I am delighted to be here in my capacity as Secretary General of the new Department. As we discussed already this morning with the Minister, Deputy Howlin, the Department and the committee share the same goals and members can be assured of our support and co-operation in this forum or in other ways as we deem appropriate.
As the committee will be aware, the establishment of the Department required a very significant effort. A number of functions transferred from the Department of Finance and the Department of the Taoiseach, in addition other functions to address commitments in the programme for Government. A very significant piece of legislation was passed by the House to give effect to these changes to establish the new Department.
It is useful to recap on what the Minister for Public Expenditure and Reform now has responsibility for, which includes the management of gross voted expenditure, the annual Estimates process, general sanctioning powers in relation to expenditure and policy matters relating to the appraisal, review and evaluation of spending. We touched upon some of these issues this morning in the context of the value for money code which the Minister has published. The Minister also has responsibility for public sector management and reform, including industrial relations and public service modernisation.
Our Department was given three key objectives by the Government, the Taoiseach and the Minister: to manage public expenditure to more sustainable levels; to manage a significant programme of public sector reform; and to support the Government in its wider political reform agenda. Since the Department was formed, working with the Minister, Deputy Howlin, and the Government we have delivered on a wide variety of different issues and I will touch on them very briefly. We have established a new management team in the Department, with external recruitment; managed overall spending within the parameters set by budget 2011; delivered the jobs budget; participated in several troika reviews of the programme for Ireland in conjunction with the Department of Finance; worked on a new pay policy for senior public servants and officeholders; developed legislation to significantly reduce future public service pension costs - a very significant piece of legislation, which I understand will pass its final Stages in the House next week; reformed the Top Level Appointments Service, including an external chair of TLAC and more members; changed the terms that apply to Secretaries General on retirement; worked with Government on the future State assets disposal programme; developed and published the public service reform plan, which we discussed already this morning; made significant progress on the development of proposals in relation to a wide variety of shared services; prepared a review of capital priorities which was published a few weeks ago; managed the comprehensive review of expenditure, which I understand we may touch on in this session; and managed the Estimates process and this week published the book of Estimates in respect of 2012.
It may interest the committee that since July the Department has answered 965 parliamentary questions - not all from Deputy O'Donnell, but one or two; 43 FOIs; and 1,900 reps' in addition to a variety of other activities. It is useful to set that out. It is important at this forum to pay tribute and thanks to the dedication of the staff in the Department who work very hard in delivering on all these other matters for the Minister, Deputy Howlin, and for the Government.
Following the establishment of the Department, the transfer of functions included the transfer of responsibility for the minutes of the Minister in the context of Committee of Public Accounts. This is an issue the Chairman has raised with me previously and we touched upon it this morning in terms of the timeliness of minutes. As of mid-July this year, there were five minutes outstanding with 108 recommendations all relating to the 30th Dáil. Since that time a significant effort has been put in by the Department and we have now issued responses in respect of four out of those five reports. That means that 74 of the recommendations have been responded to in full since July, and 43 are remaining and responses are due to issue shortly in respect of those. We have put in a very significant amount of effort in ensuring that the backlog of responses has been addressed.
As the committee is aware, officials of the Department have met Committee of Public Accounts officials to consider how we can improve the timeliness and relevance of this approach and maybe this is something we can have a discussion about. There is certainly a need for us to look at this whole process to ensure that recommendations, minutes and responses are timely and relevant. As the Minister discussed this morning, it seems somewhat unusual that for reports from 2007 and 2008, recommendations in relation to those are only being responded to this year. That is something that we are happy to work with the committee on doing better.
On the public service reform agenda, we have heard much about it already this morning. Budgetary reform is an element of this and I would like to touch on it briefly because it will have implications for how we spend and account for public money. As announced by the Minister, Deputy Howlin, this week we need to modernise our approach to budgeting. This year's comprehensive review of spending was important in this respect. There are two aspects I would like to touch on very briefly. The first concerns the need to evaluate public spending more rigorously. The second relates to the role of committees and this House, the Oireachtas. This was also touched upon earlier by Deputy Harris and others.
On the question of evaluation, one of the lessons from the review has been that good quality analytical work can be undertaken by the public service when there is a clear mandate to do so and a clear timeframe within which to deliver results. This week, our Department has released all of the background CRE documents for public inspection. It is a significant volume of material prepared by the Departments and it is all available on our website. People can see the key documents that were input into the decisions the Government has taken and announced this week. They show a serious engagement with this process across Departments and offices generally. In many cases, the standard of evaluation has been very high. The challenge for the public service is to harness this energy and commitment, so that the CRE is not just a once-off exercise. We must maintain the momentum and ensure that public spending is subject to review and evaluation on a continual basis.
There are processes that exist at present, notably the value for money, VFM, and policy reviews, that have been around since the 1990s. These reviews have been gaining some traction over recent years, and some of them have yielded useful results. However, the reviews have fallen short of their initial ambition, with only limited coverage in terms of overall spending covered by the reviews. We are pleased that the Government has agreed to reform this area entirely. As part of the announcements this week, a new VFM code is being introduced which allows for a much more focused approach to conducting expenditure evaluations, which will tie in more closely with the work of the Dáil committees. This is something we might come back to discuss in more detail with the committee on a separate occasion.
I should add that our approach is influenced by the experience internationally, particularly the Canadian experience of programme reviews during the 1990s which is seen as the exemplar in terms of how governments should look at spending and consolidation in the context of a wider fiscal consolidation. What is interesting about the Canadian system is that it has evolved from major, once-off reviews into what are called "strategic reviews", with an ongoing process of evaluations and continuous assessment of the priorities associated with different spending lines, as the Minister mentioned earlier, in order to have more of a zero budgeting approach as opposed to an incremental approach each year to spending. This approach is, in broad terms, what we are hoping to introduce in Ireland.
The second broad theme I wish to discuss is the enhanced role for the Oireachtas and its committees. The reforms fall under about five broad headings, all of which share a common theme, that is, an enhanced set of tools and a new opportunity for the Dáil and its committees to be involved in the business of expenditure. There have been a number of reports on this topic over the years. The Committee of Public Accounts produced a detailed report in 2005 on reforming the Estimates process, calling for the entire process to be brought forward so that parliamentarians could input their views and perspectives before the Estimates are settled later in the year. The Oireachtas Joint Committee on Finance and the Public Service also produced a report about a year ago, calling for re-formatting of the Estimates so that costs and outputs could be seen against each project or programme.
In essence, these reports are now being acted upon by the new Government. To begin with, this week we have published expenditure ceilings for each Department not just for 2012 but also for 2013, with indicative upper ceilings also in place for 2014. This means that Oireachtas committees, particularly the sectoral committees, are now in a position to engage with Ministers from the outset of 2012 on how their future Estimates should be prioritised. Moreover, we are now introducing performance budgeting on a general basis so that when the 2012 Estimates are published in the new year they can be referred to Dáil select committees for discussion.
At this stage we are setting out not just the inputs or the amounts of spending but also the outputs, outcomes and targets so Deputies can see not just what is being spent but also what the Government is hoping to achieve with that expenditure. This should lead to more meaningful discussions on Votes when they are discussed. I referred earlier to opportunities. This is an opportunity for the system to be more engaged in the formulation of expenditure policy and the establishment of expenditure priorities.
Finally, our Department is taking the lead on public service reform, but reform is something that should preoccupy all of us in our jobs in every Department and in every institution. In that context, we look forward to working with this committee and hearing its views and comments on what we are doing and to feed into that process.
To turn briefly to the items before us, Vote 7 is the superannuation Vote. The forecast gross outturn on the superannuation Vote for 2011 is approximately €424 million. That is lower than expected due to a lower number of retirements than expected when the Estimate was set. Overall, there is an upward trajectory for retirements over the decades ahead, reflecting the demographics of the Civil Service. It is interesting to note that the average age in the Civil Service is now 45 years, compared with 35 years about 15 years ago. The average age has increased and we have, compared with other countries and our history, a very old Civil Service. Less than 7% of civil servants are aged under 30 years. This speaks to what the Minister mentioned earlier about the need for some recruitment into the Civil Service despite the reductions in numbers and pay allocations. We will have a very significant problem in the future if we do not start engaging in limited recruitment, despite the difficult financial situation we face.
Next year is projected to show a spike in retirements as civil servants are expected to retire before the end of the grace period, after which their pensions will be based on the lower cut salary. The provision for 2012 shows an increase over the 2011 Estimate to reflect the expected retirements. That was set out in the Estimates published by the Minister this week. Over the longer term, the costs of pensions will rise significantly. Expenditure by 2022 is projected to be over €640 million, a rise of over 50% over the 2011 level. The number of Civil Service pensioners is estimated to reach around 28,000 by 2022. Meeting these costs will be a significant challenge and the Government has set out a number of legislative changes which will, in part, address the cost of pensions in the future. I will not go through them but Deputies will be familiar with some of them.
We welcome chapter 10 relating to performance management and development and its findings. We agree with most of what has been set out by the Comptroller and Auditor General. We carried out an extensive review of PMDS over 2010 and concluded, from feedback, that PMDS is not seen as an effective tool in the management of performance. That dovetails with the conclusion of the report before the committee. I will outline in a moment the reforms that we have already introduced relating to performance management in the Civil Service, but I wish to put them in the context of broader reforms in HR being delivered by my Department and HR units across the Civil Service.
We face significant challenges in developing the public service of tomorrow, which will be a great deal leaner. We know that to deliver excellent public services with fewer resources we need our workforce to be talented and skilled, innovative and responsive, and to perform to the highest levels. In response to the challenge of how we do more with less, the effective deployment and management of our primary resource, our people, is more important than ever. To address this challenge we have established a HR policy directorate in the Department. This directorate is examining fundamental reforms aimed at improving the way the Civil Service is resourced and managed. Key deliverables will include workforce planning - to ensure that we deploy existing staff optimally, manage corporate memory loss, and identify the skill gaps to allow targeted, well focused recruitment over the medium to long term. We mentioned this already. Given the number of exits and the demographic profile, we need to recruit. However, we must recruit in a different way from the past, with more emphasis on specialist skills.
The senior public service is very important. To underpin the need for reform across the public service we need strong leadership. We have established a senior public service to promote a more integrated approach and to strengthen the leadership capacity of the public service. We are reforming performance management. We have developed a comprehensive approach to the reform of PMDS and we are working closely with Civil Service management and unions in this respect.
Some of the criticisms that emerged as part of the review of PMDS include: the process is overly bureaucratic with an emphasis on form filling; a lack of consistency and fairness of standards for performance, that is, it is perceived that there are too many high ratings with everybody rated as above average; and a failure to deal with underperformance. In response, our Department has taken the initiative and is working with HR units to strengthen management capability across the Civil Service. Earlier this year my Department developed guidelines and training material on the management of underperformance. Over 100 staff from HR units were trained on the new guidelines and related HR policies such as the disciplinary policy. Departments are now expected to train their own line managers on the management of underperformance, which is a major challenge within the system. We accept and recognise what is set out in the report before the committee, that underperformance is a major issue that must be addressed.
While the initial focus of reform has been on simplifying and streamlining the process, we need to do more. Phase 2 of the changes to PMDS will focus on looking at the distribution of ratings across Civil Service Departments to see how they can be improved and how fairness and consistency across Departments can be strengthened. We will bring forward proposals on how to address these issues in 2012.
Turning to the chapter on central Government accounting, we welcome the Comptroller and Auditor General's comments. The recommendations make an important contribution to shaping policy and we accept them. The recommendations are being implemented across the expenditure reform agenda. Progress includes the agreement of a revised procedures with the Revenue Commissioners regarding accounting for vehicle registration tax, to which the Comptroller and Auditor General alluded. Regarding State cash management, a circular consolidating the requirements for grants and grants-in-aid issued to all Departments in December 2010. This refers to the issues mentioned by Deputy O'Donnell about the need to reduce cash balances and to ensure the State as a whole is reducing the financing costs of holding cash unnecessarily.
The policy on unmatured liabilities is under review, taking account of the wider context of Estimate reform, including the development of a medium term expenditure framework. One initiative that is particularly important in this respect is the move to allow carryover of unspent current funds from one year to the next. Many of the issues referred to by the Comptroller and Auditor General in respect of unmatured liabilities concern the fact that we are, in effect, paying early because we have the cash. People think that if they do not spend it, those dreadful people in our Department will take it from them. If we have a more mature system where we say that people can have the carryover of unspent current funds into the next year, that will reduce the tendency for spending towards the end of the year and, in some limited cases, of actually paying liabilities that are not yet matured, as identified by the Comptroller and Auditor General. This reform will lead to a more mature approach and there will not be such a smell of paint around Government buildings and offices so that at the end of the year, people will not be brought in to do jobs in November and December, as it was once characterised by someone. This will be an important reform if it is put in place.
We also share the view of the Comptroller and Auditor General that all accounting officers need to ensure that arrangements are in place to record effectively all transactions, produce accurate accounts and facilitate a prompt and efficient audit. With this in mind, and taking account of the concerns expressed, a circular has been issued to all Departments by Judith Brady and her team, outlining the requirements for the timely production and submission of accounts of bodies. We have reminded the system of that matter, which was raised by the Comptroller and Auditor General.
We are happy to be here and to answer any questions.