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Two Teachers Take Finance

Posted on: March 13th, 2011

I OFTEN meet Joan Burton when wandering around Leinster House. She is definitely not one of the lads. She has little small talk. She likes the macro stuff — indeed, she is a bit too numerate for many of her colleagues.

When you meet Joan she does not want to gossip or speculate idly on the latest political excitement. She is serious, sometimes a little too intense for my taste.

Joan is a number-cruncher. A professional accountant, so when she engages you in conversation, she wants to talk hard figures. She assumes wrongly that I, too , as a financial journalist, have more interest in balance sheets than in banter.

She is wrong. For me, banter is better.

Which is why Joan is infinitely better-suited to be Minister for Finance.

The demotion of Joan to the lowly job at Social Protection is puzzling.

The Labour Party’s preference for the less numerate former national school teacher Brendan Howlin at the newly created second Finance post in Cabinet was an eye-opener.

A few months ago when Eamon Gilmore was asked by RTE’s Marian Finucane who would be the next Minister for Finance, he responded rapidly with two words: “Joan Burton”. What changed his mind last Wednesday?

While old politics die hard in Ireland, old men flourish — in Labour and Fine Gael. The economy will be the loser.

Joan would have been ultra-competent.

She had been a superstar in her stewardship of Labour’s opposition finance portfolio.

Suddenly Brendan Howlin — a financial novice — is in charge of vast swathes of public expenditure and public service reform. The job was tailor-made for Joan.

Fundamentally flawed is the idea of giving Labour the task of reforming the public service. But if the Finance portfolio needed to be split between the coalition partners for political reasons, Joan was the best candidate.

Alternatively, the post could have been left vacant until the selection of the Taoiseach’s nominees to the Seanad next month. If Enda and Eamon really believe in new politics, they could have appointed two economic experts to the Senate and lifted them directly into the Cabinet. Nothing of the sort has happened.

Howlin’s appointment is astonishing at a time of economic crisis — but cabinet posts have been used to settle old scores, not to settle the economy.

Labour’s selections were bad enough (in the obvious preference for insider males in key positions), but Fine Gael’s cabinet choices were even worse. Michael Noonan was a shoo-in for the main Finance job. Fair enough, but Enda’s token gesture to gender equality with the sole selection of Frances Fitzgerald at the Children’s Ministry reeked of tokenism. He rewarded those who had supported him in the leadership heave — and mostly demoted the rest, with the welcome exception of Leo Varadkar in Transport.

How else could he have omitted Olivia Mitchell — the most talented woman in the party — from the cabinet ranks? Olivia has a useful degree in economics, but she committed a cardinal political sin in not supporting Enda during the leadership heave.

Indeed, the economy would have been better served by putting Joan (with her accountancy expertise) and Olivia (with her economics background) into key ministries. Olivia was ignored. Joan was humiliated.

Instead, the Department of Finance is headed up by two teachers, Noonan and Howlin.

Not the best qualifications to fight our corner in Europe in the coming weeks.

We are about to embark on a series of meetings where the solvency of the State is at stake. Even as the new Government was forming last week, the retreat was being beaten. We are being softened up for what will be billed as a great victory.

On Thursday, Enda enlisted the support of European Commission President Barroso for a cut in the penal interest rate imposed on us by the EU and the IMF in the bailout deal.

Unfortunately the reduction in the interest rate seems to be the limit of our ambitions. All the pre-election promises of “sharing the burden” of debt are evaporating. The bondholders are safe — protected by Nicolas Sarkozy and Angela Merkel.

Angela and Nicolas are playing hardball with the new Taoiseach. Far from relenting on the excessive rates of the loans to Ireland, they will now only offer to reduce them if Ireland is prepared to give ground on our 12.5 per cent corporate tax rate. They see the opening, they spot the weakness and they are preparing to pounce.

Kenny should not contemplate a concession on our corporate tax rate. Nor should he give a moment’s consideration to the alternative suggestion: that the rules controlling the corporate tax base be altered.

Either way spells a mega-loss to Ireland. If we agree to change the tax base, we will lose massive amounts of revenue to our European colleagues. If we concede even a decimal point on the tax rate to the Franco-German demands we will deter incoming investment.

Angela and Nicolas are willing to give us the oxygen of an interest rate cut — provided we are happy to be suffocated by an outflow of foreign investment. They are intent on cutting the transatlantic lifeline to Ireland’s economy. They eye the Googles, Intels, Facebooks and other key employers headquartered here. They would like to see the multinationals relocate to Frankfurt and Paris.

Kenny should rattle his other sabres and take the fight to Europe.

He can tell them that there is no deal that includes changes in the 12.5 per cent tax rate; that if there is any suggestion of a change he will use his veto; that Ireland’s tax is Ireland’s business. And he should remind the noble Nicolas that he himself came over to Ireland after the referendum defeat of the Lisbon Treaty to tell sceptics that there was no threat to the 12.5 per cent tax rate.

Indeed, formal reassurances were given to the Irish people to aid the treaty’s passage in a second referendum. Are Angela’s and Nicolas’s memories so short?

Enda should go further. He should let his fellow heads of government know that Ireland is contemplating encouraging further multinational investment with a unilateral cut in the rate, bringing it down to 9.9 per cent.

They would go ape; but he can remind them that Ireland’s tax is Ireland’s business. He should point out that Ireland is not in a position to repay its mountain of debt, that Europe has a responsibility for our plight.

He should then return from Brussels after the summit on March 24 and announce that he intends to hold a referendum on the EU/IMF deal.

Referendums in Ireland usually put the fear of God into Europe.

We have a record of awkward popular outbreaks of democracy that refuse to be bullied by Brussels.

If we are about to take a hard line in the interests of the economy, we need ministers who understand economics and can read balance sheets.

Joan Burton would have fitted the bill.