Tom Fleming (Kerry South, Independent)
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3. To ask the Minister for Public Expenditure and Reform how he expects to reduce the public service pay bill over the next two budgets by the introduction of new technologies and more efficient management techniques, introduced from the private sector; and if he will make a statement on the matter. [2972/14]

Tom Fleming (Kerry South, Independent)
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I asked the question because recent events have demonstrated that there is an urgent need for total quality management and more productive and efficient outcomes in state and semi-state bodies.

Brendan Howlin (Wexford, Labour)
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I thank the Deputy for the question. There have been major efficiency and productivity gains in the public service in recent years. New working arrangements have been introduced, including longer working hours, new rosters - some of which have not been changed in 30 years - and standardised arrangements for annual leave and sick leave. The numbers working in the public service have been reduced by over 30,000 since 2008. At this stage, the public service is at 2005 staffing levels, while the Exchequer pay bill has been reduced from €17.5 billion in 2009 to an estimated €13.5 billion for 2014 net of the pension-related deduction. These and other areas of progress were set out in the detailed progress report on public service reform, which I published last week and circulated to all Deputies.

Public service reform will remain a key element of the Government's strategic response to the ongoing challenges we face. It is in this context that a new public service reform plan 2014-16 was published last week. Again, I have sent a copy to everyone in the House. The next phase of reform will continue to focus on cost reduction. However, it will also focus on better outcomes for service users and on delivering real improvements in how citizens and business customers interact with public services.

Under the new plan the reform agenda will be about protecting and improving public services. Over the period of the plan there will be an emphasis on savings to invest. This is about freeing up resources by making existing processes more cost-effective and efficient and using the savings to invest in new and improved services. I have classified this as the reform dividend and it will underpin and sustain the reform agenda beyond the current crisis. We will be taking steps to ensure that the public service makes maximum use of digitisation and open data to deliver services. My time is almost up but I would be happy to deal with any supplementary questions the Deputy may have.

Tom Fleming (Kerry South, Independent)
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The matter has been exemplified in the recent past with regard to the formation of Irish Water. We have a farcical situation whereby it will take a transitional period of 12 years to bring it to formation.

Ireland is regarded as a First World country. The objective should be to reduce the period to three years. With the most modern technologies and with the experience and efficiencies at the disposal of councils, more responsibility should be given over to all local authorities. There is currently a surplus of engineers and crucial staff and such staff would be able to reduce it to a much shorter period of perhaps three years.

Brendan Howlin (Wexford, Labour)
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I understand the Deputy's concern, but Irish Water will be the biggest utility and the biggest State company to be established in my political lifetime. Nothing like it has happened since the establishment of the ESB. A similar process in Northern Ireland on a much smaller scale took the bones of 20 years to fully implement. We want to ensure that the services are not discommoded. That is the reason we have arranged for service-level agreements with every local authority. Some would say we should have been more robust in negotiating those agreements, but we wanted to bring a harmonious migration of local authority employees under the wing of this new important utility. There is a convincing case - not for me to make now - for establishing a proper utility to ensure we have a safe water supply. The nexus of the Deputy's question is transformational focus on efficiencies within the public service. I refer to the reform agenda and the progress report which we published last week on shared services, procurement, property management, downsizing and changes in rosters and sick leave. These measures have been transformational and of significant benefit to the State.

Tom Fleming (Kerry South, Independent)
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I believe we are wasting a fortune in this exercise. I reiterate my point about the bonus systems which has been raised by other Members. Because of the culture in this country we would not have the integrity or the competitiveness to control bonus systems in the first place. Who will adjudicate such a system for top-up payments if it is put in place? We must face the reality that this country is bankrupt and we cannot afford a figure of €85 million in consultancy costs. I note the revelations about Coillte and the row about a top-up payment for the outgoing chief executive officer. In defiance of ministerial orders they have given a very substantial sum, in the region of €56,000. We need to put a stop to this immediately.

Brendan Howlin (Wexford, Labour)
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We need to have a debate about performance-related pay. It is easy to talk about the notion of bonus payments as being unacceptable. Performance-related pay is the norm in the commercial sector. All commercial companies set targets and reward people who over-achieve and there are consequences for those who under-achieve. A fortnight ago I published a new performance analysis document for public consultation to establish accountability in the public service for performance, to set targets, to have a fair and objective monitoring system for those targets and to remunerate public servants appropriately. We need a debate about performance-related pay, not to say that performance-related pay should never be given. I have made it clear that we cannot afford such pay now and it is not provided for in the Civil Service nor in the non-commercial semi-state sector. I have indicated to the Deputy previously that at the moment it is not provided for with regard to chief executive officers of commercial semi-state companies.

Seán Barrett (Dún Laoghaire, Ceann Comhairle)
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Question No. 4 is in the name of Deputy Sean Fleming.

Seán Fleming (Laois-Offaly, Fianna Fail)
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This question relates to bonus payments in the commercial and non-commercial semi-state sector. The Minister has dealt with the issue of payments to chief executive officers but I ask him to say what approval is given by his Department to the line Ministers to approve schemes in organisations under their remit. I refer in particular to State monopoly companies such as Irish Water, Iarnród Éireann and EirGrid.

Brendan Howlin (Wexford, Labour)
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I answered Questions Nos. 2 and 4 together. I will not give the Deputy the same answer that I gave to Question No. 2. I suggest that I will not read the reply again but I will be happy to answer supplementary questions.

The position I set out is that chief executive officers are not given performance-related pay. This was our decision in 2011 when we came into government. As I have indicated, it is not fixed in stone forever. Because of the current pressures on the public finances we cannot accede to payments, but we will review this policy. I am pleased to have this opportunity to explore the implications. For example, there are people who would be immeasurably beneficial as chief executive officers of commercial State companies who are paid much more in the private sector. We must ensure we can attract people who will perform well into semi-state companies with a commercial mandate. Such people may bring multiple benefits to the company and to the State. We must use methods that are measurable and reasonable. Unfortunately, it is not possible in the current economic climate to breach the reduced pay levels we have set in the revised pay rates since 2011, as I have indicated to Deputies. That will remain the situation until our financial circumstances improve a great deal.

Seán Fleming (Laois-Offaly, Fianna Fail)
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At the meeting of the Committee of Public Accounts last week it was made very clear that the bonus scheme in Irish Water was part of the Bord Gáis bonus scheme, which was approved by the Minister for Communications, Energy and Natural Resources, Deputy Rabbitte, and which had been notified to the Department of Public Expenditure and Reform. The Minister's Department is in the loop.

The cuts under the FEMPI legislation are in place. It in incongruous that civil servants are still suffering cuts under the FEMPI legislation while various line Ministers are approving bonus schemes for other public servants in the commercial semi-state sector delivering public services. The issue of the State monopoly companies should be examined separately as the Minister regards them as a different case from the other commercial semi-state bodies.

Brendan Howlin (Wexford, Labour)
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The Deputy has asked a number of relevant questions. The FEMPI legislation applies to public servants on the public payroll, Members of the Houses of the Oireachtas, the Judiciary, teachers, nurses and civil servants alike. Under the most recent FEMPI legislation, those earning over €65,000 took a pay cut. That was necessary in order to reduce the public pay bill.

The Deputy asked why I would not apply the same logic to the commercial semi-state companies; it is for the very reason that they are commercial companies. We have to set standards of moderation in pay across the economy as best we can. This is normally done by means of taxation policy. I have given an indication of moderation through the cap on pay for chief executive officers that we imposed from 2011. However, companies must have the flexibility to make pay arrangements that meet their commercial needs. I will give an example in my reply to the next question.

Seán Fleming (Laois-Offaly, Fianna Fail)
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I did not say they were directly comparable; rather, I think it is incongruous. I understand the differences. Employees of local authorities are subject to FEMPI cuts.

If you have now gone on secondment to Irish Water, you can get a bonus and migrate back to your local authority in a year or two depending on your secondment arrangement. There is a difficulty there. We talk about transferability of people not just within the Civil Service but across the broader public service. That issue needs to be examined.

I come back to the issue of the monopolies. Irish Water is a monopoly. While it must operate on a commercial basis, I would hope every Government Department and non-commercial semi-State body operates to good commercial practices. We should not to mix up achieving value for money and being in the competitive commercial world. Could the Minister address the issue of State monopolies that are not really out in the commercial world.

Brendan Howlin (Wexford, Labour)
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We expect all State companies to operate in a commercial manner. These are technical deliverers of services. We have a very ambitious programme. It is not for me to give the Deputy the case for the creation of Irish Water but I am very strongly in favour of it. We have a situation where 18,000 individuals are on a "boil water" notice. There are a million households whose water is vulnerable because of inadequate supply. A third of wastewater plants are subject to concerns of the EPA and may fall foul, if I may use that phrase, of the European Commission. We need to invest in our water treatment and water provision system in an integrated way like the rest of western Europe so we need to have this.

Irish Water is unique in terms of pay because it is migrating from a number of local authority entities to one State entity and there is a transition that makes it unique. We need to have regard to that and also to the general principle that all companies in the State sector are expected to operate in a commercial way.