Mr. Maurice Quinn:

I thank the committee for the opportunity to discuss the 2015 appropriation accounts for the Defence and Army Pensions Votes. The Defence sector is made up of two Votes,  Vote 35, Army Pensions, and Vote 36, Defence. The high level goal of both Votes is to provide for the military defence of the State, contribute to national and international peace and security and fulfil all other roles assigned by Government. This is achieved across three strategic dimensions: defence policy, ensuring the capacity to deliver and Defence Forces operational outputs. The Government's defence policy for the next decade has been set out in the White Paper on Defence, which was published in August 2015.

Some 68% of the Defence Vote in 2015 provided for the pay and allowances of the Permanent Defence Force, civilian employees and civil servants, as well as the Reserve Defence Force. The non-pay allocation provided addresses capability development and operational outputs and includes both current and capital elements. Non-pay current expenditure of €123 million in 2015 provided mainly for essential and ongoing Defence Forces standing and operational costs such as utilities, fuel, catering, maintenance, information technology and training.  Capital expenditure of €89 million provided for equipment purchase and renewal and the ongoing upgrade and refurbishment of military barracks and facilities across the country. Significant operational outputs include Ireland's contribution to international peace and security, and at home, aid to the civil power.  The commitment of personnel to the international domain comprehends peace support operations, under a UN mandate, principally the UNIFIL and UNDOF missions in Lebanon and the Golan Heights, respectively.  Ireland now holds the position of Force Commander of UNIFIL. 

Deputies will also be familiar with the humanitarian mission in the Mediterranean, Operation Pontus, undertaken by the Naval Service.

At home and on a daily basis, the Defence Forces provide a range of supports to the civil power, mainly to An Garda Síochána, in addition to assistance to the principal response agencies in dealing with major emergencies, including the severe weather response, missing persons, fishery protection by the Naval Service and emergency aeromedical support missions by the Air Corps.

The Reserve Defence Force, RDF, plays an important role in supporting the Permanent Defence Force, PDF, mainly through the provision of a capability to be able to augment the PDF in crisis situations. The 2015 White Paper acknowledged the excellent levels of voluntary service provided by members of the Army and Naval Service reserves.

The Defence Vote contributes funding to the Civil Defence, channelled to local authorities. Throughout 2015, the Civil Defence was involved in a wide range of activities throughout the country, including a prominent support role in dealing with the flooding in December 2015. In response to the impact of severe flooding on businesses in late 2015, the Government established a one-off humanitarian payment arrangement for small businesses that could not obtain flood insurance but subsequently suffered flood damage to their premises in the period from December 2015 to January 2016. An allocation of €5 million was provided to the Irish Red Cross from the Defence Vote to administer the scheme in 2015.

Vote 35 - Army Pensions - provides for pensions benefits for former members of the Defence Forces and the dependants of deceased members. The expenditure, in its nature, is demand-driven and non-discretionary. It has increased considerably over recent years, principally in line with the increase in the number of pensioners. In 2015, 12,128 army pensioners were paid from Vote 35, compared with 11,322 in 2010, an increase of 806 or 7%. This Vote also provides pensions to widows of veterans of the War of Independence.

A Supplementary Estimate of €6.5 million required in 2015 was met by savings on the Defence Vote. A distinctive aspect of Army pension administration is that military personnel can retire voluntarily at a time of their own choosing rather than at the normal retirement age. This is usually with pension benefits that are payable immediately. This is in contrast to most pensions in the public service which are payable on retirement which, in itself, is normally highly predictable at ages over 60 and for which the cost and timing of liabilities can be estimated with much greater accuracy.

I would now like to refer to Chapter 8 of Volume 2 of the Comptroller and Auditor General’s report which deals with the disposal of the Government jet. As recommended by the Comptroller and Auditor General, it is the normal practice of the Department to carry out a formal cost-benefit analysis and a discounted cashflow analysis of life cycle costs which are part of the decision-making process. It is also established practice to dispose of State assets through a competitive sales process. In the case of the Government jet, the circumstances were entirely exceptional and decisive action was necessary to assess the relevant options quickly and proceed on the most cost-effective and prudent approach. The Gulfstream GIV aircraft had been in service since 1992 and was fully depreciated by 2012. An overhaul of both engines by 2018 or 2019 at an estimate of €2.5 million was going to be required. The Government noted in July 2014 that retention of the aircraft beyond that would not be sustainable, given its age. The decision in July 2014 that the jet should be disposed of for the best possible price was triggered by the unexpected estimate for repair and maintenance of €1.34 million. Disposal for salvage was considered to be the only viable option, given the estimated cost of €1.34 million to repair to a serviceable condition, the absence of any guarantee of future serviceability even after incurring repair costs, the depressed executive jet market conditions and the charges that were accumulating on the service line in the US.

There is no disagreement with the report of the Comptroller and Auditor that an assessment of costs was necessary. This was undertaken but conditioned in its approach by the exceptional circumstances. The assessment, governed by the policy approach limiting further financial outlay, together with the uncertainty relating to future serviceability of the aircraft, meant that there was only one course of action available rather than a set of options. The decision to dispose of the aircraft flowed from this assessment. The approach to the disposal of the aircraft was necessarily heavily constrained by the circumstances whereby the aircraft was in a stripped-down state in Gulfstream’s facility in Savannah, Georgia in the US. The normal circumstances in which an asset is under the control of the Department and Defence Forces did not apply and additional costs could only arise the longer disposal took. In January 2015, the Department accepted an offer of €418,000 to purchase the aircraft "as seen" from Journey Aviation, a US-based company. In February, the spare parts which were now redundant were sold to the company for €53,000. While this differs from their historical value on inventory, it was considered reasonable given that, for the Air Corps, these parts were now redundant and taking account of the nature and age of the parts and the "as seen" sales condition.

As Accounting Officer for the Department of Defence, I am satisfied with the value achieved in the sale of the aircraft and spares, given the policy parameters set and the exceptional circumstances involved. There was considerable risk of additional Exchequer costs if appropriate and timely action was not taken. Our priority at all times is the best use of the funds available and application of these to provide necessary defence capabilities having regard to Government policy, business requirements and safety considerations.