Mr. Derek Moran:

I thank the Chairman and members of the committee for affording me the opportunity to address them. With me today are Mr. John McCarthy, the Department's chief economist, and Mr. Gary Tobin, head of the EU and international division. I will focus on the specific items on today's agenda and keep my comments brief.

The Estimate for the Department of Finance for 2019 was originally set at €41.1 million, or €39.7 million net of appropriations-in-aid available. A Supplementary Estimate was obtained in December 2019, bringing our gross estimate to €62.3 million, or €60.9 million net of appropriations-in-aid. The net outturn for 2019 was €58.8 million, leaving a surplus to be surrendered to the Exchequer of approximately €2.083 million.

The Supplementary Estimate for Vote 7 was to meet the cost of legal settlements entered into by the State following advice from senior counsel and approved by the Attorney General's office. The settlements were in respect of protracted legal proceedings arising from the air travel tax introduced in budget 2009, and agreements were entered into following mediation.

Savings which had arisen during the year were used to offset partly the supplementary allocation required. These savings were approximately €1.4 million in capital and €1 million of the original consultancy allocation. Despite this, at the end of the year a surplus arose for a number of reasons. There was an underspend of €1.1 million on programme-related costs arising from lower legal and consultancy costs, mainly relating to the shareholding and financial advisory division of the Department. There were savings of €200,000 relating to the disabled drivers fuel grant scheme, and €300,000 was returned to the Exchequer in respect of the Office of the Financial Services and Pensions Ombudsman. Underspending of some €500,000 occurred in respect of non-pay administration expenses, €300,000 of which was due to capital projects not proceeding during the year.

Regarding the Exchequer financial outturn for 2019, I draw the committee's attention to the following key points. Tax revenues for 2019, at €59.3 billion, were up €3.8 billion, or 7%, year on year and €1.3 billion, or 2.4%, on profile. Regarding income tax, the largest tax head, the 2019 performance was strong, with receipts finishing the year €1.7 billion, or 8%, ahead of those for 2018 and in line with profile. Corporation tax receipts in 2019, amounting to €10.9 billion, were up by €500 million year on year and some €1.4 billion ahead of profile. VAT returns saw strong annual growth of 6.2% in 2019 and were in line with expectations. Total VAT collected during 2019 was just over €15 billion. Excise receipts were in line with profile, with some €5.9 billion collected. This represented an increase of nearly 10%, or more than €500 million, on 2018. On the expenditure side, total expenditure, at €63.8 billion, represented an increase of some €3.6 billion on 2018.

As the committee is aware, as part of the European Commission's decision of August 2016, Ireland was ordered to recover from Apple the alleged state aid, plus interest, related to a ten-year period from 2003 up to 2014. Notwithstanding Ireland's appeal against the Commission's decision, the Irish Government complied with its obligation and recovered a sum of €13.1 billion plus interest of a further €1.2 billion. The Minister for Finance agreed with Apple that the amounts collected should be held in an escrow fund until the legal process is completed. The Ireland Apple escrow fund was established under the terms of a formal agreement between the Minister for Finance and Apple pending the final outcome of legal challenges to the findings of a state aid investigation undertaken by the European Commission. The investment and management of the fund is jointly overseen by the Minister and Apple, with the Minister's functions delegated to the NTMA.

In July this year, the General Court of the European Union annulled the Commission's decision, with the award of costs to Ireland. However, the Commission has now lodged an appeal with the Court of Justice of the European Union, so it could be at least a further two years before legal proceedings are concluded. The Ireland Apple escrow fund will continue to be operational during this time. I welcome the Comptroller and Auditor General's report, which presents an excellent overview of the performance of the fund and how it is managed.

The Department's mission is to manage Government finances and play a central role in the achievement of the Government's economic and social goals, having regard to the programme for Government. The Department is currently in the process of drafting a new strategy statement for the period 2021 to 2023. It will set out how the Department will continue to work towards achieving strategic goals pertaining to public finances, the economy and the financial sector.

In 2019, the Department continued to make progress on achieving its goals, which are fully aligned with the two programmes set out in the Department's appropriation account for 2019. Solid economic growth was recorded in 2019, notwithstanding heightened uncertainty regarding the form that the UK's exit from the European Union would take. GDP grew by 5.6% over the year, with modified domestic demand – a better indicator of domestic economic conditions – recording an increase of 3.3%. Robust economic growth continued to pay dividends in the labour market. Employment growth of around 3% or higher was recorded for the seventh year straight, with the level of employment reaching 2.3 million in the fourth quarter, the highest level on record. Accordingly, the unemployment rate edged below 5%, which is broadly consistent with the achievement of full employment in economic terms.

The role of the Department and others in the Brexit process has been to protect the economic and financial interests of the State and to minimise disruption to trade to the greatest extent possible. Brexit is mainstreamed in the Department's work in all areas including economic analysis, financial services and taxation. During 2019, the Department continued to contribute to the EU-UK negotiations and to domestic preparedness work within the whole-of-government structures overseen by the Department of the Taoiseach. The Department's dedicated Brexit unit oversaw the co-ordination of this work. In fulfilling its mission, the Department carried out a broad range of activities in 2019, as well as international outreach, representing Ireland's economic and financial interests abroad as well as strengthening Ireland's alliance-building efforts.

The arrival of Covid-19 in 2020 has had a profound impact on both the economy and the public finances. The very positive outturn for 2019 has helped to facilitate an early, ongoing and economically appropriate countercyclical response to the crisis. We went from virtually full employment in quarter 1 to a peak unemployment rate of 27% in quarter 2, with an expected average of around 16% for the year as a whole. This illustrates the scale of the challenges we face. I would like to refer to some of the Department's work this year in responding to Covid-19. It has managed this work in a very different way. The temporary wage subsidy scheme, TWSS, was introduced in March to provide income support to eligible employees where the employer's business activities were negatively impacted by Covid-19. The aim of the scheme was to maximise staff retention and firm viability by maintaining the link between the employer and employee. The July jobs stimulus plan contained a suite of tax, loan and expenditure measures designed to directly support businesses at all levels of the economy that are negatively impacted by Covid-19. The employment wage subsidy scheme replaced the TWSS in September. It is an economy-wide support open to all sectors and gives a subsidy to qualifying employers on the basis of the number of paid employees on the employer's payroll.

Budget 2021 was set against much uncertainty for the coming period in the context of Covid-19 and Brexit. Despite the challenges posed by the current pandemic, the Department delivered on the budget from both policy and logistical perspectives.

The Covid-19 restrictions support scheme has been designed to assist those businesses whose trade has been significantly impacted or temporarily closed as a result of the restrictions set out in the Government’s plan for living with Covid-19.

We are in the process of applying for EU funding towards the costs of the temporary wage subsidy scheme, TWSS. The European instrument for temporary support to mitigate unemployment risks, SURE, could result in Ireland accessing just under €2.5 billion and will help to diversify sources of funding for the Exchequer.

We have been engaging with the European Commission while it develops the details of how the Brexit adjustment reserve will be allocated and how it must be spent to put forward our case that it should reflect, in particular, Ireland’s significant adjustment and expenditure needs.

I once again express my appreciation to the staff at the Department for their ongoing hard work, particularly this year in light of the additional challenges faced on foot of Covid-19. It is only through their hard work, professionalism and commitment that we can continue to deliver.

I thank the Chairman and committee for their attention and welcome any follow-up questions.