Brendan Howlin (Wexford, Labour)
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I thank the Chairman for responding so quickly to my letter offering the committee an opportunity to be brought up to speed on the Government's public service reform plan, one of the most important jobs of work the Government is undertaking. The last time I attended the committee I stated no one had a monopoly of good ideas. Traditionally, I have been a strong supporter of the Oireachtas being fully involved in actions, particularly on the reform side. I value members' opinions and advice on what we must do.

I am joined by the Minister of State, Deputy Brian Hayes, who works closely with me on implementation of the plan. The committee knows the Secretary General, Mr. Robert Watt, and the assistant secretary, Mr. Paul Reid, whom we have recruited to drive the dedicated reform office. We have just come from a Cabinet sub-committee meeting at which the sectoral plans driving the reform agenda were considered. Last month we published a statement on the implementation of the reform plan, a copy of which I forwarded to all of the committee's members for reading. The statement set out the significant progress made in the first ten months of the plan. I thank the staff of my Department, as well as those of all other Departments, for embracing the reform agenda.

It is fair to say the Government has embarked on the most ambitious and comprehensive public service reform programme in the history of the State. No previous Government has taken on anything of this scale and breadth. Our task is considerable. However, given the situation the Government inherited, comprehensive reform of the public service is not an option. It is an essential part of the strategic response to our economic challenges. This was the rationale agreed to by both parties in government for establishing a dedicated Department of Public Expenditure and Reform.

Before I get into the detail of public service reform, it is important to recall briefly the progress made in achieving our fiscal targets. In total, budgetary adjustments designed to save or yield approximately €25 billion have been made. This is an extraordinary burden on the people. As the committee is aware, two thirds of these adjustments have been on the expenditure side. It is also important to recall that we have negotiated substantial reductions in the cost of our international programme of assistance to the value of approximately €10 billion. Last year's underlying central government deficit was 9.4% of GDP, a healthy improvement on the underlying deficit recorded in 2010 and well within the 10.6% limit set under the EU-IMF programme. The deficit limit we have set for this year is 8.6% of GDP, or approximately €13.5 billion. We must incrementally reduce the deficit to below 3% by 2015. We are determined as a Government to do this.

Since 2008, overall gross departmental expenditure has reduced by €6.5 billion, despite the pressures on public services imposed by the downturn. We are committed to making significant further reductions during the next three years. It is a difficult circle to square - we have reduced amounts of money and numbers of public servants and have significantly increased demands.

As set out in the comprehensive review of expenditure report last year, a total expenditure reduction of €2.2 billion is envisaged for this year, of which €1.45 billion represents current expenditure and €750 million capital expenditure. The Exchequer pay bill has reduced by 17.7% between 2009 and 2012, from €17.5 billion gross to €14.4 billion, including the pension-related deduction. The aim is to reduce the total cost of the Exchequer pay bill by €3.8 billion in the period from 2009, when it peaked, to 2015. To put it another way, the aim is to reduce the public pay bill by 20%, which is a daunting challenge.

In discussing the pay bill we should, of course, recall that those working in the public service have already had two pay reductions, totalling an average of 14%, by way of the pension-related deduction and direct salary cuts. Salaries at the highest levels have been reduced by up to 30% and capped in the Civil Service at €200,000. We have also reduced the salaries of new entrants to the public service by 10%. Public service pensions have been reduced, saving more than €100 million annually. Legislation for a new single public service pension scheme has been enacted this year. Public service staff numbers have been reduced by 28,000 from a peak of 320,000 to 292,000.

Notwithstanding the progress made, the deficit in the public finances remains large. To this end, the Government has begun working on the detailed measures underpinning next year's budget which will be announced on 5 December. We must also be conscious of our obligations to reduce public spending in a way that is fair, protects those who rely on public services, supports employment and enterprise and takes a more strategic view to position ourselves for economic and social recovery as a nation. In terms of public services, it is clear that we must work harder and more flexibly than ever before. In other words, we must get more for less.

With a backdrop of ongoing significant reductions in public expenditure and numbers, the Government's ambitious public service reform plan was published last November.

I have set out the five commitments for change, which are placing customer service at the core of everything that we do; maximising new and innovative technologies; reducing our costs to drive better value; leading, organising and working in different ways; and having a strong focus on implementation and delivery, which was one of the failures of previous reform agendas.

Since then, effective structures to implement the reform plan have been put in place within my Department and in other Departments, offices and sectors of State. The Cabinet committee on public service reform, which met earlier this morning, continues to drive the reform agenda and holds senior management to account for the specific timelines in the plan. We have also put in place a strong governance model and brought in the necessary skills where most needed. On 6 September, over nine months into the implementation process, we published a report on the progress, and I will provide some of the examples.

We are proceeding with a radical reform of public procurement, and that is being led by my colleague, the Minister of State, Deputy Brian Hayes. An external review estimates there could be annual savings in the range of €250 million to €600 million after three years. This will involve a new national procurement office overseeing the integration of procurement policy, strategy and operations; greater aggregation of purchasing; better spend analytics; and many other actions to transform our procurement model. We are currently in the process of recruiting, through an open competition, a new chief procurement officer to lead this body, which will be located in my Department.

In April, we published the e-Government strategy, which builds on Ireland's strong recent performance in this area and is borne out by a number of international benchmarks. We have also published a cloud computing strategy and have set out plans for significant further data centre consolidation. With such initiatives, we are among the first half dozen countries in the world to have specific agendas in those areas. As part of a wider shared services strategy, which I mentioned to the committee previously, we approved the establishment of a human resource shared service centre for the Civil Service. It is estimated that this will reduce the human resources headcount by 17% and costs by 26%, with annual net savings of €12.5 million. The idea is to migrate all the human resources management centres, of which there are approximately 40, into a single centre, which will be up and running next year.

We have accelerated our plan for a pensions administration shared service and will integrate this with the human resources shared service. We are also developing a business case for a payroll shared service, which will take in all the points of payment in the Civil Service in the first instance and the public service generally. There will also be a banking and financial management shared service.

These are all Civil Service projects and each of the main sectors - health, education, justice and local government - are now finalising their own shared services plans. We got an update on that today. In July, we agreed a range of actions aimed at achieving a focused and integrated approach to external service delivery of non-core processes. A shortlist of potential major projects for priority implementation is being prepared and plans are being developed by the four main sectors. We are also proposing new services across the public service which will first be tested for external service delivery before any approval for a new service is granted.

We will shortly launch the "Ireland Stat"website, which the Minister of State, Deputy Hayes, will describe in greater detail. We have introduced a range of expenditure reforms to change the processes involved in allocating and assessing public expenditure to improve transparency and decision making. The agreed standardisation of annual leave and the standardisation of paid sick leave will assist the move to a more integrated public service by having the same cap on leave allowances for different public service employment groups. We have talked about these issues for decades but we have done them this year. Specifically, the major reform of sick leave for the public service will realise productivity and performance gains and reduce costs. For most employees, the new arrangements will mean that the amount of paid sick leave will be halved.

The senior public service has been established to promote a more integrated public service and even the Oireachtas is finding how that works as managers move across the public service. Significant reforms to the performance management and development system in the Civil Service have been agreed and significant progress is being made on the ambitious programme of political and legislative reform. Perhaps there will be another opportunity to speak about that. This takes in the expansion of the Freedom of Information Act, the protected disclosure in the public interest Bill to protect whistleblowers and the enactment of the Ombudsman (Amendment) Bill currently before the Seanad. Additionally, legislative proposals will be brought to the Government to regulate lobbyists and on Oireachtas inquiries, in which I know the Chairman and the committee are deeply interested. These are just some examples of the reforms that we are driving and which are set out in the report.

Along with this comprehensive suite of cross-cutting reforms, the reform and delivery office in my Department is also working with the main sectors of health, education, local government and justice on their sectoral plans. The office has collaborated with these sectors to develop an integrated approach to reform. The main strategic reforms being driven are public service initiatives in each sector, the suite of reforms facilitated by the public service agreement - the Croke Park agreement - clear timelines and ownership of the reform agenda, and structures to drive their implementation.

The committee is aware that the Croke Park agreement is a key enabler of the public service reform plan and is playing a strong part in underpinning many of the changes we are making in the public service. There is much commentary about the agreement but it is an extraordinarily useful tool for change and most of my colleagues in Europe would give their right arm for it. Within the health sector, this year 3,500 people have moved seamlessly to fill gaps after the significant exodus of people earlier this year. We must drive it much more proactively, particularly managers on the ground. Solid progress has been made and this has been documented by the implementation body's two annual progress reports. The committee will hear from the body's chairman later.

I want to see delivery under the agreement maximised and with that in mind, the Government agreed last month that Ministers should give consideration to options for accelerating the delivery of savings and reforms under the agreement. My Department has been examining the proposals received and, together with the Taoiseach, I will meet representatives of the implementation body later this afternoon. The Government is agreed on the need to ensure that the agreement delivers on its full potential. I expect managers to be proactive and ambitious in the pursuit of change set under the agreement, and I expect unions to continue to approach the implementation of reform in a constructive and co-operative manner.

The Croke Park agreement offers an unprecedented opportunity to achieve change in an atmosphere of proven industrial relations stability, which is extremely important not only for the delivery of public services, but for the perception of Ireland externally. We must not be seen as a place with major industrial unrest and upheaval, and working together across communities is the way to achieve these reforms. As I noted, the Taoiseach and I will meet representatives of the implementation body later today, stressing the need to ramp up delivery. We will ask that the body ensures that the proposals we have advanced and which Ministers have given be reflected in the action plans now being carried through. Our focus remains squarely on maximising the potential of the current agreement to leverage further pay and non-pay savings, as well as a further reform of work practices, which are equally important.

The committee is aware that the Chairman has written to me on the issue of the recently completed review of public service allowances. There has been much commentary on the work being carried out in my Department on the review of public service allowances, which I announced as part of the Budget Statement in December 2011. In that statement I indicated that I aimed to secure additional savings by way of reductions in overtime and allowances to assist public service management in meeting their pay bill targets. Some €40 million in overtime savings has been achieved by making reduced allocations to public service organisations this year.

With regard to allowances, in all over 1,100 allowances were notified to my Department as part of the review and of these 800 business cases, some covering more than one allowance, were made to retain allowances in either their existing or an altered format. As members of the committee will be aware, I published details of all these business cases on my Department's website. In my announcement on 18 September, I gave details of the Government decision on these allowances, and details were published of a range of allowances, costing approximately €475 million annually, which would no longer be payable to new beneficiaries. In addition, a further range of allowances, costing €245 million per annum, would be subject to review and modification for new beneficiaries.

On their own and over time, those measures would produce medium term savings as new appointments are made to posts which previously benefitted from these payments. This was the first ever review of allowances paid to public servants.

I spoke about this in some detail when answering questions in the Dáil yesterday. This is the first time anybody has drilled down into allowances and the structure of pay in the public service. The complex matrix of allowances is the result of old agreements at sectoral level, previous national wage agreements and local decisions to secure service improvements. The disaggregation of this multiplicity of decisions is not and will not be simple. Despite the impression given in much media commentary, from my perspective, dealing with the overall issue of rationalising public service allowances is very much a work in progress. I said this on the day I made the announcement, but only the headline figure was heard in some instances.

Turning to the cases of existing beneficiaries, it is clear that the allowances for which, in modern eyes, the business case cannot be justified fall into two distinct categories. The first, representing the largest allowances in terms of spend, forms a significant element of the overall taxable and often pensionable remuneration of the staff involved, especially for certain groups of public servants such as gardaí, firefighters, prison officers and members of the Defence Forces, teachers in schools and certain support grades across the public service. It would neither be practical nor reasonable, as I said when I made the announcement, to attempt to take away unilaterally such a large portion of these public servants' pay, in effect applying an additional pay cut to specific groups of public servants purely on the basis of how their wages had been built over a period of years. What the review has highlighted are structural weaknesses and a lack of transparency in the way in which these groups are paid and how their pay was constructed over decades. Addressing these issues will require preparatory work and discussions involving the relevant sectoral management, my Department and the relevant staff interests. The aim will be to achieve a simplification of the way in which we pay these staff for their services and to ensure the pay regime for these groups supports efficient and cost effective public services. As I indicated privately to the Chairman, what is at issue is looking at incorporating allowances into a proper pay structure in order that as people get a grade of promotion the work practices now paid by way of allowances will be incorporated into the core pay.

The second category of allowances is made up of payments that do not form a significant element of the overall remuneration of the beneficiary. In these cases, my Department has written, as has been widely reported today, although it was done at the end of last month, to all sectors of the public service asking that, where there is no business case to pay an allowance to a new beneficiary, the sectoral management immediately engage with staff interests to secure early agreement to eliminate payment of these allowances to existing recipients. We have also asked that all allowances falling into this category be identified to my Department in terms of their priority for elimination. My Department has also indicated its views as to those that should be tackled first - the 88 referenced today, which is not an exhaustive list. It is what we put on the table, but sectors can add to it from the list published. My Department suggests the 88 allowances would be suitable for elimination. I remind members of the committee that the Croke Park agreement provides for speedy and binding third party findings on these issues.

Good progress is being made on the implementation of the public service reform plan. It is a core function of my Department and extremely wide ranging. It is a huge endeavour, involving hundreds of organisations and nearly 300,000 employees. Everyone has a part to play in the transformation of the public service. There are challenges, but the reality is that front-line services will suffer unless we continue to implement these reforms. Without meaningful and sustained reform, we will lock into the system all the costs and practices built up in the boom years, and that would be a missed opportunity. In a nutshell, I am not interested in simply top slicing public pay and embedding bad practice and inefficiencies into the system. I want to change fundamentally the way public services are delivered. Through the establishment of a dedicated reform and delivery office in my Department, we have placed an emphasis on implementation. As a public service, we must have an equal balance of policy and implementation skills to drive the reform. My challenge is to build reforms that will last not just for the duration of the current crisis but for generations to come, not to pander to particular interests or headlines. I am fully aware that the pace of change needs to be accelerated. As Minister with responsibility for expenditure, I will have to help to shape next year's budget and all the budgets to 2015 to get the deficit below 3%. I am confident that we can do this and deliver a public service of which we can all be proud. I can honestly say the committee has an important role to play in that regard.