Ciarán Lynch (Cork South Central, Labour)
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We are considering the following Supplementary Estimates for Public Services: Vote 12 - Superannuation and Retired Allowances, and Vote 17 - Public Appointments Service. The Dáil, by order of 19 November 2015, referred these Supplementary Estimates to the Select Sub-Committee on Public Expenditure and Reform pursuant to Standing Orders 82A(3)(c) and (6)(a) and 159(3), and asked the select sub-committee to report back to the Dáil not later than 9 December. I welcome the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, and his officials and call him to make his opening statement.

Brendan Howlin (Wexford, Labour)
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I was about to thank the Chairman and members of the select sub-committee but I will thank the Chairman and Deputy Sean Fleming as no other members are present.

I am here to present a proposal for a net Supplementary Estimate of €16.77 million, gross €37 million, in respect of Vote 12 - Superannuation and Retired Allowances, and a net Supplementary Estimate of €400,000, gross €900,000, in respect of the Public Appointments Service. The Supplementary Estimate in respect of the superannuation Vote will bring the total 2015 Estimate for the Vote to €515 million gross and €386.7 million net. This compares with a final outturn in 2014 of €473.9 million gross and €368.7 net. The Supplementary Estimate arises mainly from approximately 250 more retirements than were forecast for the year under the established scheme. There are also balances payable to people who retired in 2009 under the previous Government's early retirement scheme.

Pensions and lump sums paid to members of the pension scheme for established civil servants make up just under 90% of total gross expenditure on the superannuation and retired allowances Vote. As such, the main driver of the annual cost is the number of established civil servants who retire in the year. However, it is particularly difficult to estimate the number of retirements from one year to the next for the following reasons. The majority of established civil servants may choose to retire within a five-year window between the ages of 60 and 65 years. In addition, a number of people under the age of 60 retire each year under the cost neutral early retirement scheme or are retired on grounds of ill health. Each year, a number of former employees become eligible to claim a preserved pension entitlement, in other words, these individuals retire early but reach the appropriate retirement age in a different year and become eligible for a lump sum payment in that year. The number of cessations of pensions also varies from year to year. I love this euphemism, which is a way of describing those who are no longer on the planet and, therefore, unable to claim their pension.

Pat Rabbitte (Dublin South West, Labour)
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They are brown bread.

Brendan Howlin (Wexford, Labour)
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It is a discreet way of saying that. The average pension benefits - lump sum and pension - that will fall to be payable to new retirees in any given year will vary depending on the grades and years of service of that specific cohort of retirees. If a number of Secretaries General retire in one year and very few senior personnel retire the following year, the costs incurred in the two years will vary, even if the number of retirees is similar.

This year, the gross Estimate for Vote 12 was €474 million, which was based on a forecast of 950 retirements from the established scheme. However, there have been 1,050 retirements as at the end of November and if the current trend continues, the annual total will be in the region of 1,200. The effect of this higher than forecast number of retirements has been to place upward pressure on subheads A1, pension payroll, and A4, pension lump sums.

As a general rule, for each person who retires, the once-off lump sum paid out is three times the size of the annual pension. Accordingly, increases in retirement levels have a particular effect on subhead A4, which is the most variable subhead as it provides for the lump sum payments to established civil servants. The subhead is, therefore, a key driver of expenditure on the Vote in any given year.

By the end of November, just under €75 million had been expended from subhead A4, whereas the 2014 Estimate had envisaged expenditure of €66 million in that period. Further expenditure of €14 million by the end of the year is anticipated, resulting in an overall excess of €23 million on the subhead. A further expected excess of €14 million on subhead A1, pension payroll, also driven by the higher than forecast number of retirements, means it is now estimated that gross expenditure for 2015 may be in the region of €511 million, which is approximately €37 million in excess of the gross Estimate of €474 million previously approved by the Oireachtas.

To ensure the required funding is available, a Supplementary Estimate of €37 million gross is being sought. The select sub-committee should also note that the level of the gross Supplementary Estimate being sought will be mitigated somewhat by anticipated increased levels of appropriations-in-aid which, for 2015, were estimated at €104 million. Any additional receipts in excess of this amount will act to reduce the net effect of the gross Supplementary Estimate. To date, receipts of some €112 million have been recorded. In particular, receipts with respect to the public service single pension scheme are growing strongly. As Deputies will be aware, the single pension scheme for all public service employees has been operable since 1 January 2013. This means that public servants recruited since that date pay into the single scheme. As the value of the scheme increases, it will be offset against the cost of pensions on an annual basis. It is likely that total appropriations-in-aid will be in excess of €124 million by year end, which is €20 million more than originally expected.

The requirement for a Supplementary Estimate for the Public Appointments Service for 2015 is based on the significantly increased levels of recruitment and selection activity in the service in the current year.

These levels of activity were not foreseen at the start of the year and all the costs are activity-led. This is the impact of a very positive situation in the fact that we have prudent management of the finances of the country and that has allowed us to start recruiting to targeted areas of the public workforce again. There have been large increases in demand for competitions to fill roles in the Civil Service and local authorities, as hospital consultants and trainees in An Garda Síochána and in various other specialist, professional and technical positions and all of these have driven up costs in the PAS. Costs are driven by three main components - the processing of applications through an interview and via a series of online tests; fees paid to interview board members; and the cost of managing and administrating the recruitment process. I am happy to answer any questions that may arise.

Seán Fleming (Laois-Offaly, Fianna Fail)
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There is no issue with the Supplementary Estimates for either of these areas but I will raise a few general points. It states in the notes that the contributions received from people who joined the public service single pension scheme were estimated at €25 million but that the current projection is €45 million. I take it the Supplementary Estimate would have been higher had appropriations-in-aid not been so positive. That is fair enough as it is part of the income of the Department. Can the Minister send us a note at some time showing the number of retirees each year for the past three or four years? Each year we see more than we expect. The principal issue is that we seem to think fewer people will want out each year.

Will I ask all my questions together, including those on the Public Appointments Service?

Ciarán Lynch (Cork South Central, Labour)
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Yes.

Seán Fleming (Laois-Offaly, Fianna Fail)
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How many people have gone through the Public Appointments Commission process for appointment to State boards? Some of the State boards now use the Public Appointments Service. How does the gender quota work? The target is 40% but is the PAS required to come forward with numbers to meet the target?

Brendan Howlin (Wexford, Labour)
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The Deputy is talking about State boards.

Seán Fleming (Laois-Offaly, Fianna Fail)
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Yes. I think they are dealt with by the PAS now. Do those boards feel that people of a suitable quality were not picked because of the gender quota? How is the Department getting on with the appointment of members of the arbitration board under the Construction Contracts Act? I understood the chairman was to be picked from the board but it has been done in reverse order and the chairman has been picked before the board members were picked.

Will the Minister give us the figure for recruitment across the public service, and a breakdown of grades, for example principal officer or clerical officer, not just for 2015 but 2014 too, so that we can see the trend? On Garda recruitment, I understand 33,000 might apply, which will be challenging. However, I believe the first application is made online from one's home computer and the number is then whittled down but the next round is also done off site, from a person's computer. I have been told that people have got other people, who were experienced and knew what the job was about, to complete their online applications for them. There is no guarantee that the people who filled in the first two rounds are the people who will move onto stage 3. Lots of parents get their children to fill in forms for them online and the same is happening with the applications to join the Garda Síochána. Nobody knows who is actually filling the forms in and the next round will be the same.

Pat Rabbitte (Dublin South West, Labour)
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It will push up the quality of the intake.

Seán Fleming (Laois-Offaly, Fianna Fail)
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It will help people get into round 3 who have had no involvement in the process up to that point. I have heard the complaint from members of the Garda reserve who felt they did the best they could but did not get past step 1 or step 2. Then they hear from their neighbour that they had got the garda up the road to fill in their form. Is there anything the Minister can do about this? I am worried that the applications are filled in off site and no one can verify who is actually making the application.

Brendan Howlin (Wexford, Labour)
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The Deputy asked about PAS and representatives of that organisation are present.

Seán Fleming (Laois-Offaly, Fianna Fail)
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Perhaps the Minister will deal with the questions to him first.

Brendan Howlin (Wexford, Labour)
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The Deputy asks a valid question as to how we would know whether or not the local superintendent had filled in a form for his cousin.

Seán Fleming (Laois-Offaly, Fianna Fail)
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The Minister did not have to go as high as superintendent.

Brendan Howlin (Wexford, Labour)
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It could be anybody. I am sure there is a security mechanism to deal with this. On the overall vote, there is a new integrated pension scheme for all public servants which became operable on 1 January 2013. Everybody, a judge, a Deputy, a civil servant or a garda is part of the single integrated pension scheme from that date. The calculation of a pension is different and will be on a career average profile rather than an end-of-career profile and the implications of that will be to reduce the pension Bill by some 35%. We are now recruiting again in significant numbers and that is impacting on the quantum of money people are paying into the single pension scheme in annual contributions. Deputy Fleming asked me if that was offset against the net cost and the answer is "Yes". It will increase into the future. When we brought in the single pension scheme we did not think about it because, in 2011, we were in a crisis. There might be an argument, however, for re-establishing some sort of a pension reserve fund or, at least, a bespoke fund that is transparent about the funds that are being built up. It would have to be topped up for a number of years with annualised pensions as we go along but it might be something to be looked at in the future and I have opened a debate on the issue.

One of the most significant things to have happened within the PAS in the past 12 months is the fact that it has taken responsibility for appointments to all State boards. An analysis of the impact was done last week by the Institute of Directors and it was uniformly positive about the effect on the skills mix of boards, the volume of applicants and gender equality. In terms of gender equality, 55% appointed were male and 45% female so it was approaching the 60:40 ratio. Applications received were 69% male and 31% female so the balancing carried out by the PAS equated better to the target we want to achieve.

We are not very far from having a proper 40% gender quota established across State boards and I am confident we can do it very quickly, if it has not already been done since this analysis was conducted. The arbitration board is now with the Department of Jobs, Enterprise and Innovation. There was a real issue about appointing the right chair, which is why the chair was recruited separately. If I recall, it was Dr. Bunni who was appointed. He was recruited because he has international experience in the area. The panel is still being finalised. I will obtain up-to-date information for Deputy Sean Fleming on when this might be done.

With regard to Garda recruitment and the unique identifier-----

Ciarán Lynch (Cork South Central, Labour)
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A vote has been called in the Dáil so we will have to suspend. The Minister may speak on an issue but his officials cannot speak on the record.

Seán Fleming (Laois-Offaly, Fianna Fail)
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They can speak if we are in private session.

Brendan Howlin (Wexford, Labour)
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I will give the committee my briefing.

Ciarán Lynch (Cork South Central, Labour)
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We resume in public session. The Minister was in possession.

Brendan Howlin (Wexford, Labour)
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I will conclude on the valid point about how, in the case of mass recruitment, one can know the person applying online is the real applicant. Every person is required to apply with photographic ID and receives a unique identifier. After the second test, successful candidates are brought forward for supervised tests. There is still an unanswered question. It could potentially give a person a leg up if he or she got over the first hurdle with assistance.

Seán Fleming (Laois-Offaly, Fianna Fail)
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It is done after the second stage.

Brendan Howlin (Wexford, Labour)
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I am informed it is after second stage. Now that Deputy Fleming has raised it with me, I will see if anything can be done. It will be very hard. There were approximately 25,000 applicants for An Garda Síochána. Online applications make the process very efficient. It is the same with any postal application in that one cannot be sure the person who signs the form is the person he or she claims to be, unless everyone is brought in in tranches. To do that for 25,000 people and to supervise them would add immeasurably to the cost. I will raise the point and ask PAS to consider the point Deputy Fleming has made.

Ciarán Lynch (Cork South Central, Labour)
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I thank the Minister.

Brendan Howlin (Wexford, Labour)
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Deputy Fleming asked me about numbers and I will give him them as well.

Seán Fleming (Laois-Offaly, Fianna Fail)
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The Minister can send them on, if we are caught for time.

Brendan Howlin (Wexford, Labour)
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I will send Deputy Fleming a table.

Tom Barry (Cork East, Fine Gael)
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I have a few general questions. On average, what percentage of the people who have applied for redundancy are re-employed on a contract basis?

Brendan Howlin (Wexford, Labour)
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We do not have redundancy.

Tom Barry (Cork East, Fine Gael)
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Early retirement.

Brendan Howlin (Wexford, Labour)
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Yes.

Tom Barry (Cork East, Fine Gael)
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Just out of curiosity, what percentage takes early retirement? The Minister said he is trying to predict who is going to retire or to apply to retire. Could there not be a yearly cap on that so that the predictions would be more accurate? Could a time limit be put on it whereby everybody has to submit his or her application by the end of October, for example, so there is no discrepancy in the figures? I am glad to hear the National Pensions Reserve Fund is being discussed. It would probably be prudent to put something in place there to start building that back up again. The Minister spoke about cost-neutral early retirement. For whom is it cost-neutral? Have any costings been done on the loss of experience from people? It might be cost-neutral for the employee at some stage but is there a cost in terms of the loss of experience that is hard to replace? Do we have to bring other expertise in to cover for people who leave with very significant experience?

Brendan Howlin (Wexford, Labour)
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Deputy Barry asked a number of questions. We do not have redundancy in the public service in general but we have cost-neutral early retirement. That is simply if one wants to retire before reaching one's retirement age. Actuarially, we have worked out that it is approximately 5% off one's pension and lump sum per year that one retires early so that the cost to the Exchequer is not impacted. When I say cost-neutral, I am talking about the cost to the Exchequer.

Bluntly, if somebody gets to a certain age and they really want to retire, is it in the interest of the public service to keep him or her if he or she says he or she is burned out or finished? I am not sure it would be wise to require people to work beyond that if they are within hailing distance of their normal retirement age. There could be a whole range of family circumstances, new responsibilities, caring responsibilities and so on that might make it impossible for people to go on. In terms of predictability, we do our best to look at what average annual retirements occur and then we look at the age cohort. There will be particular peak years because an intake year will mature at a given point. As there is a time horizon between the ages of 60 and 65 for people to make that choice, normally, one cannot be absolutely accurate in respect of it.

In terms of notice, principal officer grades and above are required to give three months' notice but other grades lower than that are legally obliged to give notice of only a week. In fact, virtually everybody will give significantly more notice than that because they will want to work out what their entitlements are and to ensure that the shared service for pay is geared up to pay them on time. To alter that, there would have to be negotiations on a sectoral basis with each of the trade unions involved. I have looked at a minimum notice period myself because, for example, when we were mapping the exit during the difficult period, as a matter of policy, I determined that everyone should give a minimum of three months' notice. That was adhered to, although it could be challenged. I asked for a minimum notice of three months for practical purposes so that in a time when we were not recruiting, we could prepare to ensure that services ran smoothly where there would be a particular impact and for everyone to be paid in a timely fashion. It is something the next Government might look at.

Tom Barry (Cork East, Fine Gael)
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I have one last question on that.

Ciarán Lynch (Cork South Central, Labour)
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I am really stuck for time.

Tom Barry (Cork East, Fine Gael)
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It will take two seconds. With the retirement age rising to 68, is it envisaged that the age at which people may seek early retirement might be pushed up to 65 or 64?

Brendan Howlin (Wexford, Labour)
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There is certainly a general discussion about people working for as long as they wish. We must have the predictability of retirement in order that we can plan properly but I can certainly envisage the upward movement of retirement potential at least so that people can stay longer in work. People are healthier and there is no reason they should not. I think that will be a feature of the future.

Ciarán Lynch (Cork South Central, Labour)
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The Minister is well aware of the OECD report launched last month on budget oversight by the Parliament in Ireland, which was commissioned by the Houses of the Oireachtas. This report recommended a number of changes if we are to improve the ratings that put Ireland at the bottom of the ranking of OECD countries in terms of the level of budget engagement by the Houses of the Oireachtas. The committee secretariat had already been working to make improvements in how Estimates are presented to committees before this report was issued and over the past year, it has engaged intensively with eight Departments.

Our committee has already done considerable work with the OPW on improving the quality of performance measures it includes in its Estimates. We now encourage and request that the Minister's Department engages closely with the secretariat early in 2016 to begin the process of making its performance, targets and outputs more outwardly focused, meaningful and measurable to both the committee and the broader public. We also ask for his support and co-operation as the House moves to implement the broader OECD recommendations in co-operation with Departments so that we can work together to improve transparency and ensure public moneys are spent as effectively as possible. I know the Minister has a strong interest in this and that he is very well aware of the report but maybe he will give us his own comments on the recommendations in the new year.

Brendan Howlin (Wexford, Labour)
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I wrote to the committee yesterday but I do not know whether the letter has been received yet.

Ciarán Lynch (Cork South Central, Labour)
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It definitely has not been.

Brendan Howlin (Wexford, Labour)
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I see. I just signed the letter yesterday. It is a response to the OECD report in which there are very useful observations. I have said to this committee previously that deep recession is not the best time to ask parliamentarians to engage on spending issues. When the whole trajectory of spending was downwards, there was not much appetite to engage, in my judgment. Now is a very good time to do exactly what the committee has embarked on. My Department will co-operative fully with this committee and the work it wants to do in achieving those objectives.

Ciarán Lynch (Cork South Central, Labour)
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As we have now completed our consideration of the Supplementary Estimates for Votes 12 and 17, the clerk will send a message to that effect to the Clerk of the Dáil in accordance with Standing Order 87. Under Standing Order 86(2), the message is deemed to be the report of the committee.