Mr. John McCarthy:

Okay. First, I thank the committee for the invitation to attend. I am joined by my colleague, Mr. McDonagh, who heads up the statistical unit in the Department. I have circulated a short presentation and I want to highlight the Department's role in this area. Essentially, it is twofold. First, we are responsible for compiling general Government expenditure and revenue forecasts. The CSO, represented by our colleagues on my left, compile the outturn. We compile forecasts and they are required, under EU legislation, for the stability programme, which is published every April, for the summer economic statement, for the budget and for the so-called draft budgetary plan. Our second role is to provide advice to other Departments on proposed policies and their statistical classification, and so forth. The framework is the so-called European system of accounts 2010 which is the legal framework across the EU.

Regarding our interface with the CSO, we, in conjunction with our colleagues in the Department of Public Expenditure and Reform, provide data to the CSO for compiling the outturn and calculating the current year forecasts, which are included in the twice-yearly excessive deficit procedure, EDP, notification. We do not have any direct interactions with EUROSTAT. The CSO is the primary interface with EUROSTAT in this country. I stress that the Department of Finance always respects the statistical independence of the CSO, and this is enshrined in law. We use the register of public sector bodies within general Government, which is compiled, maintained and published by the CSO.

Moving on two slides, what does the reclassification mean? It means, from a public finance perspective, our medium-term forecasts will have to include the expenditure by AHBs. Obviously, this expenditure will worsen the general government balance. Revenues to the AHBs from third parties will improve the general government balance. Borrowing from private sources by AHBs will increase general government debt because it is within the general government boundary. We are examining data to assess this impact and working with the Housing Agency, our colleagues on my right in the Department of Housing, Planning and Local Government, our colleagues in the Department of Public Expenditure and Reform, and the CSO. We also participate in some of the working groups Mr. Smith mentioned.

In the final two graphs I wanted to show the committee the position regarding the general government sector. As the committee can see, it is quite complicated. General government accounting is not for the faint-hearted, as members can imagine. Before this decision, AHBs were classified outside the general government boundary. Moving to the next slide, the committee can see they are now within the general government boundary. This means that flows between the local authority and the AHBs must be consolidated. Expenditure by AHBs, as I mentioned, is now classified as general government, GG, expenditure, and revenue from non-GG bodies is classified as general government revenue. As I mentioned earlier, debt raised by non-GG bodies is counted towards general government debt. By way of a quick overview on the public finance implications, I will leave it at that. I hope Mr. McDonagh and I can answer members' questions.