I thank members for this invitation and look forward to what I hope will be an informative and productive dialogue on the areas within my purview. As such discussions continue, it will become clear which matters are proper to the Minister for Finance, Deputy Noonan, and which are proper to me. In my first speech to the present Dáil, I mentioned the issue of committees and identified them as one of the most important tools in an effective parliament. Having spent a long time in Opposition I firmly believe this, as well as the need to have them better resourced and better focused upon. I had a discussion to that effect with the Ceann Comhairle yesterday, who also has plans in that regard. It is important to ensure that committees work.
Since I appeared before this committee last July, the Ministers and Secretaries (Amendment) Act 2011 has been enacted. This provides for the formal establishment of the Department of Public Expenditure and Reform. The passage of the Act heralded much more than the simple reorganisation of Civil Service functions, however. It clearly places the twin issues of expenditure management and public service reform at the centre of the Government's agenda at a time when they have never been more important or more urgent. Moreover, for the first time a Minister of Cabinet rank has been given the responsibility for driving an agenda of reform. This underlines the Government's commitment to driving an ambitious reform agenda and to putting in place the structures to deliver on that commitment.
At the meeting on 12 July last, I stated I had three core priorities for the period ahead, namely, achieving the Government's fiscal targets, which is a highly ambitious and demanding job of work, reforming the public service and bringing about real and much needed political reform. I wish to bring members up to date on the continuing progress which is being made on each of these three core priorities and will turn first to the achievement of the Government's fiscal targets. Following three successive annual contractions, the Irish economy is expected to return to growth this year. The growth we are currently seeing is export-led and is supported by the significant improvements in price and cost competitiveness the Irish economy has experienced in recent years. Domestic demand, on the other hand, remains subdued as households and companies look to rebuild their balance sheets. Nevertheless, there is a broad expectation on the part of the Department of Finance, the IMF, the European Commission and the private sector that GDP will increase this year, that the growth rate will strengthen next year and expand by around 3% on average per annum in the medium term. There are risks, however, particularly in the current environment, in which uncertainty surrounding the global outlook is high, but the most recent forecasts from the IMF, for example, have taken account of the latest developments and still anticipate an expansion of Irish GDP this year.
On the public finances, the most recently published figures for the period to the end of August show continued stabilisation. Tax revenues in the first eight months of the year were 1% above projections for this point in the year, while on the other side of the account net Voted expenditure is under control and being managed within the limits set. Our target for the general Government deficit this year, 10.6% of GDP, will be more than met. For next year the agreed target is a deficit of 8.6% of GDP. The Government is committed to achieving the necessary level of consolidation to ensure this target is met. It is firmly committed to restoring order to the public finances as agreed with our IMF and EU funding partners. The allocations presented in the Revised Estimates for Public Services 2011play a key role meeting our targets for this year. The fiscal position set out is consistent with the agreed end-of-year expenditure target. As regards further consolidation in future years, my colleague, the Minister for Finance, has made it clear that our target for 2012 must be a general government deficit of no more than 8.6% of GDP. The comprehensive review of expenditure which has been under way for a number of months will play a key role in this regard and set the parameters for expenditure in 2012 and in a multi-annual context thereafter.
The Government is committed to maintaining public services to the fullest extent possible, but if we are to regain our economic sovereignty, there is no question but that difficult decisions will have to be made in this and future years. As regards public service pay and numbers, the Government has committed in the programme for Government to significant public service numbers reductions of 18,000 to 22,000 by 2014 and an additional 4,000 reduction in 2015. I am committed to sharpening the focus on the performance of Departments at an organisational level. The introduction of the new performance budgeting system will bring a clearer focus to actual outputs and outcomes delivered with scarce public resources on an ongoing basis. This approach, piloted in the 2011 Estimates which were before the committee earlier in the year, presents departmental Estimates on a strategic programme basis, consistent with the presentation of the respective statements of strategy. It is not simply a numbers exercise; numbers and targets are set and can be measured at the end of the year. The Estimates are supplemented by certain performance information on outputs and the impact of performance expenditure. All of this will allow for greater scrutiny by committees of the Houses of each Department's expenditure.
The focus on outputs and performance also underpins the comprehensive review of expenditure, CRE, process. It requires a root and branch reappraisal of all expenditure. Departments, offices and agencies have offered serious solutions. The Government accepts there are no easy solutions to reducing spending levels. Difficult policy options and choices will have to be confronted and decisions made. Difficult decisions, therefore, face the Government, but it is determined to make them. The results of this process will set the context for budget 2012 and expenditure for a number of years thereafter.
In parallel with the CRE, the Department of Public Expenditure and Reform is carrying out a major review of the public capital programme for the period 2012-16. The primary aim of the review is to identify what critical infrastructure best supports economic growth and recovery and what will have the greatest sustainable employment impact in the short to medium term and meet urgent and compelling social needs. The new capital investment budgetary framework for the period will be drawn up based on the results of the review.
The drive to achieve value for money and improved performance is the main motivation for the performance budgeting initiative. It will be an important theme of my time as Minister for Public Expenditure and Reform.
Pay restraint across all areas of the public service, together with the ongoing fall in numbers and measures to boost productivity and improve efficiency, will be the key challenge in the coming years. The imposition of pension related reductions on public servants, together with pay reductions provided for under the Financial Emergency Measures in the Public Interest Acts, numbers reductions and other measures, have reduced the Exchequer pay bill by 14.4% from a peak of €17.5 billion in 2009 to €14.9 billion, a figure net of the pension related reduction. Under the relevant legislation, I am required to carry out a review of their operation, effectiveness and impact, having regard to the overall economic conditions in the State and national competitiveness. The review was completed at the end of June and laid before the Houses of the Oireachtas. The report concluded that there was a need to continue to apply the reductions in remuneration of public servants and other measures controlling the cost of the public service pay bill provided for under the legislation .
As the committee will be aware, we recently agreed to the introduction of general pay ceilings for future appointments to higher positions across the public service. The Government also decided that, subject to the recently announced referendum being adopted by the electorate, the pay rates of incumbent judges should be reduced in line with the pay and pension reductions applied to other public servants. All new appointments to the public service are being made in line with the policy adopted by the Government on pay ceilings of €200,000 in the public service and no greater than €250,000 for chief executive officers of commercial State companies. New pay rates for Secretaries General of Departments have been introduced and effective from June this year with a maximum rate of €200,000. This represents a reduction of almost 30% in the Secretary General level 1 pay rate of September 2008 - €285,341. The new reduced pay rates will also significantly reduce Exchequer pension costs into the future for these appointments. In addition, 12 existing incumbents of posts at Secretary General levels 1 and 2 have effected waivers to bring their remuneration under the pay ceiling of €200,000. No Secretary General is now receiving a salary greater than this figure. There are three statutory postholders whose pay exceeded that level. The Ombudsman, the Comptroller and Auditor General and the Director of Public Prosecutions have also effected the necessary waivers to bring down their pay rates.
The Department is informally aware of individual cases in which CEOs in relevant non-commercial and commercial State companies are making arrangements to effect a voluntary waiver, increase the level of an existing voluntary waiver or maintain a pre-existing voluntary waiver. In this regard, I acknowledge the voluntary waivers of salary made in recent years by the President, many members of the Judiciary, Members of the Oireachtas, statutory officeholders, senior public servants and others.
In 2011 it is estimated that the cost to the Exchequer of public service pensions will be €2.9 billion. This is a very substantial bill for the Government and the people which requires structural change. The issue of public service pensions is being discussed in the public domain. I have been working since my appointment to produce a new pensions scheme for the public service as agreed under the memorandum of understanding. The introduction of the single scheme will provide a more straightforward and efficient structure for the management of public service pensions. In time, all civil and public servants will have the same basic pension scheme, with appropriate accommodation for whatever terms and conditions might be required in particular areas such as the Garda Síochána and the Defence Forces.
Under the new scheme, pensions will be based on career average earnings rather than final salaries. A specific pension accrual rate will be applied to pensionable pay in order that each year public servants will earn or accrue a certain pension amount which will be payable on retirement. This will be linked to the consumer price index as will increases in pensions for those who have retired. Up to now pension increases have been linked to the pay increases in the last job held by the pensioner before retirement.
The use of a career average rather than a final salary to calculate pensions means a fairer, more equitable system overall and will be progressive in character compared with current arrangements. For example, with a teacher or somebody whose career's average does not change substantially, there will not be any great change after this new system is introduced. However, for a Secretary General who enters the Civil Service as an executive officer, there obviously will be a very substantial change if we take a career average rather than a final salary pension entitlement. This means it will deliver lower pensions than are received at present by persons whose pay escalates to high levels in late career while comparatively impacting less severely on the pensions of those with flat pay profiles through their careers. The new scheme does not include so-called added years provisions.
There will also be a maximum retirement age of 70 and a new minimum public service pension age of 66 years which will be linked to the State pension age under the new Social Welfare and Pensions Act 2011 introduced by the Minister for Social Protection. With the introduction of the new scheme, there will be a major opportunity for improvements in the management of pensions, particularly in the development of shared services, which the Government is determined to pursue. Obviously with a common pension system it is not necessary to have a multiplicity of agencies supervising pension entitlement. I will introduce the legislation to bring about these reforms later this month.
Implementation of the Croke Park agreement is a key objective for my Department. I firmly believe that the agreement has considerable potential to support the wider efforts by Government to bring about economic recovery. While some good progress has been made to date on the implementation of the agreement, as reflected in the first annual progress report published by the implementation body in June, it is clear that there can be no let-up in the efforts of all sides to ensure that further change and reform is delivered quickly and effectively.
When the Taoiseach and I met the implementation body on 29 June last, we emphasised the need to accelerate the implementation of all priority issues under the agreement over the remainder of this year. It is vital that all sectors of the public service are seen to be contributing to this process in equal measure. We also made clear that while the Government wishes to honour the commitments made under the Croke Park agreement, this will only be possible if the agreement is implemented in full.
The implementation body has been meeting top management from each sector of the public service in recent weeks to discuss how the implementation process can be progressed with even more urgency. The body will be seeking further reports from the sectors - health, public service, local government and so on - in October outlining the progress achieved to date in 2011 and I look forward to seeing further tangible evidence of delivery when these reports become available.
The programme for Government envisages the most ambitious programme of public service reform since the foundation of the State. The role of my Department is to drive and support the change that is needed across the public service. There will be a particular focus on change in a number of key areas, including better leadership and performance, greater use of e-Government and shared services, improved service delivery and better procurement practice. A dedicated reform and delivery office is also being established within my Department to lead the reform programme, and a programme director will be appointed shortly to head this new office. That appointment should be made in the coming weeks.
The main resource of the public sector is its people. This resource, like any other, has to be managed effectively. There needs to be a renewed focus by all managers in the public service to ensure high standards of service delivery. To achieve this, existing systems of individual performance management need to be strengthened and where people are not performing to an appropriate level, managers need to address this quickly. There needs to be a strong focus on developing a top-class leadership cadre for the public service through the senior public service - an initiative we have taken since coming into office - and more generally by empowering people so that the public service has leaders at all levels and in every setting.
More recently, we have been faced with the additional challenge of seeking to maintain quality public services in an environment of severe budgetary constraints and an ongoing reduction in numbers. Significant redeployment of staff and reassignment of work has already taken place within Departments to meet operational priorities in response to the reduction in staff numbers. There will be even greater demands upon us between now and next February. Redeployment is ongoing within and between the Civil Service and other sectors.
Another important element of the reform agenda is the ongoing organisational review programme, which examines the ability of organisations to respond effectively to challenges and lead and deliver focused public services into the future. Eleven organisations have been reviewed to date and the review findings and resulting action plans have been submitted to Government. These reviews will be a significant driver of reform, enhanced capacity and improved performance.
We must acknowledge the traditional commitment of public servants to meeting the increasingly complex needs of the nation. However, we must do better because of the immense challenges we face. Reform today is about providing better services with fewer resources. To this end, I will be working to achieve a more integrated public service that has the capacity to respond to current and future challenges in an ever-changing environment; that does better for less and provides real value for money by maximising efficiency and eliminating waste as far as possible; and that is focused on improving organisational and individual performance, with a real commitment to excellence in administration and service delivery.
One achievement of which we can be proud is the considerable progress Ireland has made in recent times in e-Government. Ireland was rated first of 32 countries in the latest European Commission's e-Government benchmark. In this regard, I recently launched a revisedwww.gov.ie website which gives access to more than 300 informational and transactional online services. Obviously it is my ambition to expand that. I want Ireland to maintain its leading position. I want to set a roadmap for the future of e-Government in Ireland that ensures we embrace new technologies as appropriate and maximise the potential benefits of e-Government for all the citizens and businesses in this country. Therefore, I have instructed officials in the Centre for Management and Organisation Development to commence work on preparing the next phase of Ireland’s e-Government strategy. I hope to bring this new e-Government strategy to Government by the end of this year. I expect all public bodies to develop and revise their e-Government plans in accordance with the strategy. CMOD will continue to drive and monitor progress and provide Government with regular update reports.
In my comments at our meeting on 12 July I highlighted the ambitious programme of political reform to which the Government is committed under the programme for Government. Yesterday I published the Thirtieth Amendment of the Constitution (Houses of the Oireachtas Inquiries) Bill 2011, which marks an important step in delivering on the Government's commitment to changing the Constitution to allow for comprehensive inquiries by Oireachtas committees. If passed, the amendment will ensure committees of the Houses will have the possibility to secure effective and cost-efficient parliamentary scrutiny of issues of significant public importance. This will mark an important step in delivering on Government that is open and transparent as well as effective.
Following on from this I am committed to introducing proposals for a constitutional amendment to safeguard the rights of members of the public to communicate in confidence with their public representatives. Work is also continuing on a significant reform initiative relating to bolstering the legal protection afforded to whistleblowers. I have made clear my commitment to introduce an overarching cross-sectoral legal framework which will ensure the necessary protections are put in place in accordance with best practice internationally.
Other key elements of the reform agenda which I expect to progress in this context include the regulation of lobbying activity - requiring those who seek to have influence on policy to be registered, and the reform of ethics legislation and the Freedom of Information Act. I will also be amending the Ombudsman Act to ensure the remit of the Ombudsman, whom I met earlier today, is broadened.
I look forward to the opportunity to discuss these reforms in detail with the committee as specific legislative proposals emerge.
We have made a robust start to the process of addressing the central issues of achieving our fiscal targets, reforming our public service and bringing about political reform. This Dáil session will be a demanding and challenging one for all members. We have an ambitious programme of work on the public finances, legislative and reform agendas that must be completed. I look forward to working with the committee and with individual Oireachtas Members in the weeks and months ahead. Together we can bring about substantial change and make it clear the Oireachtas is working in the interests of the people.