Tuesday 20 August 2019

The straight-shooter with a mean record in cutbacks

ECONOMIST Colm McCarthy will be more Edward Scissorhands than Mac the Knife when he delivers his recommendations for cutting some €5bn from Government spending.

Slashing social welfare, truncating child benefit and taking a machete to the health service will be done with a dazzling panache and provoke gasps and yelps from some commentators.

And his proposals to reduce the number of civil and public servants, including gardai, will earn Mr McCarthy his own place in the pantheon of contemporary Irish hate figures.

But it will not only be trade unionists and left-wing politicians who excoriate the UCD academic for scaring children and people of a nervous disposition.

Distraught backbenchers and some of the more panicky ministers will seek to have his more draconian recommendations shelved, avoided, buried or burned.

And by designating him as Official Bogeyman of the recession, the Government may well dilute some of his most controversial proposals in the Budget so they look less heartless.

Some ministers believe Mr McCarthy's recommendations will be so severe that if they make them public, whatever they decide in the budget will be a relief compared to the proposals.

Yesterday Colm McCarthy was working on the final draft of his report with the Expenditure Review Group and he hopes to deliver it to the Department of Finance before the weekend.

After it has been examined in Finance, his conclusions will be passed on to the members of Government who have to decide if it will be published -- and there are conflicting views on that.

It was Finance Minister Brian Lenihan who invited McCarthy to head the Expenditure Review Group (the official name for An Bord Snip Nua) to advise on reducing Government spending.

Those cuts, with new and increased taxes, will be the basis of the Budget that will be a defining moment for Brian Cowen's Government later this year.

Government departments have been leaking like colanders over the past 10 days revealing frightening spending cuts to nudge the public's expectations downwards in anticipation of McCarthy's report.

And by managing the public mood toward more sober prospects and depicting McCarthy as the bogeyman, ministers hope to escape some of the anger by deflecting it toward the messenger economist.

The prospect of unpopularity will not worry McCarthy, an old hand at wielding the scissors in government departments going back to our last economic crisis in 1987.

A highly respected economist abroad, McCarthy really comes into his own when the International Monetary Fund is lurking with intent outside Government Buildings in Dublin.

In 1987, it was McCarthy who coined the name An Bord Snip for the committee suggested to identify spending cuts for the Fianna Fail minority government.

He did his phrase-making as Dean of the Doheny and Nesbitt School of Economics, where he supped and discussed with other economists and friends in the Dublin pub.

Shortly after coining the name, then-Taoiseach Charles Haughey and Finance Minister Ray McSharry asked McCarthy to take charge of the committee and identify waste in Government spending.

His most famous suggestion was made to the Department of Foreign Affairs, where he asked senior officials to close down any embassy the minister failed to recall when asked to list them.

He distinguished himself with more good jokes during the current economic confusion, describing the housing supply crisis, as "building houses nobody wants in places nobody has heard of".

He has a deadpan humour that can take the edge off his realistic view of the world and once depicted the Irish health service as: "A huge nationalised industry, tax-financed, centrally run, offering a free product -- the whole thing is riddled with difficulties. There should be competition -- the [hospitals] should have lost customers by now."

Most economists say they cannot think of anyone better to head up the Government's committee on spending cuts.

He did the same job very successfully for another government a generation years ago, said one leading economist.

Between national economic crises, McCarthy was a founding member of Davy, Kelleher, McCarthy Consultants, one of the most successful economic consultants, where he gave sterling advice on both macro- and microeconomics.

A couple of years ago, McCarthy moved to lecture in economics at UCD and has a reputation as a good a teacher as he was a consultant, although he took a huge hit in salary when he made the change.

Another friend said: "He was uncomfortable as a consultant where whoever doles the fee expects to get what they paid for and Colm likes to tell the truth, no matter how unpalatable it is."

And neither did the Government hire him because is an old friend.

He described the Bertie Bowl as Airhead Park and very publicly slammed the Government for its profligacy.

He speaks in the very plain language of a northside Dubliner -- he was educated at Charles Haughey's alma mater, St Joseph's, in Fairview; UCD; and the University of Essex.

He worked at the Central Bank and ERSI before setting up his consultancy.

He loves sport, a pint and a good joke -- which may explain why he finds the Irish economy endlessly fascinating.

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