The Cedar Lounge Revolution

Sean Fitzpatrick [formerly] of Anglo Irish Bank… the gift that never stops giving. January 14, 2009

First there was this…

[he]….called on the Government to reduce corporation tax and tackle the “sacred cow” of universal child benefit, State pensions and medical cards for the over 70s.

… he said the forthcoming budget needed to be bold and “brave” and not revert to a tough budget.

then this…

“This balance [in Anglo Irish Bank] is substantially higher than in the 2007 report because in prior years I had temporarily transferred my loans to another bank before each year end. I had done this on my own initiative over an eight year period..”

The loans in question resulting in…

…the resignation of three senior officials at the bank following the revelation that the Banks’ Chairman, Seán Fitzpatrick concealed 87 million euros in loans made to him by the bank.

And now this…

The loans to the former Anglo Irish Bank chairman Sean FitzPatrick exceeded €87 million over the eight years he concealed them from shareholders and the public, the Oireachtas Committee on Economic Regulatory Affairs heard this afternoon.

Former Revenue Commissioners chairman Dermot Quigley, who investigated the Financial Regulator’s handling of its investigation into the loans, told the committee there were “variations up and down from that figure” over the period in question.

How much more? We are not told. But one hopes we will be one day.

But look, here’s the fun part. Or the tragic part. You decide. Because in a way FitzPatrick was prescient, since in a climate of public sector pay cuts and news that carers allowances are to be cut, his heartfelt appeal to ‘tackle sacred cows’ is coming true. After all, we’ve just seen our state put itself in hock to the financial sector by guaranteeing it with… er… our monies so that there’s nothing left to go around. Or at least so we are told by the great and the good.

And there really is some amazing stuff swirling around at the moment. Talk of four day weeks, pay cuts in the public sector of 5 or 10 % and so on and so forth. To be honest it’s a bit scary. And this is hardly unexpected because it’s meant to be a bit scary. Or at least that’s my interpretation.

Recently I had the opportunity to talk to a number of people involved in the Green Party and to take soundings of their views on the current crisis. And I have to be honest, whatever about the realities or otherwise of the economic problems this state faces, the really worrying stuff is just how much the tropes of the day have been assimilated by our smaller government party. For no-one will tell you with more self-evident sincerity that there is no alternative, that our situation is utterly unlike that of any other nation on the planet, that only the direst measures are necessary but that the measures abroad are not appropriate for here.

Oddly though when one probes a little the facade of assuredness begins to melt, just a bit here and there.

For example, much play was made of the idea that we couldn’t borrow our way out of trouble. “Our credit rating is poor, much poorer than Germany’s”. True indeed, but also true that it was the Governments actions which by underwriting the financial sector in the way it did, including the guarantee on deposits, which pushed the interest rate on borrowing for the RoI higher than our ‘competitors’ in the market for borrowing. Remind me again who is the junior partner in the government?

Then there is the idea that we, alone of all other countries, cannot borrow, whether the interest rate is high or low. The oddity here is that we already borrowing, that we will continue to do so and that this is now seen as the natural, indeed the inevitable, course for other nation-states.

Then the impact on demand seems to have been almost totally overlooked. I was a little heartened by David McWilliams piece on Sunday in the SBP which appeared to recognise the necessity to maintain demand in the economy. Of course to do that, and were we to follow the US and UK examples, we’d be maintaining jobs in the public sector, and increasing their numbers (as well as pump priming the private sector… look at how the UK is now guaranteeing loans to companies). But not here, for we blew much of our disposable income on the banking guarantee, so now the attitude is scalp the public sector. Okay, it’s not quite that simple, but it’s not much more complex.

But here’s the nasty little secret that has only just become apparent… the scale of the crisis is so much greater than the public sector wage bill that to place that front and centre of our response to these problems, as our media and economic commentariat did for the last month or so, is pointless since even the greatest savings would still account for a vanishingly small amount of the monies being borrowed.

Now since we can – I hope – assume that the state doesn’t intend to shut itself down as a functioning entity (although who knows, I have no sense of what the bottom line is for the Government in all this, I doubt they know themselves) some issues are coming into focus. Firstly there is the hand-waving at Government level. Latest example? Dermot Ahern sent out to defend the indefensible.

“We face probably the most drastic decisions any government in the last 30 or 40 years has had to make”, he said.

“But we have to do it and we need general support from the public,” he said.

“I think there is an understanding now, when you even hear some of the comments from the social partners that they do accept that the financial position of the country is difficult, that we can’t go on spending the way we have been spending.”

That doesn’t sound to me like a man who is entirely confident that his entreaties will be heard with anything other than an entirely reasonable scepticism.

“We have to cut our cloth to meet our measure. We need support and we need people to understand… We all have to make sacrifices and I think the Government has shown a lead in that respect.”

“At the risk of being unpopular we have to make decisions that will sustain this country for the next few decades.”

Again one wonders. And ferreted away in the details are intriguing gems such as…

The Cabinet is to hold meetings next week to identify savings but Ministers do not believe that major service cutbacks can produce hundreds of millions worth of savings by year’s end.

Add to that the news that Green Party seeks reductions in the number of Junior Ministers and one does begin to wonder how much fo this is simply cosmetic stuff. The reason for the cuts?

[Dan] Boyle said there had to be changes in the political system and in the structure of government in order to mirror any curbs in public expenditure. “Otherwise getting public acceptance of those expenditure curbs is not going to happen. Obviously, as a party of government, we are going to make that case very strongly.”

And what happens if there isn’t public acceptance of the cuts? What then?

It would be nice to think that within the Dáil there was a strong and vigorous centre left argument being made that while elsewhere left-wing approaches are being pursued in order to combat these problems here in Ireland our political elites remain wedded to a sort of Progressive Democrat redux programme of cuts, despite the fact that we’re already starting from a low base as compared with our European partners. It would nice too to hear some party, or another, or better still both or many, articulate the notion that they intend to protest this slide towards reaction – publicly, nationally and strenuously. But oddly I’m not hearing that (and yes, the Dáil has yet to sit after it’s Christmas ‘holiday’).

What I am hearing is stuff like the following…

TAXPAYERS MUST be shown that public services can be provided efficiently and existing waste must be eliminated before the public will be prepared to support them properly, according to a draft Labour Party reform plan.

While entirely aware that in the public, as in the private, sectors there is waste my experience is that the level is overstated and often a function of high level political decisions rather than systemic problems. But for Labour to phrase this in precisely this way is disheartening, and particularly now at a time when it has become a convenient media shorthand for all the woes of our society rather than the engine of growth during the coming times. And while the report continues by being more strikingly pro-public service the fact that it must wrap the candy in a razor-blade – so to speak – perhaps tells us more about the Labour party in the current period than all the boosterism of its ‘new-found confidence’ in recent times.

And that leads back to a comment made in the article above about the carers allowance.

The Carers Association….chief executive Enda Egan said: “You can’t give money to somebody and take it away again.”

I hope he’s right. But I fear he’s about to be proved wrong. Again and again and again.