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Archive for November 6th, 2011

During the week, for the first time ever, I found myself having sympathy for the Secretary General at the Department of Finance, Kevin Cardiff. On Tuesday, it was announced that an error in the way the General Government Debt (GGD) was calculated meant the GGD was actually €3.6bn or 2.3% less than previously thought – a significant error. The Department of Finance (DoF) is responsible for the calculation of GGD and another organ of government, the National Treasury Management Agency (NTMA) was quick to issue a statement saying that it had been harping on to the DoF since Autumn 2010 to investigate the way it was calculating GGD. With impressive efficiency, the Committee of Public Accounts convened a hearing two days after the uncovering of the error, and summoned the NTMA and DoF before it, to explain what the hell had gone on, and why had DoF been producing incorrect statistical information for a year after the NTMA had raised concerns. And the sympathy? Well Kevin Cardiff had the cojones to turn up at the hearing to account for his own, and his department’s, actions and faced a three hour grilling that was unrelenting and frequently “up close and personal”. The NTMA, on the other hand and to the chagrin of the Committee, fielded Oliver Whelan, the director of funding and debt management at the NTMA rather than CEO of the NTMA, John Corrigan; whilst the Committee did summon the NTMA and DoF, it did not specify the individuals to attend and part of me thinks that Kevin turned up, saw John Corrigan wasn’t there and thought “shoite! I could have sent someone in my place”

And who is Kevin anyway? Well, since the start of 2010 he has been the Secretary General at the Department, he’s a civil servant with a broad range of responsibilities in overall control of 700 employees, reportedly (not that you’ll find much information on the role or the Department in the 13-page application pack for the job – out of 13 pages, just over a page is given over to a threadbare description of the role and the Department, compared with more than two pages of description of pension arrangements!). Kevin was reported last year to be earning €228,466 per annum, though recent reporting claims he is now on a (very slightly) more modest €200,000. And Kevin was recently nominated by the Cabinet to a lucrative new role at the European Court of Auditors which he was scheduled to take up in February 2012. There are some who say the Department is glad to get rid of him, though Governor of the Central Bank of Ireland, Patrick Honohan has spoken highly of him in the past. Minister Noonan however, is quoted as giving him a less than ringing endorsement in today’s press – “I have found him satisfactory to work with”. Kevin is a bit like Forrest Gump, in that he was in attendance (“the helmsman” as Kevin grandly claimed during the week) at some of the extraordinary events in this country’s recent history

(1) the night of the bank guarantee on 29/30th September 2008 when he was Second Secretary to the Department of Finance, reporting to David Doyle, the then-Secretary General

(2) the conception and creation of NAMA in 2009

(3) the bailout of the country by the IMF and EU in November 2010 (in fact he was the unrecognised one arousing curiosity at the press conference which announced the bailout, seated alongside Taoiseach Brian Cowen and Minister for Finance, the late Brian Lenihan).

Kevin said at the Committee hearing that if a Secretary General resigned every time an error was unearthed in their departments, you wouldn’t have any Secretaries General or if you did, only lucky ones. Which seems fair enough but the size of the error must also be a consideration, and you’d logically expect an error of sufficient size to put an end to any Secretary General’s career in public service. What about the error uncovered last week? Although the quantum, €3.6bn, was jaw-dropping, remember it was a statistical error which didn’t have any direct collateral financial impact. It wasn’t real cash that was found, it didn’t even affect the national debt which the NTMA correctly calculates but the more specific “General Government Debt”, it didn’t affect the calculation of interest repayments in coming years we were told, it certainly doesn’t affect the ongoing deficit (difference between Govt tax-take and what it spends) and there is no suggestion whatsoever of fraud or deceit. So the quantum was headline-grabbing but the financial effect less so. The culture in the Department which prevented the error being referred to the top for over a year seems worthy of investigation, as does the apparent lack of “belt and braces” checks on statistical information released.

At the Committee hearing during the week, it seemed to me that Kevin lost his temper at Shane Ross and to a lesser extent at Mary Lou McDonald. Shane had suggested that Kevin remain in his post at the Department of Finance and to put on ice his move toEurope, until the error and the systems which gave rise to it were investigated and dealt with. Mary Lou suggested that not only would the move toEuropebe inappropriate but that Kevin should even consider the tenability of his present role at the Department of Finance (code for “you should resign”).

But regardless of whether he stays or goes, the Committee might consider recalling him whilst we still have him; he might be called on to

(1) Provide a detailed account of the proceedings of the night of the bank guarantee in September 2008, proceedings which he is understood to have attended alongside the then-Secretary General David Doyle

(2) Explain what he is claimed to have hinted to the USambassador to Irelandwith respect to NAMA, namely that Kevin understood in early 2009 that NAMA loans would suffer a 50% haircut on acquisition rather than the 30% which was set out in the first NAMA business plan in September 2009. This claim of Kevin’s “hint” came from the Wikileaks publication of Irish ambassadorial cables and its significance is that, if verified, it might have led to a different strategy to deal with the banks – if we knew earlier on that the banks were nursing greater losses and that NAMA would have foisted unsustainable losses on the banks then we might have wound up Anglo and INBS earlier, and correctly imposed greater losses on those two banks before the complication of promissory notes even arose.

(3) Provide a detailed account of the events leading to the decision of Irelandto seek a bailout from the IMF and EU in October/November 2010, and specifically to describe any threats or intimidation on the part of the ECB. Remember there is supposed to be a letter from former ECB president, Jean Claude Trichet on Friday 19th November 2010 which apparently threatened Ireland if a bailout was not accepted, and accepted on the terms offered which implicitly included a commitment to honour the repayment of bondholders at all Irish banks, including the two zombies, Anglo and Irish Nationwide Building Society.

By the way, in terms of the performance of the Committee, it was indeed impressive to see a speedy convening of the hearing just two days after the error was revealed, and the questioning at the hearing was rigorous and unpartisan – it actually inspired pride in our democratic organs. However, although the Committee rightly challenged the appropriateness of the DoF setting the terms of reference for any internal inquiry and also of its role in selecting an external reviewer, the Committee didn’t pursue the matter. Surely the Committee should be writing to the Cabinet with the specific request that the reviews be managed by hands who are not themselves under investigation.

UPDATE: 23rd November, 2011. Breaking news that the panel of European MEPs considering the nomination of Kevin to the European Court of Auditors has rejected his nomination. This may be a first and might reflect the intense media scrutiny to which the current Secretary General at the Department of Finance has been subjected. What now for Kevin? In the normal course of events his contract at the Department of Finance might have been expected to expire in seven years from his appointment in 2010. Relations between Kevin and the Minister for Finance Michael Noonan are said to be okay if not fantastic, so he may stay but where does that put the recruitment already set in train for a new Secretary General.  There has been no word on progress of the two reviews into the accounting error which saw GGD (see above) overcounted by €3.6bn but we were told the reviews might have been completed by the end of November 2011.

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