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— June - July
doorbell on Joan Burton’s mod-
est semi in the Dublin’s North inner suburbs,
between Stoneybatter and Cabra. I had been at
a conference at Maynooth, and she agreed to
an evening interview to save me a second trip
from Galway. She answered the door herself
and insisted I rescue my wife from the car. She
ushered us into the family sitting room. It was
cluttered and informal, looking out on the small
garden. Her husband supplied us with tea and
snacks. The TD for Dublin West asked for a glass
of white wine, but this was put aside, un-drunk,
interview
Joan Burton
Labour Deputy Leader
and Finance Spokesperson
interview terrence mcdonough
in her eagerness to respond to questions.
Have you always been interested in
politics?
I think I was always interested in debate and
discussion and I suppose I had an unusual back-
ground in that I grew up in Dublin City Centre
in Stoneybatter and Oxmanstown Road which
is now very fashionable but was deeply unfash-
ionable then. I had been adopted at the age of
two by the Burtons when they lived in Rialto,
and then we got a house in the Northside near
my mother’s family through the artisans’ dwell-
ings. I liked school and I was always I suppose
conscious of looking around me. Nobody in my
family was really involved in politics, I mean,
obviously, they had political opinions and the
one thing they did was to talk and talk and talk!
They were all great natural musicians, perform-
ers and craftsmen of the old style l. I wasn’t a
musician or singer so I think I became a talker
so that might have directed me in the way of
politics.
Imagine that we had a Labour-led govern-
ment and you are Minister for Finance. What
would be your priorities?
I think that the major priorities would be to
restore a balance to the tax system. Because
I have a background as an accountant, I have
never been convinced of the value of high mar-
ginal rates of tax. I’d prefer to have lower mar-
ginal rates but real effective rates which allow
people to contribute proportionately with
income taxes that are not excessively high.
The second thing at the moment would be to
find a way of having a stimulus programme for
people who have become unemployed.
The Department of Finance is notoriously
conservative. How would you avoid being
dominated by the standard Finance agenda
and would you avoid going native?
One thing that somebody who has the honour of
being a publicly-elected member of government
has to have is a clear set of priorities that they
wish to see being implemented - because if they
don’t, then senior civil servants will fill in that
gap and I think it is a question of trying to have a
running start. Clearly the department, in recent
years, has had some extraordinary powerful
ministers, particularly Charlie McCreevy who
basically told the civil servants what he thought.
I don’t see why the department therefore would
not be equally open to people who come from
the left of centre having very clear ideas.
James Carville said he would like to be rein-
carnated as the bond markets because every-
body would be afraid of him. Are you afraid
of the bond markets?
Was it Marx who says “Capitalism is not
patriotic, it has no home other than profit”?
Globalisation in terms like derivatives and in
terms of the flow of information has so speeded
up that political structures are simply lagging
far behind. Yes I think you should respect the
bond markets but I think it would be foolish to
be too afraid of them and as a consequence feel-
ing helpless. I would like to believe that I am a
realist, but that I am not particularly fearful.
Do you support a Tobin tax to slow the
excesses of global finance?
Yes. There was in the Budget a proposal
to introduce a % stamp duty tax, same as the
stamp duty on share transactions, into stock
exchange transactions in relation to specially
contracts for difference. Funnily enough, I had
a discussion with the current Taoiseach, Brian
Cowen. I thought the tax was a good thing and
I supported it. There was a lobby, a short sharp
lobby and Cowen withdrew it. In saying so at
the time and getting advice from various peo-
ple they were kind of warning me off in that this
was not the appropriate thing to say. I wasn’t to
know but that that was one of the vehicles for
what happened with Quinn Insurance.
In terms of the Tobin tax, yes the party of
European Socialists has a kind of standard
position now advocating that – a Financial
Transactions’ Tax.
Building on that, what ideas does Labour
have for stiffening the regulation of the Irish
banks?
My view of regulation is probably very old-fash-
ioned, I think that regulation is about the detail,
but it is far more about integrity and the cour-
age to eyeball people who are perhaps very very
rich and say what you’ve done is wrong and to
be a regulator as opposed to a cheerleader. I
mean obviously light-touch regulation failed
dramatically partly because the people at the
very top of the regulation and Central Bank
system, thought that part of their job was to
applaud Irish banking and IFSC transactions.
Do you think there is a Golden Circle in
Ireland?
Yes. The Golden Circle was that Anglo Irish was
a specialist developer’s bank. Those specialist
developers were all Fianna Fáil supporters. The
bank was growing at a phenomenal rate so the
bank funded the developers and the developers
funded Fianna Fáil. That was the relationship
and nobody was prepared to say stop.
During the NAMA Debate, the Labour Party
came out in favour of nationalising the banks.
What are the advantages of this?
In March, , when Anglo’s price fell and the
highpoint of the boom was over, the Oireachtas
Finance Committee actually met the US Fed.
— June - July
They were kind of saying we don’t know where
this is going to end. The people in the Treasury
terrified me totally as they asked us had we any
insights to offer. So my feelings when I went
outside the door was, my God if they are asking
us for our advice, things must be really bad.
So when it came to the guarantee at the end of
September , and that was the famous night
John Gormley was out of contact – his bicycle
was locked up in his shed and all his phones were
switched off! - Éamon Gilmore was phoned and I
was phoned as well. The next day we went in and
had a number of briefings from officials. Basically,
I said I only had questions, Anglo Irish and Irish
Nationwide. What I couldn’t understand in terms
of government strategy was why were they are part
of the same strategy and the same guarantee that
included the mainstream banks, AIB and BOI.
Basically the officials’ and the government’s
view was that all the banks are in this together. I
recommended to my colleagues in the Labour Party
that if Anglo and Nationwide were the centre of the
guarantee, we should not support it. Now we had
on the day and evening of the emergency legisla-
tion quite long discussions. I made my particular
recommendation and not everybody was of that
view, but I just said, look you know it is crazy to
give Fianna Fáil a blank cheque. It was intimated
to me that Michael Fingleton was some kind of an
economic genius in terms of running a building
society and that - who would replace him and his
close counterparts ? My view was well…
This was in the context of your discussion
inside the Labour Party?
No, this was in the briefings. So my view was,
hold on, if I am being told that this guy is a
financial genius, then ok, he may be a genius
but he doesn’t deserve to be bailed out in this
kind of way.
Fingleton as a genius, was this the official
government position?
To a certain degree, they seemed very taken
that he was the main man and that this building
society had strengths compared to some of the
other institutions and also that Sean Fitzpatrick
similarly had a kind of almost religious rela-
tionship to his particular bank. These were the
institutions where, particularly in the city of
London, people were talking about Nationwide
as the crack cocaine kind of financial institution
of Ireland. They were talking about Anglo Irish
in kind of Pinocchio terms.
So I recommended very strongly to my col-
leagues, as did Gilmore, that we shouldn’t sup-
port the guarantee. I was stunned and we were
all stunned to find out in the days following
the guarantee that the subordinated debt was
included in the guarantee and the bond holders
were included in a kind of primary way as well.
All the officials and, particularly, the Regulator
said that the fundamentals are sound.
That is a red flag these days - if you hear the
fundamentals are sound.
I know but all these guys came in and I recall a
group of bankers that came in from AIB, Anglo
and BOI and I remember shaking hands with them
after coming in to tell us how sound their funda-
mentals were. One of them, I remember his hands
were dripping. I was going, I don’t like this!
Should the government renew the guarantee
in September?
I have never been in favour of the Fine Gael term
of “burn the bondholders”. However, I think
the subordinated debt should be dealt with. I
think it can be negotiated with as a lot of it is
on sale for huge discounts. In relation to the
bondholders I would say that if, for instance, an
institution like the NTMA went at it quietly as a
negotiating position, I would think they would
avail of very large discounts as well. I don’t like
the term “burning” or “defaulting” because I
don’t think it is appropriate.
What would Labour do with Anglo Irish?
In my view, there should be an orderly wind
down of Anglo. I think it is toxic as a brand and I
think its continued existence as a brand is dam-
aging reputationally to Ireland.
Your nationalisation proposal included the
eventual intention, once the banks have been
placed back on their feet, to reprivatise them.
Why?
Bank rescues are extremely expensive and there
would be a legitimate objective which would be
to recover a fairly high value for the State. I also
think as well that that would have happened
over a period of time.
I also have preference for the retention of
some kind of building mutual society in the sense
that it is an identifiable brand in Ireland where
traditionally people like public servants invested
savings for the purpose of buying a house and I
still think that makes a lot of sense.
Do you see such an institution as a semi-state
institution potentially?
Well, it could be but one of the difficulties in
the crisis situation was that it seemed to me
that our Department of Finance was terrified
of directly running a financial institution and
they were really hostile to doing that, uncertain
of how to do it.
Certainly the private sector has proved itself
unable to run things.
Yes, but at the same time, any bank rescue
including nationalisation was going to become
costly. The strategic investment bank that the
Labour Party has proposed, partly based on the
old ICC, would give the State a presence in mak-
ing capital available for infrastructure and for
SMEs.
You talked about the need for a stimu-
lus earlier, but isn’t that incompatible
with the Labour Party’s acceptance of the
Government’s target of €4bn cuts in the
budget?
No, because I do think that one of the enormous
themes if Labour was in government again is a
reform agenda in the public service. If it is done
properly, it could be quite liberating, because a
lot of the reform is of extra layers of administra-
tion and bureaucracy which people find quite
stultifying whether in the Health Services or
maybe in some of the third-level institutions.
The emphasis on public-sector reform seems
to be more about giving managers more
power to use the broom on the rank and file.
How would Labour avoid that?
Yes I think that that is a really big challenge for
the Left in the broadest sense of that term, the
Labour Party, trade unions and people who are
“I recommended
to my colleagues
in the Labour
Party that if Anglo
and Nationwide
were the centre
of the guarantee,
we should not
support it”.
progressive. I always remember one of the peo-
ple I worked with when I first became involved
in politics was Noel Browne. I always remem-
ber him saying to me “work is for horses”. Now
if you can do things smarter and faster and with
less bureaucracy, I think that is liberating.
Recently, I had an opportunity of meeting
people from IBM in my own constituency. They
say to me the concept of a multi-national corpo-
ration is now obsolete. They see themselves as a
global corporation in which they have develop-
ment plans, research centres in perhaps dif-
ferent points in the world. If Ireland wants to
compete, it needs to be one of these points.
Everybody is talking about competitive-
ness. Do you think this is a proper aim for
policy, for all kinds of policy, even education
policy?
In a globalised economy, a small country like
Ireland has to find niches. I do think though
that we also have to keep up to date and keep
upping our game. I think there is a difference
between that and being very directive in a
bureaucratic way. I think that, for instance, the
debate about education is often about training
people to a certain set of skills whereas the tra-
ditional classical notions about education were
preparing people to think. Now somewhere
between the two of these we have to reclaim a
particular space.
I think there is a kind of grievance amongst
Left academics that when the Labour Party
holds a forum, they tend to invite the most
conservative economists. I know of one recent
forum that Alan Ahearne and Brian Lucey
were at. Why is that?
That was at the early stage of the financial crisis.
Basically, when people wrote articles, I phoned
them up and asked them to speak. I do think
that people like Paul Sweeney also spoke at
those forums. I have to say that I was and am
on a learning curve.
I always think as well that until the crisis
broke, there was not a strong tradition among
economists in Irish educational institutions to
speak out. I think that the Irish Economy web-
site and the TASC website have performed a
tremendous public function of basically being
prepared to discuss and talk about the financial
crisis and financial issues. What I think as well
is that a Labour Party audience should be chal-
lenged. So if you actually look at the make-up of
these forums, you will always find that there are
people from both sides of the argument.
There seems to be a feeling within the Party
that compassion is an essential element in the
formulation of policy, but the expertise really
lies with the conservative economic establish-
ment. I was told when Ruairí Quinn became
Minister for Finance, he went and got tutori-
als from Dermot McAleese. He could not have
found a more conservative economist.
I can’t speak for Ruairí Quinn. I simply don’t know.
I did know that in the areas that I was involved in,
when I was in Social Welfare, I looked to Australia.
I also looked to a small degree to the UK. I looked
at areas where I saw, if you like, hopefulness in
terms of helping people. If Labour was in gov-
ernment, I would like to establish a Council of
Economic Advisers which would be broad-based.
There isn’t enough public discussion. I recall
at one stage being at a lunch with bankers and
at the end of it I very discreetly mentioned the
name of Morgan Kelly. The people practically
levitated because he was public enemy number
as he had suggested there was going to be a bust.
I saw at the Kenmare School at the economics
forum that when he presented there, no less a
distinguished person than the current column-
ist of the Irish Times on economics vociferously
objected to his presence.
Vincent Browne has accused the Labour party
of being insufficiently concerned about the ris-
ing inequality in Ireland. Do you think that is
justified?
I think it is remarkable that Vincent also retains a
very high degree of approval for Fine Gael which,
as it were, was his original political thinking. I
think the Labour Party in government has always
been a mix. It has always been broad church,
social democratic, it’s rural, it’s urban, it’s trade
union, it’s small businesses and it is a mosaic.
I think that, as the Labour Party has not been in
government since , it is a bit unfair of Vincent
to kind of down the party because look at the areas
that Labour was most connected with, social wel-
fare reform, and bridges and transitions to work.
Do you think it was a mistake for Ireland to join
the Euro?
No, I think from a historical perspective, our
engagement in Europe, right from our member-
ship, has let us develop a bipolar focus which took
us out from our ancient obsession with everything
that went on in the UK and allowed us develop a
much broader identity.
From , all the cheap Euro billions came
available from the German banks. I don’t think
most people understood that the Irish banks were
borrowing and that it would be the ordinary Irish
citizens that would end up paying for that. I still
think is it a good idea fundamentally but obviously
it will have to be fixed.
Before we wrap up, I’d like to get your opinion
on the Croke Park Deal.
Well, I heard a number of clarifications today
which I thought were very helpful. I think it is
a matter for the people in the unions to have
a debate and decide on balance what the best
thing to do is. That is basically the Labour Party’s
position.
I certainly think that one of the consequences of
events in Greece is that the government is already
committed to a programme and there is now an
onus on Ireland to comply with the programme.
Pre-budget, it was possible to reach a lot of the cost
saving measures by agreement rather than by dict-
tat! That remains our view.
Do you think you will be Minister for Finance?
Yes, I hope so. I think it is appropriate that the
Labour Party brought in the very first modest
surplus under Ruairi Quinn. We also ushered in a
period when employment was growing. I think it
is possible but with a lot of difficulty to return to
that period. If I had the honour, I would relish the
challenge. I am up for it!
Terrence McDonough is Professor of economics at NUI, Galway.
Cambridge University Press has recently published his edited
Capitalism and Its Crises: Social Structure of Accumulation
Theory for the 21
st
Century.
“It has always been
broad church,
social democratic,
it’s rural, it’s
urban, it’s trade
union, it’s small
businesses and it
is a mosaic”.
