In the event, the talks broke down, earning the Taoiseach sharp criticism for his failure to do what every other Taoiseach had done since 1987: cut a deal with the unions. There was little acceptance either in the media or among the opposition that our circumstances had changed utterly. The talks reconvened in September and within days of the collapse of Lehman’s, the Government conceded an award of 6 per cent over twenty-one months. I recall Lenihan asking two of his senior officials if we could afford the pay increase. If it was the price of industrial peace, he was told, it was worth it.
The exchequer returns at the end of 2008 showed a drop of more than €8 billion in tax receipts over the year. In January, the Government said immediate savings of €2 billion would have to be found. In early February, five months after it was granted, the pay increase was suspended and the Government introduced a public sector pension levy, which amounted to an average cut of 7.5 per cent in the pay of public servants without the agreement of the unions. A short time later, the social partners walked away from the process.
Lenihan had been in cabinet for just under a year when he was appointed Minister for Finance. I had worked with him since January 2006, just after the Office of the Minister for Children was set up and, as its political head, he began to attend Cabinet meetings. He was fascinated by the business of government and had an in-depth knowledge of how the system worked, much of which he learnt from his father, who had held seven different portfolios in his long political career. It was as if he had been training to be a minister all his life and when his time came, he was completely at ease in his role and supremely confident in his exercise of ministerial power. He loved Justice: as a well regarded lawyer, he was a natural fit and he knew many of the personnel, having served in that Department as a junior minister.
By contrast, the Department of Finance was more reserved and hierarchical. The offices with their doors closed; the echoes of footsteps on the marble floors: he used to say it reminded him of a monastery. Although he never said so, he must have found it daunting. Critics, and there were many, especially in the first year, pointed to his inexperience in cabinet and his lack of knowledge of financial matters: although some of the most experienced figures in finance and politics around the world lost their footing in this most intractable of crises. The criticism did not bother him much. He had a job to do and he set about his work in the Department with alacrity.
Finance was now centre stage having been sidelined during the boom. The Department was under the media spotlight as never before. Scarcely a day went by without some negative piece of commentary. It had come to the point where at least one official said he had stopped telling people where he worked. Merrion Street had been knocked off its stride by the speed and depth of the crisis.
Inevitably, a siege mentality took hold and there was defensiveness. But there was a healthy self-doubt and questioning at senior level that made it an interesting work environment. The idea of setting up an independent review of its performance over the previous decade came from the Department. The hubris for which Finance was known was gone and in its place was a refreshing honesty. I recall one senior official saying to Lenihan about some banking matter: ‘Minister, we cannot advise you because we have never been in this position before.’ In the white heat of the crisis, there was no time for ‘Yes Minister’ games.
Those officials, senior and junior, who worked closely with the Minister, strove incessantly to meet the unrelenting demands. Against a background of intense criticism in the media, a strong camaraderie developed and relationships strengthened. The younger group of senior officials in Finance and in the Department of the Taoiseach recognised the political imperative of communicating the seriousness of the crisis to the public and of providing a rationale for the actions that had to be taken. As never before, civil servants and political advisers worked together on communications strategies for the budgets.
Lenihan held most of his senior officials in high regard. A small number were slightly bemused by him: the messy state of his desk and the fact that he conducted his meetings mostly from his armchair – he only ever sat at his desk to take an important phone call. His notorious timekeeping was another source of annoyance.
They seemed surprised by his openness and informality. His often hilarious post-cabinet debriefs, were something of a novelty. His agile mind and his capacity to scrutinise issues through different lenses made him wonderful company, but sometimes difficult to manage, especially when officials were under time pressure to get decisions. A few never really adjusted to what they regarded as his unorthodox way of doing business.
He consulted widely outside of the department among economists and business people. From an early stage, he had regular meetings with, among others, Patrick Honohan, then in Trinity College and his colleague Philip Lane, Jim O’Leary, Colm McCarthy and Alan Ahearne, whom he later hired as an economic adviser. Some in the Department were uncomfortable about these meetings; one official remarked that the Minister was being too liberal with budgetary detail.
He went to the ESRI offices to exchange views and discuss policy options, apparently, the first Minister ever to have done so. That annoyed some in the Department, who read it as an indication of his distrust of their advice. In fact, Brian Lenihan was simply doing what he always did: taking soundings from a broad spectrum of opinion before coming to his own conclusions. He had a list of people he used to telephone most Sunday afternoons to discuss whatever was current or on his mind.
Among his confidantes was Ray Mac Sharry, the last Minister for Finance to have dealt with a major fiscal crisis. It was from one of his many conversations with Mac Sharry that the idea of a reprise of the Bord Snip exercise emerged. Apart from the obvious benefit of seeking out waste and inefficiency, Lenihan saw it as a powerful symbol. Bord Snip of the late eighties had gained an almost cultish status as a no-nonsense purge of a sclerotic system. Key to that reputation was the plain speaking economist Colm McCarthy, Bord Snip’s public face. By asking McCarthy to do national service again, Lenihan hoped to leverage that reputation.
In effect, An Bord Snip Nua, as it quickly became known, was a souped-up, rolling estimates process under the baton of Colm McCarthy and his fellow Bord members. For officials in the Department of Finance, who did all of the leg work, it was an opportunity to resurrect all the cuts they had been proposing, however ineffectively, throughout the boom years. Lenihan was aware the subsequent report by the Bord would make politically unpalatable recommendations, which would never have a chance of being implemented. But he believed a forensic, independent, critical analysis of all public spending was needed to open up a debate and create a climate that would strengthen his hand in framing future budgets. He had also taken the precaution of committing to the publication of the Bord’s report at the time of its establishment lest there be any danger of it not getting into the public domain.
There was little appetite in Government for An Bord Snip Nua, either at ministerial or senior official level and not everybody shared Lenihan’s enthusiasm for the Colm McCarthy effect. But it resonated with the public mood and, and when its report was published in July 2009, it was a bestseller.
Lenihan had always been something of a fiscal conservative. As Minister for Justice, he resisted demands for a Court of Civil Appeal, at least in part because he believed the solution lay in making the existing structures more efficient, rather than creating an additional costly judicial layer. As Minister for Children, during discussions about the proposed amendment to the constitution on children’s rights, he firmly ruled out the idea of independent legal representation, or Guardians ad Litem, for children in legal disputes. It was, he said,