LEADING CIVIL servant Michael Scanlan, head of the Department of Health, is emerging as a prime contender to take charge of the Department of Finance when its current chief retires, possibly within two months.

The powerful job, which is the most senior in Irish officialdom, is in the gift of the Cabinet. As well as leading the Department of Finance, the holder is chief of the entire Civil Service.

David Doyle, who has led the Department of Finance since mid-2006, becomes eligible for retirement in November, but his contract runs until June.

Although it is not known whether Mr Doyle will exercise his right to retire in November, there is considerable speculation in political and official circles that Mr Scanlan is already well to the fore in the race to succeed him.

Whoever is appointed secretary general will play a crucial role with Minister for Finance Brian Lenihan in the effort to stabilise the public finances and reverse massive deficits.

This is a highly sensitive task politically given that painful cutbacks are likely for years to come with controversy inevitable whatever choices are made.

Under an agreement with the European Commission, the Government is committed to achieve budget adjustments of €4 billion in 2010 and 2011, with A further €3.5 billion needed in 2012 and €3 billion required in 2013.

Mr Scanlan declined to comment last evening.

He joined the Civil Service in 1973 as an executive officer and has spent most of his career in the Department of Finance.

He has been secretary general of the Department of Health since 2005.

Other likely contenders for the job include the three second secretaries general in the Department of Finance: Donal McNally of the sectoral policy division; Kevin Cardiff in the taxation and financial services division; and Jim O’Brien in the budget, economic and pensions division.

Sources with knowledge of the thinking within Government say that Mr Scanlan’s analytical and inter-personal skills have impressed Ministers.

Given that public sector pay will be under renewed scrutiny as the Government makes efforts to curtail its reliance on borrowing from international markets, sources also stress his extensive background in the formulation and execution of pay policy and his experience in the social partnership process.

He was secretary to the “Gleeson” and “Buckley” review bodies on remuneration in the public sector and later dealt with overall public service pay policy.

From 2000, he was the official responsible for overall public expenditure policy, the expenditure aspects of the Sustaining Progress partnership pact and decentralisation.

Mr Scanlan became chief of the Department of Health in the wake of the nursing home fees affair, a post in which his core tasks included bedding down the structural reform of the sector following the establishment of the Health Service Executive.

The successful, though long-drawn-out, renegotiation of the consultants’ employment contract and the recent achievement of cuts in pharmacy dispensing fees will strengthen his candidacy, sources said.