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Analysis/Comment Last Updated: May 23, 2014 - 7:34 AM


Irish Government parties set for 2-year vote buying spending spree
By Michael Hennigan, Finfacts founder and editor
May 20, 2014 - 7:06 AM

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An Irish general election has to be held by the spring of 2016 and following Friday's local and European Parliament elections, the governing parties, Fine Gael and Labour, will begin what will be a 2-year vote buying public spending spree.

It will appear as if a feast follows a famine and as with the infamous Irish-run Tammany Hall system in the past in New York City, there will be some positives but we will find that little has "changed, changed utterly" in the words of William Butler Yeats in his poem: 'Easter 1916.'

The Financial Times reported in March 2009 that Ireland was planning to introduce tough legislation to clamp down on crony capitalism and excess bank lending in the wake of the property bubble that has hammered its leading banks, Brian Lenihan, finance minister, told the newspaper.

“There is a problem in all small countries with too many incestuous relationships,” the late Mr Lenihan said. “We have decided to establish a central bank commission which will have comprehensive regulatory as well as monitoring powers, and will have the power to direct restrictions on lending.”

Unfortunately Crony Ireland didn't die when Fianna Fáil's Galway Races tent was dispersed to the four winds in February 2011. The promised winds of change in that month's general election were largely ignored.

In December 2012, Niall Fitzgerald, former CEO of Unilever, the household goods giant and one of the few Irish people to run a transnational group, told Brendan Keenan of The Irish Independent:

We must quickly put an end to any perception that corporate governance can be compromised by personal relationships. The victims of the recession have noted what they perceive to be a cosy cartel at the top -- the bankers, developers, politicians, regulators and business people generally.

"We know what we're talking about here -- about a 'cute hoor,' nod-and-wink, mutual pockets-lining approach to business transactions -- about cronyism. At the very least, there should be more transparency...Eighty billion of public money is being put in here. Taxpayers are entitled to know what is being done with it.

"NAMA (National Asset Management Agency, the public toxic property loans agency) for example, should not be a secretive organisation. It does not wash to say information should be classified to preserve commercial confidence. At the very least, generic descriptions of loans and assets should be disclosed. These are exceptional circumstances, with vast amounts of money involved."

Consider this on accountability:

  • Last Friday Michael Noonan, finance minister, published proposed legislation to transfer €6.8bn into the State’s new investment fund from the national pension reserve. The minister will appoint the board and will have influence on the investment committee. There is no suggestion that he plans to have overseas membership that is independent of the domestic politico-business nexus. After-the-fact monitoring by the Dáil's Public Accounts Committee and the Comptroller & Auditor General is not adequate and political interference in decision making on loans to SMEs (small and medium size firms) and other projects is inevitable;
  • Has anything changed in the decade since Charlie McCreevy, then finance minister, pulled a political stroke by announcing a decentralisation of a large part of the public services out of Dublin and ministers got the prime picks for their constituencies?  Dr TK Whitaker, Ireland's most renowned civil servant, said in an interview in 1987 [pdf] that he would like to see "a restoration of the old (civil service) principle that you were independent of ministers. You gave your views on any new proposals fearlessly, critically, honestly. You did not care whether your views were likely to commend themselves to the minister, whether for their own sake or politically." Today, tugging the forelock to ministers remains the routine and it would for example be strange if an enterprise agency chief expressed an original view on policy.
  • Minister Noonan failed miserably to make a difference to the system of limited accountability when at the behest of the bailout troika, he established a fiscal advisory council but one with neither independence from the executive or any meaningful powers. Why would he emulate Canada and Australia where the equivalents are appointed by parliament and are not subject to self-serving restrictions by the executive?

So with a  system that lacks accountability, ministers placing 'reliable' individuals on boards and civil servants going with the flow, who would shout stop?

Consider this on evidence from recent months:

  • This is the first time since the early 1980s that IDA Ireland "has funded and managed the construction of an advanced property solution for the marketplace." An advanced technology building of c. 2,674m² is to be built in Athlone and another of c. 2,348m² will be built in Waterford. Government TDs must be lobbying for more and why would there be an transparency on the issue? An empty factory gives voters hope and some continuing jobs for security staff. Reality Check: The United States now has very few large factories: of more than 295,000 manufacturing establishments counted by the Census Bureau in March 2011, only 815 employed more than 1,000 workers. The reported number increased slightly in 2011, marking the first time since at least 1998 that the number of large plants has shown an uptick. There were 1,504 in 1998. Who knows but an American tenant could eventually get such a facility in Ireland at a very low rent when it's empty for sometime. Who knows? The insiders at no monetary loss to themselves.
  • NAMA is likely to be wound up before its original expiry date of 2020 and Frank Daly the chairman who is a retired civil servant, has said he was “quite optimistic” about the agency achieving "a surplus for the taxpayer in the end." This is as illusory as the tax avoidance related-smoke that accounts for almost half of Ireland annual services exports of €94bn. By the end of 2011, a total of €74bn in loans had been transferred to NAMA by the five participating banks and €31.8bn has been paid as consideration to the institutions, an overall discount of 57%. - - the State injected €64bn into the banks to cover losses. What surplus? With the international commercial property market having recovered, what will win out: the political interest to have NAMA wound up by 2016 or the public interest that may suggest that the rush to get rid of its property portfolio is reckless? Ministers could also for political purposes force joint venture development of the Dublin Docklands, where NAMA controls many sites, to boost construction projects. Who will act in the public interest as again the insiders hold all the cards.
  • It of course helped that Jimmy Deenihan, minister for arts, heritage and the gaeltacht, is a former Kerry footballer, but Cork’s Páirc Uí Chaoimh getting a gift of €30m towards the €70m cost of redeveloping the stadium as a "centre of excellence" - - 43% of the project cost - - while only €50m could be found for social housing. Evoking the crazy years, what is this term "centre of excellence" - - clever isn't it to put the cart before the horse by claiming excellence in advance. Jerry Buttimer, the local Fine Gael TD, is happy for the time being at least, saying: "For many years we have heard about the possibility of redeveloping Páirc Uí Chaoimh, recently Cork City Council granted planning permission, and now the development has been given the financial support it requires to proceed. I am delighted that this significant capital project has received the support that it deserves." It would of course be nice to have funds for every deserving cause but Mr Buttimer, don't be surprised at the next general election if some of your constituents who have been part of the 'Hidden Ireland' during this brutal recession say to you in the Cork lingua franca: "Thank you, but now fuck off!"
  • The bailout troika had allowed the Government to spend some of the proceeds of  the sale of State assets for job creation and the Páirc Uí Chaoimh gift comes from a €200m allocation -- the taxpayer was also shafted on the sale of units of Bord Gáis. According to The Irish Times, "Depending upon performance, taxpayers may net a sum as low as €129m for a retail book of almost 700,000 customers, a power plant (Whitegate) that cost €400m to build in 2010, and a near 40-year old brand (the State is obliged to rebrand what remains of Bord Gáis). Together with Irish Water, the old Bord Gáis infrastructure business will remain in State hands as Ervia."
  • Being "economical with the truth," the euphemism that one of Prime Minister Margaret Thatcher's cabinet secretaries, used in the 1980s for lying, is common in politics and few Irish Government statements can be taken at face value. The Central Statistics Office can issue caveats when it publishes data but what becomes the official talking point for ministers is what would present it in the best light.
  • As for media manipulation, last week there was an official leak to political correspondents on plans for a second State bank guarantee to enable the issue of 95% LTV (loan-to-value) mortgages. In response to scepticism and ignoring the leak message, Michael Noonan, finance minister, qualified the planned scheme by saying it may or may not go-ahead later in 2014, depending on a study -- creating confusion again in the housing market for potential first time buyers.
  • In Ireland Government parties get public funding while there is seldom a distinction made between public and party business. Each minister has a communications department to burnish his or her image.  

In mid-September 2008, two weeks before the issue of the first State bank guarantee, at a conference on Ireland's economy, hosted by the Institute of Public Administration (IPA) in association with the Department of Finance, as a tribute to the contribution of Dr TK Whitaker, the architect of the modern Irish economy, on the 50th anniversary of the publication of the seminal document, Economic Development, an international academic warned the Irish public service that it needed to make more extensive use of international panels of experts for filling senior appointments, awarding government contracts and on competition policy. Prof Paul Hare of Edinburgh’s Heriot-Watt University said that Ireland’s economic institutions were vulnerable to undesirable distortions.

Prof Hare added:

In some respects, though, Ireland’s economic institutions, especially where they concern issues of competition policy; selection of personnel for senior positions (eg in private business, the civil service, the universities); the awarding of government contracts; and so on, seem inherently quite vulnerable to, special pleading, ‘jobs for the boys’, and other such undesirable distortions. ‘Jobs for the boys’ (and girls, too, naturally) is a widespread practice in many countries and generally refers to the practice of securing jobs through personal connections and the like.

“If the boys (and girls) who actually get the jobs are sufficiently deserving and competent, then the system need not be so bad (though it is never fair). But how does a country build up the ‘ethos’ that makes this happen and sustains it? In a small country like Ireland, where at elite level everyone knows everyone else, this is surely immensely difficult. To ensure both fairness and high standards, I would therefore favour extensive use of international panels of experts, along with a high degree of openness and transparency. To achieve this, Ireland still has some way to go,"

Almost six years later, it would be a good thing!

It would be remiss to ignore a relevant reality that a significant part of the electorate has in the past tolerated poor governance and corruption with priority given to local rather than national interest.

When Enda Kenny, taoiseach, said in a national broadcast address in December 2011: "You are not responsible for the crisis," he was technically correct.

However, it was wrong to imply that people who voted for Fianna Fáil, the dominant Irish political party, in particular, in the 1997, 2002 and 2007 general elections, had no responsibility whatsoever for their choice.

It wasn't an "Act of God" that twice in a generation the Irish economy has been brought to the brink of ruin - - as argued here, in the area of governance, none of the traditional parties, are free from blemish.

The politicians largely reflect the culture they come from. 

Update May 22, 2014: The Government's spin machine has been working right up to polling day and a press conference attended by Enda Kenny, taoiseach, and 3 ministers was held in Dublin today, to ensure that the broadcast media Thursday and the newspapers on Friday -- polling day -- will carry positive news to influence voters, that was deliberately scheduled for today.

We would be a great country if we could monetise spin or more accurately bullshit.

Bertie Ahern and Mary Harney should remind us that announcements for the media seldom match the reality.

Government announces €500m Irish SME credit scheme on eve of polling day

SEE also:

European Parliament: Vote No. 1 for Diarmuid O'Flynn in Ireland South

Irish Media Post-Economic Crash: "Don't interrupt the minister"

Celtic Tiger RIP: Change in conservative Ireland six years after crash

OECD BEPS Project: Ireland should embrace corporate tax reform

Irish Innovation: Evidence of science policy failure mounts

Irish Medium-Term Economic Strategy 2014-2020: Exports to plunge by €50bn - Part 1-8

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