Mr. Seamus McCarthy:

The annual finance accounts present the receipts into and issues from the Central Fund of the Exchequer, together with a set of statements that analyse the transactions. The financial statements of the national debt, which are prepared by the National Treasury Management Agency, NTMA, are presented in full as Part 2 of the finance accounts. The chapters that are the subject of today's meeting were compiled to highlight key aggregates and trends in Central Fund transactions and in broader State liabilities.
Chapter 1 summarises the Exchequer's financial outturn for 2012 when Central Fund issues exceeded receipts by almost €15 billion. Receipts into the Central Fund in 2012 totalled €41.1 billion, representing an increase of 6% year on year. Issues from the Central Fund amounted to €56 billion in 2012, a decrease of 13% year on year. General Government debt is the standard and most complete measure used to report Government debt under Maastricht treaty provisions. At the end of 2012, Ireland's general Government debt stood at around €192 billion. The debt represented 117% of Ireland's gross domestic product at the end of 2012 compared with 104% a year earlier.
The principal components of the general Government debt at the end of 2012 were borrowing by the NTMA on behalf of the State, which is referred to as gross national debt and which is accounted for in the national debt account, and promissory notes issued in 2010 by the Minister for Finance to the Irish Bank Resolution Corporation and the EBS Building Society, which were not included in the NTMA's national debt accounting.
The nominal value of the promissory notes at the end of 2012 was just over €25 billion. In the context of the liquidation of the Irish Bank Resolution Corporation in February 2013, the related promissory notes were cancelled and replaced with floating-rate Government bonds issued by the NTMA. The bonds now form part of the gross national debt. Almost 90% of the June 2013 gross national debt was in the form of medium to long-term debt instruments. Funding received under the EU-IMF programme of financial support for Ireland accounted for almost one third of that debt. Figure 2.6 presents a maturity profile of the debt and indicates that, at that date, over €100 billion would fall due for repayment for re-financing by 2020. Exchequer payments in 2012 related to servicing of the national debt totalled over €5.8 billion. This was up 23% when compared to the debt-servicing costs in 2011. It should be noted that this excluded the interest that accrued in the promissory notes.
The NTMA estimates that the weighted average cost of servicing the gross national debt was 3.8% at the end of June 2013. Around 80% of the debt was at fixed rates.
Cash and other financial assets held by the Exchequer totalled €23.8 billion at the end of 2012, rising to €30.6 billion at the end of June 2013. This reflects an increase of over 28% in that six-month period. Almost 46% of the end-of-June total is held as cash on deposit in the Central Bank. The average interest rate earned on such deposits was 0.09%. A significant portion of the available cash balances was held in short-term bank deposits and non-Irish treasury bills. Those investments earn a higher rate of return than the interest on Central Bank deposits but they also carry a higher risk.
The build-up of cash and other financial assets reflects the State's intention to have sufficient advance funding in place by the end of 2013 to cover 12 to 15 months of Exchequer financing needs after the EU-IMF programme came to an end. However, there is a cost to the Exchequer associated with maintaining high levels of cash balances because the return on those assets is lower than the State’s average cost of borrowing.
Accrued pension entitlements of public servants are a significant liability of the State but these are not reflected in the finance accounts. At the end of December 2009, an estimated €116 billion had accrued in respect of such pensions. The 2012 finance accounts continued to note the estimated end-2009 liability. Later assessments of the liability had not been made despite the very significant changes in public sector employment and remuneration in the intervening years. As discussed when the Accounting Officer of the Department of Public Expenditure and Reform appeared before the committee recently, a more up-to-date estimate has now been prepared and actuarial reviews and projections of public service pension costs will, in future, be carried out regularly. This should help to ensure decision-makers are aware of the long-term cost impact of public sector pensions and of changes in pension terms, and that the timing of pension outflows.
In the 2011 report on the accounts of the public services, I recommended that the Department of Finance should review the level and quality of disclosure in the finance accounts so as to increase the transparency of information about the public finances. The Accounting Officer agreed with the recommendation. In March 2013, a team from the International Monetary Fund, IMF, visited Ireland to evaluate Ireland's fiscal management and reporting arrangements based on the IMF's fiscal transparency code standards. The report of the review team, published in July 2013, contains detailed recommendations on the reform of a number of areas, including the nature, content and timing of fiscal reporting, and a proposed action plan for implementing the recommendations over the period 2013 to 2017. The report's recommendations are set out in Annex 1 to Chapter 1.
The Government has asked a steering group under the joint leadership of the Departments of Finance and Public Expenditure and Reform to implement the proposed action plan, as appropriate. My office is represented on that steering group. The Accounting Officer will be able to brief the committee on progress to date in that regard.
Finally, the 2012 appropriation account for the Vote of the Office of the Minister for Finance records expenditure totalling €26.2 million on four programme areas. These relate to the costs incurred in respect of budget and economic policy, financial services and taxation policy, banking sector policy and the provision of shared services. The expenditure on banking sector policy recorded in the appropriation account is €6.8 million. However, members should note that this does not include costs associated with staff seconded to the Department from the NTMA to deal with banking sector issues and certain related consultancy costs. Those costs are borne by the NTMA and are not recouped from the Department. The level of costs incurred is not disclosed in either the appropriation account or the NTMA's financial statements.
At the end of 2012, the Department had underspent by €7.5 million relative to its budget. That amount was accordingly liable for surrender back to the Exchequer. Note 3 indicates that much of the shortfall related to delays in the filling of vacancies and the use of pro bonostaff in a number of key senior posts and lower-than-expected legal advisory fees arising from the postponement of certain bank and debt restructuring projects.