Mr. Derek Moran:

Chairman, thank you very much. I don't propose to go through my witness statement, I'm going to keep it through to four or five minutes. I think everybody will be probably grateful for that. The first few comments just basically on two topics, one, on the advice the Department gave pre-crisis, and, secondly, on whether we're in any better position than we might have been then in terms of dealing with future challenges.

It's a notable feature of all the reports to date, Wright, Nyberg and so on, that they find the Department did warn on the adoption of inappropriate macro-fiscal policies. It's equally notable in all the reports that they're critical of the Department for not, for either not heightening the tone of that risk or for linking fiscal and, and, and the financial properly. As I said in my witness statement, this is fair and accurate comment. Nonetheless, warnings were given, and to quote Wright, they were "more direct and comprehensive than concerns expressed by others in Ireland, or by international agencies".

It's also true that external bodies, such as the IMF, warned of the same risks and on occasion in some detail. But as time went by, the narrative tended to soften, commending Ireland, for example for impressive economic performance, and prudent fiscal policy by the IMF or, or citing Ireland as an exemplar of compliance with the Stability and Growth Pact, the EU Commission. And the context here for these international bodies is important. It has to be ... remember that time, and I'm talking about 2005, 2006, Ireland had been growing consistently for a very long period of time and the budget was either close to balance, in surplus and the debt ratio was a low, only around 25% of GDP. These were very impressive headline numbers by international standards at that time.

If we take a step back a bit, in the mid to late 1990s, the objective of Government policy was very clear: run a budget policy that was sufficiently tight to qualify as a founding member of the single currency. You can see this in the numbers. Spending in '97 and '98 were lower than they were at any time for the next decade and the budget started to run a surplus in '97 at 1.3% and growing to about 2.6% by 1999. The introduction of the Stability and Growth Pact at this time was all about governments appropriately managing their key remaining policy lever in EMU, fiscal policy, as monetary policy moved from domestic central banks to the ECB.

The Department advised, from about the start of the last decade, that it was necessary to create a buffer against risks, including from about 2003 onwards ... over-reliance on housing sector. It's important to be clear about what that means. It means telling the Government of the day it should not allow spending to grow or tax be reduced by as much as they might want. In technical terms, run counter-cyclical rather than pro-cyclical policies. While this isn't an easy message, it's one that the Department must deliver. On housing, notwithstanding the warnings, we did not conceive a collapse to the magnitude that actually happened, and I think we have to say that upfront.

It is unfortunate that if you constantly predict a recession year after year and it doesn't happen, then you run the risk of the advice you're giving becoming sort of a debased currency.

In the end, it's probably the role for Government to make policy decisions, having considered all the advice given to it. And the failure to run tighter budget policies had profound consequences for the public and for the public finances. Had tighter budgets been adopted in the early and middle of the last decade, it would've reduced significantly the need for very painful expenditure cuts and tax increases during the crisis resolution period.

In terms of the second piece, I think it's better now. Do we have better systems? Have we learned lessons? I believe an answer ... on balance, the answer is "Yes". I think we have ...always have to be aware that systems and processes need to be continually evolved if they are to remain (a) relevant and (b) effective. In terms of external macro-fiscal surveillance, we know that prior to the crisis, the EU Stability and Growth Pact was not sufficient to meet the task. The changes to the pact have been very significant. Its principle elements are enshrined in domestic and constitutional law in member states. It has become much more automatically enforceable - it has real teeth. In many respects, you are now presumed guilty until proven innocent under the revised framework. It is very difficult to under ... overturn a recommendation for action for a member ... to a member state from the EU ... from the Commission. The improvements in the European economic and fiscal governance arrangements over the last number of years should result in the earlier detection and warning of emerging vulnerabilities and the enforcement of earlier action, either by European authorities or by individual member states, as the case might be. These changes are important and to be welcomed.

Domestically, we've also put in place improvements - budgetary rules have taken on a much greater significance than those that applied before the crisis through a target for the structural balance, complemented by an expenditure benchmark. The expenditure benchmark helps illustrate room for manoeuvre available to Government in setting its annual budget. This was presented for the first time in the spring economic statement this year and it's the first time that we have publicly available, six months before a budget, a range of, of room for manoeuvre that's available now for public and commentator and political debate. The advent in the independent Fiscal Advisory Council is another voice charged with specifically overseeing and endorsing the official economic forecasts and comments on the status of policy. They have embraced that role and their independence and, again, this is to be welcomed.

Extensive changes have been made in the organisation of the Department. These are aimed at ensuring the Department has the capacity to do its job and relate properly to its stakeholders. We've increased the publication of technical studies, policy reviews and other relevant papers. We've entered into a research partnership with the ESRI, whereby members of the institute and the Department work together on a number of fiscal and macroeconomic projects. Engagement with the stakeholders, think-tanks and other experts can only improve the quality of advice. We've also participated in a number of public consultations, as the Department, including, for example, on macro-prudential rules, the Low Pay Commission and agricultural strategy.

Many of the other changes in the organisation flow directly from the Wright report. These include: structures to handle corporate affairs; professionalisation of HR; improved communications; cross-divisional work; and so on. We've also, for the first time, formally codified our governance structures and processes in a single document. From my point of view as the Secretary General, there's no fixed target for improving the Department - it's a process. It should be ongoing and continually challenge the organisation to be the best it can be and, where we can, benchmark our performance against others.

Thank you, Chairman, committee, for your time and attention and I hope my contribution will be of some assistance to the committee in its work.