Wanted: a Minister for Finance with a grasp of economics

The personalities of those engaged in politics are hugely important

The personalities of those engaged in politics are hugely important. And amongst Irish politicians of the past quarter of a century one of the strongest and most attractive personalities has been Charlie McCreevy. His courage, frankness and sense of humour have from the outset marked him out from the crowd. One could never be bored by him - infuriated at times perhaps, but never bored!

In the earlier stages of his political career he lost out because of his unremitting hostility to Charles Haughey, whom, in conjunction with others, he tried to unseat on several occasions. When Haughey finally disappeared from the scene, Charlie McCreevy's career blossomed. He was, however, miscast as Minister for Social Welfare. His undoubted talents would have been more usefully employed in cleaning up the mess in such areas as Transport or - less certainly, because of his right-wing bias which had caused problems in Social Welfare - in Health. In such Departments he would have cut through the bureaucratic jungle and would have taken on the powerful vested interests that have so fatally dominated Irish policy-making for many years past.

It is, perhaps, not surprising that he was moved instead to the Department of Finance. After all Charlie McCreevy is a figures man - a genius in analysing election results and an accountant with an evident grasp of, and enthusiasm for, the details of taxation policy. Who better to run the country's finances?

In fairness, it has to said that as Minister for Finance he has introduced many tax reforms, some of them long overdue and well judged.

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But he has three traits which have adversely affected his performance in this office.

First of all, the way in which he has given rein to his right-wing predisposition has had some negative economic consequences. For his and Mary Harney's strong ideological commitment to policies designed to secure economic growth at all costs led both of them several years ago to persist with growth maximisation at a time when we were just about to reach full employment.

Mary Harney's enthusiasm for economic growth for its own sake, rather than for the purpose of benefiting the people of this country, led her to advocate, in conditions of full employment, immigration by an additional 200,000 workers to maintain growth. This, despite the huge additional pressure that such an influx would place on our domestic resources, including the further major boost this would give to the already excessive price of housing.

The deliberate overheating of our economy through inappropriately expansionary budgets at a time of full employment has been the principal cause of the inflation that has dogged us during the last couple of years and is currently threatening the viability of our economy.

Although a small once-off reduction in our competitiveness may have been justified two years ago to offset the undervaluation of our currency after we joined EMU, the scale of the inflation generated by Charlie McCreevy's pre-election budgets is now threatening our future growth.

This brings me to the second of Charlie McCreevy's characteristics which has made him, despite his many talents, an inappropriate choice as Minister for Finance. By his actions as much as by his words, he has repeatedly shown that he has no grasp of, or indeed interest in, economics.

At any time this would be likely to be a serious defect in a Minister for Finance. But in an economy such as ours which for years past has been undergoing growth at a rate and over a period of time that has no precedent within the industrialised world, this pro-cyclical budgetary policy proved a fatal defect. If ever an economy needed to be guided with skill and economic judgment, it was the Irish economy around the recent turn of the century.

The need for a steady, economically literate hand on the political tiller at this crucial period was all the greater given the disappearance - for whatever reason - of economists from the assistant principal grade in the Department of Finance. (This might be described as the operational grade, the one that actually carries out the work underlying fiscal policy).

This weakness in personnel may have had something to do with the miscalculation of last year's tax revenue by €2 billion, and with the failure to identify the cause of this error to avoid a repetition of a major overestimation of income tax in the current year.

Ministers rightly concern themselves very rarely with appointments below the top level. But the absence of economic expertise at the assistant principal level in the Department of Finance is something that one would have expected any Minister to have noticed - and to have taken steps to correct.

Charlie McCreevy's economic insouciance seems to have prevented him not only from tackling this dangerous gap in his Department's skill bank, but has also led him to refuse to accept the Taoiseach's proposal that he appoint an economic adviser.

That brings me to Charlie McCreevy's third characteristic that has contributed to his unfortunate performance as Minister for Finance - his certainty about the rightness of his own judgment.

Politicians need to be self-confident: those who aren't often end up achieving nothing. But self-confidence is one thing: certainty about being always right is quite another. For a Minister for Finance lacking an interest in or feel for economics, it is potentially disastrous.

That the Taoiseach tried to persuade Charlie McCreevy to appoint an economic adviser shows he is well aware of the problem posed by his Finance Minister's combination of personal characteristics. But why then did he reappoint to this post a man whose personality makes him unsuited to the job?

The Taoiseach may have felt he owed his own return to political office largely to Charlie McCreevy's willingness to ignore the economic dangers of over-inflating a full employment economy to splurge spending in every direction before the recent election. But if so, it was unwise of him to allow a sense of political gratitude to reward this Minister with a return to the office he had held during the previous five years.

Gratitude is an attractive virtue, but one for which there is often little room in the tough world of politics.

Because of Charlie McCreevy's persistent economic misjudgments, we are faced with a lethal combination of three serious economic problems: a dangerously acute and largely government-generated inflation; huge loss of tax revenue through what appear to have been gross miscalculations of the cost of unwise tax cuts; and runaway public spending which, despite his vocal concern for effective use of public resources, was thrown around in the pre-election period without any apparent concern to ensure it was put to good use. Some of this ill-judged spending now has to be recovered by means of panicky cuts that are further damaging our already defective public services.

In other countries, such an outcome of budgetary policy would be seen as creating a political crisis of considerable magnitude, requiring at the least a reconstitution of the Government. But not here. Fatalistically, we seem to be expected to grin and bear the consequences.