We are dealing with the 1998 Annual Report of the Comptroller and Auditor General and the Appropriation Accounts. Today we are dealing with Votes 36 and 37 - Defence and Army Pensions. Relevant documentation has been circulated, including correspondence from the Department dated 21 and 28 June, respectively.

Witnesses' attention is drawn to the provisions of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, particularly section 10 thereof. I welcome Mr. David O'Callaghan, the Secretary General of the Department of Defence. Will you introduce us to your officials?

I am accompanied by Mr. Pat Hogan, head of corporate services, Mr. Paul Kelly, principal officer in the Department in charge of litigation and compensation and Mr. Robbie Lyons, the principal officer from our finance branch.

You are all welcome. From the Department of Finance, I welcome Mr. S.O'Neill, Mr. P. Howard and Mr. P. McColgan. I ask the Comptroller and Auditor General to introduce his report on these Votes.

There are no paragraphs on either of the Votes before the committee this morning but there are a couple of items in the accounts which I would like to bring to the attention of the committee. The first item in note 13, on page 293 of the accounts, refers to payments arising from the personal injuries claims alleging loss of hearing, a matter which the committee has considered in detail in the past. Included in today's correspondence is an update of the figures which shows that the number of compensation claims received now totals over 15,000. As of last week, 5,813 cases have been disposed of and court awards were made in 255 cases, to a total value of £3.76 million. The correspondence also shows that out of court settlements were made in 5,233 cases, to a total value of £79.2 million. The other 325 cases were either withdrawn or dismissed. Plaintiffs' costs were paid in over 4,000 cases, amounting to nearly £33 million. That leaves 9,239 cases still remaining to be dealt with, as of last week. Those are the figures but there is some light at the end of tunnel.

Since the beginning of this year the Department has established a pilot settlement scheme whereby claims can be disposed of by negotiation rather than by litigation. The early indications are favourable in that claims settled in this way are not attracting the same level of legal costs as heretofore. It also appears that, generally, the average value of awards and settlements is falling to more acceptable proportions in the year 2000. I hope this trend will be sustained. It is a little soon but early indications are good and I am sure the Accounting Officer will be able to update the committee on this new arrangement.

Referring to the second item, note one, which refers to the absence of a system in the Department capable of putting monetary values on its fixed assets, I am talking about the land, the buildings and the extensive military equipment that the Defence Forces has in stores. The Department's statement of capital assets shown at note four in the accounts is, therefore, deficient in that respect. New computer systems are being developed to address this problem, but it is my understanding that it will be at least the end of this year at the earliest before they are fully operable. That is all I have to say at this stage, Chairman.

Thank you very much. Mr. O'Callaghan, would you like to make a brief opening statement?

Perhaps I should address the two points raised by the Comptroller and Auditor General. I agree with the figures that are supplied. Regarding the Army deafness, we have paid £115 million, including awards and costs, to date. We have, over the past number of years, got the average settlement figure down from £35,000 to a current one of a £7,500 award per case. We are relatively pleased with that. Our current estimate is that, if we can maintain that line, we are facing a further bill of about £108 million. We may get out of this problem for £220 million to £250 million. I obviously can take any questions on the Army deafness later from any member of the committee.

The second point the Comptroller and Auditor General raised was the question of an inventory management system. We have such a system but, because of the size of the Defence Forces, we have a total of some 350 different stores. The system has not been rolled out to all these stores yet due to a variety of problems, mainly because of the enormity of the project and the task. We have 80,000 different store items in these 350 stores. It is a huge operation. We had to divert information technology people from the operation due to the Y2K problem. Like every other major organisation, we are suffering a haemorrhage of IT people into the commercial sector. That has delayed matters in that regard. The ongoing reorganisation of the Defence Forces has not helped matters either, but we are fairly confident that, within the next six months, we will show enormous progress on this front.

I have just done the figures on that. The 5,233 settlements out of court——

Procedurally, let us deal with the Army deafness issue first. If we dispose of it, we will not have to return to it.

——and the 255 court awards imply 325 cases were unsuccessful. On that ratio, I would feel hard done by if I were one of the 325, would I not?

Is the Deputy talking about the 265 that were withdrawn?

I am saying that 325 out of 5,813 tested have been thrown out. On that ratio, it is a bit of bad luck to be among the 325, is it not?

Yes.

It is an extraordinary mind-blowing phenomenon.

It is, yes. We have not been very successful in court. There is no question about that. Those cases we brought to court were pretty worthless. They really were the bottom of the barrel. There was no hearing loss whatsoever, by any measure. Yes, I would agree with the Deputy.

Will Mr. O'Callaghan tell us about the negotiation scheme now in place?

As soon as we got the Supreme Court endorsement of the State's case, both its measurement formula, the green book, and the tariff the State proposed - that was in December - the Minister wrote to the Law Society in the same month and we opened up negotiations with it at the end of January or the beginning of February. As I reported to the committee on a previous occasion, the three main cost drivers to the Army deafness were the sheer volume of cases we were receiving, the high awards in court and the legal fees.

We were under pressure to cut our losses on the quantum, that is, the awards. The argument was that our goose is cooked and that we should concentrate on cutting down the legal awards while paying out the £35,000 and £30,000 per case. As I reported to the committee, we thought that was too high. We have been vindicated in that. We have got that down. Now we have to concentrate on the legal fees.

For an average case of about £7,500 to £8,000 going through court, the fees would be another £8,000, effectively another 100%. We felt we had to get that down. That was the purpose of approaching the Law Society. There were two objectives: to get the relevant technical experts - engineers, etc. - out of the frame and to get a deal on the fees. That is working. We have got about a 50% discount on the fees and the average fees now are about £3,000 to £4,000.

Are the average legal fees for both sides about £3,000 to £4,000 as against awards of £7,500?

No, that is the plaintiff's costs.

The plaintiff only?

Yes.

What will be the rough total of fees now incurred per case by the State?

The costs to the Chief State Solicitor would have to be added to that and that would be another £4,000 to £5,000 on top of the case.

Even under the negotiation scheme, the system roughly works out at one to one. In other words, legal costs are roughly as much as the awards.

I would hope that there would be cost benefits in the Chief State Solicitor's office as well. We are negotiating with particular solicitors. We have cut out the barristers as well, on the State side as well as the plaintiff's side, so there would be savings there.

Of the 15,000 claims that have been received, roughly how many are from serving members of the Defence Forces?

My memory is that it is about 4,000. I was including in that the figure for the FCA. Of the outstanding 9,000 claims, 2,672 are from serving personnel, 6,000 are from non-serving and there is a category of unknown at this stage.

Have the shutters come down? Presumably it is open to anyone at any time to claim that damage has been done to them.

The shutters are down in one respect in that, post-1987, we got our act together as regards hearing protection and we have successfully defended any case from a member of the Defence Forces who joined after 1987. Cases are still coming in at the rate of about 10 to 15 a week.

Are there any major awards in those? Is the negotiation system throwing up any cases of serious injury?

No, there is no one totally deaf or anything like that. There is nothing very serious. They are all very small. The majority would be in the zero to 10% disability.

Are individual personnel still exercising their right to go to court in some cases?

It is very rare. The cases have been adjourned by the High Court until 11 July, but they are providing a window from 11 July until the end of the term for people who want to go to court and a number of them want to do so. We feel they will settle before they get into court.

We had our own hearings on this. Whatever one might think about the number of cases, clearly there is culpability on the part of the authorities. To what percentage is anybody's guess, but clearly there was negligence on the part of the authorities. Can we be assured today that we do not have a similar situation in respect of any of the activities of the Defence Forces?

I think I can give that assurance. Obviously, we have to be cautious in areas like post-traumatic stress and asbestosis. We have a very active health and safety committee and I am assured there are no other problems of this nature and scale.

It appears that the projected cost has come down considerably from what we had considered. A factor of ten was thrown around in the media at the time of our original hearings. When was the key moment when this turnaround came?

I think the key moment was the Supreme Court judgment which accepted the State's case on two fronts. One, the formula for measuring hearing loss and, two, rather unusually, the State was asked by the Supreme Court what it thought, from its experience, a fair tariff would be. A tariff was submitted which the Supreme Court endorsed more or less. I think that was the defining moment.

That was when?

December last year.

The question of morale in the Defence Forces came up and there were problems in this area as this issue built up. Now there seems to be a resolution in sight has morale improved in the Defence Forces? In relation to that, regarding the outstanding cases - Mr. O'Callaghan says there are 2,672 among serving personnel, so there are approximately 6,000 among non-serving members - where is the most inertia and resistance to coming to a resolution? Is that within serving or non-serving personnel?

I do not think there would be any inertia on the part of personnel but that there is general relief among the Defence Forces that the issue does not have the high profile it had 12 months ago. There are measures in train that have taken it out of the headlines and which are heading towards a resolution quietly and behind the scenes in a way that seems fair to everybody.

And has morale improved?

It is difficult for me to say. There is a lot input into morale, but on this matter the fact that it is low profile and not on the front pages has helped morale, there is no question about that.

In the figures Mr. O'Callaghan has given us, a table shows awards and settlements. There are 5,488 cases. Costs were paid in 4,032 cases. Particularly in the year 2000, why were there no costs paid in over 60% of cases? What was the situation there?

This is a timelag between them. We just have not got the bills in yet from the solicitors.

So you expect there will be costs involved?

There will be, yes.

We know the quantum of the settlement figure and award is coming down, but is the quantum of costs coming down? I see the percentage costs going up because the award is reducing.

This is one of the advantages of the early settlement scheme. The quantum of costs is coming down appreciably as well. The technical experts and barristers are out of the frame now and we are getting a discount from the solicitors.

In relation to the musicians, how is the number of cases there coming along? There were 103 cases of hearing loss there and 56 are still outstanding. Are those any different from the cases under army difference?

No, they are no different. There is the same level of deafness and the same settlement terms. They are no different.

What is the situation regarding cases of post-traumatic stress disorder?

The position is we have approximately 25 claims on hand. Only one has gone to court and while the award was significant - £125,000 - that is the only case to date. There is by no means a flood of post-traumatic stress claims at the moment.

So 35 have been lodged to date according to the letter of earlier this week.

There are 25 pure post-traumatic stress claims, if you like, and ten more which are linked to road traffic accidents and so on which are claiming post-traumatic stress.

And the 25 referred to are linked to?

Nothing. They are just post-traumatic stress disorder in the main.

Would it be related to service in the Lebanon?

Service in the Lebanon. The oldest one goes back to the Congo and there are other operations.

Back to the Congo?

Yes.

So that is nearly 40 years ago.

What changes have been made, if any, to deal with future claims? Is there a compensation board now in the army? We have discussed before a means of establishing a compensation system within the army that is separate from the courts.

We do not have a compensation board as such. I understand there is legislation with the parliamentary draftsman to set up a claims agency under the aegis of the National Treasury Management Agency.

I was going to ask the Department of Finance about that. Where is this State claims agency that was proposed over four years ago?

We expect the necessary legislation to be published either today or tomorrow.

What is the cause of the delay? It is not just a matter of army deafness. There is a major problem with claims against the State in all its manifestations at local and national level that has been going on for a long time. The State claims agency was proposed four or five years ago by the Joint Committee on Finance - I was chairman at the time - and it has taken that long to bring this about. Do we have any facts or figures about the total amount of claims? We have asked the Department of Finance for figures which comprehended State agencies and commercial State bodies, etc. Are there any complete figures for claims against the State?

The fact is that there are no such figures.

Has there been any attempt made to get those figures?

We wrote to the secretary of the committee on that.

You wrote on 17 April. I have the letter here. You also wrote on 12 March last year.

We also wrote this year.

Yes, on 17 April this year. We asked last year for the figures. We asked the Department of Finance to go away and compile data it did not have at that stage in relation to the total claims against the State and State agencies, including local authorities and health boards, as well as statutory bodies, per year. Are you telling me that that has not been done?

No.

So we have no way of knowing the total cost to the State.

Not the totality in the sense that you have mentioned. We do have figures on claims taken against Ministers and they have been published from time to time in response to parliamentary questions. There was a very comprehensive set of replies last year that covered 1990 to 1997. This year there was another set on behalf of all Ministers concerning 1997 to which I have drawn the committee's attention.

What is the difficulty about getting figures from State companies, local authorities, health boards, vocational education committees?

I have been dealing with this in the context of the measures necessary to establish the State claims agency. I do not have any particular function as regards claims as such but with the legislation to give effect to the Government's decision to establish a claims agency. That Bill will be published today or tomorrow. As I pointed out on earlier occasions it is not intended, in the early stages at least, that the State claims agency would deal with claims against local authorities, health boards, vocational education committees and semi-State companies, all of whom have their own arrangements either through insurance, in the case of local authorities and health boards, or otherwise.

I know, but the genesis of the idea when it was discussed at the finance committee during the last Dáil was because local authorities in particular were being ripped off at the time. There were escalating claims and awards. This also applied to health boards but to a lesser extent and also to some semi-State bodies. It is extraordinary that five years later we are getting a Bill to establish the State agency that was proposed but does not comprehend the very people that were in the front line of claims and still are in the front line of claims.

I am subject to correction but my recollection is that the finance and general services committee envisaged not a State claims agency as such, as we now talk about it, but a particular dedicated unit within the Office of the Attorney General. That is my recollection.

The two ideas went in tandem. I was the originator of the idea. I am not happy with this anyway. I want you to come back to us with figures. Would you please write this week to each State company, each local authority, each health board and other semi-State bodies and get each Department to supply information within one month for the last five years as to what amount of claims were paid by each of these and what are the legal costs.

I am going to leave it at that because we have dealt with this before. I hope the hearings the committee itself had on this question of Army deafness helped to mobilise public, media and court opinion to get at least the sort of figures we are dealing with now. Even though they are huge, they are, as Deputy Ardagh said, much smaller than they might have been. Certainly the trajectory that was facing us has——

There is no question about it, Chairman, it is very helpful.

I would like the ask the Secretary General about the FCA which he mentioned earlier. What are the numbers of claims from non-serving and serving members of the FCA? Is the average cost of the claim the same as in other cases?

There are 242 claims from serving FCA members outstanding, 632 from non-serving members and 20 FCA uncategorised yet.

And the average cost of the claim?

It is the same.

My questions are of a more general nature. Are you finished with the deafness question, Chairman?

Yes, we are going to move on. I just wanted to divert you because Mr. Howard told us the Bill is coming out today or tomorrow. To be honest, in January last year I was complaining to you that the thing was going on three years. We were told at that stage that proposals were at an advanced stage. It was during the hearings on the Attorney General's office. Here we are 18 months further down the road and the Bill is coming out. I am not happy with it and it is not good enough. The Department could be accused of lethargy in defending the public finances. Here is an area that has been of grave concern to this committee for many years. I will leave it at that and we will discuss it again when we get the replies we have now sought within one month. These are replies we sought before and did not get.

I informed the committee on a previous occasion that the decision by the Government to establish the claims agency was taken in the middle of last July. The drafting of the provisions has proved to be quite difficult and complex in, as our legal advisers would say, a unique area for legislation. There is no existing corpus of legislation on which to build. In large measure that has meant that the finalisation of the text of the Bill took much longer than we had hoped.

We are going to get these responses. Today is the 29 June so by 29 July we will have the information we have been asking for. We are going on the general questioning.

What percentage of serving personnel have lodged deafness claims? Have you worked out the precise percentage of total serving personnel?

About 26% to 30%. Yes, about 30%.

And of retired personnel?

As we said at a previous hearing the potential was 150,000. We have 15,000 claims in total so I suppose 10% is a very rough estimate.

Does this relate to all activities within the Defence Forces or does it particularly arise from claims from areas that would have constant exposure to gunfire and that type of duty?

No, it is all areas right across.

Including those that would not have regular exposure to noise?

All members of the military do their annual firing training. That is enough.

For a specific period.

What impact will the White Paper on Defence have for instance on the sale of property and land, particularly regarding Army installations in Bundoran, Lifford and Rockhill in Donegal? What impact will the White Paper have on the Naval Service? Will it mean a reduction inthe number of ships at sea at any given time? Will it mean a reduction in Navy personnel or a change in the role of Naval Service ships?

The White Paper is very specific.

I am sorry but I may not have time to wait for the answers because there is a division in the Dáil.

The committee is in resumed public session.

On the sale of barracks, the White Paper does not contain any plans to sell additional barracks. The three barracks in Donegal - Letterkenny, Rockhill and Lifford - will remain open.

The Navy is not being downgraded by any means, nor are its numbers being reduced. Price Waterhouse produced a report in which it outlined various recommendations in regard to the Navy, including a new structure and a new staff complement of 1,144. That will be the Navy's staff complement. The Navy now has an extra ship, the le Róisín, which was launched last year and a replacement for the le Deirdre will be delivered next year.

To recap, no sales of barracks will occur other than those which have already been announced and the role of the Navy has been enhanced. The Navy will now have more days at sea than ever before.

Will the ships continue to be multi-functional in regard to fishery protection, drug seizures etc.?

Yes, they will be multi-functional and multi-tasked. More than 90% of their work relates to fishery protection and that will remain their main emphasis but they will offer assistance in areas such as drug interdiction, etc.

What properties are being sold by the Department, where are they located and when are they to be sold?

The properties being sold are as follows. Devoy Barracks in Naas is located on a 22 acre site. That property is currently on the open market and tenders are due to be received by 12 July. McGee Barracks in Kildare is a 60 acre site which has been used to accommodate Kosovar refugees since May 1999 to date. In view of the urgent requirement to accommodate asylum seekers, the Government decided on 28 March to make accommodation in the form of mobile homes available at this site for a further 200 people and that is now nearing completion. Fermoy Barracks in County Cork is a 21 acre site and it is being sold to Cork County Council for the purposes of economic development in conjunction with the IDA. The agreed price was £767,000. Castleblayney Barracks in County Monaghan is being sold to the North Eastern Health Board for £600,000.

An integration plan has been drawn up for Ballincollig Barracks in County Cork, located on a 138 acre site, following a rigorous process of public consultation. The plan has been submitted to Cork County Council which, we understand, will adopt it for the county development plan later in the year. Clancy Barracks in Dublin is based on a 13 acre site which is zoned for social housing. The barracks will be evacuated later this year and it is anticipated that the property will be put on the open market next year.

The following properties are also for sale - a six acre area adjoining Collins Barracks in Cork, former married quarters on a three acre site in Limerick Barracks, ten acres in Renmore Barracks in Galway and one and a half acres in Waterford.

Clancy Barracks is due to be sold next year?

Yes.

Has a review been carried out of all the property in the Dublin area in view of the housing need which exists?

Yes. We will only have two remaining barracks in Dublin - McKee Barracks and Cathal Brugha Barracks in Rathmines, whereas we previously had Collins, Clancy and Griffith Barracks in addition to a barracks in Beggars Bush.

What about St. Bricin's Hospital?

There have been some interesting developments in that regard. Last week, the Department of Health and Children wrote to us indicating its interest in the hospital for the purposes of a sub-acute patient hospital. The Department basically wanted to know whether we would sell the property to it or give it to the relevant health board. We are considering the proposal very seriously. A review body is currently examining the entire range of medical services being provided to the Defence Forces and it will make certain recommendations in that regard. It will also make a recommendation in regard to the future of St. Bricin's Hospital. We regard the request from the Department of Health and Children as a very serious one and will look at it in a very positive light.

Thank you. The committee notes the Votes.

The witnesses withdrew.