Introductory Statement by Mr Brendan Howlin TD, Minister for Public Expenditure and Reform, at the meeting of the Select Committee on Finance, Public Expenditure and Reform
Public Expenditure and Reform Group of Estimates
12th July, 2011
Chairman and Committee Members,
I welcome the opportunity to appear before the Select Committee as it considers the 2011 Estimates for my Department’s Group of Votes, apart from the Estimate for the Office of Public Works which, while part of my Group, will be presented separately by Minister of State Hayes.
On the day the Government took office, the Taoiseach announced the establishment of a new Department of Public Expenditure and Reform, comprising Sectoral Policy Division and Public Service Management Division of the Department of Finance and the areas in the Department of the Taoiseach dealing with public service modernisation. In mid-May, I published the Ministers and Secretaries (Amendment) Bill 2011. The Bill had passed all stages in the Oireachtas by 30 June and the new Department came into operation on 6 July.
The preparation of the legislation was a complex task, not least because of the fact that the powers of the Minister for Finance stretch over a very wide range of functions. Many of those functions are now in my remit. I wish to record my appreciation of the hard work involved in bringing my Department into existence and I can assure the Committee that I intend to avail of all the functions allocated to me to drive forward an ambitious programme of reform.
I have three core priorities for the period ahead:
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Achievement of the Government’s fiscal targets,
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Public service reform, and
- Political reform.
I think that it would be useful if I were to outline to the Committee the progress which has been achieved to date in my area and my plans for the future.
Turning first to the budgetary situation, the Committee will be aware that the Government is committed to reducing the General Government deficit to below 3 per cent of GDP by 2015 and adhering to the aggregate fiscal adjustment which underpins the Joint EU/IMF Programme for the period 2011-2012. I am pleased to advise the Committee that the growth of day-to-day public expenditure has been brought under control. From a situation in which spending increased by 12.1 per cent in 2007, it is now estimated that it will contract by 2.7 per cent this year. This reduction has been brought about notwithstanding the considerable pressures associated with the rising numbers on the Live Register and the downturn in the economic cycle. However, despite the progress that has been made, it is important to remember that substantial further reductions must be made over the coming four years. This, then, is the task. But what of the mechanisms and processes through it will be delivered?
One of the overarching themes of this Government is a new emphasis upon performance of public service organisations in setting clear targets and delivering upon these targets. I see a special role for the Dáil Committees, and in particular this Committee on Finance, Public Expenditure and Reform, in holding Government Departments and Agencies to account for the way in which Estimates of Expenditure are presented. It is not enough to focus upon the financial inputs and allocations, important though they are. At the heart of accountability is not the question of how much? – but also the question of for what?
Dáil Committees, who are asked to consider financial allocations, are also entitled to receive clear and succinct information on where the money is going, and whether it is achieving its objective. I am pleased therefore to be presenting a revised structure for the annual Estimate, called a ‘performance budgeting’ model. This new approach – which is being piloted in the 2011 Estimates before this Committee – presents Departmental Estimates on a Strategic Programme basis, consistent with the presentation of the respective Statements of Strategy. These Estimates are also supplemented with certain performance information regarding the outputs and impacts of Programme expenditure.
The new system of performance budgeting before you today is intended to ensure that the efficiency and reform gains are maintained, and indeed built upon in future years. We must ensure that value-for-money is a key consideration in all expenditure debate. I believe that this initiative will facilitate more meaningful discussion, both at a Committee level and in Dáil Éireann, as it will hold Ministers and Departments to account for the effective and efficient use of resources, and will link effectively with other performance-related initiatives under the reform agenda, including improved value-for-money arrangements and clearer target-setting for State agencies. In this regard I would be most interested in hearing any feedback from the members of this Committee as to the usefulness of this approach, and would welcome suggestions on ways in which it might be improved for the 2012 Estimates. These reforms are being proposed to facilitate a stronger and more effective role for the Dáil Committees, and I would be open to reforming the initiative in light of your considered views.
I would like to think that the drive to achieve value for money and improved performance, which is the main motivation for the performance budgeting initiative, will be a major theme of my tenure as Minister for Public Expenditure and Reform. Already, we in the Government have shown that we will not shirk difficult tasks. We have recently agreed to the introduction of general pay ceilings for future appointments to higher positions across the public service. We have also decided that, subject to the recently-announced referendum being adopted by the electorate, the pay rates of incumbent judges should be reduced in line with the pay and pension reductions applied to other public servants.
Reform and improved performance will require co-operation of all stakeholders as envisaged in the Croke Park Agreement. The Agreement is creating greater stability and certainty and, above all, a climate of industrial peace – necessary conditions under which difficult decisions can be taken and implemented. Its real potential is the delivery of better public services with fewer people and less resources.
On 15th June last, the Implementation Body for the Agreement published its first report on progress. I welcome their findings that savings, efficiencies and reform are being delivered across the public service with the positive engagement and co-operation of staff.
While a good start has been made, the reality is that we need to go much further, given the serious fiscal challenges we face. If we are to succeed in protecting frontline services to citizens and in particular to the most vulnerable in our society, as the numbers working in the public service continue to fall, then further significant reform must be delivered. That means increased productivity in the use of resources through revised work practices, greater flexibility, more redeployment and extensive organizational restructuring across the system.
Two weeks ago, the Taoiseach and I met the Implementation Body to underline the need to accelerate progress on delivering the change and reform envisaged under Croke Park. We made clear that this Government wishes to honour the commitments given in the Agreement but that this will only be possible if the Agreement is implemented in full.
Of course, the members of the Committee will know that Government is committed to introducing the most ambitious programme of Public Service Reform since the foundation of the State. This will take place in tandem with an equally ambitious programme of constitutional, political and institutional reform. There will be a fundamental change in democratic and public governance and a change in the cost efficiency and methods of delivery of public services.
The Programme for Government envisages a renewed focus on a range of related reform issues, including
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legislative change to facilitate more open, transparent and better government,
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an increased focus on organisational and individual performance, giving citizens greater choice and input into service delivery, and
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a more empowered, skilled and customer focused Public Service to deliver on all of these changes.
Progress will be driven by the recently established Cabinet Committee on Public Service Reform which is chaired by the Taoiseach.
In light of the need to accelerate the reform agenda, my Department is preparing an Implementation Plan on Reform to incorporate the ambitious reform agenda that is set out in the Programme for Government, as well as the priority areas from the Transforming Public Services programme. This will focus on actions to improve performance by organisations and individuals; ensure greater efficiency, effectiveness and economy; and ensure flexibility in the deployment of people and resources.
In the context of this Plan, my Department is engaging with individuals with experience in private sector reform. Over time, it is envisaged that the staff of the Department will be augmented with external expertise – both from other parts of the Public Service and the private sector where necessary – to help accelerate the reform agenda and ensure that the greatest efficiencies and value for money are being achieved.
It is clear that notwithstanding developments to date, the cost of delivering public services must be reduced further, with fewer staff and tighter budgets, and that the Public Service must become better integrated and more customer-focused, as well as being leaner and more efficient. That is a major task and one on which I and my Department will be focused over the coming months and years.
I have referred to public service reform. But, of course, political reform is also on the Government’s agenda.
The Abbeylara judgement of the Supreme Court identified limitations on the powers of Oireachtas committees to conduct investigations. The Programme for Government contains a commitment to the holding of a referendum to amend the Constitution to reverse the effects of the Abbeylara judgment and to enable Oireachtas committees to carry out full investigations.
In May, the Taoiseach said in the Dáil that the Government believed the Abbeylara referendum should be held on the same day in the autumn as the Presidential election. I am having my Department examine the complex legal issues involved.
The Programme for Government contains a commitment to a referendum to protect the right of citizens to communicate in confidence with public representatives. In addition, there is a Programme for Government commitment to legislate and change Dáil standing orders to ensure the absolute confidentiality of information entrusted to members of the Dáil by their constituents or informants, and ensure that such information cannot be compulsorily disclosed through the legal process except with the consent of the informant. Again, my Department will be developing proposals to respond to these commitments.
The Government has also decided to introduce overarching legislation providing for good faith reporting and protected disclosure on a uniform basis for all sectors of the economy. My Department is working on this and has been engaged in advancing the commitments in Programme for Government in regard to Freedom of Information. The proposals will look at the reforms needed to make the FOI system open and practical, and to reduce the administrative burden. Extending the scope of the legislation to further bodies will also be addressed. The legislation will also deal with any other concerns about the operation of the FOI Acts and how they affect the discharge of Government business.
Finally, a significant number of other reform proposals in the Programme for Government (for example, reform of the PQ system, Ombudsman legislation, and ethics rules) come within the remit of the new Department of Public Expenditure & Reform. Proposals in these areas will be developed further.
All this represents a very formidable series of tasks for my Department; I have every confidence in the ability of my Department to perform them and again I want to thank the staff of the Department for their efforts to date.
I look forward to the comments of the members of the Committee on the plans for the Department. In that context, I hereby present the 2011 Estimate for Vote 42 in respect of the newly formed Department of Public Expenditure and Reform.
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The gross estimate for Vote 42 amounts to some €40 million which represents an increase of €3.5 million compared to the 2010 outturn.
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The net estimate is €34.8 million, which is an increase of €1.9 million compared to the 2010 outturn.
€0.730m of the increase represents carryforward of an Administrative Budget saving from 2010 and as such is non-recurring. When this is excluded, the increase compared to the 2010 Outturn is €1.2m (3.6%). The net increase is accounted for primarily by an increased allocation for the Change Management Fund subhead. As I have mentioned, the new Programme for Government sets out an ambitious programme of Public Service reform and this allocation is imperative so as to resource this area and drive the Reform agenda.
Public Service reform is a key and essential aspect of the Programme for Government. In changing how the Public Service operates – both in terms of what it does and how it does it – an initial investment is required, in order to support increased efficiency and effectiveness, and to reduce costs in the medium to longer term. The Change Management Fund plays an important central role in supporting reform initiatives. An allocation of €1.5m was made in this area for 2010 but a significant funding requirement did not arise and there was a saving of approximately €1.2m.
The 2011 Estimate of €2.78m for this purpose includes provision for a number of important reform-related projects which will yield net cost efficiencies over the longer-term. Two of the main initiatives are the establishment of the Civil Service HR Shared Service Centre and the appointment of, and support for, lead officials on a number of key reform-related issues.
As regards the other Votes in the Public Expenditure and Reform Group, the Members of the Committee have been provided with background briefing by my Department on all the Estimates being presented today for your approval.
I thank the Committee for its attention and I commend the Estimates to the Committee.
I will, of course, be happy to supply any further information or clarification that Members may request.
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