Mr. John McKeon:

I thank the Chairman and members. I circulated, in advance, a copy of my opening statement. I do not intend to read through it all because it is quite lengthy and I am conscious of the time constraints. While I put a lot of information in it, because this is a new committee and many members of the committee might not be as familiar with the Department as previous members, I also put some background contextual information in it, so apologies to Deputy MacSharry who has probably heard some of this before but I will try to skim through it.

The Department is responsible for the provision of policy advice and the delivery of services across a broad and expanding remit. The traditional range of cradle to grave welfare services covers employment services, the operation of redundancy and insolvency payments, general registry services, citizens information and advice services, and pensions supervision. The impact of the Department's work is felt by every person, family and business in the State. If a single statistic can encapsulate its impact, it is that the schemes and services delivered by the Department reduce the risk of poverty by some 50% compared with what it otherwise would have been.

In delivering on this brief, the staff of the Department strive to always deliver an effective and efficient service. In doing this, they are very mindful of the vulnerability of some of the people who rely on our services. However, it is inevitable, given our breadth and scale, that failures will occur. It is equally inevitable that when these failures occur that we hear about them much more quickly than we hear about the normal, routine, high level of service in, for example, processing over 2 million claims and making about 80 million payments across more than 80 different schemes and services every year. This is not to diminish the cases where we have failed or could do better. We also have to recognise and learn from these cases. That is why the work of the Comptroller and Auditor General not only in reviewing our accounts but in examining, every year, specific aspects of our operations is welcome, as is the scrutiny by this committee.

Turning to the accounts of the Vote and the social insurance account, the 2019 accounts show that the total expenditure on Vote 37 amounted to €10.65 billion. This represented a reduction of €79 million, or just under 1%, compared with 2018 and was within 0.5% of the Revised Estimate for the year, taking account of the supplementary provision for the Christmas bonus. Expenditure on social insurance services amounted to €10.73 billion, an increase of €672 million, or just under 7%, compared with 2018. Combined expenditure of €21.4 billion represents approximately 10% of the modified gross national income.

Looking across both the Social Insurance Fund and Vote, the total increase in gross expenditure from 2018 to 2019 was €592 million, or 2.8%. There are a number of key drivers of this change. For example, 2019 budget measures included increases in primary rates of payment across all schemes. The key driver of note is the demographic effect on pensions. Pension expenditure increased by €457 million or 6%. Similarly, illness-invalidity payments, which are also related to demographic changes, increased by €230 million, or 5.4%.

These demographic trends are likely to continue with significant implications for expenditure and funding of the social welfare system. The most recent actuarial review of the Social Insurance Fund, for example, indicates that social insurance contribution rates would need to double, from a current date, in order to maintain the fund in balance over the next 30 to 50 years. Stated another way, at present pension payments are equivalent to about 27% of the total combined income tax and PRSI receipts. The actuarial review projections would see this ratio increase to somewhere between 40% and 50% over the next 30 years or so.

One of the challenges faced by the Department is to strike a balance between, on the one hand, designing and managing large-scale service processes that are reliable, efficient and effective for the majority of customers and, on the other, implementing controls and checks to assure payment and service integrity. However, we are mindful in doing this that our primary purpose is to support people who need support, and that we cannot pursue the elimination of fraud and error at the cost of unreasonably denying entitlement to service or frustrating access to that entitlement.

Looking at the report the key table of note is figure 4.3. This summarises the level of excess payments due to error or fraud as measured across 16 of the Department's schemes representing about 80% of expenditure. Although the level of excess payments varies by scheme, the overall level of excess payment is estimated at about 3.4%. This level of excess payment is similar to that measured in peer organisations. It also compares with rates of bad debt, typically 2% to 5%, and shrinkage, typically 2%, reported in commercial industry. That is not to say that we cannot do better.

The Comptroller and General's report contains several recommendations with regard to the further targeting of reviews, the monitoring and resourcing of review activities, the more timely completion of control survey reports, and the testing of new system implementations. The Department will take all these recommendations on board in 2021.

I understand committee members have expressed an interest in discussing issues related to false self-employment and the operation of the JobPath service. Both of these topics were the subject of detailed discussions at this committee and other committees in recent years. In order to assist the committee, we have provided some additional material, which was not available at the time of previous discussions, in the material we provided before this meeting. We will be happy to take further questions on these topics.

In conclusion, it is traditional for an Accounting Officer to conclude his or her address to the committee by acknowledging the role of staff in delivering the services for which he or she is accountable. In a normal year, the Department would typically receive about 200,000 jobseeker claims. So far, in response to the Covid-19 crisis, the staff of the Department have processed about 1.5 million claims from the people who were laid off due to Covid. This is equivalent to about 7.5 years' worth of claims. In the five-week period from 13 March alone, they dealt with more than four years' worth of claims and got them into payment quickly on a new scheme, the pandemic unemployment payment, that was itself designed, developed and implemented on a new IT system in a matter of days.

We also introduced a new illness benefit payment, worked with Revenue to develop the temporary wage subsidy scheme, and revised processes for community welfare services. We set up and staffed new call centres to respond to millions of queries and deployed new online service systems. Visits to our website of more than 12 million, use of our online services of more than 1.5 million, and calls to our call centres of more than 5 million exceeded those to all other public service organisations combined. We received an online application on average once every 40 seconds.

To facilitate all this, staff worked on emergency legislation to enable us to provide payments, modify redundancy arrangements and operate the civil registration service. Staff also continued to accept and process claims for all of our other key services, including carers, pensions and disabilities. None of this could have been achieved unless staff continued to come to work, and work long hours, at a time when the public health advice was to stay at home. I am proud to work in the same organisation that they do and I thank them for their commitment. Their demonstration of real public service values has been exemplary and it was not just our staff. I also wish to acknowledge and thank the staff of other Departments, Fáilte Ireland, the Passport Office, the Department of Justice and the National Shared Services Office who came to work with us. I also wish to acknowledge and thank our colleagues in the Revenue Commissioners who took on the development and administration of the wage subsidy scheme. Service partners such as An Post and our branch office providers, and our IT partners also contributed greatly.

The response of staff in the Department, and the wider public service, to the Covid-19 pandemic while exceptional is not unexpected. I see every day how the managers and staff of the Department, work hard to deliver services to the communities from which they come and in which they live, conscious that it is their families, friends and neighbours who not only depend on these services but who, through their social insurance contributions and taxes, pay for these services.

Having said that, we know, as I said, that we are not perfect and do not always get things right. This process today plays an important role in reminding us of our purpose, helping us to identify areas for improvement and helping us to learn from our mistakes. I, and my colleagues, will be pleased to discuss these issues and take any questions members may have.