Brendan Howlin (Wexford, Labour) | Oireachtas source

I am very glad to be back visiting this important Chamber. In the current fiscal and economic context, the Government's task is not an easy one. We must reduce public expenditure while maintaining the public services on which many citizens rely. This is at a time when demand for those services is greater than ever, due to the economic downturn and demographic factors. As we continue our efforts in this regard, we are acutely aware that nobody has the monopoly on good ideas and solutions. I would like to thank the Seanad for giving me the opportunity to update the House on public expenditure and reform issues and I look forward to hearing Members' views and answering any questions they have.

I met the Committee of Public Accounts in a similar context last month and will meet the Oireachtas Joint Committee on Finance, Public Expenditure and Reform next week. Ours is a reforming Government. It is prepared to take the hard decisions, not merely to reduce expenditure, but also to build a sustainable public service for the future. The Government has embarked on the most ambitious and comprehensive programme of reform in the history of the State. No previous Government has taken on the scale and breadth of reform we are now driving. Our task is considerable, but given the situation the Government inherited, change is our only option. It is an essential part of the overall strategic response to the challenges we continue to face.

On its establishment last year, I stated that my Department had three key priorities: achieving the Government's fiscal targets; delivering public service reform; and supporting the Government's political reform agenda. There is increasing evidence that our public finances are showing signs of improvement after a number of very difficult years. All quantitative fiscal targets set under the terms of the EU-IMF programme, including the 2011 annual deficit target, have been met. The Exchequer figures for the first ten months of this year confirm that we are on track as we aim to further reduce the deficit in our public finances. Exchequer tax receipts are up both year-on-year and ahead of current profile. Overall, tax receipts grew last year for the first time since 2007. The improvement in the public finances has come about as a result of the difficult decisions that have been taken to reduce expenditure and increase revenue, and also through the return to economic growth in 2011 for the first time since 2007.

The budgetary adjustment process will present very large challenges to meet the firm commitment to reduce the deficit to below 3% of GDP by 2015. This will require difficult choices to be made in all areas of public expenditure and to ensure that we remain on a credible path of budgetary adjustment. The public service pay and pensions bill, at 35% of spending, will need to make a substantial contribution to meeting this fiscal challenge. I have been clear in my ongoing dealings with public sector unions that, notwithstanding progress under Croke Park, difficult challenges lie ahead to reduce our spending in 2013 and beyond. There is no doubt that additional productivity and cost extraction measures that were not envisaged under the current Croke Park deal will be required to ensure that the Government meets these commitments.

However, there is also awareness at both political and official levels that restoring the public finances to sustainability cannot come from consolidation alone. For example, the new five-year capital framework, published last year, sets out a significant tranche of Exchequer investment of ¤17 billion out to 2016, and is designed to address critical infrastructure deficits, aid economic growth and provide much needed social infrastructure. In order to complement the Exchequer capital framework, I announced a new Government stimulus initiative in July. This initiative, a package of ¤2.25 billion, is largely predicated on the use of non-Exchequer sources of funding to support the first phase of a new PPP programme of projects in key areas of infrastructure. There will also be investment through the Exchequer which will be funded from some of the proceeds from the sale of State assets and the new arrangement for the national lottery licence, which will help fund the recently announced children's hospital.

The comprehensive review of expenditure, published last December, introduced a range of expenditure reforms to improve the budgetary process and enhance transparency and accountability. As part of this process, a Bill to provide for medium-term expenditure management through the provision of multi-annual aggregate Government expenditure ceilings and the multi-annual ministerial expenditure ceilings was published in September. This will facilitate the implementation into legislation of the medium-term expenditure framework and is one of our commitments under the EU IMF programme. This new approach will set fixed and binding current expenditure ceilings for each ministerial Vote group over a rolling three-year period and makes clear, well in advance, the level of savings that need to be planned for in each Department, to ensure that the allocations are adhered to year after year.

Economic growth will be a key contributor to recovery and in designing economic and budgetary policy we must be mindful of this. Moving towards a balanced budgetary position is a necessity but it is not sufficient, in itself, for restoring the economy to sustainable growth and for securing our re-entry to the international financial markets to source our own financing. With the need for strategic and balanced fiscal consolidation in mind, the Government is currently finalising the detailed measures underpinning the 2013 budget, which will be announced on Wednesday, 5 December.

The synergy between fiscal consolidation and reform is clear. Reform can deliver real cost savings and efficiencies, particularly in the medium and longer terms. At the same time, we must reform to allow us to continue to deliver public services in an environment of reduced budgets and staff numbers. As I have said previously, reform is a key part of the overall strategic response to the crisis. In this context, we are undertaking the most comprehensive reform of the public service since the State was founded. We must work harder and with more flexibility than ever before and continue to do better with less. The Government's ambitious public service reform plan was published in November last year. Since then, effective structures to implement the plan have been put in place within my Department and across the public service. The Cabinet committee on public service reform is driving the reform agenda at political level. In particular, I am working closely with my colleague, Deputy Brian Hayes, the Minister of State with responsibility for public service reform, whose efforts and work I commend to the House.

I established the reform and delivery office in my Department to drive and oversee the implementation of comprehensive change across the system and recruited an external, experienced individual from the private sector, who has considerable experience of change management, to lead that office. In September, I published a statement on the progress being made in the implementation of the plan. I would like to give the House a flavour of just some of the key areas of progress to date. Public service staff numbers have been reduced to around 291,000, a reduction of some 29,000 from the 2008 peak of 320,000. This is well within our year end ceiling of 294,400. We plan to go further to reduce this number to 282,500 by the end of 2014.

We are implementing a radical reform of the way in which public procurement is organised. An external review published in September estimates that these reforms could yield potential savings in the range of ¤250 to ¤600 million annually. This will involve the integration of procurement policy, strategy and operations, greater aggregation of purchasing, better spend analytics, and many other actions to transform our procurement model. The reforms will take place over a three-year rolling period. A chief procurement officer will shortly be appointed to lead this work, following an open competition.

As part of a wider shared services strategy, in May, we approved the establishment of a human resource shared service centre for the Civil Service. It is estimated that this will reduce human resource headcount by 17% and costs by 26% with annual net savings of ¤12.5 million. The first Departments will transition to this shared service in the first quarter of 2013. We have accelerated our plan for a pensions administration shared service and will integrate this with the human resources shared service. We are developing a business case for a payroll shared service and commencing a baseline exercise for a banking and financial management shared service. All of the work duplicated in human resource management, payroll, pensions administration across 16 and sometimes up to 40 different centres, will be consolidated into either one single centre or a small number of centres.

In July, we agreed a range of actions aimed at achieving a focused and integrated approach to external service delivery of non-core processes, namely, outsourcing. A shortlist of potential major projects for priority implementation is being prepared and plans are being developed by the four main sectors of education, health, justice and local government. In addition, all proposed new services across the public service will first be tested for their suitability for external service delivery before any approval to provide the service internally will be granted. We want the public service to do what it is best at doing and not replicate services which would be better purchased from outside. In April, we published the e-government strategy for 2012 to 2015, which builds on Ireland's strong recent performance in this area. We have also published a cloud computing strategy - Ireland is among the first countries in the world to do so - and have set out plans for significant further data centre consolidation.

The senior public service has been established to promote a more integrated public service and to strengthen its senior management and leadership capacity. Significant reforms to the performance management and development system in the Civil Service have been agreed and will ensure the more effective management of performance. We have launched the irelandstat.govwebsite, a pilot whole-of-government level performance measurement website which will allow the public to see how Ireland is performing across a range of indicators. I urge Senators to look at that website and provide feedback on same while it is in pilot phase and before it goes live. Progress is also being made on the Government's agency rationalisation programme. This year, 47 out of the 48 measures set out in the public service reform plan will be completed on a legislative or an administrative basis, resulting in the rationalisation of 101 bodies. In addition, critical reviews of other identified rationalisation projects are being progressed. We have introduced a range of expenditure reforms to change the processes involved in allocating and assessing public expenditure to improve transparency and decision making. These are just some examples of the progress we have achieved in under one year, as set out in the published report. Along with the comprehensive suite of cross-cutting reforms, the reform and delivery office in my Department is also working with other Departments and sectors to drive the implementation of their own bespoke reform plans.

I would now like to turn to the Croke Park agreement which is, regrettably, much maligned and often misunderstood. It is an essential element in enabling the comprehensive reforms that I have outlined - and more besides - that are taking place across the system. More importantly, the agreement is supporting the continued delivery of public services where staff numbers and budgets have been significantly reduced. In that context, I would point to what is happening in other countries right now. This week there is a national strike in Greece and last weekend there was a national strike of all public servants in Spain. The impact of such strikes, not only on the people who depend on public services but also on external investors' perceptions of countries, is significant. All of this change happening in a climate of industrial peace in the public service. The value of this is frequently overlooked in the public discourse about the Croke Park agreement. As well as facilitating real change, I argue that the industrial peace and stability being delivered by the agreement is a valuable asset in terms of helping to restore our international reputation and our attractiveness as a location for would-be investors.

I do not propose to provide an exhaustive account of all that is being achieved under the agreement but I wish to stress that it is the Government's view that the agreement is working and is delivering on its objectives. Real savings are being achieved in the Exchequer pay bill under this agreement. Over the period 2009 to 2015, the Exchequer pay bill is on target to be reduced by ¤3.8 billion, or ¤3.3 billion net of expected increases in public service pension costs.

The ¤500 million in additional pension costs for the people leaving has been factored in because these are people who have paid pension contributions for their whole working lives, up to 40 years or more.

While discussing the pay bill, we should recall that those working in the public service have already had two pay reductions, totalling, on average, 14% by way of the pension-related deduction and a further cut in pay introduced in 2010. Salaries at the highest level have been reduced by up to 30% and capped at ¤200,000, still, I accept, a significant sum of money. We have also reduced salaries for new entrants to the public service by a further 10%.

The Croke Park agreement has been and continues to be instrumental in facilitating reductions in expenditure. Reports published by the implementation body show that, overall, almost ¤1.5 billion in pay and non-pay savings have been facilitated in the first two years of the agreement. As I have noted, the reductions in the pay bill have been driven by reductions in staff numbers throughout the public service, down by approximately 29,000 on the peak number. More than 17,000 staff have left the public service in first two years of the agreement, yet services have been maintained by and large and, in some cases, improved.

Members will recall the fears expressed earlier this year about the impact on public services of the expected retirement of 8,000 public servants. They proved to be completely unfounded. I may have mentioned in the House already that I remember when one news organisation asked me to be on stand-by on the night at the end of February as if, like the fears about the Y2K millennium bug, everything would stop. That was because of the hype which had been built up, but we have had an orderly co-operative change and people are working harder and doing more, which should be acknowledged. By and large, public servants are doing a good deal more. Not everyone has bought into the change, but a significant proportion of public servants are working harder and delivering more. The departure of such a large number of staff was managed successfully by management, staff and unions, with no interruption to services, a point worth recording. The redeployment provisions of the agreement have been critical to ensure remaining staff resources are allocated to front-line areas where the need is greatest. Some staff have moved 40 km from base without compensation or demur to meet gaps created by those who had retired.

The first comprehensive review of allowances paid to public servants has shown that what was created over decades will take time to resolve and that the disaggregation of allowances from core pay is not a simple task. This is something the discussions at the Committee of Public Accounts is unveiling on a daily basis. What some see as a simplistic process can be complicated. This is something that is being and will continue to be addressed. The Croke Park agreement allows public service employers to put challenging issues on the table and secure agreement in a time-bound process. Two examples include the agreed standardisation of annual leave and paid sick leave arrangements. For the first time we have applied public service-wide standards for different public service employees. We did not have to apply the most generous allowances in the system to achieve this, which would have been the only solution in the past. In fact, for most public servants, the new sick leave arrangements will mean that the maximum amount of paid sick leave to which they will be entitled will be halved, with an even greater cut for some. If we had achieved the halving of sick leave entitlements after a protracted strike and a major public battle which would have been the norm in the past, it would have been regarded as a great achievement. However, if one does it quietly through negotiation, it is taken as the norm. We should understand what is being delivered. Some people want conflict. I am not afraid of conflict, but if I can avoid it and can deliver systems without it, I am certainly in favour of taking that route. I expect the next steps to be undertaken in the allowances review will also be facilitated by the mechanism set out in the Croke Park agreement.

All of this is welcome progress, but we understand we have a way to travel in restoring order to the public finances. The framework provided by the Croke Park agreement will continue to play an important role in the process. However, we need to ramp up the scale and pace of delivery under which the agreement is advancing. The Taoiseach and I met the implementation body last month to discuss this issue. On foot of that engagement, revised action plans are being prepared urgently at sectoral level in conjunction with the unions. They will set out proposals for extracting further cost savings and advancing key reforms. The objective is to ensure we get the most out of the agreement in the period ahead. It is my intention to publish the revised action plans when they are completed.

In tandem, real progress is being made on the Government's ambitious programme of political and legislative reform aimed at enhancing openness, transparency and accountability. I commend the great work done in this House in that regard. Last week the Ombudsman (Amendment) Bill was signed into law by the President. This legislation will result in the most significant expansion in the jurisdiction of the Ombudsman in 30 years since the original legislation established the Ombudsman was passed. Following Government approval earlier in the year, the legal drafting of the Protected Disclosures in the Public Interest Bill, the so-called whistleblowers Bill, is well advanced by the Office of the Parliamentary Counsel to the Government. I held discussions with the Parliamentary Counsel today because I have a raft of Bills which I am trying to push along. She is looking for additional staff and we have promised the, but we need to have a quid pro quo. I should not be admitting to all of this, but I am keen to get the whistleblowers Bill published and I am confident it will be published next year.