I arranged for an advance copy of this statement, together with briefing material on each of the chapters on the review, the annual report of the Department, the annual statistics report and other relevant information to be provided to the committee secretariat last week. I hope that members found this material to be of use.
In previous opening statements at this committee, I spoke about the role of social welfare in compensating for and mitigating the impact of failures in the market economy and about how our staff are acutely aware, through their everyday work, of the impact of welfare and employment services on the lives of individuals and families. In saying this, it is important to emphasise that the term "social welfare" or "social protection", insofar as it is colloquially and properly used to describe the work of the Department covers a far broader remit than is traditionally associated with the term. For some people the term "social welfare" creates images of dole office queues and connotations of handouts. This was never a fair reflection of the role of the Department, the nature of its work or the disposition of the people it serves and it is certainly not the case now.
The Department is, as members will be aware, responsible for the provision of policy advice and the delivery of services across a broad and expanding remit. As well as the traditional range of cradle-to-grave welfare services, which are themselves expanding, the remit now covers employment affairs and employment services, as well as general registry services, citizens information and advice and pensions supervision and regulation.
The Department is heavily involved in both the evaluation and development of policy and the design, development and delivery of services, giving it a breadth and depth of responsibility that is unique in an Irish Civil Service context. The expenditure of the Department equates to approximately 37% of Government current expenditure and the Department employs approximately 20% of all staff in the Civil Service. More notably, the impact of the Department’s work is felt by every person, family and business in the State. If a single statistic can encapsulate its impact, it is that the schemes and services delivered by the Department reduce the risk of poverty by some 50% compared to that which would otherwise pertain.
In delivering on this brief, the staff of the Department strive to always deliver an effective and efficient service and, in doing this, they are very mindful of the vulnerability of the people who rely on our services. However, it is inevitable, given our breadth and scale, that failures will occur and it is equally inevitable that when these failures do occur, the committee and I, as Secretary General, will hear about them much more frequently and much more vociferously than we hear about the normal, routine, high level of service in, for example, processing over 2 million claims and making over 80 million payments across 86 different schemes and services every year.
I hope I will be forgiven, therefore, if I take this opportunity to acknowledge the work of our staff by drawing attention to the evidence that they consistently deliver a high level of service. Evidence in the customer satisfaction research shows an 85% satisfaction level, in the low level of appeals of less than 1%, in the accreditation for service quality excellence by the International Social Security Association, and in the award of Quality and Qualifications Ireland, QQI, certification up to level 8 of the national framework of qualifications or staff development and training programmes to name just some of the external recognition received during the year. This is not to diminish the cases where we have failed or could do better and we also have to recognise and learn from these cases. That is why the work of the Comptroller and Auditor General not only in reviewing our accounts but in examining, every year, specific aspects of our operations is welcomed, as is the scrutiny of this committee in holding us to account in respect of the findings of the Comptroller and Auditor General.
Turning now to the Comptroller and Auditor General report for 2018, I do not, in the interests of time, intend to comment on all of the accounts and chapters but I do wish to make some remarks in respect of issues that I believe may be of interest to the committee or which have already been signalled as being of interest. These relate to the status of the Social Insurance Fund, Brexit, service performance statistics and the public services card.
The Committee will note from the 2018 accounts that the Social Insurance Fund appears to be in robust financial health. Expenditure during the year of €10 billion was some €1.1 billion less than receipts, yielding an accumulated surplus at the year-end of €2.3 billion. I can confirm that this trend has continued and we anticipate that this surplus will be in the order of €4 billion, or thereabouts, by year-end 2019. It is important to note that this positive trend will not continue and should not be allowed to engender complacency with regard to the challenges that lie ahead. Past experience indicates that cyclical forces can wipe out this surplus very quickly. In 2008, a surplus of €3.4 billion was wiped out in 15 months and, over the next six years, the SIF was dependent on Exchequer transfers totalling €7.4 billion in order to meet its obligations to contributors. That was in the context of favourable demographic conditions.
Looking to the future, demographic trends will significantly increase expenditure of the SIF as the number of older people in our society increases. This is clear from our 2020 Estimates, which show an existing level of service increase in expenditure of about €520 million, of which over €330 million is due to pension pressures. This trend will continue with the result that it is inevitable that even with positive economic conditions, the fund will enter into and remain in deficit. The most recent actuarial review forecasts an annual spend of about €15 billion and an annual deficit of about €3 billion per annum by 2030. This sets a challenging context for the development of medium to long-tem policy, a context in which the social contract may come under pressure and in which the continuing, if not stronger, support and solidarity of contributors will be essential to the maintenance of the existing level and range of services.
I will now turn to Brexit and its impact on the Department and the people it serves. The Department has two main concerns in relation to Brexit: first to protect access to benefits and entitlements for people and, second, to ensure that we can respond quickly and appropriately to any job losses attendant on an economic shock.
Existing EU-sponsored arrangements provide for access to and portability of benefits in order to protect the interests of its citizens moving between member states. Against this background, many people were concerned that once the UK exited the EU, these arrangements would cease to exist. The Department has for a long time had a very strong co-operative relationship both with the Department of Work and Pensions in the UK and the Department for Communities in Northern Ireland. I can confirm therefore that, building on these relationships and within the framework of the common travel area, the Department agreed and signed an international convention with the UK, which fully protects the interests of citizens from both jurisdictions regardless of the nature of any Brexit. People will have access to the same benefits on the same terms under this agreement as they do at present, including free travel on the island of Ireland.
The Department conducted its own assessment of the likely employment impacts of any downturn in the labour market by region and sector. Based on this assessment, we worked and continue to work very closely with our colleagues in the enterprise and education sectors to ensure that our shared processes to respond to job losses and provide employment and training supports are robust and flexible enough to support affected workers. We are confident, based on this work, that the organisation and processes innovations made following the 2008–12 crisis will stand us in good stead in delivering an effective and seamless service to people who may be affected by job losses post Brexit. We are also confident in our ability to quickly process any large influx of claims and avoid any repeat of long queues outside our offices. The development of our online service capability and the introduction of a front-office, back-office model of working will be particularly beneficial in that regard.
Chapter 13 of the Comptroller and Auditor General's report relates to performance monitoring within the Department. The Comptroller and Auditor General notes that, with some exceptions, service performance on most schemes is within target levels and is improving. Last year, committee members expressed particular concern regarding the time to decide carer's allowance claims. The Department acknowledged these issues and advised that it was taking measures to remedy the situation. Although the data in the Comptroller and Auditor General report offer no comfort in this regard, I can advise that the Department has, during 2019, undertaken a review and redesign of the carer’s claims process and has allocated additional staff to this function.
We have also increased the complement of medical assessors. Although there is much work still to be done, these steps are now yielding results. For example, the average processing time for carers' claims in October was just under ten weeks. This compares with an average of 17 weeks in 2018 and is the lowest level in ten years. I understand that ten weeks may still seem a long period to decide a claim, but the complexity of the scheme, which is dependent on multiple conditionalities across two beneficiaries - the carer and the person in receipt of care - is such that these types of claim will always take longer to decide. Nevertheless, we will continue our efforts to improve the service further.
I am aware that the committee members are concerned to understand both the legal status of the standard authentication framework environment-public services card, SAFE-PSC, process and the value for money, or otherwise, of the process. With regard to the legal status, this is, as members are aware, a matter on which there is a difference of opinion between the Department and the Data Protection Commission, DPC. In saying this, it is important to note that there is no difference of opinion between us on the core issue of whether the Department has the function and right to require people to authenticate their identity and to produce a public services card, PSC, when accessing its services. This is a key finding that contradicts and puts to bed the main criticism made of the PSC by some observers. Other aspects are the subject of disagreement between the Department and the DPC and we are anxious, as is, we understand, the DPC, that these matters be clarified and resolved as soon as possible in accordance with the process set down by the Oireachtas. We therefore await receipt of an enforcement notice and, subject to what it might say, we may seek the necessary clarity in the Circuit Court. We hope that this process can be completed expeditiously.
With regard to the issue of value for money, the committee is already aware from its review of this matter in 2016 that there is no single business case document. While, as I indicated in my letter of last week, this is regrettable, it should not be taken as evidence that the project was not planned or executed properly. In fact, as acknowledged in the Comptroller and Auditor General's report from 2016, 17 of the 19 key elements of a best practice business case were, in fact, in place.
Having reviewed the costs and benefits associated with the project, I am satisfied that it has created the basis for improved service delivery, reduced administrative costs and enhanced control savings. In a letter sent to the committee last week I indicated that the total fully allocated costs of the project to date are €67.7 million. However, a large proportion of these costs would have been incurred even if the SAFE process had never been introduced. This is because the Department always sought to authenticate the identity of people claiming its services and issued identity tokens in the form of pension books, social services cards and free travel passes. The SAFE process formalised this approach, established a consistent approach across all of our offices, and introduced a higher, more secure, standard of identity token in the form of a PSC, incorporating a photograph of the person. If a conservative allowance is made, as it properly should be, for the counterfactual or already existing costs, then the actual additional costs of the SAFE-PSC process over the past nine years are, at most, approximately €37 million.
Set against these costs are the benefits of the improved process. These include administrative efficiencies within the Department, reduced payment leakage due to error or fraud, the deterrence and prevention of fraud, but most of all, improved customer service as people accessing our services do not now have to verify their identity on each separate occasion on which they make a new claim or service request. In addition, secure authentication of identity provides the platform on which the Department is now rolling out online service access. This has already delivered some administrative efficiencies and will deliver even greater levels of savings as well as significantly simplifying service access for people into the future. As the PSC and myGov.ie platforms are available for use by public service providers, the savings and service benefits just instanced for the Department can also be realised by these other providers.
Ignoring the deterrence of fraud benefits, which are difficult to estimate, and ignoring the customer service benefits and the benefits that are being realised in other public service organisations, I conservatively estimate that the direct savings attributable to reduced payment leakage and administrative efficiencies within the Department already amount to more than €20 million. As the take-up of online service access increases, as inevitably it will, and as more people who are now SAFE-registered return to make second and subsequent claims, the level of administrative savings and customer service benefits will increase still further. I am confident that these direct savings to the Department will, over the next few years, exceed project costs and that the overall project, taking account of the other benefits mentioned but not included in the figures above, will deliver strong value for money. These figures are estimates only and I acknowledge that we will need a fuller cost-benefit analysis. Therefore, I intend, early in 2020, when full-year costs for 2019 are finalised, to commission a full cost-benefit analysis of the project.
Just under €10 million of the savings realised to date relates to detected fraud. Individual prosecutions on some cases have amounted to more than €400,000 and I have provided the committee, under separate cover today, with some examples of cases for its information. In doing this I wish to return to the principle of solidarity mentioned in respect to the maintenance of the social contract. As one eminent High Court judge has noted, prosecutions such as those circulated help to underpin the solidarity necessary to sustain continued public support for and confidence in the integrity of our social welfare system. In other words, it is important not just that we stand over the integrity of our control processes but that we are manifestly seen to apply high standards in the detection and prevention of fraud and to deploy, within the parameters available under law, the best technology available to that purpose.
The benefit in authenticating identity is, therefore, not confined to administrative efficiencies or from the savings from the detection and, more importantly, the deterrence of welfare fraud but is just as much concerned with the fact that we can defend the system of social expenditure against the claims by some that the system itself is open to widespread and uncontrolled abuse. These claims, although untrue, would, if not rebutted, threaten the continued support of the public necessary to sustain the funding of the services we provide, funding which, as I mentioned in my opening remarks, will have to increase significantly in future years if the existing range and levels of service is to be maintained. Similar considerations apply to demonstrably using the best technology available to minimise administrative cost and error to reassure the public that scarce funds are not being consumed by bureaucracy rather than being delivered to the intended beneficiaries. These are intangible but very important considerations that should not, I believe, be lost in the discussion on the merits or otherwise of initiatives such as SAFE-PSC.
I will repeat something I said last year. We, by which I mean the managers and staff of the Department, work hard to deliver services to the communities from which we come and in which we live, conscious that it is our families, our friends and our neighbours who not only depend on these services but who, through their social insurance contributions and taxes, pay for these services. We are proud of the work we do but we know we are not perfect and we do not always get things right. That is why we welcome the oversight of the Comptroller and Auditor General and of this committee. This process plays an important role in reminding us of our purpose, helping us to identify areas for improvement and helping us to learn from our mistakes. It is through such a process that we would hope to improve. I and my colleagues will be pleased to take any questions that members may have.