Brendan Howlin (Wexford, Labour) | Oireachtas source

I welcome everyone back and wish them a happy new year.

I am pleased to have the opportunity to present the 2014 Estimates for my Department’s group of Votes that have been outlined by the Chairman. The group comprises a sizeable number of Votes including the following: the Vote for the Department of Public Expenditure and Reform; a new Vote for the Office of Government Procurement; the Vote for shared services that was introduced for the first time last year and is now expanding as we produce more shared services; the Votes for a number of offices under the aegis of my Department including the State Laboratory, the Public Appointments Service, the Valuation Office and the Office of the Ombudsman; and, finally, the Votes for superannuation and retired allowances that provides for Civil Service pensions and, everybody's favourite, the Secret Service. The Vote for the remaining element of the PER group – the Office of Public Works – will be taken separately by my colleague, the Minister of State, Deputy Brian Hayes.

I wish to draw the attention of the committee to the fact that the 2014 Estimate for my Department has been kept at the 2013 level by savings being driven in certain areas. This has meant that the additional costs associated with the initial funding of the Office of the National Lottery Regulator, that will come into being this year, could be absorbed within existing resources. Similarly, employee numbers in the Department have been maintained at 2013 levels while additional services have been delivered, for example, in the Office of the Government Chief Information Officer.

The PER Vote comprises two programmes as the name of the Department indicates – public expenditure and sectoral policy and public service management and reform. The key outputs of the first programme includes the provision of advice on sustainable current and capital expenditure policy, the promotion of a stronger focus on value for money and performance information and the implementation of policies to reduce public service numbers.

Overall net expenditure for 2013 was kept at €43.1 billion which is well within the target of €43.4 billion that we set for the year and represented a net underspend of €321 million for 2013. Year-on-year net expenditure last year was 4.2% or €1.9 billion lower than in 2012. This continues the strong trend of expenditure control that we have laid out.

Last year I spelt out at some length to the committee what my Department had introduced by way of structural reform of the Estimates process. These included performance monitoring and reporting, the formulation of a new public spending code and the establishment of the Government economic and evaluation service. I also made specific reference to the proposed introduction of a multiannual expenditure framework. I indicated that the objective of the new framework was to allow for sensible, structural planning and prioritisation within each area of public expenditure.

In 2013, I introduced the legislation that underpins the new framework and implements the wider fiscal reform measures that have been introduced across EU member states generally. The legislation puts into operation the expenditure management component of the so-called six pack of five directives and one regulation that introduced, among other things, an expenditure benchmark. The purpose of the benchmark is to set a multiannual upper limit on general Government expenditure. It means that states will have to monitor and control public spending developments in line with a realistic potential GDP growth over the medium-term.

The expenditure benchmark is the core expenditure rule with which the Government and the State are legally obliged to comply in the annual and multiannual budgetary processes, by virtue of the direct effect of the regulation and the inherent supremacy of EU law. Under the benchmark the Government expenditure ceiling places a limit on the level of our total annual gross voted expenditure. That ceiling is then apportioned into individual ministerial expenditure ceilings for both current and capital for the next three years in each Department, as Deputies know. The ceilings for 2014, 2015 and 2016 were published in the Expenditure Report 2014 on budget day 2013.

This is a new top down approach to budgeting. In the past, expenditure growth was, at times, allowed to outpace the economy’s underlying ability to finance it. The new approach radically changes the Estimates process and introduces a major reform by setting out the Government’s medium term budgetary plans and overall spending allocations clearly over time, thereby allowing Departments to plan their budget structure in advance. In that context, the Government has indicated that in the course of 2014, it will undertake comprehensive reviews of both current and capital expenditure. As Deputies will remember, we carried out a comprehensive review of expenditure in 2011. I am interested in talking about, at some length, later in the year on how the committee might involve itself in the process.

The reviews will involve an in depth examination of public expenditure. They will allow the Government to recalibrate the expenditure ceilings published on budget day in line with changing priorities and informed by evaluations of how public resources are being used. The focus of the reviews will be on ensuring that public resources are used in an efficient way to deliver effective services. I must emphasise that the overriding function of the process is to ensure that we spend the resources available to fund services in the best possible way. Given the fiscal challenges that Ireland continues to face, and in order to meet the pressing targets required to restore the sustainability of the public finances, the Government is required to make difficult choices and enforce prioritisation across all areas. We want to do so in an as open a manner as possible.

In summary, the process of reducing the total level of spending must be complemented with a more nuanced approach to focus on attaining the right balance of expenditure. The review process will commence over the coming weeks.

My Department's second programme is public service management and reform. Just over two years have passed since the Government’s first public service reform plan was published in November 2011. Substantial progress has been made across a range of areas in terms of reducing costs, delivering better value for money and improving services. Details of progress are set out on the second progress report on implementation of the plan that I published yesterday and I hope all Deputies will have received same today.

There is a need to constantly update our plans and revise our objectives to ensure that the reform agenda remains ambitious and relevant so that we do not lose momentum. In this context a new wave of public service reform was also published yesterday in tandem with the progress report. We will build on progress and set out the Government’s ambition for reform over the coming years. It outlines the key cross-cutting and sectoral reform initiatives that will be implemented over the next three years. It also looks further forward to address the ambition for reform towards 2020.

As well as continuing to drive efficiencies and cost savings across the public service, the new reform plan will have a strengthened focus on achieving better outcomes for service users, that is citizens and businesses. This will be centred on using alternative models of service delivery and will change the way the public service designs and delivers services.

The new plan has placed particular emphasis on making use of digitalisation and open data. A new Government ICT strategy will be published in the first half of this year. It will address the use of new and emerging technologies, ensuring that e-Government is designed around real needs and takes steps to improve take-up of digital government. The plan has also addressed a wide range of other issues. These include the implementation of shared service models; the evaluation of new business models for the delivery of non-core services; the reform of public procurement; property rationalisation; strengthening leadership; and human resource management reforms. We do not have the time today to go into the specific detail of the new reform plan. However, I have already written to the Chairman with an offer to meet the committee, whenever there is a time slot available, in the coming weeks to discuss the reform programme in detail.

The reform and delivery office, RDO, established within my Department is overseeing and driving the reform programme. It is sometimes necessary to invest in the short-term which will be something that we will deal with when discussing money. We need to pay upfront in order to make savings into the future. It is for this reason that the RDO has been allocated €1.8 million in 2014 for the reform agenda fund. The RDO funding will support a series of reform projects and initiatives, including some of those set out in the new public service reform plan. Funds will also be used to source necessary technical and expert support, on a temporary basis, as well as increasing programme management and programme delivery capacity and capability.

As part of the implementation of the public service reform plan, the RDO has initiated a cross-departmental process to renew and refresh the vision and strategy for the Civil Service in order to ensure that the sector as a whole has the capacity, capability and commitment required to successfully meet the challenges it currently faces and will face in future. The programme is led by a cross-departmental Civil Service task force that is in the process of refining ideas and proposals. It will develop final recommendations with a view to publication in the first half of 2014.

The Haddington Road agreement sets out a number of equitable and sustainable measures to deliver a further reduction of €1 billion in the public service pay and pensions bill by 2016. It will enable the delivery of the next stage of the Government’s ambitious reform agenda as set out in the reform plan. The implementation of these measures is well advanced and the agreement is already delivering on its objectives. As we outlined our target, savings of €300 million were incorporated into the Votes last year and achieved. It represents a real and tangible reduction in expenditure.

While these monetary targets are important, we must also remember some of the other key benefits of the agreement go beyond mere monetary implications. It provides us with the scope to progress the reform agenda and to deliver unprecedented increases in productivity across the public service, specifically, the provision of an additional 15 million hours across all sectors of the public service.
We must make the most of the opportunities which the Haddington Road agreement affords us. On foot of our successful exit from the EU-IMF programme, the challenge of meeting our fiscal targets will remain. Managers throughout the public service need to be fully aware that further consolidation is required and in this context make full use of the range of options available to ensure resources are used efficiently and effectively. This will include the full use of the 15 million additional hours already mentioned.
Finally, it would be remiss of me and the Government not to acknowledge that the savings sought and delivered from the public service pay and pensions bill are extremely difficult and challenging for all public servants. I thank public servants. Many people said they would not vote for the Haddington Road agreement. Forty unions have done that for which I compliment them. However, the reductions achieved and required are a necessary and significant contribution to the fiscal consolidation process to bring our expenditure deficit under control in line with our targets.
In addition to progress in public service reform, we have been pursuing a wide-ranging political reform agenda. This is aimed at delivering open, accountable and ethical government underpinned by a transparent, efficient and effective public system to rebuild trust in government and in the institutions of the State. Many of the commitments in the area of political reform set out in the programme for Government and in the public service reform plan are now in delivery phase - this committee is involved in many of them - and real progress is being made on several different fronts including, for example the Houses of the Oireachtas (Inquiries, Privileges and Procedures) Act 2013 which was enacted in July and commenced in September 2013, the Protected Disclosures Bill 2013 and the Freedom of Information Bill 2013.
The committee has been supplied with detailed background briefing by my Department’s officials on the various Votes in the Public Expenditure and Reform group. I wish, however, to refer specifically to a number of Votes, including Vote 18 (shared services). A provision of €30.6 million is sought for Vote 18 (shared services), compared to €20.6 million last year. The increase in the allocation reflects that PeoplePoint, the HR shared service established in 2013, will be in operation for a full year while the payroll shared services centre will be coming onstream during the course of the year.
A new Vote, Vote 41 for the Office of Government Procurement is being introduced and a net funding allocation of €12.431 million is sought for 2014. This represents a transfer of resources from my own Department, and from the Office of Public Works, where the procurement function currently resides of some €7 million, which represents the funding of the National Public Procurement Policy Unit and National Procurement Service. A further €5.5 million will be required in 2014 for the up-front costs associated with premises,systems, and for additional staffing.
Reform of public procurement is one of the major projects of the reform strategy. Procurement of supplies and services accounts for around €9 billion of current spending by the State per annum. This represents a very significant portion of overall spending and it is, therefore, essential that the public service achieves maximum value for money and operational efficiency in its approach to public procurement. A key element of the public service reform agenda is to reduce costs and achieve bettervalue for money through reform of public procurement. To this end, the Government established the Office of Government Procurement under the direction of the chief procurement officer. This new office is targeted with and has planned for the implementation of centralised procurement services to deliver savings of up to €500 million over the next three years. A target of €127 million in savings in procurement has been set for 2014. These savings will be delivered through price reductions, management of specifications and demand management. This office will work within EU regulations to support the Irish SME sector, which is very important - a point raised by many Deputies - to identify the challenges for SMEs when transacting business with the public service and, most importantly, to come up with practical solutions to these challenges where possible.
I thank the Chairman and members for their attention. I commend the Estimates to the committee. I will be happy to answer any questions which may arise.