John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I welcome the Minister and his officials. I remind members and witnesses to turn off all mobile phones. I remind members of the longstanding parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

The purpose of the meeting is to review the Department and its expenditure. I invite the Minister to make his opening statement.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Chairman. When I appeared before the committee earlier in the year, I agreed to return for a discussion following the publication of the mid-year expenditure report. Members will recall that my Department’s group of Votes comprises a significant number of Votes, as follows:

(i) The Vote for the Department of Public Expenditure and Reform, the Vote for the Office of Government Procurement and the Vote for the National Shared Services Office;

(ii) The Votes for a number of Offices under the aegis of my Department, including: – the State Laboratory, the Public Appointments Service and the Office of the Ombudsman; and

(iii) The Votes for Superannuation and Retired Allowances (which covers civil service pensions) and Secret Service.

The Vote for the remaining element of the Department of Public Expenditure and Reform, that is for the Office of Public Works was handled separately by the committee this morning.

The structure of the Vote for the Department of Public Expenditure and Reform remains unchanged in 2016 from last year, with two strategic programmes focused on public expenditure and sectoral policy and public service management and reform.

The allocated resources for each programme, in terms of staffing and funding, are set out in Part 3 of the Estimate. A total gross estimate of €45.9 million is provided for 2016. The statement I gave to the committee in June dealt in detail with the areas covered by these programmes. I am not going to cover the same ground again, but I am willing to answer any questions which might arise on these matters today.

I would like to discuss some of the key strategic challenges currently faced by my Department and to listen to the views of members of the committee on these matters. I will begin with public expenditure policy and make a few comments in the context of budget 2017. I have already set out in some detail at the Select Committee on Budgetary Oversight the key points that are relevant for this committee.

The Government is very supportive and is engaging with the Oireachtas in respect of an enhanced input into discussions on budgetary priorities and it is for this reason that I published the mid-year expenditure report. This follows on from the Summer Economic Statement, which sets out the Government’s medium-term budgetary strategy. The Summer Economic Statement envisages that day to day spending on public services will increase by €1.3 billion to €53.1 billion in 2017.

We also expect that capital investment will increase by €400 million to give a total capital spending of €4.4 billion. This is to provide for continued investment in our schools, health care facilities and transport network. It also allows us to invest more in housing to address the serious pressures that exist there.

The State now employs more than 66,000 teachers, 10,000 doctors and 41,000 nurses in our education and health sectors, all figures up on 2013.

This targeted investment in front-line staff has come hand-in-hand with real reform and a focus on excellence in public service delivery. For example, linking the provision of additional funding in the health sector this year to an accountability framework for the acute hospital sector will help to ensure sustainability for our health system in future years.

The main aim for budget 2017 is to deliver sustainable public services that are fiscally prudent or affordable while looking to make improvements. There are many competing demands for scarce resources but if the main challenges and priorities are to be addressed, it is not enough to look at the incremental increases to services. We have to look at how we are effectively spending what is available to us at present.

I would like now to touch on the issue of public service pay. Control of the public service pay bill is vital to the overall sustainability of the public finances. This means responsibility on the two core drivers of the pay bill: the numbers of public servants employed and their rates of remuneration. Thankfully, we are making progress in this area.

The Government has allocated funding for extra Garda, doctors, nurses, teachers and special needs assistants in order to support essential front-line services. This increase in resources has been accomplished in tandem with real pay restoration under the Lansdowne Road agreement, LRA. This agreement provides certainty and predictability to the management of the public service pay bill. It allows for strong fiscal planning with resources ring-fenced for sustainable pay restoration, balancing the competing claims for additional Government expenditure within the resources available. It provides a framework for negotiating on issues that matter to public servants – a good example of this is the recent agreement with the INTO and TUI on new entrant teacher pay.

A final development worth noting is the agreement in principle by the Government to establish an independent Public Service Pay Commission. Its role will be to provide evidence-based analysis on pay matters to assist officials and the Government in discharging their negotiation function on behalf of Government. The Commission will be advisory in nature and will report initially by the middle of next year. A consultation is currently underway on the role and structure of this body and I intend to bring a memorandum to Government shortly.

Moving on to the broader reform, effective management and sustainable pay policy go hand-in-hand with meaningful reform of our public services. The importance of efficiency cannot be overstated, it has significant consequences for finances and job creation. Most important, the public service provides essential services for our people when they need them most.

We have made progress under the current public service reform plan to deliver better outcomes. Service users, whether citizens or business customers, are being placed at the centre of service design and delivery. We are working to achieve better outcomes for customers by prioritising the digitisation of services, as set out in the public service ICT strategy, to recognise how expectations for technology-enabled Government services have risen significantly in recent years.

Successful delivery of the ICT strategy will require a significant increase in the provision for the Office of the Government Chief Information Officer, within my Department, to be offset by savings elsewhere across the system.

We will fund much of this programme by combining our buying power, sharing our assets across Government and driving out and reducing duplication. This is a vital investment in modernisation, to reap substantial benefits across the system. We aim to streamline processes and enable citizens to transact wholly online with Government and access Government services digitally.

Elsewhere, implementation of the actions under the Civil Service renewal plan to improve capacity and capability are continuing. The plan is implementing important changes, strengthening governance, delivering and developing capacity and improving our approach to HR in the system.

However, while acknowledging we have made progress I firmly believe there is a need to build on this progress and maintain a strong focus on reform over the coming years. That is why, in addition to completing the current phase of the reform plan, I have asked my Department to initiate the development of the next phase of public service reform to cover the period 2017-19. I would be very pleased to hear the views of members on this next phase.

In parallel with this programme we continue to make progress in delivering more open, transparent and accountable Government with a number of significant changes, in areas including freedom of information, protected disclosures, regulation of lobbying and appointments to State boards. I am always mindful of more progress that we need to make. For example, work is well under way on Ireland’s second national action plan under the Open Government Partnership.

Significant progress continues to be made on the open data initiative. Ireland's open data portal,data.gov.ie, now contains over 4,400 datasets from 90 publishers and is growing all the time. A data-sharing and governance Bill is also being prepared to simplify data-sharing between public service bodies while also protecting the rights of individuals.

The Public Sector Standards Bill is designed to modernise, simplify and streamline the current framework for ethics, which is in urgent need of reform. Initiatives such as these are vital if we are to achieve fully the objectives of increased transparency, integrity and accountability underlying the Government's reform of our public life.

I will conclude by turning to some other Votes in the Public Expenditure and Reform group. The roll-out of shared services and the reform of public procurement are central in delivering the efficiency focused reforms set out in the public service reform plan. In this regard, the combined 2016 allocation for both the National Shared Services Office and the Office of Government Procurement is now €57.8 million. The 2016 allocation for Vote 2012, that is superannuation and retired allowances, is just under €527 million gross or €392 million net.

Each year there is a net increase in the number of pensioners due to retirements. It of course has the effect of increasing payroll cost year-on-year. In addition, Civil Service demographics means there has been an increase in the numbers eligible to retire in recent years. For these reasons I expect the gross expenditure Estimate for 2017 to be higher than the 2016 Estimate. There will be an offset in increase in the receipts to the Vote. The committee has been supplied with a detailed briefing by my Department's officials on the various Votes in the PER group, including those of sub-offices.

The final matter I want to address is the new statement of strategy. Members will be aware that the development of a three-year statement of strategy is a requirement for every Department under the Public Services Management Act 1997. Under the legislation a new statement of strategy must be submitted to a Minister within six months of his or her appointment. Therefore, the process to develop a new statement is under way in all Departments, including my own. This work will, of course, be informed by the priorities set out in the Programme for a Partnership Government and the overall economic budgetary and fiscal context.

The development of this strategy is extremely important for every Department in terms of their mid-term direction, their business planning, how they allocate resources and manage risk, and provides a framework for reporting on progress made during each year of the strategy. It will be a timely opportunity take stock, to look at what we have delivered, to look at choices, challenges and risks, to re-examine our values, our strengths and capacity to deliver on our strategic goals. I invite members of the committee to share their views on this matter and ask that they be good enough to write to me by the middle of October on this matter. I will benefit from hearing the views of the members.

While we have achieved much we are still borrowing to fund public services and debt remains high. The objective of delivering and improving public services within budgetary parameters remains a huge goals for all Departments and offices. I look forward to hearing the views of the members on how we can maintain public finances while meeting the needs of those we serve. I thank members for their time and look forward to answering questions.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank the Minister.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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I thank the Minister.

One of the more interesting parts of the expenditure report was the part on expenditure rules. It contains a lot. In summary, empirical evidence suggests the existence of a negative correlation between public investment and the use of an expenditure rule estimating that countries with an expenditure rule in place will see the ratio of gross fixed capital formation to GDP decrease by almost 0.6%. Is that an admission that the fiscal rules hamper the necessary public investment in, for example, housing or any area one wants?

Paschal Donohoe (Dublin Central, Fine Gael)
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No. What we have always been conscious of, and the Government and I have articulated this on a number of occasions, is that we need greater recognition of the difference between current and capital expenditure when they are being accounted for within national accounts. Where progress has been made is in how capital expenditure is treated differently within the fiscal space measurement versus current expenditure. We believe more work needs to be done in this area. A particular area that we have prioritised is the gaining of full guidance on how off-balance sheet expenditure would be treated in the future. It is an important source of investment in any economy and we believe opportunities exist for Ireland in regard to this matter.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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The option of going off-balance sheet was also covered by the report, that is to simply develop extra budgetary or quasi-fiscal activities. That, effectively, refers to off-balance sheet, PPPs and such like. The report does not refer to them as a positive but as a negative. Is there not a fundamental problem with the expenditure rule as it is currently written even in that limited basis? Is the Government arguing with the Commission that the rule should be amended? Does the Government accept the rule?

Paschal Donohoe (Dublin Central, Fine Gael)
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No, we are dealing with the Commission on how capital expenditure is recognised. With an economy and a country like our own that has such growing capital needs in the future and, clearly, a high level of social need now, we believe that capital expenditure needs to be evaluated in a different manner. That is why we are dealing with the matter of how capital expenditure is dealt with on our balance sheet.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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The report also says that expenditure rules seem to be effective in mitigating the pro-cyclical bias which characterises Government spending. If there was a recession tomorrow the fiscal space would shrink to a negative figure and to keep within the fiscal space it would be necessary to introduce extra cuts. Can the Minister explain how is that not pro-cyclical?

Paschal Donohoe (Dublin Central, Fine Gael)
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The other dimension of the fiscal rules is management of the fiscal space in the way the Government is committed to. One should see a decline in the debt and the deficit begin to reduce, to converge on becoming a surplus as the Government is committed to balancing its books. The flexibility that one gains in the health of one's key metrics, like debt and deficit levels, is what then gives the government of the day the resources to respond to a change in economic circumstances. That is also the reason that we are committed to developing a rainy day fund. In recognition of the point made by the Deputy, the time one needs to increase investment in an economy, from a public point of view, is when private investment or consumption is falling. That is why we believe it is an important objective in the coming years to put in place a fund that has the ability to respond to that situation.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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One could argue that we already have a rainy day fund in the shape of the Strategic Investment Fund. We are not allowed to spend it as long as the fiscal rules remain, at least as they currently are currently formulated, precisely because of the expenditure rules. What use is there in having a rainy day fund if we are going to be constrained within this limited fiscal space?

Paschal Donohoe (Dublin Central, Fine Gael)
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No. We are allowed to spend it, clearly, but it must be treated in a particular way.

To directly answer the Deputy's question on how can these rules and guidelines help during a period of economic contraction, where they are meant to help is when one is in a period of either growth or stability. One uses that period to get the deficit down and get debt under control so that when one is faced with the situation mentioned by the Deputy one is in a position to invest. What is a disaster for an economy and a country, more importantly, is the kind of cycle that we have just gone through. It was a time that our economy needed investment and needed investment in public services but we could not do so because our deficit was too high and nobody would lend to Ireland.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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The rules are blatantly pro-cyclical in the sense that if one had a recession tomorrow with 0% growth then one must cut spending. Those are the fiscal rules as they currently exist. Governments just say these rules exist to mitigate the pro-cyclical bias. It is impossible to explain that the existing rules are not pro-cyclical. If there is a crisis or recession further austerity will be required according to these simple fiscal rules.

Paschal Donohoe (Dublin Central, Fine Gael)
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No. The measure of the expenditure rules, and where they put their focus on, is on the structural deficit. Recognition is taken of that in the expenditure benchmarks. As the Deputy well knows, the purpose of the structural deficit is try to strip out the volatility that happens in the revenues of a Government at any point in time. The expenditure benchmark is also calculated so that it looks at the ten-year performance of an economy as opposed to where an economy is at any one point in time. They are the capacities that are in place for a Government to respond back to a recessionary period.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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Both the structural deficit and a ten-year growth are arbitrary figures. The point is also how they interact with the other rules. The Minister has said that the fiscal space this year is €1 billion.

Paschal Donohoe (Dublin Central, Fine Gael)
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It is €600 million in current expenditure, €250 million in capital expenditure and the Minister for Finance has said it is around €300 million for tax measures.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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If everything were to remain the same except for a GDP growth rate of 0% this year and a projected 0% rate next year, can the Minister tell me roughly what the fiscal space would be?

Paschal Donohoe (Dublin Central, Fine Gael)
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Of course, I cannot.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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Why not?

Paschal Donohoe (Dublin Central, Fine Gael)
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I am not a calculating machine. I cannot-----

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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The Minister is surrounded by calculating machines.

Paschal Donohoe (Dublin Central, Fine Gael)
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Whatever facilities I have do not include being able to respond to such a question off the top of my head.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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I did the figures previously. I do not have them in front of me.

Paschal Donohoe (Dublin Central, Fine Gael)
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Of course, were I to try, I would probably be wrong and then the Deputy would be correcting me tomorrow.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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I did the figures previously and they were negative. I think it is obvious that they would be negative but I did them regardless. It proves the point that the figures are procyclical. The Minister can say what he likes and that they are not but they are.

Paschal Donohoe (Dublin Central, Fine Gael)
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The next time I appear before the committee, if the Deputy shares those figures with me-----

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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No, the Minister should share his figures with me next time. He should come up with his calculations.

Paschal Donohoe (Dublin Central, Fine Gael)
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I will have an opportunity to work on and consider some of the scenarios to which the Deputy refers. However, as I have said, I take a different point of view from his on the matter.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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Regarding the other areas, we have this recovery but the figures significantly overstate the recovery. We can have a big discussion about the nature of the recovery, where its benefits are going and the fact that the majority of people do not feel it. How will we have a real recovery that is felt by the majority and that leads to sustainable growth and increases in living standards without a significant increase in public expenditure? At the moment total spending is down about €5 billion a year on 2008. Capital expenditure in 2008 was €8.5 billion; it is projected at €4.4 billion next year. Expenditure on housing is €1.4 billion, less than half of what it was in 2008. Does the Minister agree that it is necessary to significantly increase public expenditure if there is to be a real recovery for the majority?

Paschal Donohoe (Dublin Central, Fine Gael)
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Not necessarily. It is possible for people to feel a recovery with paced and affordable increases in public expenditure. A big difference between the Deputy and me is that I believe over time - the mid-year expenditure report lays out a pathway for this - that Government expenditure will have to increase and should increase. We need higher levels of public expenditure to invest in facilities and services for people to give them better support in their lives and for our economy to do better. However, we must get to that higher level of public expenditure over time and it must be matched by a growth in tax revenue to allow those steady increases to be delivered.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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I am all for a growth in tax revenue; the question is where it comes from. Regarding the public service, we had 320,000 public sector workers in 2008. At the end of 2015, there were just under 300,000 public sector workers, just over 20,000 public sector workers are missing when our population has grown by, I think, 270,000. How is it possible to provide quality public services to people given a relatively significant reduction in public service numbers and an increase in the population?

Paschal Donohoe (Dublin Central, Fine Gael)
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Increasing better public services for people is not all about hiring more people to provide those public services. It is also about what we could do with efficiency and the output per person. That said, the number of people employed to provide public services, particularly in our front-line services, is a very big part of the equation. We have seen that over time, in line with a recovery taking place, we have been able to increase investment in the hiring of more public servants. For example, since the beginning of 2015, when the economy created the resources to do it, we have been able to hire more front-line public servants, including more people working in health, teachers, special needs assistants, SNAs, resource teachers and gardaí. Since that point, the number of people involved in front-line services has increased by 8,500 to 298,000, so there has been an increase in the number of people doing that work. If one looks at our current position for 2016, we expect we will have 306,800 people working in our public services, which is an increase of 8,600, so we are increasing the number of people working in front-line services, which is paid for by the steady increase in tax revenue that we discussed earlier on.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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Appointments are detailed in Vote 17. Reference is made to 3,053 appointments to date in 2016.

Paschal Donohoe (Dublin Central, Fine Gael)
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Could I double-check that the Deputy is referring to the Public Appointments Service?

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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Yes. Elsewhere, I think in the same category, reference is made to an increase in staff numbers of 8,000, so there seems to be a discrepancy between the number of appointments and the increase in staff numbers. Is that accounted for by people in temporary positions and so on?

Paschal Donohoe (Dublin Central, Fine Gael)
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No. The Public Appointments Service is the organisation that deals with the appointment of senior civil servants or board members, as opposed to the front-line staff we are discussing at the moment.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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The last question, a key one, is pay restoration. It is clear now when one considers the teachers and the gardaí that workers will not wait for the pay restoration schedule planned by the Government. We are talking about workers who suffered because of the crisis and who, under pressure, agreed - I would not say volunteered - to give up pay. Now they hear all the talk about the recovery. They know the Government fights for Apple to keep its €13 billion, or rather our €13 billion, and they say they want to see recovery and a raise. How much would it cost to restore pay to all public servants in budget 2017, for example, and why would the Government not do that?

Paschal Donohoe (Dublin Central, Fine Gael)
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The cost of full FEMPI restoration across a given year would be around €1.4 billion.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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Why not do it?

Paschal Donohoe (Dublin Central, Fine Gael)
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I acknowledge the huge contribution and sacrifices that all our public servants have made. Our country would not be where it is now without that level of sacrifice. As to why we cannot restore the full amount, let us acknowledge what we are restoring at the moment. Under the Lansdowne Road agreement, by the third year of it, €840 million in wages will be restored, either through lower pension-related deduction, PRD, or an increase in wages targeted at people on low and middle incomes. Therefore, we are seeing wage restoration take place through the Lansdowne Road agreement. The Deputy asks me why we cannot deliver full wage restoration, which equates to reversing out of the FEMPI legislation and going back to pre-crisis salary levels. The answer is that money is not available to the Government to do so. He asked me earlier about fiscal space and what is available. There is €600 million available to the Government and we must balance the need for better services and more services that the country wants with our ability to properly pay people who are delivering those services. That is why the Lansdowne Road agreement is so important. We are restoring wages but we will have to do it at a rate that is affordable to the country and which ensures that we do not end up with an unaffordable wage bill in the future because when that happens, as I said in a previous hearing here, the unfunded wage increase of tomorrow is the savage wage cut of the following day. We have just come through that cycle and I do not want to see it happen again.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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I am not sure that is the cycle we came through. I am not sure that we had a crisis because wages were too high. I think it is because we decided to bail out a bunch of banks and developers and put that cost onto the people but-----

Paschal Donohoe (Dublin Central, Fine Gael)
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I am not saying the cause of our crisis was simply our position regarding public expenditure, pay and our tax base. Other factors were at play, which I acknowledge, but it was a big factor in it.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
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Concretely, the gardaí's pay claim, which I support, poses a serious challenge to the Lansdowne Road agreement because they are saying they will not wait, that they will take action and the Government will come under pressure.

I would support the exertion of this pressure to give a concession. Does this not pose a challenge to the Minister's strategy for dealing with pay restoration?

Paschal Donohoe (Dublin Central, Fine Gael)
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Of course it is a challenge but what is most important to me is that we have a rate of wage restoration that is affordable. The Deputy knows well that what would happen were we to reach a particular agreement on wages for the gardaí is that every other public servant would also expect it to happen.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I apologise for interrupting the Minister but I ask him to check his mobile phone because there is interference.

Paschal Donohoe (Dublin Central, Fine Gael)
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I have actually lost my phone, so it is definitely not me.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Someone has a phone near the desk.

Paschal Donohoe (Dublin Central, Fine Gael)
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It is back.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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In his opening statement, the Minister extended an invitation to write in or use this exchange to make suggestions. I tend to use these meetings as best I can to make suggestions. With regard to public service reform, page 31 of the mid-year expenditure report states there is evidence that Ireland has a strong record of efficient use of public funds. This may be the case generally. However, I want to address the fact we raise our taxes in a diligent manner but on the other side, there is the difficulty of monitoring the expenditure that takes place, which is the remit of the Department of Public Expenditure and Reform. In the context of this statement on the efficient use of public funds, how does the Minister see the State's oversight of the spend on the transport system? We give a big subvention through the Department of Transport, Tourism and Sport but it is not dealt with by the Comptroller and Auditor General. The school transport system is chaotic throughout the country and we have no insight into how this money is being spent. We have the section 38 and section 39 bodies in the HSE. We have the general difficulty that the HSE does not have a single accountancy system. We also have the various State boards which are funded by the State with little transparency. We have had a recent controversy about the appointment of a CEO over the limit in terms of what the Minister recommends. How will the Minister deal with this?

Paschal Donohoe (Dublin Central, Fine Gael)
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I will begin with transport and the Chairman is right that some of the funding available, principally to the CIE group, via subvention might not be the study of Comptroller and Auditor and General but it is subject to Oireachtas scrutiny through the transport committee. When I was Minister for Transport, Tourism and Sport, I appeared before the committee regularly to discuss subvention and the services being delivered. I had to answer questions on many occasions on services the public expected to see delivered and the level of subvention paid for them. This mechanism certainly was available.

With regard to State boards and their accountability to the Oireachtas, my understanding is the chairman of Horse Racing Ireland will appear before the relevant Oireachtas committee to answer questions on the matter and the Minister for Agriculture, Food and the Marine appeared before the committee on Tuesday evening and answered questions on the issue. As a matter of course, I expect those chairing important State boards to appear before the relevant Oireachtas committee. It is the case in the areas of transport, tourism and sport and the bodies for which I have responsibility appear before the Oireachtas committee.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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All of what the Minister has said is correct but it does not lead to transparency in the accounts. If money is allocated through the Department, or if the Department oversees the allocation of money through another Department, I expect someone will receive a comprehensive report on how the money is spent. While it is open to the Oireachtas committee to invite in the board, the CEO or the accounting officer, this does not happen regarding the accounts. We do not have sight of the accounts. We do not have a forensic examination of the accounts. I use the example of CIE because it involves a significant amount of money, within which is the school transport system that receives a significant amount of money and, in my opinion, serious issues arise in this regard. We do not seem as a State to be interested in pursuing the oversight of large amounts of money allocated through Departments to agencies and large organisations which provide services. There seems to be a reluctance on the part of the State to do this as well as a reluctance on the part of the Government, not just this Government but all Governments I have seen operate in the past, to provide the appropriate powers to the Comptroller and Auditor General to conduct an examination of the spend of taxpayers' money to the point of where it is spent. I say this because I served on committees where in opposition Members said one thing and produced reports but when in government those reports were never implemented. This is not a criticism of this Government, it is every Government.

I am anxious to see the type of reforms that will give us oversight in a way that satisfies the Members of the House and the members of the public who ask questions. Is there any movement towards this type of reform and towards grasping the nettle and dealing with these matters? One of the options for a Member of Parliament is to table a parliamentary question. The Minister should look at some of the answers to those questions. One can ask six different questions about the school transport system and one will get the exact same answer, cut and pasted, which does not deal with the issue or answer the question. It just gives one a whole load of rubbish. This is a waste of taxpayers' money and waste of people's time. I ask again whether we can look forward to the type of reform needed to have this forensic examination and accountability?

Paschal Donohoe (Dublin Central, Fine Gael)
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The Department certainly does all it can to identify where tax money is allocated, what it is spent on and how it is spent. It works with all Departments on this matter. With regard to changes, I remember serving with the Chairman on the Committee on Public Accounts and the questions I could not get answered. Perhaps I now have a deeper understanding of some of these matters and the constraints on people when they answer such questions. If we were to look at changes we have made to try to deal with some of the issues to which the Chairman referred, we recently launched a Government service of economists. We have tried to bring together a group of economists, located in the Department, to provide me as Minister and the public a better economic appraisal of services we deliver. We have also just launched a new code of practice for semi-State governance.

I did this during the summer. My expectation is that all semi-State bodies will have implemented it by next year and that it will be rolled out across all bodies.

The accounts of semi-State bodies are audited in accordance with company and commercial law. In nearly all cases, regardless of whether accounts are subject to scrutiny by the Comptroller and Auditor General, they are published. I do not, respectfully, accept that there has been any attempt on the part of this or any previous Government to turn a blind eye to how money is spent. We try to adopt the clearest stance we can on matters that are raised, but people can remain dissatisfied with they service they receive, be it in the school transport system or any other area. Even if we can provide a good reason a service is not being provided, it will never be a substitute for the service not being delivered.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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With respect, I do not know if the Minister has ever looked at company accounts.

Paschal Donohoe (Dublin Central, Fine Gael)
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I have.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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One will never find in the accounts for the school transport system an explanation for costs incurred or information on whether the system is profitable. I have looked at the accounts and could not find that information. On how Government money is spent and accounted for, I refer the Minister to the spending of taxpayers' money on the Galway project which was the subject of a "Prime Time" programme the other evening and the Tipperary hostel project. There are various Government agencies involved in the Tipperary hostel project - I do not expect the Minister to know about it - on which €6 million has been spent. When I inquire about it, I am told that the money was paid out and those involved are accountable for how it was spent. I invite the Minister to look at the place. No Department will take responsibility for the delivery of the project or how the €6 million spent could have been put to better use. We could exchange words all day, but there are significant examples of the State not taking control of expenditure it has incurred. There is significant proof, for example, that CIE in the case of its school transport service and many other agencies do not account for the spending of money, outside their audited accounts. I am speaking about allocations from local government, direct funding from the State or a Department. There is no comprehensive breakdown to show how money is being spent. I understand there was a committee that many years ago dealt with semi-State agencies. There are many bad examples in that regard.

On Horse Racing Ireland, representatives of which will appear before the relevant committee, the reforms provide for board members only to be paid a particular amount and only tjo serve a seven year term. Horse Racing Ireland is in breach of that provision.

Paschal Donohoe (Dublin Central, Fine Gael)
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No, the policy is clear. It provides that if a business case is made for an increase in remuneration or length of service on the board of an individual, the Minister can make a decision on it. It is not the case that policy has been breached in the case mentioned by the Chairman.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is the Minister happy with the appointment?

Paschal Donohoe (Dublin Central, Fine Gael)
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The Minister for Agriculture, Food and the Marine, Deputy Michael Creed, has made clear his view which I share, that in terms of sequencing, the appointment should have been handled differently by the board of Horse Racing Ireland, but there has not been a breach of policy. I do not want to create the impression that I support the view that Government policy has been breached.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That is fine.

Paschal Donohoe (Dublin Central, Fine Gael)
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There is a provision in place which provides for the making of a business case and it was availed of in this instance. I do, however, accept the Chairman's view that the appointment, in terms of sequencing and choices, should have been handled differently.

On accounting for expenditure, I have provided the committee with a booklet which explains how money in my Department is spent. I accept, as I have many times in my contribution, that there will always be cases in which we could do better, but it is not true to say this or any previous Government has turned a blind eye to how money is spent. That does not happen.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I did not say that.

Paschal Donohoe (Dublin Central, Fine Gael)
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What did the Chairman say?

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That is twisting my words.

Paschal Donohoe (Dublin Central, Fine Gael)
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Okay.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The point I am making is that greater accountability is required for how taxpayers' money is spent, down to the point where it is spent. That requires reform of the legislation. I am not pointing a finger at a particular Department. I am saying there is a significant lack of oversight of the spending of taxpayers' money and how it is reported to the parent Department and thereafter the Department of Public Expenditure and Reform. There is a difference of opinion, but I am not saying anybody has turned a blind eye to anything. I am saying that, in terms of oversight, there is a gap in the legislation and the powers of the Office of the Comptroller and Auditor General, a matter which could easily be remedied. For example, if I was to ask the Office of the Comptroller and Auditor General to explain how the school transport budget was spent, it would not be able to answer that question, although it should be able to do so. I will leave it at that.

Paschal Donohoe (Dublin Central, Fine Gael)
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Would the chairman or the chief executive of Bus Éireann be in a position to answer questions on school transport, given that it provides the service in question?

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I am speaking about accountability through a particular office for the spending of a particular amount of money which is quite large. I use the school transport system as an example, but there are others. I have said privately to the Minister that the provision in the legislation which empowers the Office of the Comptroller and Auditor General to examine the spending of taxpayers money, down to the point where it is spent, should be applied across all Departments. That would certainly bring about greater accountability and provide for greater and easier access by parliamentarians to accounts. It is similar to the point I have often made about local government. While there is a local government audit section, when does one ever see its work played out publicly? That does not happen. I know that each local authority is empowered to do so, but it does not happen in the same way that it would happen in the case of Parliament. The point I am making is that in local government auditing involves an examination of moneys collected through rates and so on. What we need is an examination of moneys allocated by central government, which figure at one stage was in the region of €4 billion per annum but which has since reduced to approximately €2 billion.

Who will service in the public service pay commission and will there be outsiders involved?

Paschal Donohoe (Dublin Central, Fine Gael)
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What does the Chairman mean by "outsiders"?

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Will it be made up of officials from Departments or will it comprise persons who are competent in the area? Will there be an input from business and other areas?

Paschal Donohoe (Dublin Central, Fine Gael)
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Officials in my Department are competent in the area. It is my objective that the commission will comprise a broad mix of individuals.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Will the members of the commission be appointed by the Minister or will different sectors appoint individuals to it?

Paschal Donohoe (Dublin Central, Fine Gael)
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Ultimately, I will make the appointments. It is my objective to have a mix of individuals in the commission.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Might Michael O'Leary be a member of it?

Paschal Donohoe (Dublin Central, Fine Gael)
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I do not know if the mix will be that broad. I also do not know whether Mr. O'Leary, if asked to serve on the commission, would agree to do so.

Deputy Paul Murphy might have a view on that if we were to do it.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How many individuals who have come directly from the private sector are employed in the higher levels of the Civil Service now?

Paschal Donohoe (Dublin Central, Fine Gael)
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I will have to come back to you with an answer. Off the top of my head, I am aware of a number of Secretaries General with experience in the private sector who have been appointed recently.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Yes, but they are recently appointed. You might let us have the information on that.

Paschal Donohoe (Dublin Central, Fine Gael)
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I will come back to you with that figure.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I heard on the radio this morning that the Garda representatives wish to meet you. Do you consider that a worthwhile step in terms of their negotiations?

Paschal Donohoe (Dublin Central, Fine Gael)
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It is definitely worthwhile. There is a need for further engagement between the Government and An Garda Síochána on this matter. What has occurred is a very serious development. We have great respect for the work of An Garda Síochána and we must have the Lansdowne Road agreement honoured and implemented. The precedent is that the Minister who has responsibility for that policy area, the Tánaiste and Minister for Justice and Equality, leads the negotiation. I and my Department will provide the Minister with any support and assistance we can.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I should explain the absence of members, particularly Members of the Seanad. They are currently listening to the Taoiseach. I hope you understand.

Michael D'Arcy (Wexford, Fine Gael)
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There are also questions to the Minister for Finance in the Dáil and the Committee of Public Accounts is meeting next door.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Exactly.

Michael D'Arcy (Wexford, Fine Gael)
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What is the Minister's opinion on the gardaí pretending not to be striking? Does he have an opinion on it?

Paschal Donohoe (Dublin Central, Fine Gael)
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The industrial activity they have indicated they might commence has not begun yet and is a number of weeks away. The Garda Commissioner and her senior staff have made it clear that they believe it is very important that there be a period of discussion about what has happened. As I said to the Chairman, we have great respect for the work of the Garda and are aware of the particular nature of that work. However, along with that, I must ensure that the wages paid by State are affordable both now and in the future. That is the reason the Lansdowne Road agreement is so important.

Michael D'Arcy (Wexford, Fine Gael)
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I understand that. I do not wish to labour the point but the Garda Representative Association, GRA, has said the gardaí are going on strike but it is pretending it is not a strike. That is clearly illegal. It is clearly a challenge to the senior management of An Garda Síochána. One can dress it and spin it, and some members of the GRA have done quite a good job on that also, but will the Minister give his opinion on that specific issue?

Paschal Donohoe (Dublin Central, Fine Gael)
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We are referring to a statement made yesterday afternoon. My message is that we wish to support the Garda and its work but we must honour the commitments we have made to everybody who works in our country's public services. Along with the Tánaiste, I wish to engage in a process and any action required that deals with the GRA's concerns but respects the fact that there are tens of thousands of members of our public service who have already signed up to the Lansdowne Road agreement. That is where my focus will be.

Michael D'Arcy (Wexford, Fine Gael)
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Does the Minister see it as a challenge to the Garda Commissioner's authority?

Paschal Donohoe (Dublin Central, Fine Gael)
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The Garda Commissioner will, and is well able to, comment on that matter. What is more important for me is to acknowledge that this is a serious matter and that we must work to seek to resolve it. However, we must do so in a way that is consistent with the broad commitments we have under the Lansdowne Road agreement.

Michael D'Arcy (Wexford, Fine Gael)
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I will leave it at that. On the last occasion the Minister appeared before the committee, I tried to probe the numbers of staff who work for the State. The Minister gave them just before I arrived, so I probably missed them. However, I wish to compare the number of people now with the number at the peak of the boom. The figure I am seeking is the number who are working now and who are on pensions as opposed to the numbers who were working and on pensions at the peak of the boom. I am trying to get the comparison between 2007 and 2017, a decade later.

Paschal Donohoe (Dublin Central, Fine Gael)
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If I could understand the Deputy's question better, does he want to know how many we have working in our public service currently?

Michael D'Arcy (Wexford, Fine Gael)
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Yes.

Paschal Donohoe (Dublin Central, Fine Gael)
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I will answer that first. The number working in the public services at the end of the second quarter of this year was 302,439.

Michael D'Arcy (Wexford, Fine Gael)
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Does the Minister have the number of retired civil and public service staff who are currently on pension?

Paschal Donohoe (Dublin Central, Fine Gael)
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I have the spend. We spent, in gross terms for 2016, €527 million on our pension bill, the net cost of which was €392 million. I do not have the number of people who are currently on pensions but my officials will try to get it for the Deputy while I am answering other questions.

Michael D'Arcy (Wexford, Fine Gael)
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The Minister can give it to me when he finds it. The Minister said previously that we will now spend more or less the same amount as we spent in 2007.

Paschal Donohoe (Dublin Central, Fine Gael)
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In current expenditure, in 2017 we will be within €200 million of what we spent in 2008.

Michael D'Arcy (Wexford, Fine Gael)
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The capital spend is significantly reduced.

Paschal Donohoe (Dublin Central, Fine Gael)
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It is not significantly reduced but it is down. Much of that reduction would be due to the fact that in 2008 and 2009, we were spending more on assets and services than we should have been. However, it is down.

Michael D'Arcy (Wexford, Fine Gael)
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The Minister gave a figure of €1.4 billion for pay restoration. What I am trying to reconcile, and it is not an ideological reconciliation but just a matter of fact, is that we are spending as much now as we were in 2008. We have taken a huge number of people out of the tax net. There are a number of issues on which politics and politicians are hooked. Some want to get rid of the USC and some want people on low pay not to pay any tax. However, with that level of expenditure, the number of staff we have and a reduced capital programme, something will have to give. They all cannot occur. What is the Minister's position? What would he like to see occur with regard to USC and taking people out of the tax net? The figures show that 29% of people will pay no income tax. That is one of the highest rates in Europe. There is also the view of the Fine Gael Party that we should abolish the USC and there is talk of replacing it with something else for high earners. However, USC is pencilled in, which is over €4 billion. What is the Minister's position on those?

Paschal Donohoe (Dublin Central, Fine Gael)
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I will answer that question shortly. On the Deputy's earlier question, the number of Civil Service pensioners is 18,400. There are also individuals in receipt of public service pensions.

We will send the figure the Deputy seeks to the committee secretariat.

I support the Government policy of reducing the USC over time. The key issue is that changes must be made in a measured manner. In reply to Deputy Paul Murphy's question on whether we needed a substantial increase in public expenditure, I indicated we must steadily increase public expenditure over time in a manner that is affordable and allows us to continue to make progress and increase efficiency. The same applies in respect of reductions in tax. The key issue is to ensure changes are made on a graduated basis over time and we do not lose sight of our income and expenditure levels.

Michael D'Arcy (Wexford, Fine Gael)
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While I accept that taxation does not fall within his brief, the Minister indicated that the Government expects revenue from income tax to reach €19 billion in 2017. Income tax receipts stood at €13.5 billion in 2007. Clearly, therefore, income tax revenue has increased by a sizeable amount. A single person moves into the higher income tax rate on earnings of €33,800, which is one of the lowest thresholds for the higher rate in Europe. How can we juggle all these balls and continue to fund State services? As the Chairman stated, our services are on a knife edge.

Paschal Donohoe (Dublin Central, Fine Gael)
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They are not on a knife edge. How can the Deputy say that? In the next 18 to 24 months, the Government aims to balance the books. That is not a definition of a knife edge. Some of the matters to which the Deputy referred come within the remit of the Minister for Finance and he will provide answers on them. As I stated, we will achieve balance in these areas by making steady and incremental change. Public expenditure should be increased and taxes reduced at a steady, moderate pace. I disagree with the Deputy that we are in a knife edge scenario. We were on a knife edge when nobody would lend to us but that is no longer the case.

Michael D'Arcy (Wexford, Fine Gael)
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Income from corporation tax was a couple of billion euro higher than anticipated. The amount of national debt we have to service is €4 billion lower than anticipated owing to the quantitative easing programme being pursued by the European Central Bank. I am criticising the position in which we find ourselves, rather than the Minister, when I point out that single earners start to pay 49.5% of their income in tax when their earnings reach €33,801. Taxpayers in all other EU countries do not move into the higher income tax bracket at anywhere near this low level. We are still talking about reducing taxes down and taking people out of the tax net.

While I appreciate the Minister's point that we must act slowly and incrementally, the changes in the national debt and corporation tax revenue were not envisaged in the budget for 2016. These have had significant benefits. We are on a knife edge.

Paschal Donohoe (Dublin Central, Fine Gael)
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We will be on a knife edge very quickly if we start using unexpected increases in receipts to reduce the taxes that pay for day to day spending. The Deputy referred to the increase in corporation tax receipts. The Minister for Finance has stated we will not use large increases in revenue in specific tax brackets to reduce tax levels for everybody or to fund large increases in public expenditure. To do so would bring us to a knife edge.

Michael D'Arcy (Wexford, Fine Gael)
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I understand that and great credit is due for reducing the debt to GDP ratio to a level nobody would have believed possible four or five years ago. At that time, Greek style figures of 125% and 130% were being bandied about. The debt to GDP ratio had declined to between 70% and 80% and continues to fall rapidly. Deputy Murphy wants pay restoration and does not want anyone on lower incomes to pay income tax, whereas the Fine Gael Party wants to remove the universal social charge. I do not know if we, the politicians, realise where we currently stand.

Paschal Donohoe (Dublin Central, Fine Gael)
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I have a particularly heightened appreciation of the current position because I am trying to deal with colleagues as a budget approaches.

Michael D'Arcy (Wexford, Fine Gael)
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When one considers the figures in light of all the requests and statements being made, I fear we will have another 1977 style bubble. I am speaking to some extent against party policy in saying that we cannot go there.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The Minister's argument is that the Deputy should not worry because he is in safe hands.

Michael D'Arcy (Wexford, Fine Gael)
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I am glad that is the case. The reason I am pursuing this matter is that I am worried.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The Deputy should not worry.

Paschal Donohoe (Dublin Central, Fine Gael)
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If the Deputy is referring to the abolition of rates in 1977-----

Michael D'Arcy (Wexford, Fine Gael)
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Motor tax and other tax measures were also abolished.

Paschal Donohoe (Dublin Central, Fine Gael)
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-----that is not a prospect for the budget in one and a half weeks' time.

Michael D'Arcy (Wexford, Fine Gael)
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The garden is not as rosy as many people anticipated it would be.

Paschal Donohoe (Dublin Central, Fine Gael)
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It was an appreciation of that which fuelled my answers to Deputy Paul Murphy's questions.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Deputy D'Arcy is the only person who is worried. I do not know why he is worried when there are 15 officials present who are carrying the burden of worry on our behalf.

Michael D'Arcy (Wexford, Fine Gael)
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There are 14 of them and the Minister.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The Minister worries too; he does not sleep at night knowing he must appear before the committee.

I have a brief point to make. In terms of State employees, certain Departments employ people on contracts and at some point let them go and replace them with others on similar contracts. Why do such employees not have their contracts extended when there is more work to be done? It is difficult to understand the reason for losing well qualified individuals who have worked in a certain position for some years for the sake of allowing someone in the Department to turn over contracts.

Paschal Donohoe (Dublin Central, Fine Gael)
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Will the Chairman provide a specific example without giving any names?

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I could give a number of examples but the one that comes to mind is the Companies Registration Office which is under considerable pressure as a result of the decision that people do not have to go to court to register a file. The office employs people on contracts which expire after a certain period, at which point someone else will be appointed.

Paschal Donohoe (Dublin Central, Fine Gael)
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Are other people appointed to do the same work?

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Yes. This does not seem to make sense. If I had an employee on a contract who was doing the job well, I would extend the contract rather than having to train someone else to do the same job, which is happening at present. I am merely bringing this matter to the Minister's attention.

Paschal Donohoe (Dublin Central, Fine Gael)
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As it is a specific matter for the Companies Registration Office, I cannot comment on it.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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How is the Department preparing for Brexit under its various programmes? How is the Minister dealing with the issue and what future planning is taking place?

It has taken up a considerable amount of time and there are three areas in which it is impacting directly on my Department. The first is the mid-term consequences for economic growth in the State and effect this could have on the resources available to me. The Department of Finance has changed its growth forecast for next year by half of one point, but owing to the way the fiscal space is calculated, that will not have an immediate effect next year. We are working with our colleagues in the Department of Finance to see what effect it could have in the coming years in terms of our ability to pay for public services and capital investment.

The second area is the budget in looking at different choices we need to make because of the consequences of Brexit. It is a live topic, particularly for my colleagues in the Departments of Jobs, Enterprise and Innovation and Agriculture, Food and the Marine.

The third area is our engagement with our colleagues in the Northern Ireland Executive on EU funding programmes. This is very much a live matter, on which the Minister for Finance in Northern Ireland, Máirtín Ó Muilleoir, MP, and I are engaging.

A theme to which we will come back next year, not to mention in the rest of this year, is the short-term consequences for Ireland which will very much depend on the exit arrangements the United Kingdom will look to negotiate. It needs to decide first. We will be in a much better position to answer the committee's questions on the exact consequences for Ireland when we have that information and know what relationship it is anticipating with the single market, the customs union and all such matters. It is only when we are clear on that information that we will be able to give more detailed answers on the effects for Ireland in the long run.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Within the Department there must be a way - I am sure the Minister is doing this - of getting that message out about Brexit, about where the weaknesses are and how the Government may react in particular circumstances. This is important for those that provide employment in this country and those who are employed in order that there will be as much certainty as one can provide.

Paschal Donohoe (Dublin Central, Fine Gael)
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Our colleagues in Enterprise Ireland and IDA Ireland, in particular, are doing that. My colleagues in the Department of Agriculture, Food and the Marine are also doing it. We are trying to provide as much certainty as we can. I repeat the point I made that a crucial element is knowing when exactly the United Kingdom wants to trigger Article 50 and will make its views very clear on the kind of relationship it wants. After that, it will be up to this state and the European Union to respond.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I am sure committee members would appreciate receiving any information the Minister might have on the general approach being taken to Brexit.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That is a matter for consideration.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Chairman.

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank the Minister and his officials for attending.