merrion street

The collapse of the Irish economy in recent years has been a frightening experience for many and a sobering experience for everyone.  Reckless behaviour and truly staggering levels of incompetence have been exposed in our financial system.  Glaring weaknesses in regulatory bodies have been highlighted.  Our political system failed to identify the emerging crisis and allowed itself to be rushed into panic decision making.

I think the Irish people are still shell shocked and traumatised by the unfolding crisis.  Great damage has been inflicted on our self-image and to our self-belief.  Confidence and trust has been undermined in our institutions.  In January of this year the Edelman Company published an international survey of trust in various institutions.  Ireland ranked last of the 23 countries surveyed.

Among the findings – trust in Irish banks was at a miserable 6%.  Public trust in the Irish government was at 20%; the international average was 52%.  The breakdown of trust in so many Irish institutions, coupled with severe economic pressure on so many individuals and families, undermines social cohesion.  In a situation of this nature, recriminations, self-pity and comfort blanket of victimhood have a certain psychological appeal.  We are even temped to blame others for our problems.  “It’s the fault of the Germans, the French or the EU itself”. These kinds of fixes are just excuses for not facing reality.

The reality we face is not pretty.  We cannot magic away our problems.  Rejecting European support, retreating to a bunker, sovereign default, abandoning the euro, are just pages from the North Korean textbook of economics.  The only realistic option is the Munster rugby option – stand up and fight – for ourselves and for our future.  We must have a clear-headed analysis of our weaknesses and our strengths, we must make our case where it counts and fight our corner when we need to.  And remember this, the future is not predicable.  I was taken by the remarks of Constantin Gurdgiev, one of the “glamour economists” recently side swiped by Garret Fitzgerald.  Writing in the Irish Times on Tuesday of this week, he said, “Economics is powerless to predict the future.  Any random number picked from the air is better than an economic prediction”.  To paraphrase the words of Barrack Obama – the future is there to be won.

This Government is setting out on the long road to national recovery.  We are determined to regain our economic independence and to return this economy to growth and a sustainable level of prosperity.  We are also determined to deliver a major reform programme and to restore Ireland’s standing on the international stage.  And on that international stage we will not be bullied or intimidated.  We will defend Ireland’s interests by building strong relationships and alliances and engaging with our international partners in vigorous debate and robust negotiations.  We won’t play poker, we won’t bluff, but we will play to win.  The damage done and the seriousness of the situation which we now face will no longer allow us to carry on as normal. Winning the future will demand major reform.  The public sector and the interaction between government and the public sector will be central to the reform agenda.

The challenge facing the Government and the public sector is to imagine and deliver the better future we so urgently need.  The Programme for Government clearly states that we must be prepared to learn from past mistakes.  Among those mistakes were electronic voting, the PPARS payment system, issues surrounding the formation of the HSE, benchmarking, decentralisation, a tax fuelled property bubble, lax banking regulation.  These were all failures in the public sector.  The failures in our banking system were truly catastrophic and these were private institutions.  We still don’t fully understand why there was such a failure of good governance and good management in our banks.  Why was there such a complete collapse of adequate risk assessment in our banks?

With the benefit of hindsight we can now see there were warning signs.  As far back as the mid 1980s a pattern of misbehaviour and a culture of impunity began to develop in Irish financial circles.  After the introduction of the DIRT tax, all Irish financial institutions engaged in a deep and sustained conspiracy against the state with the widespread abuse of bogus overseas resident accounts.  There was also a pattern of overcharging customers, scapegoating of whistleblowers, some dodgy share dealings, mis-selling of financial products and other questionable behaviour.  Hindsight of course is a wonderful thing but in future we need to be aware that any misbehaviour by a financial institution is a red flag warning to all concerned.

The banking and economic crisis which has brought this country to its knees has taught us some hard lessons.  The culture of secrecy that surrounded decision-making has not served us well.  This is why we have decided that the budgetary process and all aspects of government spending will be opened up to much more public scrutiny.  The budget process will no longer be a secretive one – budget day will lose its mystique and drama.  Government departments and other government-funded agencies will be obliged to present their budgets for public examination and account for their spending on a regular basis.  The sunlight of public scrutiny is a strong prophylactic against public waste. As part of the process of reform “the Government will establish an independent Fiscal Advisory Council [FAC] separated from fiscal decision makers in government.  That will undertake official fiscal macroeconomic projections and monitoring.  The Fiscal Advisory Council’s functions will include identifying and advising on cyclical and counter cyclical fiscal policies and structural deficits; the cyclical or temporary nature of particular revenues and the need to maintain an appropriate and effective tax base.  The FAC will be independent of Government and will report to the Dáil and the public”.

The Government will also spell out the legal relationship between Ministers and their civil servants and their legal accountability for decisions and the management of their departments.  We will also strengthen the Freedom of Information Act.  The Government is determined that all decision making within departments is properly recorded and accounted for.  We will remove barriers to mobility across the public service.  As part of this we will create a new tier of senior management structures, where senior officials are rotated across the public sector to nurture the collaborative culture need to tackle the biggest crosscutting social and economic challenges.

We will open up the senior ranks of the civil service from Principal Officer level and higher to outside competition.  We will be setting a target of filling one in three new vacancies at this level by outside candidates.  We will also encourage periods of secondment from the civil service to the private sector and vice versa.  Training and professional development in the public sector will continue to have a high priority.  I believe we need to develop a leadership cohort across the public sector, which will maintain and enforce the highest standards of public service.  Professional competence, personal integrity, ethical behaviour and highly motivated individuals driven by a desire to serve the national interest and advance the common good – these are the kind of leadership attributes we will encourage and promote.

As a Government we are setting ourselves some clear objectives.  We are committed to reforming the public sector to meet 21st century needs, modernising and simplifying state organisations and processes, developing accountability through open government, restoring stability to government finances, providing strong leadership and director to the public sector, improving services to citizens and companies and delivering value for money.

Much is going to be asked of the public sector in the years ahead and naturally the question of remuneration and other related issues will be up for negotiation.  The economic tsunami, which has swept over this country during the last three years, has left a terrible trail of destruction in its wake.  The private sector has suffered dramatic losses.  The public sector has also suffered.  Nevertheless pay and conditions, terms of employment, pension entitlements in the public sector are still quite attractive.  Previous benchmarking exercises were undertaken through the distorted lens of the Celtic Tiger.  Ireland is a small, open economy.  Our prosperity depends on us being competitive.  It is reasonable to argue that the public sector pay and entitlements in Ireland should be benchmarked against other countries in the European Union and against the European average.

We have sent a clear signal of this intent by establishing the new Department of Public Expenditure and Reform.  For the first time in the history of our State we have specifically identified reform as one of the key responsibilities of a Cabinet Minister.

As part of our programme of Public Sector Reform we have also signalled our intention to make substantial cuts to the number of state bodies and companies.  The Minister for Public Expenditure and Reform is to undertake a comprehensive review of all public expenditure.  This Review will consider the effectiveness of public expenditure in achieving its stated intentions and outcomes.  The number, range and activities of bodies funded significantly from public purse, including at local government level, will be examined and numbers will be reduced, where appropriate.

The plethora of new government agencies that were established under the previous administration has increased the cost of Government and reduced accountability for the delivery of public services.  This practice has to be brought to an end.

The area of Appointments to State Boards in an area crying out for reform.  There has been a number of attempts in recent years to tackle the system of appointments to state boards, including a Private Members Bill brought forward by Minister Leo Varadkar in 2008 which greatly enhanced the debate around this issue.  Central to the provision of this Bill was the rebalancing of the appointments process to provide for Oireachtas oversight.

The issue of political prerogative is a central theme in the debate on this issue and the balance between the role of the appointing Minister and the Oireachtas.  There are also issues around what form of administrative system would be needed to support the change in approach.  In this regard I look forward to this morning’s discussion on the Scottish system.

Under the long standing convention, the provisions for appointments to State Boards are usually set out in the sectoral legislation governing the public body.  Appointments are made by the sectoral Minister with the consent of the Minister for Finance.

Under the last Government, provisions were made in sectoral legislation applying in the Department of Energy Communications and Natural Resources area whereby a proportion of appointments would be made by the Minister having regards to the recommendations of the Joint Oireachtas Committee.  We will review the collective experience of that approach as part of developing our approach to reform in this area.

The practice of an outgoing Government, in its dying days, making dozens of appointments to State Boards – is a manifestation of the abuse of power in this area.  Last minute appointments where a Government is still in office, but clearly without a mandate, highlighted the unacceptable practice that has been allowed to develop.  A good start would be for those who were appointed to such positions in these circumstances to consider their position.  While the Government is currently looking at the entire number, composition, remit and cost of State Boards as part of the comprehensive spending review – that should not stop people from doing the right thing.  The Government is seeking advice on whether it is in a position to remove people.  Without prejudice to the calibre of the many fine appointees to State Boards who have made valuable contributions during their tenure, it is time that we move on and put openness, transparency and good corporate governance to the fore as the central aim and purpose of the appointments system.

Citizenship includes the responsibility to participate in the community and public life of our country.  We now know to our cost that bad politics and bad governance can do terrible damage.  Good politics and good governance do make a difference.  They must never be taken for granted.

The title of this Conference is Good Governance – the Tone from the Top.  Watching the fallout from the banking and economic crisis and reading some the many cases coming before the Commercial court it is disturbing to see the number of cases involving breaches of professional and ethical standards.  I also believe that each and every institution in this country must also begin a process of reform and renewal I say this because in some respects the crisis which enveloped us is a crisis of values.  In recent years of the pillars of Irish Society have crumbled before our eyes.  We are citizens of a republic.