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Ronan Fanning: Finance reinvention begins task of shaking off grip of 'dead hand'

NINETY years have passed since Michael Collins established the Department of Finance in 1922 and the time has come for its reinvention.

Readers of the austere revision of the Department of Finance's strategy statement published last Thursday will look in vain for such a bold and unvarnished statement. But that is at once its subliminal message and the historical reality.

Less than two months have passed since I applauded Michael Noonan's courage and imagination in persuading the Government to appoint an outsider, John Moran, as the department's new Secretary General. Although I then expressed the hope that it might signal the first step on a path leading to the creation of a new Ireland, I never imagined that we would so soon be presented with a blueprint for radical change.

The need for flexibility, for speed in charting a new course, is evident even in the sub-title -- 2012 Revision -- of the strategy statement for 2011-14. No longer are the department's plans and programmes set in stone. The goals in 2011, explains John Moran in his foreword, were about crisis management; 2012 is about planning strategically for the future. Or as Michael Noonan puts it in his own foreword: "the development of a modern, professional and forward-looking department will be the key to success". Modern, professional and forward-looking: three qualities that are the very antithesis of the traditional representation of the Department of Finance.

One other phrase in Mr Noonan's foreword merits special attention: "I hope also to welcome new colleagues to our team", which, when decoded, means, "John Moran will not be the last of the new brooms"; and this, crucially, is a decision that has already been approved by the Government. And so it must be.

One of the most serious mistakes that has been made in the present crisis has been to try to run the department at the eye of the hurricane with less resources rather than more. The Central Bank and the other major financial regulatory agencies in the State have already had to make a raft of new appointments at a senior level in order to meet the unprecedented demands imposed upon them by the global crisis. It would be arrant nonsense to insist that similar appointments at the highest level in the Department of Finance should be prohibited because of the embargo on public service recruitment, which is not to deny the vital need for that embargo in a wider context.

A comparative analysis of the previous management chart with the strategy statement's table reveals the magnitude of the changes. The previous, essentially tripartite, structure was as follows: Financial Services & Taxation Division; Banking Division; Budget and Economic Division. The new quadripartite structure provides for the incorporation of banking, financial services and insurance in a Financial Services Division; tax policy, budget policy and budget co-ordination have likewise been incorporated in what is now the Fiscal Division. No great change there. But where there is massive change is in the establishment of what are in effect two new divisions. The first, the International Division, has responsibility for EU policy, Ireland's Presidency of the EU in 2013, the IMF/ OECD/IFI's programme, and international relations. The second, the Economic Division, has responsibility for strategy, forecasting, and micro-unit analysis.

The thrust of the new divisions is both outward-looking and forward-looking, again a far cry from traditional perceptions of Finance. Outward-looking insofar as it is internationally oriented. There is an intriguing reference to the establishment of advisory groups in Germany, China and the Middle East directly to "communicate action points and advice" to the new international relations unit. The groundwork was laid in China when John Moran and Nicholas O'Brien, who has been brought into Finance on secondment from Foreign Affairs to head the unit, went there with the Taoiseach. Provision has also already been made for direct communication with Irish embassies, notably in France and Germany. The strategic objective, according to Mr Moran, is to reposition Ireland in Europe; to question "how do we get the best value out of the whole EU system".

The emphasis is forward-looking insofar as the raison d'etre of the reconstituted Economic Division is predictive. The key position of head of this division will shortly be advertised. Strategic imperatives also drive new appointments that have already been made in other sections of the department. Deloitte's has provided a member of its staff on a year-long secondment to the Corporate Office to review the work practices and information flows throughout the department. KPMG has done likewise in the Financial Office, where one of its staff will act as a kind of chief financial officer charged with the task of constructing a risk and compliance model.

Other outside appointments already in place include three economists on secondment from the Central Bank,

Revenue Commissioners and Teagasc; a First Secretary on secondment from the Department of Foreign Affairs; an economic analyst on secondment from the National Economic and Social Development Office; four banking officers seconded from the Central Bank; a statistician on secondment from the Central Statistics Office; and a solicitor from McCann Fitzgerald working on a pro bono basis in the Banking Division.

Such a comprehensive reinvention would not have been possible if the department had not first been emancipated from its responsibility for the public service with the appointment of Brendan Howlin as Minister for Public Expenditure and Reform (PER) and its establishment as an independent department. A harmonious relationship between Brendan Howlin and Michael Noonan has been an indispensable ingredient in the success of this Government from the moment of its formation. A good relationship between John Moran and Robert Watt, the Secretary General of PER, is just as important and it was fortunate that the division into two departments took place before Mr Moran became Secretary General of Finance, for it has meant that he could work with Mr Watt without the handicap of that historical baggage of negativity that had bedevilled his predecessors.

What, asked TK Whitaker in The Finance Attitude in 1953, can a Finance official say about "the obstructionism of Finance", about "its inverted Micawberism" -- waiting for something to turn down, about "its slowness to see the merits of a case", about "the dead hand with which it stifles every initiative". The tone and the language as much as the substance of Thursday's statement show that, 60 years on, that "dilatoriness" and "blind devotion to precedent" that Whitaker identified as characteristic of the Finance attitude are as dead as the dodo.

One of many examples will suffice. The first of the "overarching principles" identified in the statement is "Equity ... the task of repairing the damage caused to the lives of ordinary people, the economy and the banking sector". When the lives of ordinary people are accorded precedence over the economy and the banking sector in a document emanating from the Department of Finance, something has indeed changed utterly.

Ronan Fanning is Professor Emeritus of Modern History at UCD and author of 'The Irish Department of Finance, 1922-58'.

Sunday Independent