In Budget 2011, the Universal Social Charge which replaced the income and the health levy was applied to all gross income above €4,000. Despite all the opposition at the time, the charge continues to apply, although the threshold has been raised to €10,000.
At the other end of the spectrum, he was appalled when he was lobbied on behalf of one multinational to allow its PRSI bill to be written off against R&D tax credits. ‘For God’s sake, this is a social insurance tax. Do these people not see the need to pay any tax at all,’ he reacted. He was genuinely shocked by a paper written by one of his senior officials, which documented the cumulative impact on the tax system of the reductions and reliefs that had been introduced over the previous decade. The erosion of the base and the imbalance in the sources of taxation had left the economy mercilessly exposed when the property bubble burst.
He occasionally expressed his frustration at the narrow focus of his job on cutting the deficit. It annoyed him that it fell to him to look after ‘the financials’ while others in government drew up a strategy for economic growth that he regarded as unconvincing. The ‘Smart Economy,’ the buzzword of the time – or ‘An Eacnamiochta Glic,’ as he liked to call it – cut little ice with him. He was deeply sceptical about the ability of the Science and Innovation strategy to deliver a return on the very considerable amount invested in it.
His own strategy for economic growth was to concentrate on our three biggest indigenous sectors: agriculture, retail and tourism, which, he believed, would be the engine for balanced economic growth across the country. He did what he could, with the limited resources available, to support them through government initiatives and the taxation system. That is why he reversed the VAT increase introduced in his first budget: he had been dubious about the measure at the time and soon afterwards admitted it was a mistake. In Budget 2010, he ran the gauntlet of the anti-alcohol lobby when he reduced excise duties on drink in order to stem the flow of cross-border shopping, primarily driven by the availability of cheaper alcohol in Northern Ireland.
As Minister for Finance, he never got a lucky break. The ever-deteriorating state of the banks continually undermined his consistent efforts to deal with the growing imbalance in the public finances. But he did have one piece of good fortune: he had no direct responsibility for the management of the economy in the previous ten years. He used to joke that Bertie had, after all, done him a big favour by keeping him out of the cabinet for so long. And the idea that he had been excluded by Bertie Ahern appeared to have seeped into the national political consciousness. The public seemed, by and large, not only to have absolved him of any blame for the collapse, but also to have placed considerable trust in him.
He, in turn, understood that to gain acceptance of the very unpalatable steps that had to be taken, the public had to be given a comprehensive explanation of our economic difficulties. A key aspect of his budget speeches was a forthright analysis of what had gone so badly wrong in the Irish economy. In his Supplementary Budget, in April 2009, he was going out on a limb within his own government when he offered this diagnosis: ‘With the benefit of hindsight, it is clear that more should have been done to contain the housing market. We became too reliant on the construction sector for growth and tax receipts.’ So, when, in February 2010, he commissioned Klaus Regling and Max Watson to do their Report on the Sources of Ireland’s Banking Crisis, he was already well on his way towards the conclusions they were to reach three months later. Reacting to the publication of the report, he told RTÉ’s Morning Ireland he was not surprised by its findings and that he had been living with the consequences of the mistakes made over the previous decade since his appointment as Minister for Finance.
Understandably, this led to some tensions between himself and the Taoiseach as well as some other government colleagues. Any critique of the causes of the collapse implied criticism of his predecessors. It was tough medicine for Brian Cowen, in particular and, to his credit, he never flinched from taking responsibility or from defending the difficult decisions taken by his Minister for Finance. Most members of the Government were in a politically impossible position because they were identified in the public mind with the decisions that caused the crash. In the end, and especially when it came to banking policy, it was mostly left to Lenihan, Eamon Ryan of the Green Party and a group of able and ambitious junior ministers and backbenchers to fight the government’s corner. Not many queued up to sally forth for the government side on the increasingly hostile airwaves.
Notwithstanding these tensions, Lenihan and Cowen worked much more closely together throughout the crisis than is commonly understood. They respected each other and were both acutely conscious of their duty to work together in their respective positions in government, in the interests of economic recovery whatever the political cost to themselves. The stories of deep divisions between them circulating at the time were wide of the mark: part of the soap opera that surrounds leaders in times of crisis.
Certainly, there were clear political differences between them. For instance, Cowen was a strong believer in social partnership while Lenihan was not convinced the unions were prepared to play a part in solving the crisis.
Cowen had a strong attachment to the accretion of social policy that had been built up under the partnership process. At a Saturday morning meeting to discuss the Four Year Plan in late autumn 2010, he made known, in no uncertain terms, his deep unhappiness with the proposal to cut the minimum wage, which he described as a clear breach with traditional Fianna Fáil policy. Lenihan saw the level of the minimum wage as a barrier to employment, particularly in the hospitality and retail sectors, both of them on their knees at that time. It was not that Cowen was not seized of the need to respond to the economic crisis; he just seemed to jib at the idea that market forces or economic imperatives outside of our control should dictate the pace and the specifics of the required changes.
Notwithstanding these differences, there was no evidence of any personal rancour between the two men and they stood together on whatever decision was reached. Lenihan often remarked upon the support he got at Cabinet from the then Taoiseach and was very grateful for it. Both were political professionals to the end.
Lenihan’s talent as a communicator was an enormous asset to the Government in dealing with the crisis. His ability to go into a studio in the most difficult circumstances and deliver a top class performance was exceptional. He set out the Government’s strategy for dealing with the crisis with clarity and authority.
As the crisis went on, he formed the view that the Taoiseach and senior members of government should brief newspaper and broadcast editors on the Government’s strategy. When he took it upon himself to do so, it became a source of contention with some in Government Buildings. In certain instances, they had a point: Lenihan was never good at circumspection and there were times when he should certainly not have returned journalists’ telephone calls. But there is no talking to a politician with a headline in his sights.
He generally liked journalists and counted a number of senior members of the press among his friends. He would telephone them, on occasion to take issue with something they had written, but more often to exchange views. Sometimes, he was on a fishing exercise. He understood how the media worked and was acutely conscious of its influence even at times of enormous personal difficulty.
Within two days of his cancer diagnosis in December 2009, his thoughts had turned to a strategy for dealing with the inevitable media reaction. From the outset, he accepted the public’s right to know, but he wanted to avoid intrusive regular updates. He prepared himself for those who would argue that he should resign and the accusation that he was hanging on to office. ‘Don’t worry,’ he said, as I tiptoed around these delicate issues: ‘I saw all this with my father. I know what to expect.’
We agreed that a frank interview with Sean O’Rourke on RTÉ’s News at One in the first week of the New Year was the best way to put the matter into the public domain. Those plans were scuttled by TV3’s decision to broadcast the details of his illness on St. Stephen’s Day. He greeted this development with extraordinarily calm: by
