Mr. Robert Watt:

Before addressing the items on the agenda, I would like to set out some of the main areas of our work programme during 2014. More details of what we have doing are set out in our annual progress report, which is available on our website.

One of the key roles of the Department is the management of public expenditure. In 2014, gross voted expenditure amounted to €54 billion, a reduction of over €9 billion from the peak that was reached in 2009. Current spending was reduced by 9.4% and capital spending was reduced by 52.7%. This reduction was done at a time of increased demands on public services due to both demographic changes as well as pressures related to the economic downturn. During this period, reductions have sought to prioritise key services. For example, social protection spending has been reduced by 3.4%; health by 8%; and education by 3.5%. These account for 85% of gross voted current expenditure. Meanwhile, expenditure across all other areas has been reduced by 25.4%.

Since the establishment of the Department in 2011, public spending has been managed close to profile each year. The net outturn was 1.3% below profile in 2011 while, in 2012, it was 1% above profile and it was again below profile in 2013 by 0.9%. The Comptroller and Auditor General's report notes that net expenditure was above profile in four Votes and was below profile in 36 Votes for 2013. This management of public spending contributed to a closing of the fiscal deficit and our successful exit from the troika programme. The benefits of this can be seen, especially in respect of ten year government bonds, which now yield below 1% having peaked at well over 10%.

In 2014, net expenditure was 2.4% over profile. This increase should be seen in the context of the consolidation of previous years. While maintaining the focus on efficiency and value for money, the improvement in Ireland’s fiscal outlook meant that the Government was able to increase investment in a number of important infrastructure and capital areas. An additional €162 million was invested in important public transport related capital projects and moneys were allocated to meet the cost of repairing the damage caused by the severe storms in 2014. Additional funding was also provided last year to relieve some of the pressure on essential public services.

For example, the Supplementary Estimate requirement of €680 million was provided for additional spending on our health services. An additional €177 million was required in the agriculture sector, related to the delayed receipt of an EU payment relating to the European Agriculture Fund for Rural Development. This payment will be received this year, 2015.

In the Department we are focused on the need to reform our approach to budgeting and execution of budget. The committee will be aware of the series of reforms to the budgetary and expenditure processes in recent years. These reforms were aimed at improving decision making and value for money, as well as increasing fiscal transparency.

I will just mention some of the initiatives. Initiatives relate to public spending code and value for money policy reviews which are now well established. The introduction of performance budgeting links expenditure more explicitly to departmental strategy and outputs, and involves greater levels of public information and Oireachtas scrutiny over spending. The establishment of the Irish Government Economic and Evaluation Service also continues to enhance the capacity of Departments to conduct value-for-money reviews and assess policy impacts of policy.

The committee will be aware of the second comprehensive review of spending, which was undertaken last year by our Department and published in October. This process allows for the prioritisation of public money into areas where it is most needed and seeks to develop a more strategic approach to the allocation of public funds.

In the area of fiscal transparency and accountability, a number of other important reforms have been introduced. The most obvious of these is the earlier publication of the budgetary documentation. The annual budget is published now in October and the Revised Estimates are now in December. This ensures the Oireachtas has time to debate and approve the budget in advance of the new financial year and to examine the Estimates much earlier than was previously the case. There have also been important improvements in how Ireland reports fiscal data, in particular extending the focus beyond the Exchequer to include all subsectors of the general Government.

Sustainable and far-reaching reform of the public service was identified as a priority for the Department on its establishment in 2011. The Government published its first public service reform plan in 2011 and its second reform plan in January last year, covering the period 2014 to 2016.

Yesterday, the Minister, Deputy Howlin, published a progress report on reform in the public service. This report sets out the main areas of progress made so far, as well as reflecting on some of the reform priorities and objectives for 2015. Copies of this report have been sent, I understand, to all Members of the Oireachtas. The public service is now smaller and a good deal less expensive that in was in 2009, and its work in continuing to deliver essential services as budgets and staff numbers were reduced deserves to be acknowledged.

I will briefly touch on some of the changes, but I will not go through all of them. The pay bill is now down by over 20% and as part of that staffing levels have been reduced by 10% over the period, from 320,400 in 2008 to 289,600. We have implemented a variety of initiatives in looking at new service delivery approaches, including JobPath, a new call centre for assisting in the collection of the property tax and initiatives to improve how we manage State property. Leadership has been enhanced across the services through the implementation of the senior public service leadership development strategy. We have also reduced the number of public bodies by 181 - the so-called "quango cull". That programme has now been successfully completed.

We believe that the need to improve productivity and efficiency in the administration and delivery of services will continue to be an important objective for the public service in the coming years, even as the public finances improve. This is particularly the case given the demographic challenges that we face. Our population has increased by 500,000 since 2005. We have the highest percentage of people aged under 15. Life expectancy has risen and almost 13% of our population are now aged over 65 years old. These trends will continue to place increased pressure on public services for the foreseeable future. In view of this the public service must become more innovative and efficient in its administration and in how it designs and delivers services. In this context, we are looking at alternative models of service delivery and more strategic use of technology to meet both current and future challenges.

I would like to highlight, if I may, some of these initiatives in more detail. At the beginning of this year, the Office of the Government Chief Information Officer published a new ICT strategy for the public service. This has five key objectives: build to share, creating ICT shared services to support integration and efficiency across the public service; digital first, the digitisation of key transactional services to improve service delivery; improve governance, to ensure that the ICT strategy is aligned across public bodies; and increase capability, to ensure the necessary skills and resources are available to meet current and future ICT needs. A big challenge that we have within the system is our ability to attract people with certain skills which are in very high demand now across the economy, particularly skills in relation to ICT and digitalisation. Data as an enabler, the final element of the strategy, is to facilitate increased data sharing and innovative use of data across all public bodies.

With regard to the issue of open data and the possibilities for us, the strategy reflects the need for public bodies to change and fully exploit the potential of an increasingly digital world. The continuing increase in the use of ICT by public bodies has resulted in the production of huge volumes of data. This volume is valuable and the technology is now being used to transform the way services are planned, delivered and managed. As public bodies have progressed in areas like e-Government and data analytics, the potential of data to help deliver economic, social and other benefits has become clearer. We must do this, of course, while respecting fully data protection rights.

The Department is leading the implementation of the open data initiative in collaboration with other public bodies. The public bodies working group is working on a technical framework for open data, to underpin the ongoing development of the open data portal and through consultation with stakeholders we wish to see how other ideas and expertise can contribute to this overall process. As part of it, last month the Minister, Deputy Howlin, launched a public consultation on open data licences, and I hope that citizens, businesses and other public servants will engage in this process.

A public consultation process was also undertaken to inform the drafting of a new data sharing and governance Bill, which we are developing. The objective of this Bill is to provide a legal basis for information sharing across public service bodies, with associated transparency and governance obligations. We are also, within our Department, driving the development of shared services to improve information management and integration, as well as delivering administrative functions more efficiently. The national shared services office is leading on the strategic direction of shared services policies and the implementation of shared services projects in the Civil Service. I will mention some very briefly. PeoplePoint, the HR and pensions administration shared service, has been in operation since March 2013 and already provides services for more than 26,000 employees across 21 organisations. We have also put in place a single payroll shared service centre for the Civil Service, which now services 22 clients and currently issues over 70,000 payments per month to over 21,000 employees.

Work is progressing on the financial management shared services project. We hope to issue a tender document in relation to this shortly. This will have significant implications for Government accounting, how accounts are presented and the quality of financial information we are able to produce. We might get a future opportunity to present separately to the committee on this project and what it means, if members felt that would be useful. The potential benefits of this shared service will include greater capability to respond to IMF and EU requirements; more time for organisations to focus on strategic financial issues; improved financial information to support better decision making around budgets and expenditure; and reduced costs, improved performance and increased financial control.

Turning to Government procurement, the programme to achieve greater efficiency in public procurement is being implemented by the Office of Government Procurement. Mr. Paul Quinn, who heads up the office, is with us today. This office is taking responsibility for the procurement of common goods and services across the public sector. The OGP also provides the national procurement policy function, customer support services and systems for all the sourcing organisations. While budget responsibility remains with the public service bodies, the contractual arrangements put in place help these bodies to remain compliant and to deliver value for money. The procurement functions have forecast a savings delivery of €63.5 million for 2014.

On Tuesday of this week, the Minister, Deputy Howlin, and the Minister of State, Deputy Harris, published the OGP’s report on public spend and tendering analysis. I have copies we can circulate to members. I understand it was published early on so members may have had a chance to see it. This is a major step forward. Prior to the establishment of the OGP we had no mechanism for collecting, analysing and reporting on spend data across the public service.

Some of the results from the work are interesting. The report indicated that 93% of Government expenditure is with firms within the State and that 66% of expenditure is with the SME sector. One of the objectives of this programme is to promote competition in markets and to fully support and encourage smaller suppliers in competing for Government business. In doing so, the OGP works with Government agencies and industry representative bodies in developing and implementing initiatives, and in driving supplier education and awareness for small and medium enterprises.

The Civil Service renewal plan was published in October 2014. This sets out a vision for the service and a three year action plan. It outlines 25 practical actions that will create a more unified, professional, responsive, open and accountable Civil Service. The plan responds to many of the criticisms that have been highlighted in many reports and in many discussions with the committee in the past. Since the publication of the plan, significant progress has been made. The Government has approved the terms of reference for the establishment of an accountability board for the first time, to strengthen accountability and performance across the service. A Civil Service management board has been established to provide collective leadership and management to the service for the first time. The board comprises all Secretaries General and heads of major offices and we are responsible for driving the implementation of the plan. Priority actions for completion by mid-2015 include the first performance review process for Secretaries General; identifying options to strengthen the disciplinary code and to address under-performance; extending open recruitment in key areas to fill skills gaps; and carrying out the first Civil Service wide employee engagement. Two weeks ago, we advertised, for the first time, a principal officer competition for middle managers across the service. We have opened up recruitment at that level and we are looking for candidates both within the service and externally.

As part of the Civil Service renewal programme, our Department is also implementing HR reform across the Civil Service to better support managers and to enhance performance. One of our major reforms in this area was the reduction in paid sick leave, introduced last year. The new scheme effectively halves the access to paid sick leave for public servants while still providing support for them when they are ill. I expect a downward trend in absenteeism following the introduction of the scheme last year. However, there remains a significant leadership and management challenge in tackling absenteeism across the public service. Today, we publish the public service sick leave statistics for 2013. The headline figures show that an average of 9.5 working days were taken per full-time employee. In effect, 4.3% of working days were lost to sick leave in the public service in 2013. While these figures do not reflect the impact of last year’s sick leave reforms, it is clear that this level of absenteeism is not acceptable.

We also have been implementing a programme of political and legislative reforms to increase accountability, and to improve the quality of decision making and transparency in public administration. I will not go through all the reforms as members will be aware of them but they include the Houses of the Oireachtas (Inquiries, Privileges and Procedures) Act 2013, Freedom of Information Act 2014, Protected Disclosures Act 2014 and Regulation of Lobbying Bill 2014. We are developing new legislation in respect of public sector standards Bill and the Department has initiated a new approach to appointments to State boards through which all appointments must be advertised openly on the State boards portal. The statute law revision (secondary instruments) Bill will be also published shortly. I have set out in an annex to my statement the legislation we have delivered since 2011. We have been responsible for preparing 23 Bills, which have been enacted.

I would like to turn to specific items on the agenda today. The first item is the 2013 appropriation accounts for the Department. The Estimate for 2013 was set at €36.4 million, a reduction on 2012 levels, reflecting the fact that a new Vote was established to separately identify costs associated with the transactional shared services projects. The surplus to be surrendered in 2013 was approximately €3.6 million, which arose mainly as follows: savings on administrative budget pay of almost €1 million arising from resignations, vacancies arising from outward secondments and slower than anticipated recruitment of replacements; lower than anticipated funding demands on PEACE and INTERREG projects; savings on the reform agenda fund due to reduced external support costs and the completion of work in-house where possible; and the timing of recoupments from the EU in relation to appropriations-in-aid.

The second item relates to Vote 12 – superannuation and retired allowances. The 2013 appropriation accounts for this Vote show a net outturn of €338.5 million compared to an estimate of €384.6 million, giving a surplus of €46.1 million for surrender to the Exchequer. The 2013 gross estimate was based on existing pensions in payment on 31 December 2012; provision for cessation of pensions in 2013; an estimate of retirements and deaths in 2013; and an estimate in respect of lump sum payments to established civil servants. It transpired that the number of retirements in 2013 was significantly less than anticipated, primarily because of the extension of the "grace period" and this led to lower retirements and, as a consequence, lower spending on the Vote than had been anticipated.

The 2013 Estimate for the shared services Vote was set at just over €21 million. The outturn for 2013 was €15.4 million leaving a surplus to be surrendered of €5.6 million. This surplus arose due to a delay in the transition of staff from originating Departments to programmes and the later than anticipated take-on of staff in PeoplePoint.

The Office of the Comptroller and Auditor General reviewed the operation of audit committees in a sample of six non-commercial State bodies and assessed their compliance with the requirements of the code of practice. With one minor exception, the review found full compliance among the bodies with the code of practice requirements for audit committees. The recommendations of the report are also being addressed by the Department in the context of the updated Code of Practice for the Governance of State Bodies, which will be circulated to Departments for consultation in the coming weeks. We will seek observations from both the parent Departments and the State bodies under their aegis.

The Department is almost four years in existence. Over this period, we have played a substantial role in addressing the economic and fiscal crisis that faced the State. We have also taken a lead role in driving the reform agenda, delivering much needed reform and renewal of our State institutions and our public services. Effective management of public spending goes hand in hand with the reform agenda. Reform supports the sustainability of public expenditure by delivering services in a more efficient, cost effective manner. In turn, a strong and stable public expenditure framework allows us to take a more strategic and planned approach to optimise outcomes for taxpayers and public service users.

I would like to acknowledge the hard work and contribution of the staff of the Department. The visible progress made would not have been possible without their commitment.