Brian Cowen (Laois-Offaly, Fianna Fail)

I move amendment No. 1:

To delete all words after "Dáil Éireann" and substitute the following:

"—notes the Annual Report of the Comptroller and Auditor General on the 2005 Appropriation Accounts and that in line with normal procedure it will now be passed for scrutiny to the Committee of Public Accounts;

acknowledges the need to pursue best practice in the management of public expenditure to ensure value for money for the taxpayer, and in this regard commends the initiatives taken by Government in recent years to promote more efficient and effective management of expenditure including:

the introduction in 2004 of rolling multi-annual capital envelopes for better management and control of public capital programmes and projects;

the publication in February 2005 of new guidelines for the appraisal and management of capital expenditure proposals in the public sector;

the additional value for money measures in relation to major projects and ICT projects and consultancies announced in October 2005;

the introduction this year of new arrangements for value for money policy reviews in place of expenditure reviews;

the establishment of a central expenditure evaluation unit in the Department of Finance to promote best practice in evaluation and ensure compliance by Departments and agencies with value for money requirements;

recent reforms to the procurement of public construction contracts and reform and modernisation of the system for employing construction related consultants;

the introduction of the national public procurement policy framework for implementation by public bodies, in particular the development of corporate procurement plans that set targets for achieving savings and broad value for money objectives; and

reforms to the Estimates and budget process announced in budget 2006;

notes the measures taken to improve tax compliance; and

acknowledges the major improvements in public services since 1997 arising from the very significant level of resources allocated by Government over that period."

I propose to share time with my colleague, the Minister for Transport, Deputy Cullen.

I will make some remarks of a general nature on the Comptroller and Auditor General's report for 2005 to put it in context. I intend to concentrate on the Government's reforms to public expenditure management and value for money initiatives, the actions taken by Government on tax evasion and on the Government's overall achievements in regard to public services. My colleagues will, in the course of their contributions to this debate, deal with specific issues raised in the Comptroller and Auditor General's report and with sectoral reforms and achievements in their areas.

The 2005 report of the Comptroller and Auditor General must be put in the context of gross annual spend by central Government. In 2005 gross expenditure by central Government on public services, including the social insurance fund, amounted to approximately €45 billion. Of this some €15 billion was in respect of pay and pensions, over €12 billion in respect of social welfare, €12 billion in respect of health and €7 billion in respect of education.

The Comptroller and Auditor General has long been a core part of the systems of oversight in this country. There is a statutory requirement on him to report annually to Dáil Éireann on his audit of departmental appropriation accounts. His annual reports are exceptionally valuable, especially where they point to systems errors which should have prevented waste occurring. I welcome his report as an important input into the ongoing process of ensuring better value for taxpayers' money.

The 2005 report is not therefore some major new report on Government waste, but simply the comptroller discharging his annual function. As Deputies are aware, the Comptroller and Auditor General reports are transmitted to the Committee of Public Accounts and form the basis for the questioning by the PAC of the Accounting Officers of each Department. The report of the PAC is in turn remitted to me for comments and my comments are relayed back to the PAC after I have consulted the relevant Departments. This process enables the points made by the Comptroller and Auditor General and the PAC to be fully followed up and the necessary changes to be introduced to remedy any shortcomings.

Poor management of public expenditure and occurrences of wasteful expenditure are not acceptable at any time. The Government is determined to redress problems that come to light. Nonetheless, promises that all instances of inefficient and wasteful expenditure can be totally eliminated are not realistic. Is there a person or organisation, let alone a government, in the world who can honestly say that they have maximised the return from every cent of spending or every investment decision? Of course not. However, what we can and must do is have systems for planning and evaluation which minimise the risk of waste and maximise the chance of finding it when it occurs.

While there have been problems and incidences of waste, the Government has continually sought to learn from those mistakes and we have been proactive in introducing measures designed to optimise value for money from public expenditure for the taxpayer. A number of important initiatives have been put in place by the Government in recent years to secure this objective. These include the introduction in budget 2004 of rolling five-year multi-annual capital envelopes for better management and control of public expenditure programmes and projects; the publication in February, 2005 of new guidelines for the appraisal and management of capital expenditure proposals in the public sector; the additional value for money measures with regard to major projects, ICT projects and consultancies announced in October 2005; the introduction this year of new arrangements for expanded value for money policy reviews in place of expenditure reviews; recent reforms to the procurement of public construction contracts and reform and modernisation of the system for employing construction-related consultants; the introduction of the national public procurement policy framework for implementation by public bodies, in particular the development of corporate procurement plans that set targets for achieving savings and broad value for money objectives; the recent establishment of a central expenditure evaluation unit in the Department of Finance to promote best practice in evaluation and compliance by Departments and agencies with value for money requirements; and reforms to the Estimates and budget process announced in budget 2006.

The objectives of these initiatives are to ensure that there is more effective and efficient allocation and management of resources by Government, Ministers, Departments and agencies, better value for money for the taxpayer and greater accountability to the Oireachtas and the public in regard to public expenditure policy and achievements for public expenditure.

We are acutely conscious that we must get optimal return for the significant levels of capital investment we are committed to. Currently we spend close to 5% of GNP on capital investment funded by central Government. This is approximately twice the European average. Public investment under the 2006-10 capital envelope will amount to over €43 billion.

The rolling five-year multi-annual capital envelopes with a 10% capital carryover facility is a common sense move which breaks the rigidity of the annual allocations system which undermined good planning. Departments and agencies now have greater medium term budgetary certainty and more flexibility in planning and managing their capital programmes and projects. We see the benefits of this. They have general delegated responsibility for selecting and managing their capital programmes and projects within the framework of the capital envelopes, provided that they comply with my Department's guidelines for capital appraisal and public procurement and the other value for money requirements introduced last year. The response by Departments and implementing agencies to the multi-annual capital investment framework has been uniformly positive. This is being reflected in better project and programme management.

The February 2005 guidelines for the appraisal and management of capital expenditure proposals in the public sector are designed to encourage a better approach to appraisal and management of capital programmes and projects and to reflect best international practice. Key features of the guidelines are that all projects over €30 million must undergo a full cost benefit analysis and small to medium projects must undergo an appraisal commensurate with their scale. The capital appraisal guidelines contain all that is necessary to assist proper costing, appraisal and efficient execution of projects. There are checks and balances built into the guidelines to ensure that projects are properly appraised and managed from project inception to procurement and post project review. Sponsoring agencies and Departments must carry out preliminary and detailed appraisal of all projects and seek approval of the relevant sanctioning authority before proceeding through the key stages from appraisal to planning and implementation.

The guidelines explicitly state, as part of the appraisal process, that "the cost of the project should be the expected outturn cost, including construction costs, property acquisition, risk and contingency" and that "the cost of possible future price increases and variations in project outputs should be factored into the calculation of project costs".

The value for money initiative which I announced in October last includes a number of important measures to promote better accountability at project level. It is now a specific requirement for all major capital projects and ICT projects that an individual project manager must be appointed who is responsible for managing and monitoring project progress and for reporting progress to a project board. There must be regular reporting of progress on capital programmes and major projects and value for money generally to the management advisory committee of Departments and to boards of State agencies. The objective is to ensure that problems arising are brought to notice and dealt with at an early stage. A further innovation is that details on progress on project outcomes against budgets and scheduled completion dates for projects above €30 million must be included in departmental annual reports on their statements of strategy.

Departments are also required under the new value for money arrangements now in place to report annually to my Department on progress under their capital envelopes. They must include, as part of that reporting requirement, an account of progress on major capital projects and compliance with the general conditions of my Department's delegated capital sanction and the capital appraisal guidelines, including details of spot-checks for compliance carried out by them.

I have recently established a central expenditure evaluation unit in my Department. It will have a key role in promoting best practice on appraisal and evaluation generally and in ensuring compliance by Departments and agencies with the capital appraisal guidelines and other requirements under the enhanced value for money framework now in place. The unit will review the annual reports from Departments to my Department in regard to compliance with capital appraisal and value for money requirements. The objective is that deficiencies in Departments and agencies with regard to project management and value for money are identified and, more generally, to facilitate more systematic engagement between my Department and Departments and agencies in taking any necessary corrective action.

With regard to ICT projects, a formal peer review process for major projects is also in operation. The peer review is carried out at key decision points, preliminary business case assessment, detailed assessment, pre-tender, post-tender, and project close-out, by a team of experienced people external to the project board and the organisation. In 2005, I also introduced, the national public procurement policy framework. The aim of the policy is to encourage strategic change in public sector procurement by improving the procurement process in public sector organisations. Under the procurement framework each public sector organisation is required to develop and implement an individual corporate procurement plan. The plan must include an overview of existing procurement expenditure, procedures and processes, a set of high level procurement goals and a detailed breakdown of the process for implementing each goal. These target driven measures will help improve procurement processes, policies and procedures across the service and will result in better value for money outcomes to procurement.

The Government has introduced significant reform to the public construction contracts regime to achieve greater cost certainty and cost effective and timely delivery of public capital works projects. My Department has now completed a suite of five new forms of construction contracts for civil and engineering and building works and, for the first time, put in place standardised public sector conditions of engagement for construction consultants. The new contractual conditions are focused on transferring identifiable risk to contractors to allow tendering for capital works projects on a lump sum fixed price basis for three years.

The conditions of engagement for consultants are structured and balanced in a way that incentivises more efficient and effective consultant performance to better protect the public sector client's interest. The conditions also change the fee payment mechanism by introducing competitive fee bidding but allowing quality to remain a key award criterion for quality-dependent projects.

The new contracts and conditions of engagement will be applied with effect from January 2007. Prior to this, an intensive training programme will be undertaken to ensure public sector clients are fully familiar with the new contractual terms and conditions. The new contractual conditions for contractors and consultants are a key element in the drive towards greater value for money from capital works projects over the medium to longer term.

As part of its ongoing commitment to reform and building a robust management and value for money assessment framework, the Government decided to replace the expenditure review initiative with new arrangements for value for money policy reviews. These arrangements which I announced on 11 June last, build on the value for money reforms already in place, such as the multi-annual capital envelopes, the revised capital appraisal guidelines and the procurement reforms.

A programme of 90 value for money reviews has been agreed for Departments for the period 2006-08. I am determined that what I accept has been a poor record with regard to the timeliness of completion of reviews under the earlier round of reviews will not occur on this occasion. In addition, to address criticisms about the scale and nature of the topics reviewed under the former expenditure review process and to ensure greater accountability, the value for money reviews being undertaken by Departments in the period will, as a general rule, have a minimum indicative coverage of at least 10% to 15% of Departments' budgets. The completed reviews will also be published and submitted to the relevant Oireachtas select committees for their consideration. I hope the committees for their part will take an active interest in the reviews and will engage with Departments in assessing their impact on value for money for the taxpayer.

My announcement of last June also encompasses reviews which impact on value for money but which are not part of the formal value for money policy review initiative. There are many instances of dedicated reviews and studies carried out by Departments which impact on value for money. Henceforth, details of all such reviews will generally be made available to the relevant Oireachtas committee and copies of the reviews will generally be given to the committee.

The Government's reform of the Estimates and budgetary process which I announced in budget 2006 will significantly enhance accountability for public expenditure. From 2007, Ministers will be required to submit an annual output statement to the Oireachtas in tandem with their Estimate. This statement will set out the target outputs of Departments and agencies for the resources provided in their Estimates and, from 2008 onwards, Ministers will report progress on performance as compared with targets. The performance information which the annual output statements will contain will enable the select committees and citizens to see what outputs are being achieved for public expenditure. All Departments are currently actively engaged in the process of producing their outputs statements to meet next year's deadline. I envisage the process will be developed and refined in the light of its operation.

Under this reform, the Select Committee on Finance and the Public Service, taking account of the deliberations of the various select committees, will submit a report on expenditure to the House. This report can be an input into subsequent Government consideration of the expenditure Estimates for the following years.

The above package of measures marks a major move towards ensuring that we at least match international best practice in achieving value for money and better accountability for public expenditure. These measures refute the alleged inaction as set out in the Opposition motion. Following a review by my Department of tax reliefs and exemptions, I introduced significant changes in the budget and the Finance Act 2006, to curtail the potential for individuals to reduce their net liability for tax by using tax reliefs, including a restriction on the use of specified tax reliefs by high income taxpayers. The restriction will come into effect from 1 January 2007. The list of specified reliefs includes various property-based tax incentives and certain other reliefs such as the business expansion scheme, film relief and donations. Tax exemptions, including artistic income, stallion fees, and patent royalties will also be subject to this restriction.

The aim of this new restriction is to try and get the balance right between promoting tax equity in relation to those on high incomes while at the same time maintaining the incentive effect of the various tax reliefs introduced to achieve a particular public good. The measure is being introduced with effect from 1 January 2007 to allow sufficient time for individuals affected by the restriction and their tax advisers to become familiar with the operation of the restriction. It is estimated this restriction will yield €5 million in 2007 and €50 million in a full year.

It is important the record is set straight with regard to achievements for the expenditure applied by this Government. It is very easy for the Opposition to play politics with this area in an attempt to undermine Government achievements by singling out individual instances of waste for mention or by making exaggerated claims that expenditure on programmes is wasted if any part of it showed waste, or that the failure to solve every problem means there has been no progress on delivering services. The vast bulk of all public expenditure provides real value for money and delivers essential services and a good return for the taxpayer. Every day this expenditure is effectively delivering significantly important services to our citizens. Over €50 billion will be spent this year and social welfare, health, education and capital investment will account for almost 80% of that expenditure, bringing significant improvements.

The Opposition has complained that no progress is being made on the long waiting lists. It is the case that for some operations the waiting lists have shortened from five years to five months. We have built record numbers of schools——

See this speech in context