Mr. Jim Breslin:

I am joined by my colleagues, Mr. Colm Desmond, assistant secretary in the finance and evaluation division, and Ms Aonraid Dunne, principal officer. As Accounting Officer for the Department of Health's Vote 38, I am pleased to be here to deal with the 2017 annual report and appropriations accounts of the Comptroller and Auditor General. The other item on today's agenda, the 2018 financial statements of the HSE, will be addressed in the first instance by Mr. Reid, as the accountable person for those accounts. Since 2015, under the provisions of the Health Service Executive (Financial Matters) Act 2014, funding of the HSE is provided from the Vote of the Minister for Health, that is, Vote 38. Accordingly, in 2017, the Department was responsible for a budget of €14.341 billion for the salaries and expenses of the office of the Minister and certain other services administered by that office, including grants to the HSE and to a range of other research, consultative, regulatory and advisory bodies. The budget includes the additional €195 million provided by Government in 2017 to the health Vote by way of a Supplementary Estimate.

I will now set out the main points of the 2017 Vote 38 accounts. Funding is allocated to the Department in respect of its own costs and in respect of grants to a range of bodies under the aegis of the Department, including the HSE, the Mental Health Commission, the Food Safety Authority of Ireland, FSAI, and the Health Information and Quality Authority, HIQA. The Department's role is to support the Minister in providing strategic leadership for the health service and to ensure Government policies are translated into actions and implemented effectively. We support the Minister and Ministers of State in their implementation of Government policy and in discharging their governmental, parliamentary and departmental duties.

Much of the public debate tends to be on weaknesses in our health services. Identifying measures to address those issues, in association with our colleagues in the HSE, undoubtedly demands continuing work on the part of the staff of the Department. The Sláintecare implementation strategy defines this reform agenda, which is ambitious in scope and intended progressively to improve the accessibility and quality of services over a ten-year period. The Department has established a Sláintecare programme office and is working closely with the HSE, other Departments and a range of stakeholders to implement reforms.

More generally, the Department seeks to frame policies and legislation to promote health. Under the Healthy Ireland umbrella, we work cross-sectorally to achieve this objective. Life expectancy in Ireland in 2017 was 82.2 years, which was 1.3 years above the EU 28 average. It has increased by 3.2 years between 2005 and 2017. We also work internationally with EU colleagues and the World Health Organization, WHO, on health issues. Currently, considerable work is under way with the EU and the United Kingdom to address the health challenges caused by Brexit and to ensure that North-South and east-west co-operation on health matters is maintained. In addition, we support the Minister and Ministers of State in their work, including their legislative priorities and their public and parliamentary accountability. For example, in 2018, the Department processed almost 11,500 parliamentary questions, representing 23% of all parliamentary questions tabled to Ministers across government.

The 2017 gross provision, current and capital, for Vote 38 was €14.801 billion. The 2017 outturn was almost €14.798 billion and there was an overall surplus of €2.3 million. This was after accounting for a Supplementary Estimate of €195 million. Of the 2017 gross provision for current expenditure, €204 million was provided to the Department-related subheads in respect of its own costs and in respect of grants to agencies under the aegis of the Department, other than the HSE. The 2017 outturn for these subheads was €189 million, giving an underspend of €15 million. There was €14.040 billion of the 2017 gross provision for current expenditure provided to HSE-related subheads. The 2017 outturn for these subheads was €14.052 billion, giving an overspend of €12 million. The overspend primarily related to funding the existing level of service in both acute and community services and pension costs. This overspend was met from savings elsewhere in the Vote. The 2017 provision for capital expenditure was €557 million and the 2017 outturn was €557 million. The 2017 appropriations-in-aid to the health Vote was €1 million short of profile, at €459 million. The end-year net outturn for current and capital spending was €14.339 billion, against a net provision of €14.341 billion, resulting in a saving to the Exchequer of the aforementioned €2.3 million.

While I am here in the context of the appropriation accounts for 2017, I am conscious that the committee has expressed concerns in respect of the accounting treatment of the consultant pay arrears in the HSE's annual financial statements for 2018. I assure members that there is nothing untoward about this, and there were very good reasons that the Department considered it to be the most appropriate course of action. This was a purely technical solution to address the specific characteristics of the consultant settlement. As the committee will be aware, consultants took a High Court case regarding their dispute on the non-implementation of pay increases under the 2008 consultant contract. Those increases were not implemented over the intervening period due to the financial emergency. Had the State lost that court case, the reinstatement of increases with full retrospection would have required an immediate payout running to hundreds of millions of euro. Instead, the State negotiated a settlement in June 2018 that capped the historic element at less than 55% and achieved an agreement to pay this out over two subsequent years, in 2019 and 2020. This involves additional once-off payments, which were estimated at €73 million in 2019 and €109 million in 2020, in respect of the historic element of the settlement. Payment of the increases due from the date of settlement to the end of December 2018 was also deferred to 2019. The ongoing cost of the settlement was estimated at €62 million on an annual basis. Agreement for payment over the two years, 2019 and 2020, represented a very substantive benefit to the State of the settlement agreement as, in the event of a court award, the State could have been faced with a requirement for immediate payment of higher salaries and pensions and very significant arrears.

Under section 36 of the Health Act 2004, the HSE prepares its financial statements in accordance with standards specified by the Minister. These, for the most part, reflect financial reporting standards. However, several exceptions have been made through specific policy directions, including in respect of future pension liabilities, liabilities under the clinical indemnity scheme, depreciation and capital grants. In light of the specific characteristics associated with the consultant settlement, it was decided to direct the HSE to apply a "receipts and payments" convention so that recognition of the expenditure arising from the agreement would be appropriately matched with future funding from the Department of Health Vote. The reason for this approach was to acknowledge the special and unique characteristics of the settlement which, from a State budgetary perspective, was successfully spread over a subsequent two-year period.

The substance of the agreement upon which the cases were settled informed the approach taken. Had the full liability been recorded in the HSE's 2018 accounts, regardless of the fact that payment was not due until 2019 and 2020, the deficit arising would, under health legislation, have been required to be offset against 2019 funding. This would have reduced the funding available for the delivery of health services in 2019 since, under the settlement, some €109 million in once-off payments do not fall due for payment until 2020 and the funding for them will not be provided until then. This additional direction for 2018, in respect of the non-recognition of that liability, is time bound and will only apply until 2020. Different options were considered by the Department and the HSE to address the issue on a transparent basis. The direction that issued to the HSE was incorporated in the finalised annual financial statements approved by the HSE directorate.

I am happy to take any questions members may have.