COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 30 Mar 2006

Minister for Finance Minutes: Discussion.

Chairman

This is an unusual meeting because we have no witnesses. As members are aware, the Comptroller and Auditor General's remit extends to all Departments and non-commercial State agencies and some local authority bodies, principally those which are indirectly elected, such as vocational education committees and enterprise boards. The matters that fall with within the remit of the Comptroller and Auditor General are also within the remit of the Committee of Public Accounts. We receive annual and value for money reports from the Comptroller and Auditor General, followed by which the committee invites witnesses to discuss the issues in public. When our discussions are complete, we make findings and recommendations based on the reports from the Comptroller and Auditor General and evidence from witnesses. We occasionally hold press conferences, including one which will take place today at 3 p.m., at which we present our findings.

In my view, members of the public believe the Committee of Public Accounts is successful in holding public servants to account for the spending of the taxpayer's money. I am sometimes asked about what happens after we present our findings and it has been suggested that nobody takes responsibility after the issues are aired in public. However, the reports we publish are also sent to the Department of Finance which, in what is called the finance minute, is obliged to accept or reject our recommendations and to comment on them. We have a number of finance minutes to discuss. The first reports on the work of the Revenue Commissioners, the National Treasury Management Agency and the Department of Finance. A second minute was returned during the week and responds to the committee's report based on Deputy Rabbitte's recommendation on how to handle the national finances. We will discuss those two today. We have a third minute, on our 2001 report, which is extensive. There are 50 pages of response from the Department of Finance and although we will not discuss that today, we have decided to publish it today and it will be available on the website. We have three sets of finance minutes, two of which we will discuss today. In the past these would normally have been discussed in private session. However because of the lack of public awareness on how we close the circle and get effective action from our discussions here, I decided it would be better to discuss them in public session. This will help public awareness of how the Department of Finance deals with the recommendations of the committee. The first minute is Office of the Revenue Commissioners — Vote 9, chapters 2.1 to 2.6 and 2.10. I ask Mr. Purcell to introduce this and then we will go through it.

Mr. John Purcell

As the Chairman stated, the minute of the Minister for Finance represents the final stage in the public accountability process, which starts when the audits are undertaken in the bodies concerned. The minute is the formal reply to the committee's report and is prepared by the Department of Finance in consultation with the relevant Departments and agencies. In general this minute is positive in that the committee's recommendations already have been, or are in the course of being, acted on. On the Revenue side the recommendations include items such as supporting the Revenue's approach in the special investigations that are ongoing. They talk about systematic checks on non-residency, the need for random audits, targeting high-risk areas and exhorting the Revenue Commissioners to be more proactive in their prosecution activities for serious tax crimes. On the Department of Finance, the committee's concern about the lack of analysis in monitoring tax schemes has been addressed by the Minister for Finance in budget 2006. Many of these have been costed for the first time and as a result are in the course of being terminated. The report refers to the cost of tribunals. Members will see from the minute that the Department of Finance points to the advent of commissions of investigation, which offers a potential alternative to the tribunal mechanism. The measures proposed in the Tribunals of Inquiry Bill 2005 should help provide a framework for better control over the cost of future tribunals. On the NTMA, the committee's comments on the public private partnerships have been taken on board. It represents strong vindication of the committee's work in this sector.

Chairman

We will put it on screen section by section. Our first recommendation was: "The level of tax debt and the extent of the debt collected be managed against performance targets." The reply says they are doing that. Deputy Fleming is strong on this.

Deputy Fleming

I am happy with what is being proposed so far but I will have further comments to make as we get to the next section.

Chairman

We note that. Item two is:

Revenue should continue its investigations arising from the DIRT investigation and disclosures at tribunals. The committee would like to be kept informed on the progress of these investigations.

There is a commitment that we will, but the minute also gives a table of the up to date position on collecting moneys from tax evaders. The total is €2.091 billion, comprising tax of €871 million and penalties of €1.22 billion, and the number of cases was 31,000. That provides a good summary and there is a commitment that the Revenue will continue to inform the committee. We can mark significant progress there. Is it agreed to note that? Agreed.

Item three is: "Future Revenue audits of financial and insurance institutions should be undertaken in a manner that minimises the risk that latent tax liabilities will not be discovered." Is Mr. Purcell happy with that?

Mr. Purcell

Yes, this recommendation arose from the fact that a Revenue audit carried out in one financial institution did not detect under-declarations of DIRT liabilities. I had expressed concern about the audit approach in that case and the Revenue Commissioners went back as a result of receiving information under the voluntary disclosure scheme that hinted that there was a problem in that financial institution. During the new audit, that look-back audit, they found problems. I cannot remember but I think a few million euro of back-tax and interest were recovered from that financial institution. As a result, the Revenue has revised and updated for audit purposes the risk rating of the financial and insurance institutions. That has ensured that a more detailed audit methodology is applied to financial and insurance institutions. There was a positive outcome from that point of view.

Chairman

Is it agreed to note that? Agreed. The next item is the tax exile scheme: "Revenue should apply more systematic checks on compliance with conditions for wealthy persons claiming non-resident tax status and publish information on the numbers availing of this tax status and an estimate of the tax foregone." The first part of the reply is positive: "The Minister is informed that the first part of this recommendation is being implemented, but that for the reasons set out below it is not possible to implement the second part in full." They say:

Revenue have intensified the application of more systematic checks on compliance with conditions for wealthy persons claiming non-resident tax status. From 2004, income tax returns request data from taxpayers on their residence and domicile status. However this is not being captured electronically at present, which means that it is not practicable to compile overall statistics at this stage in relation to claims to non-residence domicile status. As regards the tax foregone, presumably this refers to income anywhere in the world which would have become liable to Irish tax had the Irish-domiciled person also been resident in Ireland. The Minister is informed by the Revenue Commissioners that it is not possible to provide an estimate of the tax foregone unless Irish-domiciled non-residents are required to file details of income arising outside Ireland on their Irish tax returns. Since such income is not subject to Irish tax, it is not clear that this information could reasonably be requested on an Irish tax return.

Mr. Purcell

Deputy Fleming is anxious to speak on this.

Deputy Fleming

This is unsatisfactory. I do not know what procedure the committee will use as it is the first time we have considered the minutes of a Minister in public session like this. This is wishy-washy, does not deal with the issue and allows the existing regime to continue. I am not satisfied the committee has received a satisfactory response to this issue. Perhaps we will have to return to this. Several aspects are unsatisfactory. They say the information on 2004 tax returns is not collected electronically and it is not practical to compile statistics. That is not good enough. They said the same about the various tax reliefs a year ago and they did it. All it takes is a willingness to do it. They say it is not clear that information on tax foregone for Irish people could be reasonably captured where a person does not fill in a tax form in Ireland. We pointed out that the information was not being gathered but the Minister's response was to agree, which is not adequate. We require an active response. There is a significant gap in the system because all people have to do to avoid inquiries is tick a box on the tax return to say they are non-resident. There must be a more systematic examination of all high wealth individuals dealt with by Revenue's special unit, incorporating inquiries into how many days each spends in the country. It can be done on a self assessment basis because most of these people are busy and keep detailed diaries. Their staff members know where they are at a given time and the information should be easy to compile. The response we have heard today is not sufficient.

Chairman

There are several ways the committee can deal with this. First, we can write to the Department of Finance for further information and advise it that our concerns have not been adequately addressed. Second, we can write directly to the chairman of the Revenue Commissioners and put him on notice that we will raise the issue the next time the Revenue Commissioners come before the committee. Third, we can gather a portfolio of issues for the day the Secretary General of the Department of Finance attends the meeting and deal with the major points on that day. Would it be more appropriate to channel correspondence through the Department of Finance or directly to the Revenue Commissioners?

Mr. Purcell

There is no standard procedure for such a matter. That the committee is meeting in open session specifically on the minute of the Minister for Finance means there are no set rules. Some years ago the minute would have been considered by the committee but only when it was examining the following year's accounts. If the Committee of Public Accounts was not satisfied with the Minister's reply it would refer to the matter in its later reports but there is no need for the committee to adhere to that procedure because time and the openness of the process has overtaken it.

One way to deal with it is to put the chairman of the Revenue Commissioners on notice that the committee is unhappy and that his reply does not meet its concerns. The matter could then be explored further when the chairman next comes before the committee, if the committee is willing to wait that long. That would depend on the volume of issues arising out of this and other reports and may form the centrepiece of a future public meeting, which could take place within a month or six weeks.

Deputy Fleming

To bring this matter to a conclusion, I suggest we channel our queries through the Department of Finance because the Revenue Commissioners have said it is not possible to provide an estimate of tax forgone unless Irish-domiciled non-residents are required to file details. Clearly the legislation does not require these details to be filed, meaning there is nothing Revenue can do. It requires a legislative response through the Department of Finance.

Chairman

Would the Deputy like a letter to be sent from the committee secretariat along the lines of his first intervention?

Deputy Fleming

Yes, to the Department of Finance.

Chairman

As part of our work programme, the Department of Finance, represented by Mr. Considine, will come before the committee on 11 May. We should have received a reply to the correspondence by then and Deputy Fleming can raise the issue at the meeting.

Deputy Fleming

Fine.

Chairman

We will note that. The next item is the recommendation that random audits be factored into the Revenue audit strategy. The committee supports the decision to revert to a purely random basis for that element of the audit programme for 2004. I believe the Revenue Commissioners have taken up the recommendation and adopted the practice. Is that borne out in the 2005 and 2006 inquiries into Revenue?

Mr. Purcell

Yes. I have a letter dated 16 March to the clerk of the committee from the chairman of the Revenue Commissioners. He states that the last tranche of audits under the random audit programme for 2005 is near finalisation and an analysis is already well under way of those audits completed. It is expected that a full analysis will be ready in April and he will revert to the committee when the information becomes available. It is clear that the programme of random audits, as indicated at this committee by the chairman of the Revenue Commissioners, has been undertaken and will, after analysis, be used to extrapolate an indicative level of compliance, including the extent to which taxpayers do not declare all their liabilities. I know Deputy Curran was animated by this issue, as I was. It seems the information will finally be available to inform the committee's deliberations.

Deputy Curran

I am happy with the response.

Chairman

We shall note it. The next item is the recommendation that the overall estimate of the scale of undeclared tax liabilities should be derived from the results of a representative sample of random audits. This arose from our discussions on estimates we receive of uncollected tax. We do not know whether they are informed estimates or shots in the dark. Given a sufficient quantum of random audits it should be possible to do the necessary arithmetic from which a more accurate estimate of the outstanding tax liability can be derived. The Revenue Commissioners have accepted it in principle but have attached some conditions. Can Mr. Purcell clarify?

Mr. Purcell

Yes. The Revenue Commissioners are wise to have reservations at this stage. We are seeking an indicative level of liabilities not declared. From memory they intend to conduct 400 purely random audits, which would cover the whole range of a taxpayer's activities. We will need to wait a few years to discern a pattern and iron out any kinks that might arise as a result of detailed analysis of the findings. We must be careful because even a statistically valid extrapolation could yield a potentially emotive figure. We should strive for ranges for the estimation of liabilities which are not declared.

Deputy Curran

I agree with Mr. Purcell. The next time Revenue comes before the committee we will have some information from the purely random audits and will have the historical data from their targeted random audits. At that stage it would be interesting to learn from them how they intend to roll out a more effective programme to ascertain tax that is not declared. We are moving in the right direction.

Chairman

Is it noted? Agreed. The next item is the recommendation that Revenue increase the number of cases brought forward for prosecution of serious tax offences to demonstrate its determination to deal with tax evasion. This has been raised several times by several committee members. Parallels have been drawn with social welfare fraud where the incidence of prosecution is significantly higher. The question is regularly asked whether there is a softly, softly approach to prosecuting serious tax evaders. The Revenue Commissioners have responded to the effect that the recommendation has been accepted. Part of the restructuring programme carried out in Revenue provided for the establishment of a specialised investigations and prosecutions division. One of the primary objectives of this new division is to increase the number of prosecutions for serious tax offences. That appears to be a very specific and fair response to the concerns of the committee, which have been expressed over a number of years. We hope this section will now be effective.

Deputy Curran

The committee will be able to monitor the outcome year on year.

Chairman

Is it agreed to note this? Agreed.

The Revenue prosecution strategy regarding non-filers must continue to be actively managed to improve the effectiveness of its contribution to the overall compliance strategy. It is accepted in general terms. A new risk analysis system is running on a pilot basis in four districts, which facilitates the identification of cases, including non-filers where revenue is most at risk. It analyses taxpayer behaviour performance across tax heads for which the taxpayer is registered. It seems to be a specific and fair response to our recommendation.

Mr. Purcell

Non-filing is clearly less an offence than serious tax crime. Nevertheless it is very important to underpin the compliance programme and that returns are in on time in order for them to be put into the pot, in the context of audit etc. The committee's recommendation stemmed from an audit carried out on non-filers and following up on them. It considered how diligent the Revenue Commissioners were in following up at the different stages, without necessarily bringing people to court. The timeliness of warning letters etc. is an example. The Revenue Commissioners accepted that there was scope for improvement, and this is reflected in the acceptance of the committee's recommendation.

Chairman

Is it agreed to the note the item? Agreed.

The next two items pertain to the disgraceful issue with regard to fine collection, where only approximately a third of Revenue fines are actually collected. The figure was approximately30%, if I remember correctly. The first recommendation was that there should be more effective co-ordination between Revenue, the Courts Service and the Garda Síochána in the collection of fines imposed for tax offences. There has been a good response and our concerns are met with a specific piece of action in that a specific officer in each Revenue district will be appointed with responsibility for co-ordination.

The second recommendation was that Revenue should bring forward a more effective method of fine collection, and the response has merely been to state the legal position, that the Department of Justice, Equality and Law Reform holds responsibility in the matter. We knew that, but we were asking that something different be done. What is currently in place is not working. The matter is similar to the issue of tax exiles. This should be raised with the Department of Finance or perhaps the Revenue Commissioners directly. It requires a change in the law and Deputy Fleming's point is still valid.

Deputy Fleming

My main concern on that point is that valuable Garda time was being taken up collecting what were in some cases quite modest fines. Gardaí were frustrated that their time was being used to do what could easily be done by other people not involved in the crime enforcement and detection area. The response here today has copper fastened the argument that there should be a more effective methods. We are objecting to the matter being the responsibility of the courts and the Garda, and specifically that gardaí are wasting too much of their time on fine collection. This is an absolutely inadequate response. We asked them to change the procedure and they have merely returned stating the current legal position. We want a proper response and we should draw the attention of relevant people to it.

If some of these issues require legislative change, it may not be within the power of the Revenue Commissioners to do what they may believe is eminently sensible. We must go back to the source.

Chairman

We will do as the Deputy suggested with the tax exiles issue. We will write to the Minister for Finance pointing out the inadequacy of this reply and we will raise it with the Revenue Commissioners when they come before the committee. Is that agreed? Agreed.

We move to Vote 9, Revenue investigation into offshore accounts. The recommendation was that the Revenue Commissioners' initiative in meeting the relevant financial institutions should be continued. The committee would like to be kept up to date on the discussion and the likely tax gain that may arise. The recommendation is accepted.

Mr. Purcell

When the chairman of the Revenue Commissioners was before the committee, he indicated that his approach to these various investigations was to seek the co-operation of the financial institutions. In dealing with offshore accounts, he intended to replicate the approach in the follow-up to the DIRT inquiry. This was seen as having positive outcomes, which led to financial institutions writing to their customers advising them to co-operate with the Revenue Commissioners. This was seen to be an important element in the positive response which the Revenue Commissioners received from the voluntary disclosure schemes.

The committee was supporting the Revenue Commissioners, as there were other ways of doing this. An initial "softly softly" approach has proven to work so far, with inducements to non-compliant taxpayers to make proper restitution. There were advantages in that. The stick would be used in cases where the carrot had failed.

Chairman

The co-operation with the financial institutions appears to have been very fruitful. The reply to us indicated that more than 15,000 individuals made voluntary disclosures, and the total amount collected from these disclosures as of 30 September 2005 was €762.5 million. This came about as a result of co-operation and without waving any stick, and it is a large amount of money. It is a good response.

Deputy Fleming

On a point of clarification, I recall at the time one of the biggest financial institutions in the country, Irish Life and Permanent, refused point blank to do this. It publicly refused to co-operate with the initiative at the time it was mooted by the Revenue Commissioners as a result of cost, and it took the view that taxation affairs were matters between the Revenue and customers and not a matter for the institution. Did that institution come on board and co-operate with the Revenue Commissioners on this issue?

Chairman

I am not sure if their refusal pertained to the offshore accounts or the single premium insurance. I believe it was the single premium insurance.

Mr. Purcell

It was the single premium insurance.

Deputy Fleming

Fine.

Chairman

As far as that institution was involved, there was co-operation on the issue.

Deputy Fleming

I accept that.

Chairman

We will get clarification of the single premium insurance issue.

Mr. Purcell

Irish Life and Permanent, or Permanent TSB as it is now called, co-operated on this matter. I am aware of the initial reticence in co-operating on the other matter, but I am not sure if that was subsequently overcome.

Chairman

We will write to the chairman of the Revenue Commissioners and ask the question.

Deputy J. Higgins

I apologise for my late attendance as I was involved in the statements on the Irish language in the Dáil.

I have a slight concern on this matter. The collection of €762.5 million by the Revenue Commissioners through this initiative is to be commended, but one would have seen in yesterday's newspapers, for example, high-profile settlements by leading bankers with regard to tax issues. I am concerned that these so-called elite are treated with kid gloves. It is as if there is a quiet conversation where they are told they are not playing ball and asked to come clean. Some revelations are then made and the whole thing is smoothed over. On the other hand, the constituents I represent who fall foul of the Department of Social and Family Affairs will not be treated in the same way.

I am concerned that a culture will develop whereby these people feel they can continue to avoid tax unless they have the bad luck to be caught, which will only lead to a comfortable conversation with Revenue. It will be akin to a gamble for these people because if they are caught, they will pay penalties. It is akin to putting money on a horse. I would not like this committee to send the message that such behaviour is acceptable. I am sure no member of this committee would do so. The stick that ordinary people face should also be very evident for the rich elite.

Chairman

The Deputy is not correct. Before he joined us, we discussed our recommendation that Revenue prosecute serious tax evaders in the courts. In its reply, Revenue informed us that it has established a specialised investigation and prosecution division. A number of members echoed the point made by the Deputy that the manner in which social welfare fraud involving small amounts of money is treated seems to be completely out of line with the way in which tax evaders are treated.

Deputy J. Higgins

I apologise for repeating that point. I was not present at that point in the meeting. I accept that the point has been made. Will the high-profile tax evaders referred to in media reports yesterday be prosecuted?

Chairman

It appears that what was published yesterday related to settlements so that is the end of those cases. All we can do is put procedures in place to ensure that Revenue and the Department of Finance change measures we regard as inadequate so that new procedures apply to new cases. The next case will make that point very well. If anyone would like to discuss it in combination with this, he or she may do so. We frequently addressed the fact that those who aid and abet tax evasion are never touched and we were told that the law was inadequate. A new law and legal powers were provided under the Finance Act 1985 but I do not know of any prosecution for aiding and abetting tax evasion taken since then. Our recommendation, which has been accepted by Revenue, is that the new powers be used to pursue those who aid and abet tax evasion. However, the proof of the pudding is in the eating, namely, how many prosecutions Revenue has taken since it received the new powers.

Deputy Curran

The issue does not simply relate to our recommendation concerning changes made in the Finance Act. It might also include the burden of proof needed to bring successful prosecutions. It is only with the passage of time, as we explore cases which we feel should have been prosecuted, that we might become more knowledgeable. Having the legislation in place is the first step but it is now a question of seeing whether it allows for successful prosecutions. Only the passage of time will clarify this.

Deputy Boyle

I agree that it will be a litmus test in terms of future prosecutions. I suspect Revenue probably hides behind the caveat emptor excuse that many of these products might have been sold on the basis of people being told that the products might help their tax liability rather than being told bluntly that they would help them avoid tax. Perhaps the law needs to be tweaked to get rid of these nebulous grey areas which permit people to be led into purchasing products with the sole purpose of avoiding tax.

We should examine another provision of the Finance Act 2005, which related to public disclosure and involved a raising of the thresholds. Some commentators asked whether it would lead to people with lesser tax liabilities being pursued less or whether different statistics would be available for the amount collected under that second category of people who are not being named but whose tax liability is being collected by Revenue. This will tell its own story and whether the degree of tax avoidance is being carried out mainly by people who avoid paying large amounts of tax or people who avoid paying small amounts of tax. This information is important to us as a public accounts committee.

Chairman

The old publication regulation was that if the combination of tax, penalties and interest exceeded £10,000, or €12,700, the person's name and address and the amount of the settlement would be published. A recommendation was then made that this amount be increased. I understand that this committee agreed that the amount would be increased to approximately €30,000.

Deputy Fleming

I understand the amount has been increased to €30,000 in respect of new cases. Yesterday's case was an old one.

Chairman

That is correct.

Deputy Fleming

All the old cases must go through the old system.

Mr. Purcell

There is also a distinction made between those who co-operate with Revenue and those who are less co-operative. It appears that if a person co-operates with Revenue from a very early stage, regardless of the size of the amount, his or her name will not be published. It is not simply a monetary limit; it depends on the degree of co-operation shown by the person in question.

Chairman

On the face of it, Revenue has met with a specific proposal in respect of both of these issues. We should note them but be prepared to raise them when Revenue comes before us again.

Vote 6, the Department of Finance, is the next set of recommendations. The committee was concerned about the lack of transparency in tax reliefs but our recommendations have been overtaken by events. In effect, what we sought has been carried out by the Minister for Finance.

Deputy Boyle

Yes and no. The three-volume report is welcome. It costs the reliefs in a way that was not done previously. We will only discover what the first recommendation is in subsequent budgets because the 2006 budget introduced new reliefs which were not costed on any new basis. There were extensions of previous reliefs where those questions were not asked either. The jury is still out on the first recommendation in respect of the proper consideration of the value and use of tax reliefs.

Chairman

Are there any other comments? We can say that progress was made in this area and revisit it when Revenue appears before us. We can note both of those recommendations.

The next item is Votes 1, 6, 7 and 12, Department of Finance. The issue of the overall cost of tribunals was another area of concern to members, who became quite animated about it. Again, we received quite a detailed response. Our recommendation was that efforts to control the cost of tribunals be pursued by the Department of Finance and the committee be kept informed about these efforts. We received a fairly lengthy account of measures undertaken by the Department of Finance and the Government in this regard. The committee also recommended that further tribunals be required to furnish an annual report of activities and costs to the Houses of the Oireachtas, which I understand is being met in the new Bill. The committee also recommended that the Department of Finance prepare annual estimates of the contingent liabilities in respect of each tribunal. The level of uncertainty attached to the awarding of costs necessarily means that estimates must cover a range of scenarios. These three recommendations, which concern tribunals and reflect the concerns of members, will be discussed together.

Mr. Purcell

Insofar as tribunals are a fact of life, one of the proposals is to establish an alternative mechanism, namely, the commission for investigation. We have had experience of such a commission and it appears to be a more appropriate, efficient, and dare I say it, effective forum for certain questions. Inevitably, there will be issues which must be dealt with under judicial tribunals of inquiry.

The provisions in the Tribunals of Inquiry Bill 2005 certainly appear to give the Houses of the Oireachtas and taxpayer some assurance that matters are being monitored. I am not sure whether the Order for Second Stage of this Bill has been agreed yet. Progress has been rather slow in this regard. The Bill makes provision for the specific monitoring of the estimated cost and duration of tribunals of inquiry. Regardless of whether we like it or not, when people who are involved in these matters are brought before tribunals of inquiry and granted legal representation, which is a judicial decision, their costs must be met unless they are found to be unco-operative and so on. That is also a judicial decision.

The proposals on the duration, interim reporting and provisions for the Dáil re-examining whether to refine or amend terms of reference are all positive and have the potential to address the escalating costs of tribunals or tribunals that end up where we never believed they would in terms of cost and duration. I have some sympathy for Departments that try to develop contingent liabilities for these matters in light of the level of uncertainty. There could be a range of scenarios but they would be meaningless, particularly for tribunals that are of long durations.

Deputy Fleming

I hope that the Comptroller and Auditor General will not mind if I disagree with the gist of what he said. He was too much in agreement with the response from the Department of Finance, with which I am not happy. It does not deal with anything we spoke about, gives us a bit of raiméis and tells us that the Department will continue on these matters in its present mode.

We asked that tribunals should furnish annual reports of activities and costs to the Oireachtas. Every organisation should do so as standard practice. The response from the Minister is that under the new legislation, Ministers will have the power to request an interim report. That is not right — we are not looking for enabling power. We all know that once a tribunal is up and running on this provision, Ministers and the Oireachtas will be loath to interfere and ask for interim reports on costs and progress because they will be afraid that they will be accused of interfering with a tribunal in progress. The only way to deal with this matter is to do so before the tribunals start. The new arrangements mean tribunals must return within a number of months with estimates of their workloads, but I believe they should report annually on their activities and costs on the Exchequer. The Department's response does not deal with this issue.

Based on information received from the beef tribunal's expenditure, which was being paid until recently despite having concluded many years ago, and other tribunals, I believe that the various tribunals have considerable contingent liabilities on the State. I do not agree that because there are difficulties in estimating a contingent liability, the work should not be done. Every year in his annual report, when the Comptroller and Auditor General knows of an issue that cannot be quantified, he often and regularly proceeds to give an estimate of a contingent liability. We know that there are caveats and warnings and the estimate is not a final prediction but people are entitled to know the ball park figure. No attempt has been made to do so in this case.

One can complicate an issue if one does not wish to address it, but it is quite simple if one wishes to address it. All that is required of every tribunal each year is to submit the estimates of their combined costs to date for people who have been granted representation. We accept that not all applications for representation may have been granted but, if they were, we would know what the outside figure would be. No tribunal solicitor or barrister does not have a reasonable estimate of his or her time spent and cost to date. It should be submitted to the tribunal, there should be an accounting officer in the Department or wherever and the overall figure should be placed before the Oireachtas so that people can know.

This is wishy-washy and is not a response. It does not deal with any of the issues we have raised and we should take a more definite line on the matter. I do not know how the Chairman wishes to proceed on this basis but the Department's response is not adequate.

Deputy J. Higgins

It seems vague to me. Something else that bothers me is that this relates to future tribunals. The planning tribunal has been ongoing for many years and could possibly go on for many more. I do not see why there should not be an intervention to control the costs at this stage.

I wish to make it clear that I am fully in favour of bringing out the truth. I am one of the people who has called for it, saw what was happening and knew the need for the truth to come out. However, certain elements of the legal profession cannot be allowed to use the tribunal as a virtual goldmine. According to the submitted document, 68% of its overall costs are legal costs. Previously, I remarked that the tribunals were in danger of making more millionaires of senior barristers than they were of conducting investigations. I would not be surprised if developers took up law instead of land speculation upon seeing how lucrative are the tribunals. It is little wonder that the Phoenix magazine refers to the Four Courts as the four goldmines.

Why can there not be an intervention in respect of the planning tribunal? The costs are completely out of line and, by the standards of the ordinary taxpayer who is footing the bill, outrageous. I have personal experience of this. On a Wednesday morning two and a half years ago, I appeared in front of the High Court because I had been dragged there by a county council to get an injunction against me. Having the costs awarded against me, I will never forget receiving the bill. For 2.5 hours on that Wednesday morning, Fingal County Council paid a senior barrister €7,500 and his junior, who studied the senior's back for that time, €5,000. What is worse is that, only two days later, the operation was longer. My colleague, Councillor Clare Daly, and I were before the High Court for three hours and Fingal County Council paid the same barrister another €7,500 and his junior, who looked at his senior's back even more studiously, another €5,000.

For 5.5 hours, €20,000 was paid to two barristers. That is stunning and there should be an outcry, but because the taxpayer is forced to pay in the instance of the planning tribunal rather than having the costs levied on individuals, people have become accustomed to it. We should call for immediate intervention. There are scary estimates of what the costs of the tribunals will amount to. Why can there not be an intervention or change of procedure in how these senior legal eagles are remunerated?

Mr. Purcell

A major factor is that of third party legal fees. To correct the Deputy, third party legal fees are the principal element and represent 68% of the total costs of the fully completed tribunals. The people who are representing the State, the public interest and so on are being paid what seem to most of us to be exorbitant fees for their services over a long period. The new rates represent less than 45% of the maximum rates previously payable to tribunal inquiry counsel. However, the new fee structure is being applied to existing tribunals and inquiries with effect from various dates. These were set following consultation between the Attorney General and the chairperson of each tribunal or inquiry. I was not privy to the negotiations but I presume certain contractual arrangements exist. It might be worth discovering what legal obstacles, if any, exist to applying the new fee structure from an earlier date.

I agree with Deputy Fleming's point concerning tribunal fees. We should seek an approximate figure with caveats if possible. In some cases it might be possible to do so as a tribunal is nearing its end. Costs are returned annually and this is recorded in the notes of the appropriation accounts but this shows what has been paid rather than liability up to that point. I have commented on the need to estimate these sums since the beef tribunal.

Perhaps the State should adopt a different policy on this matter and one option would be for the State to employ barristers and solicitors rather than contracting them. The argument against a State service is that the people who are the subject of the tribunal can hire the best legal advice and the State should also hire the best lawyers to establish the truth. The salaries the State would pay to an established cadre of tribunal barristers employed solely by the State would not attract the same calibre of person as the lawyers hired by those appearing before the tribunal. One can do very little to supply a quick fix once one is contracting these services from the legal profession.

Chairman

It is the consensus of the committee to raise the issue with the Minister for Finance. Specifically, we will issue a letter emphasising the need for an annual report and the committee's desire for a better attempt to establish contingent liability. As suggested by Deputy Fleming, there should be an obligation on legal teams to file an estimate of costs on an annual basis, without prejudice to the subsequent award of costs. Does that meet Deputy Fleming's approval?

Deputy Fleming

Yes.

Deputy J. Higgins

We should seek a more detailed breakdown rather than total figures. No one will suggest that the State or a Government is trying to curtail a tribunal if it is rigorous in demanding costs. If these people are being paid millions of euro, we should see a breakdown of the hours they put in, the number of days the tribunal sat and the number of hours the legal teams work from home. The media criticises Deputies because of the number of days the Dáil sits so why should others not receive the same scrutiny? Deputies and others should be called to account for what exactly they do to receive taxpayers' money.

Chairman

We will note the following paragraphs. I refer to Chapter 13.1, concerning the National Treasury Management Agency. Our first recommendation was that PPPs should only be used where there is a demonstrable economic benefit in doing so. The balance sheet treatment of the PPPs should never be the deciding factor. Also, the National Pension Reserve Fund should be more proactive in exploring innovative ways of using its funds for PPPs.

Mr. Purcell

The tone of some of the exchanges with witnesses suggested that PPPs would not be considered unless they did not impact on the bottom line in deciding the State's debt for European stability pact purposes and EUROSTAT purposes. That was put forward as a reason for pursuing PPPs. Certain clarifications were provided on this as well as a new interpretation on sharing risk, what should be considered and what could be discounted. This seemed to be somewhat unhealthy as these should not be considerations when assessing PPPs. The committee was strong in its view that there must be demonstrable value for money, in the broadest sense of that term, if one undertakes a PPP. That is apposite because PPPs can be appropriate in some cases but are not a panacea, particularly from a value for money point of view. It is reassuring that the Minister has made clear that value for money criteria must be tested at various stages in the procurement process before deciding on the PPP option.

Regarding the National Pension Reserve Fund, recent evidence shows it has not been very successful in investing in PPPs. A possible conflict of interest was uncovered in a project in which they had considered investing. The chairman of the board stated the National Pension Reserve Fund has a mandate to maximise the return for the fund and that while it may seek to achieve other objectives, such as investment in capital projects, it will only invest where it sees it will get a good return. Given the mandate, that is reasonable.

Chairman

The points made have been fairly met. Much progress has been made on new guidelines for PPPs since we made these recommendations. We can note both paragraphs. The final paragraph suggests monthly reports of savings achieved in servicing the national debt should be provided by the NTMA as an input to the Department of Finance monthly statements on the state of public finances.

Deputy Fleming

If I am reading it correctly our proposal has been rejected. Our report suggested monthly savings be achieved on the servicing of the national debt rather than the annual farce at 4 p.m. on 31 December. Projections up to that date suggest a deficit or surplus on the current account and then the NTMA opens its top drawer and announces it has savings of €500 million on servicing the national debt. It claims it has not known about these savings up to that point. The Minister appears to respond by stating he will publish a profile for debt service expenditure for the year, which will be published at the end of January. Will the Chairman explain——

Chairman

If I may interrupt the Deputy——

Deputy Fleming

Please.

Chairman

This issue is dealt with in greater detail on pages 41 and 42 of the 50 page minute we received during the week, which is in the correspondence we decided to publish. I will ask that those pages are put on screen for members because they contain a better response from the Department of Finance.

Deputy Fleming

I am happy to hear the Department has a better response.

Chairman

To give the Deputy time to consider it, rather than dealing with it now we will defer this final recommendation to the day on which we discuss the full report and take it again.

Deputy Fleming

I am happy with that.

Chairman

If Deputy Fleming wants to have a quick look on the screen——

Deputy Fleming

No, we can deal with it when we come to the full report.

Chairman

We will defer. That is the matter dealt with subject to correspondence.

Deputy Boyle

We did not make recommendations on one aspect of that final chapter, namely, the State Claims Agency. Will we be able to ask questions on it in the future? I am aware it was before the committee the week following publication. I am concerned about what has transpired since and what it has been asked to do in a particular case. I see its role as reclaiming costs wherever possible when instructed by the State to do so. Regarding the case in the media at present, a judicial decision on costs has been made and there does not seem to be a role for political input. Therefore, it has been put on the State Claims Agency to decide whether clemency should be given or a public interest defence should be applied on the matter of whether costs should be recovered. I do not see that as the State claims agency's role. That decision should be made by either the judicial process or central Government. We should investigate whether this committee should comment on it.

Chairman

My view is that the judicial process awarded the costs against the plaintiff and it is a matter in the first instance for the State Claims Agency as to whether it will move to recover its costs. The indication seems to be that it will not. Were it to move to recover its costs, it would then be a matter for the parent Department, the Minister and the Government to intervene.

Deputy Boyle

Is that not an Irish solution?

Chairman

I do not think so. If a national claims agency has been established to deal with claims against the State, and it is assured that it is independent in the exercise of its function and it will not be interfered with politically in making settlements, it follows that the matter must be left to it. The representatives of the State claims agency who came before the committee seemed to be eminently sensible people and I would be surprised if they go for costs. If they do so, the Government has a policy function to intervene to protect the plaintiff, who is in an extremely invidious position and who cannot afford the costs. This matter must follow a sequence.

Deputy Boyle

As far as I am concerned, it is about public interest. This is a particular case but this issue will arise in future cases where costs are made in a judicial sense. Who determines a public interest involvement as to whether those costs are pursued? That is not the role of the State Claims Agency.

Chairman

Precedents have been set, particularly in Supreme Court constitutional cases, where the court decides a public interest exists and does not seek costs. Does that apply in damages cases? Perhaps Mr. Purcell can assist us.

Mr. Purcell

My understanding of the position is that which was outlined by the Chairman.

Deputy Fleming

There might be an avenue other than through this report. I am sure we will deal with the State Claims Agency when it is before the committee again.

Chairman

We have concluded our discussion on this minute. We have decided to write to the Minister for Finance to state that the reply is inadequate in certain areas. We have other issues to raise with the chairman of the Revenue Commissioners when he comes before the committee, namely, the systematic check-up on people claiming non-residence tax status and fine collection.

We will also correspond with the Department of Finance to reflect the views expressed by the committee today on tribunals, specifically to request the Minister for Finance for an annual report on the cost of tribunals, that legal teams be required to file estimates of their costs, based on which a better attempt could be made to calculate contingent liability. We also want a more detailed breakdown of legal costs and what the amounts of money apply to in terms of day's or hour's work. We will give the clerk of the committee the usual editorial discretion to tidy up the letter. Do members wish to see the drafts before they are submitted?

Deputy Fleming

No.

I wish to make a minor point. The non-residency issue should be raised with the Department of Finance as well as with the Revenue Commissioners because it may involve legislation as opposed to administration.

Chairman

The Department of Finance will be also included.

We will now move to the second minute, arising from the report on proposals for the alteration in the way Estimates for expenditure are considered by Dáil Éireann, based on Deputy Rabbitte's report. In general terms, progress is being made and the Minister for Finance has responded and met a number of the committee's concerns, with one specific exception. The response is completely at variance with the recommendation of the committee that responsibility for the audit of local government accounts should be transferred to the office of the Comptroller and Auditor General or to a national audit office and removed from the Department of the Environment, Heritage and Local Government auditors.

We will examine the document in detail. The first issue is the level of service data in the Estimates. The Committee of Public Accounts agreed that the Estimates volumes and budget day documentation should contain information on existing levels of service and their full cost. The reply states this is contained in the material now published but that the Economic Review and Outlook document will be removed from the list of documents published on budget day. It will be published in advance and will contain this information. Does Mr. Purcell agree that is what is stated?

Mr. Purcell

Yes. It is a different way of tackling the problem. The minute signals general agreement that better information should be available to allow the Oireachtas to examine the Estimates and the expenditure proposals contained therein in a meaningful way. The Minister differs from the committee on how best matters can be improved.

As the Chairman stated, the Minister's proposal announced in budget 2006 involves revising the Economic Review and Outlook document and using the information from the Department's annual output based statements, which will come to the fore in a year's time, to assess the impact of spending proposals implicit in the Department's annual estimates from 2007 onwards. It recognises this has been a problem.

Deputy Deasy

I have a query on the second paragraph, that current arrangements for Oireachtas scrutiny and approval for taxation expenditure comply with the Constitution and that no change is required in legal grounds. Did we query the legal situation?

Mr. Purcell

This arose from work carried out by Deputy Rabbitte on the basis of legal advice he received that legal issues were raised regarding the passing of the Finance Bill. It is extremely technical. The committee asked that these concerns be examined by the Minister, who replied that having received advice from the Attorney General, there is a solid legal and constitutional basis for the current arrangements. The origin of this was research work carried out by Deputy Rabbitte and included as an appendix to his report to the committee.

Chairman

Is that on the basis that the Government as the Executive makes the proposals but the Dáil must vote the moneys before anything can be done?

There is a question overspending money in the first half of the year until the Estimates are debated and approved by the House. The spending authority is provided retrospectively by the Dáil, so there is an issue here. However, in this instance we are told advice was received from the Attorney General to the effect that what has happened in the past has a sound legal and constitutional basis and will continue to do so. We have to take it as given now but it can be raised again if necessary. We will note the replies to both recommendations.

Deputy Rabbitte's report on the timing of the budget cycle and budget day, which was endorsed by the committee, recommended commencing the Estimates programme in January and concluding it by the summer, so that the budget would effectively be in September. The Estimates could then be fully discussed between September and Christmas. Thus, no money would be spent without being passed by the Dáil in the calendar year prior to the actual expenditure. The committee members have copies of the reply. Does Mr. Purcell care to comment?

Mr. Purcell

The Minister's position is based on the fact that he considers he needs the most up-to-date assessment of the taxation and other budgetary trends emerging in the year to date. If that information is obtained very early in the year, it will not be the most current available. However, he has said that he sees some merit in merging the Estimates process with the budget process. He has already announced that he is prepared to consider that. The Minister reckons that when things bed down with regard to the revised economic review and outlook and the statements of annual outputs, to which I referred, that would lay the ground work for such an approach. Progress is being made.

The Minister is attempting to address the problem of timing. He is adopting a different approach to the issue which may have the desired effect but it is up to the committee to decide if his approach will meet its concerns. The other option is to wait and see if it does so and then to revert to the Minister if it does not.

Chairman

It seems to me that the Minister agrees with the analysis of the committee that there is a problem and its assessment of the nature of that problem. He has a different approach to how it should be resolved. In general terms, however, he goes quite a distance along the road we travelled. So far, his response is reasonable and we will see how it works out.

Deputy Boyle

The committee's report highlighted the fact that Estimates are not receiving sufficient scrutiny, even at committee level in the House. A secondary problem is that because of the failure to merge the Estimates and the budgetary process in the House, we receive a plethora of Supplementary Estimates which receive almost no consideration, either in the House or at committee level. As a committee, we should make an even stronger recommendation that part of this process should be to limit as much as possible the use of supplementary Estimates.

Chairman

That is right. In fact, the next item, No. 3, crosses into that territory. We will note items 1 and 2.

The next item is a recommendation that the role of the Select Committee on Finance and the Public Service should be enhanced in order that it would scrutinise the Estimates of all Departments. The response effectively says that there will be a significant revamp of the presentation to the Oireachtas from 2007 onwards to ensure a more meaningful presentation of the annual Estimates and associated output information. The individual select committees will first examine these elements. Then a role is envisaged for the Select Committee on Finance and the Public Service to co-ordinate the preparation of a report to the Dáil for its deliberations.

On the question of research and resources, the reply suggests that is a matter for the Houses of the Oireachtas Commission. It recommends that the issue be taken up with the commission, which is independent in the exercise of its function, which is a reasonable response.

Deputy Deasy

The Minister says it is a matter for the Houses of the Oireachtas Commission. He is essentially saying that he could pass legislation and fund the proposal but has no plans to do so. The first part of the reply refers to better consultation. The idea of independently scrutinising the Estimates is disregarded in the response.

Chairman

Some progress has been signalled, but we are not yet sure how much.

Deputy Deasy

Perhaps we would be have been better off at the beginning to take the route suggested by the Minister and approach the Houses of the Oireachtas Commission to determine if there is an appetite for an internal independent assessment of the Estimates. There is no appetite for developing policies, programmes and projects and we cannot get into that ground. Obviously the Government is not prepared to entertain the core of what we were proposing. Should we raise the matter with the Houses of the Oireachtas Commission?

Chairman

We should. There is an appetite on a cross-party basis for strengthening the committees. If this proposal strengthens the work of individual committees in examining their departmental Estimate and also strengthens the Committee on Finance and the Public Service, that will have cross-party support. Very often what happens at a committee is decided by the members and Deputies ought to exercise the full freedom available to them.

The changes are welcome. They may not fully meet our recommendations but one would have to say that progress is being made. How does Mr. Purcell think this might work in practice?

Mr. Purcell

I do not know. As the Chairman and the Minister have said, the way the Houses of the Oireachtas Commission chooses to use its research function is very much a matter for it to decide. Whether the commission decides to use its research function primarily to carry out financial analysis of Estimates and spending proposals implicit in those Estimates is a matter for it to tease out itself. If it decided to use its 11 researchers for the purposes envisaged by this committee, we might well have an effective cadre of people who would be able to put together a financial analysis of proposals and alternative costings that this committee would like to see and has seen working well elsewhere.

It is hard to take issue with the contention that if the commission uses its research resources in that way, then so be it. However, it may well be that other committees of the House that are not as closely involved with the financial aspects of programmes and policies would want a bite out of the research resources. That might inhibit the level and depth of research that would be possible and that this committee considers desirable to strengthen the scrutiny of the public finances.

Chairman

We will note the response and Mr. Brian Hickey, the clerk to the committee will draft a letter to the Ceann Comhairle, as Chairman of the Houses of the Oireachtas Commission, setting out the position of this committee, as already stated in the report. The clerk will supply the draft letter to committee members in two weeks' time for their consideration, before forwarding it to the commission.

Deputy Deasy

Essentially, we are going down the road of contacting the Houses of the Oireachtas Commission directly.

Chairman

We have already sent the report to the commission with a polite covering note.

Deputy Deasy

We must make a decision.

Chairman

Before we make a decision, we must prepare a draft of what we are proposing to the commission, determine if that is what we want to send and then send it on. We will return to the matter in two weeks and decide on it in private session. Is that agreed? Agreed. According to Mr. Purcell, it is clear the Minister is not prepared to provide a legislative basis to any such research or advisory unit. That will be another day's work.

On No. 4, financial accounts, the accountants among us made recommendations on the presentation of accounting material.

Mr. Purcell

With regard to this recommendation, the Minister pointed to the strengths of the current appropriation accounts and, in particular, the ease with which they can be read and understood. That is a significant advantage because there is little use in producing esoteric accounts which are only legible to accountants and not comprehensible by most Members or by the public. That strength should be retained if a new system is introduced. The Minister also noted that much of the information on financial and capital assets and liabilities is already contained in the broader notes attached to the Appropriation Accounts. However, he recognises that the format of the Appropriation Accounts can be improved and intends to review the matter in light of the forthcoming annual output based statements, which will compare the performance and outputs achieved with the forecasts made and should influence the Estimates process. The presentation of these statements will have to be considered with regard, for example, to whether they will be presented in harmony with the Appropriation Accounts or their replacements.

The Minister noted that new financial management systems have been implemented in all Departments and offices and that the information provided by those systems will dictate what can be achieved. He asked that the new systems be given a year or two in order to become fully established, after which the implications for the Appropriation Accounts and the possibility of devising a format to satisfy the concerns expressed in the committee's report can be determined.

Chairman

We will note the response. The last issue concerns our recommendation that local authority spending should be subject to scrutiny by the Comptroller and Auditor General and, consequently, fall within the remit of this committee. That recommendation has more or less been rejected out of hand. We proposed a unitary national audit authority which would examine the spending of all public moneys. Such a body would bring Ireland into line with recent developments in Scotland, Northern Ireland and Wales and the long-standing practice in New Zealand.

The opposing argument put forward by the Minister is that local government is a separate tier of government in this country, the role of which has been recognised in the Constitution, and that local authorities are accountable through the county manager system, their elected members and a cohort of auditors who report to the Department of the Environment, Heritage and Local Government. The Minister is of the opinion that the two systems of government, local and national, should be kept separate and consequently disagrees with our proposals.

Deputy McGuinness put forward a strong argument on this issue. There is such a divergence of opinion between the Minister of Finance's minute and the position of the committee as expressed by all committee members and, in particular, the Vice Chairman, that I do not think we can simply note the response.

Deputy Boyle

I share Deputy McGuinness's opinion and am disappointed with the response we received. The issue of accountability arises at local government level because the executives are appointed and citizens have no recourse to effect change or achieve value for money. It is completely different from central Government in that respect because the Executive of the latter is appointed through elections and is made accountable for the allocation of money. The estimates system in local authorities involves elected members only partially and is determined by the appointed executive. A central auditing authority would be in accordance with other jurisdictions and should have been given more consideration.

I do not accept the argument on the constitutional recognition of local government. That is a general clause in the Constitution and, while it is valuable in terms of being the first such mention, it merely obliges the Government to hold local government elections on a five yearly basis. It does not limit the ability of the Government or national bodies to hold local government to account. I am unsure as to how we can respond to this matter but, as a committee, we should continue to argue our position and seek to persuade the Minister on it.

Chairman

I suggest that for the purpose of concluding our business today, we should note the response to No. 5 and minute our strong disagreement with the response.

Deputy Curran

Given that a number of members who are not present have specific interest in this matter, I suggest that the points raised should be circulated to the committee.

Chairman

We should note the response for the purpose of clearing the minute, while minuting our strong disagreement. By minuting the disagreement, Deputy McGuinness and others who are not present could debate the matter next week arising from the minutes. We will pencil in time next week for discussion of the minutes and, specifically, this matter, while at the same time considering whether this should be the issue on which we meet with the Secretary General at the Department of Finance, Mr. Tom Considine, to hold a full debate on our respective views. As the finance Vote is never particularly heavy and is on our work programme for 11 May, it may be possible to hold such a debate when the Secretary General and his officials come before us on that date. We do not have to take that decision now but can proceed by minuting our disagreement and wait until we have heard the views of members. Is that agreed? Agreed.

We will note both minutes from the Department of Finance. If members consider the minutes mechanism is not strong enough, they should include that on the agenda for the next meeting. There is no further business.

Our next meeting, scheduled for Thursday, 6 April 2006, will deal with the 2004 Annual Report of the Comptroller and Auditor General and Appropriation Accounts — Department of Agriculture and Food: Chapter 12.1, Damages for Storage of BSE Tallow; and Chapter 12.2, National Beef Assurance Scheme.

The committee adjourned at 1.50 p.m. until 11.00 a.m. on Thursday, 6 April 2006.