Mr. Derek Moran:

I thank the Chairman for affording me the opportunity to address the committee this morning. I am joined by Ms Ann Nolan, second Secretary General, Mr. John McCarthy, chief economist, Mr. Derek Tierney, head of corporate affairs, and Mr. Fiachra Quinlan of the finance unit.

I would like to focus on the four specific items on today’s agenda. The first is Vote 7 and the 2015 appropriation accounts for the Department. The Estimate for 2015 was set at €30.6 million. Spend for 2015 was €24.4 million, leaving a surplus to be surrendered of approximately €6.2 million. This surplus arose for a number of reasons. Recruitment did not progress at the pace anticipated, resulting in a pay bill underspend of around €1.1 million and a further €600,000 underspend on non-pay administration expenses. There was also an underspend of €3.1 million on programme related costs arising from the completion of some work in-house and lower costs in relation to the shareholder management unit. The Department also recouped an additional €500,000 in respect of costs associated with the stabilisation of the banking sector. We remain committed to seeking to minimise costs where possible, subject to achieving the best outturn for the State.

I draw the committee’s attention to the following key points. Tax revenues for 2015, at €45.6 billion, were up €4.3 billion or 10.5% year on year and €3.3 billion or 7.8% on profile. Within that figure for tax revenues, the increase was distributed across the three key tax heads. Income tax grew by 7%, corporation tax by 48.9% and VAT by 7.1% year on year. On the expenditure side, total expenditure, at €58.6 billion, was up €700 million or 1.2% year on year. This was driven by increased voted expenditure which showed an increase of €600 million.

General Government debt as a percentage of GDP fell to 78.7% in 2015 from a peak of 119.5% in 2012. This downward trend is projected to continue with a debt to GDP ratio of some 72.9% forecast for 2017, which is in line with the euro area average.

I would like briefly to turn to performance and outputs in recent years. The Department was restructured around two directorates in 2016 – the economic and fiscal directorate and the finance and banking directorate. This structure remains largely unchanged in 2017. The Department is working towards achieving two broad goals, namely, a sustainable macroeconomic environment and sound public finances; and a balanced and equitable economy enabled by a restructured, vibrant, secure and well regulated financial sector.

I am greatly encouraged by the robust pace of the recovery in the economy, with GDP increasing by 5.2% last year. The increase in economic activity is broadly based and economic fundamentals are strong. Export growth in recent years has been robust and exports continue to contribute positively to growth. This is a reflection of the progress which has been made to restore our competitiveness. Notably, the domestic sector is now driving growth in the economy, with private consumption up 3% in 2016.

Recovery is perhaps most clearly evident in the labour market, with annual employment having increased in each of the last 18 quarters, representing an increase of 231,000 jobs since the low point in 2012. Strong employment gains have driven a substantial turnaround in unemployment, which has fallen from a peak of more than 15% to 6.4% in May.

Key economic indicators point to continued solid growth this year. The Department is forecasting growth of 4.3% this year and 3.7% next year. Despite the pace of the recovery and the strength of our underlying economic fundamentals, we must be conscious of the uncertainty in the external environment which underlines the need for caution supported by prudent economic and fiscal policies.

Public finances also continue to move in the right direction, with significant progress being made on the general Government deficit. Ireland exited the excessive deficit procedure in 2016 and it is planned to reach the medium-term objective of a structurally balanced budget in 2018.

Underpinned by a growing economy, the hard won improvements in our public finances provide a sustainable budgetary platform upon which funding for the provision of public services can be provided in the years ahead. The market reaction to our management of the public finances has been positive but it is vital that we sustain our progress. We must guard against complacency, maintain our prudent management of the public finances and continue with competitiveness oriented policies.

Brexit is one of the serious challenges for the economy. The Government approach has outlined twin Brexit goals, the first to secure the closest possible economic and trading relationship between the EU and UK, and the second to prepare the economy to cope with turbulence of coming years and the structural shift of new realities of Brexit. The best and most immediate policy within the Government's control to counter the likely turbulence of coming years is to prudently manage the public finances to ensure Ireland's economy continues to remain competitive in the face of future economic headwinds.

The last budget outlined a number of policies targeted at the most exposed sectors, measures to support small and medium enterprises, entrepreneurship, agrifood, and exporters, while also targeting potential economic opportunities, such as competing for mobile international investment in the international financial services sector. The Government has also put forward Dublin as an excellent location for the European Banking Authority post-Brexit.

A key focus for the Department in the past year has been the sale of the State's investment in AIB. The successful capital reorganisation of the bank in 2015 provided a supportive backdrop for the commencement of this process and significant work has been undertaken by the Department and its advisers over this period to achieve a successful outcome for the State. The recent completion of the initial public offering, IPO, represents a significant milestone and not only has it resulted in a substantial sum of money being returned to the State, but it also creates a strong platform for the State to recover all of the money it has invested in AIB over time. At the end of this process, the State will continue to hold 71% of AIB, which is worth around €9 billion, and will continue to be a substantial focus for the Department for some time.

As with any organisation, we must strive to evolve, improve and embed the skills necessary to the job at hand. This is an ongoing process. I am pleased to report that the Department was awarded the best learning and development organisation for 2017 for a medium-sized organisation as part of the Irish Institute of Training and Development awards.

The award is an endorsement of the commitment of the Department and its staff to the development of a learning culture focusing on both hard skills and those of leadership and management necessary for the job.

I express my appreciation to the staff at the Department for their ongoing hard work. It is only through their continuing commitment and dedication that we can deliver on our objectives. The Department will strive for continuous improvement and develop into the best organisation it can possibly be. I thank the Chairman and committee members for their attention and I welcome any questions.