Read Bertie Ahern: The Man Who Blew the Boom: Power & Money Online

Authors: Colm Keena

Tags: #Biographies & Memoirs, #Historical, #Europe, #Leaders & Notable People, #Political, #Presidents & Heads of State, #History, #Military, #Politics & Social Sciences, #Politics & Government, #Elections & Political Process, #Leadership, #Ireland, #-

Bertie Ahern: The Man Who Blew the Boom: Power & Money (32 page)

BOOK: Bertie Ahern: The Man Who Blew the Boom: Power & Money
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Bank statements of your client show lodgements which are in excess of your client’s gross salary at that time. The tribunal believes that this issue requires to be resolved in the context of its inquiry into tax designations during the period in which Mr Ahern served as Minister for Finance.

The letter also pointed out that the sum of the lodgements dealt with in the Peelo document—£97,338.49—exceeded Ahern’s salary for the period, which was ‘approximately £42,000 per annum gross.’

Meanwhile, as a result of the narrative in the Peelo document concerning the Beresford Avenue house and Larkin’s dealings with
AIB
, O’Connell Street—as well as the goodwill loans from an identified list of people, most of whom were still alive—the tribunal’s inquiry was spreading. All these highly confidential dealings with the tribunal were taking place during a period when Ahern’s image as an international statesman was continuing to grow.

There were extended and difficult negotiations in the wake of the Belfast Agreement about policing, decommissioning and other matters. They involved Ahern continuing to work closely with Blair and also with the White House. As if that wasn’t enough, on January 2004 Ireland took over the Presidency of the European Union. The
EU
, in the wake of the collapse of the Soviet Union and the unrest in the Balkans, was expanding to the east, bringing in tens of millions of new citizens from ten new member-states. This unenvisaged expansion led to the need for a reformed institutional framework. As Ahern took on his new role, the efforts to agree a constitution for the
EU
under Silvio Berlusconi were seen as having been unsuccessful, and few had an expectation that there would be any change now that the European leadership had shifted to Dublin. They hadn’t reckoned with Ahern’s negotiating ability, patience and drive.

He decided to mark the entry of the ten new states on 1 May 2004 in a special way. It was the largest expansion of population and territory in the
EU
’s history, and many of the states that were joining had spent the previous decades under the yoke of Soviet control. Ireland and Britain were exceptional in their approach to the enlargement in that they opened their borders immediately to workers who wished to travel from the new member-states. Multinational companies that had set up in Ireland had been complaining for years about the difficulty of finding employees—something that had led Mary Harney, as Minister for Enterprise, Trade and Employment, and others to begin a programme of trying to lure workers to Ireland. The campaign began by urging Irish emigrants to return, then identifying members of the wider Irish diaspora and, lastly, seeking out non-Irish skilled workers throughout Europe and farther afield. Lavish expenditure during this period by
FÁS
, which was spearheading the effort, would later be the cause of political scandal,
FÁS
ran a Jobs Ireland campaign during the period 1998–2002 that included targeted advertisements in foreign media, as well as a roadshow that visited, among other cities, London, Brussels, Cologne, Hamburg, Hannover, Prague, Moscow and Mumbai. Cities in Canada, Britain, Australia, New Zealand and the United States were targeted.

Not all the workers who moved to Ireland, some with families, were returned emigrants or persons of Irish descent, and, in a significant change of policy, the state began to issue thousands of work permits. The downturn that hit the Irish and global economies in 2002 lessened the demand for workers from abroad, but the enlargement of the
EU
occurred as the Irish economy returned to growth, and it meant that a population of tens of millions of potential workers was now available to feed the once-again growing demand for labour. The number of young people leaving countries such as Lithuania and Poland for Ireland became a political issue in those countries.
The Mushroom Covenant
, a book by Laima Muktup
vela, a Latvian mother of four, became a best-seller in her home country. In it she wrote about her experience of working long hours on a mushroom farm in Co. Meath and sharing a three-bedroom house with eleven other Latvians. ‘There is hardly a family left in this country who hasn’t lost a son or daughter or mother or father to the mushroom farms of Ireland,’ she told the
International Herald Tribune
when it carried a report on the phenomenon in 2005. ‘During the Cold War we all dreamed of leaving but the risk is that if everyone leaves, our country will disappear.’

According to Micheál Martin, the contribution made by the growth in population to the overheating of the Irish economy has yet to be analysed.

It was Bertie who signed the 2004 agreement [on the accession countries] because at that time it made sense economically: all the multinationals were saying we don’t have the skills sets. The
IDA
[Industrial Development Authority] too. Most multinationals would have said to us at the time, ‘Where are you going to get the skills sets?’ And we would say, ‘Actually, our skill base now is Europe. We have access to here, there and the other.’
I was Minister for Health, and the effect was dramatic, not just on maternity hospitals but on accident and emergency services. And the demand on infrastructure, housing. It was part of the boom in housing. You were employing Lithuanians and Poles to build houses that were rented to Lithuanians and Poles who were coming in, and so it was a sort of circular thing.
I remember discussing the Green Card thing with Bruce Morrison [American senator], and he said he could not think of any country in the world, ever, that had such a volume of inward migration in such a short period of time—that it was the largest ever, per capita. After 2004 people did not expect the volume that came subsequently, but it was kind of virtuous at the time. There was full employment, virtually, even with all the numbers coming in, and the argument was coming from the Dells and the Hewlett Packards that they needed these people, to keep the expansion going.
I don’t think the effect on expenditure on health and education was ever quantified in any systemic way. I’m not saying it has been a negative impact. I think in the longer term it will have a beneficial impact—even in the short term it had a good impact—but I think it did have an impact on the boom thing, on the bubble economy. Because remember we went from about a million people at work fourteen years ago to maybe 2.1 million. I remember telling international audiences this, and they thought it was absolutely incredible.

Ireland held the Presidency of the
EU
, and the expansion ceremony was held in Áras an Uachtaráin, with the heads of state from the existing and new states all in attendance, their flags flying, a choir singing the chorus from Beethoven’s Ninth Symphony, the hugely popular Taoiseach Bertie Ahern playing host. The fact that Ireland was immediately welcoming in workers from the new member-states added to the positive atmosphere.

But it was Ahern’s work on the negotiation of a constitution for the European Union that really made his mark on the
EU
stage. He threw himself into the project. He created a team of Irish civil servants and advisers and began to work the European capitals. His Minister for Foreign Affairs, Brian Cowen, and his Minister of State for European Affairs, Dick Roche, were the key politicians involved. It was an exceptional period in Ahern’s political career in that his focus shifted to outside Ireland. At an intergovernmental conference in Brussels at the end of June he worked in the same way that he had in Castle Buildings in Belfast when persuading the parties to agree the Belfast Agreement. Issues and objections were dealt with one after the other with patience and determination, as Ahern moved the wide range of parties closer and closer to a deal to which they could not object. By the end of the meeting, and to most people’s surprise, a final document was agreed. It was an enormous coup for the Irish presidency and for Ahern. When he got back to Dublin he gave an interview to Charlie Bird of
RTE
, selecting All Hallows as the location.

One of the matters the leaders had not been able to agree on was who the next president of the European Commission would be. Ahern was by this time the second most experienced prime minister on the
EU
stage—only Jean-Claude Juncker of Luxembourg had been in power for a longer period—and his achievement in relation to the constitution increased his status hugely. In his memoirs he said that it was at this time that other leaders began to suggest that he should become president of the Commission. He weighed up the matter and in the end decided against it because of his dislike of being abroad, his view of the job itself and his desire to challenge the record of the founder of Fianna Fáil, Éamon de Valera, and go to a third successful election in a row.

In June 2004 Ahern also met the President of the United States, George W. Bush, in Dromoland Castle for an
EU-US
summit in which they discussed items of geopolitical importance. During his presidency Ahern attended summits with the governments of Japan, Canada, Russia and some Latin American and Caribbean states. He also attended a
G
8 summit on an island off the coast of the American state of Georgia, where, much as he would later do in Inchydoney, he went for a ‘relaxed’ walk on the beach with the heads of state of the major powers, surrounded by a mob of photographers and television cameras. The picture of Ahern wearing a cream jacket and banana-yellow trousers among the other more sober-suited world leaders became one of his best-known images at home. It contributed to the view of Ahern as a politician who had become an international statesman while remaining the same old familiar, slightly hapless Bertie. Many surmised that this was precisely the impression he had aimed to create.

As the world economy picked up again, Irish property prices soared, and media reports about individual Irish investors or groups of investors buying iconic commercial buildings in London and elsewhere became a staple. Foreign observers began to refer to Irish property developers as oligarchs, a reference to the billionaire business figures who made so much money in post-Soviet Russia. Helicopters became a common form of transport for many of them as they rushed around Ireland and over and back to Britain, checking on their business projects. There were even reports of people being invited to children’s parties with co-ordinates being included on the invitations for those who would be arriving by helicopter. When the property developer Seán Dunne married the journalist Gayle Killilea they hosted an extended celebration on the
Christina
O, the former yacht of the Greek shipping magnate Aristotle Onassis. The yacht was by this time actually owned by an Irish syndicate, which had used a complicated tax structure that sheltered some of their income from Irish tax.

The rebound in the economy in the period after 2003 meant that Ahern was back dealing with the problems of expansion rather than contraction. An enormous National Development Plan was announced for modernising and expanding the state’s infrastructure so that it would be better able to cope with a bigger economy and a larger population.

Brian Cowen, in his period as Minister for Finance, presided over budgets that tried to cope with the demands for transfer payments, the pressures on parents who had to pay for child care, and concerns about the management of the property market. In his first budget speech in December 2004 Cowen said he aimed to ensure that the benefits of economic growth ‘permeate society as a whole.’ He increased personal income tax credits while leaving rates alone, which meant that more lower-paid workers found themselves not being taxed at all. ‘More than 650,000 of the 1.9 million income earners will be exempt from paying tax on their earnings,’ he told the Dáil. He also widened the standard rate band so that fewer middle-income earners would find themselves paying tax at the higher rate.

In the weeks before the budget, and for some time previously, there had been media stories running about the number of very-high-income individuals who had reduced their effective income tax rate to low levels, and in some cases to nil, through the aggressive use of the tax reliefs that were available. Joan Burton had elicited figures from the Department of Finance that caused quite a scandal. Eleven people who had earned more than €1 million had paid no tax at all in 2001, while an astonishing 242 people who earned between €100,000 and €1 million during 2001 had paid no tax. Many of the measures that facilitated this tax avoidance, such as the urban renewal and hotel investment schemes, were themselves contributing to the buoyant property market that was such a feature of the period. In his budget speech Cowen noted that the Revenue Commissioners had recently estimated that the annual cost of these more controversial reliefs was in the region of €200 million per year.

Because of the complex nature of this issue, the interaction of such reliefs with economic activity and the unintended consequences that untimely action may have for investment, I want to take the time necessary to strike a careful and considered balance in what I do.
BOOK: Bertie Ahern: The Man Who Blew the Boom: Power & Money
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