Bertie Ahern: The Man Who Blew the Boom: Power & Money (29 page)

In his remarks to the Dáil after the announcement of the Government, Quinn touched on an issue that was going to define much of what was to come politically. He referred to the media debate over whether the public finances were out of control.

We have seen a sustained splurge in public expenditure over the past eighteen months or two years. It was deliberate, considered and carefully measured, down to the timing of its delivery. We are now about to get a reversal of that splurge.

Sure enough, as the summer progressed a range of announcements were made about efforts to cut back on the pace of increase in public expenditure. The isolated announcements on such matters as health, education and overseas aid were not, the public was told, part of an orchestrated programme of expenditure restraint; but for a society by then used to a continuous flow of new expenditure announcements, the application of the foot to the brake felt like cutbacks. It was also in conflict with the merry message from the Government parties that had seen them re-elected.

The change in tune caused a sharp fall in the Government’s popularity and also created internal strains. Ahern was persisting with his plan for a new stadium and with the related bid for Ireland to host the Euro 2008 soccer finals; but the
PD
s, and even some of his Fianna Fáil colleagues, were resisting the plan, given the strain on the public finances.

On 16 September the then political editor of the
Sunday Tribune
, Stephen Collins, reported that McCreevy was contemplating introducing a tax on child benefit in his coming budget. The arrival of
de facto
full employment, and the movement of more women into the work force, had made childcare costs a major political issue. The Government had responded by granting significant increases in child benefit to everyone, regardless of their income or whether they worked in the home or not. Rates had increased dramatically in the two years before the election and had trebled since Ahern first become Taoiseach.

The pressures of full employment and wage and cost increases had also seen the Government creating the process whereby the pay of public-sector workers was to be benchmarked against those in the private sector. The
INTO
representative and senator Joe O’Toole famously referred to the process as an ‘
ATM
for teachers’. Now the downturn in the Irish economy and the public finances threatened the promised pay rises under that process.

The discord between what the public had been told before polling day and what it was now being told was crystallised in a report by Rachel Andrews in the following week’s
Sunday Tribune
. ‘Exclusive!’ shouted the headline over a genuinely great scoop. A lengthy and secret memorandum from McCreevy to his Government colleagues, drafted within weeks of the poll in May and days after Ahern’s re-election as Taoiseach, set out the dire position of the public finances and the need to cut public expenditure in 2003 by €900 million. If a return of high unemployment and forced emigration was to be avoided, the proposals set out in the memorandum and its appendix would have to be introduced. Furthermore, the proposal for a reining in of public expenditure was based on a set of forecasts for the economy that were more likely to be over-optimistic. Ministers were told that if there were no cutbacks in expenditure there would be no money for benchmarking, no money for social welfare increases and no money for the Government’s health strategy. Furthermore, a failure to implement the measures foreseen would lead to a reversal in the thrust of taxation policy of recent years.

The lengthy memorandum contained figures that dramatically illustrated the way in which public spending had been used as an electoral tool. Current spending had increased by an astonishing 27 per cent in the twelve months up to the election. Collins, in a piece forming part of the paper’s four-page inside package on their scoop, said the document raised serious questions about the ability of the Government to run the country, and contended that its reputation was now ‘in tatters’.

Matt Cooper, the paper’s business editor, wrote of McCreevy’s appearance on ‘The Late Late Show’ the previous Friday and of the way his usual confidence had wilted under the sustained hostility of the audience, many of whom were affected by the cutbacks that had already been introduced. McCreevy had been booed, and his syntax had become mangled as the audience laid into him. Yet the audience had not known about the memorandum, Cooper wrote, which illustrated in stark terms the scale of McCreevy’s ineptitude.

Total Government spending had grown by 23 per cent in 2001, while tax revenue had increased by only 3.2 per cent. Yet in his budget for the following year, announced in December 2001, McCreevy had planned for a further 14.4 per cent in spending increases. Not only that: he hadn’t been able to rein in his Government colleagues, and the actual level of spending had exceeded that figure. The public finances were in crisis, and it was evident, Cooper wrote, that McCreevy knew the full extent of the crisis during the election campaign. Yet the minister had told a press conference only a week before the poll that ‘no cutbacks whatsoever are being planned, secretly or otherwise.’ The scoop provided the material for the main news story of that day’s and the following days’ papers, many of which led with opposition calls for McCreevy’s resignation. McCreevy, in his first public response to the report, confirmed that the economic circumstances facing the country were worse than had been envisaged in June.

The effect of the controversy was the creation of a lasting impression with most of the electorate that they had been cheated. In the first two years of the second Ahern Government, it argued unsuccessfully that no cutbacks were being implemented—that in fact public expenditure was growing: it was simply that it was not growing as quickly as it had hitherto. However, efforts by the Government to argue that what it was doing was a responsible reaction to changing circumstances did not wash with the public, who were not inclined to listen to a grouping in which they had lost trust. The first year and a half of Ahern’s second Government was among the worst periods of his political career.

One of the great challenges faced by Ahern’s first Government, according to Micheál Martin, was the resisting of the clamour for increased expenditure.

The sense then was that we weren’t getting the infrastructural work done fast enough. And efficiently enough. People wanted the road and railways done, because of all the wealth. The big political and psychological problem was how you could justify not spending the money when we were trumpeting that we have surpluses. The clarion call was ‘Why don’t you spend on this, on that?’ The whole mindset of society was ‘Gimme, gimme, gimme.’

But the political pressures changed dramatically after the second Government was formed. Martin was still Minister for Health.

The first two-and-a-half years were covered by those cutbacks. The retrenchment regime led to some very tough meetings.

The tension grew in the Government as the local elections approached. McCreevy focused on arresting the growth in public expenditure, and his Government colleagues and their advisers focused on political popularity. But, for Martin, it was not so much the macro area of public expenditure management that created the tension as a certain perceived pig-headedness on McCreevy’s part.

There were crazy things that weren’t done that wouldn’t have affected the fiscal position dramatically. There was a big row coming up to the Special Olympics over spending on disabilities. Bertie was furious about that. I think it was €20 million. We had rows about whether it was in the budget or not. I had incredible rows over opening new hospital facilities which we had built and we couldn’t get sanction to open them before the election. This was akin to having the ball in front of the goalposts and not putting it into the net. You could have been opening these facilities that were going to be opened anyway—and guess what? They were opened after the election. Those sort of incidents really brassed off the Taoiseach, big time.

The opening ceremony of the Special Olympics in June 2003 was a huge event staged in Croke Park, in Ahern’s own constituency. It was the first time the games had been held outside the United States, and they were impressively well organised. Participants came from around the globe, and towns and villages throughout the country hosted particular countries’ teams and put on warm and impressive welcomes for them. The whole country appeared to be involved in a united effort and a sincere unleashing of good will, and the opening night was a genuine extravaganza, with fireworks and a parade of all the participating athletes. But Ahern was booed when he took to the stage during the opening night’s festivities. His Government’s stance on funding for the disabled was portrayed as being in marked contrast with the fund-raising and volunteerism of the organisers of the event. The public humiliation angered Ahern all the more because it was seen as owing more to pig-headedness on McCreevy’s part than to a matter of responsible Government restraint.

Ahern in his memoirs wrote disparagingly about some backbench
TD
s, bitter about not being included in government, who got the jitters at about this time. He listed four
TD
s—Ned O’Keeffe, John McGuinness, Jim Glennon and Noel O’Flynn—as being ‘unhelpful’ to the party by giving negative comment to the media, while Michael Smith broke ranks on a controversial report that had implications for a hospital in his constituency. In December 2003 Ahern decided to reassert his leadership of the parliamentary party. According to his own account, he told the party that he was well used to party division and had been close to Haughey during the heaves against him. He knew every trick in the book. ‘Anyone who wants to come after me, then I will come after you, one by fucking one, and I will rivet you.’ He said that he deliberately used bad language, that everyone in the room was stunned and that it was ‘good fun’. He also said he threw in the line that he would not tolerate ‘kebabs’ in the party, meaning cabals. In his memoirs he leaves it unclear as to whether his malapropism was intentional or not, but he notes that the fact that the media ran with the kebab issue, rather than the tearing strips off his colleagues issue, proved handy.

If the difficult economic circumstances of 2002 and 2003 meant that tax cuts and other forms of state largesse were no longer available for attempting to woo the electorate, Ahern’s resourceful Minister for Finance was not without other ideas. The big story of the 2003 budget, announced in December 2002, was McCreevy’s decision to go for a ‘big bang’ decentralisation of the public service. It had been Government policy for a number of years to decentralise so as to relieve pressure on the capital and to spread the economic benefits of Government activity more widely; but the budget announcement came as a shock. McCreevy had told his Cabinet colleagues that he would abandon the project if news leaked. The most senior civil servants were given only a few days’ notice, and so McCreevy’s Dáil announcement came as a great surprise to many who were at the heart of public infrastructure management.

For the first time ever, decentralisation will involve the transfer of complete departments—including their ministers and senior management—to provincial locations. A total of eight departments and the Office of Public Works will move their headquarters from Dublin to provincial locations, leaving seven departments with their headquarters in Dublin. All departments and offices will be participating in the programme. Ministers with headquarters outside of Dublin will be provided with a centralised suite of offices close to the Houses of the Oireachtas for a small secretariat so they can conduct business while in Dublin and when the Dáil is in session. The previous decentralisation programme involved the relocation of some 4,000 public service jobs. The programme I am announcing today is far more radical. In total, it will involve the relocation of 10,300 civil and public service jobs to fifty-three centres in twenty-five counties.

It was the big-ticket item in the budget and went down well with non-Dublin Government deputies who had constituencies that were going to benefit from public investment. Given the scale of the project, that meant just about every non-Dublin constituency in the country.

Economically, things were beginning to look up for the Government. Introducing his budget, McCreevy said it came at a time when international economic conditions were on the mend. Ireland, he said, had come through the international downturn better than most, in no small part because of its sound budgetary policies. The budget did not include much by way of tax changes, though the minister did announce extensions to the tax relief schemes for film, seed capital schemes and property schemes. On the last he said:

A number of reliefs were due to expire at end 2004. I am aware that there is a range of construction projects either in the pipeline or under way which will be seriously affected by this termination date. As the end 2004 deadline approaches, pressure on construction resources will mount to deliver these projects. Accordingly, I propose to extend the termination date for all these area-based schemes until 31 July 2006.

The long run of the boom in Irish property prices had flagged as Ahern’s first Government came to an end. However, by the time of McCreevy’s decentralisation announcement, prices were beginning to rise again, for reasons that were not to become clear for quite some time. It was during this revival in property prices that the decentralisation programme was announced. The Government would be able to profit from the healthy price of property in Dublin and to use its windfall gains to finance the purchase of sites and properties and the construction of new properties around the country. Civil and public servants could voluntarily opt to move to the new locations, in part because of the lures of cheaper housing and of never again having to deal with the difficulties of commuting in the capital.