Ministers for finance often have no idea just how powerful they are until they leave office. When they get the gig they are too busy being slapped on the back to think about it, and all too often the distractions of the job and their focus on getting the next job prevent them from actually exercising the power our constitution gives them.
And there are so many distractions, not the least of which is the traditional Irish political compulsion to be at the opening of things – preferably wearing a hard hat – or dealing with some crisis or other, or having the ears bent off them by special interest lobby groups.
In the case of ministers Charlie McCreevy and Brian Cowen, they exercised their powers fully for more than ten years combined, and are accountable for that fact. They held office as the economy caught up with the rest of Europe, growing steadily for almost the entire period. Being a minister for finance is never a walk in the park, but compared to their predecessors (and their successors) it must have been like playing a video game on the easy setting.
Remember also at that time the minister for finance controlled both taxation and expenditure policy, roles we have now separated.
Budget after budget from these two saw income taxes falling, replaced by ever more revenue from capital gains, stamp duty, windfall taxes and increases in government expenditure. Every. Year.
Remember the economy was growing faster than ever at this time. They allowed public sector spending to more than double, with some voted expenditure items tripling over this period. Elections were bought using fiscal policy.
Their policies made the state’s finances much more fragile at the very time they could have been made stronger. Such were the headwinds of growth that increases in service provision, rather than increases in the costs of providing the same services, could have been the order of the day. They weren’t.
When Messrs McCreevy and Cowen met the banking inquiry, sparks were always going to fly. McCreevy denied having any role to play in creating the construction bubble, despite house prices rising by more than 10 per cent every year he was in office. He did nothing to curb that, even supplying tax incentives to developers to increase the house-building boom. He had the power to do otherwise. McCreevy’s statement that he didn’t feel he had anything to apologise for was, frankly, astonishing.
Cowen apologised “for the upset”, but seemed to think those rogues in the Department of Finance and the losers in the Financial Regulator were to blame, rather than him. Also the opposition was at him. It was an off-key performance for a very clever man who, again, had the power to do otherwise when he had the office and all that power.
Cowen said he didn’t hear much about the pro-cyclical nature of Irish tax and spend systems from economists. There’s barely a single issue of the Economic and Social Review, a prominent economics journal, without mentioning how pro-cyclical Irish taxes are. Trinity College professors Philip Lane and Sean Barrett made this point so often in print it was exhausting.
The power of a minister has two sides. You can do almost anything, but you are also accountable for everything.