Thrift led on to spending spree Finance

FINANCE: Minister for Finance, Charlie McCreevyTrack recordCharlie McCreevy's instalment in the ministerial suite on Merrion Street was a sort of political epiphany, certainly in the eyes of the new minister.

After 20 years in the Dáil - much in quasi-exile within Fianna Fáil - he finally had his hands on the brief for which he believed himself supremely qualified.

Much was expected from the Kildare TD who made his name by standing up to Charles Haughey in the late 1970s and early 1980s over his profligate attitude to the public finances. McCreevy seemed anxious not to disappoint, and committed himself to keeping the annual increase in day-to-day government spending to a thrifty 4 per cent per annum.

This target barely survived McCreevy's first budget, swept way in a boom in Government spending, funded out of spectacular tax revenues from the booming economy, topped up with the sale of Government assets such as Eircom. His failure to match the high standards in this regard by which he judged others in the past did little to dent McCreevy's confidence and he set out to leave his mark on the administration.

Unlike nearly all the previous holders of his office, McCreevy was the first finance minister with the resources to take bold political initiatives and he was not afraid to do so. Neither was he afraid to defend his less popular decisions, although political expediency led to inevitable U-turns on issues such as the taxation of credit unions.

His personal projects include the establishment of National Pension Reserve Fund into which 1 per cent of GDP will be paid each year to pre-fund State-sector pensions. There was also the Special Savings and Investment Accounts, which, along with the tax breaks for professional sportsmen appear to have been very much his - rather than the Department of Finance's - idea.

The clear daylight between McCreevy and the Haughey-led Fianna Fáil administrations meant that the Finance minister suffered no collateral damage from the various tribunals that have rumbled on during the life of this Government. However, he was more than capable of making trouble for himself, most notably when he recommended that Hugh O'Flaherty - the controversial Supreme Court Judge - was appointed to the board of the European Central Bank.

Main achievement

McCreevy's overriding achievement while in office was to bring in significant cuts in the upper and lower tax bands. Over his five budgets, the top rate of tax has fallen from 48 per cent to 42 per cent, while the lower rate is down from 26 per cent to 20 per cent.

The tax cuts were combined with a switch towards a system of individual tax credits rather than tax bands. Although inherently fairer, the new system initially favoured couples where both partners worked and a hurried compromise was reached after the issue exploded in the wake of Budget 2000.

Biggest failure

The most significant criticism of McCreevy is that he failed to keep Government spending under control. The relentless rise in spending - more than 22 per cent last year - was sustainable during the boom years, but now looks set to produce a return to Government borrowing, despite some fancy footwork in the Budget.

Prospects

The Minister for Finance's re-election seems assured, but there is a school of thought that he would not really want to return to finance and have to deal with the legacy he has left himself. The only other place to go after Finance is the Department of the Taoiseach, which would require an upheaval of seismic proportions in Fianna Fáil. He may choose instead to follow the path trodden by Ray MacSharry to Brussels and then a lucrative career in the private sector.

John McManus

Finance reporter

OPPOSITION PERFORMANCE

Fine Gael

Jim Mitchell

Deputy leader as well as finance spokesman, Jim Mitchell will play a central role in Fine Gael's election campaign. His confrontational and highly political style makes him a strong Dáil performer, although it is perhaps more suitable to a time when the economy was less buoyant and the Minister more vulnerable to criticism. He has been criticised for inconsistency in calling for financial rectitude in Dáil speeches while also promising groups such as Eircom shareholders and taxi licence-holders compensation if the party returns to power. He has responded by pledging all the party's proposals will be costed by the Department of Finance.

Labour

Derek McDowell

Quietly-spoken and effective rather than colourful. He has grown in confidence since being given the portfolio, and was impressive in his response to the Minister for Finance's Budget speech last December. However, he had the advantage of having more time to think about it than Jim Mitchell, who immediately followed the Minister.

McDowell accused the Minister of elevating personal greed above the public good, adding "Champagne Charlie rides again". Like other Labour spokespersons, he has deliberately distanced himself from Fine Gael policy, despite the bigger party's desire to forge a pre-election alliance. Before the Budget, he called for increased borrowing to fund taxation and social welfare. He is viewed as a competent "safe pair of hands" rather than a spectacular parliamentary performer.

Michael O'Regan

Parliamentary Reporter