Cowen’s Defence of Record Blown Away by Devastating Critique of Policy Failures

The independent expert witnesses have had their say and have found that Brian Cowen and the banking and regulatory systems he oversaw were guilty of spectacular and catastrophic failures of economic management with ordinary taxpayers left to pay the price for this failure.

Brian Cowen and the regulatory and banking systems he oversaw are guilty of spectacular and catastrophic failures of economic management. That message comes out loud and clear from the two reports published today by Patrick Honohan and Klaus Regling & Max Watson. The reports confirm that ordinary Irish people have been spectacularly failed by an economic leadership with Brian Cowen at the apex.

The reports show that Ireland was not pursuing sustainable economic policies that were blown off course by an International Financial Tsunami. Far from it: Ireland’s economic leaders were guilty of catastrophic policy errors.

Honohan says in paragraph 1.3 that:

“Fiscal policy and budgetary measures aimed at boosting the construction sector….were significant factors in contributing to the unsustainable structure of spending.”

In paragraph 1.5 he says that:

“the weaknesses of Irish banks were not caused by the interruption of the flow of cheap money from abroad.”

Regling and Watson are equally stark in their comments. On the very first page of their Summary report they say that this was a “home made crisis”, that Government policies “added fuel to the fire”, that Brian Cowen’s fiscal policy “heightened vulnerability of the economy” and that “counter cyclical budgets could have moderated the boom”.

I am not surprised at the sharp criticism of Brian Cowen for his period of responsibility, because these errors were clear at the time and pointed out by Fine Gael. It was not sustainable to build permanent spending commitments on the basis of unsustainable tax revenues. It was reckless to extend tax reliefs for property developers at the height of the boom in 2005 and 2006. It was not sustainable to pay out big public service awards without undertaking far-reaching reform. In short, Brian Cowen put Fianna Fail’s electoral prospects ahead of the economic security of the Irish public.

Not only is the Honohan Report critical of Brian Cowen’s role in causing the crisis, he is also critical of the Government’s refusal to force more professional investors in the banks to share in the losses of those banks, particularly Anglo Irish Bank.

This mistake has cost the taxpayer dearly. Honohan said:

“the inclusion of existing debt in the coverage of the guarantee likely increased the potential share of the total losses borne by the State.”

The Taoiseach’s assertions that the Reports fully vindicate his bank rescue package are simply untrue. The Taoiseach appears to be in denial on this issue.

What Next:

Extraordinarily the draft Terms of Reference excludes both the Government’s own contribution to the crisis and its response to the crisis since September 2008 and the decision to grant the blanket guarantee. This indicates little more than a political cover-up of the political decisions taken at this time and Fine Gael will oppose them strongly.

The reality is that ordinary people have lost their jobs, have seen good businesses go under, have seen their families wracked in debt and consumed by worry. They are entitled to get two things from this process:

• Open accountability of those responsible and
• Real change that will ensure nothing like this can ever happen again.

People so far have seen very little of either. Apart from the few people who stepped down with golden handshakes, no one has been held accountable. No one has been charged with offences. The most central political figure has been promoted. Public officials continue to claim they delivered.

In the follow-up enquiry that is now to commence, it is vital:

• Politicians whose stewardship is under scrutiny must testify and answer questions in an open arena where ordinary people can see them held to account.
• That the terms of reference are decided in a way that is independent from those including politicians whose stewardship is centrally under investigation. This should be decided by the Public Accounts Committee or some other independent Agent.
• Taxpayers must see a thorough investigation, not only of the build-up to this crisis, but of the response which has put the Irish people on the hook for €17,000 per family to keep failed institutions like Anglo Irish Bank which are of no systemic importance to the economy operating as going concerns.

A purpose of this enquiry must be to herald a transformational change in the way we do business in this country. We can never again have the interests of a powerful elite take precedence over the wider community. The political culture in this country must change radically.

There are short term changes that could begin this process:

• The Dáil must demand an entirely new way of putting Budgets together.
• The Dáil must demand a new way of appointing the directors of the Central Bank.
• The Dáil must insist on changes in the way senior public servants are appointed.
• There must be proper accountability for politicians and senior leaders in the Public Service against objective benchmarks of performance.

Ireland has suffered seriously from an unwillingness to hold power properly to account. It has started from the very top of our political structure. We need to break that culture. Those who have led us into this crisis, simply do not have the capacity to lead us out.