I thank the Chairman. We are seeing a lot of each other today. I am pleased to have the opportunity to present the 2015 Estimates for my Department’s group of Votes. The group, as the Chairman said, comprises a significant number of Votes. It contains the Vote for the Department of Public Expenditure and Reform, the Vote for the Office of Government Procurement, the Vote for shared services, the Votes for a number of offices under the aegis of my Department, namely, the State Laboratory, the Public Appointments Service, the Valuation Office and the Office of the Ombudsman, the Votes for superannuation and retired allowances, which covers Civil Service pensions, and the Secret Service. The Vote for the remaining element of the public expenditure and reform group, that for the Office of Public Works, is handled separately by the sub-committee.
In total, we are seeking for these Votes just short of €504 million. This represents an increase of €30 million, or 6%, compared with the original 2014 Estimate. Almost €19 million of the €30 million increase is due to the timing of the 1 January 2015 pay bill, which had the effect of creating an additional fortnightly pay bill in 2015. If we exclude this item, the actual increase is 2%.
The Public Expenditure and Reform Vote comprises two programmes, as sub-committee members will know, public expenditure and sectoral policy and public service management and reform. In regard to the first programme, the sub-committee will recall my appearance before it a fortnight ago, on 28 January, to discuss the Comprehensive Expenditure Report 2015-2017. My statement on that day dealt in detail with the areas covered by the first programme. In the circumstances, I do not think that it will be necessary to go back over the same territory today, but I am of course willing to answer any queries which might arise.
In regard to the provision for Vote 11 for my Department, we are seeking a net funding allocation of €40.61 million. This represents an increase of €4.7 million compared with 2014. The increase is required primarily for the second programme of my Department, public service management and reform, where additional funding is required to progress the ambitious targets set out in our recent public service ICT strategy. ICT has been recognised as a critical component for the successful delivery of many existing public services. The public service ICT strategy which has been approved by the Government will enable the public service to build on these successes and use ICT to operate in a more efficient, shared and integrated manner across all Departments. The increase will also support the implementation of the Civil Service renewal plan, which is a key programme for Government commitment.
As set out in the public service reform plan, public service reform has been, and will continue to be, a key element of the Government's strategy for recovery. I acknowledge that the level of reform we have delivered would not have happened without the efforts and commitment of public servants, and I commend all of them on their contribution to date. The Public Service Reform Plan 2014-2016 has a strong focus on service improvement and the delivery of improved outcomes for service users. In addition, it maintains the emphasis on efficiency measures which was a key element of our first reform programme published in November 2011.
Implementation of the reforms set out in the plan and in the complementary departmental and sectoral integrated reform delivery plans will facilitate ongoing service improvements and cost savings into the future. Substantial progress has been made on public service reform across a range of areas in terms of reducing costs, delivering better value for money and improving services. Details of this programme will be set out in the annual progress report on implementation of the reform plan which is due to be published next month.
Staff numbers have been reduced, as members know, by around 10% since 2008, and the pay bill has been reduced by more than 20% since the peak of 2009. Our programme of public service reform has delivered significant efficiencies and increased productivity. It has also enabled us to maintain and improve public services in the face of the necessary reduction in staff numbers and budgets while meeting increased demand for services.
Examples of measures to reduce costs include reforms in the areas of public procurement, shared services, alternative models of service delivery, ICT and digital government, and property management. A core principle of the reform plan is to use some of what I have classified as the reform dividend from increased efficiencies to reinvest in new or improved services. Savings made have already facilitated the recruitment of extra staff in key front-line public services, as I indicated to the House today.
Sub-committee members will be aware that, together with the Taoiseach, I launched the Civil Service renewal plan on 30 October 2014. This innovative plan incorporates a vision and a three-year action plan. It represents a fundamentally new direction for the Civil Service. Renewing the Civil Service is a key part of the overall public service reform programme. The plan has been crafted to build on the existing strengths of the Civil Service and to take actions where required to improve the capacity and capability of the Civil Service to meet existing and future challenges. All of the actions in the plan will support a higher performing and more open and accountable Civil Service.
The key themes of the programme are for the Civil Service to be unified, responsive, professional, open and accountable. The immediate focus now is the work involved in delivering on the six priorities for implementation by the summer. The priorities are: the establishment of an accountability board, which is well in train; the creation of a Civil Service management board, which has already been done; the establishment of the first performance review process for Secretaries General; identifying available options to strengthen the disciplinary code, in particular to address underperformance; to extend open recruitment in key areas to fill the skills gaps that are now emerging; and to undertake the first Civil Service-wide employee engagement survey. I am looking forward to overseeing progress in the implementation of the renewal plan this year and working with my colleagues across the Government to support the changes.
The reform and delivery office, or RDO, within my Department is overseeing and driving the reform programme across the Civil Service. It is, of course, often necessary to invest in the short term to facilitate change and ensure savings will accrue in the medium term. For this reason, the RDO has been allocated €1.99 million in 2015 from the reform agenda fund. The funding for the RDO will be used to support a number of reform initiatives and projects, including the implementation of the public service reform plan, as I said, implementation of the Civil Service renewal plan and funding for investment in the reactivation of the Irish non-profit knowledge exchange, INKEx, database.
I will happily give more details about the database because it is a very exciting project. We will also provide support for external service delivery projects and seed funding for new shared services projects.
Overall, I am satisfied that the progress we have made on public service reform is very significant. Of course, I am very conscious that we need to maintain a strong focus on the delivery of reform to ensure that we continue to have a sustainable and flexible Civil Service into the future. To this end, my Department will continue to work with all Departments and offices, particularly with larger sectors, to ensure that services are delivered efficiently and that outcomes for services and service users are improved.
I shall now discuss public service pay. The Haddington Road Agreement forms the cornerstone of pay policy up until 2016 when it is due to expire. The recovery in the economy is in no small part due to the contribution made by public servants in keeping the cost of the public service pay bill at a sustainable level.
The public service gross pay bill was reduced from its peak of €17.5 billion in 2009 to an estimated €13.8 billion net of the pension-related deduction last year. The cost reductions and the substantial productivity increases, including additional hours worked, which the Haddington Road Agreement and previous public service agreements have facilitated, have allowed the Government the scope to reinvest in key front-line services such as education, health and policing by recruiting additional staff to deliver those services. This is a reform dividend that will help sustain the public service reform agenda by reinvesting some of the efficiency savings we are delivering into improved services.
Effective management of our fiscal affairs also requires us to plan for and address the public service pay and pension reduction measures which are based on emergency based legislation. I refer to the so-called FEMPI legislation. As our fiscal position improves, the emergency basis on which the financial emergency measures are singularly based no longer forms a secure legal basis for the continuation of the legislation in its present form.
Nevertheless, I have made it clear that public service pay rates will continue to be frozen this year. It is the seventh successive year in which there will have been no pay increases for public servants. As we know, there have been two or in some cases three cuts in wages.
While there have been some comments on the issue of increases to public service pay, it is important, as I have said this morning, that expectations in this regard are realistic. I have identified that at a minimum, my preference is to have the first quarter Exchequer returns available to me to inform any response to pay claims submitted by public servants and their unions which will form part of discussions in coming months. Any such discussions on pay will take place in the context of the State's fiscal position and the pace of financial recovery for this year and next. The current financial stability, which was hard won, will not be jeopardized.
One of the most notable features of the Croke Park and Haddington Road agreements is that both the Government and the public service unions strove to find a negotiated solution in very difficult circumstances, where public servants were being asked to contribute so much both financially and in terms of real and genuine reform. I expect that future negotiations, including any discussions that might take place this year, will also be carried out in good faith and in accordance with the industrial relations machinery in place.
In addition to progress in public service reform, we have been pursuing a wide ranging political reform programme – the other strand of my Department's second programme of work. This is aimed at delivering open, accountable and ethical government underpinned by a transparent, efficient and effective public administration system to help rebuild trust in government and in the institutions of the State.
Many of the commitments in the area of political reform, set out in the programme for Government and in the public service reform plan, are now in delivery phase and real progress has been made on a number of fronts. These include, for example, the Houses of the Oireachtas (Inquiries, Privileges and Procedures) Act 2013, which was enacted in July and commenced in September of that year; the Protected Disclosures Act 2014 which is now the law of the land; the Freedom of Information Act 2014 which was enacted last year; and the Oireachtas (Ministerial and Parliamentary Offices) (Amendment) Act 2014 which was enacted last year.
Turning to other Votes in the PER group, I am aware that the chief procurement officer in my Department, Mr. Paul Quinn, briefed the committee in recent weeks regarding the reform of procurement across the public service and the development of the Office of Government Procurement. The development of such an office is an important innovation.
The procurement reform programme is an important element of Government's overall reform programme. The procurement reform programme is tasked with delivering increased value for money, more accurate and timely data, and an improvement in the capacity and capability of procurement across the public service.
The net funding allocation for the Office of Government Procurement in 2015 is estimated at €18.974 million, compared with €12.431 million last year. That is a significant increase. A portion of this funding reflects budget transfers from the national public procurement policy unit and national procurement service, functions that previously resided on my own Department's Vote and on the Vote of the Office of Public Works. They have migrated into this consolidated Vote. Further budget reductions will be achieved, across the wider public service, as procurement functions migrate to the centre. That means there will be savings in a number of other Votes that will be added to the Office of Government Procurement Vote over time. Procurement of supplies and services represents a very significant portion of overall Government spending. It is essential that the public service achieves economies of scale and maximum value for money that it expends.
We have talked about shared services many times. Shared services is an innovative business model and a key element of the reform plan that takes advantage of the latest technologies to drive better value for money. It frees up departmental staff to focus on more strategic areas and core services. It reduces complexity and duplication across organisations and greatly improves efficiency. Shared service centres typically take two to three years to become established and stabilised.
The national shared services office, within my Department, is leading shared service strategy and implementation of shared services projects within the overall reform and renewal context. The new office is directly responsible for overseeing shared service projects within the Civil Service. As part of its wider leadership role, it provides expert guidance and support to other public service sectors in progressing their shared service commitments such as local government.
Solid progress continues to be made across all aspects of the shared services transformation agenda. PeoplePoint and the Civil Service human resource and pensions shared service now service more than 26,000 employees across 21 different public service bodies.
The payroll shared service centre services 20,000 payees across 21 bodies. It is envisaged that the financial management shared services project will be progressed further this year. Shared services projects are also being advanced across the wider public service. As Deputy Fleming will know in particular, Laois County Council is leading the roll-out of a payroll and superannuation shared service for the local government sector which is known as My Pay. Payroll and financial management shared services for the
education and training boards are proceeding as a priority in the education sector. A feasibility study and business case for a single integrated financial system is
advancing in the health sector, together with work on e-invoicing.
A provision of €39 million is sought for Vote 18 - Shared Services. The increase, compared with 2014, reflects the ongoing migration of transactional human resources, pensions and payroll processing within the Civil Service to the shared services Vote, together with the advancement of the financial management shared services project. A significant portion of this increase is mirrored by offsetting reductions on the votes of the originating Departments. These projects, by their nature, require a certain amount of upfront investment but will yield economies and efficiencies in the medium term.
PeoplePoint will become fully operational this year. The transitioning of payroll shared services will reach a conclusion next year. The financial management project will return to Government for final decision during the course of this year.
In regard to Vote 12 - Superannuation and Retired Allowances, sub-committee members will have received a short summary briefing note on the Vote and its various subheads. As recorded in that note, the Vote primarily provides for pension and retirement lump sum costs for civil servants, including prison officers, and pension payments for dependants. The sub-committee will recall that there was a Supplementary Estimate for this Vote last year. As I emphasised at the time, this is a Vote that is particularly difficult to estimate year on year as expenditure is primarily driven by the variable numbers of individuals who will opt to retire before reaching their compulsory retirement age, and whose years of service and grade-pay level will determine final payment which is variable and uncertain.
The majority of persons covered by the Vote, once they reach the age of 60, may opt to retire at any stage before reaching compulsory retirement age, which is generally 65 years of age. Eligible persons may opt to retire even earlier than 60 years under the terms of the cost-neutral early retirement scheme, CNER. In addition, there will be levels of retirements due to ill health as well as persons becoming eligible to claim preserved pension benefits arising from previous employment within the Civil Service.
These are people who are already out but did not qualify for the age until this year. To illustrate the volatility of personal decisions to voluntarily retire before reaching minimum pension age, in 2012 more than 600 persons opted for CNER, cost-neutral early retirement, while in 2013, just under 80 persons did so. Approximately 130 persons did so in 2014.
Members of the sub-committee will be aware of the announcement yesterday of an extension to June 2016 of the period within which public servants can retire under the terms and conditions which they held prior to the pay reductions under the Financial Emergency Measures in the Public Interest Act 2013. As I stated in my press release, the main considerations for the extension relate to workforce planning and impact on services. This Estimate, involving a net provision of €370 million, represents a decrease of €14.8 million or 4% on the 2014 net Estimate.
The sub-committee has been supplied with a detailed briefing by my Department’s officials on the various Votes in the Public Expenditure and Reform group, including those for the sub-offices of the Department. The Vote for the Office of Public Works is handled separately by the sub-committee.
I thank the Chairman and members for their attention. I commend the Estimates and am happy to answer any questions which may arise.
