Oireachtas Joint and Select Committees
Thursday, 23 November 2017
Select Committee on Foreign Affairs and Trade, and Defence
Estimates for Public Services 2017
Vote 35 - Army Pensions (Supplementary)
Apologies have been received from Deputies Seán Crowe and Darragh O'Brien. Deputies Aengus Ó Snodaigh and Lisa Chambers are substituting and welcome. All mobile phones should be switched off for the duration of the meeting as they cause interference with the recording equipment in the committee room, even when left in silent mode.
The meeting has been convened to consider the Supplementary Estimate for Vote 35 - Army Pensions - which was referred to the select committee by Dáil Éireann on 21 November. A briefing document has been circulated to members. I thank the Minister of State at the Departments of the Taoiseach and Defence, Deputy Paul Kehoe, and his officials for attending to assist in our consideration of the Supplementary Estimate. I also thank them for the briefing material provided which has been circulated to members. I remind members that, in accordance with Standing Orders, the discussion should be confined to the items which constitute the Supplementary Estimate.
I invite the Minister of State to make his opening remarks.
I thank the select committee for giving me the opportunity to present for its consideration the Supplementary Estimate for Vote 35 – Army Pensions.
I will commence with a short statement setting out the background to this Supplementary Estimate.
The Army pensions Vote makes provision for retired pay, pensions, allowances and gratuities payable to or in respect of members of the Defence Forces. The 2017 Estimate provides a net sum of €224.6 million for the Vote. However, net outturn this year is expected to be €235.3 million, leaving a shortfall of €10.7 million.
Subhead A2 is the largest subhead of the Vote. It covers spending on all pension benefits for former members of the Permanent Defence Force, PDF, and their dependants. It accounts for over 95% of all military pensions spending, including gratuities. It is demand-driven and non-discretionary. The original provision of €220.1 million for subhead A2 will not be sufficient to meet all requirements for the year. The shortfall in this subhead is estimated at €10.8 million.
I will outline the main reasons for the shortfall in subhead A2. The number of Defence Forces pensioners has continued to rise during the year, with some 12,350 military pensioners across all categories. This is a net increase of about 1,350 since 2007. It is expected that approximately 320 military personnel will retire with a pension and lump sum in 2017. Overall, this level of turnover during the year was greater than what was provided for in the original Estimate.
In other areas of the public service, most people leave at a standard retirement age, meaning that their numbers and timing of departure can generally be predicted well in advance. However, the PDF is atypical. The majority of military personnel who retire on pension do so voluntarily, that is, before reaching maximum retirement age and at a time of their own choosing. As such, the details are not known in advance, which can contribute to greater than expected expenditure on military retirement benefits in any given year. This situation is a product of the availability, for operational and human resources, HR, policy reasons, of the early payment of pension benefits immediately on retirement after relatively short periods of service and regardless of age.
In any given year, forecasting of Defence Forces pensions expenditure and the exact numbers of retirements is difficult. During 2016, 75% of military personnel who retired on pension did so voluntarily. The picture is much the same for 2017. In addition, many retirees qualified for the maximum retirement benefits, which also contributes to the ongoing increased costs.
A shortfall arises in subhead A3, which covers the cost of military disability pensions, disablement lump sums and related dependants' pensions. It accounts for some 4% of all military pensions expenditure. The original provision of €8.7 million for this subhead will not be enough to meet the full costs arising during the year. A shortfall of €430,000 is expected and is due to greater than expected expenditure in respect of new disability pension and disablement lump sum awards over the course of 2017.
The combined shortfall of €11.3 million in subheads A2 and A3 will be partly offset by expected savings of €260,000 in subheads A4, A5 and A6, combined with surplus receipts of €300,000 in subhead B.
To sum up, the purpose of the Supplementary Estimate for Vote 35 is to seek additional funding of €10.83 million for subhead A2, seek additional funding of €430,000 for subhead A3, reallocate savings of €260,000 from subheads A4, A5 and A6 to subhead A2, and reallocate projected surplus receipts of €300,000 from subhead B into subhead A2. This leaves a net Supplementary Estimate requirement of €10.7 million.
As I previously indicated to the committee, it has been my intention to seek extra funding for military pensions as part of the overall future budgetary negotiations. Arising from those negotiations, the gross allocation for Army pensions was increased by €6 million for 2017. I am pleased to inform the committee that, as recently announced in budget 2018, the Army pensions allocation will be further increased by €9.5 million next year. The military pensions funding envelope for 2019 will again be addressed next year as part of the process of ongoing engagement with the Minister for Public Expenditure and Reform and his officials.
Although the costs of recruitment to the PDF are not met from the Army pensions Vote, I will take this opportunity to update members on the measures being taken to replace personnel who are leaving the PDF through retirements and discharges generally. I reiterate the Government's commitment to reaching a full strength of 9,500 PDF personnel as set out in the White Paper on Defence. In that regard, I assure the committee that there is sufficient funding within the budget for a full strength PDF.
In terms of defence spending, budget 2018 delivered an extra €25 million for 2018 and an additional €98 million for capital expenditure out to 2021. As I have acknowledged, however, the process of reaching and maintaining the 9,500 target strength level presents many challenges. As with other areas of the public service, challenges have arisen for the Defence Forces in terms of the recruitment and retention of personnel with scarce and highly marketable skills. This is always a factor where highly trained personnel are a desirable asset to any employer. There is a particular challenge in retaining personnel with specialist and scarce skills but having spoken to my ministerial colleagues at European meetings, I note this is a challenge faced by military forces internationally.
I have welcomed the recent announcement by my colleague, the Minister for Finance and Public Expenditure and Reform, on the next phase of work of the Public Service Pay Commission. I am pleased to see that the Defence Forces are highlighted as a priority area requiring a more comprehensive examination of underlying difficulties. The Department of Defence, in conjunction with the Defence Forces, has raised recruitment and retention issues as part of its submission to the commission. We will be making a further submission to it when it commences this next phase of its work.
As stated in the 2015 White Paper on Defence, continuous recruitment is the lifeblood of the Defence Forces organisation. It provides young, motivated and enthusiastic personnel to replenish military formations for operational deployments. As the committee is aware, there has been a concerted effort in recent years to ensure significant ongoing recruitment at enlisted and officer levels. It is anticipated that 800 personnel will be inducted into the PDF during 2017. This includes officer cadets, Air Corps apprentice aircraft technicians, direct entry officers for the Naval Service, medical doctors and, of course, general service recruits.
A new general service recruitment campaign was launched in September. This builds upon the successes of previous campaigns and will provide for the induction of new personnel in 2018. Aside from recruitment, there were also more than 1,400 promotions across all PDF ranks in the years 2014 to 2016. Promotions within officer and non-commissioned officer, NCO, ranks are ongoing in order to fill vacancies and, to date in 2017, a further 190 personnel have been promoted.
A range of recruitment methods are being employed, including direct entry competitions for specialist positions, and the scope to expand direct entry further is being considered. This includes actively considering the terms and conditions that would allow and encourage former members of the Defence Forces with specialist knowledge, skills and expertise to return to service to meet any identified skills gap.
The Government is committed, with the support of the Chief of Staff and within the resources available, to retaining the capacity of the Defence Forces to operate effectively across all roles and to undertake the tasks laid down by the Government at home and overseas.
I commend this Supplementary Estimate for the Army pensions Vote to the committee. I will be happy to take whatever questions arise and will do all that I can to answer them openly and honestly.
I thank the Minister of State and note that he stuck rigidly to my exhortation that he stay with the subject matter of the Supplementary Estimate. I welcome that it is a Supplementary Estimate, not the reallocation of funding for the capital programme to fund the shortfall in pensions that has been a recurring feature of the past few years.
The Minister of State mentioned the loss of many highly qualified skilled people who had not reached retirement age. Unfortunately, there are many well qualified, committed former members of the Permanent Defence Forces who I think should still be serving. I know some of them very well and they left because they are not satisfied with the conditions and the morale within the Army. Recruitment, which the Minister of State mentioned in his contribution, needs to be addressed but retention also needs to be addressed.
I gather from some of the low-ranking members of the Permanent Defence Force, PDF, that the availability of the disability pension is not widely known with the Defence Forces. It was suggested to me that it is very well known and availed of by higher ranking officers who had retired, but the lower ranking ones did not seem to be so well acquainted with their entitlements. Could the Minister of State arrange for the Department to ensure that people are fully aware of their entitlements?
We need policies to be put in place and measures to be taken to retain members of the Permanent Defence Force because we all want to see enlistment at required levels.
Today, the subject is the Supplementary Estimate and as we have a time constraint, I will allow very little tolerance for veering away from the Supplementary Estimate. However, a request has been sent to the Minister of State to engage with us on general Defence Forces matters in January. He will be here next week for statements on the European defence policy but in January we hope to devote a full meeting to Defence Forces matters, where a dialogue will be very important.
In response to the Chairman's question on pensions, I am told by officials that this information is published in booklets available to all members of the Defence Forces, enlisted personnel and officers. I work with the pension side, and I know that there is a good mix of enlisted personnel and officers in receipt of such pensions. I will take the Chairman's query away from this meeting and make sure this is highlighted in so far as possible throughout the organisation. This is not hidden from anybody. Perhaps the Chairman is referring to new members.
This is published in information booklets available in every barracks and is available to all members of the PDF, enlisted and officers. The personal support services are there to assist members and to inform them of any pension rights they are entitled to.
I thank the Minister of State. I know from dealing with some representations that the time to process and approve or make a final determination on an application is far too long. That needs to be speeded up.
I know from my own experience that many medical files have to be gathered and gone through. It is not a simple process. This has to go to different branches. It is not just one civil servant who reads a medical file and is able to determine if a person has lack of hearing, a disability or some form of injury. It has to go through different branches. The medical side takes some time and has to go through due process. There is also the Army pensions board. The processing time depends on the complexity, nature and range of medical conditions and injuries claimed. To assist in its investigations, the board often seeks outside independent medical opinion from consultants in the relevant specialist fields and the process for deciding disability pension applications is very different from the one involving the award of military retirement benefits. It takes some time to complete due to the need to fully verify the background details in individual cases for the medical investigation by the Army pensions board.
I thank the Minister of State but I am sure that when he signs replies to representations from Members of the Oireachtas in regard to delays in finalising some of these applications, if he were to read them, he would see that it takes too long, unfortunately. If that could be speeded up, it would be helpful to those people.
To follow on from some of the points made by the Chairman, in many services very experienced and skilful people are leaving which presents difficulties. The Chairman spoke about low morale. It is a great credit to our Defence Forces that they have carried out their work in spite of that.
The shortfall has to be met but the Minister of State said this is likely to occur again. What can be done to ensure we are not in this position again? How can specialist skills be retained? What is the Minister of State doing to achieve that?
Is there a resource for people who have retired and are in severe financial difficulties? What sort of disabilities do people on the disability pension have? What effect does direct entry have on the services?
I take on board the point that today we want to keep to Army pensions but as the Minister of State's statement today was quite comprehensive, I gather that he anticipated questions on other areas.
I raised the superannuation arrangements for post-January 2013 entrants with the Minister for Finance in the past week and he was quite sympathetic to the anomaly that exists. Since 1995, Defence Forces officers pay a pay related social insurance, PRSI, class A contribution and their pensions are fully eligible for the social welfare system. Those officers fulfilling the agreed criteria are eligible for a supplementary pension provided for by an agreement in 2009. The retirement age for the rank of commandant was increased from 56 to 58 years to facilitate that arrangement. The Public Service Pensions (Single Scheme and Other Provisions) Act 2012 came into operation and I gather from the Department and from the Minister of State that it does not provide for pre-existing superannuation arrangements. Therefore, the terms of the 2009 agreement no longer apply to entrants post-January 2013. The implication of this is that a new entrant to the Defence Forces as an officer from 1 January 2013 who is mandatorily retired at 58 or 60 will have a final benefit pension less the value of the contributory State pension. New entrants will be at the loss of the value of the contributory State pension, which is currently €12,390 until they reach the age of retirement at which that becomes payable.
They are at a loss. It is an anomaly. From what I gather, that issue was not brought up during the negotiations in respect of the 2012 Act. There was an expectation on behalf of the Defence Forces and their representative association that this superannuation arrangement would continue in place, which is no longer the case. This will require funds to fix it, and the Minister of State will be obliged to speak to the Minister for Public Expenditure and Reform, Deputy Donohoe, to address this issue. An officer who came in post 2013 and who knows that his or her pension will be severely reduced when he or she hits the mandatory retirement age will look to get out earlier. These people will have to find employment at a younger age and start a new career. In light of the retention difficulties we are facing, this is an area that can be addressed with minimal cost. The Minister of State should consider this issue and come back to the committee - and to me personally as Fianna Fáil spokesperson on defence - to give an answer as to how that anomaly is to be addressed.
I want to go through the Minister's statement and the issues raised within it. The main reasons for the shortfall are referred to, and I accept the difficulty in calculating what the pensions are year on year because members can leave voluntarily and at different ages. However, I find it strange that the list of main reasons did not include the issue of retention and the fact that we are losing people at an alarming rate. That is one reason there is a shortfall in the pensions budget. I do not see anything in the Minister of State's statement and still have not seen a physical document that outlines the Department's retention policy. I acknowledge huge effort is being put into recruitment but we are losing people at such an alarming rate that we cannot catch up with ourselves.
In his statement, the Minister of State indicated that the Government is committed to reaching a strength level of 9,500. It is difficult to marry that with the current state of our Defence Forces. They are currently in an extremely poor state. We are losing middle and senior management, that is, experienced people with expertise and skills. Those are the people we need to train the officers and NCOs coming through the recruitment process into which so much effort is being put. Officers who are recruited, go through their cadet school training and come out the other end as second lieutenants still are not fully trained to take up some of the posts they are expected to take up. They do not have the expertise and skills to lean on, in terms of senior personnel to help train them further, to get them to the required level to operate as unit commanders.
On the last page of his statement the Minister of State observed that "continuous recruitment is the lifeblood of the Defence Forces". While I acknowledge this point is not directly related to Army pensions, I must mention the Reserve Defence Force, RDF. If the RDF continues to operate as it does currently, it will cease to exist. It is almost dead and gone. Recruitment continues to be a major issue. While I acknowledge recruitment within the Permanent Defence Force, PDF, is ongoing, the issues concerning RDF recruitment, including getting people through the process of medicals and Garda clearance, have not been rectified. The RDF's strength at the moment is down to just over 1,000 personnel. It pains me to see the organisation struggling to survive as it is. In the near future we will no longer have an RDF unless something is done. I have raised this issue with the Minister of State time and time again. Towards the end of the Minister of State's statement, he noted he is "actively considering the terms and conditions that would allow and encourage former members of the Defence Forces with specialist knowledge ... and expertise to return to service to meet any identified skills gap". We have identified skills gaps. The Air Corps is a clear example of that. We do not have enough pilots or aircraft technicians. We do not have enough members to run a properly functioning Air Corps. The time for actively considering terms and conditions has long passed. That ship has sailed. We need proper, concrete action which will encourage members to stay within the Defence Forces in the Air Corps, Army and Naval Service. We have not seen that to date.
The Minister of State has mentioned that the Government is committed, with the support of the Chief of Staff, to retaining the capacity of the Defence Forces within the resources available. We do not have capacity in the Defence Forces to deliver the service that is required. That is gone and has been lost. It will take years to build up the skills and expertise we have lost. It is a devastating place for the Defence Forces to be. Had this been addressed a number of years ago, we would not be in the position we are in today. We are where we are, however, and still do not have a retention policy. This was made clear to the Minister of State at both the Representative Association of Commissioned Officers, RACO conference and the Permanent Defence Force Other Ranks Representative Association, PDFORRA, conference that took place in recent months. We need a retention policy, and it needs to be implemented immediately.
In the context of the Defence Forces operating effectively, need I mention Rescue 116 and how top cover could not be provided? We could not operate effectively within the Air Corps. We have a new naval ship which we cannot man. We have people in the Army who are double and triple-jobbing.
I make the point that we will see an increase in the pension supplement every year because we are not addressing retention. We have not seen a policy in that area and as a result, we will be back here next year to seek another increase in the pensions budget.
Deputy Maureen O'Sullivan spoke of morale in the Defence Forces. I presume the Deputy is referring to the University of Limerick, UL, document. My Department, the Defence Forces and the associations have taken that report very seriously. We have actioned quite a number of points and are working through the document. The report was carried out at a time of tough economic circumstances within the State. Were the UL study to be carried out again, there would be different results. There have been pay increases across the board for members of the Defence Forces. Deputy O'Sullivan also spoke about specialist skills. People retire right across the board, from different ranks and with different skill sets. The Minister for Public Expenditure and Reform, Deputy Donohoe, has prioritised the Defence Forces, along with the health sector, to investigate recruitment and retention issues around specialist skills. We are preparing for negotiations with the Public Service Pay Commission. Work is ongoing on that at present in association with the representative organisations.
The ongoing financial difficulties in respect of Vote 35 were discussed. We have had increases over the past two years. We are in continuous negotiations with the Minister for Public Expenditure and Reform and his officials to address this issue. We cannot say for definite at the start of each budgetary year how many people are going to retire. It depends on whether they retire in January or November as to how much of a chunk will be taken out of our budget.
Disability as it relates to members of the Defence Forces was brought up. There is a range of disabilities, including hearing problems and physical injuries to limbs and backs. Those people go through a process, which includes medical documentation, as I outlined to the Chair at the start of the meeting.
Deputy Chambers mentioned supplementary pensions for officers. I cannot negotiate the terms of reference for a supplementary pension here.
I addressed this at the recent Representative Association of Commissioned Officers, RACO, conference. I stated I will be in consultation with the Minister for Public Expenditure and Reform. Officials from the Department and RACO have been in contact with the Department of Public Expenditure and Reform on this issue. The Deputy said the Minister, Deputy Donohoe, addressed the matter during question time. I have spoken to him about this, and I told RACO at its conference that I had spoken to the Minister. There is ongoing consultation between that Department, my officials, the representative associations and me. I cannot negotiate the terms of reference at this meeting. It is a matter for the Department of Public Expenditure and Reform.
I do not agree with the Deputy regarding the numbers leaving. When I was appointed in May 2016, one of my first priorities was the number of members of the Permanent Defence Force and trying to get back up to a strength level of 9,500. We have a full budget for 9,500 members. In 2016, 569 members left and 619 people were taken in. It has been out there for quite some time that more people are joining then leaving. Since my appointment in May 2016 we have taken in just over 800 members, between enlisted ranks, the Naval Service, the Air Corps and cadets. There is ongoing recruitment. I have recruiting meetings on a quarterly basis, with Deputy Chief of Staff support, with all of those involved in recruitment to keep the pressure on and see where they are being trained, and I am quite content. It will take me some time. I have stated from the time of my appointment this will be a huge challenge as we are competing with a very strong economy, but this is a priority for me. We are taking in more than are leaving. Our strength level at the end of October was 9,219 personnel across all services.
The Deputy said that after their training personnel are not fully trained. This is absolutely not the truth. I am not sure if that is what the Deputy meant.
I will clarify. What I meant is that when people come out after two years in the cadet school they really rely on senior officers to show them the ropes. On coming out of cadet school they go into a posting. The officer corps tells us it is very important to have that link with senior officers who have served and who will pass on their skills and knowledge. It is how the organisation works. We are losing this.
Like any organisation, people pass on their skills and knowledge, and I am the first to accept it is a challenge. I have been assured by the Chief of Staff that all new commissioned officers are given every help and assistance to bring them right through the organisation. These are highly trained and skilled cadets. I have looked at the curriculum to see how skilled these people are when they come out and they are really skilled.
They are well able and independently able to work in the organisation.
Direct entry and re-entry is something of my own initiative. I spoke about this in February or March and I stated I wanted this to be a priority. The terms and conditions are being worked on regarding re-entry. There are officers who have retired from the Defence Forces, such as pilots, explosive ordnance disposal personnel or engineers, who want to go back to the organisation. I am not saying there will be hundreds of them, but there are a number of them and I want to give them the opportunity to come back into the organisation. Terms and conditions are being worked on with the Defence Forces and the Department and they have to go back to the representative organisations. Let me state very clearly I will be making a decision on this myself if it is held up by any of the representative organisations. This is a priority. It is the right thing to do. Of course, people coming back in cannot come back in at the same level as their peers. They will have to come back in at a different level. I accept this has to be worked on, and it is being worked on as part of the terms and conditions being developed.
The Deputy spoke about the Air Corps not properly functioning. As recently as yesterday, I spoke to the general officer commanding the Air Corps about any issues he has. I have to say that even though it has huge challenges it is properly functioning. Huge capital investment has been made and extra investment is being planned. There are two classes of apprentice military aircraft technicians and approximately ten began training this year. Ten cadet pilots began their training in October. Other cadet classes are in training. Five cadet pilots received their wings in October. Options on the provision of air traffic control services in the long term are being considered by a civil military working group to ensure their sustainability.
The Deputy spoke about top cover and Rescue 116. I want to be very careful. There is an agreement that on an available basis only we provide top cover to the Coast Guard. Let me state this is totally on the basis of being available. The loss of Rescue 116 was a shock for us all. I send our deepest sympathies to all those involved. Investigations are ongoing and I do not want to go into it. The agreement we have with the Irish Coast Guard is on the basis of being available only, and that is the way it is.
I am not aware of any naval vessel that is not operational at present. Huge capital investment has been made to the Naval Service over the past three or four years. In the worst recession in the history of the State, we are awaiting the delivery of a fourth ship. The flag officer commanding the Naval Service has not come to me, and neither has the Chief of Staff, to state they are unable to operate the full flotilla. They are able to carry out all of their duties asked of them by the Government, such as sea fisheries. Recently, we became fully fledged members of Operation Sofia. All vessels are fully operational. I am the first to state the Air Corps, the Naval Service and the Army have challenges, but I have not been told they are unable to carry out their full duties asked of them in the White Paper on Defence of 2015.
I may as well finish my point. The Minister of State spoke a lot about capital investment in those in training, but I make the point this does not immediately address the capabilities of the Defence Forces, because capital is equipment and those in training are not fully trained and, therefore, operational. The Minister has told me there are no difficulties in the Air Corps and that it is fully effective and fully operational. I am just saying to him here today that is not the information I have. I am also getting different information to the Minister on the Naval Service because I am being told it is extremely stretched in terms of personnel. The focus on capital is one thing, but we need people to man the ships.
I am being told they are fairly stretched. The same is true of the Air Corps. It is widely documented. It has been reported in every newspaper that there are huge staff issues in the Air Corps. I am not making it up.
I would be the first to state that we have our challenges in the Air Corps but within the PDF establishment of a naval service, it is 1,094. The strength as of the end of September 2017 was 1,076. I do not think there is a huge shortage of personnel given the figures of 1,094 and 1,076. Nobody in the Naval Service, the flag officer commanding or the Chief of Staff, has come to me to state that they are unable to operate the full flotilla.
My priority, and this in no way plays second fiddle to the RDF-----
I appreciate that there is a vote in the Dáil but I have three questions. Could the Minister of State address the issue of capital expenditure? A total of €98 million in capital expenditure was announced for 2018 to 2021. Can the Minister of State give me a breakdown about where the funding will be spent? We mentioned recruitment. Over the past decade, the number entering the Defence Forces was only greater than the number of those leaving in it in 2013, 2014 and 2016. I know other members have highlighted this. What measures have been taken to ensure the rate of intake continues to be greater than the number leaving? Can the Minister of State reassure us that the number of cadets entering the Defence Forces exceeds the number of officers leaving it?
Regarding industrial relations and pay, which were already mentioned, will the Minister of State ensure that the Department makes a submission to the Low Pay Commission outlining the challenges facing the Defence Forces because this is a major issue. Many constituents in my area in Sligo are based in Bundoran, Ballyshannon and Finner. Could the Minister of State update the committee about his intentions to renew the conciliation and arbitration scheme within the Defence Forces?