An independent panel's report shows that the
Fianna Fáil/ Progressive Democrat (FF/PD)
governments headed by Bertie Ahern as taoiseach, ignored the timid warnings of
Ireland's Department of Finance over a period of 10 years.
The Irish Times reported on Jan 28, 2011 that
former Taoiseach Bertie Ahern regretted that he did not succeed in having “a
proper, national infrastructural stadium” while he was in office.
On his last full day in Dáil Éireann, Ahern told RTÉ he wished that
“somebody, somewhere” had told him about the developing crisis in the Irish
banking system while he was in office.
He said he had lots of regrets about different things. “I still think we
didn’t get a proper, national infrastructural stadium, and I think unfortunately
when I see little countries like Qatar and Kuwait . . . talking about their 10
stadiums and we never succeeded in getting one national stadium. That’s an
achievement I tried hard to do but I didn’t get.”
“I would have loved if somebody, somewhere had of told me what was going on
in the banks in this country but nobody ever did. You get wise after the event,”
the discredited boom cheerleader said.
In July 2007 in Bundoran, Co. Donegal, with
the approval of trade unionists, Ahern rounded on critics of his bubble economy:
"Sitting on the sidelines, cribbing and moaning is a
lost opportunity. I don't know how people who engage in that don't commit
suicide because frankly the only thing that motivates me is being able to
actively change something."
The Minister for Finance, Brian Lenihan TD,
today welcomed the report of the Independent Review Panel, chaired by Rob
Strengthening the Capacity of the Department of Finance (pdf). The
Minister appointed the Review Panel to assess the Department’s performance over
the past 10 years and, based on the lessons drawn from that assessment, to make
recommendations for the future development, structure and resourcing of the
In publishing the report, the Minister stated: “I
welcome the Panel’s report. It provides a very fair and thoughtful assessment of
the Department’s performance over the past ten years. While a number of
recommendations are matters for the new Government and require further
consideration, a significant number relate to organisation, skills set and work
practices -- many of which are being implemented without delay. The
implementation of these proposals will assist the Department in taking on the
complex challenges arising in the coming years. I have no doubt but that the
Department will address the issues highlighted in the report with vigour and
Rob Wright, the chairman of the group has 35 years of economic
policy and management experience in the public service of Canada, over twenty
years of which was at the Deputy Minister (Secretary General) level, most
recently as Deputy Minister of Finance.
The report says the department did not
identify the risks to the tax system that arose from the very active tax agenda
of the Government in the period since 1999 and the tax commitments in the 2002
Programme for Government were “effective political messages for the
electorate but not good tax policy.” An analysis of the risks involved
“should have been provided and communicated forcefully to the Minister for
Finance and the Government.”
The authors says a failure by the department to pay sufficient attention to the
broader macro-economic risks for Ireland during the period may in part have been
due to a shortage of highly-trained economists and financial market experts on
the department’s staff.
Given the ignorant short-termism of Fianna Fáil and
Progressive Democrat politicians, any decibel level was unlikely to matter.
Besides, Department of Finance staff took the
benchmarking payments even though they knew that they were contrary
to the recommendations of the body that produced the first report.
It simply paid to go with the flow; nobody did what would have been bizarre in Ireland - - resign on an issue of principle.
The report makes the following summary points:
Despite predictions to the contrary, the Irish
economy continued to grow substantially after 2000. However, the dynamic
fundamentally changed. Exports no longer contributed significantly to growth,
which was now driven by domestic developments, notably investment in building.
Participation in EMU left interest rates too low
for Irish circumstances. This fuelled the property boom as did financial market
competition and interbank borrowing from Europe.
Meanwhile, Irish competitiveness had deteriorated
very significantly. The property bubble began to collapse from 2007 and the
fallout was exacerbated by a significant deterioration in the external
environment. The economic and fiscal challenge was, of course, severely
aggravated by the failure of the Irish banking system.
Generally speaking, we found that advice prepared
by the Department for Cabinet did provide clear warnings on the risks of
pro-cyclical fiscal action. These views were signed-off by the Finance Ministers
of the day who would submit the Memoranda to Cabinet. The Department’s advice
was more direct and comprehensive than concerns expressed by others in Ireland,
or by international agencies. With very few exceptions, however the quantum of
spending and tax relief outlined in December Budgets was very substantially
above that advocated by the Department and Minister in June.
We see three key reasons for this failure of
fiscal policy. First, there were extraordinary expectations of Government in
Ireland to create spending and tax initiatives to share the fruits of recent
economic gains. These pressures were reflected in the political debate of the
day where all political parties were eager to meet public expectations for more
and better services. As well, the Irish economy was regarded by most as a model.
The EU fiscal rules, the Stability and Growth Pact, were respected, debt fell
and spending appeared to be well below EU levels. The underlying dangers were
either missed or ignored.
Second, the Government’s Budget process was
completely overwhelmed by two dominant processes - Programmes for Government and
the Social Partnership process. We recommend major changes to the budgetary
process that would enhance ministerial accountability to Parliament, expand the
release of detailed departmental analysis for consultation well before Budget
time and provide oversight by some form of Fiscal Council.
Third, the Department of Finance should have done
more to avoid this outcome. It did provide warnings on pro-cyclical fiscal
policy and expressed concern about the risks of an overheated construction
sector. However, it should have adapted its advice in tone and urgency after a
number of years of fiscal complacency. It should have been more sensitive to and
provided specific advice on broader macroeconomic risks. And it should have
shown more initiative in making these points and in its advice on the
construction sector, and tax policy generally.
does not have critical mass in
areas where technical economic skills are required;
has too many generalists in
positions requiring technical economic and other skills;
is more numbers driven, than
does not have sufficient
engagement with the broader economic community in Ireland;
often operates in silos, with limited
is poorly structured in a number of areas,
including at the senior management level;
- is poor on Human Resources Management.
The Public Service Management and Development
Division should be managed as a separate entity, as either a separate
Department, or reporting directly to the Minister of State for Public Service
Modernisation. The Minister and the Department of Finance should retain
authority over the overall wage bill, negotiating mandates for new collective
bargaining processes and manage a single window with other Departments to
control public spending.
This change should help focus effort on the
extraordinary opportunity provided by the Croke Park Agreement to modernise the
capacity of the Public Service. We recommend two other processes to help - - a
fulltime Task Force from across Government to include individuals from the
leading Departments and a Private Sector Advisory Board to help drive the