Vol. 936 No. 2
1. Deputy Dara Calleary asked the Minister for Public Expenditure and Reform the source of the extra funding to pay for the Labour Relations Commission's decision regarding the Garda associations and for the recent deal with the Irish Congress of Trade Unions, ICTU; if he has had discussions with line Ministers regarding the potential impact of the revised allocation on their departmental budgets; and if he will make a statement on the matter. [3597/17]
I ask the Minister to outline where he intends to find the €120 million announced last week regarding an extension of the terms of the Lansdowne Road agreement and the €25 million that is part of the Garda settlement that is being assigned to general expenditure.
The requisite funding in respect of the recent Government decision for an additional payment to public servants with annualised salaries of up to €65,000, as provided for under section 6 of the Lansdowne Road agreement, will be met from available public resources, taking into account the scope for the reallocation of expenditure while ensuring that core public services are not adversely affected. Regarding the separate Labour Relations Commission decision in favour of increased Garda remuneration, the Government agreed in December to fund half of the estimated €50 million cost of this recommendation, with the balance to be met from savings within the Department of Justice and Equality group of Votes to be achieved during this year. The additional funding of €25 million from the Exchequer was provided in the Revised Estimates Volume, which was published before Christmas.
The extent to which Departments are in a position to meet the additional cost of the broader recommendation with unions will only be determined later in the year. The Government will monitor the position closely and consider how best to meet any additional funding requirements where the need arises. However, given that the additional cost represents 0.2% of total gross voted current expenditure, most Departments should be accordingly in a position to absorb the additional costs arising from this decision. As reported in the end-December Exchequer returns, savings of €168 million were achieved in 2016, which is less than the sum of money in consideration for this year.
It is important to note that this is effectively a once-off additional payment for 2017; it is not a recurring payment. This is because the payment will be replaced by the already scheduled and budgeted payment for public servants on similar terms of €1,000 to annualised salaries up to €65,000 from 1 September 2017. The carryover costs into 2018 of this payment have therefore already been provided for in respect of the Lansdowne Road agreement for 2018.
I will read to the Minister a comment by the Fiscal Advisory Council:
For 2017, the ... fiscal space under the rules has already been allocated in budget 2017 for tax cuts and expenditure increases. As a consequence, any new increases in expenditure, such as to fund higher public sector pay, imply lower spending in other areas unless offset by compensatory tax changes.
Can the Minister give a guarantee that there will not be any impact on services delivered by any Department in this regard? I am concerned that we are now coming into the beginning of the second month of the year and that he has allocated €120 million worth of expenditure in respect of which he still does not know where it will come from.
Finally, I ask him to comment on the overnight development regarding the HSE's decision to withdraw its appeal to the Workplace Relations Commission regarding the payment of consultants and the potential this may have for a necessary increase in the Department of Health budget. Will he outline the Government's strategy for dealing with this position?
I will begin with the matter on which the Deputy concluded. I will not comment on the details of the two individual cases that were agreed overnight. However, I want to be very clear to the House that the Government will vigorously defend our case regarding consultant contracts over the coming period. As we move into the period of defending our case in this regard, the Department of Health, the Department of Finance and my Department will be parties to that case and we will vigorously defend our views and our legal case regarding this matter.
Regarding the two other areas the Deputy has raised with me, I have outlined a process whereby throughout the year I will identify this funding and I will be accountable to him and to the House in that regard. The other challenge I face is that if I had not made this agreement, I could have faced far greater uncertainty in the public finances for 2016.
I will focus on the case because the Minister has left many unanswered questions about it. How can he say the Government is vigorously defending a case when it has withdrawn the appeal? I do not want him to comment on the two specific cases but I do want him to comment on the reports we are seeing across all the media today that this could cost up to €350 million.
The Government has lost the case. Given the fact that it has withdrawn the appeal against the case, the notion of vigorously defending its case seems rather hollow. I appreciate the Minister cannot comment on the two specific cases, but what are the overall implications of this decision not to proceed with the appeal? What are those implications for the health budget in 2017, 2018 and beyond? When will we have a strategy from the Government as to how it will deal with this? Will that strategy impact on services that are already in crisis in the health sector?
I have been very clear about what we will do in this regard. I have commented on two individual cases that reached agreement over the past 24 hours, but my comments refer to those cases that are to come, of which there are a significant number. The Government will make very clear that we will robustly defend our views regarding consultant contracts, which date back to 2009. This is an issue that has been going on for a number of years. I will not comment on the terms and settlements regarding those individual cases that were settled. That would not be appropriate. To deal with the question the Deputy has just asked me about the cost, it would be absolutely irresponsible of me to come into the Houses of the Oireachtas and outline a liability regarding cases which the State will defend and in respect of which we will make very clear our robust views. I am happy to confirm this to the House.
2. Deputy David Cullinane asked the Minister for Public Expenditure and Reform the detail of the review his Department will undertake regarding the role and use of public private partnerships in future capital projects, further to his comments before the Select Committee on Budgetary Oversight; the lessons learnt in this regard; and if he will make a statement on the matter. [3599/17]
In response to a question asked at a sectoral committee hearing regarding the greater use of flexibilities in terms of the fiscal space for capital investment, the Minister said he and his Department were looking at "a greater use of public private partnerships". I ask him to outline the detail of any review that his Department will undertake regarding the role and the use of public private partnerships in future capital projects.
As I announced in my speech on budget day last year, this spending review will be carried out in advance of budget 2018. The economic and political landscape in Ireland has changed very considerably since this work was last done in 2014. There are now increasing and competing public service demands across a period in which expenditure growth is planned at a moderate pace. The approach taken to this review will therefore be tailored to reflect the changed context and lessons from previous reviews. We will systematically identify the cost of existing projects and, as part of doing this work, we will look at the role of PPPs.
PPPs offer an alternative model for delivering infrastructure that can be effective in particular circumstances. Under the comprehensive policy framework for PPPs that has been put in place, there is detailed guidance on the value-for-money tests that must be applied at different points in the procurement cycle to determine a project's appropriateness for procurement as a PPP.
While I am open to considering, on the basis of this review, the role they may play in priority public capital infrastructure, as I said to the Deputy in the meeting of the Committee on Budgetary Oversight, the complexity of determining the off-balance-sheet status of a project can, in certain circumstances, introduce a level of uncertainty into capital planning. Consequently, at a point in the future the Government can find itself facing difficult choices over commitments made if it turns out that the planned level of off-balance-sheet funding simply is not feasible.
The affordability and fiscal sustainability of PPPs are particularly important considerations for the review in light of the higher cost of private finance and the long-term nature of the financial commitments arising from PPPs.
Of course, PPPs can be presented as an alternative model. The question is whether they are viable and represent value for money. Even conservative economists such as Colm McCarthy have raised concerns about their use. There are significant oversight issues that need to be addressed but nothing in the Minister's response indicates this will be the case. The Comptroller and Auditor General says he does not have the resources to give the Committee on Public Accounts the reassurance it wants about value for money. He said there is a need for post-project reviews to be carried out. Very few of these reviews were carried out and presented to the Committee on Public Accounts for proper scrutiny. There are no real checks and balances and no opportunity, despite the Government's talk of reform, for us to assess the value for money of PPPs. Unless the Minister is prepared to present us with a value-for-money report and a review of the existing use of PPPs, it is unlikely that he will get support for further PPPs.
In the comprehensive spending review, we want to focus on the role of PPPs and to examine the benefits and costs relating to them. I am well aware of their operation from their extensive use in the provision of public transport. The Deputy continually presses me on the need for increased capital investment. He points to the projects that need to be delivered. Surely, therefore, it is appropriate that we consider the role PPPs may play in the future in delivering very important transport infrastructure projects. PPPs have enabled the delivery of five bundles of schools and a variety of road projects across the country, including those relating to the M11 and N25. We will deal with the benefits and costs of that approach in the capital review.
The Minister has not answered my questions on the viability of PPPs and value for money. There is already flexibility in capital spending whereby any investment can be spread over four years, which is why Sinn Féin provided for €1.2 billion of additional capital investment in our alternative budget. The Minister flunked that and missed an opportunity to have significant capital investment this year when it is most needed. According to a response to a query to the Minister's Department, only 11 post-project reviews of PPPs were carried out. The reports were never published or laid before the Committee of Public Accounts despite requests for them. In other jurisdictions, it is the norm to have pre and post-project reports. The level of monitoring and oversight in respect of PPPs in this State is very poor and lax. That is why we do not have the confidence that we are getting value for money because even the post-project reports are not being properly scrutinised by the Oireachtas.
The only one missing an opportunity here is Sinn Féin by the Deputy's not taking the opportunity to listen to the answer I gave. I made very clear that the capital spending review will consider the options, benefits and costs that such PPPs offer. Many projects have already been built but because they were pursued under the PPP model, there are payments the State will have to honour in coming years in respect of their maintenance. As the Deputy knows, many documents are not made public because they are commercially sensitive and because of the agreements we have made with Irish and international companies that have been paid to deliver significant infrastructure projects. I am not committing to more PPPs because I want to do the work to ensure I do the right thing for the infrastructure projects the State needs.
3. Deputy Dara Calleary asked the Minister for Public Expenditure and Reform his Department's plan to undertake an expenditure review in 2017; the timelines involved; if the review will include a comprehensive review of departmental expenditure ceilings; and if he will make a statement on the matter. [3598/17]
The Minister announced on budget day that there would be an expenditure review in 2017. We are three months on from budget day and I want the Minister to outline the detail of that review, the timescale involved and what impact it will have on preparations for budget 2018.
Preliminary work began on this at official level at the start of this year. I will be bringing to Cabinet in the next two weeks papers and proposals further laying out the process and the manner in which I aim to deliver this work.
This review will systematically examine the costs of existing policies to identify scope for funding of new initiatives from existing resources. This represents a change from the approach taken in previous spending review rounds, with a focus on the need to prioritise between competing demands, rather than a need to reduce overall expenditure. This review will also see a move away from the comprehensive approach taken in previous years to a system of rolling selective reviews. All current departmental expenditure - with the exception of pay rates - will be examined over a three-year period.
The expenditure report for 2017 details the expenditure ceilings from 2017 to 2019 for each of the ministerial Vote groups, which are within the allocations allowed by the latest forecasts of available funds. The aim of this process is not to review or reduce expenditure ceilings, rather to examine existing spending within those ceilings to identify less efficient or effective areas and thereby create space for new, higher priority, more effective and efficient initiatives. This process operates within the wider budgetary architecture and the medium-term expenditure framework, which supports sustainable expenditure policy, anchored by adherence to the fiscal rules. This reprioritisation and focus on totality of spend, rather than on incremental increases in expenditure, is something I have repeatedly emphasised.
The spending review will operate as a separate but parallel process to the budget. This year, the spending review process is beginning earlier than would have been the case previously.
I am still in the dark as to the practical steps of the review. There will be rolling selective reviews and new processes. When will Departments be informed of the process? Does the notion of a rolling selective review mean that some Departments will not be involved in the process this year or will they all be involved? Will this process be completed ahead of the summer when Departments submit their various budget priorities for 2018? What will be the consequences? The Irish Fiscal Advisory Council said previous expenditure reviews and ceilings were consistently breached and raised. What will the consequences be or will there be discussions about consequences for a Department that does adhere to its expenditure ceilings? Will the new controls arising from the fiscal rules be part of this review?
Yes, all Departments will participate. We have selected, at official level, specific subheads within each Department that are equivalent to approximately one third of the expenditure under which this approach will be used, setting out the objectives for those expenditure subheads and using cost-benefit analysis and other economic techniques to determine whether they are delivering the objectives set in respect of them. I would expect the work to be completed in the second half of this year rather than the first half. It will be exceptionally serious if a Department breaches its expenditure ceiling. All our efforts go in month after month to making sure it does not.
The spending review will be complete in the second half of this year. Can the Minister confirm that it will not have any impact on budget 2018? He has identified a third of the expenditure in the various Departments. How were those budget votes identified? If they are excluded will they not be limited or subject to scrutiny? Does that mean that certain areas of expenditure will get away with not being scrutinised? How were the various Votes selected?
I answered the Deputy's question about the timing of the review when I said it will be completed in the second half of 2017. Clearly, my objective is to get this work done as early as possible in the second half of 2017. That would facilitate the redeployment of existing expenditure in the hope of delivering new initiatives next year, or delivering existing objectives in a better way. Areas of expenditure were selected on the basis of policy relevance and discussions between officials in my Department and the Department that is responsible for the relevant subhead. The answer to the Deputy's question about whether other areas of expenditure will get away with it is "No". We have outlined a rolling process. The objective is that we will cover a third of Government expenditure every year. This means we are aiming to cover all Government expenditure over a period of approximately three years.
