I thank the committee for giving me the opportunity to make a short statement. I would like to talk briefly about the role of the Department, and then discuss in detail relevant aspects of the 2012 appropriation account and the 2012 report that the Comptroller and Auditor General has outlined.
A key aspect of our Department’s work since its establishment in 2011, which work has been carried out in conjunction with the Department of Finance, has been the strategy for fiscal consolidation. This has involved very significant reductions in Government spending. Since its peak in 2009, gross voted expenditure has been reduced by 13.5%, from €63.1 billion in 2009 to €54.6 billion in 2013. Consolidation measures to date have ensured Ireland's successful exit from the troika programme. A further reduction of €1.7 billion is budgeted for this year, 2014. This consolidation has required effective budgeting and it is worth noting that gross spending has been broadly in line or below profile in each of the years since the Department was established. In 2012, the year we are debating this morning, the variance was 0.2% on gross expenditure of €98 million. That is out of a budget over €60 billion. It is a very modest variance from the Estimate.
I would like to highlight this morning two aspects of this consolidation: reform of the budgetary and Estimates process and the ongoing reform of the public sector. With our colleagues in the Department of Finance, we have implemented a set of reforms to Ireland’s budgetary architecture. We hope they will improve the management of public resources, increase transparency in the budgetary process, and deliver greater value for money for public spending.
A new medium-term expenditure framework, setting out multi-annual ceilings for each Department, has been implemented. The amount of information provided in the annual Estimates has been increased as part of the implementation of our performance budgeting initiative. We hope that is useful for committees, particularly this one, when examining public expenditure.
A new public spending code has been introduced to ensure that both current and capital expenditure are subject to more rigorous value-for-money appraisal in advance of public moneys being spent. The website www.irelandstat.gov.ie – the whole-of-government performance measurement website – was launched. The Irish Government Economic and Evaluation Service was established to support better policy-making across the system. We know from previous reports of the Comptroller and Auditor General, including the one we are discussing this morning, that a lack of capacity in policy areas led to mistakes, which led to value-for-money issues when it came to particular programmes. We are very determined to improve the capacity and policy capacity across the Civil Service. We will shortly be commencing a second comprehensive review of expenditure to examine spending and inform the next three-year cycle of fiscal targets and expenditure allocations, for 2015 to 2017.
Along with the work of this committee, the Comptroller and Auditor General and internal audit committee, these reforms continue to embed a value-for-money culture across the public service. Of course, we are happy to work with members of this committee to see what further steps can be taken. I am happy to hear suggestions based on the work they undertake. I will speak in a moment about some of the specific Vote budget management issues that have been raised.
The ongoing reform of the public service has been necessary to ensure that important services continue to be provided as spending is reduced. In a recession, demand for public services increases. Our latest recession was no different. Demands on our public services have increased and we have maintained service provision while reducing staff numbers by over 30,000 since 2008. The public service pay bill has fallen from €17.5 billion in 2009 to €14.1 billion last year. Further reductions are scheduled for 2014. New working arrangements have been introduced, including longer working hours. Some 15 million additional hours are in the system on foot of the Haddington Road agreement. New rosters and standardised arrangements for annual leave and sick leave have been introduced. We are making good progress on increasing efficiency in areas such as public procurement, shared services, digitalisation and property management. Further details of these reforms are set out in the second progress report, which the Minister, Deputy Howlin, published in January of this year. At that time, the Minister also published a new public service reform plan for the period 2014 to 2016. It sets out a new phase in the reform programme and our ambitions for the period ahead.
Reform has been enabled by a climate of industrial peace that we have worked to maintain over the past three years. The Croke Park agreement delivered on its objectives. The Haddington Road agreement sets out measures to deliver further savings out to 2016. As I mentioned, it provides for a total of 15 million additional hours annually across all sectors of the public service, which will help to deliver long-term and sustainable increases in productivity. Reform is about productivity, and we can see significant gains in productivity across the system. That is an important point worth highlighting. When people talk about reform, their meaning is sometimes a little nebulous. What we mean is that we do more or the same with less. It is ultimately about productivity and delivering more.
I would also like to highlight to the committee some further aspects of our work in the Department that may be of interest. The Civil Service - that smaller part of the public service with a staff of 35,000 - has gone through a period of change and we, as leaders in the Civil Service, recognise that further change and renewal are required. Last year, we started a Civil Service renewal process. The purpose of this process is to set out a new, clear vision for the service and the actions required to deliver on this. We are looking at areas where capacity and capability need to be developed to meet current and future challenges. These include areas such as leadership, change management, policy formation, and project and policy implementation. Enhancing our HR capacity, different recruitment models and increased investment in training and skills are integral to the agenda.
As part of a broad consultation process, a series of town hall meetings are taking place across the country to brief civil servants on the issues being addressed and to seek their input and ideas. To date, almost 1,700 staff have engaged with this process. This is the widest process of this type we have ever undertaken. On another day, we will be very happy to come here to brief the committee on what is happening with and planned for this process and on some of the findings.
In January, we published a consultation paper on strengthening Civil Service accountability and performance. Greater clarity, transparency and common understanding of responsibilities will accelerate improvements in how the Civil Service works and how performance is assessed. The Minister, Deputy Howlin, intends to publish the outcome from these various processes in July before the summer break.
Let me mention a few other developments of interest to the committee that relate to our Department. The Office of Government Procurement has been established to improve how public procurement is structured and managed, and we have targeted savings of over €500 million over the next three years. The Office of the Government Chief Information Officer has also been established within the Department to build on our performance on e-government and to maximise the potential benefits of digitalisation and open data to deliver services in a more efficient and innovative way. PeoplePoint, the Civil Service HR and pensions shared service centre, was established and it now provides services to 24,000 civil servants across 19 organisations. When fully operational, PeoplePoint will deliver savings estimated at €12.5 million per annum and, critically from our perspective, improve the quality of information for managers across different Government Departments.
The Civil Service payroll shared services centre is being established under our Department. Twenty-seven of the 53 in-scope bodies will transition into the new services centre this year. When fully operational, this service will also deliver savings each year.
We have also undertaken a base-lining and business case exercise for a financial management shared service to assess the potential for streamlining and improving the processes in respect of financial management that currently operate across 48 bodies in the Civil Service, defence and justice sectors. On completion of this assessment, a further submission will be made to the Government to proceed to full implementation of a shared services approach to financial management. An estimated €14.6 million in savings could be delivered and the project, if implemented, will also yield benefits in terms of improved financial management information, adding value to both financial analysis and decision-making across the system.
Moving to accrual accounting is an important related issue. Our Department is engaging with stakeholders to identify the relevant issues and will be engaging with this committee in due course. The process needs to take account of a number of related developments, including proposals for EU harmonised accounting standards, the recommendations of the IMF fiscal transparency assessment report and the financial management shared services project. These will be important changes affecting the management of public money. The Comptroller and Auditor General is involved with us and we are very happy to brief the committee in detail as the project advances.
Turning to the political reform agenda, our Department is supporting a range of initiatives in this area. We have drafted changes in legislation to give greater powers to the Ombudsman and for the Oireachtas to conduct inquiries within the current constitutional framework. We are also participating in the Open Government Partnership, which includes a number of countries. Other legislative reforms being advanced include the regulation of lobbying, a reformed Freedom of Information Act, legislation to protect whistleblowers and the further strengthening of the ethical framework for officeholders and public servants.
In addition to these political reform measures, the Department has prepared and published five pieces of legislation in the past 12 months. I have set them out in my speech. Last year, we dealt with a total of 1,956 parliamentary questions and are hoping for more than 2,000 this year. We also dealt with 1,699 representations.
I would now like to turn to some specific items on the agenda today. Listening to the Comptroller and Auditor General's remarks, I should say that we accept all the recommendations listed in the report. In most cases, they are being implemented. The first item is the 2012 Appropriation Accounts for the Department of Public Expenditure and Reform. The Department had an outturn of €37 million in 2012, compared to an estimate of almost €42 million, leaving a surplus to surrender of €4.6 million. This variance arose largely because of savings on administrative budget pay of over €2 million due to a large number of retirements in February 2012 and slower than anticipated appointments to key posts as we sought to ensure the necessary skills were recruited and savings of almost €1.8 million arising from the timing of funding draw downs on cross-Border PEACE and INTERREG initiatives.
Vote 12 provides primarily for pension benefits for civil servants and pension payments to their dependants. The original gross 2012 Estimate for the Vote was just over €500 million. This was subsequently increased by way of Supplementary Estimate to a revised gross Estimate of some €525 million to accommodate higher retirement levels in 2012. The gross outturn under Vote 12 for 2012 was €520.5 million. We agree fully with the Comptroller and Auditor General's recommendation that from now on, variance should relate to the original budget as opposed to the budget augmented by a Supplementary Estimate. We think that is a good suggestion and we have written to Departments by way of a new circular, which will be reflected in future accounts. The higher than anticipated numbers retiring in 2012 impacted significantly on the A4 subhead from which once-off lump sum pension payments are made. The original 2012 Estimate had been €116 million against an outturn of €83.4 million in 2011. However, expenditure of €134 million had taken place on the subhead by November 2012. It was against this background that a Supplementary Estimate was required.
A new single public service pension scheme for new entrants to the public service has been introduced which sees pension benefits based on career-average earnings rather than final salary for all new entrants since the start of 2013. There is a new minimum public service pension age of 66 for these "new joiners" which will rise in step with changes in the state pension age to 67 in 2021 and 68 in 2028. In addition, with effect from 1 July last year, there has been a further reduction in the rates of public service pensions of between 2% and 5% for those in receipt of pensions of more than €32,500.
At my appearance here last October, I stated that following discussions with the Comptroller and Auditor General, my Department had commenced a major actuarial exercise with the intention of updating the accrued liability in respect of public service occupational pension schemes. I can inform the committee that my Department has now completed an exercise to estimate the accrued liability in respect of public service occupational pension schemes. The key result is that the accrued liability in respect of public service pensions is estimated at €98 billion as at end December 2012. This figure is €18 billion lower than the previous estimate of €116 billion that was arrived at by the Comptroller and Auditor General for 2009. Therefore, over the three years from 2009 to 2012, the accrued liability has fallen by €18 billion or 16%. This reduction reflects the effect that expenditure control and containment in respect of pay and pensions have had on the overall liability since the last valuation. Further details of this work are on our website. If policies had not been changed on a "no policy" basis, the accrued liability would have been over €130 billion by now. The measures we have taken have reduced it by €18 billion against the 2009 Estimate but if we had done nothing, the Estimate would be over €130 billion.
Ireland currently has 17 operational public private partnerships, PPPs. Two additional PPPs have reached financial close and are currently under construction. Expenditure on PPPs to the end of 2012 was almost €2 billion. Future unitary charge commitments, including the two additional projects now under construction, were almost €6.6 billion at the end of 2012. That represents the total liability from the PPP projects. In July 2012, the Minister for Public Expenditure and Reform announced plans for an additional €2.25 billion investment in public infrastructure projects in Ireland, which included the new €1.5 billion PPP phase 1 programme. This investment is additional to the Exchequer public capital programme, as it is primarily funded by the private sector. Due to co-ordinated efforts by many Departments and agencies over the past 18 months, particularly the National Development Finance Agency, NDFA, the Irish PPP market has made a significant turnaround and has finally reopened to Irish projects. Phase 1 PPPs are progressing well and in line with market capacity. Seven of the nine projects announced in the stimulus plan have issued to market.
Dealing now with Vote accounting, the Comptroller and Auditor General's report shows that departmental spending funded from the Exchequer fell from €49.3 billion in 2008 to €44.9 billion in 2012, a reduction of almost 9%. Each Vote stayed within the allocation appropriated by Dáil Éireann for 2012, with Departments surrendering €641 million back to the Exchequer at the end of the year, having regard to Supplementary Estimates.
While the management of expenditure within voted allocations is the responsibility of each Department and Office, the reforms to the medium-term expenditure framework implemented in the past year will assist with the control of departmental spending. The arrangements for ministerial expenditure ceilings have been placed on a statutory basis. An administrative circular issued by my Department details the rules and arrangements for planning and managing current expenditure within these ceilings. Under the common budgetary timeline introduced as part of the EU two-pack regulations, the annual budget was published on 15 October. In line with this new timetable, the Revised Estimates volume for 2014 was published on 18 December 2013. This new timetable allowed much earlier consideration of the Estimates by the relevant Oireachtas committees.
I hope I have been able to give some examples of the work of the Department. Once again, I would like to acknowledge the work and commitment of officials in the Department who continue to deliver on a very significant agenda for the Minister and Government. We look forward to working with the committee as we continue our work.
