Select Committee on Finance, Public Expenditure and Reform, and Taoiseach díospóireacht -
Thursday, 30 Nov 2017

Vote 17 - Public Appointments Service (Supplementary)

Acting Chairman (Deputy Peter Burke)

I remind Deputies to ensure their mobile phones are switched off. This is important because such devices can cause serious problems for broadcasting, editorial and sound staff. Apologies have been received from Deputy Paul Murphy and Deputy Bríd Smith is attending in substitution. In addition, Deputy Dara Calleary will substitute for Deputy Michael McGrath.

Today we will consider the Supplementary Estimates for Vote 12 - Superannuation and Retired Allowances, and Vote 17 - Public Appointments Service in the presence of the Minister for Finance and Public Expenditure and Reform, Deputy Paschal Donohoe. For the information of Deputies, the Public Service Pay and Pensions Bill 2017 has not yet been referred to this committee. Therefore, this morning's meeting will adjourn following our consideration of the Supplementary Estimates. I ask the Minister to address the committee.

Minister for Public Expenditure and Reform. (Deputy Paschal Donohoe)

I thank the committee for the opportunity to present to it a proposal for two Supplementary Estimates within the Public Expenditure and Reform group: a net Supplementary Estimate of €6.5 million, or a gross figure of €10.5 million, in respect of Vote 12 – Superannuation and Retired Allowances, and a Supplementary Estimate of €664,000 in respect of Vote 17 - Public Appointments Service.

The Supplementary Estimate in respect of Vote 12 will bring the total 2017 Estimate for Superannuation and Retired Allowances to €550.4 million in gross terms and €366.4 million in net terms. This Supplementary Estimate arises mainly from the fact that this year, there have been more retirements than forecast under the pension scheme for established civil servants. In addition, balances have been payable to former civil servants who retired in 2009 under the incentivised scheme for early retirement. The pensions and lump sums that are paid under the pension schemes for established civil servants comprise just under 90% of total gross expenditure on the Superannuation and Retired Allowances Vote. This means the main driver of the annual cost is the number of established civil servants who retire each year. For various reasons, it is particularly difficult to estimate the number of retirements from one year to the next. Most established civil servants may choose to retire within a five-year window between the ages of 60 and 65. In addition, a number of people under the age of 60 retire each year under cost-neutral early retirement schemes or on grounds of ill health. Each year, a number of former employees become eligible to claim a preserved pension entitlement. The average lump sum and pension benefits that fall to be payable to new retirees in any given year vary depending on the grades and years of service of that specific cohort of retirees.

This year's gross Estimate for Vote 12 of €539.9 million was based on a forecast of 1,320 retirements from the established scheme. There have been 1,309 retirements to date this year. This trend suggests there could be up to 250 more retirements by the end of the year. The effect of this higher-than-forecast number of retirements has been to put upward pressure on subhead A4, which relates to pension lump sums. As a general rule, for each person who retires, a once-off lump sum that is three times the size of that person's annual pension is paid. Increases in retirement levels have a particular effect on subhead A4, which provides for the lump sum payments to established civil servants. Therefore, subhead A4 is a key driver of variations in expenditure on the Vote in any given year. So far this year, €85.5 million has been expended from subhead A4, compared to the original full-year Estimate of €90.4 million. It is estimated that up to €18.6 million will be further expended by the end of the year. This would result in an overall projected excess of approximately €13.7 million under subhead A4. It is estimated that total gross expenditure on Vote 12 for 2017 may be approximately €550.4 million, or approximately €10.5 million in excess of the gross Estimate of €539.9 million that was voted previously by the Oireachtas. The committee should note that the level of the gross Supplementary Estimate being sought will be mitigated by anticipated increased levels of appropriations-in-aid. It had been estimated that appropriations-in-aid for 2017 would be €180 million and some €159.8 million has been received to date. Receipts with respect to the single public service pension scheme are ahead of profile so far this year. Total appropriations-in-aid are now projected at €184 million by the end of the year, or €4 million more than expected. This excess amount will act to reduce the net effect of the gross Supplementary Estimate.

The Supplementary Estimate of €664,000 in respect of Vote 17 - Public Appointments Service - will bring the total 2017 Estimate for that Vote to €12.044 million, which represents an increase of 5.8% on the original Estimate. This reflects the higher-than-expected levels of activity to meet the recruitment and resourcing needs of the civil and wider public service in the light of the improving economy, the end of the recruitment moratorium, the ongoing process of public service reform and the need to build resource capacity and capability across the public service. The committee should note that there are supplementary requirements under pay and non-pay costs within this Vote. An additional €196,000 on the pay side is requested to meet higher staffing costs this year as a direct consequence of the scale of additional recruitment and resourcing that the Public Appointments Service is required to oversee in 2017 in meeting its statutory obligations under the Public Service Management (Recruitment and Appointments) Act 2004. This funding will enable the Public Appointments Service to assign additional staff to recruitment and selection units and increase support to client Departments and offices.

A non-pay additional request of €833,000 is as a direct consequence of increased recruitment costs associated with increased operational activity. In 2015, the Public Appointments Service received 54,025 applications, interviewed 6,871 candidates and assigned 5,256 people to positions in the civil and public sector. By the end of October of this year, 75,000 job applications had been processed, 13,000 candidates had been interviewed and over 8,000 people had been assigned to positions across the public service. The total number of assignments may reach 9,500 by the end of the year. The Public Appointments Service is legally obliged to undertake this recruitment activity, which results from Departments, offices and the wider public sector restoring capacity after the ending of the recruitment moratorium and preparing for the future challenges presented by a growing economy, rising public expectations, public service reform and demographic trends. For reasons relating to the increase in the volume of recruitment activity, spending on interview boards, research and advertising and testing has been higher than expected this year. The additional request of some €1.03 million is offset by lower-than-anticipated capital investment spending this year for the Public Appointments Service of €365,000 due to timing factors. Therefore, the proposed Supplementary Estimate for the Public Appointments Service is €664,000.

I am satisfied that approval of the Supplementary Estimate of €6.5 million net for Vote 12 will confer the necessary legal authority to meet the pension entitlements of civil servants who are expected to retire up to the end of 2017. I am happy that the approval of the Supplementary Estimate of €664,000 for Vote 17 will enable the wider public service to restore capacity and prepare for the future challenges presented by a growing economy, rising public expectations, demographic trends and public service reform. I commend both of these Supplementary Estimates to the committee. I will be happy to answer the committee’s questions on these Votes.

Deputy Dara Calleary

I thank the Minister. I have two questions for him. Is any work being done to ascertain why retirements are ahead of projection? Is this being driven by any trend within the service?

Is any particular area of the public service showing a higher rate of retirement than other areas? If so, are there any plans to make up for the retirements in that area?

I acknowledge that a substantial amount of work has been done by the Public Appointments Service this year. It has filled a significant number of positions. We have had ongoing conversations about human resources practices in the civil and public service that need to change to make it a more attractive place in which to work. The Minister heard me speaking about this issue last night. Flexibility is needed in the education and health care sectors to try to keep people in Ireland. Is the Public Appointments Service investing in new human resources practices that would encourage new ways of looking at recruitment and new forms of contracts? Pay is an issue, but other issues in public service contracts need to be addressed as well.

Deputy Paschal Donohoe

I can respond to the Deputy's second point by saying that the work which needs to take place to overhaul and modernise human resources practices within our public and civil services needs to be led by a line Department. While the Public Appointments Service will be doing various pieces of work in this area, I envisage that it will continue to focus most of its work on appointments and on selecting candidates for State boards. I believe the work that is under way will deliver against the needs to which the Deputy refers. The progress we are making in some of these areas is better than is sometimes acknowledged. The 2017-2020 people strategy for the Civil Service is driven by the anticipation that up to 10,000 civil servants will retire in the coming years. This feeds into the first question asked by the Deputy, which I will answer in a moment. We need to look at ways of continuing to improve our efforts to give people structured career paths over which they have visibility. Perhaps we have not been able to do this up to now.

I think we are making progress in two areas. Figures have been presented to me to show that this is happening. I can see it happening with my own eyes. People are moving at different levels of our Civil Service between various Departments and agencies. I am seeing far more mobility across Departments than I have seen at other times. I see two other positive developments that are happening. Higher levels of recruitment are now taking place within our Civil Service. Over recent years, I have seen a real change in the experience of the people who are coming in. When I attend engagements with broad groups within the Civil Service, I see a far broader diversity of age and experience than I would have seen in the middle of the previous Dáil and Government. I think the long-term effects of that will be very positive.

I am seeing growing evidence of our ability to meet expertise needs in areas of the Civil Service, such as the topical area of international taxation. Our Departments and the Revenue Commissioners now have the ability to attract and recruit people who will work in the Civil Service or the Revenue Commissioners for a number of years before deciding to stay on or go back to the private sector. We should acknowledge that this is a welcome and positive development and we should continue to support it over the coming years. The important changes that have been made have resulted in higher levels of recruitment, more diversity among those who work in the Civil Service and greater opportunities for mobility from Department to Department. As I have said, the people strategy for the Civil Service that is in place for the period up to 2020 looks at how we can deal with issues like mentoring and development as a way of reflecting the fact that the private sector is far more competitive than it has been in the past. In the coming weeks, we will launch the Public Service 2020 plan, which is the next phase of public service reform and in which the Public Appointments Service will play a role.

The Deputy's first question related to the variance in the number of retirements. I am satisfied that the Department of Public Expenditure and Reform is doing everything it can to predict recruitment levels in order that those numbers can feed into the expenditure commitments we have each year. We have a continual difficulty in anticipating when a group of people will retire. It is understandable that we have to provide for lump sum payments in the year in which those payments are made. This means that a small movement in either direction has an effect on our expenditure commitments for that year. As I have said, there is a five-year window within which the majority of civil servants can choose to retire. A curve in the demographics within our Civil Service, for want of a better phrase, is approaching us at the moment. The number of people who are eligible for retirement will increase between now and 2021. A small movement in the number of people who expect to retire will mean that we have to hand money back to other parts of the Department or to the Exchequer, or that we have to look for additional money from the Exchequer for the year in question. Having said all of that, the total amount of money we are looking for from the Oireachtas this year is a gross Estimate of €10.5 million from a total subhead of just under €540 million. I believe the variance is at a level I can stand over at this committee this morning.

Deputy Dara Calleary

The Public Appointments Service manages recruitment to State boards.

Deputy Paschal Donohoe

Yes.

Deputy Dara Calleary

How many applications for positions on State boards have been received this year? Has the number of applications increased over the years? Is any specific area particularly affected by the demographic curve mentioned by the Minister? Will the health and education sectors, for example, be affected more than other sectors? Are specific plans in place for such sectors? Will the Minister bring the Public Service 2020 document to this committee for assessment and analysis?

Deputy Paschal Donohoe

Up to now, we have not been asked to take documents like the forthcoming Public Service 2020 document to the Oireachtas. I will be very happy to circulate it and make everybody aware of it. We are hoping to launch it and have it in place before the end of the year. My number of appearances before the committee is growing, but maybe we can make arrangements with the committee to fit in another one.

Deputy Dara Calleary

We can discuss it in January. I am very conscious of our other commitments.

Deputy Paschal Donohoe

I would be eager to launch it internally if possible because a sizeable amount of work has gone into it. I hope this will happen before the end of the year. Maybe I can come before the committee in January to highlight some of the good work that is under way. It is understandable, particularly after the week we have had, that we all hear about the difficulties. I would welcome an opportunity to highlight the significant amount of work of great value that is going on as we seek to continue to modernise what we do with our Civil Service. I am dealing today with Vote 12, which relates to civil servants only. I have seen no evidence to suggest that any particular cohort of civil servants in any part of the Civil Service is any different in this regard.

If the Deputy is asking about an area across all of Government that would be important to me in terms of how we account for it and plan for it better, I would mention teachers in that context. In recent days, I have had to go to the Cabinet in quicker than anticipated circumstances to seek agreement to make additional provision for superannuation and pension payments for our teachers.

I have been struck by the variance in respect of the number of teachers that are looking to retire and how we account for this is different from what I want to see in future. Although the matter is not covered by this committee, I am keen to indicate the point. It is something the Minister for Education and Skills, Deputy Bruton, and I will have to work on for next year. We need to see how we can plan for it better. We do not want to be in an adverse position. If a teacher voluntarily decides to retire, then clearly that teacher has a legal commitment and an expectation that we will be in a position to meet his or her expectations. I am keen to see how we can plan and account for this better in the coming years than we do at present.

The first question I was asked related to trends. I will read out the details but I might circulate them in tabular format to the secretariat in order that the details can be shared in a better way with the committee. I will set out the trends. In 2015, we advertised 304 vacancies on State boards. For that year, we received 4,699 applications. Of those 4,699 applications some 916 were submitted to the Minister for consideration and of those in turn 206 led to appointments. The figures are: 304 advertised, 4,699 applications received, 916 submitted to the Minister and 206 appointed.

I will share the figures for 2016 as well but the 2017 figures are not yet complete. In 2016, the equivalent figures were: 2,598 applications received, 639 submitted to the Minister and 173 appointed. The total number of vacancies advertised for that year was 163. Those are the figures for 2015 and 2016. I have figures for 2017 as well and I will share them with the committee, but the figures are not for the full year so I am not in a position to draw conclusions.

I was asked about the challenges, what is working well and what I think is not working well. There has been a dramatic improvement in the diversity of applications. The diversity of individuals who are being put before Ministers is significantly better than in previous years. When I was Minister for Transport, Tourism and Sport, the work that had to go into identifying a diverse group of candidates to put on boards was significant and took a considerable amount of time. Now, we have an organisation that will generate these applications. It can find new ways for us to talk to new people about State board vacancies. That represents a major improvement.

Something else has changed since then. There is definitely a growing awareness among people who are looking to apply for these roles regarding their responsibility as well as the potential challenges and pitfalls in doing that work. The profile of the roles has increased, as has the reputational benefits and consequences of such work going well for individuals or otherwise. I attended an event recently for the Institute of Directors in Ireland. I am doing another for the Institute of Public Administration before Christmas. My role is to reinforce to people the obligations they have if they go on boards. While it would not be fair to say yet that there is hesitancy in people applying for positions, it is fair to say that there is greater awareness of the responsibilities involved in being on these boards. That is a good thing but it is something that we need to keep an eye on.

Deputy Joan Burton

I wish to ask the Minister about superannuation and retired allowances. My question relates to the restoration of the reductions that people took as a consequence of the economic collapse. People, especially retired people, are extremely confused about how the restoration may affect them. People may have retired at different times and, as a consequence, the rules are different. I am seeking a people-friendly thing whereby someone can input the date of retirement and find out the particular scheme under which they retired.

It is important that people who retried before a certain date and before the changes took place are told that their situation is straightforward. In other words, it is important to say that restoration follows the general principle of people who are working in the public service.

A situation has arisen whereby there is now evidently a labour shortage. Large numbers of nurses and teachers opted to retire earlier than they might otherwise have retired because they feared that their pensions would be cut significantly. At the same time, we have a difficulty in many schools in obtaining substitute teachers, especially in DEIS schools at primary and secondary level.

The Minister could have an influence in making the position clear to those who have retired but who may wish to offer themselves from time to time for substitute work, perhaps for a couple of days a week or for a couple of weeks at a time. The question is how they can go about it. We need to give the same information to principals. I realise this is more a matter for the Minister of Education and Skills. In any event, there is extensive confusion. Many of those who retired early might well be interested in doing occasional work. Some may well be interested in doing more than occasional work, were it to become available. This arises in the context of the shortages now being experienced in different parts of the public services, but it is most evident in teaching and nursing.

I am seeking people-friendly information for people who have retired on how restoration will affect them. In particular, I want the Minister to make clear to people who retired before or as the crisis began that they might have a straightforward situation. I imagine the Minister has found that people are genuinely confused as well. We get tables from the Department of Public Expenditure and Reform but they are extremely difficult to track and explain. I realise it is a difficult communications issue but it is important for many people.

I represent a constituency where approximately 30% of the population were not born in Ireland or their parents were not born in Ireland. I imagine Dublin Central, the Minister's constituency, is pretty much the same - the figures may not be as high as Dublin West but they are high nevertheless. I found this question difficult when I was Minister, but the recruitment embargo was in place for most of that time and certainly up to the last year and a half. At that point, gradually, we were able to get rid of it. I do not find Polish people working in places in the public service in any significant number. I do not find people from the Baltic states working there. I do not find too many people from Africa or Asia working in the public service either.

As the Minister knows, these big population groups have immigrated into Ireland in recent years. The Minister and everyone else accepts that gender diversity is really important, but I suggest that when the public service is looking at the issue of diversity, it should also focus on the representation of people who have come to live and work in Ireland, many of whom are quite highly qualified. I know the Public Appointments Service has advertised in some international languages, but I do not know whether it has focused on the people about whom I am talking, many of whom have significant qualifications. If they are without employment at the moment, with some appropriate training they might be able to make a career in the public service. I see this being done in other European countries. I do not see why we would not move towards the same tendency. There are large numbers of students of international origin in many secondary schools, particularly in Dublin 15. It is important for young Irish-European, Irish-African and Irish-Asian people who are planning what they might do for a living to have a sense that the public service is open to them as a career. I suggest there would be merit in the Public Appointments Service offering career guidance information sessions to school-goers from an early stage to advise them on careers that are available and may be of interest to them.

I wish to ask about mobility within the public service. My personal view is that one of the biggest problems with the HSE is the constant moving around of people in junior to senior executive positions. Every time one has business to transact with the HSE, one finds that somebody else has moved into the position. Does the Government have a policy in this regard? When I served as Minister for Social Protection, I strongly advised against the adoption of a HSE-style constant rotation of officials that means people do not stay in their positions for very long, particularly as they make progress through promotions. When an official is appointed to a particular area, he or she should be able to serve at least three years in that area. It can be extremely difficult for clients to use the public service if there is constant rotation of staff. This kind of rotation may also be difficult for some staff members. If new people are arriving in and out all the time, it appears as though the place is in a constant state of flux. This is a difficult issue because I appreciate that mobility is desirable on the one hand, but on the other hand the key thing is the service to the client or customer. If we cannot stabilise service provision and ensure staff members feel confident they can provide a good service, it can be tricky.

Acting Chairman (Deputy Peter Burke)

I remind members that the Minister has commitments in the Dáil Chamber shortly.

Deputy Paschal Donohoe

I thank the Chair for recognising that I have to take questions to the Minister for Finance in the Chamber at 10.30 a.m. I agree with almost everything Deputy Burton has said. The first point she made related to the status of public service pensions that are currently being paid. As the Deputy will acknowledge, this is an immensely complicated environment.

Deputy Joan Burton

Totally.

Deputy Paschal Donohoe

The reason for this complexity is simple, but the consequences of it are hugely complicated and multilayered. Broadly, three different pension schemes are in operation for those who joined the public service up to 1995, those who joined between 1995 and the end of 2012 and those who have joined since the start of 2013. The number of people retiring from the public service hit a particular peak across the crisis period. They retired under a certain set of conditions because they correctly expected that if they stayed on longer into the period of difficulty we experienced, they would leave with lower levels of pension benefits. It was decided to incentivise retirement as part of the efforts that were under way to deal with the immense difficulties at that time. The simple answer I can give to the Deputy's questions on this matter is that we will look at how we can address it better.

The legislation that is currently in place means that by the time we get to next year, the public service pension reduction will be broadly eliminated in the case of someone who has a pension with a value of less than approximately €34,000. By the end of the agreement we have negotiated with representatives of employees in our civil and public service, the public service pension reduction will be eliminated in the case of someone who has a pension with an approximate value of €50,000. I do not have the Bill in front of me now. I looked at it last night. Perhaps the figure is closer to €53,000 or €54,000. I will come back to the committee with all of that information. By the time we reach that point in 2020, the vast majority of people who are in receipt of a pension will have their public service pension reduction completely eliminated. We have already had a great deal of contact with the pensioners' representative organisations. We have given them information to explain our plans. Maybe we will share that information again after this morning's meeting. Perhaps I will make a simple table explaining what is actually happening available to all Members of the Oireachtas, starting with the members of this committee, before Christmas.

Deputy Joan Burton

I thank the Minister.

Deputy Paschal Donohoe

While I have explained what will happen by the end of 2020, of course the kind of amelioration a pensioner will get will depend on when he or she retired. That is where the complication kicks in. Broadly, by the end of 2020, anybody who has a pension of between €50,000 and €53,000 will have the public service pension reduction eliminated. By the time we get to next year, anybody who has a pension of approximately €34,500 will see the public service pension reduction eliminated. I want to make a point about the average pension levels out there. For reasons we are all familiar with, much of the public focus and debate tends to centre on higher-value pensions. It is worth knowing that in 2017, the average pension paid to existing pensioners was €23,800. That is a very valuable pension in the context of the difficulties being experienced in private pension schemes and the status of those schemes, but it is very different from the figures mentioned in public debate, which tends to foster a belief that public sector pensions are worth multiples of that amount. That is not the case. It has to be recognised that the pension payments of people who are on the more recently established pension schemes will be co-ordinated. They will get the non-contributory State pension and their pension payment on top of that. This approach will be taken to get them to a certain level. Unlike people who would have been in receipt of pensions up to 1995, they will not get their pension and the non-contributory State pension on top of it. Both payments are combined to get retirees to a certain point. When we were negotiating the current agreement, I was very conscious of the need to be aware of the reality of pension payments for people who are retired.

Deputy Joan Burton

Will the pre-1995 people continue to pay the universal social charge, the payment of which is a quibble for a number of them?

Deputy Paschal Donohoe

Yes.

Deputy Joan Burton

How many of them are there approximately? They seem to get less beneficial treatment than others once they have reached the pension age of 66.

Deputy Paschal Donohoe

Is the Deputy asking how many of them there are?

Deputy Joan Burton

Yes.

Deputy Paschal Donohoe

There are approximately 15,000 such people. They do pay the USC.

Deputy Joan Burton

Does the Minister foresee them receiving the same treatment as other people? When they reach 66 will their USC contributions come to an end, for instance?

Deputy Paschal Donohoe

No, I do not have any plans to change the way in which we structure pension payments beyond the changes we have already made. "No" is the short answer to that question. To address the two other points which the Deputy put to me, in respect of mobility I made the point earlier that I think it is improving. It is not that I think that. It is improving. There must be a trade-off however. We have to allow people to stay in a job long enough to build up the expertise needed to do that job before moving onto another assignment. Each Government Department must put together a workforce plan to deal with matters like that.

In respect of the Deputy's point on our diverse population, only yesterday the Public Appointments Service gave a presentation in Trinity College on new ways in which we might recruit people from the new communities which form part of modern Ireland. As we speak, the Public Appointments Service is seeking to change its website to make it more appropriate and understandable for those from the new communities to which the Deputy referred. We have now started an outreach programme in secondary schools which will be implemented by PAS through career guidance teachers. It focuses on the value and diversity of careers within the Civil Service. All that is under way.

I take a very positive view of the impact the diversity in our community is having and what it will mean for our economy in the future. It is wonderful to think that in a few years' time we will have people working in the Civil Service whose mams and dads were born outside of our country, or who were themselves. I can see it now at entry level. I am beginning to see a change. If one looks at the programme which will be on in schools in west Dublin and central Dublin, in a few year's time when the diversity we now have in our classrooms and colleges passes into employers, including our Civil Service, it will be a huge source of strength for Ireland. I take a different view on that kind of diversity to that others in politics at the moment might take.