Select Committee on Finance, Public Expenditure and Reform, and Taoiseach debate

Vote 43 - Office of the Chief Government Information Officer (Revised)

Chairman

I ask members and all those present to turn off their mobile phones. I also ask members to identify themselves as they contribute to the meeting. If members remove their masks during their contributions, it helps with the recording of the meeting.

I welcome the Minister and his officials. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. I remind them of the constitutional requirements that they must be physically present within the confines of the places in which Parliament has chosen to sit, namely, Leinster House and the Convention Centre Dublin, in order to participate in public proceedings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting. Members should confirm that they are in compliance with this requirement.

The Dáil ordered that the Revised Estimates for public services in respect of the following Votes be referred to this select committee for consideration: Vote 11 - Office of the Minister for Public Expenditure and Reform; Vote 12 - Superannuation and Retired Allowances; Vote 14 - State Laboratory; Vote 15 - Secret Service; Vote 17 - Public Appointments Service; Vote 18 - National Shared Services Office; Vote 19 - Office of the Ombudsman; Vote 39 - Office of Government Procurement; and Vote 43 - Office of the Chief Government Information Officer.

As for the meeting format, as we consider the Revised Estimates, members can focus on the Department's commitment in terms of achieving its outputs and incomes, consider whether the performance targets included in the Estimates are a sufficiently complete description of services provided by the Department and whether those targets strike the right balance in terms of the needs of society, and consider whether the information provided by the Department makes clear how the moneys available are allocated between services and whether these allocations are the most appropriate in the circumstances. The meeting will conclude within two hours.

I ask the Minister to make an opening statement.

Minister for Public Expenditure and Reform (Deputy Michael McGrath)

I am pleased to be before the committee to present the 2021 Revised Estimates for my Department's group of Votes. I am joined by the Minister of State with responsibility for public procurement and eGovernment, Deputy Ossian Smyth, and a number of our officials.

The group comprises a significant number of Votes, as the Chairman outlined, including: Vote 11 - the Office of the Minister for Public Expenditure and Reform; Vote 12 - Superannuation and Retired Allowances; the Votes for a number of offices under the aegis of my Department, including the State Laboratory - Vote 14, the Public Appointments Service - Vote 17, the National Shared Services Office - Vote 18 and the Office of the Ombudsman - Vote 19; Vote 15 - the Secret Service; Vote 39 - the Office of Government Procurement ; and Vote 43 - the Office of the Chief Government Information Officer. The Minister of State, Deputy Ossian Smyth, is happy to address issues relating to the Office of Government Procurement and the Office of the Chief Government Information Officer, and I will address questions regarding the other Votes.

I note that a detailed briefing has been supplied by my Department's officials, who were assisted in this task by their colleagues in a number of bodies under the aegis of the Department. Further detailed material is also contained in the Revised Estimates for Public Services 2021, which was prepared by my Department.

Covid-19 has presented unprecedented challenges to officials, Members of this House and the general public. Arrangements for business continuity and flexible working have ensured that essential public services can continue to be delivered, while also ensuring that the general principles of safety, health and welfare are adhered to. Officials from my Department, and in bodies under the Department's aegis, have played a central role in responding to the challenges of this crisis, and I take this opportunity to thank all parties involved for their collective efforts in this regard.

In an overall context, the 2021 total gross allocation for the public expenditure and reform, PER, group of Votes comprising of nine distinct Votes shows an increase of 3% on the 2020 allocation. The overall gross figure for 2021 is approximately €858 million compared with €829 million in 2020. This is largely driven by an increased Estimate provision to Vote 12, targeted minor increases to enable the delivery of essential services such as additional HSE recruitment, and to meet the additional salary costs associated with the Public Service Stability Agreement.

I will touch on the individual Votes in a little more detail. The structure of Vote 11, the PER Vote, remains unchanged in 2021, with two strategic programmes focused on the two main strategy goals of the Department, namely, to manage public expenditure at sustainable levels in a planned, balanced and evidence-informed manner in order to support Ireland's economic, social and climate goals and to drive reform and innovation across the civil and public service to improve services to the public and enhance strategic policymaking and public governance structures. The Department has kept its overall 2021 budget flat and has reallocated resources across a number of expenditure subheads to meet 2021 priorities.

The most significant changes to programme subhead budgets are as follows. Subhead A9 funding for pensions for bodies under the aegis of the Department increased by €700,000 to €1,150,000. This will assist with additional pensions costs incurred by the Economic and Social Research Institute, ESRI, and the Institute of Public Administration, IPA. Subhead A3, the ESRI grant subhead, has increased by €225,000 to €3,000,000 to support the institute in carrying out additional social research in 2021. The allocations for subheads A8 and B5, the programme consultancy subheads, have reduced by €383,000 in total. Subhead B7, the reform agenda subhead, was reduced by €542,000 to €648,000, which is sufficient to meet its requirements this year.

In relation to other Votes, the Estimate for Vote 12 - superannuation and retired allowances, which is the largest Vote, accounts for the vast majority of the envisaged increase in PER Vote group expenditure in 2021. Year-to-year variations in the expenditure of this Vote are primarily driven by the number of pensioners on the payroll, the number of individuals who will opt to retire before reaching their compulsory retirement age and whose years of service and grade or pay level are variable and uncertain.

The Estimate I am proposing today for Vote 12, involving a gross provision of €666.268 million, represents an increase of just over €26 million, or 4%, on the 2020 gross Estimate. This increase reflects an increase in the number of pensioners on the payroll and the number of civil servants reaching retirement age in the year.

Other bodies under the aegis of the Department, such as the Public Appointments Service, PAS, the National Shared Services Office, NSSO, and the State Laboratory, provide important services to large numbers of clients across the civil and public service. A modest increase to the State Laboratory's 2021 Estimate will allow the laboratory to meet additional forecasted demand for tariff classification advice in 2021, and also enable the laboratory to provide an analytical service to the HSE in relation to e-cigarettes. The Public Appointments Service - Vote 17 - has received a modest once-off increase in the current year to assist the HSE with increased recruitment demand arising from the pandemic. The NSSO has played an important role in the reform of public services in recent years through the delivery of human resource shared services and payroll shared services to clients across the civil and public service.

The 2021 NSSO allocation will enable the continued provision of HR and payroll shared services and also enable the office to progress the roll-out of financial management shared services.

The Estimate provision for the Office of the Ombudsman will allow the various constituent offices to deal with their respective workloads and enable continued investment in ICT modernisation, which will support the office to meet the challenges of delivering essential services to the public remotely at this time.

Procurement is a key element of the Government’s public service reform agenda. The State procures goods and services costing in the region of €8.5 billion each year. In this context, it is essential that the public service operates in a co-ordinated and efficient way and delivers sustainable savings for the taxpayer. Some of the key OGP initiatives supported by the 2021 Estimate include: improving procurement capability in the public service; further developing, implementing and actioning a medium-term strategy for construction procurement, including the capital works management framework, CWMF; supporting Future Jobs Ireland and the climate action plan through focused procurement policy initiatives; the development of a new national eTenders system; and the delivery of commercial skills training across the public service.

Finally, 2021 marks the second year of the Office of the Chief Government Information Officer, OGCIO, as an independent Vote - Vote 43. It was established in 2020 with an Estimate of €21.7 million net, all of which came from Exchequer-neutral funding transfers from other Votes. The Estimate for 2021 will rise by 5%, which is largely funded via Exchequer-neutral transfers of €1.1 million from other public sector bodies. This Vote serves to drive the digital transformation agenda across Government while providing and developing pan-public service ICT infrastructure, service delivery models and cross-government applications. The OGCIO is facilitating a sustained and wider spread adoption of the build-to-share suite of services as set out in the public service ICT strategy and endorsed by the Civil Service Management Board, CSMB, with Departments contributing to the funding of services received. This approach to Exchequer-neutral funding means that ICT costs can be suppressed across the wider system as a result of labour specialisation, economies of scale and the elimination of duplication.

I am happy to present the 2021 Estimates for the public expenditure and reform group, approval of which will allow the individual Votes to continue to meet their responsibilities and deliver essential services. The Minister of State and I are both happy to answer any questions that arise.

Deputy Mairéad Farrell

I thank the Minister and Minister of State for coming before the committee and the officials who produced a very comprehensive document on this. The first thing I wish to focus on is procurement. There is a lot of concern out there regarding Government spending and buying from companies during this pandemic, particularly where the goods it has bought have proven to be faulty or not up to scratch. We saw that with the purchase of faulty ventilators from two separate companies. One transaction with a company called Shenzhen Prunus, which cost the taxpayer almost €5 million, involved buying 250 units. After a number of those units failed tests, all 250 units were quarantined. Can the Minister confirm whether they are still in quarantine or have been destroyed, and whether the taxpayer has received a refund regarding this?

In a second transaction, 300 ventilators were bought from Roqu Media International. That company specialised in entertainment services, not the provision of medical equipment. That contract cost €14.1 million. This company organised festivals in Saudi Arabia yet at the same time, it seemed okay to give it €14.1 million to purchase ventilators. To anyone who has seen the documentary, it is very clear that this is Ireland's answer to Fyre Festival. This deal was supposed to cost €35 million and we know Roqu Media International was not the actual manufacturer, which was Shenzhen Probe, but it acted as the intermediary. In actuality, it was an intermediary of another intermediary called Shanghai Lingang Group, an arrangement that was not made clear to the HSE at the outset.

Can the Minister confirm how many of these ventilators were faulty and were any of them used? Let us put this into context. We need to remember that at this time, there were communities in local areas trying to raise enough money to pay for PPE for their local nursing homes or whatever else they felt was necessary, yet at the same time, we see a festival organiser get €14.1 million. That is simply not good enough. I would really like to hear the Minister's clarifications regarding that issue.

I have also seen an internal document that looks at the risks relating to Roqu Media. We see that it was red flag after red flag yet the purchase went ahead. This was done internally in the HSE. It said that there was a risk that expenditure of this magnitude would be wasted, that the quality of the machines was not to the standard specified or expected by the HSE, that there were no CE marks on the machines and there were issues relating to the variation in standards involving multiple machines being supplied from multiple manufacturing sites. This was red flag after red flag so I would like to hear the Minister's clarification on this issue.

I understand that this same company was also involved in other schemes where the plug had to be pulled. I would be interested in hearing the Minister's views on companies that have continuous issues regarding the quality or standard of what they provide and whether there is any concern regarding them being able to apply for and win more procurement contracts. Is it the Minister's view that this highlights weaknesses in Ireland's procurement regime and, if so, what is he going to do to ensure that our light touch regulation, which is what it has been called, becomes a bit more hands-on?

Minister of State at the Department of Public Expenditure and Reform (Deputy Ossian Smyth)

I thank the Deputy for raising the question. The first thing to say is that the Office of Government Procurement is not a policing or regulatory body. It is a policy body that provides advice on how State money should be spent along with guidelines and suggestions for suppliers that have been vetted to contracting authorities. I understand that the body that purchased these ventilators is the HSE. The HSE would have been the contracting authority. The HSE is responsible for spending its own money. It has its own Accounting Officer and is subject to audit by the Comptroller and Auditor General and to being cross-examined at the Oireachtas Committee on Health. Primarily, that would be the method of oversight of the health budget or the HSE spend.

I cannot really comment on the particular circumstances of that supplier to that contracting authority because I am not aware of the details but we must acknowledge the extreme urgency of the situation in which we found ourselves last summer. We were facing a situation where we had a new virus and did not know the extent to which the numbers could increase to a point where they would overload our hospital system. We could see what was happening in Italy on television and there was a rush to acquire PPE, ventilators and other equipment to prevent a calamity. In those situations, there is room within the procurement rules for emergency procurement of equipment and supplies so that we do not have to go out to a full tender. If somebody's house is on fire and one needs a bucket of water, one is not necessarily going to have a tender to obtain buckets. Of course, there are limits to how emergency procurement can proceed but, generally, it seems to have worked very well.

Deputy Mairéad Farrell

Regarding the Minister of State's statement that if one's house is on fire, one needs a bucket of water, one actually needs to make sure there is water in that bucket rather than something flammable. Yes, we were all extremely concerned, as we still are, hence the reason we need to ensure certain things. As the Minister of State said, the Office of Government Procurement is a policy body. We need to make sure we have the right policies in place so that when we do have something like this - when our house is on fire - we are not bringing a bucket full of flammables but are actually bringing a bucket full of water.

Let us consider the ventilators, for example. What if people needed those ventilators? We spent millions of euro and had ventilators that did not work. This was in a global pandemic. This is why we have policies and why we need to make sure that our policies work. I acknowledge the issue of non-competitive procurement practices and I understand that they can be needed in times such as a pandemic but we need to look at this situation very clearly. With regard to companies that fail so greatly and so gravely in times of absolute need, we must ensure that they are not going to be used again and again and that these issues do not keep arising. That is definitely something I would be concerned about.

I would also push back on the whole concept of the non-competitive procurement practices. What kind of data collection is there for these non-competitive practices? How frequently are they used? Who are the most frequent users? What is the value in a given year? What reasons are cited for going outside a competitive process? I am aware that the OGP has provided guidance to contracting authorities on purchasing during the pandemic without a competitive process via a so-called "negotiated procedure". That is one of the ways of going about the competitive tendering process but are the Minister and the OGP aware of the total number and value of procurement contracts for Covid-19 related spending in 2020 and 2021 that took place via negotiated procedure and without prior publication? Is the office aware of anyone who is collecting this data centrally? This is very important.

Deputy Ossian Smyth

The total volume of goods or services that were obtained outside of a contract or normal procurement rules is known by each of the contracting authorities. The OGP does not keep track of each individual procurement contract that is taken out. Even in the case where an emergency procurement is done because the contracting authority is in an emergency situation, they are still required to audit all of those procurement activities. The Accounting Officer is still required to account for all of them and the Comptroller and Auditor General can investigate all of them.

The Deputy is right to be concerned about the probity of public expenditure to make sure that money is not misspent. That certainly applies. In an emergency situation, however, the normal checks and balances that take place initially can be delayed or circumvented to deal with a critical situation. Overall, I believe that it worked remarkably well last summer. Many organisations contacted the OGP and the State to offer equipment and PPE to the HSE at no cost or a reduced cost. The OGP worked to take all of those offers and to go through them all. It was extremely helpful. Overall, I feel that we had a successful emergency procurement. There certainly will be instances where things went wrong, and these must be investigated. We must find out what happened in those cases and they should be audited. If there was any wrongdoing, of course that should be punished. We need an emergency procurement system for emergency situations. I hope and expect that any questions arising from the HSE's purchasing are carefully examined at the health committee.

Deputy Mairéad Farrell

Gabhaim buíochas leis an Aire Stáit. Obviously we need to have a system in times of pandemic, but we also need to be careful. When one sees that this company then went for another tender, it is very concerning.

I have one final question on expenditure for the Minister because I know other members need to get in. Previously the Government put €4.7 billion into Bank of Ireland and, as a result, now has a 14% shareholding in that bank on behalf of the people. We have seen the news, which I am sure we can all agree is very disturbing, that 103 branches will be closing, North and South. This affects mainly isolated and rural areas. The national recovery plan is based on balanced, regional development. With these bank branches closing in the more isolated and rural areas such as Oughterard, County Galway, surely this is not good for balanced regional development. What can the Minister do with regard to this happening?

Deputy Michael McGrath

I thank the Deputy for raising this important issue. I acknowledge the significant public concern as a result of the Bank of Ireland announcement. None of us want to see bank branches closing because we realise just how important they are for the communities they serve, for personal customers and for business customers. On the role of the Government, as the Deputy has pointed out, the Government is a minority shareholder in Bank of Ireland, with a 14% shareholding. A relationship framework agreement is in place that governs that relationship. As a result of that agreement, the Government does not interfere in the day-to-day commercial decisions made by the bank. We want to ensure that financial services are provided in communities around the country. In that regard, we welcome the new partnership agreement being entered into by Bank of Ireland and An Post. Arising from the bad news on the closure of branches is an opportunity for the post office network, some of which is under strain as the Deputy and colleagues on the committee will be well aware. I also believe there are opportunities in this regard for credit unions to continue to expand the range of services they offer. The Government will do all it can to provide a supportive environment and a framework for the continued provision of services. It would be wrong of me, on behalf of the Government to say that we can control the decisions made by the Bank of Ireland on individual branches because we simply cannot.

Deputy Bernard J. Durkan

I apologise that I was not available for the start of the meeting.

Apropos of the previous discussion on procurement, we must recognise that in an emergency we need to have an emergency procurement process. Whether it has operated effectively or efficiently remains to be seen, but it needs to be in existence. Inevitably, emergencies occur and in an emergency it is not possible to go through a two-month or three-month tendering process. In fact, it could be found that the procurers were negligent if they put people's lives at risk and the public would not tolerate it. I would, however, like to know a little bit more about the extent to which emergency procedures are available and what covers the procurers in the process in that event.

On the banking system, particular challenges arise now. I am not certain that they will be resolved easily. At a time one bank is withdrawing completely from the market, another bank is closing down more than 100 of its counter services. This is a big challenge and a disadvantage to many people who are dependent on the banking system. We need to make sure that we have something to offer. I will come back to some comments I have made in the past at our meetings. I am not so sure that we have any influence at all as a committee, and I believe that we should. Our views should be taken into account but they are not. They were not taken into account when it was decided to close one banking establishment altogether. We were told after the event, the same as the employees. I do not believe this is good practice, especially in the aftermath of the bailout of the banking system, some by this jurisdiction and some by other jurisdictions.

The fact remains that either the finance committee or an appropriate committee has a function and a valid commentary in these situations or it has not. If we have not, that is fine. We may have to deal with it in another way. Likewise, with regard to the Bank of Ireland, the employees were not warned beforehand and the appropriate committee was not warned beforehand, as far as I am aware. We did not know anything about this. The decision is taken arbitrarily. I believe we must examine the basis on which these arbitrary decisions are taken.

The banks will say it is on the basis of the need to look after the shareholders and so forth. We have to raise a red flag and say that while we are not shareholders, we represent shareholders and constituents alike, and some constituents may be shareholders. It is important that some type of good established practice be put in place to ensure we do not continue swimming in the dark, as it were.

Deputy Michael McGrath

I thank the Deputy for his comments. They are points he has made on many occasions. I was a member of this committee for many years and took part in many of the hearings it had with the banks. We had many robust exchanges. We made progress on some issues and did not make progress on others. However, it is true that the Government is not directly involved in running the banks, even those in which it has shares. We have an interest, of course, in the services they provide and the impact of any changes in those services on the economy and the communities that are supported by those services.

The banks are operating in a very challenging environment at present, as the Deputy would acknowledge, given the interest rate environment and the lack of returns that are available at this point. We need to ask ourselves why a bank such as Ulster Bank, which has been in this country for 160 years, or its parent company NatWest Group would make the decision to depart from the Irish market. We must think very carefully about the issues which led to that decision, because it has been a difficult and bad week for the customers and staff of Irish banks, given the combination of the Ulster Bank announcement. It was devastating that the third largest bank operating in the Irish market would signal its departure, albeit over a period of a number of years. The Government will do all it can to manage the fallout from that. We welcome the ongoing engagement with Permanent TSB and AIB regarding what role they may play. Notwithstanding that, it is still a very serious and adverse development.

The closure of bank branches is a recognition of a number of factors which the bank outlined yesterday. However, it means we must do all we can to support the post office network and the credit unions to ensure that where services being provided by one institution are lost to a community, those services are replaced by another institution. That is the key issue. There are many businesses in communities that require cash services. They require the service of going to a bank branch and lodging cash. They cannot afford to travel 15 or 20 miles or further to do that because of the cost involved, the time and the security issues that are raised as a result. I welcome the announcement by An Post, and we need to see the full detail of that over time. That will be important to reassure customers that those essential services can continue.

Deputy Peadar Tóibín

Gabhaim buíochas leis an Aire as teacht isteach chun an méid atá laistigh den tuarascáil sin a phlé. The country finds itself in a new banking crisis at present. My major frustration with this is the fact that Bank of Ireland and AIB can function in the manner in which they are functioning because they operate in an unbelievably uncompetitive banking market. The major threat to customers, small businesses, farmers and regional and rural Ireland is the wholesale absence of competition in the Irish market. That has happened largely because previous governments and the former Minister, Michael Noonan, created a two-pillar banking system, in part to protect the value of those banks. What that has done is create a duopoly. As anybody who does leaving certificate economics can explain, that duopoly means there is enormous supplier power in the hands of those two banks. As a result, they can control all aspects of engagement between themselves and the customers. They can do what they like to the customers because the customers have absolutely nowhere else to go. One must either do business with those two banks or start bartering. That is the market that exists.

I listened to the Minister and Deputy Durkan with regard to not wanting to direct these banks to take particular actions. If I was in government, I would not want to direct those banks in certain actions. What I would do is create a competitive market, a market in which those banks lose their supplier power and there are competitor banks put into place, such as a stakeholder public banking system, and in which far more banking power is given to the post offices and the credit unions. My worry with regard to credit unions is that I have listened to ten years of platitudes in Leinster House when it comes to credit unions, how wonderful they are and how they should be doing more, but very little extra support is being given to them to enable them to achieve more. Indeed, I met the regulator of the credit unions a number of years ago, who basically communicated to me that the Government did not trust the credit unions to have the management infrastructure to be able to provide a proper banking alternative in this country. The thing to do in that scenario is to buttress that management infrastructure so they can provide that system within the banking market.

Ireland is moving into an uncompetitive space for banks. That is the reason Ulster Bank left. It left on the basis of a financial decision. It was as pure and simple as that. The reason is that banks in Ireland have to hold two and a half times as much capital on mortgages as their European peers, and interest rates are not providing income streams to banks. Does the Government have a significant plan to introduce competition in the banking sector to make it attractive for a stakeholder public banking system? Does it have a plan for the post offices and the credit unions and to make them more attractive to European competitors?

Deputy Michael McGrath

It is important to acknowledge that there is competition in the Irish market. We have the pillar banks, obviously, but Permanent TSB is playing an increasing role in the SME market. It has significant ambition in that space. On the personal banking side, we have a foreign-owned bank, KBC Bank, in the Irish market. It has restated its commitment to remaining in this market, which is important.

When we emerged from the financial crisis, the Irish market lost many foreign-owned banks. They departed because of the level of losses they incurred. The Deputy made an important point. Ulster Bank left the Irish market for financial reasons. It is a bank that makes commercial decisions and if it does not see a pathway to a sustainable return on equity, it will not remain in the market. Unfortunately, to our cost, that is the decision it made. We have seen some entrants in the mortgage area. We have Avantcard, for example. Although it targets a particular part of the market, it is offering a rate as low as 1.95%. I very much welcome seeing that level of competition in the market. An increasing role is now being played in the provision of financial services by non-bank lenders across a range of platforms. A number of fintech operators have entered the Irish market. They are lean, have a very low cost base and operate within the regulatory environment.

As a former member of this committee, I spent a lot of time engaging with credit unions. In the previous Oireachtas, this committee compiled a very good report on the key challenges that credit unions face. The Government is determined to work with credit unions in developing a strategy that provides a sustainable basis for the expansion of their services in communities. From my engagement with them, it is clear they are expanding their services and investing in technology. While they have issues with certain aspects of regulation, regulation is carried out in an independent manner and must be done.

I touched on the issue of post offices. I am liaising with the Minister for the Environment, Climate and Communications, Deputy Eamon Ryan, and the Minister of State, Deputy Hildegarde Naughton, on the future of the post office network and how we can support An Post. However, we must also acknowledge hard realities. Deputy Tóibín touched on the level of capital provision that is required under the risk-rated assets system for Irish banks. That is determined by regulation and is not determined by the Government in any way. The truth is that the system ascribes an additional premium to lending in Ireland because it is seen as more risky. That reality is related to the requirement to hold additional capital. Those are the issues we need to consider and work our way through to make sure we hold on to the competition we have and try to find new ways of bringing in additional competition.

Deputy Peadar Tóibín

I understand the two pillar banks account for roughly 80% of the Irish banking market but I am open to correction. The alternatives the Minister mentioned are very small in comparison. When analysing our market it is still very clearly a duopoly, which is the opposite of what we need as a State. Perhaps the Minister did so by accident but giving the pretence that there is functioning competition within the Irish market is unhelpful. There most certainly is not proper competition within the Irish market. That is at the heart of the problems that have manifested themselves in provincial towns right across Ireland.

I am a big fan of regulation and believe it is necessary but we have cyclical regulation. This means regulation is applied when a particular market is in trouble but is then reduced when that market starts to burgeon. We need countercyclical regulation. Regulation must be in place when needed.

On procurement, where are the ventilators that were discussed earlier? How much does it cost the State to store them? What is planned for them in the future?

Deputy Ossian Smyth

I would love to be able to answer the Deputy's questions but the details of a contract between the HSE and a private company to supply equipment is a matter for the HSE and Department of Health. I suggest the Deputy directly address his questions to the HSE and I am sure it will be able to help him. I regret that I do not have details on the contract. In general, the Office of Government Procurement does not police individual procurement contracts that are taken out by contracting authorities across government. That is not its role.

Deputy Peadar Tóibín

Who has a cross-departmental oversight role on the efficacy of procurement by Departments? To be honest, I would have thought that the location and the continuing cost of a procurement contract to a Government organisation, such as the HSE, should be of significant concern both to the Minister of State and the Office of Government Procurement.

Deputy Ossian Smyth

The HSE has its own procurement organisation, health business services, HBS. All of the Government is going to be examining its response to the Covid-19 crisis last year to see what is to be learned from it. I am sure there will be-----

Chairman

Who is on the reform board? How is its membership made up?

Deputy Bernard J. Durkan

I strongly support the Chairman's views on this subject. While we are on the subject of the banks, I want to remind myself and everybody else that a major issue was tracker mortgages. The banks held the view for a long time that they could not afford tracker mortgages because they were losing money on them, which, of course, was untrue. They were not losing money but, potentially, they could have charged more if they did not have tracker mortgages, so they could make more profits. Other European banks right across the European Union did not seem to have a problem and they were acceptable. We need to find out more information in regard to why we are so different. Is it because we are a small country or because we are not full members of the European Union, which, of course, we know is not true? We should be entitled to the full entitlements that go with membership of the European Union. If they have tracker mortgages throughout Europe, I do not see any reason we should not accept them here.

To go back to the question of reserves and risk, I acknowledge what the Minister says about that, but the risk was created, as the Chairman rightly said, by the banks themselves. They encouraged people to borrow wildly and indiscriminately. It was not necessarily the customer who looked for this. The banks offered them facilities that were above and beyond their ability to discharge.

We are in a situation where, as we proceed into the future, we need to get clarity as to where we are going. Incidentally, given the previous conversation on procurement and how some contracts are filled from inside the State and some from outside the State, I remember having the temerity to inquire into that some years ago and I was treated with absolute disdain. I was asked how anybody could ask a question like that. That is as it may be. We have to do things in the future in a way that is not in accord with what happened in the past. As the Chairman said, we have to account for our activities and what we are doing to protect our constituents throughout the length and breadth of the country.

I am not certain how good-hearted the banking system is going to be towards the credit unions or the post offices. Previously, the post offices needed an extra revenue-generating avenue and, presumably, it will come in the course of the changes that are taking place. I am not 100% certain but I would like to be certain. Similarly, if a third banking force is required, how is it going to come about?

Do we wait for it to happen at the behest of the banks or do we suggest to the Minister and the banking system how they might construct a realistic competitive third banking force in the country upon which the Government and the public can rely? Those are questions that need to be asked and to which we need a response.

Deputy Michael McGrath

I thank the Deputy for his questions and the Chairman for his remarks on this issue. The Chairman has always been consistent and forceful in raising these issues related to the banking sector. He has also been very effective as Chairman of this committee for some time.

The issue of the staff of the banks was mentioned. First and foremost, they are the people we think of at this time. Different banks have made various announcements of redundancies, primarily voluntary in nature, over a period of time. I hope they will all be voluntary but, nonetheless that will mean a major upheaval for many people. Some people are late in their careers, others are not so far into their careers and, for many, it is a huge setback. We need to acknowledge that and hope the banks fulfil the promises they made in finding alternative employment, redeploying people and ensuring that lay-offs are voluntary in nature.

It should be acknowledged that during the Covid crisis the Government made very significant interventions in the lending market through the Strategic Banking Corporation of Ireland, SBCI. We have the credit guarantee scheme whereby the State guarantees 80% of each individual loan. The uptake on that has been limited, largely because the demand among businesses to take on additional debt at this time is muted for understandable reasons. They are trying to survive. The State has done the best it can in the form of the employment wage subsidy scheme and restart grants and we will continue to support businesses in that way. We have also provided considerable support through Microfinance Ireland in the context of small and microbusinesses getting support on attractive terms. Those schemes have proven to be particularly popular and successful. That should also be acknowledged. My understanding is that the Minister for Finance will be before the Dáil on banking issues this week. I am sure he would welcome the opportunity to come before this committee also but, having said that, I am more than happy to answer any question put to me on the wider issues affecting the banking sector, the people working in it and the customers being served.

The post office network and the credit unions have a major role to play. There has been much talk for many years about setting up new banks in the form of new public banking. The credit unions are a form of community banking. With the right support and strategy, I believe that is a role they can very successfully fulfil.

Chairman

Does Deputy Tóibín want to come in again? He had his hand raised.

Deputy Peadar Tóibín

Deputy Michael McGrath

As the Deputy is aware, the ESRI operates on an independent basis. The analysis it publishes on a regular basis on different issues is of very high quality and is carefully considered by Government and others in civic society. The additional funding I provided in the budget, in the form of a €225,000 increase in the grant, to the ESRI was to make sure there was a particular focus on the social dimension of its remit and responsibilities. It has always produced excellent analysis on economic issues and this was an area it was keen to develop further. I thought there was much merit in looking at income inequality, poverty, health, well-being and so on.

As for the shared equity scheme, the ESRI appeared before the committee during the pre-legislative scrutiny phase of that Bill. It gave its assessment and the Deputy has highlighted one part of it. It gave a full assessment of different aspects of that Bill which is absolutely its right, entitlement and duty. The Government must take that on board, as well as all the other advices it receives and all the other factors that go into making such a decision. The ESRI is listened to but that does not necessarily mean that any Government at any time has to follow to the letter everything it recommends.

Deputy Pearse Doherty

I understand that and the work of the ESRI is crucially important. The Minister talks about listening to the ESRI but is it not the reality that the Government has listened to the developers here? This is a developer-led scheme. I am not saying that to make the accusation. I know it because developers came to Sinn Féin and tried to convince us of the merits of this proposal. We told them to sling their hook. They went to Government Buildings or to Fianna Fáil and got a friendly ear in the form of Deputy Darragh O'Brien, who ended up becoming Minister for Housing, Local Government and Heritage, and is now implementing their policies.

Whether the Minister is listening to the ESRI telling him the scheme will push up house prices, his own former Secretary General who said developers are lobbying for this because it will push up house prices, the entire Central Bank which is saying it has concerns or the Institute of Property Auctioneers and Valuers, which is just interested in selling property, all are saying the same thing. This is a scheme that will push up prices. The reality is, when it comes down to it, it is the ear of developers that have got the friendliest tones when it comes to a Fianna Fáil Minister. Is that not the case? How can the Minister justify the chorus of opposition from State-funded bodies against this scheme, when it seems the only ones supportive of it are the Government and the developers?

Deputy Michael McGrath

In essence the scheme is an attempt to bridge the gap for many first-time buyers who have a certain level of income and who cannot afford to purchase on the open market. The State has already done a considerable amount, as the Deputy knows. I know he does not agree with the help-to-buy scheme, for example. However, many thousands of first-time buyers would not have been able to purchase their first home without such support. In the context of a Department of Housing, Local Government and Heritage budget of over €5 billion, the €75 million for the shared equity scheme is modest. It is designed to help first-time buyers to bridge the affordability gap.

We believe in home ownership. Of course, we want to see private supply increased and we need to examine the bottlenecks in the system preventing private supply coming on stream in the numbers we need. We should acknowledge the viability issues, particularly relating to the development of apartments in city centres. They are just not viable and are not happening. In my city of Cork, no apartments are being built nor have there been for several years indicating that there are problems there. The scheme is designed to make the purchase of a home more affordable. It will not be for everyone. For those who qualify, it will play a modest but important role in the market when it is operational.

Deputy Pearse Doherty

We will have a further debate when our motion is tabled in the Dáil. I hear what the Minister is saying. He believes it will make it more affordable; almost everybody else says the opposite. The Government is in tune with the developers. Both of them claim it will make it more affordable but everyone else is saying it will do the opposite and push up house prices. These are people without any political allegiances, including the Central Bank, the Secretary General of the Department of Public Expenditure and Reform, the ESRI and other institutions.

Deputy Mairéad Farrell and other Deputies spoke about the impact Bank of Ireland's decision to close 103 branches will have on communities, on vulnerable customers and particularly on businesses. The evidence shows that when a branch closes, the credit lending growth reduces by two thirds. When it is the last branch in town, which is what is happening in many villages and towns as a result of the Bank of Ireland decision, the credit lending growth reduces by over 100%. This is happening at a time when we will need banks to support businesses to help to rebound on the other side of this pandemic.

I am sure the Minister will give the Civil Service answer about the framework relationship agreement. However, does he accept the Minister is entitled to express an opinion about what Bank of Ireland has done by deciding to close 103 branches across the island of Ireland in the middle of a pandemic?

Deputy Michael McGrath

I will not give a Civil Service answer and there is nothing wrong with our Civil Service. I will give my own opinion and the facts. The facts are that the Government cannot intervene over a commercial decision, as the Deputy knows as well as I do. I will not sugar-coat it. The decision by Bank of Ireland to close so many branches is a very serious blow for the communities served by those branches. It is an enormous blow for the staff. I have already spoken about the need for them to be properly looked after and indeed for the customers who are served by those branches to be looked after. In recent days we have seen news reports indicating how those communities will miss having a branch.

Chairman

The Deputy may put that question to the line Minister tomorrow. The Minister, Deputy Michael McGrath, has made his views known on it and it is only fair that he would pursue it with the line Minister.

We have half an hour left.

Deputy Pearse Doherty

With respect, the Minister has not made his views known on that question. He continues to avoid that question.

Chairman

He obviously does not want to. The line Minister will deal with it tomorrow and I ask the Deputy to take it up with him, as I have no doubt he will.

Deputy Mairéad Farrell

On the issue of Bank of Ireland closing branches, I listened with interest when the Minister mentioned the potential of the credit unions. I would be interested to hear his views. I think in the last year or so, new lending regulations now allow credit unions to lend 7.5% to 15% for secured loans, which was deemed a big success by certain people. Certain people in the credit union sector felt that it shut them out of the market. As the Minister mentioned the role of the credit unions, what are his views on that? Will he raise it with the Central Bank the next time he is in contact with it if it is his view that credit unions will be playing a major role in the future?

Deputy Michael McGrath

Can the Deputy restate the issue, the figures she gave and what the context is?

Deputy Mairéad Farrell

According to the figures I have, credit unions are allowed to lend 7.5% to 15% for secured loans, which is mortgages.

Deputy Michael McGrath

I am broadly familiar with the issue of the lending limits. It is very much a regulatory issue. It would be wrong of me, as Minister, to cross over into space that belongs to the Central Bank. The Oireachtas has a role in setting the legislative framework for the Central Bank to perform its functions, but it would be wrong and inappropriate of me as a Minister to comment on a specific regulatory function that relates to the Central Bank.

Deputy Mairéad Farrell

There has been a lot of talk in the last hour and a half about Sparkassen and moving to that type of model. A report published in 2018 states that we do not need a Sparkassen-type model here, but it would be interesting to investigate it further, as well as the role of the credit unions. However, I take the Minister's point.

I would like to return to the procurement issue. On the level of non-compliance with the competitive tendering process in 2019, it is my understanding from the response of the Minister of State, Deputy Ossian Smyth, that no information is available yet for 2020. I add my voice to the call that the Minister of State, who has specific responsibility for procurement, seek that information. It is important that information is made available to the committee.

Deputy Ossian Smyth

I am not sure what the Deputy is looking for. Is it a report on non-compliant procurement across all of government?

Deputy Mairéad Farrell

Yes, in regard to 2020.

Deputy Ossian Smyth

I will communicate with the OGP on that matter and revert to the Deputy.

Chairman

I would like to ask some questions. In terms of reform, are there plans to reform the Office of Comptroller and Auditor General to the extent that it might be amalgamated with the Local Government Audit Service, such that we would have one audit office for the country? The spend on local government does not get the same scrutiny as Departments and agencies. Given the amount of money that is now going through local government, the Office of the Comptroller and Auditor General should be improved to allow for that audit and also to allow for the possibility of auditing any body that would get a significant amount of funding from Government. I am not suggesting that office would audit every body but that if the occasion arose, as it did in the past, there would not be any legal obstacle to the Comptroller and Auditor General following the money.

My second question is also on reform. This morning, the ESRI was mentioned. I refer now to the Institute of Public Administration, IPA, and the National Economic and Social Council, NESC. In organisations that have a bearing on Government policy there is little input from the private sector and so each of those organisations is heavily weighted towards public sector involvement. I believe they would benefit from an appropriate level of private sector involvement. Similar to the gender quota, there should be a minimum of 30% representation on these agencies and boards by people from the private sector in order that we would have a dynamic working between public and private and, perhaps, an influence on policy that would be more positive and business driven than is the case now. I believe there is a lack of diversity in this area. I ask the Minister to comment on the fact that of all of the people recruited from the public sector to the higher level within the Civil Service, only 8% have been successful. In other words, only 8% of those coming from the interview process are from the private sector. The issue here is the level of pay. A person from within the service receives a level of pay that is equal to his or her current standing within the organisation but a person coming in from the outside must start at the bottom level of the scale. I think the Minister needs to look at that.

Staying with the issue of reform, we continually refer to the relationship framework with the banks. I accept the following is probably a matter for the Minister for Finance, Deputy Donohoe, but I suggest to the Minister, Deputy Michael McGrath, as I will also suggest to the Minister for Finance, that the relationship framework should be reviewed and a clause inserted therein that allows the Minister to intervene where it is in the interests of the community, society and the State so that we need not always put forward the excuse that it is not within the relationship framework to do this or that. Deputy Pearse Doherty mentioned the banking framework for the future. We need to examine that closely. We should stop the branch closures. This committee should be saying to the Government that it too should be insisting that there be no branch closures by Bank of Ireland. The public banking model report was produced and discussed at this committee and the Government at that time, which introduced vulture funds to the country, did not support the public banking model. It was in the previous programme for Government and it is mentioned in the current programme for Government, as are so many other issues it is hard to believe anything has been left out. I would like to see that coming forward.

There are two final issues I want to raise. There are employees of a semi-State company based in Shannon waiting to be redeployed to various parts of the public service. They have been waiting a considerable length of time but no move has been made in regard to the numbers. I have tabled parliamentary questions on this matter. A number of the employees want to deploy to civil or public service jobs. This process has been stalled for some time. It now needs to be revisited in order that the employees' case is settled.

On the whistleblower legislation, I understand the Minister does not have authority in respect of each disclosure but that legislation needs to be reviewed. The committee has decided to do its best in the context of the restrictions in place on committee work to take that into consideration. Looking across the disclosures that have been made, is the Minister concerned by the actions of the State in terms of how disclosures have been handled? One whistleblower was named at the Committee of Public Accounts and that is illegal. The arm of the State with which whistleblowers are dealing is using a significant amount of taxpayers' money to beat them down. In some cases, what the whistleblower or protected disclosure has disclosed has been a help to the State and it has been acknowledged that it is, rightfully, a protected disclosure yet, particularly in the education sector, there is a refusal to sort out the problem. It is similar to the question on the procurement side raised with the Minister of State, Deputy Smyth.

I will have a look at that issue. I would point out that an external chairperson, Mr. Sean O'Driscoll, who is formerly of Glen Dimplex, has been appointed to the ESRI. He is doing a really good job there.

Regarding the employees in a company in Shannon, the Chairman might provide me with the details of that particular case. Is the organisation to which he referred under the remit of the Department of Transport?

Chairman

I asked a number of parliamentary questions about this issue. It is about redeploying a number of employees from a semi-State company back into Civil Service positions. It is an ongoing issue which I will bring to the Minister's attention separately, if he likes.

Deputy Michael McGrath

I will look into it. I am keen that we have as much transferability as possible across the civil and public service and also the wider public sector. That is important.

On the whistleblower legislation, I will be bringing forward new legislative proposals in this area in the coming months. A review is needed and some changes are required. An EU directive on whistleblowing was adopted in October 2019 and we have until December of this year to transpose it into our national laws. A public consultation on the areas of the directive where Ireland has discretion took place last year, closing in July. A total of 24 submissions were received as part of that process and they will inform the approach to be taken in the transposition of the directive. My intention is to bring forward the legislation as early as I possibly can in order that we can engage in pre-legislative scrutiny. There are important issues around protected disclosures that we need to look at afresh. The legislation is seven years old and we must learn from our experience over that period of time to see how we can improve and strengthen it. We want an environment across the public service where we are open to whistleblowers making information available without any fear of recrimination or consequences. People still feel reluctant in many cases to challenge the system and bring forward information. I will be engaging with the Chairman and the committee in the months ahead in regard to the legislation on protected disclosures.

Chairman

My final point related to cases where Departments are dealing with a protected disclosure on a matter that is almost without question or doubt and are using taxpayers' money to drag it through the courts. Is there any way of intervening with Ministers to ensure that, within each of their Departments, any protected disclosures that are made are dealt with efficiently regardless of the outcome? The person who made the protected disclosure must not be left out of the process.

Deputy Michael McGrath

We will consider that as part of the new legislative provisions. We need to be careful to ensure that employees who are the subject of an allegation or disclosure made by somebody else are entitled to their good name. If we have a situation where such persons are cut loose and left to carry huge costs in defending their good name in the performance of their duties for the public good, as they would see it, that would raise serious issues. It is something we can examine as part of the review we are doing into the legislation.

Chairman

I thank the Minister. Deputy Tóibín has indicated that he wishes to speak.

Deputy Peadar Tóibín

With the permission of the Chairman, I would like to ask a question on the budget deficit, which, for 2020, is expected to be 5.5% of GDP and approximately 10% of GNI. In many ways, this is an economic elephant in the room that we will be faced with when, God willing, the pandemic is subsiding. Has the Government developed any plan to reduce the budget deficit and the timescales that might apply for that reduction? Has the EU been in contact and have there been any discussions with it regarding the timescales to meet the fiscal rules? Has there been any discussion with the ECB in this regard? Can the Minister give us any information as to whether the reduction will be done through tax hikes, public spending cuts or economic growth? My preference would be economic growth. There is a massive train coming around the corner and I want to know the Minister's thinking on how we are going to avoid it.

Deputy Michael McGrath

I thank the Deputy for raising this question. It is absolutely the case that the pandemic has had a dramatic impact on the public finances, first and foremost on the people we serve, including the 470,000 people on the pandemic unemployment payment, many of whom have remained out of work for almost a year since they lost their jobs in March 2020. Our number one priority and challenge will be to rebuild the economy and bring about a recovery that is focused on helping people to get back to work.

There was a question on the deficit. The preliminary estimate for last year, as committee members know, is of a deficit of €19 billion and a forecast we made in the budget for 2021 is of a deficit of a similar order or slightly higher at over €20 billion. The truth is that we are in a period of such uncertainty that it is difficult to make predictions.

We need to consider in the coming weeks how we approach the stability programme update. As committee members know, we must prepare and submit that statement to the European Commission by the end of April. I imagine there will be engagement with the committee as part of that process. We will have the summer economic statement in the summer as well. We made provision in the budget for the contingency fund and for the recovery fund. Those two are being used currently to sustain the supports currently in place in the form of the pandemic unemployment payment, the employment wage subsidy scheme, the Covid-19 restrictions support scheme and so on. Those funds will come under strain as we move through the coming months depending on the level of the public health restrictions.

In overall terms, last year we spent €85 billion. The forecast this year that we set out in the budget was for expenditure of approximately €88 billion over the course of the year. The commitment we have given is that we will maintain the supports as long as is necessary and there will not be a cliff edge. We are not going to allow them to end abruptly.

Recently, I had a good meeting with the National Treasury Management Agency to get an overall handle on the work officials there are doing in managing the national debt. I was convinced following the engagement that they are taking maximum advantage of the current borrowing conditions, which are extraordinary because of the support of the European Central Bank. As committee members know, the ECB has committed to continuing with the exceptional bond buying programme up to March 2022.

At this point the focus of the Government is on supporting people and businesses and getting everyone through this in the best way possible. Our assessment is that the bulk of the heavy lifting in respect of the deficit can be achieved through growth, trying to repair the economy and bringing about that recovery. I am not going to suggest for one moment that it will be plain sailing right through the full term of Government. It would be foolish to make such a commitment. Anyway, our focus is on continuing with the supports and bringing about the recovery. A reduction of the deficit will be done gradually. It will be led by growth and by helping people to get back to work.

I believe the Irish economy has the capacity to rebound strongly when we consider the level of savings. Over €15 billion in extra savings has been amassed in our financial institutions in the past year. I believe the economy will start to recover in the second half of this year. All the forecasts from the main bodies internationally and domestically are for growth of between 4% and 5% next year. Now, we cannot take anything for granted but I believe if we can help to ensure that businesses get through this period, then that money is well spent in general terms. We will keep the supports under review. We are doing a good deal and we will see what further work we can do or need to do. When it comes to the reopening phase of the economy there will be a need to try to give extra help to businesses, some of which may have been unable to open their doors for the past 12 months or more by that time. There will be damage and legacy issues will need careful consideration. We will work with people on that basis, but the commitment I can give is that our focus will be on bringing about recovery. That is the best way to address the deficit, which will need to be addressed over time.

Chairman

I thank the Minister, Deputy McGrath, the Minister of State, Deputy Smyth, and all their officials for their attendance.

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach debate - Tuesday, 2 Mar 2021

Vote 43 - Office of the Chief Government Information Officer (Revised)

Mr. Dermot Sellars

Mr. Dermot Sellars

Mr. Dermot Sellars

Mr. Dermot Sellars

Mr. Dermot Sellars

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach debate -
Tuesday, 2 Mar 2021