Oireachtas Joint and Select Committees
Tuesday, 3 December 2019
Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach
Matters relating to the Department of Public Expenditure and Reform: Discussion
I welcome Mr. Robert Watt and his officials.
By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. If they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
Members are reminded of the long-standing 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.
I call Mr. Watt to make his opening statement.
Mr. Robert Watt:
It is a pleasure to be here. I thank the committee for the invitation. I have been asked to talk about the role of the Department with regard to general reforms of the Civil Service, public procurement, the overall public expenditure framework, and in budgetary matters. These are quite wide ranging and one could spend a lot of time on each item. I will try to address a flavour of each of these and I look forward to hearing the views of the committee afterwards.
The Civil Service comprises 14 Departments and a number of major offices, including the Revenue Commissioners. It carries out a broad range of functions and roles from developing policy to delivering front-line public services. My Department's role in respect of the reform of the Civil Service is to lead and support changes that will assist Departments and offices to improve how they work so that they effectively deliver on their remits as set out in their statements of strategy. The implementation of the Civil Service renewal plan has increased our capacity and capability to deliver an improved service to the State. The programme was developed to create a more unified, professional, responsive and open and accountable Civil Service.
The fourth report was published in May and is available on our website. I will take a few minutes to highlight some of the reforms for the benefit of the committee. Reforms to make the Civil Service more unified include the development of a common governance standard for the Civil Service. I recall the Chairman raised the lack of a common approach to governance across Departments with me in his previous role as Chairman of the Committee of Public Accounts. We have developed a common standard, which should hopefully help to ensure that Secretaries General, leaders and managers in offices and Departments know exactly what their obligations are in respect of governance of organisations.
Another reform is the implementation of the shared services programme, which covers a variety of different areas such as HR and payroll, the public procurement transformation programme, and financial management shared services at the project stage. On the professionalisation of the Civil Service, the launch of the Civil Service people strategy, led by my colleague, Mr. David Cagney, sets out the strategic direction for HR across the Civil Service. This strategy aims to position HR as the driver to enable the delivery of three priorities. We want the Civil Service to be an employer of choice that can attract the best talent to help us to deliver on our services. The second priority is building the workforce of the future, which is critical, given the demographic and other challenges which impact on workforces in the public service and elsewhere. The third is building, supporting and valuing managers as people developers.
The strategy builds on initiatives in place, especially with regard to project management, performance and development, to talent management and open recruitment. Since the end of the moratorium in 2015, more than 14,600 civil servants have been assigned to Departments and Government offices. This is offset by retirements and other departures so it is not an increase in the net number. Approximately a third of the staff complement have been recruited since then. This reflects the enormous demographic changes throughout the Civil Service. Offices and Departments have been dealing with normal demands and having to manage this demographic transition and bringing a new generation of people into the service. The Civil Service people strategy is also strengthened by the establishment of OneLearning, which is a new learning and development service for civil servants. There have been approximately 27,000 attendances to date at the OneLearning course across 25 counties and 45 Civil Service bodies since its establishment in September 2017. A new ICT-based learning management system has been implemented for the majority of public servants across the country. This is an attempt to centralise and professionalise learning and development across the Civil Service whereas in the past we had a somewhat devolved, ad hocapproach where individual offices and Departments did their own thing. We have centralised to maximise the benefits from centralisation and to have a more professional approach.
Over the past few weeks, the Civil Service excellence and innovation awards, which recognise excellence and innovation, were announced by the Minister. Some 90 nominations were received across many different categories. The standard of projects was particularly high, giving a strong sense of the important, diverse and challenging work that is happening across the system. They also showcase the creativity and innovation that is being brought to bear by those on the front line to deliver better services to the public. My colleague, Dr. Lucy Fallon-Byrne, is with us and one of her responsibilities relates to excellence and innovation across the Civil Service. This is an important event to reward innovation and creativity. Having an event such as that can be a great spur. It is not just about people being nominated on the night and winning but about creating a culture of innovation across organisations and recognising those who do the best in their fields.
Reforms have also been introduced to make the Civil Service more responsive. These reforms include the delivery of the public service ICT strategy and the implementation of mobility arrangements. There has been significant interest in the mobility scheme with approximately 4,800 staff members making an application. More than 350 moves have completed to date. When we were developing the first Civil Service renewal plan, one thing we received from civil servants across the country was that there was an unwillingness, in part, for people to be allowed to move to different offices and Departments. Colleagues would be stuck in particular areas when they wanted to move and there was not a sufficient mobility scheme. We have put a scheme in place which is making a difference. The response is encouraging so far. We are implementing a more strategic approach to workforce planning approach across the Civil Service, which Mr. Cagney leads on.
The fourth stream relates to making the Civil Service more open and accountable. We conduct organisational capability reviews to assess the impacts of reforms on Departments. We have developed the national data infrastructure, which I will talk about later on, to improve how we use data across the Civil Service and public service. We hold more open policy debates on a variety of issues to engage with experts and others to allow them to provide input on policy. We have improved communications and engagement with staff, including the implementation of the open data initiative. I do not have time to speak in detail about all of these initiatives. I would like to mention briefly the open data initiative, the Civil Service employee engagement survey and the Civil Service customer satisfaction survey.
The benefits of open data are well documented, including allowing for greater transparency and trust in government and facilitating business innovation and efficiency. Ireland has made substantial progress in its national open data initiative since it was instigated in 2014 and is now leading the way in Europe, having been ranked top in the European Commission's open data maturity survey for 2017 and 2018. I believe we have been at the top for the past three years.
Mr. Robert Watt:
We put a lot of effort into making sure that data that have been collected at great cost to the taxpayer are then made available.
They are out there and a lot of these data are being commercialised in the private sector. It is a very positive initiative. Much of the data are used in various new apps that help people to access services more widely.
The first Civil Service employee engagement survey was carried out in 2015 and the second one was carried out during 2017. The results were published in early 2018. Of the 24 areas surveyed, 22 showed improvements in the most recent survey. The results indicate that overall employee engagement remains high at 72%. This result compares well with other administrations across the world. The findings indicate that the majority of staff have a sense of energy and connection with their work, that they can cope with the demands of their job, and that they find their work fulfilling. The results confirm that we are doing well in a number of areas but highlight where we need to focus our efforts in the future. For example, we need to provide opportunities for greater levels of involvement, create a more innovative culture, address performance issues and improve the public perception of the work of civil servants.
It is quite interesting that, when we asked civil servants whether they valued their own work, they said they did but, when asked whether they feel their work is valued by citizens, they did not. We then asked citizens whether they valued the work of the Civil Service and found that they do and that they rate it very highly. The difference between civil servants' perception of how citizens perceive them and the reality is interesting.
The committee may also be interested to know that last week we published the results of the 2019 Civil Service customer satisfaction survey. Running regular surveys of customers to more fully understand our users' experiences is a key commitment in the Civil Service renewal plan. This is the eighth survey carried out among the Irish public. It determines satisfaction levels with services received from Civil Service Departments and offices. It also surveys more general perceptions of, and attitudes to, the Civil Service. The results of the customer satisfaction survey show a very positive trend in terms of overall satisfaction with service provision and outcomes.
I will highlight just a few statistics from the survey. Some 85% of customers surveyed were satisfied with the service received from the Civil Service. These are people who engaged with the Passport Office, the Revenue Commissioners, the Department of Employment Affairs and Social Protection, the Department of Education and Skills or other Civil Service offices. It refers only to the Civil Service, not the wider public service. This figure is an increase from 83% in 2017 and 76% in 2015. The same percentage of people were satisfied with the outcome of their most recent contact with the Civil Service and 89% of customers indicated that service levels are mostly meeting, or exceeding, expectations. Some 87% were satisfied with both the knowledge and helpfulness of staff and the public’s perceptions of Civil Service efficiency, trust, independence and equality have also all improved since 2017. Based on this survey, almost 70% of citizens in Ireland have a high opinion of the Civil Service with regard to trustworthiness, competence, independence and so on. We are very happy with that result but, of course, we need to do better and to improve upon it.
We are now reflecting on what has been achieved and what we need to do to support the future development of the Civil Service and to ensure that it can play a more effective role in meeting the needs of the Government and the public. We will develop a long-term strategy for Civil Service renewal. We are now engaged in a process of consultation and will welcome engagement with the Houses of the Oireachtas in due course. We will welcome input on the next phase of the plan.
I would like to briefly mention the reforms of the wider public service that have been undertaken since 2011. I have already mentioned the establishment of the Office of the Government Chief Information Officer to drive ICT. I will speak shortly about the Office of Government Procurement where Mr. David O'Brien is involved in reforms.
The current framework for public service reform and innovation is entitled Our Public Service 2020. It builds on earlier reforms while expanding their scope to focus on delivering better services for our customers, as well as building innovative and responsive organisations. It puts focus on evaluation, the importance of building a reform culture, and developing indicators to support outcomes. A public service leadership board, on which Secretaries General and CEOs sit, has been established to implement this agenda. This group involves myself, other Secretaries General, the Garda Commissioner, the Chief of Staff, the head of the Health Service Executive and others. It is the first time we have had a forum for Civil Service and public service leaders to meet regularly to talk about issues around HR, innovation, data management and so on. It is a useful forum and we will see how it helps to deliver in the future.
I will now turn briefly to public procurement, which is the second item on the agenda. A division within my Department leads the procurement reform process, sets out the overarching public procurement framework, manages the Government’s eTenders platform, engages with and communicates to the large number of stakeholders who are tendering for public service jobs, and provides support and advice to public bodies and suppliers. This is one of the areas in which there has been a lot of change. The procurement service is now a centre of excellence. Colleagues in different Departments and office come to Mr. O'Brien and his colleagues to seek advice on procurement solutions. This division also delivers these solutions for public bodies, largely through central arrangements such as framework contracts.
It is important to state that, while the office and its sector partners in health, education, defence and local government put these central arrangements in place for common goods and services, the individual public bodies are responsible and accountable for the contracts awarded under these arrangements. We provide a service but the Secretary General is still the Accounting Officer responsible for the management and delivery of the service procured. The work of the Office of Government Procurement brings a strategic focus to procurement, drives value for money, enables compliance, supports business participation and promotes transparency.
This year to date, the office has established 17 framework agreements with a total value of €3.6 billion, bringing the overall number of framework agreements currently in place to over 130. During the year, the office also conducted 800 mini competitions, with an estimated value of €654 million on behalf of 222 public bodies.
This commitment to better public procurement is also underlined by the ongoing development and communication of the overarching policy framework, which is a comprehensive suite of guidance for public bodies. With regard to e-invoicing and e-tendering, a significant digital development in 2019 has been the Office of Government Procurement's support for the e-invoicing programme. The e-invoicing directive has been transposed into Irish legislation and appropriate solutions were available for public bodies through a services framework in time for the implementation date in April of this year. This has delivered a flexible range of solutions for a variety of finance functions across the public sector. The outcome of this is apparent in the fact that 85% of central government bodies were compliant within months of the implementation date. The adoption of e-invoicing in the public sector will facilitate the digital transformation of how public services process the more than 4 million invoices that are currently processed on a paper basis annually. At the moment, we receive millions of invoices, which are manually checked against purchase orders before a direction as to whether to pay the invoice is given. With e-invoicing, this will be done automatically, which will have a number of benefits including reducing processing cost and improving accuracy. The hours spent on this matter will reduce. It is a very significant reform which, over time, should bring significant benefits to the public sector.
I will now turn to the final area, which is the overall public expenditure framework, public expenditure reforms, and the role of our Department in respect of budgetary matters. The Department, with the Minister, has responsibility for the overall public expenditure framework to support the management of expenditure at sustainable levels in a planned, rational and balanced manner to support Ireland’s economic development and social progress. This includes developing central policies and guidelines in respect of public expenditure. The implementation of this framework, and in particular the management of expenditure within the allocations voted by Dáil Éireann, is a key responsibility of the line Departments and relevant Accounting Officers.
A sustainable expenditure policy needs to meet certain key requirements including ensuring that the overall level of expenditure remains affordable over the longer term and delivering sustainable improvements in public services and infrastructure. This requires that growth is set at a level that is consistent with the long-term growth potential of the economy and that there is an ongoing focus on the quality of spending. To ensure sustainability, these two elements of the framework are necessarily interlinked.
The reforms to the framework implemented in recent years seek to embed sound expenditure practices that maintain a focus on the totality of spend rather than the incremental amount added each year. Key elements within this suite of reforms include performance and equality budgeting, the Irish Government Economic and Evaluation Service, and the spending review process.
The objectives of the spending review for the period from 2017 to 2019 have been to create a larger stock of relevant analysis and evaluation across all Departments and offices, to underpin continued prudent allocations of expenditure, to identify areas of existing expenditure that require ongoing analysis, to spotlight areas of innovation and good practice, both in programme design and delivery, that will be of wider interest and applicability and to provide an evidence base in respect of departmental spending that informs the choices made on budgetary allocations. These objectives have been largely achieved. Nearly 80 papers have been produced and published. Over the three years of the process, the level of engagement across key line Departments and agencies has increased. The process is aligned to the Estimates process, with publication of papers in July by the Minister allowing the findings from the reviews to feed into budgetary discussions.
Significant momentum has been developed and it is intended to continue the process in 2020 and beyond. This provides an enormous wealth of information and data analysis of spend, the efficiency and the effectiveness of spend, which can guide decisions in any given year and into the future.
As part of the ongoing reform of Ireland’s capital management systems, an updated public spending code will be published shortly before Christmas or in the new year, focusing on improving appraisal, cost estimation and the management of infrastructure projects. This updated guide will better align the realities of project delivery with decision gates at each stage of the project cycle to ensure full consideration of the costs, risks and benefits of each investment. The guide will be supplemented by a new governance and assurance process for major projects, estimated to cost more than €100 million. This new process will involve an independent, external review of projects at key stages in the project life cycle. It is being developed by my Department and will come into effect in 2020.
In this statement, I have sought to set out some details of the work my Department is undertaking in respect of the items on the agenda for today’s meeting. We have made considerable progress in these areas since the Department was established in 2011. I am proud of the work of my colleagues in the Department in this regard and I would like to take this opportunity to thank them for their commitment to this significant and collective effort. As I have set out, we have ambitious plans for the future. I would like to highlight that my Department is currently preparing a new statement of strategy to cover the next three years. I would be happy to receive the views of the committee in terms of priority areas to be addressed in that strategy.
I thank Mr. Watt. I want to start by asking him some questions on the procedure whereby Deputies claim travel and accommodation allowance and if he has a view on the way the system currently operates, which is that Deputies have to fob in for 120 days, in which case they are entitled to the maximum allowance, depending on their band. There is no system in place to ensure it is the Deputy who is fobbing in, as opposed to a member of their staff or another Deputy. Is that something Mr. Watt has a view on?
Mr. Robert Watt:
I do not have any views on the matter I am happy to share publicly, because it is a matter for the Accounting Officer in this organisation. I believe the Clerk of the Dáil and the Houses of the Oireachtas Commission who are responsible for ensuring procedures are put in place in order that money is spent correctly and people claim their due entitlements. I have nothing to add to that matter. It is a matter for the Accounting Officer in the Houses of the Oireachtas Commission.
The answer to this question might be the same but does Mr. Watt have any view on or responsibility for the system in place that is provided by a company called FlexTime? This system is used by both staff in the Houses of the Oireachtas and Deputies. When the staff clock in, it records the time the staff clock in at, clock out at and so on. I have requested my own records but it seems that for Deputies, the time is not recorded. At some point, a decision was made somewhere to request that this recording of time was not included in the system that was procured from FlexTime. Unfortunately, that makes it more difficult to establish whether Deputies were fobbing themselves in and then leaving to go to whatever place or country, or whether they had someone else fob in for them. Does Mr. Watt have any insight or information about how that decision was made?
Mr. Robert Watt:
I do not have anything to say publicly about these matters. I presume the flexitime system is the same system we have across other offices and Departments. We can check that but I imagine it is the same system that operates in our Department. Many staff have to clock in and clock out and a record is kept of that. That is used for attendance management by HR and line managers. It is a system that has been in place for a long time. In our Department, a record is kept because that is required to reconcile flexitime allowances and so on and I would guess it is the same for staff in the Oireachtas. Mr. David Cagney knows more about it that do I but if people infringe on that, a conversation with the HR manager follows and so on. I have nothing further to add on how Deputies go about their business or about how this place operates. I have nothing whatsoever to say on that. I would like to stress it is independent of us. We are reminded each year that the Houses of the Oireachtas Commission is independent of our Department. I would probably be fired if I said anything.
I have a separate question. Within the Civil Service for this flexitime system of clocking in, is Mr. Watt aware of any category of staff for whom the time is not recorded and only attendance is recorded in a digital fashion? Is Mr. Watt aware of any such scenarios or does it always record the time?
I want to ask about the resignation of the chief executive officer of the Office of Government Procurement, Mr. Paul Quinn, from the board of the national children's hospital. Is Mr. Watt aware of why he resigned?
Mr. Robert Watt:
Mr. Quinn was asked to go on the committee and he was there to discharge his duty as a member of the committee and not in his official capacity as the chief executive officer of the Office of Government Procurement. Mr. Quinn had served on that committee for a number of years and he made his decision to move off that committee. Mr. Quinn is busy managing a large organisation of 300 people and he has many different responsibilities. He had made his contribution. As the Deputy knows, the procurement process for the hospital had reached a certain stage and at that stage I think Mr. Quinn felt it would be best for others to step in and make a contribution. He has made his contribution.
Would Mr. Watt have described his position on the board as being a position he had in a personal capacity or was it related to his position as chief executive officer of the Office of Government Procurement?
Mr. Robert Watt:
We have debated this matter several times. I was in front of this committee before and I was before the Committee of Public Accounts and I spent seven hours talking about the children's hospital. I do not have anything further to say on the matter. I have unburdened myself considerably on all those matters for seven hours previously. Mr. Quinn was there to provide his expertise, we have explained his role and we have explained how he discharged his role. For the record, I have said before and I might as well say again that Mr. Paul Quinn is a fantastic officer who has done a brilliant job as chief executive officer of the Office of Government Procurement. I am delighted he works with us and works for us. I have nothing further to add.
Is Mr. Watt happy with the performance of the Office of Government Procurement in light of, for example, the multiple changes in specifications of the national children's hospital and the spiralling costs related to that?
I note in Mr. Watt's opening statement he talks about making the Civil Service more open, accountable, transparent and so on. Does that not include answering questions in the Committee on Finance, Public Expenditure and Reform, and Taoiseach?
Mr. Robert Watt:
I spent about three hours here. I spent the afternoon here and I spent the morning in the Committee of Public Accounts. It was a day-long discussion. We have answered questions on the matter. My colleague, Mr. Jim Breslin, who is the Accounting Officer for the project has also answered questions on many occasions in the relevant committees so if there are questions, members can put them to me but I do not know if I have much to add to what has already been said. I will try to do so if members have questions.
Mr. Robert Watt:
This has been gone over. The Official Report of this committee and of the Committee of Public Accounts is a written record and it shows our views on this project. There was a two-stage process, which is unusual and that reflected the scale of the project. There were major flaws in how this two-stage process was managed, that in effect it was thought that the estimate was based on a final specified detailed design. It turned out that was an outline design that was not complete. The subsequent bill of quantities when it came to the guaranteed maximum price was out by some quantum. That explains the cost overruns from the €1 billion plus to the figure that was subsequently disclosed to the committees.
The two-stage process was unusual because we usually go for a fixed price lump sum contract but because of the complexity of this hospital, which is three times bigger than the last hospital we built, Tallaght Hospital, a two-stage process was agreed as the procurement approach. As we said at the time that was not a wrong decision but what went wrong was the implementation of that approach: a decision was made on a cost based on what turned out to be a fairly outlined design when it was understood that was a detailed design. There is more to it but in summary that is the main issue that arose.
I welcome Mr. Watt and his officials. The thrust of what Mr. Watt is getting at when it comes to the Civil Service changes or reforms has to do with making the Civil Service more attractive to people from the outside. There is some irony in the fact that a few years ago Mr. Watt came before the Committee of Public Accounts and famously said one of the big problems in recruiting and attracting people to the Civil Service was appearing before the Committee of Public Accounts because in some cases people were not willing to do that. Does Mr. Watt think it has improved since then now that Deputy McGuinness is no longer the Chairman?
Mr. Robert Watt:
I know the Deputy was joking. I do not think the point I was making was a controversial comment and I do not think Deputy McGuinness or other members necessarily agreed with it. It was that for many potential candidates taking up leadership positions in the Civil Service and public service while they do not mind doing the job, the accountability or appearing at a forum like this, there have been many occasions when the way people were treated, not just at the Committee of Public Accounts, did not make the positions attractive. I know this from having conversations with my colleagues to try to encourage them to go for these jobs. We might dismiss that and say it is of no concern but that is the reality.
I do not think anyone is dismissing it either. Mr. Tony O'Brien made some comments about the committee hearings he attended before he resigned. I have been involved in many heated meetings. Is it still an issue?
Mr. Robert Watt:
It is not just about people coming before committees but generally. That might be a controversial thing to say, but probably not. In public debate people's bona fides and motives are questioned, they are not treated on their merits, on whether they are trying to do a good job but they make mistakes. There is a lack of balance or perspective and an unwillingness to try to understand the complexities of delivering projects.
Mr. Watt is repeating conversations that elected representatives have every day around here these days. They remark to their colleagues about mean-spiritedness, coarseness and a debasing of politics generally. Mr. Watt is saying that from the standpoint of the Civil Service and the public service that has not improved in any way since he made those comments a few years ago. I was only joking about the Chairman.
Mr. Robert Watt:
The reality of it has not improved and it is a challenge for us to encourage people to go for positions and to get them to go for high-profile positions. When we have conversations, people say that the potential reputational risk is not worth it because of the potential for something to go wrong. Things always go wrong. Mistakes will be made but it is a question of the way those mistakes are dealt with it. It is more a "gotcha" culture as opposed to what we call a learning culture. We focus on trying to learn from mistakes and encourage people to do better to try to be innovative. A gotcha culture does not encourage that. It encourages all the wrong habits. Unfortunately we do have a gotcha culture when it should be a learning culture. That is not to say that people should not be accountable and there should be sanctions for people who make mistakes. If they make several mistakes there are sanctions of course but we do need to look at things in a different way. I do not think it has improved.
I would probably agree with Mr. Watt.
In his opening statement Mr. Watt talked about people transferring between Departments and he was going to facilitate people or make it easier for them to do so. Can he explain that? I ask because in my time here I have come across people who I would have thought would be better off doing something else in a different Department. They probably would have agreed with that but they found it quite difficult to make that move. How is the Department of Public Expenditure and Reform improving that?
Mr. Robert Watt:
Mr. Cagney may wish to talk through the details of this. We now have a system which goes across different grades and geographical areas so that people can apply to different offices and Departments in the same area. In effect this is a response to the town hall meetings with staff where somebody in Department X in a particular location felt his or her career was stuck but there might have been opportunities for advancement in another Department that would better appreciate his or her skills. There was no sophisticated system of transfer. They had to identify somebody who would go the other way, a partner as it were. This system uses IT so people express an interest in moving then moves or advertises, and managers can fill the place. It is an attempt to be much more strategic and use the IT to enable those transfers.
It can happen that somebody is in a career and feels stuck and somebody in another office feels the same, if he or she can move, everybody can be happier. There were 350 moves in the most recent tranche. It is a bit too early to say definitively but the feedback is quite positive. It is a challenge for managers who may not want somebody very good to move but for the good of the system they have to co-operate with those transfers.
Mr. David Cagney:
The default position is they go if they are interested in it. The only circumstance where they would not go is where there was a clear disciplinary issue or a process in which they were involved. We would not foist that type of situation on another manager. The system was designed in co-operation and consultation with HR managers across the system so they kind of own it. To date they are very happy with it.
There are two other categories which we will address shortly, the higher executive officer and the assistant principal officer and we are likely to have a variation of the IT mobility scheme that Mr. Watt talked about plus an application-based system, most likely for the assistant principal officer.
I thank Mr. Watt for his opening statement. It would have been beneficial to have had it a little earlier than 9.53 a.m. today.
Mr. Watt has a broad area of responsibility. In terms of members needing time to scrutinise the statement, it would have been appreciated if we had got it earlier.
I want to concentrate first on broadband. The Government recently signed the contract with Granahan McCourt for the rolling out of the broadband plan, which is the most costly capital project in the history of the State. As Mr. Watt is aware, two ownership papers were produced by PwC and KPMG in 2015 that formed the basis of the Government decision to pursue a gap funding model, a privatisation model that means the private sector will finance, design, build, operate and own the infrastructure with the State giving the subsidy. This was chosen over the four other options including State financing and ownership, which we in Sinn Féin have long advocated. As we predicted, all of the bidders fell out of the bidding process except Granahan McCourt, wiping away the only stated advantage of the gap funding model, which was competition. As a result, the taxpayer will be subsidising Granahan McCourt by up to €3 billion, with the private operator contributing only €220 million in the initial funding through working capital and equity.
In his own words Mr. Watt has stated: "I note that by 2028, the private operator [will have all of their moneys paid back] in dividends and interest [...] while the Exchequer could have paid out almost €2.5 billion". In his letter to the Minister for Communications, Climate Action and Environment, Deputy Richard Bruton, dated 16 April 2019, Mr. Watt wrote that the contract "represents a major leap of faith" which represents a major subsidy from the taxpayer for private benefits. Regarding the final cost benefit analysis, Mr. Watt concluded that his Department does, "not believe that this CBA justifies the use of scarce public funds on this scale". Regarding the risks borne by the State and the private bidder, Mr. Watt again wrote that there are, "unprecedented risks to the Exchequer posed by this proposed project". He further stated: "New technological advantages [...] could result in a stranded, obsolete asset, despite Exchequer investment of up to €2.275 billion by 2026 by 2026 - in an asset that we will not even own". Mr. Watt further stated: "I would question whether the further risk associated with guaranteeing service provision over 25 years is genuinely transferred to the private operator or, in reality, actually retained by the Exchequer." He further stated:
In effect, the private operator is being insulated from project [risk] while being afforded a massive upside potential in terms of any excess profitability. [...] I wish to re-emphasise one further time this Department's fundamental concerns in relation to the unprecedented risk that the State is being asked to bear in the event that the current NBP contract is recommended for approval by Government.
In conclusion, Mr. Watt stated, "I find it difficult to see how such a contract represents value for money for the State or is in the best interests of the taxpayer."
In a reply to a parliamentary question received by my colleague, Deputy Jonathan O'Brien, on 21 May 2019, it was confirmed that after 12 months of full deployment, by as early as October 2028, Granahan McCourt can asset strip, flip and sell on the infrastructure that was predominantly funded through the taxpayer subsidy. I agree with much of what Mr. Watt said but in terms of my question, has his view on the Government's national broadband plan changed?
Mr. Robert Watt:
Many people helped me but I had to clear it.
In respect of the broadband plan, it is my job to give my advice. That is what I am paid to do. It is ultimately the job of the Minister, the Taoiseach and the Cabinet to accept or not accept that advice because they are the people who got elected. I did my job and the Government did its job, and it made the decision. It is now Government policy. The decision has been taken so I have nothing further to add on the matter. I gave my views, which is my job, and that is what I understand we want from the Civil Service now.
Mr. Robert Watt:
There was a lot of criticism that before the economic crash civil servants did not stand up and do their job, and that there was groupthink throughout the system. I believe we have developed over the past number of years much more of a culture of challenge and engagement. That is certainly what the Minister, Deputy Donohoe, wants. It is certainly what the Taoiseach, Deputy Varadkar, wants. He wants the civil servants who serve the Government and the public interest to give their views, and that is what I did. The Government made a decision, it has signed the contract and that project is now proceeding.
It is disgraceful that all of Mr. Watt's repeated observations around the value for money factor are totally dismissed. One would have to ask what the point is in having senior civil servants with an expertise to advise the Government on these issues when it ignores that advice.
Mr. Robert Watt:
If the Senator extends that logic, there is no point in having a Government. Let the Civil Service run the country.
It is, but Mr. Watt repeated his view many times in terms of potential asset stripping and how bad this is for the State but the Government went ahead and did not take any of his advice. It continued along its own pathway. This will not be the last time Mr. Watt will be quoted. In years to come, in terms of us examining the value for money, this is atrocious. It is important to put on the record the Government's dismissal of Mr. Watt's advice around the broadband project.
On the consultancy fees, in his opening statement Mr. Watt stated that the Civil Service carries out a broad range of functions from developing policy to delivering front-line public services. I want to focus on the Civil Service developing of policy. Does Mr. Watt believe that the Civil Service is adequately resourced and skilled to develop policy options for Departments and the Government? In a letter to the joint committee on finance on 18 July this year it was confirmed by the office of the Minister for Finance and for Public Expenditure and Reform that the Government paid in excess of €25 million in consultancy fees for the national broadband plan. That included, for example, the ownership option papers that Mr. Watt spoke about of PwC and KPMG. Through parliamentary questions in May, we found that between 2011 and 2018, all Departments excluding the Department of Employment Affairs and Social Protection, spent €82.5 million on consultancy fees from the big four consultancy firms - PwC, KPMG, Deloitte and EY. Not only does that raise concerns about the ability of the Civil Service to carry out its own functions, it also raises questions about the influence these consultancy firms have over public policy and the direction of taxpayers' money and State resources. Are private firms dictating public policy?
Mr. Robert Watt:
There has been an enormous improvement in the capacity of the Civil Service to analyse and prepare policy and advise the Government. That is the core function. There are 40,000 civil servants. There are many civil servants who are providing a direct service but there is a core of 3,000 or 4,000 who are engaged in policy work from all the different areas. We have done a lot to improve the capacity. I will mention two initiatives, the first of which is the Irish Government Economic and Evaluation Service where we professionalised economic expertise. We set up a new structure, and I am very proud of the service we have developed.
In my remarks, I mentioned the number of policy papers we have produced and the quality of the analysis. We are much better at using data. Through the national data infrastructure, we can share and combine data sources to get better insights into what is happening. I am happier that the Civil Service has far more capacity to analyse. The Senator knows this from talking to people in Departments. They have a great understanding of the policy issues and the options. People can be brought in for particular jobs. It does not make sense to have an expert on a particular activity who may be required intermittently or every few years all year but one may require a certain expertise. Consultancy houses that have reach into other countries can help because somebody involved in policy issues in other OECD countries can help. There is a balance to be struck. I would be very worried if Departments were overly reliant on consultants. That is not a good sign. If a Department goes back repeatedly to consultants to ask for advice on policy issues that are central to that Department, that Department needs to build capacity in-house because, ultimately, it is a better system to have professional civil servants who are there acting in the public interest and who are trained in building capacity and have the values of our service around objectivity and impartiality. It is much better to have that type of administrative structure than the alternatives. Too much reliance on consultants is a bad thing but there is a balance to be struck. Optimal spending is not zero. I do not know what the optimal spend is but it is not zero. We will come back to the Senator regarding some of the numbers she quoted but some of those involve ICT projects and legal support as opposed to policy.
It is interesting to think about the value of that spend in the overall context of the pay bill for the Civil Service, which is approximately €2.5 billion. How is this consultancy spend relative to the overall size of the service? I agree with the Senator that it is a challenge, which is why since 2011, we have put a strong emphasis on building capacity. There is still a reliance. Getting the balance is the correct thing. There has been a reliance in some places on ICT. In effect, if one had the same contractor there providing that support, ultimately, one does not have the capacity in the office or Department to draft the contract properly, procure properly and manage the contract. That is one of the things on the ICT side where we built up the Office of the Government Chief Information Officer, OGCIO, and our in-house chief information officer capacity. We increased the budget and the number of people so that we do more of that software development in house. There is a balance to be struck. If a Department is too reliant on external assistance, that raises questions about the capacity and management of the organisation.
If they are getting such vast sums from Government and are also being asked to do reports on different issues, is it not human nature that they will give favourable reports in terms of what the Government wants to hear rather than anything else? The Government is one of their largest customers so they will not say anything that will deviate from-----
Mr. Robert Watt:
There is a legitimate issue about the independence of that advice. If Department X is wedded to a particular project, will a consultancy tell it that the project is no good if that consultancy wants to get work again? Of course, there is an issue there. That is one of the reasons we have a Civil Service. It is so that we hope people in the Civil Service will develop the skills but, ultimately, try to give their advice based on their assessment of the public interest.
One then finds situations such as the one we saw with Carillion where we take it as gospel that companies like that are financially secure whereas when one digs beneath, one finds that they are far from being financially secure so Government is making decisions that are not based on what they need to be based on. We need to be very careful about the Government using consultants as a cover when something goes wrong. This committee is looking at it in terms of going to Great Britain.
It is an issue with which we and Mr. Watt must deal. We are keeping an eye on that figure. A figure of €82.5 million in eight years is not acceptable. We need to see that being reduced as well as looking at conflicts of interest and other issues.
Another major problem I have with contracting out is the lack of transparency. I refer to the JobPath contract. It has been impossible for us to get details of that contract. We spend €202 million on services for employment when one adds in local employment services and all the duplication on the ground but we cannot get the details of the contract because of confidentiality. I feel that much is being covered up because we do not have transparency regarding the contract. Taxpayers deserve to know why and how their money is being spent.
Mr. Robert Watt:
I do not know the individual details of that so I do not want to comment. When it comes to taxpayers' money and contracts, the details must be in the public domain. The details of the contracts with which we deal are out there. The contractors who engage with us know the rules of the game. They know that the terms and conditions, the price and so on will be publicly available. Let us come back on that because I do not know the exact details of that contract. There might be particular issues but I do not know so let us come back on that. We operate a system where the level of transparency is equal to any other country in the world in terms of freedom of information, publication of reports and making information available. A total of 50,000 parliamentary questions were asked last year and there were thousands of freedom of information requests. There is very little exempted that people cannot access in terms of what is happening in Departments. I will check the details of the example cited by the Senator and get back to her because that would be unusual.
I would appreciate that because I started the quest for this in 2016 when I came into the Seanad. The Taoiseach was then Minister for Social Protection. I started asking for details of those contracts that were given to private providers. Three years later, I have not received those details so I would appreciate finding out the rationale for that because €202 million of citizens' money is a hell of a lot of money without accountability.
I thank Mr. Watt for appearing before the committee. I appreciate that he probably turns up for meetings of the select committee regarding the Estimates but I think this is only his second time before the joint committee in the three and a half years I have been a member so he is very welcome. It would be useful if he came before this committee as the lead person in the Department at least annually. I appreciate that we have a relatively tight agenda regarding the three specific issues about which he has agreed to discuss.
We are speaking in the context of the general reforms of the Civil Service. I had two parents and two grandparents who worked in the public service. One grandparent worked there until she got married and had to give up work. I had a grandfather who was a garda, a grandmother who was a teacher and two parents who worked in UCD. This is not coming from an anti-public service stance at all. The witnesses mentioned the ability to reward people who do an exceptional job or a job well beyond what is expected. I also refer to the ability to do what is very politely referred to as "managing people out". This happens in the private sector all the time. Can Mr. Watt tell us how many people are employed in the public service and how many people State bodies able to manage out because their position is not working, either for them or for the organisation they are employed by?
Mr. Robert Watt:
The total workforce of the public service is now 325,000 people. The figure for the Civil Service is now 41,000. Those are overall numbers as opposed to full-time equivalents. There has been a significant increase after a period of retrenchment. We have increased the numbers once again. There are big issues around both incentivising excellent performance and implementing a tougher regime of exiting people who are not performing. I would not say it is a regret because when running any office or organisation, one cannot do anything one likes at any time. However, I regret that we were not able to have proper conversations about different types of contracts and placing more people on temporary or performance-rated contracts involving payments for delivery and penalties for non-achievement.
There is a bit of a misapprehension when it comes to comparing the public sector to the private sector on this. People in the private sector are on contracts. The arrangements depend on the level an employee is at, but if someone at a senior level does not perform, he or she is given 18 months' or two years' salary. The worker signs a confidentiality clause, nobody reveals the details and the employee does not talk about why he or she left. Nobody will ever know he or she was fired. Employees are not fired; they are just managed out, as the terminology has it. Those tools are available. Would it be better if they were available in the Civil Service or the public service? We have some of them. We can offer people early retirement. As managers, we would like to have the facility to have conversations with people when things are not working out and offer 12 months' or 18 months pay in a confidential arrangement. Can we do that in a public system with taxpayers' money? The Comptroller and Auditor General would want to see it recorded in the accounts. Public accounts show the amount awarded in severance payments and so forth. There is a controversy about that every year. We would like a more mature discussion about this. It would help everybody. It would certainly come at a cost but it would improve performance. If somebody makes a mistake in the private sector, there is a conversation. He or she is told that there will be another conversation if he or she do it again. If it happens a third time, the employee is managed out. It depends on the terms of the contract, which can be quite specific about the terms under which an employee will be managed out. Sometimes things go down the legal route, but they are mostly managed.
There could be a debate about having that type of approach in the Civil Service. In the UK, they have been doing this for several years. My UK equivalents have the capacity to have those conversations and do deals that are kept confidential. This has been very controversial in the equivalent committees in the UK. There has been a lot of pushback about that. It is worth debating. In effect, we make it very difficult for managers. We do all we can to reward people who do well. We have an awards event and we try to promote people who perform well through our system. A lot of our promotions are based on that. If someone delivers, we promote them. It can be very difficult to deal with people who do not perform. We have sanctions. We prevent people from going for promotions, we dock increments and eventually we move people out. We do not have the type of tools that are available elsewhere. I know that was a very long-winded response. I have tried to answer the Senator's question. It would certainly help to have a more sensible engagement. We also have to realise that everybody makes mistakes. The key is to learn from them. Clearly if someone makes two or three, it is over. He or she cannot stay in place any more. We must have that maturity. We would welcome conversations on that, but it is not easy.
I accept the point Mr. Watt is making. Not everybody in an organisation of 325,000 people will be on par or above par. The vast bulk of employees are. This is Ireland - we all know people who work in various Departments and in the wider public service, which, as Mr. Watt has acknowledged, is much larger than the Civil Service. It is very frustrating to have an employee who consistently has to be prodded, pushed, minded and watched when there are other people who are superbly good at what they do and they are all on the same pay. Some people know that they can come in, do as little as they can get away with and go home and there is very little anyone can do about it. This demoralises people who are breaking their backs because there is not as much opportunity for them.
Mr. Robert Watt:
This comes through when we talk to employees and colleagues about their frustrations. However, it varies from place to place. Mr. Cagney is on the coalface of this, but I would certainly hope that our organisation does not tolerate people swinging the lead. We would address that. I am not suggesting for a moment that there are no pockets of underperformance. Of course there are. It depends on the culture and the leadership of the particular organisation. That involves having hard conversations. There is an issue about people not being willing to have hard conversations. We try to have a culture where we will point it out when something is not working and try to find out what is going on. We try to engage and so does HR. There are many aspects of underperformance. Over the years we have noticed that underperformance can turn into a non-attendance issue, that is, repeated absences. Our Department has a process whereby an employee who does not come in on Monday is asked to account for what happened to HR. If we see a pattern, we try to deal with it because it can develop into a bad habit. Other aspects of underperformance can become apparent, so we try to deal with it. It is about leadership. I do not accept the view that we do not have the tools, which I occasionally hear from my colleagues. Perhaps we do not have all the tools, but we have tools to deal with these situations. It is about having frank conversations. It can be very difficult. In our environment, which is unionised, people make representations on behalf of employees so escalating something can get very difficult. Managers can find they are doing nothing but dealing with very difficult cases.
I appreciate that. It is fair to say that Mr. Watt is responsible not only for the Civil Service but for the wider public service. His Department deals with public expenditure and reform in local authorities, the teaching profession, universities, An Garda and the HSE. The role of the Department is to cover public expenditure. Everything that the State spends should come under the remit of his Department. Setting up a separate Department with a separate ministerial position, so that finance became two briefs rather than one was a bit of a fudge. The same Minister now covers both Departments. Mr. Watt probably cannot give an opinion on this. There is a lot of work involved in being the Minister for Finance and the Minister for Public Expenditure and Reform. They are quite significant Departments, as he acknowledged. Should one person be dealing with both of them, or should there be two different individuals doing the two jobs?
Before he was the Minister for Finance, he was quite busy in Mr. Watt's Department. He now has two Departments. That is the point I am making. I saw a report from Mr. Watt's Department last month about the growth in public service numbers and the related planning. There is almost full employment. Mr. Watt has spoken of people's unwillingness to go to senior levels because they might have to listen to people like us.
I say this as somebody who, to put it on the record, is chairman of a school board in south Dublin. It is incredibly difficult. Mr. Watt can ask any principal in any school, particularly in south Dublin. It applies everywhere in the greater Dublin region. It is difficult to get staff. It is also difficult to retain staff, particularly if they have links with a rural area. Historically, the teacher might have come up from a rural area to Dublin. All of a sudden, there is a job available down the country, the rent or the house price is a quarter of what it is in Dublin, and the pay is the same. How will Mr. Watt retain and recruit staff, especially in Dublin? I mean that about all the urban centres in the regions. It is becoming increasingly difficult to get staff and that, ultimately, is part of Mr. Watt's gig.
Mr. Robert Watt:
It is an enormous issue. I would not say that there is a generalised recruitment challenge. We can recruit teachers and we can recruit gardaí and civil servants. There is not a generalised recruitment problem, but clearly, if the economy continues to grow, we have full employment, and there is more evidence of shortages appearing in the economy, we are an employer competing like other employers for talented people. There is not a generalised issue.
There is an issue with technical staff, such as those with ICT skills - that is a common problem - and those with legal backgrounds in special activities. We have a pay structure that sometimes can be a little inflexible when it comes to offering salaries that are market facing. As I mentioned the leadership roles, it is not only about the joys of appearing in front of committees such as this. There are other factors involved in that.
There are challenges. If the economy continues to improve, this will be an even greater challenge for us. There is a debate to be had about what type of public service one wants because, ultimately, we cannot provide in many cases the volume of more public service. Much of it can be linked to numbers, particularly in the health system where if one wants to address issues, it involves more recruitment. There are challenges.
It is not a generalised problem. We recruit at graduate entry level. We recruit people, such as teachers and gardaí. The Public Appointments Service does it. We are able to recruit fantastic people. It is not just the younger generation and recent graduates. There are people throughout their careers who come into the service. It is fantastic. However, there are definitely pockets.
As somebody who sat in a room with 30 or 40 school principals and 30 or 40 school chairpersons in the region from the Liffey to Arklow, I can tell Mr. Watt that they cannot find Irish teachers, science teachers, continental language teachers, design and communication graphics, DCG, teachers and technical drawing-type teachers. It is getting ever harder to get them. When a school gets one, all of a sudden it discovers that the same job is on offer in some other part of Ireland where the teacher happens to be from, he or she has parents there, and that teacher can rent a house for €400 instead of €2,500 a month or spend €80,000 or €180,000 instead of €800,000 to buy one. I am flagging it because this is not a future problem. This is a current problem. I could find 50 school principals in south Dublin who will tell Mr. Watt that they cannot get X, Y and Z, or A B and C. That is not the future. That is now.
It is because the same salary is being paid. Somebody who came up from the country, for example, might want, as he or she gets older and his or her parents are getting older, to be a bit closer to the parents in Limerick, Longford, Mayo or wherever. All of sudden, the teacher realises that he or she could have a much larger take-home pay at the end of every week or month. I am not asking for a London weighting-type concept. I am saying that if Mr. Watt is not careful, significant pockets of Dublin that are full of staff from Facebook and Google who are all on €150,000 a year will be affected. I am aware of schools in Dublin to which teachers drive two hours in the morning and two hours in the evening every day. That is not good for the teachers. It is not good for their families. It is not good for those they are ultimately teaching because the teachers are leaving at 6 or 6.30 in the morning to get to Dublin in time and they are leaving at 4 p.m. or 5 p.m. to head home. That happens every day. It is something that needs to be flagged to Mr. Watt, as head of the Department of Public Expenditure and Reform who is responsible for the public service generally, because it is a genuine problem. It will only get worse with every ICT company that comes in. Such companies are great. They pay good salaries. That is great, if one works for them. However, they are forcing everybody else out. I am sure it applies to the Civil Service. I am sure Mr. Watt has staff in his Department who are travelling long distances every day.
Ultimately, Dublin needs teachers, gardaí, nurses and staff in the public service to do the jobs. When we were growing up, people of every civil and public service grade were living in all parts of Dublin. Now it is much more difficult for them to do that on the salaries they are on when they are competing with workers who are on much greater salaries. It is an important point.
We had it here previously. The average AIB salary is €55,000. At Facebook, it is €153,000, including share options. Those people, if they are lucky to work for Facebook or Google, are welcome to it. Do not get me wrong. They pay plenty of income tax etc. and contribute to the economy. It just means that with the limited housing supply, they are taking the housing, driving up the price and making it incredibly difficult. It is important that I make these points to Mr. Watt who, effectively, is top of the recruitment chain in the public service. I could give Mr. Watt chapter and verse on this, if he wants it. I am a little surprised that Mr. Watt stated that we can recruit teachers. Mr. Watt can probably recruit teachers in total but I am telling him teachers are having it very difficult.
Mr. Robert Watt:
I do not disagree with what Senator Horkan is saying. I stated that there is not a generalised recruitment challenge. That is not to say there are not specific issues. I do not know teaching as well as the Senator does but I have heard that there are problems in certain areas. The Senator mentioned some of them, such as technical areas, science, languages, etc.
I would ask that these be looked at between Mr. Watt, his colleagues in the Department of Education and Skills, and the Department of Justice and Equality for gardaí, and so on. I doubt many entry-level gardaí can afford to live in Dublin.
Mr. Robert Watt:
There is a general issue of Dublin growth and what we are doing in the Civil Service. We are looking at establishing so-called satellite offices so that colleagues who work in Departments that are based in Dublin can turn up at a satellite office that might be in the outer regions of the commuting belt, log in there, and interact and work with their colleagues in their office in Dublin without having to come in. That is something Mr. David Cagney and his team are looking at. This morning we had a presentation, which was quite interesting.
If they have broadband, that will be good, but one cannot do that for teachers and nurses. I accept that point. I have not mentioned public procurement but I want to make the point. There may be a great deal of good public procurement going on that we do not hear about because it is fine. I refer to projects such as broadband, the national children's hospital, which I will not go over, and the public service procured printer, although Mr. Watt will probably say it relates to the Oireachtas Commission or somebody. That is what the people see. That is what we all see. I am not saying Mr. Watt will not have a defence. It was not Mr. Watt, but ultimately they are all on the State payroll. Somebody somewhere made a costly decision and it is not something that any of us wants to see happen again.
In terms of data sharing and automation etc., there is scope for efficiencies in how one Department talks to another. With all the limits and regulations on not having staff looking at citizens' Revenue accounts, health records etc., there must be ways of using all the public data available so that a local authority tenant need not fill in a hundred forms, the details of which are already known to the Department of Finance or the Revenue Commissioners. I am not sure that there is enough on that. Mr. Watt might respond on that.
Mr. Robert Watt:
On the issue of procurement, nobody in the system is happy to read about the incidents the Senator mentioned, especially the most recent controversy. The point I was making is that I am not the Secretary General of that Department. Ultimately, the person who is responsible must account, as I would and as others have in the past, in terms of issues that are relevant to their responsibilities.
I agree that it presents the system in a poor light. It misrepresents what is happening because people only hear about the things that go wrong. They do not hear about all the fantastic things that are built and delivered on time. I could read out a list of them here. I had them in my briefing pack. I might share them instead. That might be better. I refer to projects that have been delivered on time and on budget. Senator Horkan will be aware from his own experience of the fantastic facilities that are being built efficiently, but there is no coverage of any of that.
It is interesting the numbers I gave on people's satisfaction with and perceptions of the Civil Service, at 70% to 80%. That is because, in effect, they are not listening to this debate. They are forming their views on the Civil Service based on their experience of dealing with the Civil Service, not what they hear on the radio or what they read in the newspapers. They do not necessarily say everything is rubbish because of that incident. They think of their personal experiences. However, it can do damage. If citizens believed what they heard and read every day, we would not be getting the type of responses back that we do when we ask them about their perceptions of the Civil Service. It would not make sense.
I do not blame him for that because there are a lot of issues in that Department. Other Departments need to talk to the Department of Public Expenditure and Reform about their budgets. If they spend a budget badly or if they make a mistake, it eventually comes back to the Department of Public Expenditure and Reform.
Mr. Robert Watt:
We have discussions in two ways. First, in preparing the Estimates for next year, there will be discussions on their priorities, the demands and the cost of no policy change. Those discussions take place from mid-year until budget day. Throughout the year we have discussions where every month we receive the monthly profiles of actual spend and we assess that Departments are in line with their spending.
Mr. Robert Watt:
We have about 200 people in our Department in the Vote sections who shadow all the other Departments. For the Department of Health, which is a big one, we would have a large number of people whose job it is to shadow that Department. There would be ongoing engagement and discussions, particularly on health, which is more complicated than other areas. There would be day-to-day discussions about different issues.
I accept that issues will arise all Departments and local authorities. A risk will have been taken and it might not quite come off the way it was planned. We accept that happens in life, in business and so on. When it does not quite give value for money, it then comes back under the Comptroller and Auditor General to the Committee of Public Accounts. This committee would be Mr. Watt's line committee and he deals with the Committee of Public Accounts. When that committee deals with a report, it sends it to the Department of Public Expenditure and Reform. The Department of Public Expenditure and Reform sends it to the line Department and that Department sends it back to the Department of Public Expenditure and Reform, which decides-----
Mr. Watt gave a very positive opening statement about the work of the Civil Service. The other side of that is when it fails. In his opening statement he said that the Department of Public Expenditure and Reform manages the Government's eTenders platform, that it delivers procurement solutions for public bodies and so on. In the context of what he stated, he must reflect on the enormous overruns that are taking place. I just want to deal with this in a general way. However, I know other members mentioned the children's hospital. We invited Mr. Watt to appear before the committee to discuss the public services card and he would not come in, nor would the Minister.
Within the schools building programmes we had the Carillion issue and all the local small builders affected by that. We have had constant overruns in the HSE as well as the enormous settlements being reached by the HSE in court having disgraced itself again by going through the entire court process. Mr. Watt must be disgusted at that. Despite all of his efforts and those of his Department, the procurement section and all that, the basic action of purchasing a printer gets so botched up. I want him to explain what he does when that happens. Does he ring the Secretary General and ask him, "What the f-ing hell are you up to?"
Mr. Robert Watt:
I would never speak in such terms. As we mentioned, the system is vast. Mistakes are made. Sometimes there are legitimate reasons for mistakes. At other times the reasons are based on maladministration, lack of leadership, poor decision-making or systemic failures. We need to differentiate here. I will come back to the incidents the Chairman mentioned in a moment. I just do not accept the general characterisation that can come out of the types of discussions that all projects are mismanaged and that there are overruns.
Mr. Robert Watt:
I have said this to committees previously, and when we discussed the children's hospital I produced the data. The vast majority of projects come in on time and on budget. I wish to deal with this notion of overruns. Someone planning on building something might think it would cost €20,000. Following preparation of a detailed specification, the final bid might indicate it will cost €50,000 and then eventually after the contract it comes in at €55,000. The overrun is €55,000 against €50,000; it is not €55,000 against €20,000. The Chairman will know this from his time-----
Mr. Robert Watt:
Somebody speculating over how much it would cost to build a kitchen extension makes no sense. The only cost against which one can judge the outturn cost is the cost based on a detailed design and a tender based on that detailed design. Across swathes of the public service - education, universities, schools and so on - there are, of course, cases where things do not work. I have spoken about the children's hospital, which was a unique project and we debated what happened there.
The public services card is a responsibility of the Department. The infrastructure we built is not about the card but about providing the option of a unique digital identifier for citizens to enable them to access services at a time that is convenient and suits them. I believe this is transformative and over time will be seen as a very successful piece of infrastructure. In the past ten days we have seen 13,000 people apply for payments under the national childcare scheme based on using the infrastructure set up by the public services card, mygov.ie. That avoids us having to replicate that type of system time and again for different schemes. I would be very happy to have an engagement with the committee about digitalisation of mygov.ieat another time.
The Chairman mentioned school buildings and Carillion. In that case the contractor went bust. The Chairman and I have spoken about PPPs in the past and he knows my views on PPPs. In this case it showed that the PPP model actually worked because the penalty clause included in the contract compelled the entity to go and get a new contractor to finish the work, because until it actually finished and presented the school, it would not get any unitary payment. There are different issues here depending on the nature of the contract.
When I hear of something going on, I do not think there is any comparison between printer problems in the Houses of the Oireachtas, the children's hospital and other issues. We need to look at each individual case. There might be complexities associated with buying a printer and having it installed in an office. That should in no way be compared with building a children's hospital. When I see things like that, I am not happy and I ask what is going on and what the issue is there. When it comes to a Department that has a Vote, I ring up the Accounting Officer and ask what went on.
Obviously, with the Houses of the Oireachtas Commission being independent, I do not have that relationship with the Clerk of the Dáil. I am not in a position to do that. However, if it were another Secretary General, I would ask what is going on. We would ask for an assessment report and we would have a discussion about it. That would be independent of whatever might happen at an Oireachtas committee, including the Committee of Public Accounts, or whatever action the Comptroller and Auditor General might take.
We are not happy about things. It is inappropriate use of taxpayers' money and it is not good for people's perception of how their money is being used.
I wish to go beyond the emotion and get into the factual remedy. We learn from all our mistakes. For me the children's hospital was just handled wrongly from start to finish. We have our views on it.
I am not saying that every contract is wrong. When they go wrong, my God do they go wrong. We can look at the electronic voting machines and all the stuff that happened in the past. Under a different presentation they happen again.
The children's hospital and the Oireachtas printer are examples. I acknowledge that the Department is not responsible for the printer. Who in the name of God would buy a printer without measuring first to see whether it will fit into the room in which it is to be housed?
With regard to the schools building programme, I accept the point on PPPs but it is the small business people who suffered. I spoke to Mr. David O'Brien about trying to protect-----
-----the SME sector. That Mr. Watt, as a senior civil servant, would give such direct advice to those concerned on broadband is to be admired but their continuing to ignore that advice must surely be disappointing for him and his officials. I am not trying to draw him into a conflict, I am trying to understand how anyone could put €3 billion, or whatever the sum is, into a project and not own any part at the end or get any real return on it. The taxpayer loses out again.
I wish to single out the HSE. Every time I get an opportunity, here or at meetings of the Committee of Public Accounts, I ask about the financial IT system. The HSE does not have a single IT system that can do all that is supposed to be done.
This has gone on for ten or 15 years. Mr. Watt is the paymaster. I would say to the HSE that it should get it together or not get its money. Someone has to take charge. Mr. Watt spoke about leadership. There is no leadership. The public system is almost in a collapsed state right now. In the private system, services operate like clockwork. The most basic thing that makes that happen is the flow of information. Despite this, we still do not have a HSE system in place.
I must return to the point I made about the settlements. I am not commenting on any case but the amount of money is phenomenal. We are meeting again this week to deal with the exceptional circumstances of a particular case. We are to meet the Minister for Finance. What is happening cannot continue.
Mr. Watt should not mind that. I am just saying it cannot go on the way it is going. What is the Department doing to wake up the political system or change its system? The Department is part of the permanent government. Mr. Watt can dress it up whatever way he likes but he is here for good or for as long as his contract lasts.
We can do whatever we want in here and feel great about huffing and puffing in the Chamber but Mr. Watt is the guy with the pen and the power to insist that someone do something about this. What is his view on that?
Mr. Robert Watt:
The Chairman raised many issues. Many of them are political issues that are not for me to comment on. I have given my views on some of those matters already. I gave my views on broadband, which is my job. It is ultimately for the Government to decide how to proceed.
Issues arise in respect of the HSE. Without getting into the issues of health delivery and health politics, which are not my area, I believe there is an enormous difference between a public system and a private system. A public system has a vast array of different operations and services whereas a private system will provide a subset of those services. My view is that the problem we have in the health system is that there is an uneasy mix of public and private. The way they interact is the problem. Sláintecare, the policy the Minister set out, which will be very difficult to implement, is the approach to try to unravel some of the strands. The Chairman and I have spoken about this at various fora. I have set out many the changes made and measures we have introduced. We have made great progress on many aspects of public administration but, of course, there are things we can do better.
With regard to the management of capital projects and procurement, we have taken a number of steps. I have alluded to some of them. On another day, we might be able to talk in more detail about what we are trying to do. There is an enormous difference between one-off, large bespoke projects and the sorts of routine projects we do. Somebody mentioned to me the example of the Luas being built in Dublin. There were overruns and delays when the first two lines were being built. The final Luas line, connecting the green and red lines, was on time and on budget because the contractors and the State learned how to avoid mistakes. We had great difficulty building the first motorways. Back in the 1990s, there were overruns. We did not have fixed-lump-sum contracts then; there were price-variation contracts and it was a disaster. We eventually got it right. We can learn. With regard to the wider issues concerning the HSE, Mr. Paul Reid has a very effective leadership team. We need to see what the HSE does.
I talked earlier about the indicators of people's perceptions of the Civil Service. A few weeks ago, the OECD published Government at a Glance, which is a fantastic document. Every Irish public service we do well is above average. Health is the one area where the outcomes, relative to expenditure, are below the OECD average. Nobody in the system doubts that there is an ongoing challenge in that regard.
Deputy Paul Murphy asked Mr. Watt about the fob-in system here and about transparency. Mr. Watt said this is not the responsibility of his Department because the commission is independent. Then Deputy Paul Murphy asked about civil servants fobbing in. Does Mr. Watt fob in?
It is amazing, is it not? I fob in. I do not mind doing it; I am just thinking of the next generation of politicians. I am gauged for three days per week but not on the other four when I fob in at my constituency office or when I do this, that or the other. I am not talking about me but about everybody. Given that the money Mr. Watt talks about goes to the commission, it is wrong that the Department does not have oversight of some kind in respect of it.
I understand that but I am saying that the Department should since it is taxpayers' money and since the Department is responsible for its administration. That there is no role shows how wrong the whole process is. I was an employer and know how staff must be managed and how things must be dealt with. The systems in here are geared for failure but nobody wants to change them. I heard on the news on my way here this morning that politicians made the arrangements for politicians. I do not believe they did. I was never asked about them. I am quite happy to give in receipts and so on but nobody wants to listen. The Department says it is the responsibility of the commissioner or somebody else down the road. Auditing is done by Mazars or some other firm. It is an absolute farce. The vast majority of Members and, I am sure, civil servants just come in to do their work and they just want to get on with it. I will have to get Mr. Watt a fobbing machine in order that he might see what it is like.
I was struck by Mr. Watt's comment that there is a huge difference between the issue of the printer and that of the children's hospital. There is one major point in common. Both involve taxpayers' money. Therefore, they have a lot in common. At this stage, no matter what Department we go to, the Department of Public Expenditure and Reform comes up. With regard to every item of expenditure we are looking into, the Department in question has to defer to the big daddy of the Department of Public Expenditure and Reform.
Is it possible that the Department of Public Expenditure and Reform is minding the cents and not the euros? Is it the case that the Department is engaging in micro-management rather than macro-management, leaving Departments unable to manage in terms of their budget allocations? There are lines of expenditure in many Departments that are questionable in terms of value for money. There are also areas within Departments where there is major underspend and when we inquire about them we are told the Department of Public Expenditure and Reform will not allow them to be spent, despite the fact that this would result in value for money for the taxpayer. I am interested in hearing about the process by which the budgetary allocations are made. Is the Department interfering too much at a micro level in the day-to-day operations of the Departments? How many accountants are employed in the Department of Public Expenditure and Reform?
During my questioning of various Departments on items of expenditure, the Department of Public Expenditure and Reform was referred to an extraordinary number of times. From my perspective, the Department is the most powerful Department in the apparatus of Government by a mile in that it makes all of the decisions on expenditure. I ask Mr. Watt to outline the budgetary process in respect of the Department of Public and Expenditure's interaction with the other Departments. For example, do the other Departments request that interaction and, at that point, do they hold the same level of spend they had the previous year or do we have an imprest system? It frustrates me to hear the Department of Public Expenditure and Reform will not allow spend of an allocation that has not been spent in another areas, even where value for money for the taxpayer is possible.
Mr. Robert Watt:
That is the nature of the system. With any Government system there is a treasury function. The Department of Public Expenditure and Reform discharges that treasury function on behalf of the Government. This function was previously a function of the Department of Finance but it became the function of the Department of Public Expenditure and Reform on its establishment in 2011. It is the role of the Department to monitoring spending and manage the Estimates process. Where people are facing down various vested interests or constituents, it is convenient to blame the Department. For example, if the Senator was to call for more pay for the teachers, the Department of Education and Skills might respond that it would love to do that but the Department of Public Expenditure and Reform will not give it the money to do so. That is just an example. I am not suggesting that happens but if that were to happen, it would move the conversation on and away from the Senator. That is the nature of it.
Mr. Robert Watt:
The Department is often criticised for not being sufficiently involved in the detail. In effect, the system we have is one of delegated sanction for budgets. In response to an earlier question from the Chairman, the budget is negotiated. There is a process of negotiation for the budget. We engage with Departments about their spending priorities and demands and we come up with a budget which is announced by the Minister.
Is it possible that there are lines of spending by Departments that are not providing value for money and that there are other Departments that are urgently in need of funding to which they cannot get access because it is embedded in a line of spend in another Department? Do we have an imprest system such that each Department holds the budget they have the previous year?
Mr. Robert Watt:
No, they do not hold what they had. It becomes an administrative political debate and discussion. For example, taking the Department of Social Protection and Employment Affairs budget, there were a lot of increases in its budget in the past when unemployment rose to 15% but the spend on unemployment benefit has since decreased dramatically and that money is no longer allocated to that Department. The leeway generated by that has been used to improve pensions and other payments. The budget allocation remains in place but the spend is different. The ultimate budget administrative challenge is how to identify lines that are not performing and reallocate that money to other parts of the Department, let alone other Departments, which, in the end, comes down to politics. It might be that there are schemes within a Department that one would want to close down or operate differently so that funding could be allocated to other areas but within that there would vested interests around that scheme and different priorities. That is the challenge the Minister for Public Expenditure and Reform faces all of the time because he has endless demands every year, most of which can never be met. He would love to be able to do things differently. He can, of course, enable reallocations but there is an enormous challenge in getting people to agree to it. People do not see the opportunity cost of the funding. Let us take the Department of Education and Skills and the best way of achieving value for money being to reduce class sizes and an allocation is made. The value of the spending is not considered in the context of the opportunity cost of reducing class sizes but is considered against the objective of what the benefits delivered by the scheme are. The benefits would be greater if the funding was reallocated but that is not how it the conversation happens. The debate turns to getting more money from the Department of Public Expenditure and Reform to keep the scheme going, as well as getting money to reduce class sizes. This is the ultimate challenge of managing budgets and individual Departments.
I am more interested from the perspective of a range of Departments. Where a Minister wants to spend money in a particular area but from within the Department's existing budget, does he or she require the sanction of the Department of Public Expenditure and Reform to do so?
Mr. Robert Watt:
No. Ultimately, the Minister for Public Expenditure and Reform provides the allocation and Ministers decide how much is spent and where. There might be particular priorities, Government or otherwise, in respect of which the Taoiseach may set a budget to deliver X, Y and Z and the Minister would be required to do that.
Mr. Robert Watt:
During the year, if the money is going across different Votes and different areas, the Minister would have to get permission to vire the money or move it across. In my experience, the Minister for Public Expenditure and Reform would always approved such requests. If such request is made before the year commences as opposed to in-year, that is a conversation that takes place at political level between the Ministers.
Mr. Robert Watt:
I understand. It might not be that money is taken from a Department. In terms of the increase in spending over the last number of years, most of the increment in spend has been on health. The health budget continuously increases. In terms of 2020, the health budget is up 6% and the remaining spend is up by 3% or 3.5%. Spend for the Department of Justice and Equality is up, as is spend for the Department of Children and Youth Affairs in terms of the affordable childcare scheme and spend for the Department of Housing, Planning and Local Government. In cash and percentage terms the spends for housing and health have increased most. There is a differentiation between Government priorities in these areas, such that they received more of an increase than other areas.
Mr. Robert Watt:
We have about 150 to 250 people in the Votes sections. They would have a background in business, finance, accountancy, economics and a variety of other areas. They would be career civil servants who worked in many different areas. They would have qualifications or could be specialists brought in. It would depend.
Does Mr. Watt believe the perception that we get back from other Departments that the Department of Public Expenditure and Reform is more interested in the micro-spending of Departments than the actual overall macro-spending is unfair?
Mr. Robert Watt:
No, I do not think that is the case. Our main concern is to ensure that the spending increases are sustainable and budgets are executed in line with profiles. When it comes to large-scale spending and projects, we get involved from a value for money and assessment perspective. The micro-spending of Departments is for the Accounting Officers. They must deliver that spending in line with the procedures set out. We do not tend to get involved in the micro-detail.
Does the Department of Public Expenditure and Reform have a chart or an estimate of exactly how much extra money the Department of Health got between last year’s and this year’s budget process, as well as the additional allocations during the year?
We ended up this year with Supplementary Estimates where an additional €400 million was given to the Department of Health. By any criteria, whether in the public or private sector, the figures are utterly astonishing. The Revised Estimate for the Department of Health stands at €17 billion. The Estimate for the Department of Employment Affairs and Social Protection, which used to be significantly larger than health, is now just over €20 billion. At the same time, the total allocation to the education Vote, which we all agree is vital to the country’s future, has fallen back. It is miles behind the Department of Health.
What needs to be done? There is the Department of Health and the HSE, yet we are in an appalling situation. I listened to people talk about the children's hospital. What about the maternity hospitals and what will happen to women giving birth to babies in the three hospitals in the Dublin area and other hospitals right around the country? Recently, the master of the Rotunda Hospital said in public that the hospital’s facilities are dangerous for seriously ill babies. It is difficult to fathom what exactly is the role of the Department of Public Expenditure and Reform in all of this. I know it does not have clinical responsibility. However, in 2015, when the current Taoiseach was the Minister for Health, he announced, on behalf of the Rotunda Hospital, that it was going to move to a new campus on the west side of Dublin, adjacent to Connolly hospital, where, by and large, a significant proportion of the women giving birth are living close to the motorways serving the hospital. The same argument was made for the children's hospital. In the intervening years, the Rotunda has got, according to its master, more concerned about the care it can provide. At the same time, the question of a new maternity facility has been stalled. It is unbelievable.
Take the case of the national maternity hospital. Is somebody in the Irish foreign service or the Department of Public Expenditure and Reform on to the Vatican to ask it when it will make its decision as to whether it will be hands off from the governance of the hospital to allow the new national maternity hospital to commence? Is this something that has to be thought about? Will we hear in a year or two from whoever has the go-ahead from the Pope to be a decision maker on this? I see the Department of Public Expenditure and Reform having an overall managerial role to be able to intervene critically.
In fairness to the Chairman, he asked a significant question for everybody who has the honour to be a Deputy or Senator. What on God's earth is going on with the fob system? Why are we reading about this in the newspapers? The Chairman made a plea to Mr. Watt because it is the reputation of public service that is under challenge when one hears that somebody can pop in and out on Friday night or Monday morning. We do not have a clue. Maybe the person sleeps here for the weekend and then heads off. We have no idea. The point is that when public confidence is lost in institutions, it is democracy that is damaged and, therefore, our particular role as elected representatives. The Department of Public Expenditure and Reform has oversight of all staffing. I am not aware that any Deputy has had any involvement in the design of the fobbing system. We just got our instructions as to what we were to do. Most people followed that honourably. The Department of Public Expenditure and Reform has the oversight management role but, again, it does not have any oversight.
When Professor Fergal Malone, master of the Rotunda, says that sick babies will die, does somebody in the Department pick up the phone to him and say they are distressed to read that today? Does it have to go all the way through the HSE, over to the Department of Health, down to whoever opens the letters in the Department of Public Expenditure and Reform and back up again? We seem to be in some kind of communication system. Maybe it is all done by email but it sounds like it is done by pony and trap. There is just no reaction to crises which are building up.
Most of us here have had experience of difficult years when everybody pulled together to get better outcomes for the country. We got to a certain plateau and then it all seemed to fall apart, be it in housing, health or the new childcare scheme. I am glad to hear people are signing up to the new childcare scheme. On the ground, however, many parents are confused by what they are asked to do.
Does Mr. Watt regularly meet the Taoiseach to tell him how the public service is performing? Does he attend a Cabinet committee? The previous Taoiseach had a practice of having Cabinet committee meetings on Monday once a month. From parliamentary replies, it would seem the Cabinet committee system has fallen back. How often does Mr. Watt meet the Taoiseach? Is his communication via the Secretary to the Government? We are beset by problems which are not about lack of money but about the failure of the issues to come together, along with the failure of people to be able to get reasonable answers.
Mr. Robert Watt:
The Cabinet committee system is alive and well. The Deputy is correct that the meetings are on Mondays. The Taoiseach chairs those meetings which are organised by the Department of the Taoiseach. Colleagues from my Department go to various committees on health, social policy and so on. There are conversations which I have with our Minister and the Taoiseach on budget matters.
Does Mr. Watt meet the Taoiseach regularly, face to face, to discuss some of these issues which are regularly debated by people up and down the country? Does the Taoiseach get the message that such an issue is a problem but we have it solved or we are working on it but we are not yet sure of the answer?
Mr. Robert Watt:
The Taoiseach gets his information, as the Deputy knows, from many sources. He is a politician like the members and he is out there meeting people so he has a sense of what is going on in the country. I am sure that he has a better sense than I have about how people are assessing where we are. My job is to have conversations and the agenda is set by the Taoiseach, as ever. He gives us his views on what we are doing. He asks questions. We bring issues to him. That structure takes place, which is quite an effective structure in terms of the engagement between the Civil Service and the people we work for - the Taoiseach and Ministers. So that structure is there. There is the formal Cabinet structure, there are more informal engagements, as may be required, and we work with the Taoiseach on the Government's agenda and priorities.
In terms of the fobbing system, I have nothing to do with the fobbing system that operates here. It is not my business to comment on it. I have sympathy for how politicians are portrayed in terms of the whole issue of fobbing and expenses and I think it is very unfair but it has nothing to do with me. It is the business of yourselves.
In terms of the capital projects, there are capital projects, I understand, in terms of the maternity services. I do not have the details but we can certainly come back to the Deputy on the timeline. There are projects in relation to Holles Street and the Rotunda. I am not familiar with the details but there are capital-----
We have seen with the children's hospital low-ball estimates that have then climbed enormously. In some jurisdictions there would be an immediate query as to why one moved from estimates, which start off sounding reasonable, and then climbed dramatically. I do realise that situations can change. However, we have crisis after crisis in the health service yet we have an escalating health estimate. Does Mr. Watt think we will get €17 billion worth of output from the health services this year? There are people working in the health service who are under tremendous stress and, very often, completely exhausted. Last week, we saw an image of a woman in her 90s sitting on a trolley but spending her third day on a trolley. Is there a rapid reaction or response within the Department of Public Expenditure and Reform when something is seen that is genuinely outrageous? Does someone in the Department lift up a phone and call the Department of Health to ask what is going on? The public cannot understand what is going on at the moment. It would be helpful if the public could understand the situation. We have had incredibly difficult years and people made tremendous sacrifices yet now we are looking at a lot of that go down the drain because there does not seem to be anybody in control. Is Mr. Watt surprised that the outcome of the health service this year is €17 billion? Perhaps it should be €18 billion or €14 billion. I do not know. Does Mr. Watt have a view on the matter? His Department looks at the overall Estimates.
Mr. Robert Watt:
There is an allocation for the Department of Health and it has increased by, I think, an average of about 6% over the last number of years. That reflects the priority that the Government gives to improving the health system and the demographic pressures and so on. There is a big challenge in terms of managing the budget and staying within it. This year, as the Deputy mentioned, there is an overrun of around €330 million.
As to the issue of financial management and overall value for money, it is a massive system that provides many different services across many different units of the health system. Of course, there are issues around that. Of course, there are issues about how we could improve the service and how service delivery can get better. As I mentioned earlier, the OECD's government publication at a glance has very interesting metrics on spending per capitain countries. On the outcomes, nobody would disagree with the view that the health system is challenging. There are parts of it that are under an awful strain and pressure. It is not really my job to get involved in the cut and thrust of this issue but there are also fantastic things happening in the health service. There are fantastic services. There are people being treated every day in our system who, thankfully, are treated well and leave the system happy with same. There is another story as well, as the Deputy knows from her own experience. It is not all negative. It is not all doom and gloom. There are challenges but there are also very positive aspects of the system as well.
The challenge is a very simple one. Notwithstanding all of the good work that is going on in different parts of the health service, which everybody here would acknowledge, the problem is that there appears to be a budgeting system that is subject to regular massive overspends. My understanding is that the Department of Public Expenditure and Reform is a Department that addresses the issue of overspends. Mr. Watt has mentioned the children's hospital and that we did not need to go back into it in detail but there is talk of further significant overruns being possible. I mentioned to him the three maternity hospitals in Dublin but there are also maternity hospital situations in locations around the country. The Rotunda Hospital was meant to transfer but we are now being told that we will have to, possibly, build a temporary five or six-storey building in Parnell Square and nothing is happening. I want to get an image. These are significant amounts of money. Will moving the Rotunda cost €300 million or €500 million plus the cost of building a new maternity hospital?
In terms of the sister hospital on Holles Street, which is on the southside, we are now told, and have been for a while, that the Vatican must make up its mind as to whether it will have some kind of governance involvement. In the meantime, does one ring somebody and say there is a problem? We have an ambassador to the Vatican and the Department of Foreign Affairs and Trade. Mr. Watt has said that his Department has oversight. Where is the problem solving, firefighting approach when these are serious issues for the staff, the patients who will use the hospital, the babies who will be born there and the master in terms of safety? The poor master has talked about feeling that there is a level of unsafety for babies. That is a massive thing for the master of any hospital to actually say. It is also really worrying for women and their families who are likely to have babies there, particularly if the baby is likely to need special support.
Mr. Robert Watt:
I do not know the details concerning the hospitals but we will come back to the Deputy. I do not know what the plans are. I know that there are plans to redevelop both Holles Street and the Rotunda. I do not have the details but I shall come back to the Deputy in terms of what they are.
What about the Vatican? Has there been a discussion? Has Mr. Watt and the Taoiseach discussed the Vatican and its role? The function of Mr. Watt is to be both a leader and a problem solver for other Departments and it is a function that he has carried out extremely well. I have listed some examples and I am sure everybody here could list four or five other examples. I shall not even discuss broadband. We are paying gigantic money for something that we will never own and that seems extraordinary to most people. Where are these conversations with An Taoiseach and some of the line Ministers? I know that Mr. Watt is not a person who is accustomed to holding back his views.
Mr. Robert Watt:
The Deputy will know from her time in government how the system works. I think the system works and should work with people like me giving their views or advice and then the political system makes the decision, and that is what happens. Pretty much the same structures that pertained from 2011 to 2016 are in existence now in terms of the relationship between civil servants and the political system and the structures that we have in place.
Mr. Robert Watt:
The Government has a right to ignore all of the advice it receives from the Civil Service, accept all of it or be somewhere in between. As the Deputy will know, it is somewhere in between.
I welcome Mr. Watt and his staff. I shall follow on from the final point that Deputy Burton made about broadband.
Mr. Watt gave an opinion and advice on that. Does he give an alternative opinion as well where the Government or Department have a view on a proposal? If he gives his advice and this is not in agreement with that view on the proposal, does he give an alternative view?
Mr. Robert Watt:
People will be disbarred from going for promotions, increments would be deducted from their pay and for people who repeatedly failed, they would be exited. We have fired people and people do leave the system. As discussed earlier, there tends to be a managed process but that can happen.
Mr. Robert Watt:
This is an ongoing issue. We have managed to reduce two grades, a number of years ago. We believe the system is too hierarchical and needs to be flattened. Suppressing grades or elongating scales are very difficult industrial relations, IR, challenges to get agreement upon. My own view is the systems are too hierarchical.
Most people believed that the banks were the whole cause of the crash but the public deficit was probably the biggest cause of the crash. How sustainable does Mr. Watt believe that things are at the moment? We have seen a huge increase again in the Civil Service, the HSE, and all areas of public expenditure. All of these areas have defined pensions and lump sums, which comprise a huge burden on the taxpayer. Is Mr Watt making recommendations on how the burden can be reduced in all areas as well?
Mr. Robert Watt:
The deficit was a function of the crash. The fiscal deficit opened up when the economy collapsed back then. It was a big task to get that back into balance.
Our focus with the Minister at all times is to look at the sustainability of expenditure, of the budget, and to work with the Minister on what the appropriate increase in spending is, given the other demands. There is the whole question of the sustainability of the public finances, to debt and the pensions issue. On pensions, there is a big contingent liability out there, which is greater than the gross debt, which is something we are very focused on. Many changes have been made, for example on public pensions with the single pension scheme of 2012, and changes on social welfare pensions in increasing the retirement age. There are issues about the sustainability of the pension system, which is a big issue for society. There are wider issues on the cost of healthcare, particularly nursing home care, and how that cost is to be met in the future. The demographic impacts on the public finances are significant. Every year it costs €450 million to €500 million just to deal with the demographic consequences on pensions and health systems.
Mr. Robert Watt:
I did not say that. Spending cannot keep increasing at the rate we have seen unless the economy grows at 4% or 5% as it has been. Given that we are now running out of labour since we are fully employed, and we are seeing all of the consequences of growth, the economy can only grow in future then at maybe 2% or 3%. Spending will have to grow at a lower rate in the future.
Mr. Watt referred in his statement to payroll and human resources. In many companies they are outsourcing their payroll and human resources sections. In many corporations, these functions are centralised. Is it the case within the whole Civil Service that each area has its own human resources and-----
Mr. Robert Watt:
There are two things here. We have consolidated payroll into payroll shared services. There is a massive payroll system which we provide in three different locations. We are responsible for providing payroll and pension services for hundreds of thousands of people. The transactional human resources, HR, function is consolidated in PeoplePoint in Clonskeagh. The strategic HR is managed by people in individual Departments, in partnership with Mr. Cagney who is head of HR for the Civil Service and with the people in PeoplePoint who provide the data and analytics to help them. We have gone some of the way.
There was big issue in the past as to whether we should outsource all of it but we felt that we should consolidate it, improve the technology, and get many of the efficiency gains through doing that. If we had outsourced back then, all of the gains would have gone to the outsourcing partner, so we do it in a different way. We have an in-house solution as to all of those services.
Mr. Robert Watt:
The HSE has its own system. It represents one third of the public service.
Mr. Robert Watt:
It has its own pay, financial management, and HR system which is centralised within the HSE structure.
I have seen recently where a number of new agencies have been set up. These are all Dublin-based. I cannot remember them specifically but some of them are old like the Standards in Public Office Commission, SIPO. They are all centralised in the one block. All of the new agencies for the past ten, 15 or 20 years have been based in Dublin. Mr. Watt has mentioned that he is looking at people working from home or in central hubs or hotpoints in counties outside of Dublin.
Has Mr. Watt's Department looked at decentralisation recently to see how it might help, might take people of Dublin or ease the current housing problem in Dublin? I read a report recently where quite a number of civil servants, up to 5,000 or 6,000, would like to transfer immediately out of Dublin. Has he looked at that whole area?
Mr. Robert Watt:
The Minister announced a review of workforce planning in the budget as to the location of offices. Mr. Cagney and his team are working on that. The decentralisation programme that was done before was a disaster and was ill-conceived. I can say this because I worked with former Minister, Mr. McCreevy, I see him a great deal, would have good time for him and he will not be offended when I say this. The notion of decentralising administrative head offices is a mistake. It can be considered, however, when looking at other types of services. It is a possibility. One does not have to have all the services in one location but one needs the administrative heads and the head offices of Departments together. It, of course, does not have to be in Dublin but historically that has been the case and I cannot see that changing any time soon. No matter what one does, those elements need to stay together.
There is no reason why a whole variety of other services should be in Dublin. One of the things that we are looking at is the whole question of digital, not hubs - I cannot think of the title we are using at the moment - but where we can have offices out on the commuter belt, people can go and log in there rather than having to come into the city centre. We are looking at this because we are conscious of the fact that people want to move and work differently as the commuting times are so long now and this is a big factor for people and their families.
There are other areas where the Office of Public Works, OPW, is involved and it might have been much cheaper to have them located outside the city. Storage, for instance, would be located much more cheaply throughout the country rather than to have it in the most expensive part of the country. Has Mr. Watt looked at that area?
Mr. Robert Watt:
We agree on that and on the footprint. We have approximately 16,000 civil servants in the centre of the city of Dublin. Accommodation is expensive. This is an issue for us. Do we need to have all of those services provided centrally in Dublin? We have a number of buildings that we were in and which we have now vacated. Consequently, we have demands to lease and build new offices. This is an issue for us.
Finally, I will turn to decision-making.
The biggest problem we have as public representatives is getting a decision from somebody in the HSE, the county council, the Civil Service or elsewhere. These people may not be around on a particular day and if we ring back, we get somebody else. Getting somebody to make a decision is impossible in many cases. What is being done about this or streamlining processes?
We have seen over a number of years breaches in ICT because of malware. It happened in Meath County Council and the HSE. Are these processes centralised or do the local authorities and the HSE have their own sections to combat malware?
Mr. Robert Watt:
There is a centralised government network that is managed from the Office of the Government Chief Information Officer. Mr. Barry Lowry is the chief information officer and he is responsible for that. It is a significant network that provides services across the public service. As the Senator can imagine, there is much investment debate about security and cybersecurity all the time. We had a discussion about it this morning.
This will be a brief question, as Senator Jerry Buttimer is on his feet in the Seanad, and I have to attend the House to debate the Finance Bill. My question is about badly performing contractors. Earlier this year, the construction firm, Western Building Systems, was awarded a contract to deliver the 60-bed modular extension at University Hospital Limerick but the same construction firm was found responsible for structural defects in as many as 42 new schools that have been built in recent years. In August, the Minister for Education and Skills, Deputy Joe McHugh, stated that structural flaws had been identified in a further 17 school buildings, which would require temporary works to be carried out in the following weeks. Section 56(8) of the European Union (Awards of Public Authority Contracts) Regulations 2016 indicates that the contracting authority "may exclude from participation in a procurement procedure any economic operator in one or more of the following situations: ... where the economic operator has shown significant or persistent deficiencies in the performance of a substantive requirement under a prior public contract, a prior contract with a contracting entity or a prior concession contract".
Will the witnesses give an example of a contractor, such as Western Building Systems, that has been disqualified from a public tendering process on these grounds? Is there a database in place that allows contracting authorities to score contractors on their performance and share information across Departments and authorities while disqualifying contractors or penalising them during a tendering process?
Mr. David O'Brien:
I am saying there is not a central database that records poor past performance. A number of steps need to be taken to verify the evidence necessary to exclude a party. Under the Constitution, people have a right to earn a living and there must be a process. It is no different from any other disciplinary procedure, some of which we discussed earlier. There is a right to a response and a party must make a final decision. Quite often under contracts, people may call something out and a dispute might arise as to whether that judgment or call is correct. It will go through a determination and dispute resolution if necessary and if the contractor or consultant in some cases refuses to accept that determination.
Surely there is a due diligence obligation to ensure a contractor that has a very poor record could be recorded. I am amazed that there is no communication across Departments on this. How can we ensure we get value for money and that we do not end up in scenarios that we have seen previously, which have cost small or indigenous businesses, along with other parties? That worries me.
Mr. David O'Brien:
There are measures that need to be applied consistently. We are engaged in a review of how capital projects are procured and managed under contracts. We are looking at all those aspects. The reality is there must be consistent application of these measures. If one contracting authority is particularly hot on one aspect and excludes a party because of that issue but nobody else is examining it or evaluating it in a different way, it leaves scope for a successful challenge to the exclusion. The metrics must be clear. The tools are in the contract through deduction of moneys. Grounds for exclusion are termination, damages or comparable sanctions under the EU directive's provisions. Unless those have been applied and upheld, if there is a challenge to them, there will be no evidence. Whether there is a national matrix or otherwise, if the applicant is following a tender competition, it must declare whether any of those grounds for exclusion apply to it. The database could be some sort of blacklisting system but, in reality, the system is set up so the applicant must inform us if there are any issues.
Mr. Robert Watt:
There is definitely an issue concerning performance management. I am talking about a contract being managed. It is about documenting this process and sharing information if a party is not eligible. We must think about litigation in this regard. If I say something did not go well, the contractor could blame me for the fact that the contract did not go well. There could be an accusation that the design was not good enough or there were not enough specialist staff. Even establishing the extent to which a party performed adequately can tie us up in law. That is even before concluding a party has not performed and putting this on a register that other public bodies could use to exclude somebody. We are very mindful of this but it is a legal minefield.
Much has to do with the way the directive is written. We would like more flexibility to say that if we did not have a good experience with a contractor, it would not get the next job but we cannot do it. We cannot exclude somebody like that. It is very difficult but the Senator's point is a good one. This is not straightforward.
I understand the complexities but there is no point in blaming the European directive. This feeds into the issues with low tenders as well. If a party consistently tenders a low price and we do not capture the data, we will fail the public.
The witnesses can take the point and come back to us with some detail. Senator Horkan raised the matter of civil or public servants being fired or disciplined.
Could Mr. Watt send data on that to the committee?
I have another point of clarification and I ask Mr. Watt to come back to us on it. When I asked him whether he fobbed in, I should not have personalised it. In the tier of civil servants, I want to know who does and who does not.
Mr. Watt might let us know the numbers and the grades as well.
We were talking earlier on about the expenses and the payment to politicians. I thought it was the Departments of Public Expenditure and Reform and Finance that, originally put this in place before the commission.
Mr. Watt will not mind checking it and letting us know what that is.
Finally, on a singular matter, the payment of pension to personnel who worked in the HSE and the Defence Forces is an issue that has been referred to the Attorney General. I tabled parliamentary questions on it recently.