Thursday 18 December 2014

Woman who warned on house prices will be inquiry's star turn

New finance chief was among senior officials who ignored whistle-blower's warnings about impending crash

Published 20/07/2014 | 02:30

VOICE IN THE WILDERNESS: Marie Mackle whose house-price warnings in 2005 and 2006 were ignored. Photo: David Conachy
VOICE IN THE WILDERNESS: Marie Mackle whose house-price warnings in 2005 and 2006 were ignored. Photo: David Conachy

She was a lone voice at the heart of the Department of Finance, warning about the dangers of the overheating property market, but those warnings were ignored.

She now no longer works at the department, but one of those who strove to keep her warnings quiet has just become Michael Noonan's most senior official.

In April 2012, the Sunday Independent introduced the name of Marie Mackle to the country as the whistle-blower who had sought to alert the powers that be, including then minister Brian Cowen, about how the crash was coming.

"I paid the price for being a whistle-blower," she claimed in an official submission to a review panel into the department after her predictions came to pass. She is however to be a star witness at the upcoming Oireachtas Banking Inquiry. Several members of the inquiry have this weekend said she is a witness they must hear from.

Derek Moran has this month been appointed by the Government as Secretary-General of the Department of Finance.

Back in 2005, Ireland was a country in the middle of a property boom. The nation was addicted to cheap money and, based on the belief that prices would keep on rising, demand exploded. The arrival of 100 per cent mortgages and a raft of property-related tax breaks poured fuel on the fire that would two years later destroy the country.

Officially, at the time, the Department of Finance and its then minister Brian Cowen lionised the success story of Ireland's property boom. They said the boom was based on sound fundamentals, a rapidly increasing population and full employment. "There is no reason to believe that any of the fundamental driving factors are about to go into reverse," Cowen said many times in speeches at the time.

However, top-secret internal emails and documents seen by the Sunday Independent revealed that Mackle's isolated courageous voice within that department was screaming for the madness to stop. But the warnings were ignored and erased from public statements by senior officials, including Moran.

These secret emails show how her crucial warnings to her superiors, throughout 2005 and 2006 - at the height of the boom - that Ireland was heading for an economic crash were erased from public statements made by Cowen and the department.

Time and time again, always basing her observations on reports from bodies like the ESRI, the OECD, the IMF and the Central Bank, Mackle drafted warnings for her bosses, who noted her objections countless times, to dismiss them.

More alarmingly, the documents catalogue beyond doubt how Mackle's warnings were systematically removed and erased from draft answers to Parliamentary Questions from opposition TDs, who had begun to ask questions about the government's reliance on property-based taxes.

Mackle began raising concerns that Ireland was facing a property crash in January 2005.

The assistant principal officer began to say that evidence from various bodies like the IMF, the OECD and the Central Bank warning of great risks "deserved attention".

A month later, in an email, which was copied to Derek Moran, Mackle again noted her concern about the risks of a housing crash, but conceded that her section head ultimately had the call on what is to be included in the final reply.

"I felt it should acknowledge the risks to the housing market. However, I am new to the area. As head of the section you decide what goes into the final reply and obviously I must do as directed," she wrote. None of her concerns was contained in the final official replies given in Cowen's name, which remain on the Dail record to this day.

In 2006, Mackle's objections became more pronounced. A clearly frustrated Mackle called into question Cowen's "soft stance" on the threat of a crash. "I have difficulties with the line taken on debt, for reasons clear in the CB report. While personal views can't appear in a PQ, the minister appears to perhaps be taking a softer line than the CB on debt."

Mackle produced an alternative reply which she said "is more trenchant but has a zero chance of being passed by the department." In May 2006, an extraordinary series of emails were exchanged around the formation of a reply to a priority question from then Fine Gael TD Paul McGrath.

Again Mackle raised concerns. One email exchange between her and bosses, including Moran, showed clearly how her concerns were ignored and vanished from the official replies and how she was forced to adopt the "official position" which she totally disagreed with.

"Two replies have been drafted. The first contains material which is as close as I can get to the official position. The second represents what I perceive to be a more accurate reply but may be unacceptable to the department. I have serious doubts and reservations about the past official position on the housing market," she wrote starkly. She reiterated her concern in an email to one senior official.

The official replied: "The first reply is acceptable . . . the second reply with reference to consideration given to broadening of the tax base is not appropriate from the tax side."

It is clear that Moran was becoming annoyed at her persistence and delivered a put down to her saying that he did not want a series of emails from her, but just one email per question. "For future reference I want only one reply to each question. . . (official). Answer is okay with me. . ." Moran wrote.

A month later, Mackle was instructed by Moran to issue a highly positive statement extolling the virtues of the broad consensus that there would be a "soft landing" in comparison to her by now well-voiced concerns. "Go back to them and say this 
. . . the large increase in new housing supply will restore equilibrium to the market 
. . . There is a broad consensus amongst commentators that the most likely outcome for the housing market is a 'soft landing'. The government continues to run a prudent, stability-orientated budgetary policy . . ." Moran said to Mackle.

In November 2010 she prepared a 22-page report for a departmental review group into what went so badly wrong inside its Merrion Street walls. In a dossier for the Wright Commission, Mackle said she felt she became an isolated and alienated figure within her department for attempting to speak out.

A spokesman for the Department of Finance said this weekend that Moran was merely reflecting the view of then minister Brian Cowen.

"It is not Derek's view, nor is it Marie Mackle's view, it is the position of the minister. So the answer has to reflect the position of the minister," the spokesman said. The Sunday Independent has confirmed this weekend that Marie Mackle has since left the department. She did the State some service.

Sunday Independent

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