I thank the committee for inviting me here today to discuss the appropriation account for Vote 37, and chapter 9 of the report of the Comptroller and Auditor for the year ending 2020 relating to the regularity of welfare payments, chapter 10 relating to appeals and chapter 11 on the PUP. I also understand that the committee would like to review the accounts of the Social Insurance Fund and I will be pleased to respond to any questions that members may have on these accounts.
I am joined today by Ms Joan Gordon, chief appeals officer, Mr. Ciarán Lawler, assistant secretary with responsibility for finance, Ms Philomena McShane, the Department’s chief accountant, and Mr. John Conlon, assistant secretary with responsibility for control policy. I may, with the Vice Chairman's permission, rely on assistance from my colleagues in addressing some of the questions that members may raise. I am particularly mindful of the notice given by the Vice Chairman at the beginning of this meeting. I am a witness outside the curtilage, and I am self-isolating at the moment.
I arranged for an advance copy of this statement together with briefing material on the accounts and the chapters under review, the annual report of the Department, the annual statistics report and other relevant information to be provided to the committee secretariat. I hope that members found this material to be of use.
I would like to commence by breaking precedent. Normally, Accounting Officers conclude their statements at this meeting by acknowledging the work of their staff. I hope that members will agree that, in the context of the 21 months just past, it is appropriate to place my appreciation and my pride in the Department’s staff to the forefront of my comments. The committee may think that this is due to the unprecedented response to Covid-19 crisis, and it is true that the measures taken to flatten the curve in the health domain resulted in an unprecedented peak in demand for income supports and other welfare services. Over the period, the Department has built not just one but two new IT systems to process approximately 1.8 million claims for the PUP, equivalent to approximately nine years' worth of jobseeker's claims.
The Department’s staff processed more than 212,000 claims for the special Covid-19 illness payment, introduced a new enterprise support grant, implemented new flexible arrangements for rent supplement, rolled out online and telephone-based services for the General Register Office, GRO, appeals, medical assessments and employment services and developed new IT functionality to provide attributed or full social insurance contributions to people who were laid off during the Covid pandemic. We also implemented a new protocol for victims of domestic abuse. All of this was Covid-related and I could go on. The Department has now distributed or funded some €17.4 billion in expenditure on Covid-related supports. Just as we thought we were making progress in transitioning back to normal operations, staff again worked over the past weekend to put a new PUP scheme in place and are already processing claims into payment for next week.
However, the past 21 months have not all been about Covid-19. Having made substantial improvements in processing performance across most of our schemes and in the appeals service over the previous year, we were determined to protect these improvements. In fact, across most scheme areas, processing performance continued to improve as more online options were implemented and staff adapted to new processes and to working remotely from the office. To take just one example, carer's allowance claims, which took on average 14 weeks to process in 2019, are now being processed in about four weeks.
In parallel, staff of the Department rolled out new services including the benefit payment for 65-year-olds. They developed new services and expanded others as part of the pathways to work strategy, established and supported the work of the Pensions Commission and enhanced our IT security and energy management capabilities. Again, I could go on.
The efforts of staff have been recognised in a number of independent awards for customer communications and for professionalism in procurement. In addition, in a world where cybersecurity and energy management are key concerns, the Department has also, over the past year, been awarded International Organization for Standardization, ISO, certification for information systems security management and for energy management conservation. Ours is among the first Civil Service Departments to achieve these certifications.
I will say no more on this subject except for two things. First, it is not uncommon to hear and see bandwagon criticism of the civil and public service as being cosseted, of not being innovative, of being inefficient or of lacking customer focus. It may be a vain hope, but I hope that the evidence, not just in my Department but across the public service over the pandemic period, will help dispel these lazy caricatures. Second, I am hugely proud to be associated with the work of the Department’s staff and the 350 other public servants who worked with us on occasions over the past period. I say "associated" because it is not my work but theirs and I hope the committee will join me in acknowledging that work and offering a heartfelt appreciation.
The committee will note, from the 2020 accounts, that total expenditure on Vote 37 services and administration, before appropriations-in-aid, amounted to €16.5 billion. This was €5.6 billion higher than 2019 Vote expenditure of €10.9 billion. Out of this increase, €5.4 billion related to expenditure on Covid income and employer supports. Excluding this expenditure, the additional expenditure represented a small increase of 1.9% compared with 2019 spending. If Covid-related expenditure is excluded from the comparisons, the expenditure for the year amounted to €11.1 billion, an increase of €200 million or 1.9% compared with 2019.
Expenditure on Social Insurance Fund services amounted to €14.1 billion. This was an increase of €4.1 billion on the 2019 outturn. Again, if Covid-related expenditure is excluded, the adjusted figures for 2020 show expenditure of €10.4 billion, an increase of €400 million or 3.7%. Combined expenditure of €30.5 billion across the spending period represents approximately 15% of modified gross national income for the year.
It is clear that there are a number of key drivers of this change, with €265 million additional expenditure related to pensions, of which demographics account for €218 million and €47 million is related to pension budget measures. Similarly, illness and invalidity payments increased by €263 million. As previously discussed at this committee, these demographic trends are likely to continue with significant implications for expenditure. This issue was at the heart of the deliberations of the Pensions Commission and members will be aware the commission has made a number of proposals both with regard to mitigating the cost impact and generating the necessary revenue to fund the inevitable increases in expenditure. These proposals are now being considered by the Government and have also been referred to the Oireachtas Joint Committee on Social Protection, Rural and Community Development and the Islands and the Commission on Taxation and Welfare. Taking account of inputs from these bodies, it is expected that the Government will provide its response by the end of March 2022.
Chapter 9 of the Comptroller and Auditor General’s report is concerned with control over welfare payments. Chapter 11 is specifically concerned with control of the PUP. Chapter 9 makes no recommendations but chapter 11 makes a number of recommendations with respect to PUP payments.
I have said at this committee before that one of the challenges faced by the Department is to strike a balance between, on the one hand, designing and managing large-scale service processes that are reliable, efficient and effective for the overwhelming majority of people who use our services and, on the other, implementing controls and checks to assure payment and service integrity. However, we are mindful in doing this that our primary purpose is to support people who need support and that we cannot pursue the elimination of error or fraud at the cost of unreasonably denying entitlement to service or frustrating access to that entitlement. This is always a key consideration and never more so than when implementing the PUP.
Given the volume of claims to be processed, the level of public anxiety arising from the truly dystopian images we witnessed in other countries, the need to ensure people who lost employment due to Government-mandated measures were supported and the imperative to buttress public acceptance of those measures, I believe it was correct, when designing PUP within an incredibly short time period, to accept a higher level of risk and to favour prompt processing over very tight control. That is not to say that there was no control. In fact, there was a range of take-on and in-payment controls and while they may not have been as extensive as for normal jobseeker payments, their impact is reflected in the fact that about 500,000 of the claims processed were not awarded. In addition, in-payment control reviews are associated with about a further 143,000 claim closures.
It is also notable that although the Comptroller and Auditor General’s report identifies control improvements that could be made, the gross level of overpayment estimated based on a sample of claims reviewed was 9.4%. In making this estimate the report notes the Department’s observation that the figure is arguably inflated by the inclusion in the sample of periods when there was a high level of churn on the scheme. Excluding these periods, the estimated overpayment level would be about 6%, a figure consistent with data from the work we have since concluded in awarding accredited social insurance contributions. These estimated figures need to be seen in the context where overpayment levels in welfare administrations, not just in Ireland but around the world, tend to average between 3% and 5%, with high churn schemes such as jobseeker payments having somewhat higher rates.
It would have been untenable to impose the normal level of control checks and frustrate prompt access to payments during the period of a global pandemic in order to achieve a marginal percentage reduction in overpayment levels. It is also to be borne in mind that the Department can and will in the coming months review claims paid and, for example, using data matching with Revenue records, identify and pursue recovery of overpayments made. Any overpayments made will of course be followed up in a reasonable and proportionate manner. Having said this, I accept that the level of overpayment is material and that it is always possible to do better. I accept the recommendations in the report are appropriate. We have accepted them and I can confirm they are being actioned.
Chapter 10 reviews the approach to management of appeals and contains a number of recommendations. By way of background, the appeals services, headed by the chief appeals officer, although part of the Department, has statutory independence in the performance of its functions. Each year it receives and processes about 23,000 appeals, representing about 1.4% of all claims. As part of the appeals process, it forwards all appeals received to the Department providing the Department with an opportunity to review the decision made based on the appeal submissions of the appellant. Typically, about 20% of appeals result in revised decisions being made by the Department. The balance fall to be determined by an appeals officer.
Overall, taking Department reviews and appeals decisions together, over 50% of appeals, or about 0.7% of first instance decisions, result in a favourable outcome for the appellant. It is important in saying this to point out that the success rate varies by scheme and, generally speaking, the schemes with higher success rates tend to be schemes that rely on medical evidence as to a person’s capacity for work or requirement for care. While not the only factor at play, it is often the case that appellants submit additional medical information that was not available to the Department. In order to address this issue, the Department has worked with advocacy groups to revise its application forms and new disability allowance and invalidity forms will be launched in the first half of 2022.
In terms of processing performance, the appeals process can be quasi-judicial in nature, with all parties to an appeal being provided with the opportunity to submit information and state their case. This necessarily results in a lengthy process. Nevertheless, increases in the number of appeals officers in recent years are now bearing some fruit and appeals processing times have improved. The approach to considering appeals and in particular to interaction between the appeals office and the Department to reduce transaction times is also being reviewed. It is hoped that this, together with the implementation of a new IT system starting in 2022, will lead to further improvements. In addition, in order to improve overall management capacity within the office, including quality assurance recommended by the Comptroller and Auditor General, the Minister is bringing forward legislation in the forthcoming Social Welfare Bill to enable the appointment of more than one deputy chief appeals officer.
I understand committee members have expressed an interest in discussing issues related to false self-employment and the contracting of public employment services. Both of these topics were the subject of detailed discussion at this and other committees in recent years, including in response to reports presented by the Comptroller and Auditor General.
The issue of false self-employment was also the subject of a recent report by the Joint Committee on Social Protection, Rural and Community Development and the Islands. In order to assist the committee, I have provided additional material in response to questions submitted to the Department last week. Rather than go into these matters further in this opening statement, I will be pleased to respond to any questions members may have.
I will conclude, as I have previously, by saying that we, as a Department, although we try to do our best, are not perfect and we do not always get things right. We pride ourselves on being, and hope we are, open to challenge, criticism and suggestions for improvements. The process today plays an important role in reminding us of our purpose and helping us to identify areas for improvement and learn from our mistakes. It is through such a process that we hope to improve. I and my colleagues will be pleased to take any questions members may have.
