OPINION:The reports into the banking crisis have set a high standard, which the review of the Department of Finance must aspire to
THE RECENT Honohan and Regling/Watson reports into the banking crisis told us little we didn’t know already, or strongly suspected. Yet they were universally welcomed with a palpable sense of relief at the publication of straight-talking, unsanitised, official reports delivered by independent minded, trusted experts.
Weary of denial, obfuscation, spin, missing documents, perjury and every other conceivable tactic for hiding the truth, the two reports gave us cause to hope that we were seeing the beginnings of a new culture of transparency and accountability.
But just as we were experiencing the heady, liberating impact of the two reports, “briseann an dúchas tré shúilibh an chait”. The inherited culture of cover-up and manipulation manifested itself once again.
In the week before publication, as elements of the reports began to leak out, Brian Cowen “got his retaliation in first” with a series of public speeches and interviews setting out his version of events.
Such was the searing clarity of the two reports, however, the Taoiseach and former minister for finance’s media blitz was seen for what it was – a carefully timed and choreographed effort at self-justification and damage limitation to himself, his Government and his party.
Honohan, Watson and Regling have set the standard that we need and, as citizens, have a right to expect in all impending inquiries into the banking crisis and the crisis in public finances.
It needs to be remembered that the two reports are intended as “scoping” reports which will be used to determine the terms of reference of the more comprehensive, forensic inquiry. But even before the remit of the larger investigation is set out, the Government tried – true to form – to spike the inquiry by trotting out the line that there was no more we needed to know about the role of the political system or about what occurred in the hidden sanctum where advice was given and received and decisions made by senior civil servants and Ministers.
Thankfully, the Public Finance Committee has been vigilant and active in confronting and refusing to accept these omissions from the second-phase inquiry.
For example, in response to questioning by Fine Gael TD Jim O’Keeffe, the secretary general of the Department of Finance acknowledged that the department lacked the specialist skills needed to handle the banking crisis, having relied too much on generalists. This simple admission glosses over the truly shocking skills deficits in the department.
The department has been short of essential skills for some time, and not just in regard to its ability to anticipate and handle the banking crisis. Policy departments or units always need to have a small core of deep specialist expertise relevant to their domain. As Brian Lucey of Trinity College put it, the lack of specialists in the department “is like trying to run the OPW without architects”.
In-house expertise is needed not just to do the work of the unit but, crucially, to commission and interpret external advice. Frustration in dealing with the department recently expressed by Michael Somers, former head of the National Treasury Management Agency, had to do with the apparent inability of the department to understand proposals from the agency.
Persistent questioning by Oireachtas committees has contributed to Brian Lenihan’s announcement last Monday of “a review of the Department of Finance by an independent review group comprising a small number of experts with relevant international and/or domestic experience to evaluate the systems, structures and processes used by the Department of Finance . . . over the past 10 years”.
Within days, The Irish Times reported on “newly released briefing material prepared for the department’s secretary general Kevin Cardiff [that] amounts to a staunch defence of its advice over managing the economy, as well as finger-pointing at the failures of other institutions . . . ”
Game on! The scope of this independent review and the tone in which the Minister set it out before the Oireachtas committee suggest that he means business and is intent on securing a report that meets the standard set by Honohan and Regling/Watson. This is to be greatly welcomed.
Two areas not specifically mentioned in the Minister’s announcement that would be worthwhile including are the culture of the department and the levels of financial, accounting and economics expertise that are deployed across all government departments and agencies.
Culture may be an elusive element, but it is noteworthy how frequently commentators have reached for the construct “culture” to explain every institutional failure of recent times: the culture of extravagance in Fás, the culture of greed among developers, the culture of denial and cover-up in the Catholic Church and the “culture of deference to Ministers in the Department of Finance which migrated down to the Central Bank when the retiring secretary general automatically became governor,” as Ruari Quinn expressed recently.
Another matter well worth including in the independent review’s remit are the levels of expertise in finance, accounting and economics that are deployed across departments and agencies in general. Ensuring adequate functional strength in these areas is the responsibility of the department, as the “corporate finance function” of the public service. It seems clear that there are major gaps in such expertise in organisations with multimillion or multibillion euro budgets.
The Minister’s good faith in regard to ensuring the integrity of the review will be evidenced by his choice of members of the group; the specifics of what he includes and, more tellingly, excludes from its scope; the freedoms he gives to civil servants to speak the whole truth; the protection he provides against attempts to sanitise its findings; and the speed at which the task is accomplished.
While this inquiry will put the department into the spotlight in ways that will be uncomfortable for staff who take such pride in their work, I believe the people who work in the department will be major beneficiaries of an honest, expert, external appraisal. I hope that they can come to see it that way rather than as an attack on them, against which they feel compelled to launch a staunch defence.
The department plays a vital role in the economy and wider society with responsibility for ensuring the health of public finances, a stable banking system, a fair and sustainable taxation system, national competitiveness, maintaining employment levels and an efficient, effective public service. Is there any more important public service mandate? Apart from the Government, the department is the single most important actor in all that has happened and they will be key to achieving sustainable solutions.
For this reason I contend that the independent review of the department announced by Lenihan will be even more important than the Honohan and Regling/Watson reports or the planned wider second phase inquiry. Its pivotal position as the “parent” department of the Central Bank, together with its central role in the economy and its pervasive influence on all other departments and public agencies, means that this opportunity for a root and branch review must not be missed.
This is an opportunity to produce a landmark report that will set in train a new era of financial stewardship and good public service governance.
The situation calls for visionary leaders who, if they can rise to the occasion, will leave behind an indelible, positive legacy when they move on, rather than a reputation for more of the same that has contributed to landing us in the mess.
The country desperately needs a reinvigorated, strengthened Department of Finance. This should be the purpose of the independent review and not name and shame or finger-pointing.
Eddie Molloy is director of corporate consultancy Advanced Organisation