Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach debate -
Wednesday, 22 Jun 2022

Public Service Performance Report: Department of Public Expenditure and Reform

Vice Chairman

I welcome members and the television viewers who are looking in. The purpose of today's meeting is to discuss the recently published Public Service Performance Report 2021. From the Department of Public Expenditure and Reform, we are joined by Ms Caroline O'Loughlin, assistant principal, performance budgeting unit; Mr. Ed Hearne, principal officer; and Ms Monika Mura. They are all from a good stable and they are very welcome. The format is that Ms O'Loughlin will make some brief opening remarks and this will be followed by a question-and-answer session with the members. Is that agreed? Agreed. That is the first item on which we have agreed today, one of many, no doubt.

The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected for privilege purposes. Witnesses attending remotely from outside the parliamentary campus may be made aware that full privilege may not apply. They are again reminded of the long-standing parliamentary practice on naming identifiable people outside the House who are not in a position to participate in the meeting. We have to protect good name of the person or entity.

I remind members of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable. I remind members attending remotely of the constitutional requirement that members must be physically present within the confines of the place within which Parliament has chosen to sit, namely, Leinster House, in order to participate in the public meetings.

I invite Ms O'Loughlin to make her opening remarks.

Ms Caroline O'Loughlin

I thank the Chair for the invitation to appear before the committee and the opportunity to discuss the Public Service Performance Report 2021 and to answer any questions the committee may have on performance budgeting and its role within the overall expenditure framework. The Government submission to the Select Committee on Arrangements for Budgetary Scrutiny in June 2016 committed to the publication of a performance report by the Minister for Public Expenditure and Reform. The first report was published in 2017, with the Public Service Performance Report 2021 being the sixth edition of the report. As recommended in the Committee on Budgetary Oversight’s final report on the framework for parliamentary engagement throughout the course of the budgetary cycle, financial performance should be assessed through the principles of performance budgeting, focusing on what is being delivered with public resources and how this aligns with the programme for Government and departmental statements of strategy.

The purpose of the performance report is to increase transparency and accountability and ensure every citizen can see clearly how public funds are being utilised. The information is deliberately presented in a clear and accessible way to ensure that everyone, not just those with financial expertise, can fully understand how public money is being used. The public service performance report, therefore, serves as a key tool for Oireachtas committees in their engagement with Departments. It contains a wealth of information, provided by all Departments, which clearly outlines each Department’s goals, key outputs and key impacts, giving a very succinct account of the Department’s activity and achievements. The report builds on the existing elements of the performance-based budgeting initiative and creates a space in the budget process for performance dialogue.

While performance information is provided alongside financial information in the Revised Estimates Volume, REV, in December, outturn information for the current year cannot be provided due to the timing of REV publication. This means that committees may not have the relevant information to allow them to assess performance for the most recent year in a timely fashion. The performance report addresses this by providing timely, quantitative information on what was delivered with public funds in the previous year. This creates an opportunity for meaningful dialogue between Ministers or Departments and the relevant sectoral committees on Government performance. The information provided in the report will assist the relevant sectoral committees in tracking progress in relation to the outputs and outcomes of key governmental strategies.

The Committee on Budgetary Oversight’s final report on the framework for parliamentary engagement proposes that sectoral committees meet to consider the chapters of the performance report relevant to their areas of oversight.

The performance report is designed to support such an enhanced focus on performance and delivery by committees. This approach also seeks to enable sectoral committees to make best use of the time available for reviewing performance and achievement by Departments and agencies. The performance report is just one element of a suite of measures to increase evidence-based decision-making, such as the spending review process, the Irish Government Economic and Evaluation Service network and the public spending code. Updates on equality and green budgeting, which are both integrated into the performance budgeting framework, are also included in the report. The equality budgeting pilot was implemented in 2018 and it brings a new focus to performance budgeting while looking at equality dimensions such as gender, socioeconomic inequality, disability and minority groups. Following a Government decision in 2021 to accelerate the implementation of performance budgeting, all Departments now participate in equality budgeting and report equality metrics in both Revised Estimates Volume, REV, and the performance report. In 2019, Ireland joined the OECD Paris Collaborative on Green Budgeting and committed to the progressive implementation of reforms to the budgetary process to better embed climate and environmental goals within it. With the advent of the ambitious climate targets in the programme for Government commitments and their incorporation into legislation via the Climate Action and Low Carbon Development (Amendment) Act 2021, this need grows ever more pressing. An update on this work is also included.

An ambitious work plan for performance budgeting policy is in place for the coming year, which aims to continue the momentum achieved to date and further advance this work. Work is currently under way to improve the tagging and expenditure to equality, green, well-being and sustainable development goals, SDG, dimensions. The performance budgeting framework is kept under constant review to ensure it best serves the purpose of increasing transparency and accountability. Feedback from stakeholders is an essential part of this and the Department would particularly value feedback from this committee.

It is clear from the Committee on Budgetary Oversight's final report that the performance report is a source of information that can be further utilised by the sectoral committees in their engagement with Ministers and their Departments. Such engagement would, in principle, allow the sectoral committees to consider, with the relevant line Departments, any issues regarding performance against target, with the specific indicators selected for inclusion in the report.

I thank the committee for including this document on its agenda and look forward to hearing the members' feedback. Engagement with committees in relation to the overall format of the report, and its positioning within the budgetary cycle, is very important to the Department of Public Expenditure and Reform as we continue our work in enhancing the overall performance budgeting framework and the performance report in particular.

Vice Chairman

I thank Ms O'Loughlin and compliment her on the production of the report. It is certainly a very readable report that can be seen at a glance. Having glanced at it for some time, I will have to take some more time to digest its contents. In the meantime, I call Deputy Farrell.

Deputy Mairéad Farrell

I thank the Vice Chair. I want to add my voice to what the Vice Chair said. It is an absolutely excellent report. I also sit on the Committee on Budgetary Oversight and it was discussed there but I think it is excellent and I thank Ms O'Loughlin for coming in front of the committee. The whole report was a very important initiative in its own right in improving how we match spending inputs to performance outputs. It has certainly helped to narrow a gap in oversight, which is welcome. I note from today, and also from the previous committee, that the Department is always looking to improve. The Committee on Budgetary Oversight was mentioned as were reforms made which were based on improvements recommended by members.

I want to raise a couple of areas which could potentially be improved and to get Ms O'Loughlin's thoughts, if possible. These generally relate to procurement. As we know, we are big spenders on procurement - approximately €17 billion annually - and we have new initiatives like green public procurement and promoting social considerations in public procurement. What I have noticed since being elected is that we do not have as much information on this big area of spend as I believe is needed and it would be good to analyse it. The Office of Government Procurement publishes its spend and tendering analysis report, although the report published last year related to 2018, so there is a lag there. If we had annual up-to-date information on procurement spending of the kind reported in spend and tendering analysis report, could that be incorporated into the public service performance report?

Ms Caroline O'Loughlin

It is certainly something I will look into. The Deputy should be aware the Department is currently conducting a project funded by the EU under the state register of statistical units project. What it aims to do is to enhance our performance budgetary framework as a whole. That encapsulates performance budgeting and all of the dimensions underneath that which include green budgeting, well-being budgeting, socioeconomic group and equality budgeting. We are at the pilot stage of that project. Three Departments are doing pilot exercises on how they can tag their expenditure against those dimensions. That is something we would hope to see being fully implemented in the next 12 to 18 months as that project is finalised. That would certainly give an enhanced tagging ability for expenditure. Mr. Hearne may be able to expand on this.

Mr. Ed Hearne

The Deputy's point is well made. One of the strengths we have in this regard is that so much of our procurement is now done digitally and through eTenders and the wider European portals for major tender awards. That tells us that there is information available and there could well be more real time information. There is probably some limitation in relation to the publication of contracts pre-things like the expiration of the standstill periods and so forth, but they should not really pose a barrier to how we would be able to report in a more timely fashion. It will be complemented by the project my colleague talked about in relation to the tagging but we will take it away and speak to our colleagues in the Office of Public Procurement about how we can make a richer source of information available and one that is more up to date.

Deputy Mairéad Farrell

That is very interesting. Another thing that caught my attention was in the slides received earlier. One of the core principles at the heart of performance budgeting is that it can provide greater transparency and accountability and improvements in these areas and can help to bring better management of public funds, essentially greater value for money. The revised national development plan outlines spending on capital projects to the tune of €165 billion. Due to the rise in costs of inflation and increasing costs of construction materials, we have seen the launch of the new inflation co-operation framework so the State will bear up to 70% of additional costs arising from such inflation. In terms of a more medium-term measure, this will mean that the €165 billion might not go as far as planned. I am not sure if it was this committee or the other committee but concerns were raised in relation to that. Given that information on cost overruns and capital projects is not collected centrally or published in reports like this one, is this something that could be incorporated if such data was collected?

Mr. Ed Hearne

In principle, better information about the performance of capital programmes and projects can certainly be incorporated here. One of the differences is that we have much greater scrutiny of capital projects and a more established system of appraisal before projects are committed to. There is a wealth of information about the requirements for appraisal, the public spending code and arrangements for scrutiny of major projects. We can probably do more to incorporate that. Something we have looked at as part of green budgeting is to do more ex ante appraisals of projects, and in the climate area much of the expenditure is capital so we will automatically be bringing in more of a crossover with the reporting under the national development plan. That is something that can be looked at.

I make the point that the actual performance on overruns - the average level of overruns - is often overstated. We have seen a couple of high-profile examples of major complex bespoke projects that have gone over but, on average, we have gotten much better at this in this country and typically major programmes in a number of sectors come in on time and on budget. In particular, there was some very good analysis done by Transport Infrastructure Ireland some years ago to show the level of success in major roads infrastructure. Similarly, as we have developed the level of commercial capacity, and professionalism in other agencies - for example, Irish Water - we have seen, on average, a much greater level of performance there as well.

As we roll out the tagging project, which Ms O'Loughlin has mentioned, and as we see more of an overlap between what is in the national development plan and what is counted as green budgeting, that will definitely provide more insight. Certainly we can provide more granular reporting on that at a major project level as part of this report.

Deputy Mairéad Farrell

I thank Mr. Hearne. Unfortunately, I must attend another meeting.

Senator Alice-Mary Higgins

I have a few initial questions, with the first one on procurement, which I have been considering. I might come back in later as I am going through the hard copy of the full report. I have produced legislation and engaged with officials in the Department on quality public procurement. The use of price quality approaches means that rather than going with the lowest price that meets the technical specifications, emphasis is placed on a price quality ratio. This is done successfully in other countries. One of the key issues that has arisen is how quality is measured. That almost comes to the same issue that is being examined in the budget. As we move towards a well-being budget and other indicators, there is a need to find appropriate measures to indicate quality.

I wish to note that project overruns have been mentioned. When a decision was being made on awarding the tender for the national children's hospital, which is a high-profile project, a 25% weighting was given to quality whereas a 75% weighting was given to price. I have pushed for major projects to have a weighting of 50%, at least, for quality. I am interested in hearing more about how that procurement issue is being examined. Specifically, I want to hear about how some of the performance report indicators that have been created as part of the performance report could be useful in developing quality indicators in contracts for public services.

My query on green budgeting also ties into green procurement. I am interested in the witnesses' views on how we can do more to ensure we have shadow budgeting on carbon budgeting within projects, particularly concerning scope 1, scope 2 and scope 3 emissions. We need to include emissions that are in the supply chain as well as those that are in the ground. I want to learn how that should and could be better factored into budgeting and procurement. This is really relevant, particularly for the next couple of years, because the front-loading of action is key. As well as looking to environmental projects, I am interested in hearing from the witnesses on how we can do better to proof other projects around their impacts. For example, are there things that we cannot afford to do in a particular year because our emissions are too high and they would add too much to our national targets?

I am extremely interested in equality budgeting. I am glad to see it has featured properly in the performance report. I feel like it had momentum before it seemed to get a little sidetracked into piloting. What is the next stage for equality budgeting? Is it happening across all Departments? I have read the examples that were tagged in the report. A few of them are specific, positive measures that promote equality. In the performance review, how can we improve the equality proofing of general decisions? I am not simply referring to specific measures to promote equality for specific groups. If we have a new taxation policy, for example, will we examine its impact on equality? Is a new area of public service, such as a new area of transport expenditure, gender-proofed and gender-analysed? I am asking about the actual proofing of general budgetary decisions, separate from specific projects.

I ask the witnesses to explain more about two aspects of the section on equality budgeting. How quickly will the well-being budget framework be established? Will we begin to see that in budget 2024 or has it begun to trickle through?

Lastly, on the sustainable development goals, I noticed a little bit of tagging in the report. Again, that seemed to be in the equality section. Perhaps the witnesses will comment on how the sustainable development goals might be integrated into the budgetary cycle and how that might fit with the well-being framework.

Mr. Ed Hearne

I will respond to the Senator's questions on procurement, environmental impacts and so forth, and Ms O'Loughlin will comment on equality. I will not go too much into procurement policy because it is not what we are here to report on. I take the points made by the Senator about the scope within procurement to take account of factors that go beyond cost. There is plenty of scope in the European procurement directives, to which we are obviously bound.

The Senator mentioned green procurement. My colleagues in the Office of Government Procurement have worked on that. They have seen how we can bring in broader considerations about the sustainability of procurement within things like overall award criteria and so forth. It is obviously a very tricky environment in which to work because it is so characterised by legal challenge and bound up in European directives, but there is scope there. I know that my colleagues on that side of the house are actively working on this matter.

Senator Higgins asked a number of questions and made a number of comments on how to better account for the climate impact of individual spending decisions. That is particularly relevant in capital. We are doing a number of things. In the run-up to the national development plan, which the Government published last year, a climate assessment of every spending measure was set out. That was a big step forward and was not something that we had done before. To the best of our knowledge, it is not something that had been done on such a comprehensive whole-of-government basis elsewhere, certainly not across the EU. As part of that analysis, we looked at the likely climate impact of each measure across seven dimensions: climate mitigation, climate adaption, air quality, water quality, nature and biodiversity, waste and the circular economy, and the impact of the programme on just transition. It was a step forward for us to have that assessment, at least, and to have information to enable us to rank programmes alongside each other as a base point from which to build on into the future. That is at the programme level.

At the overall project level, work is advancing within the Department that will capture some of the points the Senator made about measuring the climate impact of a project throughout the supply chain. Members will probably have heard about the public spending code, which is the process by which we appraise and evaluate projects, and then manage and implement projects throughout the life cycle. We are engaging with the OECD to embed climate action considerations within the public spending code. We will finish that work just after Christmas or early in 2023. The initiative will do two things; first, it will measure how we capture the embedded carbon emissions within a project. For instance, when concrete is used for a project like a cycle lane, that has associated emissions which we need to evaluate. The initiative captures that aspect.

Senator Alice-Mary Higgins

Is demolition included?

Mr. Ed Hearne

Demolition probably has not explicitly been included. I do not see any logical reason it should not be.

Anything that constitutes the construction activity that generates the asset really ought to be included. There is no reason it should not be. We certainly will take note of that point and follow up on it.

The second element is the more induced impact the asset ultimately has. If there is a cycle lane that engenders a modal switch from cars, for example, then there is obviously a climate impact. That will be a big step forward in how we look more holistically at projects.

There is one other element, which is very technical. In essence, we put prices on carbon emissions. For every tonne of carbon that is emitted because of a project, we evaluate that as part of the cost-benefit framework. We will be substantially increasing the value per tonne of emissions, which will mean projects that have a more favourable emissions impact will be more favourably treated in the cost-benefit analysis. That is a very technical piece of work that has to be done. The evaluation has changed because our national climate action targets have changed, which means the price will be more expensive. This will make a big difference at the marginal level for various projects.

Finally, as Ms O'Loughlin mentioned, the tagging will give us a lot more information on the whole generality of green investment and what the likely impacts might be.

Senator Alice-Mary Higgins

Before Ms O'Loughlin responds on the equality issue, I have a quick follow-up question on the cost-benefit aspect. In the climate committee's report on transport, one of the issues we identified was the concern that the cost-benefit approach used on major transport and other projects did not really give a weighting to the idea of induced impact. It was very much based on a demand-centred approach to public transport provision. On projects like the western rail corridor, for instance, the cost-benefit analysis gave a very low weighting to certain matters and a very high rating to others. That is something we in the climate committee identified as a real problem. Given that Mr. Hearne says the cost-benefit issue is being looked at again, it might be worth looking at that report from the climate committee. Will he indicate whether there is a general re-analysis of the cost-benefit approach to major projects? He mentioned a different pricing being given to carbon emissions. I am wondering whether there is also a different approach to some of the other performance indicators that are used.

On leasing, in terms of cost-benefit analysis or even risk assessment, things can tend to get narrowed into a year-on-year focus. I am interested in the role of leasing. Previously, we were operating in a situation where we had considerable constraints as a State in what we could do under the EU budgetary rules. Those rules have changed, with a suspension of the fiscal rules for a two- to three-year period. There is a debate around what form the new EU semester process will take when it comes back. As Mr. Hearne will be aware, it seems different kinds of indicators are likely to be part of the semester process. There has been a discussion about the idea of certain green projects and, indeed, certain social and public projects being excluded from some of the rules relating to balance sheets. I am adding these questions in for whomever can answer them. Has there been an examination in terms of a cost-benefit analysis of leasing versus capital expenditure versus long-term ownership? I would also like to hear about the EU semester process and the kinds of indicators on performance we might be integrating into that.

Mr. Ed Hearne

I am not involved at present with our input to the debates the Senator mentioned and cannot really speak with authority in that regard. In general on her point about leasing, for any given intervention all of the feasible options should be considered, particularly at the long list of options stage when we move from the strategic assessment of why we need a project to how we are going to develop it. In certain sectors, I expect that is very much front and centre. The way we tend to operate these things is we set the overall parameters at the central level and then people in the individual sectors, whether that be transport, water, housing or whatever, go away and develop their own individual, sector-specific methodology. I expect there is probably more consideration being given now to those types of questions within the sectors.

On the Senator's question on cost-benefit analysis, we have sometimes struggled with the question of induced demand and trying to understand whether our demand forecasts at the outset will be borne out. We saw in the past with road projects, for example, that there was a higher level of demand than initially envisaged because there was an induced element involved. What we need to do generally, and what the project with the OECD tries to do, is move to complement cost-benefit analysis with other approaches. Cost-benefit analysis definitely will still form a fundamental part of the decision-making process but it probably needs to be rounded out with wider considerations. A good innovation in the transport sector has been the use of modal hierarchies and intervention hierarchies to say that, as a rule of thumb, we prefer maintenance to new build and we prefer improvement before going to the creation of new assets. Building in those kinds of rules of thumb across the various sectors will be really important. It certainly is something we would aim to build out as part of the OECD work.

Ms Caroline O'Loughlin

The Senator asked about equality budgeting. I assure her that the momentum in this regard has not weakened at all. It may appear that way because a lot of the work at the moment is behind the scenes, so to speak. When we launched the pilot, we really tried to articulate what it was about and sell it to the Departments. What we are doing now is trying to embed that within the overall performance budgeting framework and build up Departments' capacity. There is a focus on training to ensure Departments are using equality budgeting to refine their policymaking process in order that policies are targeted at the specific cohorts they should be and to ensure public expenditure is reaching the maximum target it can. We have shifted over the past number of years towards impact budgeting to make sure policy is hitting the people for whom it is intended.

There has been some important progress in the past two to three years. As of now, all Departments are participating in equality budgeting. This means they are, at a minimum, reporting on equality metrics in the performance report and the Revised Estimates Volume, REV. However, as we have always said, equality budgeting is not about clocking up equality metrics. We do not say, okay, we have 50 equality metrics and we are done. We always wanted to make sure it was not going to turn into a tick-the-box exercise. We wanted to embed it into the performance budgeting framework and ensure it sharpened up how policymaking is done within Departments. As we have increased the number of equality budgeting metrics, we can see the impact of equality budgeting policy being embedded in the performance metrics as they are reported in the REV and the performance report.

We have also done a number of other things recently. After the OECD did its scan of equality budgeting in Ireland, it gave us 12 recommendations for how to improve and embed the implementation of equality budgeting. A key part of that has been the improvement of the availability of disaggregated data, the lack of which was one of the barriers to how we could identify the metrics to measure these things. We have done a huge amount of work in this area. It began with an equality budgeting data audit. The Central Statistics Office, CSO, appointed a statistician to us for six months and she conducted a data audit of equality budgeting information in Ireland. That information is now housed on the CSO website. It is a central point to which everybody can go to see what disaggregated data are available. That information will inform identification of equality budgeting metrics. The data audit showed us what we had, including the fact there was duplication in some efforts, where the gaps were and what we were not picking up.

We are conducting a data audit strategy to identify how we can plug those gaps and identify what measures can be taken within general data protection regulation rules, etc. and how we can capture that data. That is a huge body of work that is being done at the moment.

I mentioned capacity building in Departments. We engage greatly with Departments as a whole and sections within the Departments to raise their awareness of equality budgeting and see how they can embed that in their general policymaking frameworks. The structural reform support programme that is under way at the moment to tag expenditure, will be a huge momentum for this work as well. The ability to be able to tag all expenditure against the nine grounds of equality will also be of great help as the work continues over the next 12 months.

We have also established an interdepartmental group. The Government made a decision in March 2021 to the effect that it wanted to accelerate the implementation of equality budgeting. On the back of that, an interdepartmental group was created. That group was represented by every Department and, as I said, the purpose of the group is to build capacity within Departments and make sure everybody in the Department is aware of equality budgeting and, vice versa, to share information with us on what work is going on around all the different Departments to help accelerate this work.

A huge amount of work is going on at the moment. On equality budgeting, certainly, we have been very careful to make sure that momentum has not been lost and has been maintained. We are also working on something with our colleagues in the Department of Children, Equality, Disability, Integration and Youth. Our colleagues in that Department are doing work on gender mainstreaming. Obviously, we work very closely with them because gender is an element of equality budgeting but all of the work there is also very transferable to other areas of equality. We are looking at things in our own Department like introducing a module under OneLearning for equality budgeting. Again, as I said, this is all really to raise capacity building within the Departments.

Senator Alice-Mary Higgins

I have a quick follow-up to that. I should mention that I am also a member of the Joint Committee on Gender Equality. I know that we will be talking about gender mainstreaming and equality. We might look at the very good individual projects that are listed on pages 115 to 117, many of which specifically relate to supporting equality in the context of certain targeted groups Ms O'Loughlin mentioned. That general point around almost screening for inequality, something that is a bugbear of mine, relates to our committee in terms of, for example, tax reliefs and private pension tax reliefs, and the fact that the marginal rate for pension tax reliefs we have at the moment very largely benefits higher earners and men. This debate has happened in Scotland, where they have had equality budgeting for a period. As the Scottish Government has taken on more areas of independent policymaking from within the UK, however, there is that question of how equality budgeting and screening gets integrated into things like the finance year. We are not just talking about public expenditure per se, although, actually, tax reliefs are public expenditure. We are not just talking about specific targeted measures to address inequality, however we are also looking at how to ensure that existing measures which have an unequal impact and which increase inequality are addressed. How is that being integrated into this next phase for the equality budgeting?

Ms Caroline O'Loughlin

We have had an equality budgeting expert advisory in place since 2018. The job of that group is to ensure that equality budgeting is being progressed in the same way. We draw on best practice from stakeholders. It is a very broad group. The Departments of Finance and Social Protection and the Chief State Solicitor's office are key. We also have stakeholders such as the National Women's Council of Ireland, the Irish Human Rights and Equality Commission, the National Disability Authority, the National Economic and Social Council and the Economic and Social Research Institute. We have academics on that group as well.

Representatives from the Department of Finance are key members of the group. They have their switch model every year. Last year they released a paper on budget day. I cannot remember the exact title of the paper but it was to do with equality budgeting impacts on tax measures. Therefore, we work with all colleagues to try to capture different dimensions of it. Certainly, that group is a key driver in the work plan for how equality budgeting will be progressed over the next few years. As I said, the paper the Department of Finance published last year will certainly guide that work.

Mr. Ed Hearne

To add to that, we talked about a number of different categories like green budgeting, equality budgeting, well-being and SDGs. The risk we need to manage is that these do not just become new silos and new things we focus on for a little bit of time and then move on. Ultimately, what we are trying to do is integrate them all into a better performance framework whereby we bring in a wider view of the performance of public policy programmes beyond just the traditional focus we have had in terms of money amounts and input numbers.

As we develop out this tagging project, I think it will be very useful and very flexible in the future for how we might want to look at other modules. It will also provide the basis for much better policy analysis. We have had some really good developments over the last decade or so with the advent of the Irish Government Economic and Evaluation Service. As we get better data for analysis through the tagging programme and other initiatives, that will really help us build the evidence base in the context of how we might be able to carry out more discrete analysis around, say, things the Senator mentioned like screening particular programmes or screening the overall expenditure of a Department with regard to a particular theme, whether that is equality or climate impact or whatever it might be. We would very much see these as building blocks of a more integrated process.

Senator Alice-Mary Higgins

I thank Mr. Hearne. My final question is on that because that is exactly what we hope will happen; that it will become a different kind of approach. Ultimately, I focused on budget really although as Mr. Hearne said, this is around public service performance in that sense. This question is about public service performance - I know I mentioned procurement so this is not necessarily around the awarding of contracts or that kind of piece - and tracking the kinds of indicators the Department develops in a cross-cutting way around our services working well and our public services delivering and ensuring those kinds of indicators get tracked in when the services are outsourced or contracted out. Is the Department confident that those measures are there, as I said, not just in terms of the award of tender but in the monitoring of how it works?

Does Mr. Hearne have comments on the upward stream measure? As I said, we know that at European level there are what used to be the country-specific recommendations. There is beginning to be a real push that any semester process that would happen in the future might have different kinds of measures almost very close to that idea of the well-being measures or SDG measurements in terms of how well countries are doing. Is that an active conversation in terms of bringing these new kinds of metrics and tracking them when things are contracted out, and also maybe influencing the debate at a wider European level, which we know is happening around what we measure and what we value?

Mr. Ed Hearne

In our Department, we tend to be pretty focused on the money in light of the nature of our remit. What we really have been trying to do is expand that. As we have been talking about here, there is more of a focus on outputs but it is now much more about trying to bring a focus on outcomes. We are also feeding into the well-being work across Government that is being led by the Department of the Taoiseach. Our contribution to that is focusing on looking at particular discrete policy analyses on different topics. We have started looking at particular work in early child and youth intervention and also in outcomes for the elderly in society. Our contribution to those has been to take it through from the outputs that are set out in the performance report to look more at outcomes. Again, as I said, that will gradually form part of how we build this out.

On the wider question, if we contract public services we need to be able to ensure the provider is concerned with all of the things we would be concerned with if we were delivering it from the public sector. It should be concerned with the outcomes. Sometimes it will be difficult to structure a contract where outcomes or impacts that might be dependent on many extraneous factors are captured. We really should be ensuring at a minimum that we are confident the outputs that make up the contracts can contribute to the outcomes. The breadth of what we are doing here will be another strand in this work.

Senator Alice-Mary Higgins

The point on outcomes versus output is important. I will give an example, although it is not in the remit of this committee, from the area of home care. There is a concern that much is contracted out and the outputs can become X units of dinners made and X hours, whereas the outcomes in terms of qualitative outcomes for persons receiving care are crucial. In the end the money is part of it. The Department is focused on public expenditure but part of the value for public expenditure is similar to procurement whereby the most economically advantageous is that which also gives the most additional social and environmental benefit. Outputs are an easy measure. I notice that even in this excellent report, much of it is based on targets and delivery. It is very numerical. The challenge I mentioned at the beginning with regard to procurement and having proper objectives but measurable qualitative indicators will be very important so that this not box-ticking and will be meaningful. I am using home care as an example because it is contracted out and output does not give us enough of the story as to whether there is good public service delivery.

Mr. Ed Hearne

I accept the point. These concerns are to the forefront as we develop this to make it more useful. The Senator mentioned an example that could be very relevant to the deliberations of other committees. As Ms O'Loughlin mentioned, we encourage all committees to look at this when going about their business generally and when looking at specific improvements we can make. We are all ears to hear about them.

Senator Alice-Mary Higgins

I would say that pensions is the issue I would choose for this committee. I ask the witnesses to have a look at private pension tax relief from an equality perspective. I will leave it at that. The Vice Chairman has been very indulgent.

Vice Chairman

The Senator got me at the right time. This particular area has intrigued me for years, particularly the degree to which public expenditure and reform impacts throughout the economy. I do not want to identify any particular Department but have the witnesses noted particular trends we might have to be careful about? I am thinking about such issues as inflation, which is public enemy number one at present. If it is followed by interest rate changes at national, European and global level there will be serious implications for all economies throughout the globe. Has the Department factored into its thinking the extent to which it is likely to happen in this country? The Government rightly provided support to industry, the public, employers and employees during Covid. It definitely cannot go on for ever. There will be implications if we come to the conclusion that it should go on forever. The last thing any country should do is borrow to support public current spending. Capital spending is one thing but it is a different story for current spending. It only creates an artificial platform. What is the extent to which the Department is conscious of this? What impact might it have on performances in a year's time?

Mr. Ed Hearne

In terms of the specific structure and the contents of this report we have tended to focus solely internally on what individual programmes have performed, given the environment that prevailed over the previous year. The Deputy has made some important points on the wider economic context that will certainly form the backdrop for a number of big policy developments we will have later in the year between the summer economic statement that we will see shortly and in preparation for the budget. Our focus has been to try to ensure that whatever decisions are made on public expenditure, maximum value from money is obtained for that expenditure. We do this through a range of processes. As I mentioned, a lot of analytical work is done by the Government's economic service. The spending review every year looks back at the performance of various programmes. We have the performance report that we are speaking about today. We also have the public spending code to ensure the major capital investment we are planning for the next decade is delivered in the most impactful way that can deliver the highest level of public services in the overall challenging and uncertain context.

Vice Chairman

Any programme can be eroded by inflation. In a small way I have raised some questions in individual cases as to what caused inflation in a particular area, product or service, only to be told there is a war on. With no disrespect to the people who tell us this, I am not sure whether it is the Second World War, the Boer War, the Crimean War or some other war they are referring to. The fact of the matter is that all are not attributable. We cannot identify where they are all coming from. For instance in the tourism sector, there has been a massive rise in hotel bed-night costs. The cost of hiring a car is appalling on the basis that cars are scarce. I can think of a number of places where as far as the eye can see there are cars parked. They are here already. With regard to the economic benefit of the use of cars and meeting the green economy requirements, which we have to, there are plenty of electric cars coming into the business now. I suggest that we need to be very careful about the damage we can do to ourselves with a glib remark about a war that does not affect that particular product at all. It is not attributable. To what extent do the witnesses see in the future oversight that is likely to impact, hopefully in a positive way, on the prevention of price gouging for want of a better description?

Mr. Ed Hearne

Our focus has been on the public expenditure elements of it. These can contribute to competitiveness in the wider economy. In many cases they rely on the private sector to deliver services. Certainly it is very relevant to inform overall trends in the economy. The measures I mentioned regarding how we try to ensure maximum value for money in all areas of expenditure, be they current or capital, will continue to be our focus. It will be very important that as we deliver programmes and improve and expand the type of information we have been speaking about today, we can use the analysis to better inform how we target public expenditure in future and we know which programmes perform, which provide value for money and which, ultimately, will support the achievement of the various public policy objectives we have been speaking about.

Vice Chairman

If one looks for a moment, the whole economy progress and tangent can be upset, undermined, overtaken and overthrown by a departure from realistic budgeting, realistic expenditure etc., and by people charging €1,000 a night for a hotel room and so on and so forth. We need to remember that if we go down that road, we will not survive. We will be in a serious position because we will not be competitive. We will not be in the marketplace and we will not be able to compete.

I was a member of a committee in 2008 that was brought over to Brussels to be advised and told by every sector, every commission and every commissioner’s office how we had gone wrong and the damage we had done to Europe, our own economy, the European economy, the precedents we had set and so on and so forth. I remember not being pleased at listening to that for three quarters of a day because I had raised the same questions long beforehand. Some of the same people were there and did not respond even though they knew we were going in the wrong direction at the wrong time. The trajectory was all wrong and needed to be arrested.

Public enemy number one at the moment is inflation. It can take off so rapidly that it could bring the country to a halt. We need to do everything possible to avoid that and try to ensure we do not allow individual segments of the economy to proceed in an inflationary fashion, such as charging €1,000 or more for a hotel bed night. It is not feasible or possible. It did not cost that to put it there. When people say there is a war on, in what way has the war affected that? Not at all, is the answer, but it is to provide for something we do not know about it.

I will go back to what I started on. I have raised numerous questions to the Minister for Public Expenditure and Reform over the intervening years about the degree to which Departments can be compared in terms of performance, whether we are all on one track and going in the same direction at the same time, whether some are some holding back, and whether some segments of the industry may be progressing well and some perhaps not so well. The whole emphasis has to be on not going back to where we went wrong before. It is as simple as that and there is a danger of that.

The Department officials can claim no responsibility for that at all if they want to, which I will not believe. However, I am throwing it out there to air it.

Mr. Ed Hearne

Understood. The Vice Chairman mentioned looking across different Departments and so forth. We definitely see the scale of the role that public expenditure can play through day-to-day expenditure and the massive investment we have in capital through the national development plan. We are under no illusions as to the extent to which that has a major impact in the economy. All our focus is on improving or ensuring that can provide maximum value for money, that the public services are provided as efficiently as possible, and that the public capital programme we are engaged in is also delivered with maximum efficiency.

Going back to 2008 and those years and everything we saw, in our Department we have put in an awful lot of effort in the intervening decade and a half to try to improve how decisions are made, how resources are allocated across Departments and programmes and how we benchmark and evaluate performance against those programmes. We can have more confidence now than perhaps in the past to make sure the evidence base is there underpinning all of those various Government decisions. However, I certainly take the points the Vice Chairman made.

Ms Caroline O'Loughlin

I wish to add one thing. To reflect what Mr. Hearne said, the whole point of this report in particular is to capture that transparency and accountability of public expenditure. Just to note, while we collate the information and provide guidance to the Departments on what information should be captured in the report, it is up the individual Departments to decide what metrics are put into the report. However, what greatly influences that is the engagement they have with different committees throughout the year. Again, if sectoral committees engage with Departments on this report, that will greatly influence what information is captured in it and, obviously, improve the value of the report to this committee in its role for scrutiny.

Senator Alice-Mary Higgins

On Enterprise Ireland, there was quite a high estimate of the potential sales from client companies, but I noticed that figure was not available. Are there areas such as that where we are giving a public input into Departments, especially Enterprise, Trade and Employment, but for commercial sensitivities we are not getting to see either the outputs or outcomes?

Building on the discussion we have just had on inflation, it was inflation in speculative areas such as property and so forth and which we see now in certain areas of hospitality, as the Vice Chairman highlighted, that was the driver, rather than public expenditure. It was, in fact, very much driven by extreme inflation in asset classes and almost a lack of Government regulation rather than others.

A concern I have had in the period since 2008 is that there is a shift towards short-term framing, and this has been slightly acknowledged, where we have seen in the period since a move towards almost quarterly or annual reporting. That is why I have mentioned the semester process a number of times. If the Department officials perhaps do not have thoughts on it for now and nobody is really engaged, perhaps they could follow in up writing. The semester process became very much about the annual indicators and the long-term timeframe was lost. As a result, I believe Europe lost a decade when it should have been investing heavily in the green transition and, indeed, areas like the digital transition. That is one of the reasons we have so much catching up to do now. We lost a decade of long-term benefit because the pressure was so much on the fiscal targets in each quarter or each year.

In that context, are the Department officials confident that, in the way they are approaching this kind of performance assessment now on public services, they are capturing and leaving space for the long-term benefits, impacts and outcomes rather than just the annual figures? We know that some of the very big shifts, such as in climate and social areas or establishing whole new areas of public service, can take two, three or four years for the investment to deliver the return. I ask the officials about monitoring performance in the short-term versus the long-term. Do they feel that has improved? Do they feel it is an ongoing process?

I have specific questions on some of those areas where we are giving financial grants to the private sector. I noticed a couple of areas where some of the data on the impact of those kinds of transfers did not seem to be coming in or to be available.

Vice Chairman

Who would like take that?

Mr. Ed Hearne

I might just ask Ms O'Loughlin to speak in a minute on those questions about specific data not being available. On the Senator's question about the timelines and whether we are not losing sight of the medium and longer term, this report will ultimately facilitate trend information, particularly when we have more digital information with the tagging programme and so forth.

It is by no means the only analytical tool we use to look at the performance of public programmes. We also have the spending review process and focused policy analyses in different areas. These procedures have produced a wealth of information, which has taken much longer-term perspectives as well.

To turn to the forward-looking element of this activity, the more prospective analysis, investment was mentioned and the question of whether we lost ground in that regard owing to the shorter-term nature of the cycle. We have definitely addressed that aspect. We have a ten-year national development plan that is given effect by rolling five-year capital envelopes. Therefore, every Department will have a good degree of certainty concerning its medium-term investment. We are an outlier in that regard across Europe. We do not see this level of certainty provided across sectors of the public service in other countries and this is certainly a plus. Most important of all, these aspects are linked. We now have a national development plan that is embedded with and allied to the national planning framework. We very much see those elements as two sides of the one coin that will try to future-proof us in respect of how the country develops and then match that with the relevant public financial envelope. From that investment perspective, then, we think we have a much better strategic focus now then perhaps we had in the past.

Senator Alice-Mary Higgins

Okay. Across Europe, there has been this realisation. It is why the recovery and resilience fund is framed in a slightly different way. I regret that last decade, however, because I feel that we could have done many things better in that period. I thank the witnesses for answering my questions.

Ms Caroline O'Loughlin

I will clarify a few points. There were gaps. Data were not available at the time of publication. Since we published a few weeks ago, the online version has been updated at least twice. As the information comes in, we are capturing it. We just wanted to get the information out as soon as we could.

Long-term trends were also mentioned. In the next year or so, we are hoping to make this publication digital and to bring it online. At the moment, under the subject of impacts, we give three years of a trend. We want to be able to capture all the information since the report was established, which is more than six years ago now. We always promote this to the Departments as a tool for dialogue. It is not a scorecard. It is not something that Departments pass or fail in this year. This should be a tool for dialogue as things go on. It is not a pass or fail situation, but will, instead, inform dialogue in future.

Senator Alice-Mary Higgins

I thank the witnesses.

Vice Chairman

Do the witnesses believe that regard will be had for the concerns expressed regarding aspects such as inflation? How will that come about?

Mr. Ed Hearne

This issue sets the context for a great deal of public policymaking now and it will obviously be front and centre in the run-up to the budget. We already saw several packages of measures announced in February to try to assist with tackling the cost of living. Therefore, inflation is certainly front and centre in making major policy decisions now. At the more granular level, we will start seeing this aspect having more of an effect. Changes to public procurement rules were mentioned earlier. This will be something we must keep a close eye on, depending on how construction inflation plays out. It could be the case that many of the supply chain issues will have resolved themselves in the near term, so we may not be looking at inflation in the price of materials along the same lines as we have seen heretofore. Inflation will certainly, though, become material in considering budgets for individual capital projects. In general, in respect of how inflation will inform what we do, it is critical to the wider environment in which public policy choices are being made, especially in the run-up to the budget.

Vice Chairman

I disagree to an extent with Mr. Hearne on one point. Regarding capital projects, we have a choice. We can decide to not do them, in which case the country loses because we are behind in terms of badly-needed infrastructure. The obvious thing to do in this respect in this context is to not undertake them but that would damage the country in the long run. Therefore, we have a need to urgently review activities in respect of the creation of inflation, which will mean that we can fund those vital areas of development we will need for a long time to come and do so on a basis that is acceptable to international bankers and that meets the trends and guidelines of our European colleagues, as opposed to ignoring everything and hoping it will all be all right at the end of the day.

I say that because I remember full well the questions I used to table alone in the run-up to what is now referred to in some quarters as the crash and in other quarters as something that it was unnecessary to have to pay the price of. Unfortunately, however, when a crash takes place, everybody pays the price, the rich and poor all together, in the form of the big lumps of money that are sunk in the middle of it. People are victims at all levels of society. We must be very careful now in this regard.

I would like to continue all day, as is my wont. On this occasion, I will not do so to enable the business to move on. We have done our examination. Undoubtedly, other Departments and other committees will have other examinations and I am sure the witnesses will have a great time explaining to people how they come to the various conclusions. I am also sure that the various Departments they have assessed will be happy to see the next report produced as well, whenever that will be. I thank Mr. Hearne and Ms O’Loughlin for being with us. I was going to say that I was not sure where Ms Mura went to, but she is right here. She did not say anything or address the committee, but we will take it as read. I thank all the members for their participation and all our guests. Our next select committee meeting, on 29 June, will deal with double taxation agreements with the Minister for Finance, Deputy Donohoe.

The joint committee adjourned at 2.47 p.m. until 1.30 p.m. on Wednesday, 13 July 2022.