Brendan Howlin (Wexford, Labour) | Oireachtas source

I thank the Vice Chairman and committee for the invitation to meet them today to discuss the 2014 comprehensive review of expenditure. As the joint committee knows, I published the outcome of that review process at budget time in the form of the Comprehensive Expenditure Report 2015-2017. All the relevant committees of course will have occasion in the coming few weeks to discuss the outcome of that process in detail with each line Department as they consider the 2015 Revised Estimates. However, it is important that I appear before members today to provide an overview of the process and of the overall outcomes. I look forward to the broad and informative discussion and debate I know will take place on all these key expenditure policy issues.

Over the past number of years, there has been a significant transformation of the budget cycle and of the overall approach to budget planning, on which I will touch. While the comprehensive review process is one element of that, another important element, and perhaps one on which we need to focus further, is how the Dáil, and in particular the committees of the Dáil and the Seanad, engage in and contribute to the budget process. The committees of course scrutinise and approve the annual Estimates and during the course of the year they also investigate and challenge spending policies across each Department of the Government and its agencies. However, in my experience, much of that engagement tends to centre around very short term, immediate issues. Dealing with immediate issues and problems of course is important but frankly, the discussions too often get reduced to gamesmanship, points scoring and party politics. I say that in no partisan way because Members from all sides of the House have engaged in it. However, as someone who is genuinely interested in the business of Parliament, I hope this process can be reformed and that change can be brought about. This is why the comprehensive expenditure report is important. It provides an opportunity, particularly for this committee, to have a much broader and more strategic policy debate around overarching issues and challenges facing public expenditure and policy options into the future. The report sets out an expenditure path for three years ahead. Just as importantly, however, it also raises longer-term expenditure policy matters that extend far beyond any individual Dáil term. Issues such as climate change, demographics and population trends will have an impact on public policy and budget management for the next two decades or more.

The comprehensive review process also included a number of short, targeted policy reviews by the Irish Government Economic and Evaluation Service and I wish to underscore this point because not everyone will be familiar with that service, which is a relatively new institution. It has been examining difficult issues on pension sustainability and a range of other issues. These issues perhaps are controversial and certainly are politically difficult and sensitive. However, such issues must be raised, examined and debated. Consequently, together with the comprehensive expenditure report, there are published papers which take a long-term view on expenditure policy challenges. These are available on the economic service's website and are presented as objective assessments, rooted in evidence and in the principles of policy analysis. They are intended to challenge and probe existing policies and expenditure approaches but members should not confuse them with Government policy or my views, for that matter. It is open to any of us, including myself, my departmental officials, all Members of the Oireachtas, politicians and the public, to agree or disagree with and challenge the analysis presented objectively by a team of economic experts. What is important, however, is that one supports the principle of evidence-based policy analysis in the public service and that such analysis is produced without veto from Ministers. I make this point because it was interesting to note that some papers we published were criticised as though they were Government policy. It is necessary to allow such rigour and debate and the base analysis must be provided to do this objectively. It is important that there is recognition and consensus that expenditure reviews are a key input into the budgetary debate about how resources should be best allocated. One must accept that all areas should be subject to such review.

A key priority for the Government when it came to power in 2011 was to instigate a broad-ranging and ambitious programme of reform right across the public service. I believe a huge amount has been achieved and in particular and critically in the modernisation of how the public finances are planned and managed. Among the first actions of the new Government in 2011 was one to put in place a new, multi-term budgetary framework to enhance the openness, transparency and structure to the overall budget process and, in particular, the management of public expenditure. The comprehensive review of expenditure process, which the Government undertook for the first time in 2011, is a key component of the medium-term fiscal approach. As a result, members have before them today - in the form of the Comprehensive Expenditure Report 2015-2017 - a published three-year, forward-looking plan for public expenditure which sets out clearly the overall fiscal and budgetary context for the period ahead, the Government's priorities for public expenditure and, at an individual Vote level, what the more than €50 billion in current Government spending will deliver for citizens in 2015. It contains an unprecedented level of financial information and programme level detail about what will be delivered by the State over the course of the next few years. This simply was not produced in this form nor made available in any form just a few years ago and the State's budgetary process and decision-making are better for it.

A number of other reform initiatives are also worth mentioning at this stage, including performance budgeting, IrelandStat and the Irish Government Economic and Evaluation Service, and I will deal briefly with each of them. The performance budgeting initiative is an ongoing reform process aimed at aligning spending, that is, what our evaluators call "inputs", with achievements or "outputs". The purpose is to bring clarity as to what Government spending is achieving for citizens and from there to allow for a more informed assessment and discussion of whether what is being delivered is good enough. As part of this reform, for example, the Revised Estimates, which I understand the committees will be considering this week and next week, present both a financial breakdown of programme spending and performance information in the form of short statements about the targets associated with moneys allocated.

In respect of IrelandStat, the Government has launched a new website that provides valuable public information on the performance of Departments across the areas that matter most to the people of Ireland. While the Government is still building up this information, even now it has a lot of detailed and easily-accessible information on areas such as the economy, education, and infrastructure. It is a good comparative website that will be populated fully over time. This reform is being made possible by the Irish Government Economic and Evaluation Service, which the Government decided to establish in 2012 and into which it has been recruiting trained economists and evaluators each year since. At present, more than 70 economists and evaluators are working on policy analysis and economic planning across almost all Civil Service Departments and the Government is still in the process of recruiting more. There clearly was a skills deficit in the system, which the Government is addressing and the positive impact in this regard is becoming increasingly evident. All of this ties in with the broader reform agenda launched recently for Civil Service renewal, which will introduce a much more robust accountability and performance management regime for civil servants, including Accounting Officers.

Turning specifically to the 2014 review process, it is important to draw a distinction between the previous 2011 process, about which I have spoken to the joint committee previously, and this latest exercise. The economic and fiscal backgrounds for each were very different and, therefore, the objectives changed from one process to the next, as did the outcomes. The 2011 comprehensive review of expenditure was undertaken at the height of the economic storm as Ireland battled its way through the first phase of the EU-IMF programme. It was dominated by an urgent need to reduced public expenditure in overall terms but in so doing, to protect key public services. By contrast, the 2014 review was undertaken against the backdrop of the Government having exited successfully the troika programme and, at around mid­point of the review process, a rapidly improving economic and fiscal environment. This meant that by the end of the review - for the first time since the onset of the current economic crisis - the Government could make decisions on budget allocations without recourse, as members saw in the last budget presentation, to further reductions. Consequently, the focus shifted from an emergency response to recovery planning, with the key challenge to build on the achievements of the previous few years and to put in place a spending plan that would secure full economic and social recovery.

To that end, this comprehensive report, which looks ahead over the next three years, is clear on a number of points. The efficiency and productivity improvements made by Government Departments since 2011 must be secured and expanded into other areas. Public expenditure policy and management must continue to focus on how best to use limited public resources. The space to provide additional spending of €429 million this year, the first increase in public expenditure since the onslaught of the crisis, has been made possible by the very careful management of the public finances of recent years and, therefore, continuing on this path is key to providing more room for increased spending in the years ahead.

What is most important to my mind about the comprehensive review process and the broader budget management reforms is that the Government now has in place a much more robust and evidence-based framework to help it to make budget and resource allocation decisions. This facility is also available to the committee. This does not necessarily make the decision-making process less difficult, particularly when very hard choices are to be made, but it does provide a more solid basis for making those decisions. As important is the resulting publication of a report which sets out more clearly than ever the Government's three-year spending plan and commitments laid out for Parliament and the public to examine and scrutinise.

Having given the committee an outline of the overarching reform context and the strategic objectives of the comprehensive review process, it might be useful for me to briefly describe the nuts and bolts of the process. The Government agreed the 2014 comprehensive review of expenditure should provide it with a precise set of decision options which would help realign spending priorities with the priorities set in the programme for Government, meet the overall agreed fiscal objectives, and help explore new and innovative ways of delivering Government policy in a reformed public sector.

Co-ordinated by the Department of Public Expenditure and Reform, the review involved all Government Departments, which were asked to examine existing expenditure in all of their main spending programmes, set out priority areas and future pressures, and identify opportunities for reform and efficiencies. The Government was presented with an overarching assessment of these evaluations early last summer. This formed the basis of the budget discussions which followed, and informed the final decisions made by the Government on the allocations of expenditure for 2015 to 2017, which were presented to the Oireachtas at budget time.

This approach sought to ensure the resource allocation decisions attained the right balance of expenditure and that public resources were used effectively and efficiently to deliver public services in effective ways. The public and other interested parties were invited to submit comments and suggestions on public expenditure and reform in the context of the review. It is interesting that more than 60 submissions were received from a mixture of individuals and organisations. These all fed into the process and were considered by relevant Government Departments as part of the analysis. A selection of the proposals received are available on the Department's website.

Economic conditions are improving. There are reasons for optimism following the recent crisis we have endured, but in Ireland, as in other countries, there is a need to ensure the resources provided by taxpayers are managed carefully and it will always be thus. In our post-economic crisis environment, spending reviews should not be regarded simply as a tool for reducing expenditure. Instead they should be seen as a feature of the budget preparation process and a core instrument for ensuring good expenditure prioritisation and proper decision-making. Spending reviews give the Government the opportunity to examine how public resources are used, to set out how public resources should be used, and to examine where new spending proposals can be accommodated in existing budgets. I strongly advocate they should be here to stay because they are critical for informed and balanced fiscal management. They are also a growing feature of how all progressive governments deal with budget planning. I look forward to hearing the views of the committee and answering any questions that might arise.