I welcome the Minister, the Minister of State and their officials.
Public Service Reform Plan: Discussion
I thank the Chairman for responding so quickly to my letter offering the committee an opportunity to be brought up to speed on the Government's public service reform plan, one of the most important jobs of work the Government is undertaking. The last time I attended the committee I stated no one had a monopoly of good ideas. Traditionally, I have been a strong supporter of the Oireachtas being fully involved in actions, particularly on the reform side. I value members' opinions and advice on what we must do.
I am joined by the Minister of State, Deputy Brian Hayes, who works closely with me on implementation of the plan. The committee knows the Secretary General, Mr. Robert Watt, and the assistant secretary, Mr. Paul Reid, whom we have recruited to drive the dedicated reform office. We have just come from a Cabinet sub-committee meeting at which the sectoral plans driving the reform agenda were considered. Last month we published a statement on the implementation of the reform plan, a copy of which I forwarded to all of the committee's members for reading. The statement set out the significant progress made in the first ten months of the plan. I thank the staff of my Department, as well as those of all other Departments, for embracing the reform agenda.
It is fair to say the Government has embarked on the most ambitious and comprehensive public service reform programme in the history of the State. No previous Government has taken on anything of this scale and breadth. Our task is considerable. However, given the situation the Government inherited, comprehensive reform of the public service is not an option. It is an essential part of the strategic response to our economic challenges. This was the rationale agreed to by both parties in government for establishing a dedicated Department of Public Expenditure and Reform.
Before I get into the detail of public service reform, it is important to recall briefly the progress made in achieving our fiscal targets. In total, budgetary adjustments designed to save or yield approximately €25 billion have been made. This is an extraordinary burden on the people. As the committee is aware, two thirds of these adjustments have been on the expenditure side. It is also important to recall that we have negotiated substantial reductions in the cost of our international programme of assistance to the value of approximately €10 billion. Last year's underlying central government deficit was 9.4% of GDP, a healthy improvement on the underlying deficit recorded in 2010 and well within the 10.6% limit set under the EU-IMF programme. The deficit limit we have set for this year is 8.6% of GDP, or approximately €13.5 billion. We must incrementally reduce the deficit to below 3% by 2015. We are determined as a Government to do this.
Since 2008, overall gross departmental expenditure has reduced by €6.5 billion, despite the pressures on public services imposed by the downturn. We are committed to making significant further reductions during the next three years. It is a difficult circle to square - we have reduced amounts of money and numbers of public servants and have significantly increased demands.
As set out in the comprehensive review of expenditure report last year, a total expenditure reduction of €2.2 billion is envisaged for this year, of which €1.45 billion represents current expenditure and €750 million capital expenditure. The Exchequer pay bill has reduced by 17.7% between 2009 and 2012, from €17.5 billion gross to €14.4 billion, including the pension-related deduction. The aim is to reduce the total cost of the Exchequer pay bill by €3.8 billion in the period from 2009, when it peaked, to 2015. To put it another way, the aim is to reduce the public pay bill by 20%, which is a daunting challenge.
In discussing the pay bill we should, of course, recall that those working in the public service have already had two pay reductions, totalling an average of 14%, by way of the pension-related deduction and direct salary cuts. Salaries at the highest levels have been reduced by up to 30% and capped in the Civil Service at €200,000. We have also reduced the salaries of new entrants to the public service by 10%. Public service pensions have been reduced, saving more than €100 million annually. Legislation for a new single public service pension scheme has been enacted this year. Public service staff numbers have been reduced by 28,000 from a peak of 320,000 to 292,000.
Notwithstanding the progress made, the deficit in the public finances remains large. To this end, the Government has begun working on the detailed measures underpinning next year's budget which will be announced on 5 December. We must also be conscious of our obligations to reduce public spending in a way that is fair, protects those who rely on public services, supports employment and enterprise and takes a more strategic view to position ourselves for economic and social recovery as a nation. In terms of public services, it is clear that we must work harder and more flexibly than ever before. In other words, we must get more for less.
With a backdrop of ongoing significant reductions in public expenditure and numbers, the Government's ambitious public service reform plan was published last November.
I have set out the five commitments for change, which are placing customer service at the core of everything that we do; maximising new and innovative technologies; reducing our costs to drive better value; leading, organising and working in different ways; and having a strong focus on implementation and delivery, which was one of the failures of previous reform agendas.
Since then, effective structures to implement the reform plan have been put in place within my Department and in other Departments, offices and sectors of State. The Cabinet committee on public service reform, which met earlier this morning, continues to drive the reform agenda and holds senior management to account for the specific timelines in the plan. We have also put in place a strong governance model and brought in the necessary skills where most needed. On 6 September, over nine months into the implementation process, we published a report on the progress, and I will provide some of the examples.
We are proceeding with a radical reform of public procurement, and that is being led by my colleague, the Minister of State, Deputy Brian Hayes. An external review estimates there could be annual savings in the range of €250 million to €600 million after three years. This will involve a new national procurement office overseeing the integration of procurement policy, strategy and operations; greater aggregation of purchasing; better spend analytics; and many other actions to transform our procurement model. We are currently in the process of recruiting, through an open competition, a new chief procurement officer to lead this body, which will be located in my Department.
In April, we published the e-Government strategy, which builds on Ireland's strong recent performance in this area and is borne out by a number of international benchmarks. We have also published a cloud computing strategy and have set out plans for significant further data centre consolidation. With such initiatives, we are among the first half dozen countries in the world to have specific agendas in those areas. As part of a wider shared services strategy, which I mentioned to the committee previously, we approved the establishment of a human resource shared service centre for the Civil Service. It is estimated that this will reduce the human resources headcount by 17% and costs by 26%, with annual net savings of €12.5 million. The idea is to migrate all the human resources management centres, of which there are approximately 40, into a single centre, which will be up and running next year.
We have accelerated our plan for a pensions administration shared service and will integrate this with the human resources shared service. We are also developing a business case for a payroll shared service, which will take in all the points of payment in the Civil Service in the first instance and the public service generally. There will also be a banking and financial management shared service.
These are all Civil Service projects and each of the main sectors - health, education, justice and local government - are now finalising their own shared services plans. We got an update on that today. In July, we agreed a range of actions aimed at achieving a focused and integrated approach to external service delivery of non-core processes. A shortlist of potential major projects for priority implementation is being prepared and plans are being developed by the four main sectors. We are also proposing new services across the public service which will first be tested for external service delivery before any approval for a new service is granted.
We will shortly launch the "Ireland Stat" website, which the Minister of State, Deputy Hayes, will describe in greater detail. We have introduced a range of expenditure reforms to change the processes involved in allocating and assessing public expenditure to improve transparency and decision making. The agreed standardisation of annual leave and the standardisation of paid sick leave will assist the move to a more integrated public service by having the same cap on leave allowances for different public service employment groups. We have talked about these issues for decades but we have done them this year. Specifically, the major reform of sick leave for the public service will realise productivity and performance gains and reduce costs. For most employees, the new arrangements will mean that the amount of paid sick leave will be halved.
The senior public service has been established to promote a more integrated public service and even the Oireachtas is finding how that works as managers move across the public service. Significant reforms to the performance management and development system in the Civil Service have been agreed and significant progress is being made on the ambitious programme of political and legislative reform. Perhaps there will be another opportunity to speak about that. This takes in the expansion of the Freedom of Information Act, the protected disclosure in the public interest Bill to protect whistleblowers and the enactment of the Ombudsman (Amendment) Bill currently before the Seanad. Additionally, legislative proposals will be brought to the Government to regulate lobbyists and on Oireachtas inquiries, in which I know the Chairman and the committee are deeply interested. These are just some examples of the reforms that we are driving and which are set out in the report.
Along with this comprehensive suite of cross-cutting reforms, the reform and delivery office in my Department is also working with the main sectors of health, education, local government and justice on their sectoral plans. The office has collaborated with these sectors to develop an integrated approach to reform. The main strategic reforms being driven are public service initiatives in each sector, the suite of reforms facilitated by the public service agreement - the Croke Park agreement - clear timelines and ownership of the reform agenda, and structures to drive their implementation.
The committee is aware that the Croke Park agreement is a key enabler of the public service reform plan and is playing a strong part in underpinning many of the changes we are making in the public service. There is much commentary about the agreement but it is an extraordinarily useful tool for change and most of my colleagues in Europe would give their right arm for it. Within the health sector, this year 3,500 people have moved seamlessly to fill gaps after the significant exodus of people earlier this year. We must drive it much more proactively, particularly managers on the ground. Solid progress has been made and this has been documented by the implementation body's two annual progress reports. The committee will hear from the body's chairman later.
I want to see delivery under the agreement maximised and with that in mind, the Government agreed last month that Ministers should give consideration to options for accelerating the delivery of savings and reforms under the agreement. My Department has been examining the proposals received and, together with the Taoiseach, I will meet representatives of the implementation body later this afternoon. The Government is agreed on the need to ensure that the agreement delivers on its full potential. I expect managers to be proactive and ambitious in the pursuit of change set under the agreement, and I expect unions to continue to approach the implementation of reform in a constructive and co-operative manner.
The Croke Park agreement offers an unprecedented opportunity to achieve change in an atmosphere of proven industrial relations stability, which is extremely important not only for the delivery of public services, but for the perception of Ireland externally. We must not be seen as a place with major industrial unrest and upheaval, and working together across communities is the way to achieve these reforms. As I noted, the Taoiseach and I will meet representatives of the implementation body later today, stressing the need to ramp up delivery. We will ask that the body ensures that the proposals we have advanced and which Ministers have given be reflected in the action plans now being carried through. Our focus remains squarely on maximising the potential of the current agreement to leverage further pay and non-pay savings, as well as a further reform of work practices, which are equally important.
The committee is aware that the Chairman has written to me on the issue of the recently completed review of public service allowances. There has been much commentary on the work being carried out in my Department on the review of public service allowances, which I announced as part of the Budget Statement in December 2011. In that statement I indicated that I aimed to secure additional savings by way of reductions in overtime and allowances to assist public service management in meeting their pay bill targets. Some €40 million in overtime savings has been achieved by making reduced allocations to public service organisations this year.
With regard to allowances, in all over 1,100 allowances were notified to my Department as part of the review and of these 800 business cases, some covering more than one allowance, were made to retain allowances in either their existing or an altered format. As members of the committee will be aware, I published details of all these business cases on my Department's website. In my announcement on 18 September, I gave details of the Government decision on these allowances, and details were published of a range of allowances, costing approximately €475 million annually, which would no longer be payable to new beneficiaries. In addition, a further range of allowances, costing €245 million per annum, would be subject to review and modification for new beneficiaries.
On their own and over time, those measures would produce medium term savings as new appointments are made to posts which previously benefitted from these payments. This was the first ever review of allowances paid to public servants.
I spoke about this in some detail when answering questions in the Dáil yesterday. This is the first time anybody has drilled down into allowances and the structure of pay in the public service. The complex matrix of allowances is the result of old agreements at sectoral level, previous national wage agreements and local decisions to secure service improvements. The disaggregation of this multiplicity of decisions is not and will not be simple. Despite the impression given in much media commentary, from my perspective, dealing with the overall issue of rationalising public service allowances is very much a work in progress. I said this on the day I made the announcement, but only the headline figure was heard in some instances.
Turning to the cases of existing beneficiaries, it is clear that the allowances for which, in modern eyes, the business case cannot be justified fall into two distinct categories. The first, representing the largest allowances in terms of spend, forms a significant element of the overall taxable and often pensionable remuneration of the staff involved, especially for certain groups of public servants such as gardaí, firefighters, prison officers and members of the Defence Forces, teachers in schools and certain support grades across the public service. It would neither be practical nor reasonable, as I said when I made the announcement, to attempt to take away unilaterally such a large portion of these public servants' pay, in effect applying an additional pay cut to specific groups of public servants purely on the basis of how their wages had been built over a period of years. What the review has highlighted are structural weaknesses and a lack of transparency in the way in which these groups are paid and how their pay was constructed over decades. Addressing these issues will require preparatory work and discussions involving the relevant sectoral management, my Department and the relevant staff interests. The aim will be to achieve a simplification of the way in which we pay these staff for their services and to ensure the pay regime for these groups supports efficient and cost effective public services. As I indicated privately to the Chairman, what is at issue is looking at incorporating allowances into a proper pay structure in order that as people get a grade of promotion the work practices now paid by way of allowances will be incorporated into the core pay.
The second category of allowances is made up of payments that do not form a significant element of the overall remuneration of the beneficiary. In these cases, my Department has written, as has been widely reported today, although it was done at the end of last month, to all sectors of the public service asking that, where there is no business case to pay an allowance to a new beneficiary, the sectoral management immediately engage with staff interests to secure early agreement to eliminate payment of these allowances to existing recipients. We have also asked that all allowances falling into this category be identified to my Department in terms of their priority for elimination. My Department has also indicated its views as to those that should be tackled first - the 88 referenced today, which is not an exhaustive list. It is what we put on the table, but sectors can add to it from the list published. My Department suggests the 88 allowances would be suitable for elimination. I remind members of the committee that the Croke Park agreement provides for speedy and binding third party findings on these issues.
Good progress is being made on the implementation of the public service reform plan. It is a core function of my Department and extremely wide ranging. It is a huge endeavour, involving hundreds of organisations and nearly 300,000 employees. Everyone has a part to play in the transformation of the public service. There are challenges, but the reality is that front-line services will suffer unless we continue to implement these reforms. Without meaningful and sustained reform, we will lock into the system all the costs and practices built up in the boom years, and that would be a missed opportunity. In a nutshell, I am not interested in simply top slicing public pay and embedding bad practice and inefficiencies into the system. I want to change fundamentally the way public services are delivered. Through the establishment of a dedicated reform and delivery office in my Department, we have placed an emphasis on implementation. As a public service, we must have an equal balance of policy and implementation skills to drive the reform. My challenge is to build reforms that will last not just for the duration of the current crisis but for generations to come, not to pander to particular interests or headlines. I am fully aware that the pace of change needs to be accelerated. As Minister with responsibility for expenditure, I will have to help to shape next year's budget and all the budgets to 2015 to get the deficit below 3%. I am confident that we can do this and deliver a public service of which we can all be proud. I can honestly say the committee has an important role to play in that regard.
I welcome the opportunity to appear before the committee and recognise its importance in our work.
To put it bluntly, the key task of the Government is economic survival. That means getting the country to a better position over a period of years in order that we can get the economy growing again. When both parties were elected to office, the mandate given to them was not just to clear up the economic mess we inherited and bridge the gap between expenditure and tax receipts over a period of years, it was also to seek radical reform of the public sector and specifically to decide how to deal with this. It was important that, nine months after the launch of the public sector reform plan, we put in place a review and set out what we had achieved. As the Minister said, what we are looking for is buy-in and support across the public sector in delivering on these key tasks. We have a clear plan that is headed by a special unit in the Department. There are key time lines with the names of the officials who will deliver the reform within a period of time. We have a political responsibility, as does the committee and all Members of the House, to ensure the plan is implemented.
In much of the commentary surrounding this debate there is no focus on what has been achieved. The achievements have been astonishing, given the economic collapse that occurred in this country. The number in the public sector was 320,000 some years ago and it is just over 290,000 now. It will go down to 282,000 in the next period of time. That is an extraordinary reduction in the total number of public servants. We must ensure the group that is left is organised in such a way that we secure maximum efficiencies within the public sector at a time when more people are using the health service, more children are in school and there are greater demands because of the economic collapse.
I have responsibility for four areas in the plan: shared services, public procurement, property and Ireland Stat. The Minister spoke about the reductions in human resources. To put it simply, we have approximately 860 employed to perform HR functions across government.
Human resource management.
Yes. By the time our plans are fully implemented that number will be down to approximately 640. Bringing all of the HR personnel together will yield savings of 26%; therefore, we will have reduced by one quarter the total amount of money we are spending on HR services in the public sector. It will allow us to move HR personnel to do other things because of the arrangements in place under the Croke Park agreement. That is a tangible example of what "shared services" means. We also have plans to bring forward the same principle of shared services on the pensions, pay and banking sides. We are very confident we can achieve this.
We are still spending a great deal of money on public procurement. The figure is about €9 billion for goods and services and €5 billion for construction. We must achieve much greater savings. I will be clear and blunt to the committee. We have too many involved in public procurement. This is a small country. The efficiencies should be much easier to obtain here because of our size. If we can organise the system properly, we will do so.
The first decision we have taken is to ensure we mandate the public sector to use the framework agreements that have been put in place. The Cabinet signed off on it last July. The Minister for Public Expenditure and Reform, Deputy Howlin, announced a competition for chief procurement officer. It is proposed that the chief procurement officer will bring forward an implementation plan by March 2013 to generate savings ranging from €250 million to €600 million during the next three years. These savings can be achieved by aggregating contracts, having greater framework contracts and by demanding the public sector uses the framework agreements we have negotiated. That will require much more centralised procurement, which brings its own issues but none the less we believe significant savings can be put in place.
We have 2,200 buildings across the public sector. About 60% are owned but 40% are leased. Some years ago we were spending €130 million on leasing buildings. There is no reason that in two years that figure should not be less than €100 million on an annualised basis. We are negotiating in a much more aggressive way because of the circumstances we face and because of shared services. We will be demanding that the public service will work in a collaborative way and use space better. We will put in place a new policy on the use of office space, with greater use of open plan offices in the public sector. We hope to launch Ireland Stat if not next week, then the following week. This website is aimed at explaining to people how we are doing internationally and will be very clear. It will show our outputs and expenditure levels across a whole range of matrices. I think this portal will explain how much money is being spent and what we are getting for it.
I appeal for fairness in the commentary on our situation. Much has changed. We must ensure the implementation process actually works and the change process is delivered. Many positive things have occurred. In the debate we do not get the full buy-in and support for what has occurred. While the change has occurred, much more needs to happen. We need to parcel the debate in the context of the dramatic changes that have taken place in the public sector in the past number of years.
That you. Deputies O'Donnell, Murphy, Donohoe, Nolan and Connaughton have indicated. Does anybody else wish to contribute? Deputy Fleming has indicated.
I understand the Minister's time is limited.
Yes. I ask members not to repeat questions. The Minister has 30 minutes.
I welcome the Minister, Deputy Howlin, and the Minister of State, Deputy Hayes, to this committee. Deputy Howlin states in his presentation that he has had discussions with colleagues, both ministerial and others, on the Croke Park agreement. Will he update us on his objectives for savings: the timeframe in which it will happen; what is being done to make the agreement work to its maximum limit and the progress that is being made? One does not need to reinvent the wheel, but management is very important.
The Minister also referred to the second category of allowances which are made up of payments that do not form a significant element of the overall remuneration of the beneficiary. What is the timeframe for sectoral management getting agreements in these areas?
Earlier in the week the Minister announced an additional 8,000 voluntary redundancies. What is being done to ensure that key personnel are not lost, so that we do not suffer from a brain-drain? I am conscious that we could lose intelligence built up over many year, which I value greatly.
My questions relate to the announcement to target 88 allowances. I would like to get a figure for the total value of these allowances, the breakdown by Department, the salary grades that are affected, if they are directed at existing public sector workers, and whether it is envisaged to buy out and abolish those particular allowances.
I welcome the Minister and Minister of State. I have read all of the progress reports and found them very helpful. Any initiative the Government undertakes is being sucked up underneath the umbrella of the Croke Park agreement. Let me give an example from the progress report from September which states we have progressed in relation to ordnance surveys, Revenue online and data sharing. How can we attribute such progress which the Minister would want to happen at these times to specific steps under the Croke Park agreement?
I fully welcome and acknowledge the progress that has been made in relation to the Garda roster, the consultants' roster and so on, but why has it taken so long? The negotiations on the consultant contracts went on for years. The Garda roster change-----
That was conducted by the previous Government and it took four years.
I accept the Minister's point. I believe it is the first time the Garda roster has changed in 40 years. To put it bluntly, why has it taken so long to achieve something that everybody would want to make happen?
The Minister's point, which I accept, is that 3,000 people have moved across the health service to fill jobs. Many people would say that should happen anyway. If there is a vacancy and somebody in a job is able to fill it, then the person should fill the vacancy.
The Minister has also made this point many times, and last week he criticised the slow rate of change. Who is accountable for the length of time it takes to make changes? Who is not getting paid an increment or not getting a promotion in the different sections because of the slow pace of change? I am supportive of the Croke Park agreement and it is the way to handle staff. The most decisive characteristic of the economic lives of the people who pay our wages has been involuntary change - the involuntary loss of jobs and wages. Many in the public sector are doing a great job but they labour under a voluntary agreement. I think the Minister may share my views on the rate of change. Will he comment on the factors that contribute to the slow pace of change?
I welcome the Minister, the Minister of State and the officials to the committee. I may be following on from Deputy Donohoe's point.
The plans are very ambitious, which is welcome and the Croke Park agreement is allowing for flexibility and willingness on the part of the staff. One of the issues that was raised with me early in my career as a Deputy was the lack of management, particularly in the health services. We saw how a new management structure in a Galway hospital was able to turn around the hospital using the existing budgets. What is the Minister's sense of the ability of management in the public service to deliver the plan? One can have all the plans but if one does not have the management experience to deliver them, they will not happen.
In respect of the announcement yesterday to target over 80 public service allowances, what savings will be achieved by the end of this year or into next year? Was a business case made for the payment of those allowances by the various Departments?
Considering there are 80 and the Minister has said it is not an exhaustive list, does he believe there are many more allowances in that area that can be reviewed? When will they be reviewed?
I thank the Minister for his presentation which dovetails with the discussion we had during Question Time in the Chamber yesterday. When he announced his plan in November 2011, I mentioned the appointments of eight to ten senior responsible owners in the overall delivery of each of the major ten crosscutting projects. Are they ten new staff? How many people have been employed to deliver this? The document gave the impression they were new positions. They might be old people with new jobs. It is just new titles.
It is people with new titles.
On the procurement issue I ask the Minister to outline the outside commercial experience. I would hate to think we are just growing our own internally. People have done MBAs in procurement but have never personally purchased anything beyond a car for themselves. I ask the Minister to outline the range of commercial practical experience.
My other point relates to property and is broader than just the OPW. I wish to make a constructive statement. The State property portfolio involves many agencies. OPW is responsible for many Government buildings. NAMA, a Government agency, has the biggest property portfolio in the world. IBRC, formerly Anglo Irish Bank, still has a massive property portfolio, which it is entitled to dispose of or whatever. There is something else known colloquially as the "NAMA for local authorities" - the Housing & Sustainable Communities Agency. During the boom years all the local authorities paid boom prices to buy land for housing developments in towns and on their outskirts, none of which are now proceeding. There are at least €500 million worth of almost greenfield sites being sent over to this agency through the Department of the Environment, Community and Local Government. There is nothing wrong with consolidating the ownership of those away from the approximately 40 different local authorities.
Those are four State bodies with major property portfolios. I would like to see a co-ordinated State approach to the management of all property under all State agencies. I would suggest the OPW should have ongoing talks with NAMA. We asked representatives of NAMA here before and I might have mentioned it. I want to broaden it to the local authority properties that were purchased and those owned by IBRC. The Minister should have a consolidated approach rather than four State agencies competing with each other in the property area.
The Minister has said the Government's reform programme is ambitious and revolutionary almost, but it is nothing of the sort. He has dressed up things that are housekeeping and streamlining measures and tried to pass them off as some great change. The Government has consistently protected a segment within the public and Civil Service at the very top and defended them at every turn. They are cosseted and the Government shows no sign of taking that on. The big issue is that of pay equity and fairness in the system, and the Government has failed on that.
If the Government was making any claim that there had been any kind of cultural change within the service, two top officials from the Department of Health and the HSE comprehensively gave the lie to that at the last meeting of this committee. We have a major problem with accountability, transparency, delivery and the level of pay at the very top level. I could comment longer but my time is limited.
What are the 88 allowances to which the Minister has referred? To whom are they being paid? What grades are involved? What are the savings envisaged from those 88?
I have two questions. What is the biggest challenge for the Minister in terms of the Croke Park agreement? My second question is on shared services. How is the model of shared services being applied to local authorities implementing the efficiencies?
I have one further point for the record of the House. Deputy Ross's Christian name is spelled incorrectly on his name bar.
It is "Shame" Ross. They obviously went back to the Deputy's birth certificate.
That was not an accident.
The Deputy is not untouchable.
The Deputy can hardly blame Deputy Mattie McGrath for that.
I have some questions for the Minister. Is there a copy of a standard contract for somebody entering the Civil Service? Could copies of other contracts be made available to the committee so that we can clearly understand what people have signed up to? I ask the Minister to explain the concept of a job for life and that a person cannot be fired, which is often discussed.
The assistant secretary can explain - he is on a five-year contract.
I would prefer the Minister or the Minister of State, Deputy Brian Hayes, to explain.
The Secretary General is on a seven-year contract.
I am talking about being let go for absolute incompetence, which is what we experience here on a regular basis in our meetings every Thursday. I would like to see that dealt with because once that dynamic is removed; there would be a different experience from workers throughout the service. I would like to see exactly what is contained in the contracts particularly for those on lower levels of pay in the Civil Service.
The Minister of State spoke about the 860 people involved in human resource management or with human resource qualifications. I am absolutely amazed to hear that. With the number of problems in the public service relating to human resource management, bullying and other issues, I want to know the qualifications most of those people hold in terms of how they manage. Given the qualifications that exist in the private sector then the issues relating to salaries, increments, add-on payments would not have become so embedded in the system.
I believe one of the Deputies may have touched on this already. Who is managing the change? Are there change managers running right down the service with a particular agenda to drive change and nothing else? On procurement, in my constituency a €5.9 million contract was issued. The contractor went broke and all the subcontractors were caught again. No one local could tender for it because they did not have the turnover and yet they had the ability to do the job. The same is happening with the Government's print management framework. I recently tabled a parliamentary question on the issue. A €10 million turnover is required and all the smaller enterprises need to feed into the bigger companies that are tendering. As a result they do not have the access to the tender process. The Minister of State might indicate how that is broken down.
I will.
Am I correct that there are 300 for which no business case was made?
There were 800 business cases but some of them covered a range of allowances.
They take in all the allowances - that is fine.
Mention was made of the HSE. I am not going to go back into the debate on that. It has been said that there are legacy issues over the eight health boards and the 50 agencies. Obviously that organisation needs investment in terms of financial management, technology and so on. Is there room within the budget to take a big spending agency such as that and modernise its controls and management so that its representatives do not end up in here every year talking about overspending? Is that an issue for the Department of Public Expenditure and Reform?
Are senior managers and top civil servants co-operating with the reform programme? The Minister has often pointed to the need for better engagement from them. Is that a secret code for: "Get into the programme here and let's bring about the reform that is necessary"?
I will begin-----
On the banking inquiry, if the Minister wishes.
I would be very happy to do that as well. I am preparing legislation on the capacity of inquiries generally. There are issues of objectivity with any inquiry. It is important that people are not compromised by any utterances they make in advance regardless of the issue. I believe members of this committee are very mindful of that.
A variety of issues were raised and I will be as comprehensive as I can. Deputy Donohoe asked some insightful questions.
The Croke Park agreement, as I said, is the most useful device for bringing about change, but, like any device, it is only as useful as its utilisation. We have a very complex, multi-layered and disparate public service. During my time at the Department of Health I saw that services were built in a topsy-turvy fashion, whereby voluntary services were subsumed into the main health sphere, for example, which makes reform very difficult. The most difficult challenge for us is to engage management at ground level to utilise the capacity of the Croke Park agreement to change skill mixes, rosters, working arrangements and so forth. We have been desperately pushing that agenda. There is full engagement at the top level, but it has not filtered down to every level. As I have said previously, there are some who will use the agreement as a shield in claiming they cannot do what they patently can do. We need to break through this. Deputy Derek Nolan made a point on a particular hospital where a new manager is like a new broom and has brought about significant change. We need to drive this change everywhere, but it is a daunting and difficult task.
I wish to be very direct with the committee on the task facing us. Public pay accounts for a large proportion of all that we spend, but, in relative terms, we do not have a huge public service. There are 1.8 million people working, approximately 1.5 million of whom are in the private sphere. There are now less than 300,000 in the public sphere, within which there are large groups such as gardaí, teachers and nurses. We need to motivate them because we have already taken significant money from them through a direct pay cut of 7%, on average, and up to 30% at the top levels. We have also imposed a pension levy of 7% on them. We are driving them to deliver services differently and most of them are working much harder.
On the question of allowances, as I have explained previously, this is very complex, although I know some might want to portray it as being simple. If one looks at the structure of public service pay, one sees that some allowances have been subsumed into core pay, although they are still called allowances. We must disaggregate them in order that we can determine what is considered pay and an allowance. If there is an allowance payable, we must determine what is the direct function. An allowance meets an additional cost to the individual, for example, where he or she pays the cost of travel for work purposes, or there is a premium payment for working out-of-hours or for being on-call during the night or at weekends, or where there is a definable, additional workload. That is the criterion used to evaluate the business cases submitted. In the appendix we have produced it is stated there are 180 classes of allowance for which we have determined, politically and objectively, there is not a sustainable business case. However, we could not take the bulk of them away instantly because we would be taking away a core pay element. The bulk of the money is paid in three areas - education, the Army and the Garda Síochána. If, for example, we were to take the rent allowance of €4,000 from the pocket of every garda, it would account for a large proportion of the money he or she earns. That is how his or her core pay was built. We want to make sure that is not the way he or she will be paid into the future and that we will have a different way of paying him or her.
We have identified 88 allowances that do not form such a huge part of core pay. The rule of thumb is that allowances up to the value of approximately €1,500 annually are not deemed to form a significant part of core pay and can be bought out under the Croke Park agreement. Deputies will know that there is a facility under the agreement whereby, for a payment of 150% of the annual cost of an allowance, we can buy it out. However, this must be done through agreement. As I said in September, one of the complexities is that if I decide, arbitrarily, to abolish the 180 classes of allowances that I have identified, every one of the workers affected, by right, will be able to go to the Labour Court for independent arbitration. To be blunt, that would mean the Labour Court would do nothing else for the next year and that the reform division in my Department would do very little else except prepare these cases, all in respect of a sum of €75 million. That would not be the right thing to do. I made my determination in that context and took a political hit for it. However, we want to phase out these allowances and I want to use the mechanisms of the Croke Park agreement to do it, while also reforming the way pay scales are structured, particularly in the education sector and the Garda Síochána. I have spoken in detail to the Minister for Education and Skills and the Minister for Justice and Equality about these matters.
On the issue of voluntary redundancies, the first exit package-----
Will the Minister tell us what the 88 allowances are?
I can give the Deputy that information later, although it is not an exhaustive list.
That is the number the Department has identified.
Yes, it is a list of the allowances we have identified that do not form a significant part of core pay and which can, therefore, be addressed under the existing Croke Park agreement arrangements. However, I have asked sectoral managers to add to that list and I will keep the committee informed of how that work is progressing. I do not want them all to be referred to the Labour Court, although people have that option. I am hoping to negotiate a quicker arbitration mechanism to determine these cases. If people want to use the legal mechanisms in place, they can do so, but I want to engage with the unions to try to find a quicker way of dealing with these cases.
In terms of voluntary redundancies, the exit package in February involved people making sensible decisions for themselves. Those who were coming up to retirement were given the option of having their pensions based on their pre-cut salary level and some decided to leave early. We had no control over who those people would be and, as Deputy Paschal Donohoe rightly said, we lost skilled staff we did not want to lose. The voluntary redundancy scheme for which I have Government approval involves each Minister examining his or her own Department and agencies within its remit to find areas in which there are surplus staff. There are surplus staff in many agencies. There are significant staff surpluses in the HSE on the administrative side, for example, and also in the Department of Agriculture, Food and the Marine, to name but two. We will have targeted schemes to deal with these surpluses. Staff will not be applying for redundancy and no one with a critical skill who would have to be replaced will be eligible. We can talk about this matter again in greater detail at a future date, but I am under time pressure today.
I have answered Deputy Eoghan Murphy's question on allowances, but I can provide more details for the committee, if required. I will furnish members with copies the letters sent. In fact, I will put them on the website which perhaps might be helpful to the committee.
Can the Minister give us an idea of the total amount involved?
I cannot do that. The Deputy will forgive me for not setting targets.
Can the Minister give us an indication of the figure involved for the business cases?
I know what they cost, but the amount is not large because the allowances do not apply to large categories, for example. I heard the distinguished broadcaster Ms Ingrid Miley talk about a boot allowance of €69 per year, but abolishing it will not contribute massively to the public finances. Allowances are included in a great amalgam, but they vary widely. I will endeavour to give as much detail as possible by issuing the aforementioned letters and so forth.
The question was asked as to how we could disaggregate Croke Park agreement reforms from what would have been happening in any event. The implementation body is supposed to examine the implementation of the Croke Park agreement, the framework through which the reform agenda is progressing.
Members asked why change was taking so long, which was a nice and handy political ball to present to me. We now have a Department responsible for reform, led by a Minister and a Minister of State who are determined to reform, as well as an office and a Secretary General responsible for reform, which is why things are now happening. However, the proof of the pudding will be in the eating. At the end of our five year term we want to have a transformed public service. I hope it will be accepted that there will be hiccups along the way.
Deputy Paschal Donohoe spoke about involuntary pain in the private sector, but I can assure him that there was no voluntary sign-up for a pay cut or a 7% pension levy in the public sector We must, therefore, be balanced in our approach. New jobs are still being announced and there are a lot of areas in the private sector which have taken no hit.
Part of the private sphere has fallen off a cliff, so to speak, especially the area related to construction. Everyone in the public sphere has taken a hit so there should be some balance in the dialogue.
Deputy Nolan asked a question about management and I have dealt with that. I also dealt with the allowances issue raised by Deputy Connaughton. Deputy Fleming raised another issue. I will ask Paul Reid to discuss who is driving the change and management systems, and the Minister of State, Deputy Hayes, will refer to procurement and property.
Mr. Paul Reid
A question was asked about senior responsible owners and whether they were new people. The approach we are taking to reform is rather different. We are driving reforms throughout Departments. For example, the human resource shared services must be driven across 40 public service bodies. In that case we need one accountable person and one senior responsible owner. We have assigned people who have senior responsibility to lead and drive the reform throughout 40 public service bodies. In general, the senior responsible owners are from within the system and the senior management have responsibility and accountability to drive change across the systems. We have had limited recruitment of specialist skills. We brought in one person to work centrally in the reform office on shared services. That person has global experience of implementing shared services. We supported the Department of the Environment, Community and Local Government, which has a large local government plan related to driving shared services. It is in the process of recruiting a similar person to help the Department drive that agenda. There has been limited recruitment. Overall, our governance structure is strong. We hold each Department and each of the large sectors accountable for the reforms in their area.
As the Minister said, this morning we presented to the Cabinet committee a single view of reform. We are now in a position to outline a total suite of reforms that encompass the public service reform plan, the programme for Government reform elements driven in each Department and sector and the Croke Park elements of reform that have industrial relations implications. We have an overarching reform and each of the major sectors must put in place and is putting in place the equivalent of what we have done centrally, that is, a central governance structure. Overall it is strong. It is a programme management discipline that has strengthened our approach to reform. This has probably not been traditionally a skill. We used to lean harder on policy but now we have strong, disciplined programme management and we hold Departments and sectors accountable. This morning was our fifth Cabinet committee meeting in the course of this year since we launched the plan. Overall there is a strong governance structure.
I will take the Chairman's question on print managed contracts first. It was interesting that the Chairman approached the issue from the perspective of the local business but not from the perspective of the public purse. It seems that if we are to make the savings on procurement, we must become a good deal more strategic and ensure we implement what we claim we will implement. The Chairman referred to print managed contracts. This is something the national procurement service negotiated under my Department. A total of five companies won that contract, three of which were Irish small or medium-sized enterprises and two of which were US multinationals. We put it to everyone in the Irish public sector that the framework we had negotiated on exceptional prices should be used.
One example is the savings that Dublin City Council has managed to realise as a result of a print managed contract. What is a print managed contract? A print managed contract is an alternative to the old fashioned way of having photocopiers everywhere which we own and every time they spew out paper, we pay for it. Under this method, we give a contract to a company to run printing in that aspect of the public sector. Dublin City Council had savings of 60% over a two year period by doing this. We will replicate this in every other aspect of the Irish public sector. If that means some local companies miss out, I am sorry. However, if the Chairman is telling me that he wants to extract savings on procurement as part of his role as Chairman of the Committee of Public Accounts, then this is the brave new world we are entering. Moaning and groaning about local businesses here, there and everywhere will not achieve the targets we want to achieve. The Chairman cannot have it both ways. There is a reason I am being so potentially belligerent on this point.
(Interruptions).
I am making the case to the Chairman that we need the committee's support on this matter.
Let there be no misunderstanding. I am very interested in the public purse. The Department sent out a circular which I referred to in the parliamentary question I tabled. It excludes the consideration of the smaller supplier.
The Chairman misunderstands it.
Let me finish. The Minister of State can correct me if I am wrong but the contract stipulates a €10 million turnover. The small and medium-sized enterprises buy into it. I want to see value for the public purse. If the services can be purchased for better or equal to the best tender, then so be it. That saves the public purse and that is my view on it.
The interpretation-----
I am not moaning and groaning.
I apologise.
When I moan and groan, you will know all about it.
Once the Chairman moans and groans with the facts, that is what it is all about. The circular refers to turnover but turnover is proportionate. In other words it should never be used as a reason not to grant a contract. That may occur because a local procurement officer does not know his or her business and is misinterpreting the circular in such a way.
The Minister of State should tell them that.
The Irish businesses on the framework which have won the contract and which will deliver this service at knock-down rates to the local government sector throughout the country are with it. They have shown that they can do this. Stationery is another example. A deal was won by an Irish business which is now securing costs in the local government sector that it thought unimaginable. If we are going to move to this, we need political support. We are not in the business of supplementing local employers in terms of what we can do. We are in the business of driving the best deal we can get. We are going to introduce in the public sector the same requirement that the private sector has and we make no apologies for that.
Another question was asked about shared services. There are 860 staff at the moment but we will go to 630. This is real reform, a reduction from 862 to 630. There are 320 on the transactional side and 300 on the training side. Can I be blunt? The Chairman put his finger on it.
The Minister of State is doing well so far.
We have too many managers involved in transactional aspects of human resources. In Clonskeagh we will move to an open plan office where all the human resource transactions will be dealt with in the same way as in Hewlett-Packard or any other organisation. That is the difference it will make.
Deputy Fleming spoke about property, a matter he has raised this with me in the past. We have had and continue to have discussions with NAMA to establish whether we can extract the best possible deal in terms of the utilisation of space. Along with the Minister, Deputy Howlin, I will bring a new memorandum on property to Government. Property in the public sector is like a gigantic chess game. If one moves someone, there is a gap that must be filled. Up to now, we have not had the big stick to compel a Department to move to a particular place and say "sorry for your troubles", but we will have it as a result of this memorandum, and that is important. Up to now, the OPW has been in the position of trying to cajole and persuade people but we have not had a big stick approach. The memorandum will give us that. The memorandum will also ensure we have for the first time ever a map of what we know we own throughout the country. This has not been the case in the past but the new office plan we will put in place will ensure greater and more efficient use of space. I will challenge everyone to reconsider cellular offices. Is a person entitled to a cellular office because he is a particular grade? In my view, he is not. That is something we will drive to ensure we get those efficiencies.
I was asked whether we have people from the outside in the system for procurement. Yes, we have. Recently, we took in seven buyers from the private sector who have particular knowledge in certain sectors. They are working in the national procurement service, which was under the OPW but which will move now to the Department of Public Expenditure and Reform.
It will be a stand-alone office.
It will have a new chief procurement officer to ensure that the savings are implemented.
An Accounting Officer will be accountable to the Houses.
Will the Minister of State provide clarification on one issue relating to local procurement officers? The Minister of State will be conscious that there are many old businesses employing people locally and they simply wish to know that if a contract comes up under the framework-----
If they can get a better price, can they use it? Yes.
Many of the procurement offices around the country are not aware of that. I ask the Minister to write to them-----
We will make that clear to them.
-----again and to spell it out clearly for them. Local jobs are at stake. I know this because small and medium businesses in Limerick inform me that they can go in at a lower price than the framework price but the procurement office is not aware of that.
In July, the Government made an agreement which is now published in circular form. It states that these contracts must be used or else a reason must be given as to why they are not being used. If a better price can be achieved, then I am very interested to hear that.
Clarification is required.
I am using this opportunity and I can follow it up. These decisions are not made centrally by our procurement officers; local government makes the decisions, by and large. As the Minister said, we have too many people in procurement locally making these decisions.
With no training or expertise.
In the spirit of co-operation, I ask the Minister to write to the procurement officers or to the relevant bodies and spell it out for them in straightforward language because local jobs are at stake. We are all practising politicians and the Ministers will be aware that our role is to protect jobs in our constituencies at all costs. We must get the best value for the public purse. Local small and medium enterprises are the life blood of the economy and can give the best value. However, I ask the Ministers to write again.
We said that we will write.
I made the same point, as did Deputy Fleming. Clarification is needed at local level.
Our only objective in this regard is to get the best value and if that is available locally, then that is excellent.
We are on the same page.
If I may, I will conclude on the other points. I am sorry Deputy McDonald has left the meeting. Unfortunately, she always makes the same presentation, that we do not need any of these changes and it is all a matter of cutting top pay. She regards top pay as anyone earning over €100,000 a year. I explained in some detail yesterday that the number of people in the public service - not the Civil Service - earning more than €100,000, is 1.8% of the total. Deputy Fleming had a discussion yesterday about increments. The increments involved for fewer than 600 people would be so small-----
It would be €30 million.
Does the Deputy mean to say that 500 people get €30 million in increments? That is €80,000 or €60,000 each. I do not think it is €60,000 each. As an example, if they were each receiving an increment of €1,000, that is €500,000 and half that comes back, so it is less than €500,000. Would the Deputy recommend bringing in specific legislation for that sort of money? If we are talking real money, let us deal with that in a proper way. Deputy McDonald is not present, unfortunately, but the presentation of her argument seems to be much more important than the substance of it. This committee is about substance. As a people we have a horrendous task to solve our economic woes and this committee has a role to play.
I refer to the other point made by Deputy McDonald. I may be straying away from my role this morning in commenting on yesterday's meeting of the committee and the officials who came before it. To put it bluntly, there are standards of decency which should be observed when people come to attend. Every public servant should be treated with respect. This is a personal point of view about how senior public servants, who are servants of the public, must be held to account but in a way that is respectful of the individual. I do not think that was done yesterday, but that is a personal perspective.
Deputy McCarthy spoke about the biggest challenge and I think I have already answered that. We are driving an agenda for which we need to have a buy-in at all levels but we have not succeeded yet. However, I am determined to do that. The shared services issue is a very large and important agenda for us. The Minister of State, Deputy Brian Hayes, spoke about the human resource service which is to be put in place. We are fast-tracking other areas of it and we can supply details of these areas. One body doing the task rather than 40 centres all doing the same work is a significant reform not only in monetary terms, but also in terms of efficiency. It is often the case that personnel officers are moved on promotion to other duties. This may mean that such individuals have no skills in personnel work. We need to change this practice and make it more professional.
On the Chairman's final point, I will send him a copy of the standard contract. The contracts for driving the reform agenda in my Department are all term contracts. The last time I sat beside the director at this committee we were discussing public pay - I should not say this - but he gave me a note in which he wrote that he was now earning half of what he earned in the private sector for doing a similar job and without the public scrutiny. That is an issue we need to be mindful of when discussing salary ceilings. If we want to recruit capable people to drive the change, then we must mindful of that also. The Secretary General has a seven-year contract. The new procurement officer will be on a contract and the Minister of State is determined that the pay for the office will be determined by achievement. This will be an innovation in the public service.
How many people are coming in from the private sector to fill advertised management and senior management positions? Is there private sector interest?
We have not all that many because we are not recruiting a large number. Those who were recruited by my Department from the private sector include the head of human resources shared services. There is also great interest from the private sector in the job of procurement officer.
Mr. Robert Watt
To add to what the Minister has said, there are issues to do with recruitment into the public sector from the private sector. I would be happy to discuss these with the committee when I appear again. It is an issue for the top level appointments committee. It is much more complex than much of the commentary on this issue. The percentage of candidates from the private sector filling vacancies has risen over the past six to nine months compared to the previous periods. The sample size is very small so care must be taken. We are not recruiting large numbers but there has been an increase. I can discuss this with the committee at my next appearance. There are issues associated with the perception of the public sector and of how it is portrayed in the media. The issues include pay, how senior civil servants are called to account by this committee and how committee members interact with individuals. Those issues are very important when we want to attract high calibre candidates. To put it bluntly, I have had conversations with people in the private sector-----
We are all being blunt today.
Mr. Robert Watt
The pay may or may not be attractive but the level of public scrutiny and the way in which that happens now is something many people are not willing to take on. We need to reflect on this fact and perhaps it could be discussed in more detail at the next meeting.
The Chairman's final point was about modernising the Department of Health. We need a long time to address that issue-----
Mr. Tony O'Brien stated that he was given his contract in one hand and a report in the other hand, which may not have restricted him but which told him what needed to be done. There are eight legacy issues from the different health boards and 58 others, as I have said. I presume there is a need for investment in their systems and a need to give someone like the new chief executive officer the necessary proper management tools.
From my personal perspective, I have very great confidence in the management team in the Department of Health.
I am talking about the systems. I am not making any comment.
It is very difficult. The task we have given the Department of Health is to bring about fundamental transformation, to abolish the HSE, to subsume responsibility back into the Department, to create an integrated health system, to develop a system of primary care similar to the European model and to introduce universal health insurance within the next five years. At the same time, we have to undertake this fundamental change with a significantly reduced budget and reduced staff numbers. It is a very great challenge for those involved and we will assist them in every possible way. I know this committee will assist in achieving those challenges.
The Minister made a reference to Tuesday's meeting.
I am taking the opportunity to assure the Minister in this regard because I cannot let the matter go and would not like to say it when he has left the room. Putting the opening incident to one side, the general tone of the meeting thereafter was one of complete engagement by both sides. I am sure the Minister has heard individual Deputies voicing their own opinions as to what happened. My view is that the opening incident was caused by a misunderstanding of the reason the representatives of the Health Service Executive and the Department of Health were at the meeting in the first place. They seemed to be under a misapprehension that the purpose of the meeting was to discuss a draft report they had received which was sent to them out of courtesy. In fact, the purpose of the meeting was to examine the facts and figures given a previous meeting with Mr. Cathal Magee.
I was taken aback by the content of the delegates' opening statements which were almost legalistic in style and largely set out why they could not answer particular questions. It is not the case that we were getting into policy matters. As the Minister is aware, I read out a statement at every meeting declaring that we do not deal with policy issues. Moreover, I have often had to caution members when their questions are policy related. However, we do have an open exchange at the committee and have enjoyed a relationship with the HSE and the Department under previous CEOs and Secretaries General that has been very fruitful and productive. I do not know why the delegates came to Tuesday's meeting armed, as they were, with references to legislation and Standing Orders and declaring that they could not answer a specific set of questions. In fact, they went on, after the incident we are discussing, to do their business as we would expect them to do.
It might have been helpful if they had brought their concerns to me prior to the meeting. I met Dr. McLoughlin last Thursday and there was no indication that he had concerns about attending the meeting on Tuesday. Tensions were obvious before the meeting, however, in that it was difficult to fix a date for the delegates to come before the committee in the first place. Perhaps there are issues in that regard. As such, I take the opportunity to assure the Minister and the Minister of State that their officials can knock on my door at any time to explain their concerns or outline why they do or do not want to answer specific questions. On Tuesday, however, I would not accept the statements they placed in the public domain.
I am under a time constraint, unfortunately, as I have to be elsewhere at 11.30 a.m. I referred to the incident in question only because it had been raised by Deputy Mary Lou McDonald. My perspective, looking in at it, is that in the context of the extraordinary economic crisis facing the country, it is vital that the committee - the flagship committee of the Oireachtas in terms of its role in scrutinising public expenditure - go about its work in a co-operative way. After almost 30 years in the Oireachtas, I have learned that there is a way of proceeding in these matters which does not seem to have been followed in this instance. I refer to the discordant incident at the beginning of Tuesday's meeting. That is just my personal perspective and I will say no more about it. I agree that the meeting was subsequently very good.
I look forward to having open, frank and sometimes, I am sure, discordant conversations at the committee as we map our way through the very difficult task we face. I thank the Chairman for the courtesy he has shown me and my officials.
The Minister might come to me in the future rather than the Government Whip. I am sure we can organise things between us.
We do not go to the Government Whip; the Chairman should not worry about that.
In fact, the Minister or somebody else did go to him this week. However, we will leave it at that. I thank the Minister, the Minister of State and their officials for attending.
Sitting suspended at 11.25 a.m. and resumed at 11.35 a.m.