Already handed the task of rescuing the economy, Brian Lenihan also has to
cope with another, much less commented-upon, problem. Can he prove
convincing enough in his role as finance minister to eradicate concerns that
he may turn out to be more like his late father, the much more famous Brian
Lenihan, who was one of the most amiable characters in Irish politics yet
who lacked the killer instinct displayed by other figures in Fianna Fail?
Lenihan Jr bears more than a passing resemblance in appearance and speech to
Lenihan Sr. Many of us remember the 1980s, when the elder Lenihan was
frequently sent out to bat for Fianna Fail in public when the party found
itself in yet another crisis.
Lenihan was an extraordinary bluffer, a man who would swear black was white if
Fianna Fail required him to do so. He elevated spoofing to a fine art, even
when faced with conclusive evidence that he was wrong. At the height of
Charlie Haughey’s leadership difficulties, Lenihan at least provided the
public with a few genuine laugh-out-loud moments.
The problem with this approach was its failure to inspire confidence that
Fianna Fail was willing to confront and deal with problems. While Lenihan
was part of the government that eventually got a grip on the public finances
between 1987 and 1989, the role he was usually given was a waste of his
talents, especially his intelligence, likeability and fundamental decency.
He was asked to put loyalty to the party ahead of his reputation. All he got
from Haughey in return was betrayal.
Now Lenihan Jr is the nation’s second most important politician. With a more
powerful and important portfolio than his father ever held, the finance
minister must inspire and restore confidence when he talks and, more
importantly, when he acts.
Having taken the unprecedented step of bringing budget day forward by six
weeks, Lenihan cannot afford to be a spoofer or a bluffer. If the
government’s attempts to stabilise a deteriorating economy are to be
successful, then his credibility becomes a vital issue. He was accused of
making a poor start when he seemed to joke in public about the downturn in
the construction sector. In retrospect he was only stating the obvious.
While the extent of the current “crisis” may be somewhat overstated, it is the
trend that is potentially disastrous. Collapsing tax revenues show just how
badly the overall economy is performing. If the government allows its costs
to escalate further, then the gap between the two figures will widen with
catastrophic results. We will soon be borrowing to fund day-to-day spending
as well as infrastructure. Difficult, and politically unpopular, decisions
must be made. Clearly the money is not available to fund pay increases in
the public sector for other than the genuinely low paid. How can it be, when
Lenihan claims every 1% increase costs €180m?
If the government fails to stem rising unemployment then its social welfare
costs will spiral out of control. It has to conduct a root and branch reform
of expenditure and processes within the public sector to ensure our money is
not wasted. It has to persuade vested interests to accept change, and
quickly.
The concern is that Lenihan does not have the necessary experience or
credentials to achieve these aims. Bertie Ahern stunted Lenihan’s political
advancement for reasons never adequately explained. He only made him a full
minister in the justice department little more than a year ago.
More pertinently, Lenihan has no background or education in economics. A
barrister by profession, there are concerns that he does not have an
instinctive feel for finance in the way that Charlie McCreevy did, for
example.
Lenihan has already flunked an early test. The cutbacks in public spending
announced in July — €440m this year and €1 billion in 2009 — were never
going to solve our problems. There was a serious lack of detail as to where
and how the cuts would be implemented. There were also heroic assumptions
made about the likelihood of international recovery and how this would
protect against the financial impact of accelerating unemployment.
Lenihan also failed to do the one thing that could have bolstered his
credentials. If he had abandoned the public-sector pay increases that kicked
in during the first week of September, then the state would have been saved
€155m this year and a further €310m in 2009. Of course, all hell would have
broken loose but if politicians are doing their job properly then that goes
with the territory.
It’s been a poor start, but there are signs that Lenihan now understands the
scale of the task he faces. Both he and Brian Cowen have been gathering
intelligence to feed into their decision-making. They have held private
meetings with economists and senior business figures to get first-hand
knowledge of what’s happening in the real economy.
They have taken counsel from Ray MacSharry who, as finance minister from 1987,
achieved legendary status in some circles for his role in our economic
recovery and subsequent success. No doubt MacSharry emphasised a preference
for spending cuts over tax increases as the basis for economic recovery.
It is also a positive sign that union leaders don’t seem to have the influence
they managed to wield under Ahern. Neither Cowen nor Lenihan appear to be in
awe of social partnership, regarding it as useful rather than essential. It
may even be fortunate that the pay talks broke down at the start of August:
the unions rejected a deal that one month later looks over-generous. They
won't get it now.
Other taboos may also be confronted. Payments into the National Pension
Reserve Fund could be suspended. I also expect our payments to developing
countries to be slashed on the basis that even though they are worthy, the
needy in this country must get priority.
Lenihan will also take a more realistic approach to projects identified in the
National Development Plan, ditching aspirational projects such as the Metro
line to Dublin airport. There are signs that he will not cave into the
self-serving demands of the construction industry either as they seek
artificially to jack up prices in the housing market.
If he is brave, Lenihan will seek redundancies and real reform in the public
sector. He certainly doesn’t seem to have any ideological hang-ups on the
public versus private debate. He seems unbothered about maintaining
ownership of commercial state assets and might welcome a takeover bid for
Aer Lingus if it means he can dispose of the state’s remaining 25%
shareholding at a decent price.
While Fianna Fail backbenchers will fear a political backlash if Lenihan
proves to be as tough as MacSharry, a dose of realism could be what the
party needs if it wants to hold onto power. They can forget about knocking
out the lights in next year’s European and local elections regardless of
what the party does in October’s budget. The only election that counts is
the general election and unless Lenihan pulls off the recovery it will be
lost.
Fianna Fail’s long period in power is based largely on the public perception
that it acted tough when it had to. The Lenihan family is famous in Irish
politics for producing talkers. This particular family member has to prove
he’s a doer.
matt.cooper@sunday-times.ie
