The size of the public service grew significantly in the early years of the last decade. By 2008, some 320,000 were employed in the public service and, by 2009, the gross Exchequer pay bill peaked at more than €17.5 billion. It is perhaps easy to become jaded in our discussion of public service pay costs. However, I would ask the House to note that the total net cost of the public service pay bill will be reduced from 2008 to 2015 by some €3.5 billion - by 20% in seven years. This reduction is necessary to contribute to the fiscal adjustment targets essential for our economy.
While commenting on public service numbers and the associated pay bill, we must always remember that these costs are the price we pay for a civilised society. Public servants educate our children, care for our sick and disabled, clean our streets and protect our environment. Public servants ensure that our rights are protected and our person, homes and businesses are secure. In an emergency, gardaí, fire and ambulance crews and members of the Defence Forces willingly place their lives at risk in the service of the State and their fellow citizens. Less dramatic but no less important is the role played by public servants in the administration of a complex modern society such as ours. Bluntly, too much odium has been poured upon public servants in an effort to divide public and private in recent years, which I regret.
Citizens expect and demand a wide range of services to ensure their rights are protected and their well-being is ensured in such areas as housing, water, transport, food safety and the provision of a social welfare safety net. Business requires an appropriate regulatory environment in which to operate and flourish. Without such services it would be impossible to attract inward investment and international confidence. In short, the myriad of roles undertaken by the public service has ensured we now have the healthiest, best educated and most innovative population in this country's history.
As I stated, the Government is committed to reducing public service numbers and producing a more customer focused, efficient and better integrated public service which delivers maximum value for money. This is not being done merely because it is a fiscal imperative; it is being done to ensure we can continue to enjoy a vibrant, modern, forward looking civil society.
The Government must and will continue to give close attention to the State's finances. Ireland is committed under the EU-IMF programme to reducing the overall size of the public service and this is also a key element of the programme for Government agreed one year ago between the two parties. Delivering this reduction will require continued implementation of the moratorium on recruitment, with exceptions being limited to only essential posts and the utilisation of redeployment as the primary mechanism to fill posts which have been approved. To protect frontline services, the Government is committed to making fundamental changes to the way the public service operates. This will inevitably mean changes in the way in which services to the public are delivered.
As Deputies will no doubt be aware, the Government is committed to reducing public service numbers to 282,500 by the end of 2015 as part of its reform agenda. The overriding objective is to have a more customer focused, leaner, more efficient and better integrated public service which delivers maximum value for money. The establishment of enhanced numbers monitoring systems and multi-annual employment frameworks has strengthened the Government's capacity to control public service pay and plan future staffing levels. Today, I am pleased to inform Deputies that significant progress is being made in reducing the numbers employed in the public service. The numbers working in the public service have continued to fall, with the provisional outturn for the end of last year now standing at 296,900, which means we are now at close to the 2005 staffing levels. This is a year-on-year reduction from the end of 2010 of more than 8,500. The employment control framework ceiling for the public service in 2011 was 301,000. To exceed this target by more than 4,000 is impressive.
The public service pay bill has stabilised and we are now back to 2006 pay levels. This is no small achievement and I recognise the impact this has had on public service workers and their families, although, given the response in some quarters, one would think there has not been a significant contribution to our economic recovery from the public service. I would like to salute the many people in our public services who are striving daily to deliver a first-class service with reduced resources and increased demands.
I am confident that, given the number of departures last year, together with estimated retirement figures for 2012, we are well on track to meet our 2012 target of 294,400, exceeding the target set by the previous Government by two years. This will allow us headroom to recruit up to 3,000 additional staff this year to maintain services, mainly in the health and education sectors, which Deputy Ó Caoláin will be glad to hear.
Of course, such a reduction in public service numbers will pose challenges. It will require a re-focus on business processes and adjustments to the way public servants use available resources. It will require changes to the way individual public servants go about their daily work and greater flexibility in the way services are provided, for example, with greater use of technology and shared services. I am certain, however, that our public servants are capable of meeting and exceeding these challenges. The Croke Park agreement demands a number of specific sectoral and cross-sectoral reforms. Some of these are designed to save money directly, others are tools to manage and prioritise services, as staff numbers decline. Reforms so far delivered include reduced leave, extended working hours, rationalisation of agencies, centralised and shared services, staff relocation and staff redeployment.
The redeployment arrangements contained in the Public Service Agreement 2010-14, popularly known as the Croke Park agreement, allow the Government to sustain priority services by providing the Government with an effective and efficient mechanism for allocating staff to the areas of highest priority without the need to resort to outside recruitment. Where recruitment is necessary, this can and will be undertaken within the parameters of the Government's numbers and budgetary strategy.
There are some who question the Croke Park agreement. However, it has provided the framework of co-operation and flexibility to enable us to effect a necessary reduction in the Exchequer pay and pensions bill in a climate of industrial peace. That is very important. Few of the critics of the Croke Park agreement recognise that it is almost unique in Europe that we are making such fundamental change without industrial unrest and without impact on frontline services. In simple terms, the agreement provides an agreed framework to reduce base costs, to enhance productivity and to support the public service reform agenda. There are real advantages to the State as an employer to be able to pursue this ambitious programme without industrial strife.
In addition, where the circumstances require it, the Croke Park agreement allows for targeted voluntary exit mechanisms in the public service. It is envisaged that such mechanisms will be required only when redeployment or upskilling are not appropriate and a permanent reduction in numbers is required.
There was some focus on my comments during Question Time last week that the next round of exits would be targeted. I did not wish to imply that there would be a great new set of programmes but, in future, now that those who wished to exit before the impact of the reduced pay affected their pensions and lump sums, we would look at areas that are overstaffed to see whether we could shrink those as well.
As Members are aware, some concern has been expressed about the ending of the grace period towards the end of last month. I am pleased that the considerable work undertaken in all areas of the public service has ensured that the nightmare scenario depicted by some has not materialised. It is a little like the year 2000 when people expected something catastrophic to happen. I am pleased that the management controls, supports and flexibilities that were put in place have managed to get us over that period. It was expected that between late 2011 and spring 2012 approximately 9,000 public servants would retire. The latest figures suggest we will have exceeded that slightly. Overall, there will be approximately 17,000 retirements between 2011 and 2012, which equates to three years of retirements truncated into two.
I suspect that in many cases Deputies misunderstood the extent of the departures in February. Approximately 8,000 retirements will occur over 2012. What is different this year is that most of the retirements are happening in the first two months rather than over the 12 months as a whole. It is always the case that staff retiring in any organisation will be among the most experienced. However it is the responsibility of local management to handle ongoing staff turnover. It gives opportunities for people to naturally migrate upwards in the public service.
Sectoral transition teams have been put in place to deal with the specific short-term challenges arising from the ending of the grace period. The reports from these teams indicate that they have given due consideration to the impact of staffing reductions on the various sectors, and the most fitting and expeditious ways of managing those have been put in place. As they have the most current information on service provision at a local level, each sectoral transition team has been directed to communicate actively with the public via whichever appropriate means to allay concerns with regard to critical front-line service delivery. I said at the beginning of the process that I would not seek to micro-manage it from the top and that there was a responsibility on front-line managers to manage their staffing. They are sufficiently skilled and paid to do that, and to communicate any difficulties if they arise and their plans to deal with them at local level. Public concerns about service levels are being addressed proactively and the public should and will be kept informed of business continuity arrangements that are in place.
Much has been made also of the fact that public service pension costs are set to rise from €2.1 billion in 2008 to €3.1 billion in 2015. However, it should be noted that the €1 billion increase in Exchequer pension costs represents a pension liability that was due to mature in any event as a result of the normal retirement of staff recruited 30 to 40 years ago and - this is a critical point - it does not represent a new liability for the Exchequer. Those who wish to recognise the point do and those who do not, do not recognise it. The liability was always known. Those people were coming up to the age of retirement in any event and provision has been made because they were paying for their pension for the past 40 years.
There was a significant expansion in many parts of the public service in the 1970s, influenced among other factors by the accession of this country to the then EEC and the introduction of free second level education. It should, therefore, come as no surprise that we would see additional public service pensioners coming on-stream in this decade as the original cohort of staff reach the end of their careers.
The increased number of retirements and the changed nature of society present the Government with the challenge and the opportunity to reshape and reform the public service to meet emerging social needs. That is the central mission of my Department. To help with the task, the Government has established strategic workforce planning groups in the Civil Service and in the education, health, local authority, defence and justice sectors. These workforce planning groups will ensure that sectoral employers are developing plans to deal with the operational and strategic consequences arising from the anticipated staff turnover in 2012 and future years on an ongoing basis. The sectoral groups are liaising with the central strategic workforce planning forum under my Department.
While the primary focus of the numbers policy will remain the reduction in the public service pay bill, there will also be an opportunity in the coming years to reinforce the upskilling and reform of the public service. It is important that longer-term workforce planning needs are also addressed with, initially, a very small-scale recruitment of staff at various levels across the various parts of the public service. Measures such as the targeted graduate recruitment competition, which is now under way, will address such gaps.
I reiterate that in the first instance, responsibility for operational planning must and will rest with the relevant public service body and its parent Department. To mitigate the impact on front-line service provision as far as possible, with the co-operation and flexibility of individual public servants, we will fully use the mechanisms set out in the Croke Park agreement, including the filling of essential posts and the utilisation of redeployment.
Public services are essential to the functioning of the economy and society. Citizens and businesses expect and demand a modern public service that is continually improving and delivering more and better for citizens. It is the intention of the Government to ensure we have such a public service not only for this generation but for the next and future generations.