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Thursday 8 December 2016

How Ahern ignored key warnings on economy

FF-PD leaders spurned advice of civil servants for a decade

Siobhan Creaton

Published 02/03/2011 | 07:32

Bertie Ahern and his finance ministers Charlie McCreevy and Brian Cowen shattered the public finances by ignoring repeated warnings from their civil servants over the course of a decade.

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The damning revelation in a new report detailing how Fianna Fail politicians swept aside advice came as Fine Gael and Labour began talks to strike a coalition deal centred on fixing the public finances.

In a major independent review of the Department of Finance's performance between 1999 and 2008, details emerged of how the Fianna Fail/Progressive Democrat governments ploughed ahead with tax and spending packages that were €6bn more generous than the Budgets recommended by officials within the department.

This is almost two-thirds of the €10bn gap that now stands between government spending and taxes this year.

The report, compiled by Canadian expert Rob Wright, exposes how Department of Finance officials repeatedly warned the Government about the dangers of its economic policies over the last 10 years.

But, crucially, their advice was ignored.

The report found that the budget-making process was overwhelmed by programmes for government and social partnership. And it says the biggest surge in budget spending happened in 2001 and in 2007 in the run-up to general elections.

In 2001, despite having agreed a Budget worth €1.3bn, the then Finance Minister Charlie McCreevy subsequently delivered the now infamous "giveaway Budget" worth €2.7bn that extended tax reliefs and accelerated spending.

Mr Wright found that while Mr McCreevy and Mr Cowen as finance ministers each year brought the Budget recom-mended by the civil servants to their cabinet colleagues, they were overturned in favour of more generous policies.

The year the Cabinet had its eyes on an election, it dramatically boosted budget spending despite repeated warnings.

Once the government had won this election, it dampened down its next Budget -- but it was still about €700m more than the €1bn tax and spending measures agreed.

Mr Ahern said last night he did not know the report was being published and he would "have to have a read of it". Mr McCreevy could not be contacted for comment, while Mr Cowen did not respond to questions on the matter.

The only year where the Budget was below that recommended by the department was 2003, with the smallest package delivered during that government's term of office.

This shows some effort to rein in spending at a time when the international economy was beginning to falter. By then Mr McCreevy wanted to introduce a round of cuts to stabilise the situation -- but these were met with widespread opposition.

In 2004, Mr McCreevy delivered his last Budget. That year, instead of a more modest Budget, measures that were €400m more than the department wanted were included and the surge in spending began again.

When Mr Cowen took over as Finance Minister in 2005 he delivered a significantly bigger Budget again -- €700m above what the department advised.

And as another general election approached, in 2006 the Cabinet once more signed off a Budget that was €600m more generous than advised at a time -- at this point the economy was beginning to overheat.

But the biggest giveaway was in 2007 when Mr Cowen brought in a Budget even more generous than Mr McCreevy's pre-election one in 2001. That year, the Ahern-led government added another €1.3bn to the Budget package, introducing tax cuts and spending that was almost twice as much as recommended. As in 2003, once the government was re-elected, the Budget drifted lower again.

Mr Wright notes that the department's advice was "more direct and comprehensive" than the concerns expressed by other commentators.

However, the department and its civil servants did come in for stiff criticism in relation to the construction industry.

It states that while there were "repeated expressions of concern", the department failed to "organise a strategic response". It was also found to have lacked coherence in dealing with the issue, including the introduction of 100pc mortgages.

The Association of Higher Civil and Public Servants said the report had vindicated the decisions taken by its members.

Irish Independent

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