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 bespoke supporting statements that analyse the transactions. Members of the committee may wish to note that the accounts do not include a balance sheet. The accounts have a statutory purpose of providing an annual statement of Central Fund transactions on a cash basis and are not intended to be a comprehensive set of annual financial statements for the State or for central Government.

The national debt accounts, which are prepared by the National Treasury Management Agency, NTMA, and audited separately by me, are also presented in full as Part 2 of the finance accounts.

The chapters from my Report on the Accounts of the Public Services 2013 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 2013, when Central Fund issues exceeded receipts by €11.5 billion. Receipts into the Central Fund in 2013 totalled €44.1 billion, an increase of 7% year on year. Issues from the Central Fund amounted to €55.6 billion in 2013, a decrease of 1% year on year. Figure 1.1 shows the trends in issues and receipts from 2002, and the progress being made in closing the gap between them that emerged during the recession. Some significant developments during 2013 which the committee may wish to note are an increase of approximately 28% year on year in the cost of servicing the national debt, which in 2013 amounted to €7.5 billion; an increase of 24% year on year in Ireland's contribution to the EU budget, which amounted to €1.73 billion in 2013; and payments of just over €1 billion under the Credit Institutions (Financial Support) Act 2008, following the winding up of the Irish Bank Resolution Corporation in February 2013. These were mainly payments made to bondholders and depositors with IBRC, arising from protection provided under the eligible liabilities guarantee scheme.

At the end of 2013, Ireland's general Government debt stood at approximately €216 billion. The debt represented 123% of Ireland's gross domestic product, compared with 117% a year earlier. The principal component of the general Government debt at the end of 2013 was borrowing by the NTMA on behalf of the State, totalling €197.5 billion. This is referred to as the "gross national debt" and is accounted for in the national debt account. It increased by €36 billion or 22% during 2013.

A substantial part of the increase in the national debt in 2013 related to the extinguishing of the promissory notes issued in 2010 by the Minister for Finance to the predecessor institutions of IBRC. These notes were not included in the NTMA's national debt accounting but were included within the definition of the general Government debt. The promissory notes held by the Central Bank as collateral for lending to IBRC were replaced with floating rate Government bonds issued by the NTMA when IBRC was placed in liquidation in February 2013. The new bonds form part of the gross national debt, accounting for 23% of the Government bond debt in issue at the end of 2013.

Medium and long-term debt at the end of June 2014 accounted for just over 90% of the gross national debt. Figure 2.3 presents a maturity profile of this debt, which indicates that, at that date, approximately €100 billion falls due for repayment or refinancing in the period up to and including 2020. Funding received under the EU-IMF programme of financial support for Ireland accounted for over one third of medium and long-term debt. Since the publication of my report, Ireland has repaid €9 billion of EU-IMF funding ahead of schedule, with the agreement of other programme lenders. The Accounting Officer can update the committee further on this.

As I said, Exchequer payments in 2013 related to servicing of borrowing undertaken by the NTMA were approximately €7.5 billion. The NTMA estimated that the weighted average cost of servicing the gross national debt was just under 4% at the end of June 2014. At that date, around 88% of the debt was at fixed rates, including debt where hedging had been undertaken. The balance of the debt was at floating interest rates.

Cash and other financial assets held by the Exchequer totalled €23.6 billion at the end of 2013, rising to €25.4 billion at the end of June 2014. High levels of cash balances had been maintained since the beginning of the financial crisis and the Accounting Officer can update the committee on the level of balances held currently. In the past, the bulk of Exchequer cash balances were held in the form of deposits with the Central Bank. In contrast, by the end of June 2014, only around 19% of the total was held as cash on deposit in the Central Bank. The rest of the assets were held in a variety of forms, including short-term bank deposits with commercial banks, non-Irish treasury bills and instruments called tri-party reverse purchase agreements with financial institutions. Such investments typically earn a higher rate of return than the interest on Central Bank deposits, but they also carry a higher risk.

While the form in which Exchequer balances are held has changed significantly, with greater investment in higher yielding and higher risk instruments, the average return on Exchequer balances is still lower than the average cost of borrowing. This means that there is a cost to the Exchequer associated with holding high levels of cash balances. The Minister for Finance has not set a specific monetary limit for the level of cash and financial assets maintained by the NTMA. At the time of my report, the NTMA stated that its aim was to maintain these balances at a level high enough to cover at least 12 months' Exchequer funding requirements.

Finally, the 2013 appropriation account for the Vote of the Office of the Minister for Finance records expenditure totalling €27.3 million on five programme areas, up from €26.2 million in 2012. The programme areas relate to the costs incurred in respect of European Union and international policy; financial services policy; fiscal policy; and economic policy and provision of shared services. The expenditure on financial services policy recorded in the appropriation accounts is €9.6 million. However, it should be noted that this is not the full cost of the financial services policy function, because it does not include costs associated with staff who are seconded to the Department from the NTMA to deal with banking sector issues and certain related consultancy costs.

These costs are borne by the NTMA and not recouped from the Department. The level of costs incurred on these services is not disclosed in either the appropriation accounts or the NTMA's financial statements. At the end of 2013 the Department had underspent by €8.6 million, which amount was, accordingly, liable for surrender back to the Exchequer.