DR MICHAEL Somers did not have to retire as chief executive of the National Treasury Management Agency (NTMA) now but the decision to make it known, on the day that the Nama legislation has passed through the Oireachtas, is serious and significant. It is no coincidence.
For more than two decades Dr Somers has helped to manage the national debt with notable success, achieving considerable savings for the taxpayer by borrowing on competitive terms on international markets. The NTMA has done so through the best and worst of times for the Irish economy: in the 1980s as exchequer borrowing soared, in the 1990s when the debt ratio declined rapidly as a share of national output, and once more as borrowing is set to rise sharply in the years ahead.
Few public servants, with the notable exception of Dr TK Whitaker, leave such an impressive legacy of achievement as Dr Somers. As a civil servant in the Department of Finance in the late 1980s, where he was secretary of the national debt management division, he proposed that management of the national debt should be handled by a separate State agency outside the Civil Service. Inflexible pay structures in the Civil Service had made it difficult to recruit, and even harder to retain, the specialist staff required for the task.
When the NTMA was established in 1990, one in four euro of tax revenue was required to service the outstanding national debt. By last year, just four out of every 100 euro were needed: a figure that will rise significantly in future. In the past year, as more questions were raised about Ireland’s creditworthiness, the cost of borrowing soared. In March, Ireland as a sovereign borrower was paying far more than Germany – by almost 3 percentage points – to issue government debt, despite both countries sharing a common currency. The differential has since halved and the NTMA has fully funded the State’s borrowing needs for 2009 and for part of next year.
One measure of the NTMA’s success has been the extension of its remit, as the Oireachtas has given it many additional functions including the State Claims Agency and the National Pension Reserve Fund. The NTMA was one of the two big successful ideas to emerge from the last economic downturn – the other being the International Financial Services Centre.
Dr Somers expressed public reservations about Nama before a Dáil committee earlier this year. He feared it may prove to be a “courts bonanza” for lawyers and he was concerned about the NTMA’s own lack of experience of bank restructuring. Maybe these issues were only the tip of the iceberg.
On his retirement, it would be interesting to know whether he believes in the Nama project, whether €55 billion should be paid by the State to bail out the banks and whether Nama is an independent entity free from political direction into the future. Dr Somers has done the State considerable service, always mindful of the taxpayer’s long-term interest.