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McCarthy counts pension blessings

The most powerful civil servant in the country, rotund Dermot McCarthy, whose retirement package of a €570,000 'golden goodbye' and a pension of €142,000 a year was revealed last week, presided over social partnership, benchmarking and the Croke Park agreement during his 11 years in Merrion Street.

Known semi-affectionately by Brian Lenihan as 'The Cardinal', McCarthy was a career civil servant who served under Bertie Ahern and Brian Cowen and was at the epicentre of the last three Fianna Fail administrations. He replaced Frank Murray as Secretary General to the Government in January 2000, and consolidated his power in July 2001 when, with the retirement of the Secretary to the Department of the Taoiseach Dermot Gallagher (DAG, to his colleagues), the two positions were combined into one big job.

Born in Dublin, Dermot McCarthy attended school in the Christian Brothers Synge Street, and at the age of 16 won an essay competition on the benefits of the EU, which he later said influenced him to join the civil service. He then went to Trinity College, from where he graduated with a BA and a Masters in Literature.

He worked in the Department of Industry and Commerce, and later as a principal officer in the General Medical Service section of the Department of Health before moving to the Personnel Unit under the influential 'Sir Humphrey', John Hurley.

McCarthy was then promoted to the Department of the Taoiseach in 1993, where he became an Assistant Secretary, with responsibility for the Economic and Social Policy Division -- which under Bertie Ahern would manage the government's pet project, social partnership.

European Affairs was later added to the portfolio, even though he had a well-known aversion to flying. In later years, he would often drive to London and take a train to Paris or Rome or Brussels to attend meetings with the Taoiseach of the day.

In a rare enough public appearance in 2003, McCarthy set out his vision of the "virtuous" economic cycle in Ireland.

"Buoyant tax revenue allowed tax reductions, that supported continued wage moderation and further increased competitiveness, which increased inward investment, yielding income that increased domestic demand, giving rise to non-traded business activity and further employment," he told an OECD Forum on 'Governing Growth and Development: The Irish Experience'.

It was a succinct assessment of the so-called 'Celtic Tiger'.

What he didn't say was that that the "continued wage moderation" existed in the private sector. In the public sector, benchmarking, which he and Bertie Ahern championed, began absorbing a huge slice of tax revenues as it was used to boost the public services with increased wages, bonuses and index-linked pensions following the first benchmarking report in 2002.

When Charlie McCreevy was dispatched to Brussels, the Ahern/McCarthy axis's love of social partnership and all its pomp became sacroscant.

In 2007, the year he was conferred with an honorary degree by the National University of Ireland, there was a 25 per cent pay increase for McCarthy and his colleagues at the top of the civil service.

The "non-traded business activity" to which he referred was mainly the housing market, which would turn into the incredible hulk that reduced the main banks to corporate wreckage and bankrupted the state.

Tomorrow night on TV3's documentary series on Fianna Fail, former cabinet minister Eamon O Cuiv TD, speaking to political editor Ursula Halligan, compares the situation to Gay Byrne's famous treats on The Late Late Show.

"Maybe when it came to dealing with vested interests in society -- be it farmers, employers or unions -- maybe they all twigged the fact that with Bertie Ahern and the Secretary of the Government, that as far as possible there would be something for everybody in the audience at the end of negotiations and that they would never be told: 'Look, sorry, this time there is nothing' and maybe that was in hindsight a major, major weakness," says O Cuiv.

Fellow GAA aficionado and friend Bertie Ahern appointed McCarthy to the board of the semi-ludicrous Active Citizenship Taskforce, which was established as part of social partnership and managed to spend €383,000 of taxpayers' money on a now-forgotten report.

When the regime changed, Brian Cowen continued to depend on McCarthy, who pushed on with the Croke Park agreement, even though the public finances had fallen off a cliff.

"The Cardinal and the Beards have f***** it up again" Lenihan would fulminate.

Although he generally kept a low profile, McCarthy did become embroiled in one major public controversy when it was revealed that he knew Aer Lingus was pulling out of Shannon for three days before the public announcement, but had neglected to mention it to the cabinet.

He was also present in Government Buildings and at the centre of events throughout that fateful night, September 29, 2008, when the government decided to unilaterally guarantee the Irish banks. The other 'mandarin' in the room was his old mentor John Hurley, who had became General Secretary of Finance in 2000 and Governor of the Central Bank in 2002.

In his memoirs published last week, the former British Chancellor Alistair Darling says: "I did later find out that it [the decision to guarantee the banks] had been taken at something like 2am, which smacks of panic rather than a plan, although I understood Brian's [Lenihan] predicament."

Now, as he retires at the age of 57 with a lump sum payment of €428,011, a special top-up of €142,670 (for senior civil servants who retire early) and an annual pension of €142,670 the question is what will Mr McCarthy do next.

When the new Kenny administration came to power, it was clear that Mr McCarthy's tenure would come to an end. The idea was floated that he might be appointed as Irish Ambassador to the Holy See as a diplomatic way of handing the job to someone favoured by the new government.

This idea was likely to meet with stern opposition in the Department of Foreign Affairs, but when he opted for early retirement last month it was no longer an option.

A committed Catholic who attends mass in Westland Row church and organised a visit by Prince Charles to St Andrews Resource Centre in Pearse Street, where he is deeply involved with the St Vincent de Paul, it is now likely that he will commit his many talents to the voluntary sector.

McCarthy, who was born in 1953, lives in Castleknock, Co Dublin with his wife Rosemary Grant, head social worker in the Rotunda Hospital.

Their son went to Blackrock College and was a distinguished schools rugby player.

Sunday Independent