Mr. Conor O'Kelly:

Not at all. I understand.

I thank the Chairman and members of the committee for the invitation. With me are Mr. Ian Black, our chief operating officer and chief financial officer, and Mr. Ciarán Breen who the committee has got to know probably more than any of us had hoped as director of the State Claims Agency. I was not planning on reading my opening statement. I have supplied slides for reference. Their purpose is to illustrate some of the themes which inform our strategy and policy on the marketplace.

I will touch on a number of the businesses, starting with the primary original business, as the Comptroller and Auditor General described it, of managing the national debt. A theme at which we are looking is how late it is in the investment cycle and the changing interest rate cycle and environment. We see this in a number of ways, although the most obvious is the announcement of the withdrawal and ending of the quantitative easing programme and what that might do. The interest rate environment has been supportive and tranquil and had no surprises. That is the environment in which we have been for seven or eight years. It is supportive in that central banks have been buying bonds for quantitative easing in the European Central Bank's case; tranquil in that "lower for longer" has been the mantra for central banks with regard to interest rates; while "no surprises" means that the forward guidance central banks have given us on interest rates has been quite specific. It is our view that all three of these pillars of policy to which we have got used in the past seven or eight years are likely to change. As we will have the withdrawal of quantitative easing, it will not be as supportive, while rates will not be lower for longer. The Federal Reserve System has already raised rates seven times in its changing interest rate cycle and it is likely that the ECB will start to change its approach to interest rates, even though it has issued statements stating it will continue to keep rates low well into 2019. However, the environment is likely to change. That means that we will have to be careful and cautious heading into the future, particularly since Ireland is still very indebted, as we regularly point out in our bulletins and discussions with investors. Investors remain concerned about Ireland's very high levels of debt. Our debt-to-GDP ratio has traditionally been the metric used and it has moved in a more favourable direction, but investors are less interested in that metric these days because of the obvious difficulties we have had in Ireland with GDP as to whether it is an accurate measure of our ability to repay our debts. Investors look more at interest as a percentage of Government revenue and at total debt as a percentage of Government revenue. Ireland does not fare quite as well on these metrics as we do on others. We are still quite high up the league tables. I provided a chart to demonstrate this.

There are concerns about the indebtedness of the country, despite the interest rate environment. The interest rate environment has meant that our interest bill, as the Comptroller and Auditor General says in his report on our accounts, was €6.2 billion in 2017, down from €7.5 billion at its highest. We think it is on its way towards €5 billion, notwithstanding the fact that the interest rate environment will change. The reason we have a high degree of confidence that the interest bill will continue to fall, despite the changing interest rate environment, is we have pre-emptively locked in interest rates by building up a significant amount of cash, repaying the International Monetary Fund and taking a number of other actions in buying back higher coupon bonds and locking in today's lower rates. We have been able to buy insurance for taxpayers because of this pre-emptive action to lock the interest bill into today's interest rate environment before it begins to turn. We can be confident that that will occur because between now and 2020 we will have a lot of debt maturing, much of which is high coupon debt. The averages of the maturing coupons are between 4.5% and 5.9% which we are replacing at today's rates or the rates in the past 12 to 18 months. That differential is being locked in. What happened this morning is a good example. As committee members have been sitting here, an auction has been taking place in the market in which Ireland has issued €1.25 billion, a ten-year note at a yield of approximately 0.81% to 0.82%, or just below 1%, and a 30-year bond at a rate closer to 1.6%. We are locking in that differential as these coupons mature. That means that we will produce some savings in the near term. That is what one would expect the National Treasury Management Agency to be doing in this environment and what quantitative easing is all about. It allows more indebted countries to make interest rate savings. We have been able to do this to some degree to buy some insurance, but it does not mean that the environment will not change.

A good example might be what recently happened with Italy, which is a reminder of how quickly things can change and spreads can move. The Italian ten-year spread moved by 100 basis points, or 1%, over a three month period, as there began to be uncertainty about Italy's future policies and concerns about instability of the Government there. If Ireland's credit spread was 100 basis points wider, since we have issued €50 billion since the beginning of 2015, having borrowed €50 billion in the marketplace-----