Mr. John Moran:

I thank the Chairman and committee members. Yesterday was the first anniversary of my appointment as Secretary General. It has certainly been a busy first year, but I had expected that. Members are probably aware that one of our early initiatives was to revise the statement of strategy that we inherited when the new management team took over. Its aim was to place a much greater focus on our objectives, namely, economic stability, growth and job creation. We set out five goals on which to focus our work. The first was the economy, the second was sound public finances, the third was improved living standards for all citizens, the fourth was a return to market funding and the fifth was a more secure and effective banking system. We also conducted a review and set out many ways in which we were going to change the way in which the Department operates.

Looking back at 2012, starting with the economy, we know that economic growth and a recovery in employment are crucial preconditions for a sustained improvement in living standards. Domestic demand is still constrained, as households and firms work off imbalances built up during the boom. Our job is far from complete. The unemployment rate remains at an unacceptably high level - 14.1% in February. While the household debt-to-income ratio fell to its lowest level since early 2007 in the third quarter of 2012, it is still at a high rate of 204%.

Not surprisingly, our 2013 programme reflects our continued focus on the steps necessary to work through those problems and in addition to focus in particular on ways to facilitate the recovery of the SME sector. This sector is key in order to achieve real reductions in the unemployment rate.

The challenges are significant but in facing these challenges, it is important to remember how different this country is from an economic perspective than it was only 12 months ago. We have now completed over 190 of the programme tasks, drawn down 83% of the funding under the troika programme and are working towards being the first euro area country to exit from a programme of financial support.

Anglo Irish Bank, the Irish Nationwide Building Society, the promissory notes and the bank guarantee are now all historical parts of the banking sector rescue. We have sold Irish Life back into private hands and traded €1 billion of the contingent capital we put into Bank of Ireland, both at a profit to the State. Central Bank support, which was a key part of the restoration of stability for the Government-supported banking sector, is down a further 28% year on year and stood at only €48.1 billion in Jan 2013. Following a return to growth in 2011, the Irish economy looks to have recorded a second successive year of growth - 0.9% in 2012 - contrasting with a contraction of 0.5% in the euro area. The composite purchasing managers index remains in expansionary territory and puts us, in effect, with Germany in a club that is showing growth in the area.

Recent Commission forecasts estimate that unit labour costs will have improved by 23% relative to the euro area over the period from 2008 to 2014, underlining the flexibility of the Irish workforce. Having increased in the third quarter for the first time since early 2008, the fall in domestic demand is showing signs of having bottomed out, with core retail sales having increased in each of the last six months and VAT receipts positive in the first two months of the year.

The level of exports is now well above that of the pre-crisis period, having increased by 3.2% over the first three quarters of 2012 to stand at a significant 106% of GDP. In the context of exports, the services export sector is particularly strong, having grown by 9.4% over the first three quarters in 2012. The current account of balance of payments has shown surpluses of over €3 billion in each of the last two recorded quarters. In 2012, taxes on a headline basis were up 7.7% year on year. All of that has contributed to a further reduction in the deficit. We expect a deficit of less than 8% for 2012, which is again significantly below the troika target of 8.6% for the year.

I understand that the fiscal adjustments are painful in many cases. They are, however, essential to the restoration of growth in the economy, our ability to go it alone after the end of the programme in December, and to the restoration of international confidence in the economy, which will be reflected in further investment and jobs. We are a very open economy. I have mentioned the size of GDP and our exports, and we are very dependent on the continued recovery in the performance of other large trading blocs.

In the last 12 months, we are however seeing strong external validation of the strategy. The IDA had a record year in 2012 and, most encouragingly, signs of stabilisation in the labour market finally emerged. Ireland is back in the markets, issuing conventional bonds of €4.2 billion, a further €1 billion of amortising bonds, short-term treasury bonds of €1 billion and bond switches of €4.5 billion. There has been with a dramatic fall in interest rate costs for the country as confidence in Ireland improved over 12 months. Treasury bill costs have dropped dramatically to between 20 and 25 basis points, compared with the first issuance in August 2012 at 1.8%. Our two and eight year spreads are now at 1.07% and 3.74%. It is worth recalling that only 20 months ago, these were at 22.4% and 15%. It is also worth noting in terms of the importance of this that with a stock of debt approaching €200 billion, even a 1% movement or reduction in interest rate costs can very dramatically improve the interest costs of our budgetary numbers.

In the past 12 months we are also seeing growing levels of investment in many sectors of the economy, particularly from outside, including commercial property. All told, €10 billion has been invested or committed in the past six months, mainly by international investors in transactions managed by the State or entities controlled by the State.

I mentioned at the outset in terms of our statement of strategy that we set out over the past 12 months to play our part in all of the events mentioned but in parallel to embark on a significant change agenda in the operation of the Department. More detail is contained in our review of 2012 which will be published later today. In brief, we have implemented a complete restructuring of the Department into four key policy areas, and two support office areas - a finance area and a corporate support office. We have restructured the operation of our management advisory committee, which now focuses more on business planning and objective delivery and on challenge sessions on key policy areas. We have an enhanced risk and control environment, including the creation of a chief risk officer position, which reports directly to me, and the implementation of a risk committee and a radically different approach to audit committee and internal audit support.

Along the way we have also tried to extract significant costs savings of approximately €750,000 through the reorganisation of accommodation, resulting in a reduced premises footprint, and through other initiatives from our colleagues in Tullamore, which is a shared services office, who have embarked on various reform measures such as the elimination of payable orders and the reduction in frequency of issuing payslips. Indeed, overall in 2012, we delivered our programme with approximately €7 million savings against budget, including by the deferral of costs where possible.

One of the other hallmarks of 2012 in terms of the change in the way the Department has operated has been a much greater openness. We have had much more frequent public speaking and media engagements, greater interaction with the wider public sector and the private sector, as well as the secondment of a number of specialised resources into the Department to assist with various tasks. We have also deepened our links with other Departments and State agencies in 2012 and have availed of resources from a number of them.

We are very proud of our achievements, but as I noted earlier, there is still much to do. We remain committed to that task. I have noticed especially of late a welcome growing appreciation of the effectiveness of the public sector and its contribution to the higher profile deliveries I have outlined above. I put on record my gratitude to the staff in the Department for their continuing help and support. I would particularly like to record the efforts of the unsung heroes who behind the scenes somehow make it all possible. Whether it is managing the legislative process, answering parliamentary questions, dealing with the scheduling of stakeholder visits, organising foreign trips, preparing strategic briefings, ensuring the preparation of financial accounts or payments across the system, printing material often at the last minute and late into the night or just keeping the offices and IT systems open and working well, all of those and other things are essential to the functioning of the Department and the delivery of the objectives we have set ourselves.

In this difficult time for all citizens, it is only fair that I recognise publicly their contribution and willingness to be flexible and adaptable in dealing with the many conflicting time demands on our Department. I look forward to members' questions and thank them for their attention.