Dáil Éireann debate -
Tuesday, 13 Dec 1988

Vol. 385 No. 6

Supplementary Estimates 1988. - Vote 7: Office of the Minister for Finance.

Minister for Finance (Mr. Reynolds)

I move:

That a supplementary sum not exceeding £3,391,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1988, for the salaries and expenses of the Office of the Minister for Finance, including the Paymaster-General's Office, and for payment of certain grants-in-aid.

The three Supplementary Estimates which I am moving today are in respect of the Office of the Minister for Finance, the Office of Public Works and the Vote for Public Service Early Retirement Payments.

Mr. Noonan

(Limerick East): Is it the Minister's intention to circulate his script in the usual fashion?

Mr. Reynolds

I expect it will be circulated.

Mr. McDowell

Is it the Minister's intention to circulate the Estimate in respect of the public service early retirement scheme?

Mr. Reynolds

It will be made available to the Deputy. My colleague, Deputy Noel Treacy, Minister of State at the Department of Finance, will speak later on the Supplementary Estimate for the Vote for the Office of Public Works for which he has direct responsibility. I will, therefore, confine my own comments to the Supplementary Estimates for the Office of the Minister for Finance and the Vote for the public service early retirement payments.

The Supplementary Estimate for my own Department is required for three purposes — to make additional moneys available to the western development fund, to enable increased repayment to the Central Fund of advances made by the Exchequer to the Industrial Credit Corporation and to provide for recoupment to the Industrial Credit Corporation plc of revised figures for losses which arose in respect of high risk lending in the manufacturing sector. I propose to deal briefly with each of these items.

As Deputies will be aware the Government decided, as one of the recent series of measures to stimulate growth, to allocate an additional £350,000 to the western development fund. The moneys will be used to assist the establishment of timber harvesting projects in western counties. These projects will promote the further development of our natural forestry resource and are expected to generate 60-70 new full-time jobs at full production.

The second reason for the Supplementary Estimate is to enable repayment of an additional sum to the Exchequer in respect of losses incurred by a subsidiary of the Industrial Credit Corporation plc, the Shipping Finance Corporation. In the mid 1970s the Shipping Finance Corporation advanced loans of £10.8 million towards the financing of two ships at Verolme Cork Dockyard. In 1986, the owner of the ships defaulted and, after some negotiations, a sum of £2.9 million of the loan principal outstanding was written off by the Shipping Finance Corporation. My Department agreed to a write-off of a corresponding amount of repayable Exchequer advances, and this amount must now be repaid to the Exchequer. Because of a saving on the existing allocation the amount required by way of Supplementary Estimate is £2,751,000.

The third item relates to losses under an industrial development loan scheme operated by the ICC. The losses referred to arise in respect of high risk loans advanced by ICC in the manufacturing sector under the terms of a scheme, known as the development finance scheme, agreed between ICC and my Department in 1980. Under this scheme the Exchequer accepts 40 per cent of the credit risk on certain loans advanced by ICC to clients who might not otherwise have been able to obtain finance for their projects. The main reason for the increase in the amount involved under the scheme for this year is that during the early years of a loan, bad debts are relatively rare. As the scheme has matured, losses have increased, probably peaking in this year. This scheme is being phased out, in the light of the increased sources of capital now available for investment purposes.

Before leaving this Supplementary Estimate, I would point out that because of savings of £1,100,000 within the Vote the net amount needed by way of Supplementary Estimate is £3,391,000.

I will now move on to the Vote for public service early retirement payments. A further £18 million is now required for this Vote. Eighty million pounds were originally provided for this purpose.

There are two principal reasons for this divergence from the Estimate. First, because of the voluntary nature of the scheme it is very difficult to predict which staff members will avail of the terms, and since the payments due to individuals on departure vary according to their age, salary levels and length of service, the total cost of the package is difficult to predict. Second, the scheme has been more successful than we anticipated. Particularly, the announcement on the termination of the early retirement scheme for public service employees over the age of 50 has led to a large volume of later applications which, it is estimated, will bring the total cost of the scheme to £98 million this year.

The Government decided in July 1987 to introduce a package of voluntary redundancy in areas of the public service where staff had been identified as surplus to requirements. In November 1987 we decided that the early retirement terms should also be offered to employees aged 50 and over in the Civil Service, health boards and non-commercial State bodies. These early retirements create vacancies into which staff who are no longer required in their present work areas, but who do not wish to leave the public service, can be redeployed.

The scheme was introduced because the Government accepted that it was necessary to reduce the size of the public service. Over the last two years we have examined critically the entire range of public expenditure and have decided to scale down activities in many areas: it follows, if the intended savings are to be made, that the numbers of staff engaged on those programmes must fall. In order to facilitate this, we therefore decided to offer an incentive package to ensure that public service staff numbers would fall to the desired levels.

The policy has been highly successful. Over seven and a half thousand people will leave the public service under the scheme this year, in addition to the 1,135 who accepted the terms in 1987. These reductions in numbers have been achieved on an entirely voluntary basis.

The costs of the scheme are substantial: £8.4 million was issued from the public service early retirement payments Vote in 1987, and the requirement for this year is now expected to be £98 million. It will be necessary for us to maintain a very restrictive approach to public service recruitment for some years in order to achieve the full benefit of the resulting pay savings. We have therefore decided that the policy adopted last year will be continued in 1989. No vacancies may be filled in the Civil Service without the consent of the Minister for Finance, and no vacancy may be filled in any other area of the public service, excluding the commercial State bodies, without the approval of the Minister responsible and the consent of the Minister for Finance.

The voluntary redundancy package will continue to be available on a restricted basis in 1989. It will be available only in areas where staff have been identified as surplus to requirements or where adherence to the financial provisions in the 1989 Estimates will require further reductions in staffing.

With these comments I commend these three Supplementary Estimates to the House. If Deputies wish to raise any points in relation to the Supplementary Estimates for the Office of the Minister for Finance and the public service early retirement payments, I will be glad to address them in my reply at the end of this debate.

My colleague, Deputy Treacy, the Minister of State, will address any points relating to the Supplementary Estimate for the Office of Public Works.

Mr. Noonan

(Limerick East): It would help if the Minister of State at the Department of Finance were to speak first.

Minister of State at the Department of Finance (Mr. N. Treacy)

The first item in the Vote for the Office of Public Works is the additional allocation of £239,000 sought for Subhead D for the purchase of sites. The Government have taken decisions on the Office of Public Works building programme for next year and purchase of the required sites now will facilitate orderly progress of the programme. The commissioners are also negotiating the purchase of certain lands for conservation.

An additional sum of £516,000 is required this year for Subhead E for the capital building programme. I am particulary pleased to be seeking this sum, as it arises primarily because of better than anticipated progress with the major development at Dublin Castle. I want to emphasise that this superb project will be completed faster than we had anticipated and within the original budgetary target set in 1985. For these reasons I am taking this opportunity to pay the highest compliment to the team involved in its execution. I might add that I hope the media will devote at least as much attention to this success story as it has to less successful projects.

The maintenance and supplies subhead, F1, will need an additional allocation this year. The Government have decided that, from the beginning of next year, individual Departments will assume financial responsibility for contract maintenance works in the buildings they occupy. Details of this change are outlined in the General Note in the Abridged version of the 1989 Book of Estimates. In the period since the Government took this decision the Commissioners of Public Works have been actively encouraging contractors to claim their money immediately on completion of maintenance works in order to avoid, as far as possible, the situation where the accounts would not be cleared until next year, and would then have to be met by the individual Departments. In the normal course of events contractual commitments on maintenance works, amounting to about £1 million, would be carried from one year to the following year. Given that the contractual liability in these cases rests with the commissioners, I believe the case for providing the additional sum of £937,000 is compelling.

The energy costs subhead, F4, needs additional funding of £450,000. Deputies will be aware that individual Departments have, this year, assumed responsibility for their own energy costs. Heretofore these costs were charged to the Office of Public Works Vote. The sum of £804,000 provided in Subhead F4 in the original Estimate was intended to clear departmental energy costs, incurred in 1987, but not billed until this year. The sum was also expected to cover the energy costs of certain prestigious buildings and other premises in the case of the Office of Public Works. There have been minor teething difficulties with the operation of the new system which have left doubt as to the correct subhead of charge for the energy costs of some accommodation. The excess on this subhead is directly offset by a saving on the energy allocation provided in subhead B3. The difficulties I mentioned are currently being resolved and this will be reflected in the 1989 Book of Revised Estimates.

An additional sum of £94,000 is sought for inland waterways this year. The sum is needed to cover the cost of purchasing transport vehicles. Since taking over responsibility for the canals in July 1986 the Commissioners of Public Works have been examining ways of making better use of the existing resources. The previous owners of the canals adopted the practice of hiring vans for the transport of the work crews to the areas in which they were needed. In the medium and long term this practice is significantly more expensive than the cost associated with owning the vans. In the circumstances the commissioners are purchasing six vehicles for use by the canals workforce.

The additional sum required for the arterial drainage subheads, L2 and L3, is £296,000. Deputies will be aware that it was necessary to introduce limited short-time working on the drainage programme recently. The matter was disputed and the Labour Court considered the case in October. On 19 October the Labour Court recommended that, pending consideration of the issue by the Central Review Committee of the Programme for National Recovery, short time working should cease. The additional sum sought for these subheads will allow drainage workers to be maintained in full time employment for the rest of the year.

At the outset I mentioned that this is a token Supplementary Estimate. Deputies will see from Part 2 of the details that significant savings, totalling £1.73 million, are expected on certain subheads. An increase of £799,000 on the original Appropriations-in-Aid Estimate is also anticipated. I propose to give details only of the significant factors in both cases.

A saving of £321,000 is forecast on subhead A1, due to the rate of take up on the early retirement offer and the non-filling of vacancies. The bulk of the savings on subhead F3 is due to the fact that FÁS will be paying rents this year in respect of accommodation occupied by them. This matter had not been settled when the 1988 Estimates were being framed and, accordingly, provision was made in Vote 10 for these rents.

The saving of £146,000 expected in subhead M is due to the takeup on the early retirement offer and a decrease in demand for spare parts for the machinery used on the arterial drainage programme.

There are a number of reasons for the projected increase in Appropriations-in-Aid. Firstly, the income from charges at Dún Laoghaire Harbour will be higher than anticipated. Furthermore, the popularity of our parks and monuments for our visitors continued to increase and, this year, the income will be the highest on record. I believe that these latter increases are not only a sign of a general pick-up in tourist activity, but are also a tribute to the outstanding quality of the commissioners' work in the conservation and amenity fields.

I commend this token Supplementary Estimate to the House.

Mr. Noonan

(Limerick East): I would like to congratulate the Minister for Finance on his recent promotion and to wish him every success in this most difficult ministry of any Government, particularly of this Government, especially when we consider that financial policy is so central to overall Government objectives.

My party have no objections to any of these Estimates. We see them as part of the normal prudent housekeeping which is necessary at this time of year. It appears that the Government's borrowing requirement will be somewhat less than 40 per cent of that which was budgeted for in the budget. Consequently, the necessity for Supplementary Estimates does not arise this year and certainly does not arise in respect of the Estimates put before the House.

I have no difficulty at all in accepting subheads K, L and M in Vote 7, Office of the Minister for Finance, and I presume that in order to improve the position for next year a decision has been made to pay before the end of this calendar year rather than there being any necessity to bring these items into the Estimate for the current year. If it would lead to an improvement in the position for next year I think any Minister for Finance would do it and it presents me with no difficulty.

I would like to raise one or two points in respect of the public service early retirement scheme and I hope that in replying the Minister will take the opportunity to respond to them. Our time is very limited and therefore I will not dwell unduly on this matter but will proceed by way of question. The original Estimate was for £80 million and this is now being raised to £98 million. An estimate was given of the sum that would be drawn from the Central Bank so as to pay lump sum payments. Subsequently, there was a variation of this figure if I recall correctly a statement made by the Minister's predecessor. I would like the Minister to explain to the House what the present position is. Is all of this money, £98 million, going to be drawn down from the Central Bank or is part of this figure going to be provided by the Exchequer, seeing that the Exchequer is now in a better position than they thought they would be? I know that all of the money received from the Central Bank passes through the Government's accounts but I would like a more detailed breakdown as to what portion of the £98 million will be drawn down as part of profits in advance from the Central Bank and what portion will be supplied by the Exchequer.

The Minister has also reaffirmed today what is implicit in the 1989 Estimates, that the Government's policy on recruitment in the public sector will continue in 1989 and that the early retirement package will be made available once again but only in circumstances where staff are surplus to needs in the opinion of the Minister for Finance. It seems that the Minister will have to take a look at this area in greater detail in the context of the forthcoming budget. In the Estimates for 1989 there are several patterns but that which strikes one most forcibly is the one that indicates that while there have been real cuts in many Departments these savings have been swallowed up to a large extent by real increases in other Departments. When one examines the Estimates one will see that effectively pay increases are swallowing up the savings made in other areas. What is clearly emerging is that while programmes remain in position across line Departments there are insufficient civil servants to deliver the particular services. This also applies outside the Civil Service, for example, in the health boards, in local authorities and, increasingly, in some of the semi-State organisations.

This leads to two difficulties, the first of which is that all of these programmes are left lie there waiting for the day when things improve sufficiently, when the traditional level of expenditure will be provided. I did not see any evidence of a restructuring of Government spending as distinct from a reduction in Government spending. Does the Minister have any further plans to restructure Government expenditure in so far as it relates to the number of people on the State payroll, either directly or indirectly? I am not convinced that a continuation of the early retirement scheme along with the embargo, admittedly in a more targeted way, will achieve the end which the Minister and the rest of us desire.

It will be difficult in future wage agreements to hold the line on pay particularly if inflation remains quite low. The numbers on the payroll will have to be reduced further rather than there being an attempt made to control the level of pay which the existing group receive. Has the Minister considered reconstructing some of the activities of Departments so as to take out some programmes and offer them to outside agencies? Some programmes could be dropped completely although in others the services provided are desirable and, in many cases, vital. Has the Minister considered the possibility of offering programmes, along with the staff who run them, who would effectively either become employees of new semi-State companies or alternatively of the private sector, to outside agencies? I believe the movement has to be in that direction. There are around 180,000 public servants but I presume, through the effectiveness of the redundancy programme, this number has been reduced further. Perhaps the Minister will give us the correct figure when replying but restructuring public expenditure, rather than continuing to cut in every annual budget, would involve further reductions in numbers and if this is to be consistent with maintaining services it seems that there is only one way to go. I would like to hear the Minister's views on this matter at an early date.

I would also like to thank the Minister of State with responsibility for the Office of Public Works for his very detailed statement on why the additional sums required under Vote 10 are necessary. I have no comment to make on this but he is right to draw attention to the fact that the Office of Public Works who are frequently subjected to quite trenchant criticism have had some notable successes. It is appropriate when there are major successes, such as the beautiful work carried out on the Royal Hospital in Kilmainham and the restoration of Dublin Castle, not only ahead of schedule but within budget, that this House and people outside, too, should note them. There have been major successes within the public sector, but it has not been fashionable to praise the public sector in recent years. I believe it is about time some balance was restored and where there are real successes we should praise the people involved. The work done on the castle is a notable success and I applaud the Minister in drawing the attention of the House to this work.

I do not think the Minister of State will get an opportunity to reply to this debate but perhaps the Minister will take up one point in relation to these Votes: will he make a policy statement on the Government's intentions on arterial drainage for 1989? I understand that those regions in the process of submitting integrated regional programmes to the Minister's Department, through the filter of the Minister for the Environment, are not including arterial drainage works in their integrated regional programmes. If arterial drainage is to have a place in the economic development of regions it seems that it more than anything else needs to be integrated and if it is not included in the integrated programmes, is it the intention not to have any further major arterial drainage schemes under the 1946 Act? I should like the Minister to take up that point. We are finishing the debate at 5.30 p.m. and I am sure my esteemed colleague, Deputy McDowell, would like to contribute to the debate.

Acting Chairman (Mr. M. Barrett)

I should like to remind Deputy McDowell that he has to conclude by 5.20 p.m.

Mr. McDowell

Time constraints and also my own inclination will restrain me to brevity on this occasion. I should like to join with Deputy Noonan in congratulating Deputy Reynolds on his appointment as Minister for Finance. I wish him well with his appointment. I agree with Deputy Noonan that it is a most difficult task but I have no doubt that he has the will, determination and competence to carry out his functions properly and efficiently and to carry on the good work that has been done in relation to the public finances.

I want to reiterate what I said before in this House in relation to the public service early retirement scheme. Its popularity, which has been mentioned by the Minister, is an indication that perhaps it was over generous in its form and a bit too diffuse in the way in which it was targeted. I accept from the Minister that in the forthcoming year the scheme is to be more closely targeted to areas of surplus employment but it strikes me that it is necessarily a blunt instrument to achieve certain results to use a voluntary retirement scheme. Although I appreciate the industrial relations aspects of voluntary rather than compulsory retirement, I would have preferred, and still would prefer, the Government to specify the size and composition of the public service and its deployment in the form of some kind of White Paper. I should like to know what end is in view, what the final targets are for each Department and whether or not, as Deputy Noonan said, it is proposed to scrap individual programmes and to perhaps amalgamate agencies and reorganise the division of the apparatus of State into different Departments? In this context I think this House is entitled at some stage to get from some member of the Government a long-term strategy on public service employment spelt out. This may not be the time to do it, and I am not suggesting that the Minister should do so between now and 5.30 p.m., but it should be done in the long term.

I wish to inquire whether the Government are willing to issue a long-term strategy paper in relation to their semi-State banking operations, including ACC, ICC and other such bodies. It seems that ICC in particular are a body capable of being made independent, self-sufficient financially and fully commercial and, of course, in that context they are a body who are capable in the long run, in principle at least, of being divested of their Government ownership and put into the private arena to compete in the post-1992 single European financial services market.

With regard to the Minister of State's speech on his Estimates, I should like to refer to two points. I agree with him that it is wrong for this House to criticise always the Commissioners of Public Works when things go wrong for them but never to give them praise when things go right for them. It is wrong for those who like myself believe that the Office of Public Works should be substantially restructured and the commissioners' activities redefined on a narrower basis and for those who oppose the present structure of the Commissioners of Public Works to criticise what they do as a reason for justifying their restructuring. That is not fair. I do not do this because, like Deputy Noonan, I agree that they do many fine things and many jobs which it is hard to envisage any private sector body doing. However, in other respects they do jobs which might be more efficiently done by other bodies. I hope what I have said will not be taken as a criticism of the individuals involved but it is a criticism of the structure under which they operate. It is an old-fashioned structure and concept which dates from the 19th century and even though it is now being changed so as to make individual Departments responsible for their own housekeeping expenses, it seems that in many respects a further and more radical change is needed in the Office of Public Works to get the best value for money for the taxpayers.

With regard to the Dublin Castle project I wonder if the Minister could take a suggestion on board. The castle is, albeit by about 50 or 60 yards in a corner of my constituency and I very rarely have the opportunity when listening to debates about the Office of Public Works to hear anything about something in my constituency. I have looked over the hoardings into this void in which the original moat of the castle has been excavated and various buildings put in place. I would love to have a look around the castle and rather than chance my arm and say "I am a TD and I should like to have a look around", I suppose the best thing to do is to ask the Minister to allow Members of this House to see the work being carried out in the castle. In advance of an official opening to which everyone will come on their best behaviour and in their best suits and stand around and have a sip of sherry, if the public finances extend to that, the Minister should invite Members of this House, while the works are in progress, to see the nature and the size of the works which the Commissioners of Public Works have undertaken and succeeded with, when the extent of the works is obvious rather than just show us at the end — and most people in this House have not been in the relevant buildings — the finished product. I should like to see the work in progress and should like the Minister to make that opportunity available to Members of this House on a formal basis.

I want to refer to the inland waterways. I note that the Minister is looking for extra money for a specific purpose in relation to the inland waterways. In that context I should again like a long term statement of policy as to who will control the canals, how they will be operated, what goals are being established for the management of the canals, what usage levels are being contemplated and how improvements, especially in the inner city areas through which they flow, will be made. I believe, and this is one bugbear of mine in relation to the canals, that there is huge scope for integrating the Royal and Grand Canals more fully — and I know they are to some extent already integrated — into some form of youth training for unemployed young people in the areas through which they run. Much work has to be done on the canals. Because a lot of it is labour intensive but non-capital intensive, if young people were offered the opportunity to do something constructive in relation to something as worthwhile as conserving the canals and the system of canals, and the training opportunities which the woodwork, stonework and horticultural work associated with the canals offer them, this would be a desirable long term aim.

Like Deputy Noonan I have no objection to these Estimates. I have no major comment to make on any of their technicalities except to wish both the Minister and the Minister of State well in the execution of their duties.

Minister for Finance (Mr. Reynolds)

I thank the Deputies for their contributions and for the expression of their good wishes for success in the future in what no doubt everyone appreciates is a very difficult ministry. I will give the Minister of State a couple of minutes to reply to the specific points raised.

I want first to refer to the points made by Deputy Noonan. With regard to the supplementary figures for subheads L and M, I should like to remind the Deputy that they are matured liabilities. Whether I liked it or not, I could not put them on into next year. The Comptroller and Auditor General would make sure they were brought into this year. They are all matured liabilities and as such must be included this year, irrespective of the state of the finances.

The Central Bank are providing £51.4 million this year instead of the £18 million that was being spoken about because of the improved position in relation to Exchequer finances. With regard to Government efficiency, the House can be assured that I will be looking at every aspect but this is not the time for a major statement on the matter. This Government do not stand back from change. We set up the Ministry of the Marine and brought together many functions under its aegis. We set up the office of the Minister for Food, which was long overdue since the State organisational structure had been spread all over the place, involving many Departments and agencies. We will continue to look at areas where efficiency can be achieved because we must continue the downward pressure on Government expenditure.

Earlier this year my predecessor gave a forecast in the budget that public service numbers would fall by about 9,000. It appears that this target will be met. The fall in numbers will slow down in 1989, when employment in the public service is tentatively forecast to fall by some 3,000.

Mr. Noonan

(Limerick East): What is the total number of people in the public service?

Mr. Reynolds

There are 30,000 civil servants and I believe the figure for the public service as a whole is about 180,000. I have not got the exact figure but I will get it for the Deputy.

Mention has been made of pressure on pay as a result of low inflation. I tend to take an opposite view. For the first time in years workers are getting real increases in their wages. The inflation rate is around 2 per cent. The public sector are getting an increase of 2.5 per cent and others are getting more than that. I do not see any excuse for pressure for an increase in wages. For many years high inflation was eroding the value of any wage increase. We will keep the matter under control because we must continue the downward pressure on Government expenditure. We still have major overheads and it costs £2 billion annually to service the debt. Public service pay and two or three other Departments eat up the rest of the money. We must continue to manage the State finances in an efficient and effective manner. I will not stand back from any organisational change. I have certain things in view but it is too early yet to speak about them. I must first have them tested within the Department to see if they can run. Deputies can be assured that we will be returning to this topic early in 1989. The Minister of State will deal with matters pertaining to his Department.

Minister of State at the Department of Finance (Mr. N. Treacy)

Government policy on arterial drainage is to proceed with the present programme of construction works on the Boyle-Bonet and the Monaghan Blackwater. Design work is continuing on the Arrow-Owenmore, the Dunkellin, the Mulcaire and the Suir rivers. In the context of the structural programmes, the Department of Finance will liaise with the Office of Public Works when the various submissions are received if they contain any proposals on arterial drainage.

I thank Deputies for their positive and generous comments regarding Dublin Castle. I would be delighted to allow Deputy McDowell, Deputy Noonan and any other Deputy to visit the Castle at any time. If they consult me tomorrow I may be in a position to accommodate them. It has been my policy, where possible, to make all the Members of the Oireachtas aware of any opportunities or facilities in which they may be interested. I should like to see all Oireachtas Members visit our national parks and monuments and I should be delighted to make special arrangements for them at any time.

Since taking over responsibility for the canals from CIE in 1986, the Office of Public Works have commissioned a major management and development strategy report which will form the basis of future plans. This report — the Brady. Shipman and Martin report — has been widely welcomed as being a very imaginative, feasible and practical report pertaining to the canals. A start has been made on the huge backlog of maintenance work. This has involved the purchase of several major items of equipment. It is hoped, resources permitting, to continue to make progress on the detailed plan to develop the full potential of this valuable amenity. We are seeking European Community funding for substantial improvement works on the canals.

Vote put and agreed to.