They say in politics that either the times make the man, or the man makes the times. Whatever the truth, the mettle and resolve of a politician is tested during troubled times as he or she tries to outmaneuver oncoming obstacles. Our government has been hit by bad news, sagging public support and a much-maligned economy and everybody is looking to the Minister of Finance, arguably the most important man in the country, to lead us out of recession. This is the unenvied situation in which Mr Brian Lenihan finds himself, and it is one which he is attacking with gusto.
For all that he must be struggling to cope with the weight of the responsibility that this relatively new Minister for Finance finds himself saddled with, he shows no sign of strain when we meet him on a wet and blustery Friday morning in his constituency office. We are third in line, waiting behind a disgruntled banker and a woman who is having problems with her pension. As we wait, we share a joke about the fact that adjacent to his office are those of a construction firm and a property company, industries which are hurting inexorably and played a huge part in creating the mess in which we find ourselves.
When our time comes he greets us with a smile and leads us into a tiny office overlooking a sports field. Throughout our conversation we are taken with his relaxed manner and how he seems to take criticism in his stride. Indeed the Minister seems to be enjoying the controversy and takes delight in wrong-footing his political opponents.
This passion for a good debate is something he no doubt learned during his undergraduate years. A Foundation Scholar and a graduate of Cambridge, he was a keen debater within the walls of Trinity. “The Noble Savage of the Rubrics” (a title given to him by Piranha magazine) recalls his time at Trinity. We exchange pleasantries and anecdotes about the college before delving into its present financial difficulties.
With the eyes of a nation fixed on what will be one of the most aggressive cost saving budgets in our nation’s history, Brian Lenihan will leave no stone left unturned in the search for savings. With €1.3 billion of the expected €4 billion in cuts set to come from the public sector, education will undoubtedly be hit.
The Minister has repeatedly stated that pay cuts are “essential” for the economy to get back on track. In light of this, the Provost’s mooted pay increase, as reported in the last edition of this paper, gains new significance. Commenting on this report the Minister reaffirmed his views on cuts in the education sector stating that “very bluntly, we all have to take reductions in our pay, especially those on the higher level base.” A commission has already been set up to report on those on pay within the public sector. While Mr. Lenihan could not say for certain whether the review includes the heads of universities also, the Minister has given his word that the matter will be investigated in full.
Indeed, the Minister views pay increases in the current environment as being incompatible with in the economic reality that we are faced with. The cost of living in Ireland has gone down by about 7% in the last year and as a result of this “there have to be pay reductions and we have to look at our social welfare costs. We cannot have individuals on the public payroll who are receiving increases,” Mr. Lenihan stated.
Falling prices have also meant that the college registration fee for students, which increased by 67% last year, represents an even greater proportion of disposable income for families. At a time when education has never been so vital to maintain Ireland’s reputation as a knowledge economy, there is widespread concern amongst the student population that any further increase in the registration fee could push those at the margin out of third level education.
While “conscious of the burden” that has been placed on families, the Minister raised his concerns about the free provision of education. He pointed to the issue of staff performance when you don’t have the consumer paying. “If the student is making a contribution it does mean that there is far more supervision of staff performance because the students want value for money. If the state pays for everything you have no check on the staff performances in the college.” Defending his position, the Minister said that he had no “great ambition to fleece students” and pointed to colleges such as Hibernia and Griffith which provide a “full, top class university education” without any public subsidy.
When asked if the registration fee would remain at its existing level, Mr. Lenihan refused to be drawn on the issue. He declined to comment on the grounds that he didn’t want to give the impression that an increase would be pushed through again. He added that his department “hasn’t actually decided what we’re doing with it this year.” However, it is more likely that such measures will be announced in the Budget which would explain why the Minister is keeping mum.
There are mounting concerns about soon-to-be graduates’ ability to find employment. Indeed, the numbers signing onto the Live Register have more than doubled since the recession hit and there are fears that there will be a resumption of the type of widespread emigration that forced a talented Irish workforce abroad in the 1980s. Minister Lenihan is adamant that the situation today is very different from what was twenty years ago. “One of the great difficulties with the current world economy position is that every country is in recession. Ireland is not unique.” Back in the 1980s it was a different story with both the US and Britain experiencing a return to high growth. Moreover he is critical of successive governments “of all political colour… [who] postponed the decisions and as a result the country stagnated for a long period of time in the 1980s.” As the Minister puts it, “Ireland was an economic basket case.” He points to the fact that, this time around, Britain and Germany are heading towards contractions of 5-6%, although it must be said that Ireland’s fall of 8% in economic growth is far worse than that in many other countries.
His main fear, and indeed he tells us the it is shared by the whole cabinet, is the inordinate size of those highly qualified workers on job-seekers benefit, or allowance. However, he cites the case of his constituency where many of those who have lost their jobs are seeking unpaid internships in order to get valuable work experience.
The issue of a worldwide recession coupled with the interconnectedness of the world is obviously of primary concern to Mr Lenihan. He speaks passionately about coordination and indeed defends the recent actions of his department. While he acknowledges that students and the people of Ireland alike are often critical when it comes to issues like NAMA, he points to other countries and their actions: “What I think isn’t understood is that what we’re doing exactly what is being done in every other country. In other words in the United Kingdom, France, United States it’s not just billions, it’s trillions are being pumped into the banks because they fear that if the banks collapse their whole underlying economy will collapse.” The Minister is unwavering in his view that we need a coordinated international approach to dealing with the immense economic challenges of our times.
And while certain banks have recently been posting record profits, unemployment in some countries is decreasing and business in many industries is picking up ever so slightly, Mr. Lenihan is quick to remind us that “one swallow doesn’t make a summer”, referring in particular to recent news indicating a decrease in the Live Register figures for the month of October. While other more optimistic analysts such as Chief Economist at Bank of Ireland, Dr. Dan McLaughlin, are trumpeting the end of the global recession, Mr. Lenihan is waiting on a sustained period of growth and lower unemployment; “I wouldn’t call it over… [recent figures] are encouraging but it is too early to tell.”
Furthermore there has been growing criticism over the NAMA legislation. Some of the most damning criticisms have come from his alma mater. Dr Sean Barrett, Senior Lecturer in Economics at Trinity, denounced NAMA as “a macroeconomic three-card trick to refinance incompetent bankers and reflate a property bubble without addressing reform in the property market, banks, or bank regulation.” Moreover, in a recent debate organised by Trinity’s Historical Society, Nobel Laureate of economics Joseph Stiglitz slammed NAMA saying that “if you’re not getting €150 billion [from the banks in return for taking bad loans off their balance books] you’re being robbed.” “The view that there are no alternatives is wrong,” he added in closing.
The Minister for Finance raised the issue of his opponents’ alternative proposals. He was very critical of Fine Gael’s alternative of setting up a new ‘good’ bank. Such a plan “wouldn’t provide very much credit to the economy for a long time. It would be in its infancy for the first few years so it’s difficult to see how such a bank could work.” While he didn’t believe this proposal was a credible alternative to NAMA, he did give some consideration to the Labour party’s suggestion that the state temporarily nationalise the banking sector. So why was it not accepted? He pointed at the difficulty a “vast statutory monopoly of banking services” would have in obtaining credit from international financial markets. He highlights the negative implications that would arise from an absence of competition. “If we did a total nationalisation of the domestically owned banks the signal it would send to the markets is that the Irish banks are essentially in fierce difficulty,” he added. Beyond the financial implications, the Minister alluded to the fact that at a time when Irish citizens are becoming increasingly disillusioned with their elected representatives’ ability to lead them out of the financial crisis, it would not necessarily be a good idea to extend political control over a huge section of the economy.
With next month’s budget expected to tighten all of our belts, there have been calls for more fiscally expansive measures. In particular David Blanchflower, a former Bank of England policy maker and notorious dove, in a talk hosted by UCD criticised the government’s planned cuts warning that the €4bn in spending cuts “could send the economy over a cliff.”
Mr. Lenihan was quick to respond to what he termed “the David Blanchflowers of this world,” stating that “we have a very fiscally expansive policy here in Ireland already and I think that’s what he’s ignoring.” He warns that if we continue spending the way we do then the fiscal deficit would swell to 15% of GDP next year placing “an unsustainable burden on students, and future generations.”
In these times of recession, everyone wants to weigh in with their opinions, and the Minister and the government have many a critic to counter. But amid all the fuss and debate, it is clear that the Minister is quietly determined to get on with running the country, and ensuring that we reach recovery as soon as possible in a fiscally responsible manner.
One can’t help but admire his calmness and composure amid downbeat spirits and forlorn hopes. He remains absolutely resolute that Ireland is still a good place to do business and points to the buoyancy of Irish exports and to the fact that our balance of payments is on course to for a surplus next year. Coupled with this, “our workforce is both educated and flexible.”
Given the current crisis, it heartening to see that the Minister still has cause for good cheer; “We have built up a fantastic talent bank of entrepreneurial ability in Ireland the last twenty years. I see in my own constituency how enterprise-driven it is.
People want to set up businesses, people want to take risks in setting up businesses and that’s there now. There is far more flare in business in Ireland now and that’s why we’re exporting so many services for example.” While the government and the state can point the way out of this quagmire, ultimately our ability to move from recession to prosperity will depend on its citizens’ ability to adapt and innovate under difficult circumstances. If any man can be said to be in touch with this reality it is Mr Lenihan, and we left his office optimistic that he can help Ireland to weather the storm.
