Business Irish

Sunday 22 April 2018

Clearout now complete

Department of Finance secretary general seen as the latest senior official to pay for his role in Ireland's economic woes

THE imminent departure of Department of Finance secretary general Kevin Cardiff to the European Court of Auditors marks the final stage in a gradual clearout of the officials who were in place at the time of the 2008 bank guarantee.

On Thursday, it was announced that Mr Cardiff, who has been secretary general of the Department of Finance since February 2010, would become Ireland's representative on the European Court of Auditors in March 2012.

Under normal conditions, the appointment of the Irish representative to the Court of Auditors would be entirely non-controversial. Not this time.

Not alone did the existing Irish representative on the Court, barrister Eoin O'Shea, who was nominated to serve the remainder of Maire Geoghegan's six-year term following her elevation to the European Commission in April 2010, make it clear that he wished to be re-appointed for a full term, a position which was supported by Court of Auditors president Vitor Caldeira, it is also clear that Mr Cardiff was a reluctant replacement.

Following the announcement of the appointment, Department of Finance sources confirmed that Mr Cardiff had not asked for the switch, which will see him forego a large chunk of his public service pension entitlements, which only fully kick in after 40 years of service.


The move to the European Court of Auditors, which is based in Luxembourg, will make Mr Cardiff one of the shortest-serving secretary generals in the history of the Department of Finance.

In recent decades, only John Hurley, who served two years as secretary general between 2000 and 2002 before leaving to head up the Central Bank, had a similarly short spell in charge. However, Mr Hurley's appointment as Central Bank governor was widely seen at the time as a promotion.

It would be difficult to make the same claim for Mr Cardiff's transfer to the Court of Auditors. Although technically one of the institutions of the European Union, alongside the European Parliament, Commission, Council, Council of Ministers, European Court of Justice and ECB, the Court of Auditors has had a largely undistinguished history since its foundation in 1975.

A possible measure of its lack of effectiveness is that it has failed to sign off on the EU's accounts since 1994.

So why is Mr Cardiff, who is still only in his early fifties, accepting what is, at best, a move sideways after just two years as secretary general of the Department of Finance, in fact if not in theory, the most important job in the Irish civil service?

The blunt truth is that he probably didn't have any choice. In the run-up to last February's general election, Fine Gael called for senior civil servants to be held accountable for their part in the decisions which led to last November's EU/IMF bailout.

The then leader of the opposition, Enda Kenny, called for top civil servants to be held accountable for their actions and criticised the lack of talent within the Department of Finance.

The March 2011 Wright Report was scathing in its criticism of the performance of the department in the decade leading up to last November's bailout.

The report accused the department of lacking "critical mass in areas where technical economic skills are required" and of having "too many generalists in positions requiring technical economic and other skills".

It also described the department as being "poorly structured" and was also highly critical of its human resources management.


Wright was also scathing about the "warnings" delivered by the Department of Finance to its political masters during the boom years.

"It [the department] should have adapted its advice in tone and urgency after a number of years of fiscal complacency."

In other words, the department's "warnings" were of the wishy-washy, on-one-hand, on-the-other-hand variety that successive taoisigh and ministers for finance felt free to ignore with impunity.

Reading between the lines of the Wright Report and the related Nyberg, Honohan and Regling Reports, which dealt with different aspects of the Irish fiscal and banking collapse, the picture that emerges is one of bureaucrats and regulators who had grown too close to politicians who had been in power for too long.

As a result, the permanent officials lacked the necessary professional and intellectual detachment that was required to stand up to the politicians as the economy headed over the cliff.

Whatever the precise details, what is indisputable is that ever since the decision of September 30 2008 to unconditionally guarantee the deposits and bonds of the Irish-owned banks, a move that would eventually bankrupt the Irish State and lead to the November 2010 EU/IMF bailout, there has been a steady clearout of all those involved, both politicians and officials.

While the removal of the politicians was a brutal, abrupt process, with Fianna Fail losing three-quarters of its Dail seats and the Greens being completely wiped out in last February's general election, the bureaucratic clearout has been a slower, less dramatic process.

First to go was Financial Regulator Patrick Neary, who became the early scapegoat for the collapse of the banking system. He "retired" in January 2009. Central Bank governor John Hurley, who had previously been granted a six-month extension, stepped down in September of that year, while David Doyle retired as secretary general of the Department of Finance in January 2010.

Now, Mr Cardiff, who had been the head of the department's banking policy division from December 2006 until his appointment as secretary general just over three years later, and before that the head of a combined banking and taxation division, is also clearing his desk.

This meant that Mr Cardiff was the official in charge at a time when the department's revenue projections were completely askew, failing to anticipate both the collapse in the tax take that would result from the property crash, and the banking system going bust at an eventual cost to the taxpayer of up to €70bn.

His central involvement in both the banking and revenue debacles rendered him extremely vulnerable following any post mortem of the department's role.

While the former Finance Minister, the late Brian Lenihan, appointed an insider, Mr Cardiff, to replace David Doyle when he retired, he brought in outsiders to fill the Central Bank governor and financial regulator jobs.

TCD economist Patrick Honohan was appointed Central Bank boss in September 2009, the first time an outsider got the top job in the organisation's 70-year history, while Matthew Elderfield, who had previously headed up Bermuda's Monetary Authority took over as Irish financial regulator in October 2009.

So who will succeed Mr Cardiff? Precedent would tend to suggest that the job will go to an insider. However, in these extraordinary times precedent could turn out to be a very poor guide.

Will Finance Minister Michael Noonan break with almost 90 years of tradition and reach outside the ranks of the civil service for the first time in the history of the state to fill the job?

If he does, it would represent a stinging rebuke to Mr Cardiff and his predecessor Mr Doyle.

However, it may only be by going for a clean sweep and appointing outsiders to all of the key jobs in the Irish financial bureaucracy that public confidence, which has been so battered by the events of the past three years, can be restored.

Irish Independent

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