. They are due to return in the middle of this year to start the process all over again and will conduct a formal examination in January 2008.

Mr. Doyle:

The Department, in the main, does not engage the OECD to undertake particular tasks. The OECD has intellectual rights and decides itself what to examine. A significant exception to that rule is the fact that the OECD has been engaged by the Department of the Taoiseach to review the system of government, and the Taoiseach commented recently on the matter. It is conducting a mjaor consultancy review of the way in which the public service operates, covering not just Departments but major agencies. Over the course of this year, we will stand back and look at the way Ireland governs itself, apart from the political system, to see if any international lessons can be learned to enhance our operations.

In that context, do the Department of Finance and the Civil Service in general have a mechanism for carbon costing and auditing in the context of our commitments under Kyoto?

Mr. Doyle

I am burdening Mr. Niall Callan with many questions for next week but he has the major responsibility for climate change strategy and will be able to give the Deputy an expert answer.

I have one observation on Deputy Burton's point about reducing the amount of literature sent through the postal system to every voter. Fianna Fáil has a policy whereby, if there are two, three or four candidates, they only issue one communication. We run candidates in more than 40 constituencies and only issue 40 items of documentation. We have dramatically reduced the amount of literature we send in that regard.

On page 13 of the accounts, under current non-tax revenue received, there is a figure for €20 million, referred to as the annual surplus from the Commission for Communications Regulation. I suspect he will refer me to the Accounting Officer of the Department of Communications, Marine and Natural Resources but can Mr. Doyle say why there is such a surplus? Is it a hidden tax on mobile telephone users? Is it a regular occurrence and was there a surplus in previous years? The Commission for Communications Regulation is quite a small organisation and I could suggest many ways the extra money could be spent in the area of mobile telephone communication, such as reassuring the public about emissions from handsets and antennae, which would be better than handing the money back to the Department of Finance.

Mr. Doyle

The referral to the Department of Communications, Marine and Natural Resources is taken for granted but the figure for 2005 represents two years' transfers. There was no such entry in 2004 for technical reasons relating to changes in accounts personnel. In 2003 the figure was €15 million and it is expected to be between €10 million and €12 million in 2006-07. The original objective was for the Commission for Communications Regulation to wash its face, so to speak, so that there would not be a significant surplus. There is a current surplus, which the Department concerned is reviewing. I do not know if the policy on the level of charges will change in the future. The commission also collects 3G licence fees. The Deputy may recall that one of the features of the 3G licence was deferred payment fees rather than an upfront fee, and approximately €2 million per year comes in under that heading. As to how better to spend the money, that is another day's work.

There are many regulators, such as the Financial Regulator and the financial services ombudsman, and I regularly see statutory instruments, signed by the Minister, setting fees for their charges. Does Mr. Doyle know if the fees are set by statutory instrument or by the organisation itself?

Mr. Doyle

I do not have the information but can arrange to let the Chairman have the answer in due course.

If it is set by statutory instrument, we would have to take it up with the Minister. The accounts show guaranteed liabilities of €63 million relating to ACC Bank, which was taken over by Rabobank in 2002, and €3 million relating to ICC Bank, which was taken over by the Bank of Scotland in 2001. Have those amounts reduced since the accounts were prepared? What are they currently and how long are they expected to remain in force?

Mr. Doyle

The Deputy can take it that they have reduced, although I do not have the precise details of the deposit facilities in question. Having dealt with the Bank of Scotland deal personally, my recollection is that the figure was very significant on the day of the takeover so it has reduced to almost nothing.

Perhaps Mr. Doyle can send us a note on the matter.

Mr. Doyle

We can provide a timescale.

The last issue concerns superannuation. There has often been communication with Members about retired prison officers who have a particular issue relating to the heading "Superannuation and Retired Allowances". They have sought to have rent allowance included as pensionable. Mr. Doyle can come back to us again if the information is not to hand. This was approved in 1994 and retired prison officers are seeking to have it backdated on the specific basis that their rent allowance was akin to basic pay. It was not based on attendance, overtime or the number of hours worked. For the past 200 years, even prior to the establishment of the State, rent allowance has been linked to basic pay. Rent allowances for other grades in the Garda and Army are based on attendance and location. Retired prison officers have always maintained that their pensions should cover the allowances paid in the period prior to which they became pensionable. Is Mr. Doyle familiar with the topic?

Mr. Doyle

I heard about the issue on one occasion but have no material before me on it. We will provide a note for the committee.

Retired prison officers are indicating their case is separate. I do not want Mr. Doyle to broaden the issue and speak of general knock-on effects. He should prove there would be knock-on effects. I would prefer if the specific rather than general issue could be dealt with.

Mr. Doyle

We shall reflect on what the Deputy has stated.

Mr. Purcell

I shall go back and comment on a couple of points made. The accounts of the Commission for Communications Regulation are audited by my office and can be brought before the committee for examination in the normal way. As the Accounting Officer has stated with regard to the surplus, this was intended to be self-financing. In the early stages when licences were being issued for the upper spectrum etc., much money was coming in. I remember having an argument with the then communications regulator about the way the surplus was calculated, as I was of the view that more should be returned to the Exchequer. I would have had the interests of the Exchequer at heart. However, it is not easy to do. I could understand that there was a certain validity to the argument being made at the time that a fighting fund was required to take on court cases, etc. That matter has been resolved but it is not easy to determine the surplus to be surrendered. A bit of give and take is required. I would have to be satisfied with the basis of the calculation of the surplus before I would be prepared to sign off on the accounts.

The surplus of the Central Bank was also mentioned, another matter in respect of which some Jesuit training would come in handy. When we moved to the euro currency system, certain issues had to be resolved.

I was very interested in two points made on the tribunals. Deputy Fleming suggested it might be relatively easy to secure an up-to-date indication of the costs of third parties granted legal representation. This may be worth exploring. Mr. Niall Callan from the Department of the Environment, Heritage and Local Government is coming in next week. It should be remembered that in calculating the contingent liability in redress awards etc., we did something similar in the latter stages. We got in touch with firms of solicitors and asked how many claims were in hand, how many had not yet been submitted and so on. From this we were able to create a firmer base for the ultimate calculation. In that case we did not receive total co-operation and, in the matter of ascertaining third party costs, would be relying on the co-operation of the legal firms involved. The Deputy is correct in that they are assiduous in recording their billing times. It might be worth exploring the matter to get a handle on a significant part of the cost incurred to date.

Another point made by the Accounting Officer concerns the responsibilities of the tribunals to act in a responsible way in recording costs. The Accounting Officer's understanding is that there is no mechanism within the administration of the tribunals that would allow them to be aware of such factors as legal attendance or the extent of attendance, for example. This should not be left until the end of a tribunal for legal cost accountants or the Taxing Master to come up with a figure for legal representation, perhaps years after the event. I would like to reflect on this issue.

It may be appropriate for the Comptroller and Auditor General to reflect on it. I would not call it a value for money report, as that would be subjective, with everyone having his or her own view on the value of the tribunals. I ask that we discuss the issue as part of the Comptroller and Auditor General's annual report or a separate one. The process has been ongoing for years and, regularly, we hear about small overruns on capital projects. We have spoken about PPARS. The ultimate potential cost of the tribunals is far more significant from the taxpayer's perspective. Perhaps the Comptroller and Auditor General will let us know if it would be appropriate for his office to examine the matter. The information is available and the legal firms waiting year in, year out in the hope there might be an adjudication on costs would like there to be a broader appreciation of the costs incurred. It is not good practice. Some people may be dead and buried before costs are paid out. This relates to proper management. There is also an element of decency. Asking people to work now and telling them that we will discuss the issue of costs in ten years time is not a decent way to do business. We have obligations in that respect.

Not too many are going out of business waiting for their costs.

Mr. Doyle

I will briefly comment on Mr. Purcell's remarks. I did not intend to state the tribunals had no system but I am not aware that they do.

Mr. Purcell

That is what I was saying. I would like to reflect on what has been stated and perhaps make a few inquiries of my own in the meantime. I can see what might be done in calculating the potential liability in terms expressed by Deputy Fleming and, if possible, how the tribunals are monitoring costs. I am not sure what my role is vis-à-vis tribunals, although I know what it is vis-à-vis public expenditure. There may well be a system in place and I am sorry if I picked up the Accounting Officer’s statements incorrectly. I do not know but will try to find out and reflect on it. I will see if we can conduct the exercise along the lines suggested by the Deputy.

I referred to tax returns forecasting in my report around 2001 and 2002 when we were not getting the tax returns we thought we should be getting. Again, there were exceptional circumstances such as the events of 11 September 2001 and the foot and mouth disease outbreak which slowed down economic activity. I welcome the Accounting Officer's statements about reviewing the methodology to try to improve the position, although it is not an exact art, as everybody recognises.

Regarding the Vote for the Department of Finance, I think Deputy Dennehy recited a number of significant surpluses going back five years. It is important that this matter be raised because everyone must be accountable and the Department of Finance must apply the same criteria to its budgeting that it does to other Departments. The administrative budget system is used throughout Civil Service Departments and offices and the Department of Finance is a signatory to this but, one wonders, is it a signatory to its own administrative budget? This is a matter that requires reflection and I might pass it over to the Accounting Officer to consider it.

Deputy Dennehy has left and the Accounting Officer will provide him with information, but the financial high point of our relationship with the EU came in 1997 when net receipts came to €2.5 billion. The figures for net receipts fell from 2004 onwards and that year they were €1.4 billion. In 2005 the figure was €880 million and it was estimated to be around €660 million for 2006. Ultimately, the time will come when we become net donors, although most of the receipts, around €2 billion, as the Accounting Officer indicated, will continue to come in on the side of agriculture.

I welcome the new contract arrangements and have long held the view, which I have expressed at meetings such as this, that the State should maximise its clout as a major purchaser of goods and services. I mentioned this regarding consultants, engineers, architects, quantity surveyors and so on in a special report on the roads programme and I am delighted to see this being brought to completion. This also applies to the type of system that existed for some time with regard to construction contracts. The re-measurement system was a recipe for inflation at extra cost to the State. That is a broad review but I hope it sums up what was said at the meeting adequately.

Could Mr. Doyle pass on the information we requested on inquiries and tribunals as quickly as possible? Likewise, contact can be made with the other Accounting Officers so we can have the information to hand when we discuss Mr. Purcell's fully developed views.

Does the committee note Votes 1, 6, 7 and 12, the contingency fund deposit account 2005 and finance accounts for 2005?

Is it agreed that Chapter 1.1 is disposed of? Agreed.

The witnesses withdrew.

The agenda for our next meeting on Thursday, 22 February is as follows: the 2005 annual report of the Comptroller and Auditor General and appropriation accounts, Vote 25 — Department of the Environment, Heritage and Local Government; Chapter 5.1 — landfill targets, local government fund accounts 2005 and environment fund accounts 2004 and 2005.

The committee adjourned at 2.45 p.m. until 11 a.m. on Thursday, 22 February 2007.