Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I thank the committee for the opportunity to present to it a proposal for two Supplementary Estimates within the Public Expenditure and Reform group: a net Supplementary Estimate of €6.5 million, or a gross figure of €10.5 million, in respect of Vote 12 – Superannuation and Retired Allowances, and a Supplementary Estimate of €664,000 in respect of Vote 17 - Public Appointments Service.

The Supplementary Estimate in respect of Vote 12 will bring the total 2017 Estimate for Superannuation and Retired Allowances to €550.4 million in gross terms and €366.4 million in net terms. This Supplementary Estimate arises mainly from the fact that this year, there have been more retirements than forecast under the pension scheme for established civil servants. In addition, balances have been payable to former civil servants who retired in 2009 under the incentivised scheme for early retirement. The pensions and lump sums that are paid under the pension schemes for established civil servants comprise just under 90% of total gross expenditure on the Superannuation and Retired Allowances Vote. This means the main driver of the annual cost is the number of established civil servants who retire each year. For various reasons, it is particularly difficult to estimate the number of retirements from one year to the next. Most established civil servants may choose to retire within a five-year window between the ages of 60 and 65. In addition, a number of people under the age of 60 retire each year under cost-neutral early retirement schemes or on grounds of ill health. Each year, a number of former employees become eligible to claim a preserved pension entitlement. The average lump sum and pension benefits that fall to be payable to new retirees in any given year vary depending on the grades and years of service of that specific cohort of retirees.

This year's gross Estimate for Vote 12 of €539.9 million was based on a forecast of 1,320 retirements from the established scheme. There have been 1,309 retirements to date this year. This trend suggests there could be up to 250 more retirements by the end of the year. The effect of this higher-than-forecast number of retirements has been to put upward pressure on subhead A4, which relates to pension lump sums. As a general rule, for each person who retires, a once-off lump sum that is three times the size of that person's annual pension is paid. Increases in retirement levels have a particular effect on subhead A4, which provides for the lump sum payments to established civil servants. Therefore, subhead A4 is a key driver of variations in expenditure on the Vote in any given year. So far this year, €85.5 million has been expended from subhead A4, compared to the original full-year Estimate of €90.4 million. It is estimated that up to €18.6 million will be further expended by the end of the year. This would result in an overall projected excess of approximately €13.7 million under subhead A4. It is estimated that total gross expenditure on Vote 12 for 2017 may be approximately €550.4 million, or approximately €10.5 million in excess of the gross Estimate of €539.9 million that was voted previously by the Oireachtas. The committee should note that the level of the gross Supplementary Estimate being sought will be mitigated by anticipated increased levels of appropriations-in-aid. It had been estimated that appropriations-in-aid for 2017 would be €180 million and some €159.8 million has been received to date. Receipts with respect to the single public service pension scheme are ahead of profile so far this year. Total appropriations-in-aid are now projected at €184 million by the end of the year, or €4 million more than expected. This excess amount will act to reduce the net effect of the gross Supplementary Estimate.

The Supplementary Estimate of €664,000 in respect of Vote 17 - Public Appointments Service - will bring the total 2017 Estimate for that Vote to €12.044 million, which represents an increase of 5.8% on the original Estimate. This reflects the higher-than-expected levels of activity to meet the recruitment and resourcing needs of the civil and wider public service in the light of the improving economy, the end of the recruitment moratorium, the ongoing process of public service reform and the need to build resource capacity and capability across the public service. The committee should note that there are supplementary requirements under pay and non-pay costs within this Vote. An additional €196,000 on the pay side is requested to meet higher staffing costs this year as a direct consequence of the scale of additional recruitment and resourcing that the Public Appointments Service is required to oversee in 2017 in meeting its statutory obligations under the Public Service Management (Recruitment and Appointments) Act 2004. This funding will enable the Public Appointments Service to assign additional staff to recruitment and selection units and increase support to client Departments and offices.

A non-pay additional request of €833,000 is as a direct consequence of increased recruitment costs associated with increased operational activity. In 2015, the Public Appointments Service received 54,025 applications, interviewed 6,871 candidates and assigned 5,256 people to positions in the civil and public sector. By the end of October of this year, 75,000 job applications had been processed, 13,000 candidates had been interviewed and over 8,000 people had been assigned to positions across the public service. The total number of assignments may reach 9,500 by the end of the year. The Public Appointments Service is legally obliged to undertake this recruitment activity, which results from Departments, offices and the wider public sector restoring capacity after the ending of the recruitment moratorium and preparing for the future challenges presented by a growing economy, rising public expectations, public service reform and demographic trends. For reasons relating to the increase in the volume of recruitment activity, spending on interview boards, research and advertising and testing has been higher than expected this year. The additional request of some €1.03 million is offset by lower-than-anticipated capital investment spending this year for the Public Appointments Service of €365,000 due to timing factors. Therefore, the proposed Supplementary Estimate for the Public Appointments Service is €664,000.

I am satisfied that approval of the Supplementary Estimate of €6.5 million net for Vote 12 will confer the necessary legal authority to meet the pension entitlements of civil servants who are expected to retire up to the end of 2017. I am happy that the approval of the Supplementary Estimate of €664,000 for Vote 17 will enable the wider public service to restore capacity and prepare for the future challenges presented by a growing economy, rising public expectations, demographic trends and public service reform. I commend both of these Supplementary Estimates to the committee. I will be happy to answer the committee’s questions on these Votes.