Learning to cook at Martin O Donoghue's ball

Martin stepped in and Charlie stepped out ..... " creative accounting" Part 2.

By Vincent Browne

" I now know how Charlie Haughey made his fortune," said a sceptical economist on Friday night after Fianna Fail had unveiled its taxation proposals, "he brought forrward his income for 20 years all in to one year."

'It was a comment typical of the incredulity with which those taxation proposals were greeted among economists. There had been a perception that Fianna Fail had been drawn back to the road of fiscal righteousness by Martin O'Donoghue since the opening press conference of the cammpaign - that perception vanished on Friday afternoon. The proposals to finance £71m. of expenditure through changes in cash flow were what evoked such reaction.

Martin O'Donoghue had agreed to come back onto the Fianna Fail front bench after Christmas only after very categoric undertakings were given by Haughey. One of these was that there should be no requirement on O'Donoghue to justify the economic record of the Haughey Government - O'Donoghue simply wasn't prepared to jusstify the abandonment of all restraint on public sector pay which occurred in 1980. Neither was he prepared to stand over the "creative accounting" exercise of the January 1981 budget nor the splurge of public expenditure which occurred in the run up to the June '81 election.

There was also a significant difference between them on the Coalition's budget of July 1981. O'Donoghue said at the time on television that corrective action was needed then to deal with the soaring current budget deficit. That line was vigorously rejected by Haughey himself and Gene FitzGerald, his then Finance spokesperson. Opening his speech on the July budget FitzGerald had said, "I believe this budget is totally unnecessary at this time. If corrective action is needed theJanuarybudget time is the time to take it." (Dail Debates, Vol. 329, No.5, Col. 599.)

Thus O'Donoghue was in conflict not alone with the economic policy adopted by Haughey while in Government but also in conflict with policy in Opposition. This issue was to arise very early on in the campaign.

There was animated debate between Haughey and O'Donoghue prior to the budget of January 27. O'Donogghue insisted that the budget would not be opposed in its entirety and that the current budget deficit aimed at by the Coalition should be accepted. Thus when O'Donoghue was responding to Bruton's budget statement in the Dail, he avoided any criticism of the current budget deficit target, although he expressed profound disagreement with the stra-, tegy otherwise of that budget.

Following the fall of the Government that night, the division between O'Donoghue and Haughey became quite apparent on television. O'Donoghue steadfastly refused to· even comment on the period of Haughey's tenure in office, stating specifically he would justify only the record of the. Lynch Government from 1977 to 1979. When Haughey came on he poo-poohed the clamour about borrowing.

The following day Haughey gave his first press conferrence of the campaign in the Shelbourne Hotel. He was flannked only by Albert Reynolds, the director of elections, and by Frank Wall, the party's general secretary. Apart from one very brief answer by Wall to a question directed solely at him, Haughey fielded all queries.

He was in a buoyant humour, fully confident of an easy victory. He opened by expressing a sense -of deja vu and said to the assembled' journalists, "I hope you will follow us' assiduously around the country, down the highways and by-ways, up' the boreens and down the mountainsides. You are all very welcome." (In the event Haughey's cammpaign trail was to be very much more confined than he then suggested.)

Again he decried the obsession with foreign borrowing, stating again and again that the Government and some commentators had become "hypnotised" with the subject. He again and again deflected questions on borrowing and the current budget deficit.

He was asked what the main issues in the campaign were and having listed unemployment and inflation he said: "I put in a very high place in the priorities the need to dispose with the - most of the provisions of yesterday's budget. I believe that the election will be fought very largely for and against yesterday's budget."

Later on in the course of that press conference he said: "this election will be very largely fought on the basis of for and against the budget brought forward by the Coaliition Government ... people will be asked in this general election, do you want to vote back in the Coalition Governnment to implement that budget or do you want to vote for Fianna Fail."

He was asked if Fianna Fail would be producing an alterrnative budget and he, replied. ~'NQ.. that would be foolish. Only a Government in office can form and put forward a budget."

O'Donoghue was reported to have been furious with Haughey's performance and there .appears to have been something akin to a showdown the next day, Friday, Jannuary 29. From then until the press conference of the Friday two weeks later (February 12), O'Donoghue seemed to be in the ascendant.

In RTE radio's "This Week" programme on Sunday, January 31, Haughey's line had changed perceptibly from his tack of just three days previously. He was a good deal less cavalier on the borrowing issue, stating "we would stick to the same levels of borrowing and the current buddget deficit (as the Coalition had proposed in the defeated budget) because it would not be sensible, wise or prudent to depart too much."

The following day (Monday February 1), Martin O'Donnoghue did an on-the-record tape-recorded interview with this reporter which revealed divisions within Fianna Fail of quite considerable proportions.

In the course of that interview O'Donoghue repudiated Haughey's intention of placing in a high priority the need to dispose of most of the provisions of the Coalition budget. . O'Donoghue said: "Whatever new Government comes in on the 9th of March, it's clearly necessary to present a budget and that means that there isn't any prospect of Fianna' Fail designing  their own budget from scratch. So in effect you must bring forward the bulk of the budget as it stands but we would certainly make those two fundamental channges (removing VAT on clothing and footwear and restoring food subsidies) and possibly one or two others." That was the line on the Coalition budget that was to prevail for the rest of the campaign.

O'Donoghue made it implicitly clear that he felt uneasy with the Haughey commitment at the first election press conference to resume the construction of Knock Airport and repeatedly refused to justify that commitment on "economic, social and infrastructural grounds" - the ratioonale Haughey had used.

O'Donoghue simply stated that a commitment had been entered into by the last Fianna Fail Government and he felt bound by that. Asked if he believed that corrective action was needed last July to deal with the mounting budget defiicit problem then, he unhesitatingly replied, "Oh yes." He did not recollect that Gene FitzGerald and Haughey had opposed the taking of any action at that time. Again he repeatedly refused to justify in any way the record of the Haughey Government and he then got into a particularly tricky area when asked the following series of questions:

Given what you know of Charles Haughey s record as Taoiiseach [rom December 1979 to June 1981, do you think he is a fit person to be Taoiseach of this country?

I think that is a totally irrelevant question for the purrpose of this interview (the interview was on general Fianna Fail policies in the election).

You are refusing to answer a question on whether you think your leader is a fit person to be Taoiseach of this country?

I think it is an impertinent question to ask me in this context. Charlie Haughey is the democratically elected leaader of Fianna Fail and as such will have the loyalty of every member of the Parliamentary Party of Fianna Fail, includding myself.

But do you think' he is a fit person to be Taoiseach of this country again?

Charlie Haughey has a long record in politics. He has demonstrated his political skill and expertise on many occaasions. He has certainly demonstrated a far greater degree of political skill and capability than Garret FitzGerald.

You are not answering the question and it is a very crucial issue.

I think I've answered it more than fully.

The O'Donoghue refusal to in any way endorse Haugghey's suitability as Taoiseach that Monday, February 1, reeflected as much as anything else, one presumes, the degree of conflict that had existed between the two over the previous few days. But O'Donoghue's reservations about Haughey as Taoiseach were echoed ten days later by George Colley on The News At One Thirty when he too refused to say that he hoped Charles Haughey would be next Taoiseach.

Haughey's performance at the press conference the following day - a cavernous room in the Burlington Hotel - was very subdued compared with his performance of just five days previously. He repeated the O'Donoghue line on the need to accept the bulk of the Coalition budget and was in difficulty in explaining how then the budget could be the major issue in the campaign. He again accepted the Coalition target of £715m. for the budget deficit and was in difficulty in explaining how this could be achieved. He promised to bring forward specific taxation proposals once he and Martin O'Donoghue had been into the Departtment of Finance - again a significant departure from his contention five days previously that it would be impossible to do this.

That press conference was attended by the entire front bench and he grudgingly allowed others answer questions, although he retained control over the microphone and would not allow journalists to direct their questions to inndividual spokespersons when they wished. He repeatedly fobbed off questions on the economy saying that Martin O'Donoghue would deal with these later and then when O'Donoghue did fmally get in Haughey intervened to say that O'Donoghue would deal with individual queries after the conference.

That press conference was more professional and controlled than the first one but Haughey was clearly uncommfortable having to so obviously retract what he had said the previous Thursday and he was verging on the paranoid whenever any of his spokespersons answered questions. When Martin O'Donoghue was queried on Knock he was heard to urge "say yes" - O'Donoghue declined to oblige.

The commitment to go specific on their tax proposals to a large extent suspended the election campaign for the following ten days. Early this week the party, however, held a press conference, this time in a small room in Jury's Hotel and here further transformations in the Haughey persona were evident.

This time he farmed questions out to Martin O'Donooghue , Des O'Malley and others as a matter of course. There was none of the hesitation and cautiousness about doing so that had been evident the previous week in the Burlinggton. But by then the polls in The Irish Times and The Sunnday Independent, showing him trailing Garret FitzGerald by 20% and 30% respectively, had been published. Haughey had become a liability and his performance in Jury's suggessted that even he himself acknowledged that.

Albert Reynolds fielded a facilitatory question about the possibility of a smear campaign against Haughey by damnning Fine Gael, rather than, as expected, the press. However, Haughey couldn't let it go at that, for having graciously put Reynolds into bat on that issue, when he resumed the wicket himself, he made a swipe at unnamed newspapers @clearly he had The Irish Independent in mind.

When the taxation proposals were finally announced at yet another press conference in the same caverrnous room in the Burlington Hotel (incidentally, politicians have a decided advantage over the press in such rooms for they can command the scene through a public address sysstem that booms across the empty spaces) the press was taken by surprise.

Nobody was really sure what it all meant and when Marrtin O'Donoghue, who incidentally was again dominating this press conference, was .pursued by this reporter and forced to concede that the opening deficit for 1983 would be £71m. worse than it would otherwise be because of the cash flow proposals, he became decidedly venomous. Haugghey followed through with an amazing attack on John Bowman, the presenter of the "Day by Day" programme accusing him of bias in favour of ' Garret FitzGerald in not asking the Taoiseach about the Coalition's broken promises (Haughey actually had a point for this was not one of Bowman's best interviews - it had been taped late at night in FitzGerald's home and it was clear that both interviewer and interviewee were tired.)

No explanation is available to this reporter for the appaarent capitulation of O'Donoghue to political expediency in the propagation of these proposals. It appeared that he had set his face decidedly against anything that would personnally compromise him, hence his blank refusal to justify the record of the Haughey Government and his support for corrective action last July. Also his refusal to endorse Haughey's personal suitability as Taoiseach, his insistence that the Coalition's current budget deficit target would be adopted by Fianna Fail and tliat the bulk of the Coalition budget be appropriated. The story of how he agreed to the cash flow three card trick or perhaps of how he sponsored it, remains to be told. •

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Editorial postscript - Fianna Fail's Funny Money

Fianna Fail's election promises would cost well in excess of £ZOOm. beyond what the Coalition budget will raise in revenue. The FiannnaFail tax package proposes to raise only £119m.

It is proposed to raise 76% of this .revenue . (£91m,) through what can only be described as the most dubious of means. Twenty million pounds is supposed to accrue from buoyancy xeconomists, apart from Dr. O'Donooghue are agreed that this is economic nonsense. A further £71m. will be raised in 1982 through bringing forrward Corporation tax and V A T on import payments from 1983 into 1982.

This "miracle" is achieved in the following way. If, for example, you currently earn £500 per month but wish to spend £1000 per month you can get over your initial difficulties as follows - arrange to be paid at the beginning of the month (i.e. a month in advance) instead of at the end of a month (i.e. a month in arrears). This 'means that on the first month that this operates you will get a total of £1000 (£500 for the previous month and £500 for the month ahead). This solves one's immediate cash flow problems but it fails enntirely to address the basic difficulty that one is spending £500 more per month than one is earning. The next month you are going to get into grave financial trouble unless you manage to pull another "stroke" or halve your expenditure. The reejigging of the cash . flow will have served only to ease the initial stages of this disaster course.

This is precisely what Fianna Fail proposes to do - refuse to meet the problem that we are spending more than we are taking in on revenue by rejigging the cash flow, there by ennsuring that we. will get into serious difficulties sooner or later. In fact what it means is that the opening current budget deficit for 1983 will be £71m. worse than it would otherrwise have been.

The significance of this exercise is that Fianna Fail has entirely abanndoned any pretence at fiscal responnsibility and has committed the party to a course which, if they are elected, could lead only to financial disaster.

The contention of OUl editorial (page 4) that this election had dragged politicians back onto the path of sannity and responsibility is therefore missplaced (it' was written and printed before the Fianna Fail announcement). This ploy represents the same kind of cynicism which led to the falsification of the January 1981 estimates and the "let-it-rip" attitude to public expenditure which the Haughey Government adopted in the run-up to the June '81 election - the ploys that" caused a great deal of the current economic problems.

The amounts involved are not that significant but the mentality behind the "stroke" is frightening. For this, if for no other reason, Fianna Fail deserves to be defeated in this election.