Coalition plan falls short of pre-election promises


ANALYSIS:There was much on openness and fighting white-collar crime in the parties’ manifestos – but where are they in the programme for government, ask PAUL DONNELLY, JOHN HOGANand BRENDAN O'ROURKE

BEFORE THE election, we examined the parties’ manifestos on issues at the intersection of business and society: corporate governance; white-collar crime; whistleblowing; strategic State enterprises; and running government as a business. This examination was conducted in the belief that the function of business is to serve society, and not the other way around.

Now that Fine Gael and Labour are in government, we examine their proposed programme in the context of these issues. We are interested in identifying what has carried over from their manifestos and whether the compromises reached have resulted in a compromised document.

In line with both parties’ manifestos, the programme commits the Government to restoring economic confidence by fixing the banks. Rogue bankers and all who misappropriate funds are to be pursued to the full rigour of the law. The Central Bank is to be charged with monitoring growth at financial institutions, with the ability to impose ceilings on mortgages. Once restored and functioning, a levy will be applied to banks based on the size of their liabilities.

Following through on their manifestos, the Government commits to restructuring bank boards, replacing directors who presided over failed lending practices and giving the regulator powers to pre-approve bank directors and senior executives. All remuneration schemes at banks receiving State support will undergo a fundamental review to ensure an alignment of interest between banks, their staff and the taxpayer.

Interestingly, Fine Gael’s manifesto proposals to give the Financial Regulator powers to wind down banks that threaten financial stability, or veto their choice of auditors, have not made it into the programme.

More generally, Labour’s proposal that good corporate governance be a legal condition for listing on the stock exchange, while Fine Gael’s promise to hold State agency managers directly accountable to ministers, both become commitments.

Something hinted at in Labour’s manifesto, and specified in the programme, is that chief executives of State-funded bodies will have to attend the relevant Oireachtas committee on a regular basis to answer oral parliamentary questions.

However, despite both manifestos promising an open and transparent system for appointments to State boards, the programme contains no commitments to reforming the appointment system. Both parties proposed publicly advertising State board vacancies, with Fine Gael suggesting ministers select suitably qualified candidates from shortlists, while Labour proposed that parliamentary committees scrutinise applicants.

Fine Gael promised that “the directors of all State bodies will be asked to resign and reapply for their positions within six months of a Fine Gael-led government coming to power”. What happened to these promises? Are we back to “politics as usual”, with cronyism still the criterion for such appointments?

On white-collar crime, both Fine Gael and Labour made explicit pre-election promises. The programme for government contains a commitment to “strengthen measures to ensure that convicted white-collar criminals cannot transfer assets to spouses or other family members”. But what happens if someone has transferred assets prior to being convicted? Will the legislation allow for the retrospective reversal of such transfers?

From Fine Gael’s manifesto, the new Government commits to enacting “a new consolidated and reformed anti-corruption law to punish white-collar crime and end the impunity from consequences for corporate behaviour that threatens the economy”. However, the promise in Fine Gael’s manifesto to provide whatever resourcing is necessary to the Office of the Director of Corporate Enforcement to tackle such crime has disappeared.

What point is there in introducing legislation if there is no recognition of the extra resources that may be needed for enforcement? Equally, what is the point of regulation if the enforcer is not mandated to be proactive?

The programme commits to enacting whistleblower legislation covering the public sector. Such legislation is to be welcomed; indeed, it is vital to public sector reform.

However, we are also on our knees because of decisions made in the banking and property sectors. Why can the proposed whistleblower legislation not be expanded to cover the private sector, particularly in the context of the commitment to tackling white-collar crime? Where is Labour’s promise to also cover the private sector?

Public enterprise is promoted in a manner unfashionable since the 1930s: the New Economy and Recovery Authority (New-ERA) echoes US president Franklin Delano Roosevelt’s “New Deal” and the Shannon hydroelectric scheme of the early State. Among New-ERA’s projects are Irish Water, aimed at upgrading the water network; a new broadband network investment company led by the State; BioEnergy Ireland, which will combine Bord na Móna and Coillte; and a new smart grid company for power.

Despite both manifestos referring to the country’s oil and natural resources, nothing appears in the programme on the topic. Fine Gael talked of incentivising and promoting off-shore drilling to both secure supply and generate much-needed revenue, with the State possibly taking an equity share in new finds. Labour talked of extending the country’s royalty regime to the Corrib gas field “as part of a wider review of the tax regime and conditions of oil and gas exploration”.

Were the parties not able to reach agreement on these natural resources? Given the estimated 10 billion barrels of oil and gas (with oil currently trading at $106 per barrel) in the Rockall and Porcupine basins, which excludes Corrib, and the perilous state of the country’s finances, this seems a glaring omission.

We will have to await the McCarthy Review Group on State Assets before we learn which non-strategic State assets are to be sold to achieve the €2 billion target to part-finance investment in strategic assets. In a nod to Labour, assets will only be sold when “market conditions are right” and when “adequate regulatory structures have been established to protect consumer interests”.

Frontline services are to be protected while the number of public servants is to be cut by between 22,000 and 25,000 by 2015. How is this to be achieved? Public service is “about serving the public, not making a profit”. The creation of a fiscal advisory council, cost-benefit analysis for major infrastructural projects and reforms to the budgetary process are to give greater efficiency. There is to be a review that will “outsource, where appropriate, non-critical functions”.

But there is also to be an examination of “ways to require agencies to seek legal advice from the CSSO [the Chief State Solicitor’s Office] and not from the private sector in order to save costs”. Talent is to be brought from outside the system. There are schemes to promote greater mobility, to reward team achievements, to encourage staff suggestions and to require greater public reporting on performance within the sector. Notably absent is any reference to social partnership.

Paul Donnelly, John Hogan and Brendan K O’Rourke are lecturers in DIT’s college of business and are editors of the recently published volume Irish Business Society: Governing, Participating Transforming in the 21st Century(Gill and Macmillan)

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