Mr. P. J. Fitzpatrick:

I thank the committee for inviting members of the implementation body. We said on the last occasion that we would be happy to return when we had completed the second review of the public service agreement.

I welcome the opportunity to brief the committee again on the ongoing implementation of the agreement and, in particular, the second report. I am joined by the secretary to the implementation body, Mr. Colin Menton. As I mentioned on the last occasion, I am here as the independent chairman of the body; I am not representing management or trade unions or their agendas. I will seek to provide the committee with a fair, impartial and objective assessment of progress made or deal with other issues the Chairman or members wish to discuss with me. I will provide the committee with a short overview of the second annual review report and then deal as best I can with questions or other issues the Chairman or members wish to raise.

On a point of clarification, there is sometimes confusion about this, although I realise that is not the case here, but it is not the role of the implementation body to make decisions on reforms or the structures that need to be put in place to deliver them or on the size and scope of the public service. That is the role of the Government and management in the various Departments and the hundreds of organisations throughout the public service. The agreement can and must enable decisions that have been made by the Government or management to be implemented with the co-operation of staff and their representatives in a climate of industrial peace and full co-operation. I continue to be encouraged by the support and commitment of my management and union colleagues on the body. They have been unstinting in their determination to make the agreement work, often when there are difficult issues for them to confront.

As members will know, under the agreement, the implementation body is required to carry out an annual review for the Minister and the Government which must quantify the sustainable savings achieved and the progress being made in each sector in implementing the change and reform agenda. The review was completed in April and May this year and the report was presented to the Minister and the Government and published in June. We plan to carry out the next review in line with the calendar year; therefore, it will be for the 9 month period ending in December, as that will make it easier to make comparisons with Budget Statement outcomes and so on.

We made a number of key findings. We have concluded that the agreement continues to be a very effective enabler for the implementation of the reforms and changes provided for in the agreement and the more recent Government public service reform plan which was reported on separately a few weeks ago. A key role of the agreement when it was drawn up was to enable a sustained and large reduction in the size of the public service. We noted that a very substantial reduction in numbers, some 11,500, had taken place during the review period. That significant reduction presented particular challenges for both management and staff during the period which, in the view of the implementation body, were responded to effectively. The committee will recall that when we appeared before it previously there was concern about the retirement of some 8,000 staff in the first two months of 2012. In particular, the redeployment provisions of the agreement, its other major feature, have been critical in enabling public service organisations to maintain and develop services with significantly fewer staff. We are satisfied from all of the evidence we have seen in the second year of the agreement that management, staff and trade unions are co-operating with the reductions in numbers and the redeployment provisions, some of which are not often that easy because personnel can be and have been redeployed up to 45 km away.

The agreement continues to be successful in ensuring the large reduction in numbers and the necessary and fundamental reform that flows from it have been and continue to be achieved in a climate of industrial peace, notwithstanding the magnitude of the task of maintaining services with almost 30,000 fewer staff than in 2008. That is not to imply for one minute that it is all plain sailing. Issues do and will always arise when one is implementing major changes and, if they did not, there would be something wrong with the ambitions set in terms of change. As I said on the last occasion, one of the benefits of the agreement and its dispute resolution provisions is that they ensure when disagreements arise, they are dealt with speedily and in a timebound way - there is a six week period for consultation and a four week period for the LRC-Labour Court process.

It is also important to note that the outcome of the Labour Court process or arbitration in the case of the Civil Service is binding on both sides. There is no opt-out if issues are referred to a third party. That, in its own way, creates an incentive for management and trade unions to reach agreement in face to face negotiations. For example, I chair the Garda sectoral group because its members are not and cannot be part of the ICTU. I also chair the Defence Forces sectoral group. The new Garda rosters which were introduced in April and represent a massive change across the country were the first change made in 50 years. The change was successfully negotiated without reference to a third party; there was no involvement in terms of mediation or arbitration. My involvement as chairman was minimal; management and unions did the work. Other changes such as the introduction for the first time of a performance management system in the Garda; the transferring of compensation injury claims from the courts to the State Claims Agency, which involved a saving of approximately 40% in legal and medical fees; co-operating in outsourcing in the operation of speed cameras; and civilianisation, which has been implemented at passport control at airports and in other areas have all been agreed to in face to face negotiations and not once did anything have to be referred to a third party. There is an incentive for management and unions to negotiate, but there are some issues that end up being referred to a third party because management and unions cannot resolve them and the benefit is that the outcome is quick and binding. In other words, there is no hiding place in obstructing change under the agreement.

Turning to pay and non-pay savings, we found that the agreement facilitated the delivery of further significant savings. The Exchequer pay bill has been reduced by almost 18% between 2009 and 2012, net of the pension related deduction. We found that in the second year pay bill savings amounting to €650 million were facilitated by the agreement. We also recognised that the Government had announced that it was going to fill some front-line posts. We checked with the Department of Public Expenditure and Reform what the limit might be and it advised that there might be recruitment to fill up to 3,000 front-line posts. We then allowed for this. In other words, the figure of €650 million was reduced to €521 million to allow for the fact that there might be recruitment. We did not want to publish figures that might by year end be overstated by the equivalent of 3,000 staff. As of now, that provision of 3,000 has not been utilised; there are about 2,000 fewer under the ceilings set. I do not know what the figure will be by the end of the year. There will certainly have been an increase in terms of the number of teachers in September in the education sector. The figure we reported and the one we have used is €521 million which is probably on the conservative side; it may well be different when we have the end of year figures. We also found that the agreement continued to leverage non-pay savings. Savings equivalent to €406 million on an annualised basis were reported to us.

In summary, in the first two years the agreement has delivered €810 million in sustainable pay savings and €678 million in sustainable non-pay savings, giving a total of €1.5 billion. The target is that by 2015 the Exchequer pay bill will have been reduced by €3.8 billion, or €3.3 billion net of expected increases in public service pension costs. We were asked on the last occasion to consider not doing this by including more than a footnote in the second report.

We have done that. We have set out in the report the year-on-year increase in pension costs. They do not necessarily arise from the agreement but as a result of the numbers retiring or leaving the public service for whatever reason. We included that and we have a table in the body of the report showing the year-on-year increase. The pension costs are €3.8 billion gross with an additional pension cost of approximately €500 million by 2015 from 2009. The reason we took 2009 as the base is because that is when the public service pay bill peaked, when the last phase of the previous pay agreement kicked in. We have given many examples in the report. I will not go through them all. There are many examples of new roster arrangements that match peak demand to services. I mentioned the Garda. There are new rosters in the prisons. We have extended working days and new rosters in laboratories, radiography departments and many nursing units. Discussions have taken place at the LRC with consultants on extended working days and weekend working. There are also new rosters for non-consultant hospital doctors. There has been much development around more efficient and more cost-effective rostering.

I mentioned redeployment. Again, another 200 secondary teachers and 950 primary teachers have been redeployed. Before the agreement there was no redeployment of second level teachers at all. Significant costs have been avoided because teachers are being replaced. There is no moratorium on the recruitment of teachers. A significant cost is avoided with the redeployment of 950 primary and 200 secondary teachers. We are not claiming that as a saving. We are simply making the point that if the redeployment provision did not exist then more teachers would have had to be recruited. A total of 4,500 people were redeployed or reassigned throughout the health service during the year. Hundreds of administrative staff in the Civil Service and State agencies have been redeployed, some to other Departments to meet increased demand, such as the Department of Social Protection, others where agencies have numbers that are in excess of their authorised numbers and they have to reduce their numbers so staff are being redeployed. There is a range of such movements.

Quite a bit of reconfiguration is going on. We have a lot of examples in the report about areas such as mental health, child care, services for the elderly and health. The closure of the Army barracks and the collapse of three brigades into two in the Defence Forces has resulted in a significant reconfiguration that has impacted on thousands of Defence Forces members. There has also been much reconfiguration of local offices in the Departments of Social Protection and Agriculture, Food and the Marine, Teagasc offices and the courts.

Work practice changes have been progressed. Terms and conditions have been standardised such as annual leave, sick leave and pension arrangements. The committee is probably aware of the recent Labour Court ruling on working hours in the local government sector. VECs are to follow. Streamlined, centralised and shared services have been progressed in many sectors. We have given examples of those. In education, the single student grant, for example, replaces four separate grants previously administered by 66 different agencies. One body, the Dublin VEC, administers the scheme and online facilities are available for people to use. It has simplified the maze students and parents had to go through previously.

The centralisation of the medical card processing system has taken place. A national procurement model has been adopted in the health service. More national procurement frameworks have been put in place by the National Procurement Service. The HR shared services of the Civil Service is significant. Members might have heard about it. We are talking about savings in the order of €12 million per annum and a reduction in staff numbers of approximately 149 following the development of a shared services centre.

When we were before the committee last year there was discussion about evidence relating to productivity and how it was faring with reduced numbers. This time we sought to include information on activity levels. I will not go through it in detail but members will see from the report that in virtually every sector demand has increased, which is what one would expect in a recession in any event. I refer to demand for social welfare services, health services, employment and services generally. That is evident in the Prison Service and in Revenue. We have given examples and I am happy to elaborate on them but I will not go through them in detail. There are many good examples in the report.

On the pace and ambition of change, notwithstanding the progress that has been reported, the body is of the view that the pace and ambition must be systemic and fully address the fiscal challenges that lie ahead, which are still significant. There is no doubt that the establishment of a dedicated Department of Public Expenditure and Reform, and the reform and delivery unit within it, together with the external recruitment of staff with the skills to drive shared services, procurement and contract management has been of huge benefit to the implementation body. There is a complementarity in that much of the change agenda under the Croke Park agreement and the reform agenda are separate, but there are overlaps as both require the buy-in of staff and unions and co-operation. We, as an implementation body, have found the establishment of a dedicated Department to be very helpful and to be of huge assistance to us. However, as we say in the report, the Department alone cannot drive the reforms for the entire public sector. We are talking about well over 20 Departments and hundreds of agencies. Managing change in one organisation is a huge challenge. Managing change in hundreds of organisations simultaneously is doubly so. The Department does need the support and active engagement of top management in all sectors. We have repeatedly emphasised the critical role of management across the public service in terms of devising ambitious plans for change and leading that change.

Our view is that the sustainability of the agreement will be measured against its ability to accelerate the pace of change and its potential for extracting further Exchequer savings, both pay and non-pay. Clearly, a priority issue for the agreement would be to support the achievement of the Government’s 2015 target for public service numbers of 37,000 or reducing the overall number to 282,000. It is a challenging target but we believe it can be done. The recent collective agreement between public service management and the public service unions on voluntary redundancy terms is an important development, if it is required. Further and more fundamental reform will be necessary to ensure that services are maintained to the greatest extent possible as numbers continue to reduce. We made it clear in our June report that a range of priority change initiatives still need to be urgently progressed. Further roster changes, in particular for nurses and consultants, are required. Skill mix in the health service is an area that requires attention, as is benchmarking under its support staff programme

We have seen the example with shared services when the business case was produced for HR shared services and the scope for savings. There are many other areas where there is scope for savings across the entire public service. We have been driving this forward and some sectors have taken it up and are moving on it more quickly than others. In any sector where there is a large number of bodies doing pretty much the same work, there is no reason that they should all have their own HR departments, payroll and pension sections. We have seen a good example with the Civil Service shared service model which has been driven by Paul Reid and his people. Work has started on it and we have seen the business case savings on that which are significant.

Performance management is still a big issue, and it must be driven right across the public service. The recent review of the performance management system certainly does give it more teeth. It addresses some of the issues we discussed here on the last occasion about the power of managers to discipline the public service and the fact that they do have the same power as managers elsewhere. There are positive aspects to the performance management system. It has developed a system for those who are doing a good job. There are, of course, thousands doing a good job so I would not like to give the impression that there are not many people doing a good job. The revision of the sick leave scheme is a positive aspect as well.

We need to see further changes to work practices, particularly where there are outdated working arrangements, extended working hours, and there ought to be efforts to ensure the availability of resources to front-line services by making full use of the redeployment provisions of the agreement. We need to see continuing co-operation on the rationalisation of structures, organisations and offices. Any agency rationalisations or amalgamations that have been progressed so far have enjoyed full co-operation, including in respect of the redeployment arrangements that are very often necessary to enable those rationalisations or amalgamations to happen. We give some examples in the report.

More effective inter-agency co-operation must be considered. One considerable area that the Department of Justice and Equality is examining is co-operation between the courts, Garda and prison service, particularly with reference to the utilisation of fewer prison officers and gardaí.

Let me return to a point I have mentioned here before and at many fora, that is, the need for more online services. These are critical. They involve providing a better service to the customer or user and reducing the work for the staff in organisations. There is still much potential in this area. Much progress has been and is being made. However, there can be no let-up in this area.

In summary, it is clear that the agreement continues to deliver, but there are challenges ahead. Industrial peace has been maintained. When I last appeared before the committee, we continued to insist that action plans for savings and reform be sufficiently ambitious, both in their scope and timeframes for delivery. We have just completed a series of meetings with the top management of other sectors, although we must still meet representatives in the defence area. We emphasised once more the importance of accelerating change through reviewing action plans. We all know the budget challenges will not be any easier and that they will be significantly more difficult. We were frank in our report in saying it is not sufficient for management to rely on the reforms delivered to date, however significant or welcome they might be. We recognise there is further change required in light of the continuing difficult circumstances confronting the economy.

The agreement continues to provide a very effective framework. I have seen nothing frustrated or stopped by the unions or staff. Where there are disputes or issues that cannot be resolved genuinely, there are fora to achieve this quickly. That is what is happening where disputes arise.

I assure the members that the body will continue to do what it can to increase the momentum around the agreement. We will also be working to ensure that all sectors play their part. I thank the Chairman for the opportunity to brief the committee on recent developments. I will be happy to deal with any questions they have on implementation. I know they will be taking up the progress report with various sectors and Accounting Officers. As I said at our last meeting, this is mutually beneficial. I thank the Chairman and members.