The General Government Balance is quickly replacing the Exchequer balance as the barometer of the public finances.

There are several reasons for this, the most significant of which is that it is the measure used by Europe to judge Ireland's position under the Growth and Stability Pact. The pact outlines the fiscal rules that the participants in the single currency have agreed to abide by and covers things such as debt levels and government deficits.

The Exchequer balance is the difference between what the Exchequer - in effect the Department of Finance - has received into its coffers and what it has paid out in the process of running central government each year. Money from sources outside the central government - such as the sale of State assets like ACCBank or windfall payments by the Central Bank - are counted as revenue and can be offset against expenditure.

The General Government Balance is best seen as the difference between what all the arms of Government received and what they paid out. It includes the Exchequer plus the non-commercial State bodies such as the Central Bank as well as local government and extra-budgetary bodies such as the National Pensions Reserves Fund and the Social Insurance Fund. As a result, transfers to the Exchequer from the Central Bank or the Social Insurance Fund are just book-keeping exercises for the purpose of the General Government Balance and don't represent additional income. By the same token, the transfer of money from the Exchequer to bodies such as the National Pension Reserve Fund is neutral for the General Government Balance.

It is similar to the difference between company accounts and group accounts. The various companies in a group can trade with one another and make gains and losses, but they all cancel out in the group accounts.

The General Government Balance "is the most appropriate measure in assessing the state of the nation's fiscal position as it attempts to treat the public finance accounts on a consolidated basis. This means that the General Government Balance is unaffected by the movement of funds between the different government sectors so the full impact of revenue and expenditure trends can be assessed," according to the ESRI.