Dr Eoin O’Malley, Lecturer in Irish Politics at School of Law & Government, DCU

Since coming to office last year the government has spent some time and energy on the subject of political reform. The referendum on Oireachtas Inquiries was just one of the more high profile of a range of initiatives which seem, on the face of it, genuine reforms moving in the right direction.

However, the reforms have lacked a strategic or unified vision. Some appear ill-thought through. There are a large number of reforms, but it is not clear how they hang together, or complement one another, if indeed they do. They don’t seem to be based on a clear analysis of the problems underlying the Irish political system. Perhaps this is because there is no single minister or body charged with the reform agenda. But it does appear that it’s deliver ‘reforms’ come-what-may.

Do we just think we need some reforms to satisfy the need for an intervention in the same way people with the ‘flu go to a GP? The intervention will make no substantive difference, but we somehow feel better for it.

We are often susceptible to making mistakes of logic when we analyse the effectiveness of public policies. Public policy responses often take place after an extraordinary event, or series of events. Because of this we demand a policy response. Last week I heard a radio interview in which a TD exclaimed that all the crime statistics in the world could be cited to him (which showed that crime was generally in decline), but he wanted a response to the serious crimes that had taken place in the previous few days!

When, after the policy intervention, if the problem appears to allay somewhat, we often assume that the policy intervention was decisive. We do not consider that there was what is called ‘regression to the mean’. So if there is an acute rise in car accidents in one year, we might respond in some way, say setting up a new ‘taskforce’. The rise might have just been a spike, and the number of accidents naturally goes back to a more normal level in time, but we think the ‘taskforce’ did it. Only by using experiments through pilot studies can we say if the intervention was actually important.

We might end up seeing the same phenomenon of ‘regression to the mean’ at work in political reform. We had a massive failure of public policy. If (as is likely) we don’t observe massive failures in the next decade (these things only come around every 30 years or so) we might feel the government’s response has addressed those systemic failures. But we shouldn’t necessarily think that the political reforms we have seen or are in the pipeline will be effective; we might just be storing up trouble for a few decades when the next crisis erupts.

I can sympathise with ministers’ impatience to start getting things done. When changing a political system is so hard, it makes sense to at least make a start on some reforms – indeed it might make further changes easier. But if we end up with just one plank in a raft of reforms, the whole vessel might flounder without the other reforms to support the first. For this reason leaving the whole reform agenda to a Constitutional Convention, forced to report within a year, might have been a better approach, and could have taken party politics out of the debate.

LOCAL GOVERNMENT REFORM

One of the areas which has not featured much in the debate on political reform is Local Government (or maybe we should say local administration as there is virtually no local control or influence of local policy in Ireland). Phil Hogan has initiated some reform in the decisive way he dealt with the boundaries of LimerickCity. But beyond this we see little in the reform agenda that relates to the local government. If anything, the most interesting potential reform, directly-elected mayors, has been pushed to long grass.

This is despite that many people say that local government is important. It makes sense that it would be important.  If we look at what is wrong with the political system, it is often said that TDs haven’t done their job as national legislators and they concentrate on the needs of the local constituency to the detriment of national issues. This is possibly driven by necessity. If local policy is not made locally, then citizens sensibly go to national politicians to deal with their problems.

If we were to give power over local issues back to local authorities, then constituents would instead contact their local authorities and leave TDs to do their job as legislators.

A problem with this analysis is that of the issues that TDs report as the most commonly brought to them in constituency clinics, housing allocation, which is the preserve of local authorities, tops the list.  Other TDs report that during the economic bubble requests for assistance on planning permission came to them on a daily basis.[1]  So constituents contact TDs even when the TD has no special access or formal power in the area. And the TDs, unlikely to tell a constituent to ask someone else, take up the case that should be the preserve of local councillors. Especially now that electoral competition within parties is so strong, TDs are probably reluctant to disabuse citizens of the notion that they can be of assistance. Giving local authorities more power won’t necessarily stop the TDs getting involved in local issues.

TDs may be so anxious to help constituents because they have little real impact on national policy. Most Dáil debates have no effect, and are more a signalling exercise to voters and to the media to take them seriously as politicians. So they get involved in areas that they think can have an impact, which might only be to ensure that constituents get access to services to which they are already entitled.

But even if devolving more power to local government is not going to magically change the behaviour of TDs, we might want to give more power to local authorities for other reasons; not least because they might be in a better position to make good decisions for their local areas.

What do we want local government to do? As with all government, we want them to make people’s lives better. And local government has huge potential to have an impact on people’s lives – arguably even more than central government. This is because it controls much of what affects our daily lives – the environment in which we live. Think of the effect when it goes wrong, as it did in Galway when people were forced to queue up for water.

Although the measurement is the subject of some controversy, there is some agreement that in already rich countries, such as ours (and we should not lose sight of the fact that Ireland is still remarkably wealthy), money is less important in achieving greater happiness than factors such as strong communities.

Really simple things, such as well-designed urban spaces, can have an enormous impact on our lives. Just the addition of trees to a streetscape makes the street much more pleasant (and has health and other social benefits). Urban areas with good transport links, shops, public buildings, parks and playgrounds are much nicer places to be, and make people happier. Car-dependent cities with dying centres and out-of-town shopping centres (and indeed out-of-town university campuses) do not.

So what type of local government reform would give us a better environment and make us happier?

One aspect of local government reform that the host of reports agree on is that local authorities lack autonomy. They link this lack of autonomy to the structure of finance. Most money comes directly from central government and is just used to administer centrally-decided policies. Even locally-raised revenue is not for the authorities to spend as they will.

So if you want to make local authorities powerful, you do so by giving them some sort of tax raising powers. But do we really want to do this? Certainly not without some radical overhaul of the structure of local government.

Where we see local authorities do have an ability to set taxes, in the form of business rates, some local authorities have a tendency to treat businesses as a cash cow. And because local authorities are small in size they can’t really control how a region is planned or will grow. An example of this is Limerick city, which has high business rates, but covers an area that is not contiguous with what is actually the city (parts of Limerick city are in Co. Clare). Businesses escape the high rates by moving to the suburbs, where other councils are happy to accommodate them, but have no interest in how the city grows. A policy response should be to put a charge on parking in out-of-town shopping centres. This tax, unlike other taxes, such as the Household Charge gives people a choice; one can change behaviour and avoid the tax.  Yet the city corporation charges people to park in the city (mainly because it can) without ever considering the implications of such a policy. It cannot benefit from charges to those shopping outside its area, but the city can be damaged by it.  The result is that Limerick city-centre is dying.

Cities and towns also need to think about what they provide for people. They are more than just shopping centres that we can drive through. The way people shop has changed radically in the last ten years and will change even further, so we cannot expect cities to be just retail spaces. To keep urban areas alive we need to ensure that city centres have amenities such as hospitals, libraries, playgrounds, schools, colleges, cinemas and museums.

But what reform of local government will ensure that authorities have control over their medium and long-term growth and an incentive to think about the people who live there? The current manager system does not offer this. What it is meant to be good at – technical competence and a bulwark against patronage and corruption – has not been delivered. Regular flooding points to incompetence in planning, and it is an open secret that many planning officials were biddable.

If we look at some of the better developments in Dublin, it was where someone or some group have a clear remit to consider the whole development. The standard planning model is demand-driven rather than plan driven. Notwithstanding some issues of governance, the Dublin Docklands Development company produced an urban quarter that is good to look at, pleasant to live and work in, easy enough to get to and I suspect, one that has better withstood the ravages of the property bubble.

Urban sprawl has rendered irrelevant many of our historical local boundaries.  While we might care about county boundaries in the All-Ireland championship, they’re not the basis on which we should design local government. County Councils are too small for effective decision-making in cities and too large for democratic decision-making in villages and towns.

There is a debate as to whether local government should be consolidated into large metropolitan or regional areas, or whether left fragmented to smaller local authorities they would successfully negotiate for the good of the whole area. It’s probably the case that we should not choose one or another. Some responsibilities, such as transport, are sensibly left to large areas. Others, like whether to allow certain types of businesses in an area or the location of a playground, might be best decided at a neighbourhood level.

And given that many businesses/people make choices to locate on the basis of metropolitan area (rather than county) we all have an interest in the development of Dublin. An elected mayor might be the best way to push Dublin’s development, but only with appropriately-sized constituency and appropriate powers.

We need to think more carefully about local government reform. I’m not arguing that we should avoid local government reform, but we should avoid reform for the sake of it. We run the risk that any reform will do. But political reform isn’t like a placebo or the warm feeling we have when the GP says everything will be fine. Reforms have real effects, but sometimes these are a bit unpredictable, and potentially very big. Any reform won’t do.

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Dr. Eoin O’Malley is co-editor of Governing Ireland: From Cabinet Government to Delegated Governance (IPA 2012).

Patrick Lenain, OECD [1]

After four years of decisive efforts to reform and rebalance the economy, signs of a recovery have finally emerged in Ireland. Output is rising, employment is improving, exports are increasing and financial markets have become more confident. Ireland is now frequently quoted as the “success story” of the European periphery, the euro-area member that has chosen the right path. Indeed, a lot has happened since 30 September 2008 — the day when Minister of Finance Brian Lenihan announced a guarantee scheme for the country’s six main banks on the verge of bankruptcy. Ireland returned successfully to the international bond market in July 2012, and ratings agencies have improved their outlook. Financial support from the European Union, the ECB and the IMF has been important, but it is Ireland’s own efforts that made a difference. Restoring the economy to health has not been easy, as shown by lower wages, higher taxes, fewer jobs and a depressed housing sector. The economic recovery will eventually cure these pains, but attention needs to be paid to long-term wounds, especially the risk that large numbers of job seekers are left behind. Action is needed to mobilize the stakeholders in charge of continuing education, labour reform and social protection: more than ever, their goal should be to do what is necessary to foster the return to work of the jobseekers.

Gradual unwinding of past excesses

Over the past four years, Ireland has endeavoured to overcome its difficulties and put the country back on a path of growth. Bold measures have been adopted to reform the Irish state, put the banks back on their feet, improve competitiveness and restore sustainable public finances. International investors have recognized this progress and regained confidence in Ireland’s prospects, as shown by the continuous decline in the “risk premium” that they demand to hold Irish government securities (Figure 1). Better market sentiment means lower interest rates, which in turn implies a lower debt service burden falling on the shoulders of Irish taxpayers. Although one needs to be very prudent in the current turbulent international environment, it is fair to say that some light can be seen at the end of the tunnel.

Figure 1 — Better financial market sentiment towards Ireland
(Government 10-year bond yields, Ireland and Germany, in %)

Source: Thomsom Reuters Datastream

A glimmer of hope is that real GDP and employment are increasing once again, largely thanks to the rebound of exports. Most forecasters, including at the OECD, project that the recovery will gain some momentum in 2013, despite on-going budgetary consolidation (Table 1). Improvements in cost competitiveness will continue to help exports, and a gradual waning of the crisis in the euro area should help to improve demand in partners’ economies. With activity gaining strength gradually, the labour market situation should slowly turn around and unemployment should decline, though at an unsatisfactorily slow speed. Household spending remains depressed, reflecting the ongoing adjustment in balance sheets, and high unemployment. Indeed, the narrowing of macroeconomic imbalances continues to generate headwinds, with house prices and construction activity still falling and household debt remaining high.

 Table 1 – Main Economic Projections

* % of GDP    ** % of the labour force

Source: OECD Economic Outlook, November 2012
Note: Government deficit excludes bank support costs and the impact of the promissory note restructuring.

With bold action, the government has stopped the fiscal crisis and put the budget deficit on a downward path (Figure 2). In 2012, the general government deficit was reduced below 8% of GDP, with measures both to raise revenue (VAT increase, property tax) and cut spending (public pay, infrastructure, etc.). Staying the course of deficit reduction will be essential to stabilise the public debt and then put it on a downward trajectory. Interest payments on the government’s debt have increased sharply and now reach about 4% of GDP. This burden can be reduced by pursuing a medium-term debt-reduction strategy.

Importantly, Ireland’s well-developed social protection policies have been shielded from austerity, and the burden of adjustment has not fallen on vulnerable households. Estimates by Tim Callan and co-authors[2] have suggested that high-income households made the largest contributions to fiscal consolidation in Ireland. In other words, the cost of adjustment was distributed with a concern for fairness and social cohesion, in contrast to the experience of some other countries.

 Figure 2 – A gradual reduction of the budget deficit
(General Government balance excluding bank support cost, % of GDP)

              Source: OECD Economic Outlook, November 2012

Another welcome development has been the improved external cost-competitiveness and the associated recovery of exports. Before the crisis, Ireland’s unit labour costs had risen far in excess of those in partner countries, while in Germany real wages had increased less than labour productivity (Figure 3). Progress has been made in unwinding Ireland’s past excesses, without eliminating them entirely, and some of the decline in unit labour costs reflects “composition effects”, as low-productivity sectors such as construction are contracting while high-productivity export-oriented manufacturing and services keep on expanding. It is striking that the improvement results less from real wage cuts than from the improvement in labour productivity. This testifies to the flexibility and resilience of the Irish economy, where firms are able to improve productivity rapidly, a rare achievement by international standards.

 Figure 3 – Ireland is becoming more competitive
(Unit labour costs, 2000Q1 = 100)

Source: OECD Economic Outlook, December 2012.

The flip side is, of course, that job losses have been severe and that the number of jobseekers has increased by nearly 200,000 since the onset of the recession (Figure 4), even though 130,000 workers have left the labour force, including by leaving the country. Fiscal consolidation and macroeconomic adjustment are necessary and progress is in the right direction, but the labour-market consequences are severe and should continue to be addressed vigorously, a topic further discussed later in this paper.

Figure 4 – A depressed labour market: fewer jobs and more jobseekers
(in millions of persons)

Source: CSO Quarterly Labour Force Survey.

Ireland’s economic strengths

Until 2007, the Celtic Tiger attracted the admiration (and envy) of the entire world, with high living standards and a spectacular expansion. At the peak of the cycle, in 2007, Irish GDP per capita was among the highest in the world, well above the average in the OECD (by 36%), only surpassed by the United States, Norway and Luxembourg (for special reasons in the latter two countries). In 2011, the latest data available, Irish GDP per capita had fallen somewhat, but was still above the OECD average, by 20%, and only Switzerland and the Netherlands had joined the group of countries that outranked Ireland.

However, one has to be careful when interpreting statistics. It is well known that Ireland’s GDP is boosted by the presence of large multinational companies. These firms create many jobs and are powerful exporters, contributing to Ireland’s economic fortunes in many ways. Being subsidiaries or branches of foreign firms, they remit abroad a large share of their profits and make sizable intellectual property royalty payments, although some of them reinvest part of their profit in the country. These outflows reduce Ireland’s national income. The OECD computes an indicator that takes into account these remittances, and also makes other adjustments – such as for depreciation. Net National Income per capita seems a better indicator to benchmark Ireland’s living standards against other countries. Figure 5 shows that that Ireland’s net national income per capita is 1.5% below the OECD average. While this partially reflects the depressed state of the economy, it nonetheless seems closer to reality than the inflated level suggested by GDP per capita.

Figure 5 — Irish living standards are lower, now close to OECD average
(Net national income per capita, current prices and PPP, OECD=100)

              Source: OECD National Accounts at a Glance.

While these are difficult times, the Irish economy nonetheless still displays considerable strengths. Government policies are market-friendly, the labour market is flexible, Irish workers are well educated and productive, and Ireland retains very strong arguments when it comes to attracting foreign direct investors. The OECD attempts to capture the quality of the government’s regulatory policy with its indicator on Product-Market Regulation (PMR), which measures the degree to which policies promote or inhibit competition in areas of the product market where competition is viable. They measure the economy-wide regulatory and market environments in 30 OECD countries in (or around) 1998, 2003 and 2008, and in another 4 OECD countries (Chile, Estonia, Israel and Slovenia) as well as in Brazil, China, India, Indonesia, Russia and South Africa around 2008; they are consistent across time and countries. The indicators cover formal regulations in the following areas: state control of business enterprises; legal and administrative barriers to entrepreneurship; barriers to international trade and investment. According to this indicator, Ireland had the third most product market-friendly regulatory environment in 2008, after the United States and United Kingdom.

The flexibility of Ireland’s labour market is partly captured by the OECD indicator of Employment Protection Legislation (EPL), which measures the procedures and costs involved in dismissing individuals or groups of workers and the procedures involved in hiring workers on fixed-term or temporary work agency contracts. It is important to note that employment protection refers to only one dimension of the complex set of factors that influence labour market flexibility, including wage bargaining. The OECD employment protection indicators are compiled from 21 items covering three different aspects of employment protection, such as individual dismissal of workers with regular contracts, additional costs for collective dismissals, and regulation of temporary contracts. According to this indicator, Ireland has the sixth least stringent employment protection legislation among OECD countries, between Australia and Japan.

Fighting high unemployment

Despite sound macroeconomic policies and a market-friendly environment, it will take time to go back to normal. Getting people back to work will be the most acute challenge. Between 14% and 15% of the labour force is currently unemployed, more than half out of work for more than one year (Figure 6).

Figure 6 – Ireland’s unemployment rate by duration
(percent of the labour supply)

Source: Central Statistical Office, Quarterly National Household Survey.

Those who lost their jobs have followed different paths: some have gone into retirement; some have emigrated abroad; many look for another job, relying on the jobseeker’s benefit and, if necessary, the jobseeker’s allowance to escape poverty and deprivation. Tim Callan and co-authors (2011)[3] estimated that, without this social safety net, the “at-risk-of-poverty” rate[4] would have increased by 3.7 percentage points (the largest in the EU). Instead, it increased by about 2% between 2009 and 2011, reflecting the protection provided by Ireland’s various welfare programmes. While the spread of poverty has been limited, it is clear nonetheless that the social consequences of the recession are severe. One in four families was subject to some form of deprivation in 2011, as measured by the Central Statistical Office.

The jobseekers normally return to work after short recessions, as the economy recovers and firms increase their payroll once again. After deep recessions, however, notably those caused by financial crises or housing market crashes, unemployment tends to remain persistently high; professional economists say that unemployment becomes structural. This is because jobseekers who remain unemployed for a long period of time become disconnected from the labour market, feel marginalised and demoralised, lose some of their skills, no longer update their competencies, are considered less employable, or give up looking for a job for other reasons.

Recent quantitative analysis published by the OECD[5] suggests that the probably of exit from unemployment for someone who has been seeking a job for 12 months or more in Ireland has declined from a pre-crisis level of 51% to the latest level of only 24%, much less than on average in the OECD-member countries (47%). The long-term unemployed suffer from competition from the newly unemployed, who are more connected and more attached to the labour market and can regain employment more easily. It is thus a concern that nearly 200,000 jobseekers have been on the live register for more than one year, as these people could remain persistently unemployed and, eventually, could stop seeking a job altogether. In a time of scarce budgetary resources, it is important that public spending devoted to fighting unemployment be used effectively. i.e. not only to combat poverty but also to help the unemployed return to work, or at least get ready for the day when the economy will recover. This requires institutional reforms to move from a tradition of “passive” support to the unemployed to “active” forms of support, which focuses on pathways to return to work.

A variety of labour-market initiatives have been recently introduced in Ireland. Perhaps the most important institutional reform is the creation of Intreo centres, one-stop shop services where jobseekers can get their financial and employment supports. The goal is to bring together benefit provision and activation programmes under the same roof, so that all jobseekers can receive individualised assistance to facilitate their return to work, notably through training and job-search assistance. These new centres are part of the government programme “Pathways to Work”, which aims at improving the matching of labour demand and labour supply. “Pathways to Work” relies on mutual engagement of government agencies and jobseekers on individualised return-to-work strategies, with adequate activation and training programmes.

It is essential that these new programmes are rolled out fully and quickly. The deployment of a sufficient number of case workers – officials with the ability and authority to help each job seeker individually — has the potential to avoid high unemployment becoming structural by allowing direct engagement with those most at risk of staying unemployed. For such a strategy to be successful, jobseekers’ adherence to the principle of mutual obligation should be ensured, including with sanctions and penalties, as required. Financial sanctions for non-compliance by the unemployed with activation and training measures were introduced in 2011. The evidence is that the sanctions are being applied, which gives credibility to the regime, but only in few cases.

High unemployment can become structural when the sets of skills supplied by jobseekers do not match employers’ needs. In Ireland, re-skilling those who were formerly working in the construction sector and in low-skilled jobs is a formidable task. Over half of the unemployed were occupied either as craft or plant and machine operatives, and the evidence suggests that these workers are not being re-absorbed in the labour market, while those with managerial, professional, marketing and ICT skills face fewer problems. There even appears to be a shortage of Irish workers with the skills required by employers. The “Vacancy Review” produced for the Expert Group on Future Skills Needs suggest that Irish employers at times run into difficulties filling vacancies, given the set of required skills, and have to advertise abroad. This is particularly relevant for jobs requiring professional-level skills (ICT, engineering, finance and accounting) and for jobs requiring language skills, especially for sales and customer services.

Thus, more needs to be done to re-skill jobseekers in trades for which there is demand in the marketplace. The creation of SOLAS, following the dissolution of FÁS, is a step in the right direction. SOLAS will be responsible for the co-ordination and funding of training and further education programmes, while 16 Education and Training Boards (ETBs) will ultimately be responsible for the delivery of publicly-funded programmes of Further Education and Training (FET). There should be a clear focus on reducing the mismatch between the supply and demand of skills, including a greater focus on growth industries. SOLAS should foster a dialogue between employers and trainers to assess future skill demand and respond to emergent skills needs.

Young people are the most severely hit by the wave of unemployment. They have difficulties entering the labour market and may not be able to acquire the right experience needed to secure long-term employment prospects and rising labour earnings. The focus should be put on combining education and work through vocational programmes, training schemes and apprenticeship. Experience directly in the workplace, through subsidized jobs or apprenticeship, is a safe way for the young worker and the employer to learn to know each other, often leading to longer term employment.

*

*  *

Irish history has been marked by many ups and downs, including periods of mass emigration. Between the early-1980s to mid-1990s, Ireland experienced high and persistent labour-market weakness – the unemployment rate remained above 10% for 16 years – before Irish governments finally moved decisively in the direction of economic reform. New policies in the areas of taxation, competition, regulation and education gave birth to the Celtic Tiger and, although the tiger was not as resilient as expected, Ireland remains a very attractive place to do business and create jobs. Today, once again, the challenge is clear. A pathway to recovery is available. It should be embraced without hesitation.

_______

Frances Fitzgerald TD, Minister for Children & Youth Affairs           

1980 – The Taskforce on Child Care

1993 – Kilkenny

1995 – Kelly Fitzgerald

1998 – West of Ireland Case

2005 – Ferns

2009 – Dublin, Ryan, Monageer

2010 – Roscommon

2011 – Cloyne

2012 – Gibbons-Shannon

And there were more…

Seventeen statutory reports since 1980.  A litany of failure.  This is our history. It need not be our future.  This autumn there will be a children’s referendum. The people of this state will be asked to enshrine the protection and rights of children in Bunreacht na hEireann. This constitutional change, alongside the legislative change and service change which my Department and I are currently pursuing represents the single most important set of reforms that have ever been made in the history of child protection in Ireland.  Not just ‘symbolically’ important. Not just ‘legally’ important. Not just important in ‘principal’. It is literally the most important move we can make to protect our children. Because cumulatively these changes are about something more. They’re about a cultural shift in our attitudes and behaviour. They’re about fostering a culture where child protection is everyone’s responsibility.   All of us.

We have failed our youngest and most vulnerable

We have a nationally shameful record when it comes to protecting our children. We have, since the foundation of the state, failed huge numbers of our youngest and most vulnerable. And as those failures became clear we attributed blame to the most obvious targets.  Some were perpetrators, some scapegoats, some who sinned by omission and some not at all.  But we as a nation felt that someone, or some entity had to be at fault.

We started with the Catholic Church. Members of that church ran the industrial schools in which children were beaten, raped and exploited. Representatives of the Catholic Church in many of those institutions – men and women of a Christian god – perpetrated abuse beyond belief.  So we as a nation blamed the church.  But it was not the church who put the children in those institutions.  In fact, in some instances, it was prominent members of the Catholic Church who first raised questions about the performance and appropriateness of industrial schools. So maybe we should blame the state?  The state’s judiciary that heard requests for committal orders and with the bang of a gavel ended childhoods.

The state’s legislators failed for year after year and decade after decade to assess, analyse and arrest what was happening to our youngest citizens. The state’s legislators and law enforcers removed children from families and condemned them to a life of – in some instances – quasi imprisonment.

But it was not the legislators or the law enforcers who found the children; who made the decision to remove them from their parents.  That was the ‘cruelty man’.  An unfortunate euphemism.  Unfortunate because it allows us to forget who the ‘cruelty man’ was. He was the man, as the Ryan Report recounts, (and they were nearly all men) who would visit families and who had the power to take children from them.  And his proper title was ‘Inspector’. A paid employee of an archaic child welfare society, who could ship children off to industrial schools.  So maybe we should blame Inspectors?  Or maybe we should blame parents, the other big deliverer of children to the Industrial School system.  It is difficult to confirm precisely, because of the lack of good record keeping, but there is evidence that children, sent en masse, ended up in reform schools because their own parents sent them there.  So let’s blame them.

Except, in many cases those parents thought they were doing the best for those children. Poverty was so bad for some that children grew up with malformed bones through rickets and lived in – as reports of the time say – filth and squalor. So some parents decided that their children would be better off in the care of a religious order. We can look at the church, the state, TD’s, Gardai, child welfare agencies and parents and with each group we see horrendous failures. And we also see tremendous care, love and effort. In every sector, in every decade since the foundation of the state there have been people doing their very best for children. And the way we ensure that the problems in child welfare are never solved is by allowing one sector to carry the can for what is everyone’s problem.  It is much easier to assign blame than to accept that a problem is complicated, systemic, cultural and societal.

The problems did not go away

And let me be very clear; the complicated, systemic, cultural and societal problems did not go away with the closure of the industrial schools. The problems did not go away with the publication of the Ryan report.  They didn’t go away with the state apology to survivors.  They didn’t go away with the set-up of the redress scheme. Many of the settings changed; but problems remained; as is proven by the Report of the Independent Child Death Review Group. That report – which Norah Gibbons and Geoffrey Shannon did such a professional painstaking job in preparing – showed that as recently as 2008 children were being failed by the exact same sectors as they were in 1998 and 1988 and 1958 – the state, the Gardai, non-governmental agencies, voluntary groups, communities – and families. The report shows that some individuals did their best, some did nothing, some did harm. It shows social workers going over and above what could be reasonably expected of them. And it shows some falling far short of what could be expected.  It shows Gardai doing everything in their power to intervene where problems existed. And it shows some doing the opposite. It shows families struggling to cope with the burdens placed on them by poverty and fate and it shows some creating their own problems by neglect and indulgence.

It shows voluntary groups engaging in heroic fashion to protect children and families. And it shows some pawing ineffectually at a problem beyond their competence. It shows communities of care and compassion. And it shows some communities of cold indifference. It shows that child protection is everyone’s job. And it shows that those from whom children must be protected are not easy to stereotype.  We have had to learn the same brutal lesson again and again and again. The villain and the saviours are sometimes the same. Over-zealous intervention by inspectors destroyed lives, yet interventions by the same group undoubtedly saved countless childhoods and innumerable families.

Parents have been found to have subjected children to the most appalling abuse.  Others have gone to endless lengths and through endless suffering to give their children the best lives possible.  Relatives have been sexual and physical abusers. And they have been saviours who have stepped in to replace parents lost to children. And the state has been inept and ignorant. And it has sometime been better than that.  Sometimes!  It is my belief that it can be much better than it has been.  We have already made progress.

No aspect of government’s work has been so neglected

The Child and Family Support Agency legislation is being drafted, based on the report of the task force, which I published last week.  We have published legislation to put Children First into law, we’ve published important reports, and we’ve ensured that the church publishes its reports too.  We’ve also recruited additional social workers and commenced the biggest re-organisation of child and family social and judicial services in the history of the state.

But we have such a distance left to go.  I believe that no aspect of government’s work has been as neglected down through the years as child protection.  It has been ignored at Ministerial level for decades.

While everyone knows the economic challenges this government inherited, what isn’t so clear is the challenges we inherited in child protection – no national framework for service delivery; no proper data collection; no standard approach to assessing risk and referring cases; no effective interagency working between agencies funded by the public.  And the result is a chaotic system. There are still good people doing their best at all levels, but the system has operated so long without attention from the top that it has become astonishingly unfit for purpose.

Problems that should never have occurred have been allowed to grow and fester.  For instance, we still spend too much, far too much, on residential and special care both in this jurisdiction and for the small numbers of children and young people we send abroad for care.  We still have a situation where we do not have national policy for the use of Guardian ad Litems; people who act in loco parentis, to represent children during court appearances. Situations like this have been going on so long that managers have gotten used to it; and the system here has atrophied.  Let me refer also to another situation that has been ongoing; this relates to Section 47 of the Child Care Act where a judge can mandate specific treatment for a child.

I appreciate the frustration of judges constrained by a system where so many of our most challenging and vulnerable young people who come before them have not received the service or support they should have. It’s clear that as a result, judges, more and more, are relying on Section 47 and with the bang of a gavel, can demand a range of services from the local child care managers with its obvious impact on child care expenditure.  And Section 47s are happening more and more. This is often in the absence of proper national planning for the kind of resources that children with complex needs might demand.  In addition, we are seeing more and more child care cases being argued by barristers on both sides. Something that is as costly as it is combative. 

None of this is the fault of the individual; you can’t ask a social worker to take on a high-dependency young person when it would mean risking their life. You can’t ask a Guardian ad Litem not to charge.  You can’t ask a judge not to make decisions in the best interest of the person in front of them.  You can’t ask a barrister not to represent, or a plaintiff not to seek representation.

The individuals are not to blame. Nowhere in Irish society, to my knowledge is there a sector more chaotic than this; a sector more in need of reform than this.  Nowhere is there a sector with more people committed to excellence. And nowhere is there a sector with more people sharing a combined objective.

From front-line social workers, through system managers, through Gardai, through NGOs, through the child and family welfare agency, through my department all the way to the Taoiseach, we all have the same goal; providing a happy, healthy childhood to every child – a safe childhood.

The Child and Family Support Agency will be accountable

That task is going to take a long time, and a lot of change.  But we’re getting there.  Alan Shatter’s legislation will change how the courts handle child and family cases.  His legislation on reporting combined with mine on Children First will fundamentally change how child abuse cases are handled. The New Child and Family Support Agency presents us with a ‘once in a generation’ opportunity to break down the barriers between agencies and services; to deliver seamless integration of policy and service delivery, not fragmentation – with a single focus – the child.  Where child protection is no longer lost in a health-focussed system; where child detention is no longer lost in a prison-focussed system; where childhood mental health services are no longer lost in an adult-focussed system.

This won’t necessarily mean all services under one roof. But it will require, that across government, we will have to ensure that services work together. It will require real interagency working.  It will take time for us to create that new reality out of the rubble of a system that has been crumbling for years. But reform has been the hallmark of this government’s approach to every sphere of national life. The establishment of this new Agency must; and will, represent public service reform in practice.

This Agency will have real accountability. It will dissolve silos between services. It will create efficiency and excellence out of a system of chaos. After decade of failings, after far too many reports, this is where the new Agency can make its biggest difference: delivering value-added through integrating service delivery for families-in-crisis, for children-in-care and for troubled teens.

We should never underestimate the human cost of the devastating impact on children of abuse or neglect; of family breakdown, of parental substance misuse, of undiagnosed mental health difficulties.  Consider a young person:

• • who grew up in a dysfunctional and chaotic family setting – social work services were involved
• • missed a lot of school – education welfare services involved
• • dabbled in crime – youth justice services involved.

But not only were all three not working together, none of them engaged with adolescent mental health services.  If they did, they would have found this young person had serious undiagnosed behavioural and emotional difficulties.

By integrating services, this new Agency can do much better for these young people.  Separate services in separate settings for the same cohort of children simply don’t make sense.  But the Agency is not just about protecting children, as its title indicates – it’s about family support.

As I see it, protecting children and supporting families are simply two sides of the one coin. I believe these are complimentary goals that we can all sign up to.

This is a concept which is recognised right throughout our reform programme, and ties much of it together.  For example, providing enhanced focus on early intervention and family support in the working of the new Agency represents the practical application of a new approach towards ‘proportionate’ service responses – an approach which will also be at the heart of the Constitutional Amendment on Child Protection which will be put before the people later this year.

Passing that referendum will not be an ending.  It will not be a panacea.  Rather it will be a foundation; a foundation on which we can gradually build the new system. A system which will ultimately ensure that the children of each coming decade have a better childhood than those of the last; where we move from bleak failure to a bright future.

_________

Norah Gibbons, Director of Advocacy, Barnardos

On 28^th September 1992, Ireland ratified the UN Convention on the Rights of the Child. The Convention, then just four years in existence, outlines the responsibilities of state parties to protect and promote children’s rights through their laws, policies and practice. There is no doubt that we have come a long way with regards to children’s rights in the last 20 years.  In 1992, Ireland was just at the very beginning of our climb towards the Celtic Tiger.  The Child Care Act 1991 was in its infancy and was transforming the powers of health boards to intervene on behalf of children at risk of abuse and neglect.  In 1992 (as per the 1991 Census), Ireland’s population was 3,525,719. Children comprised over 34% of this, amounting to 1,212,380 children. 20 years on our population is now 4,581,269, and children aged 0-18 comprise over 26% of this, amounting to 1,206,527 children.

The Shameful Failure

The year following our ratification of the Convention on the Rights of the Child, Justice Catherine McGuinness published her landmark investigation report into the Kilkenny Incest Case. The report clearly outlined the gaps in the system that allowed abuse and neglect of children to go unchallenged throughout the State.  In the intervening decades numerous other reports have outlined our shameful failure to challenge cultural and societal norms that too often left children to fend for themselves against horrors many of us would be incapable of coping with.  The Ferns, Monageer, Ryan, Murphy, Cloyne, Roscommon and most recently, the Independent Child Death Review Group, reports all reflect the value Ireland placed on its most vulnerable children in the past.  They were cast out of normal society, abandoned by State structures that were unable to adequately respond to what was happening and ignored by Irish society at large, because we did not know and did not want to know what was happening.  We have not had that excuse for many years now and the progress we have seen in recent years is testament to many dedicated social workers, policy makers, politicians and others who have fought hard for lasting change in the area of child welfare and protection.

Progress has been encouraging

As we assemble here in Glenties in 2012, approaching the 20^th anniversary of our commitment to enshrining the principles of the UN Convention on the Rights of the Child, I am encouraged by the strides we have made to finally put in place a child welfare and protection system that is fit for purpose.  Many of the recommendations of Justice McGuinness’ report are now, finally, close to being implemented through legislation including the Children First Bill and policies including the Child Welfare and Protection Practice Handbook and the development of a child protection register.  Most importantly, the Irish public will be given the opportunity to vote on a referendum to strengthen children’s rights in the Constitution this autumn, marking what will hopefully be a new era for our State in how we respect, value and protect children.

In addition, the proposed establishment of the Child and Family Support Agency, announced formally last week, marks, for the first time in Irish history, our joint commitment to put in place a distinct body solely dedicated to working with and for families and children to improve family support and protect children at risk of abuse and neglect.  In 1992, Justice McGuinness commended the introduction of the Child Care Act 1991 but recognised the urgent need to ensure the proper resources were available to ensure its full implementation.  20 years later, this is still something we have failed to do. The recent Report of the Independent Child Death Review Group, which I wrote with child law expert Geoffrey Shannon, proves that we haven’t quite cracked the challenges of child welfare and protection yet.  There are many lessons I took from the tragic stories contained in the case reports we read but, of all, none made the same impact on me as those cases where concerns about children were known but not acted upon – where children were left in horrendous situations until it was too late to really help them in a meaningful way.  The lives of those children whom we failed must be honoured through a renewed commitment to getting it right this time.

We have failed to adequately invest in our children

We have learned much from our past and we have put much of that learning into practice. The Report on the Task Force on the Child and Family Support Agency was published last week and many of its recommendations reflect that learning.  The report, if implemented, will transform services for children and families and will set Ireland on a new course with regards to child welfare and protection.  However, it is now time to put our money where our mouth is, so to speak. The new Agency must be provided with the necessary resources to ensure it can do its job properly. Notwithstanding the economic climate facing the country, we have choices to make about how we use our resources and nothing can be considered more important than investing in the childhoods of Ireland’s future adults.  There is endless evidence that proves the economic sense inherent in investment in prevention and early intervention.  I don’t need to expound it here.  The point is that, despite many reports outlining previous failures and recommendations for how we can do better, we have been slow to back up our vision for children in meaningful ways.  We have failed to adequately invest in them.  We need to ask ourselves where we want to be in another 20 years.  And then we need to really think about how we spend the increasingly restrained resources we have to prioritise our investment in our greatest assets.

Child Poverty is complex and challenging

One of the greatest challenges in the establishment and work of the new Agency will be its role in combating the impact of intergenerational poverty on children in Ireland.  There is a significant crossover between child welfare and poverty. While it is obvious that child abuse can and does occur in families across the full spectrum of socio-economic background, it is undeniable that welfare issues are often exacerbated by the deprivation and disadvantage experienced by children, families and communities. Child poverty is a complex and challenging issue.  No one is under any illusions that eradicating it will be an easy task. However, it is undeniable that, to date, Ireland has failed to adequately address child poverty in any meaningful way.

In 2002, the then Taoiseach Bertie Ahern and the then Minister for Social, Community & Family Affairs Dermot Ahern launched the revised National Anti-Poverty Strategy containing a set of ambitious targets and a framework for action to tackle poverty. In the Strategy, Government committed itself to eliminating poverty, or at the very least reducing consistent poverty to 2% from the 6% it stood at as of 2000. Well, ten years on and our consistent poverty rate remains essentially static at 6.2%. Even during our most affluent period, we did not make the kind of progress we might have expected. This was largely due to policy decisions that relied heavily on income supports to redress inequalities in society, rather than tackling underlying causes of poverty and disadvantage and seeking a balance that would help to permanently level the playing field for all children in Ireland.

The 2005 National Economic and Social Council (NESC) report, The Developmental Welfare State, called for the development of an improved social protection system that would deliver social justice, a more egalitarian society and a dynamic and flexible economy that could sustain Ireland in a globalised world.  Key to their recommendations for achieving this is a balance between income supports and access to services, including health, education and housing.  It is true to say that during the economic boom, investment in income supports and public services did increase.  In relation to income supports, Child Benefit became the Government’s preferred vehicle for addressing child poverty, with that payment accounting for 6% of all social welfare spending in 1993 increasing to 15% in 2002.  There is no doubt that increased investment in Child Benefit resulted in reduced child poverty rates over the 1990s and 2000s.  Relative poverty declined from 27% in 1996 to 19.9% in 2007.  This is an important statistic to remember in light of the debate about Child Benefit in recent weeks.  While we need to look at how we tackle child poverty in Ireland, as I will outline now, it is imperative that we don’t progress any measures that push more children into poverty. Means testing Child Benefit would, I believe, result in that outcome.

We need to drastically re-think our approach

The failure to engage in fundamental and meaningful social protection reform has seen significant regression in poverty rates since the onset of recession.  The percentage of children at risk of poverty rose from 18.6% in 2009 to 19.5% in 2010, a figure likely to increase in coming years.  Equally, increased investment in public services delivered little by way of significant changes in outcome during the boom years.  A Department of Education report showed that 1 in 3 children from disadvantaged areas continued to leave school with literacy and numeracy difficulties in 2004, a figure that had remained static since 1980.  The number of young people who leave school early has remained consistent since the 1990s, with around 9,000 leaving each year.  This indicates that, while investment in monetary terms is important, how we spend it is also crucial.  It shows us that we need to start thinking differently about how we provide supports to children who need them and we need to start by looking at the interplay between income supports and access to services.  We need to drastically re-think our approach to poverty, beginning by making a meaningful commitment to the protection of those with the least in our society.

A recent Social Justice Ireland report indicates that we are not succeeding at this. The report, using statistics from the CSO, shows that Ireland’s poorest families experienced an income drop of almost 20% in one year while the income of the richest increased by 4%. In 2010, the top 10% of the population received almost 14 times more disposable income than the poorest 10% — it was eight times more in 1980.  What this tells us is that successive budget decisions have not spread austerity evenly.  They have targeted low and middle income earners and we are now seeing the impact of that in families across the country.  There were many children and families who never really felt the benefit of the Tiger; those who continued to live in poverty and disadvantage throughout the last decade.  It is telling, in fact, that the at risk of poverty rate for 2007 was 19.9%, a figure that then represented the modest success of State interventions between 1996 and 2007.  The fact that we are now sliding back down the scale should be a warning to all of us who are concerned about children’s welfare and well-being.

The new Child and Family Support Agency will undoubtedly take on much of the responsibility for the delivery of services to children living in disadvantage.  But it is essential that the Agency is not seen as the sole player in this goal.  If we are to succeed at eliminating child poverty, as initially targeted in the National Anti-Poverty Strategy, we need a whole Government approach.  It is not sufficient to land the burden of child poverty on any one Department but to look at the interplay between the work of multiple Departments, including Health, Education, Social Protection, Environment and Children and Young People for solutions that will deliver the kind of reform we need.  We need a system that puts children firmly at the centre of legislative, policy and practice decisions.  We need a system that can put the immense knowledge and learning developed over the many years we’ve been providing social protection in its numerous incarnations to work to reform, grow and make better those protections.  This has never been more important than now.

Strong political and policy will is needed to ensure that the Programme for Government commitment to combat child poverty is pursued as the demands on our dwindling resources increase.  While the welcome commitments made to maintain social welfare rates were upheld this year, other decisions to target low income families are creating and will continue to create real hardship for children unless brave political choices are made to protect them in the coming Budget.  This is particularly true for lone parents who are facing changes to the One Parent Family Payment.  The proposed measures will, I believe, reinforce the poverty traps that continue to plague our social protection system.  These poverty traps make the decision to work difficult for many parents who struggle to maintain low paid, often part-time, employment that allows them to balance working with their parenting responsibilities.  It is wholly insufficient to make inadequate, short term moves towards creating afterschool care places for one cohort of children.  The provision of early childhood and education care and afterschool care services must always be based first on the best interests and developmental needs of children.  We need to create an environment that meets the needs of children whose parents are at work.  We have made significant progress towards the delivery of affordable, quality early years childcare in recent years, through the free pre-school year.  Any attempt to put in place interim measures that affect only one group of children and that allow the system of childcare to continue to develop in an ad hoc and scattered way does a severe disservice to children in Ireland.  We need to work together now to deliver lasting solutions that will benefit our children now and into the future.

In the debates that followed the publication of the Ryan report, our now Tanaiste quoted James Connolly’s challenge to the Labour party to achieve a country where “every child in our Irish soil will by the mere fact of its existence be an heir to, and partner in, all the country produces; will have the same right to an assured existence as the citizen has today to his citizenship.”  Deputy Gilmore followed this saying “More than 100 years later, the 21st century must become the century that the Irish people hold true to and deliver on our obligations to all our children.”

I wholeheartedly endorse these words.  We are living through perhaps the most difficult economic period we have faced to date. There are no easy decisions and no easy wins when it comes to how we spend our limited resources. But it is essential that we put our children first when we are making the kinds of choices that no one wants to have to make.  We need to deliver opportunity, possibility and hope for all the children of Ireland.  Anything less than that is a failure on our part to deliver the kind of childhoods and the kind of society that will make us strong long into the future.  The decisions we make now will be felt for generations to come.  It is crucial that we make the right ones.

______

Madeleine Clarke, Founding Director of Genio, former Deputy CEO, Barnardos

Introduction

The current climate offers us an opportunity to re-design public services. I am going to talk about some of what is involved in seizing that opportunity. I am proposing that putting the citizen at the centre of the reform of public services is the best way to ensure quality and achieve cost-effectiveness. It also provides a means of achieving a common premise which can appropriately be used to tame and harness vested interests to achieve positive change. Finally, I will describe an example of how to put the person at the centre of the design and delivery of services they need, reduce costs and achieve better outcomes.

Opportunity to re-design public services

The economic boom allowed us the luxury of simultaneously funding some enlightened initiatives while sidestepping certain nettles that still remain to be grasped. We generally did this by adding initiatives on at the margins of large expenditure programmes. The sharp contraction now requires us to face these deferred challenges. These are challenges that are not unique to Ireland. John Jay Chapman’s precept “Reform consists in taking a bone from a dog” may be a safer guide than the chorus of “win, win” optimists, as we set about this task.

What’s involved in seizing the opportunity?

It is important to take the full measure of the challenges involved. We will not be served well by simplistic assumptions and poorly thought through strategies.

One such assumption is that all we need to do is demonstrate evidence of how to design services that reduce waste and produce better outcomes and then widespread adoption will spontaneously follow. It is utterly naive to assume that resistance to change will graciously surrender in the face of irrefutable evidence. Key stakeholders in this terrain are not disinterested empiricists.

Another common assumption is that investment in expensive, professionally staffed services automatically translates into good outcomes. It is true that many leaders and innovators are open-minded, committed professionals. It is also the case that some of the poorest-performing services, in terms of adding value to people’s lives, are led and staffed by highly paid professionals.

Shirking the pain and rigour of hard thinking leaves us prey to superficial, almost sloganeering remedies. Reducing the number of community and voluntary agencies is one such remedy – indeed one which almost commends itself as a ‘no-brainer’. Certainly, the development of locally responsive shared services would be a worthwhile achievement if it reduced duplication of back office costs. Competently incentivised and executed, this could be achieved without insisting that organisations merge, lose their identity or go out of business. An insistence on wholesale culling of agencies would be ill judged and politically risky given the particular origins and ethos of groups in that sector. Sometimes the ‘no-brainer’ epithet contains a literal truth.

The blanket application of crude percentage cuts as a means of reining in expenditure is another example of avoiding serious thought. This acts as a disincentive to efficiency, encouraging agencies to maintain ‘off-radar’ pockets of inefficiency which they know will be needed to be offered up against future rounds of cuts. We need to develop capacity to discern and moderate decisions on the basis of efficiency performance.

More ruthless aligning of resource allocation with national policy objectives is often urged. Linking funding to validated delivery of outcomes goes hand-in-glove with this line of exhortation. As high level objectives these are unassailable. But the complexity of challenge associated with any serious sustained intent to deliver on these objectives requires sophisticated strategies that are adequately informed and considered. Clarity of thought and resilient resolve are sine qua nons of any serious endeavour to land a reform programme of such ambition.

Putting the citizen at the centre – taming the vested interests

The commitment to “a more customer-focused approach to the delivery of public services which puts the public at the centre of public services” [1] contained in the Towards 2016 Social Partnership Agreement has yet to be realised. Social partnership provided what seemed to be ‘win win’ solutions for all concerned – except arguably for those in need of public services, notably those who are marginalised and require supports to become valued, included and contributing members of society. The theme continues to recur as in the Public Service Agreement 2010-2014 which refers to “working together to build an increasingly integrated Public Service which is leaner and more effective, and focused more on the needs of the citizen”. [2]  It is fair to say that the jury is still out on whether ‘Croke Park’ is being implemented primarily in the interests of the public or whether it represents a damage limitation vehicle for embedded interests.

Given the different and conflicting interests, the only safe guide is to put the citizen at the centre of the design of public services. This forces all others into the appropriate position – being of service. The most compelling case for reform can best be put by those to whom it matters most. Putting the person at the centre of the design of services provides a common premise against which the contributions of all can be measured. For this to work, it is essential that expectations are made explicit at both strategic and operational levels. It is the lack of being able to work back to – and forward from – a common premise that is at the heart of our problems in accelerating progress.

Harnessing cross-sector collaboration for reform – the Genio model

The impetus for Genio came from three sources. Firstly, the recognition that there are good and able people in every sector who want to make a difference; secondly the clear need for a more customer-focused and cost-effective approach to providing public services; and thirdly a personal desire to work with others to ensure that people who are marginalised have the best opportunity to become included and valued citizens – not just for their sake but because society benefits by valuing diversity and including the contribution of all of its members.

Genio was established in 2008 with the objective to ‘foster cross-sector collaboration involving key stakeholders’… ‘to promote personalised services’ to people who need them in order to live purposeful and productive lives. I was determined that Genio would not be another organisation offering commentary. Instead we would concentrate on being helpful, adding value where we can to implement good national policy.  The sectors we are working with are public, private and non-profit. The fields we are working in so far are disability, mental health and older people, particularly focusing on those with dementia.

 We have had some exploratory talks in the children’s area. We believe that the model we have developed has wide applicability within the public service, notably where there is an interface between the State and the citizen with a significant – especially an enduring – vulnerability.

Genio acts as a catalyst in reconfiguring resources to refocus services to put the citizen at the centre of their design and delivery. We develop a deep understanding of the fields we are invited to work in on the basis of our existing expertise and knowledge and through consultation and research. We assess the capacity and leadership potential that exists in the field and use this as a basis for agreeing specific targets with our funders in the overall context of achieving national policy objectives. We bring private and government funding together. Our funding currently comes from Government through the Department of Health and HSE and from the Atlantic Philanthropies. We are now opening up opportunities for other interested government departments and private investors/philanthropists who feel we can help achieve desired change.

To give you a flavour of our targets in the fields in which we are operating – in disability and mental health we are increasing the numbers of people who are receive person-centred support to:

• • Move from institutions
• • Live in the community
• • Work or participate in education or training aimed at employment or otherwise engage in meaningful activities.

In mental health our agreed targets also include:

• • Redesigning services currently provided in day hospitals and day centres to focus on outcomes important to the service user that support recovery and increase opportunities to regain valued roles in the community.

These targets are agreed in the context of the national mental health policy Vision for Change which proposes a “person-centred treatment approach” with “special emphasis.. given to the need to involve service users and their families and carers at every level of service provision” [3]: and the national disability policy Value for Money and Policy Review of Disability Services in Ireland which proposes a “fundamental change in approach to the governance, funding and focus of the Disability Services Programme, with the migration from an approach that is predominantly centred on group-based service delivery towards a model of person-centred and individually chosen supports.” [4]

In the dementia area, Genio has received funding from the Atlantic Philanthropies and the HSE to:

• • Develop and test new service models which will improve the range and quality of community-based supports for people with dementia
• • Inform developing policy and investment in this area
• • Build the leadership in the field that is necessary in order to capitalise on the potential of the proposed national dementia strategy.

How do we do it?

We work in three ways:

1.  We provide financial support in the form of grants to stimulate the reconfiguring of resources towards innovative, cost effective, individualised supports that foster community inclusion. Applications are invited through the national press and are evaluated against published criteria that reflect national policy. Sustainability and value-for-money are key criteria. Successful applicants must have a compelling sustainability plan to maintain change beyond the life of the grant. Thus Genio funding provided through the Genio Trust is used as ‘bridging finance’ to get from the old to the new. For example, when closing institutions, running costs are needed until the last person leaves. Meanwhile funding is required to develop supports for residents moving to the community to enable them to be appropriately supported to become re-integrated and connected. Once institutions close, resources needed to run them can be used to support people in the community.

Since 2010 we have received 713 applications and have been in a position to award 145 grants to projects all over the country which total over €10.6m. This has leveraged a further €19.7m in matching and reconfigured resources directly, and will hopefully stimulate the reconfiguration of more significant resources as momentum for implementing policy to move away from group-focused services to individualised supports is nurtured and grows. We monitor progress of grantees, making onsite visits three times a year and, on occasion, have taken funds back into the Genio Trust where agreed outcomes were not being achieved. (Part of our ‘value-add’ is to introduce private sector performance expectations into the traditionally more sheltered public sector.)

2.   We build skills and leadership amongst key stakeholders including:

• • people who use services, their families and friends, to advocate to secure the supports they require
• • service providers, policy makers, and service commissioners to refocus service provision in the desired direction.

3.  We measure impact and gather evidence to support refocusing and scaling.  We have commissioned the University of Ulster to identify:

• • changes in the quality of life of those being supported to live more independently in the community
• • costs of providing individualised supports to people with different needs across urban and rural settings
• • what works best in refocusing services.

 What are we achieving?

We are aiming to support and publicise enough demonstrations to achieve momentum in the desired direction that will be self-perpetuating. Through our grant-making and the direct work of the Genio team:

• • 474 people are being supported to move from institutions to live more independent and connected lives in their communities
• • 1,011 young people and adults are being supported to participate more in their communities and to access work, education and training opportunities
• • The families of 382 adults and children are receiving ‘community-based respite’ breaks without being confined to placing their sons and daughters in institutions
• • 2,934 people who use services have received training, information and practical support to enable them to live more independently in the community
• • 1,153 family members have received information, training and support so they can support their family member more effectively
• • 2,074 staff have received training and support directed at service improvement and acquiring the skills they need to support people using services in an individualised way
  • 5,921 people from the general community have attended information events, awareness-raising events and conferences.

 Sustaining collaboration

Identifying strengths, interests and possible barriers to cross-sector collaboration are important to get to the starting blocks. Developing collaborative options that address the interests of the various sectors involved is critical to sustain collaboration. At Genio, we offer the government an opportunity to reroute funding in a policy-bound direction through an independent vehicle that uses a transparent, accountable and publicly defensible process. We offer philanthropists and private business opportunities for high impact social investment through our understanding of how positive change can be achieved and scaled and through our relationships with statutory agencies and other key stakeholders. Crucially, we provide opportunities for private funding to be used strategically to support projects that are sustainable beyond the life of grants provided, avoiding the usual problems associated with philanthropically-backed initiatives.  This is also appealing to government officials who are usually left to worry about the bills when the philanthropist leaves. For the not-for-profit and statutory service providers, we can support innovation and provide an injection of funds and expertise to begin, accelerate, and to sustain reconfiguration. One senior manager in the HSE recently described Genio as ‘an innovation partner’. For those needing services we are driving reconfiguration in a direction that puts them at the centre of design and delivery. For many, this means putting them in the driving seat of their own lives. Finally, for the general public we are achieving and driving good value for public funds.

________

Professor Brigid Laffan, University College Dublin

Introduction

The global financial crisis posed a series of interrelated challenges to the EU and more particularly the euro area. As the crisis unfolded, European institutions and the euro member states struggled to respond in a manner that convinced the markets that the political capacity and financial muscle existed to address Europe’s woes. When a series of ad hoc measures, best characterised as muddling through, failed to contain the problem, the Union set out to agree a ‘comprehensive package’ at its March 2011 meeting of the European Council.

Notwithstanding numerous further meetings of the European Council and the Euro group, the search for solutions to the crisis continues and the economic situation within the euro area deteriorates for many euro states. There was initially a deep reluctance and then numerous ideological, political and institutional barriers to addressing the issues raised by the crisis. Given its nature, the crisis has received extensive coverage from economists in academic papers, blogs and media commentary. The politics of the crisis has received less attention although at its core are important issues of political economy and politics. In ‘hard times’ existing paradigms come under strain and a high level of contestation concerning policy prescriptions is to be expected (Gourevitch, 1992,17). The crisis mutated from a global financial crisis to a crisis of the euro area, or to put it another way,  the global crisis took on a distinctive euro area character in Autumn 2009,  when the Greek government identified a serious ‘fiscal gap’ following the October election that saw George Papandreou return to power. In its third year, the euro area continues to struggle to stabilise the crisis. The extent and depth of the crisis has continued to deteriorate since summer 2011 with short periods of relative calm followed by renewed turbulence. The evidence of serious contagion in Spain and Italy, the third and fourth largest economies in the euro area respectively, brings the systemic nature of the crisis sharply into focus. It could be argued that considerably more political and policy time has gone into preventing future crises than managing the complexities of the crisis as it evolved. This paper covers three issues.

First, it will be argued that a Fiscal Union on its own is insufficient to solve the crisis because of the inter-relationship between sovereigns and banks in Europe. Second, a Fiscal Union, if this implies permanent inter-regional transfers in Europe, may not be an available policy solution. Third, the politics of the crisis have pitted debtors against creditors and have brought the primacy of domestic politics to the fore. If a solution to the euro crisis requires deeper economic and fiscal integration, then it may also require political union, however defined, and the consent of Europe’s peoples. Before addressing the key questions, I will begin with a short synopsis of why Europe’s politicians are finding it so difficult to stabilise the problems of the euro area.

Distributive Politics: Who Bears the Costs?

The euro area faced its first major challenge not as a normal downturn of the business cycle but during the most serious economic dislocation since the Great Depression, hence its title, the Great Recession. A young currency and central bank were and are faced with an existential crisis just over a decade since its creation. The crisis requires collective action from the ECB and the 17 member states in an environment of deep divergence of preferences and interests. Not all euro states are experiencing the crisis in the same way and suffering the same consequences.  Divergence of economic performance and experience across the member states adds to the difficulties of agreeing solutions. Whenever there is an economic downturn of this magnitude, the distribution of costs across countries, sectors, families, and individuals is a major issue.  In the euro area the core cleavage is between creditor and debtor countries, notwithstanding the deep interdependence between them. Debtor countries want salvation through solidarity and are thus committed to policy solutions that distribute the costs beyond their borders. Creditor countries, on the other hand, want to insulate their tax payers from exposure to the debtor states and are reluctant to discuss large scale burden-sharing.

Another way of identifying the cleavage is between those states that can borrow at sustainable rates from the financial markets and those that have already left the market or are under severe strain. The level of contestation about the nature of the crisis and the policy toolkit revolves around three difficult questions. First, who bears the cost of the losses incurred in the boom and bubble that preceded the crisis? Second, who carries the burden of adjustment in the aftermath of the crisis and three, who carries the risk and how much risk in addressing the problems?  Hence the costs relate to the past (losses), the present (adjustment) and the future (risk). The public purse in many countries has carried a significant amount of the losses incurred by banks although the proportionate costs across states have differed greatly.  The IMF data base on systemic banking crises concluded that in 2008 eight euro area states experienced a systemic banking crisis with a further four euro states representing borderline cases. Hence the financial systems of twelve of the 17 euro states were in considerable stress in 2008. Cyprus subsequently joined this group in 2012 and the banking situation in Spain deteriorated.  The cost to the euro states of the banking crises ranged from a high of over 40% GDP in Ireland to 0.3% for Italy. Some taxpayers in Europe have borne very large losses incurred by their banking systems.

The June 2012 European Council/Euro Area Summit  appeared to change course by concluding that it ‘is imperative to break the vicious circle between banks and sovereigns’ (Euro Area Summit, 29 June 2012) and by agreeing that the ESM might be channelled directly to banks without enlarging the debt burden of a euro area sovereign. This will only become operational following the establishment of a euro area supervisory authority. 

So Far Fiscal Rules not Fiscal Union

The title of a Commission research report published as agreement on EMU was secured, Stable Money and Sound Finances (1993) captures the core of the euro paradigm. The euro was designed around the twin goals of stable money and sound finances enshrined in the Treaty on European Union (TEU), the Maastricht Treaty, and the 1997Growth and Stability Pact (GSP). Underpinning the single currency was a policy consensus that privileged low inflation (McNamara, 1998).  Monetary policy was characterised by a single centre of authority, the European Central Bank (ECB) buttressed by the national central banks in the European System of Central banks (ESCB). The ECB was given treaty based guarantees of its independence in what was to be an ECB centric euro-zone (Dyson, 2000, 12). The treaty was definitive on the key goal and responsibility of monetary policy as laid out in TEU: ‘The primary objective of the ESCB shall be to maintain price stability’ (Article 105, TEU). The power of the ECB was buttressed by the fact that it was responsible for defining what price stability was and did so in a ‘hawkish’ manner from the outset by agreeing an inflation objective of below 2 per cent (Dyson, 2000, 12, ECB 1999).  A strong and independent ECB was accompanied by a ‘no bail’ out clause which specified that neither the Community nor a member state government would become liable for the commitments of another member state. The ECB in turn was prohibited from directly buying debt instruments (Article 104).

The centralised and unified monetary pillar was complemented by a significantly weaker economic pillar, thereby creating an asymmetrical EMU from the outset. Although the interdependence between the two pillars was evident in the TEU, the means of assuring an equally strong economic policy pillar were absent. The French government of the time argued strongly for the inclusion of provisions on ‘economic governance’ to counterbalance the ECB but this was unacceptable to the German government, lest this would impact on the independence of the ECB, the core of the monetary union.  The difficulty of specifying  the ‘economic’ in EMU was not just because of the ‘high politics’ of ECB independence but also because economic policy can be ‘varied, nuanced and phased to a much greater degree than monetary union’ (Laffan et al, 1999, 144).

The EU did not put in place mechanisms (Fiscal Union) to offset asymmetric shocks to one part of the monetary union even though the likelihood of such shocks was greater in Europe than in the US. This reflected the underlying integration bargain in the EU; the small European budget would assist member states ‘catch up’ but was far too small and rule bound to engage in inter-regional transfers of the kind found within a state (Laffan 1997). Nor did the EMU design encompass a framework for the maintenance of the stability of the financial system. One of the functions of the ECB provided for in the TEU was a responsibility to oversee ‘the smooth operation of the payments system’ which had a supervisory dimension but one not specified in the treaties or the ECB Statutes. Given that financial integration was proceeding in Europe at an accelerated pace, the absence of a financial pillar in EMU greatly accentuated the design faults of the single currency. The euro was created in an environment in which there was ‘a firm belief that free markets were the best guarantee of sustained high growth, stable prices and currencies, and the optimal use of resources, including capital’ (Goodhardt, 2008, 7). The euro delivered sound money in its first decade of operation but faced an existential threat shortly after its 10^th birthday.

The Crisis and the Search for Solutions

At the onset of the crisis, economic governance was placed firmly on the agenda and considerable effort has been devoted to enhancing economic governance in the euro area. The strategy was to strengthen the rules based system of the SGP. There has been agreement to a six-pack of legislation, a Fiscal Compact and further rules are being negotiated (two pack). The focus of the regulatory framework was on the collective co-responsibility of the member states within the euro area. This is captured in the following quote from a letter sent by Chancellor Merkel and President Sarkozy to the President of the European Council, in December 7th, 2011. In it the two most influential office holders in the euro area stated:

We need more binding and more ambitious rules and commitments for the euro area Member States. They should reflect that sharing a single currency means sharing responsibility for the euro area as a whole. They should pave the way for a new quality of cooperation and integration within the euro area

(Letter from Chancellor Merkel and President Sarkozy to Herman Van Rompuy, 7th December 2011).

The creditor states led by Germany, with the support of the ECB, sought a quantum leap in economic governance from the onset of the crisis. Their focus was on tighter surveillance of national budgets and economic policy and tougher sanctions. The Chancellor’s search for even greater assurance in economic governance was based on the over-riding German commitment to ensuring that the GSP, that had proven incapable of preventing the near collapse of the euro, would not fail in future. The ‘six pack’ which contained much of what Germany wanted, was based on secondary European law and hence could be revised through the normal EU legislative procedures. A Fiscal Compact, on the other hand, was an instrument of treaty law, although not a formal European treaty, because the UK vetoed treaty change at the December 2011 European Council.  In summer 2011 when under pressure from the markets, the Italian government embarked on fiscal consolidation; this was accompanied by ECB intervention in the secondary markets (SMP) to buy Italian bonds. Once the pressure eased on Italian spreads, PM Berlusconi slowed the adjustment process domestically. This sealed his fate as an unreliable partner and added to Chancellor Merkel’s conviction that the euro states needed to go beyond the ‘six pack’.  Much of what emerged in the Fiscal Compact was already contained in EU treaties and laws but there are a number of innovations in terms of primary law that enhance EU level economic governance.

The euro states have created a new regulatory and institutional framework for national budgetary and economic policy, one that encases them in a wider euro area framework of responsibility. The new framework puts flesh on the commitment already contained in the Maastricht treaty to the ‘common concern’ of the member states. The aim of the emerging system of economic governance is to strengthen the ‘ties that bind’ each euro state to the collective and to limit the freedom of manoeuvre of any one state. The evolving system has been achieved not only with EU law but the incorporation of new rules into the domestic by means of a ‘debt brake’. The latter is intended to make it more difficult for any future euro area government to ignore EU level law. In order to bind the other euro states, each state has submitted to being bound by collective rules.

The creditor governments led by Germany demanded these changes in return for action in bailing out stressed states. Reciprocal responsibility as a member of the euro area significantly reduces domestic budgetary and economic policy autonomy, alters the timing and cycle of budgetary preparation and brings the ‘outside’ in at an early stage of budgetary planning.  EU intrusion and surveillance is designed to ensure that euro states put their public finances in order and once order has been restored, maintain them within the rules. Putting the house in order poses formidable challenges to many euro area states. In 2012, 12 of the 17 euro member states were in an excessive deficit procedure and of those, four countries were in bail-outs.

Greece, Ireland and Portugal, already in their fourth year of austerity, face many difficult years ahead, as do states with high levels of debt. All five countries with a high stock of debt (+90%) face the challenge of eliminating deficits and then running surpluses to bring down the overall stock of debt.

Almost all euro states face a prolonged period of heightened EU level scrutiny as they consolidate their public finances and re-gain their competitiveness. If euro states fail to achieve the targets outlined in the ‘six pack’ and the Fiscal Compact, the corrective arm is much stronger with provision for automatic sanctions. Given the experience with the rules-based GSP, it is difficult to say if the new regulatory regime will lead to more prudent economic and budgetary management within the euro area.

 The Van Rompuy Report

The emerging economic governance regime is a set of fiscal rules, not a fiscal union, because it does not have a transfer mechanism to redistribute income across the euro area. The EU budget, representing 1% of EU GNI, is too small to act as an economic stabiliser although the structural funds represent a mechanism of redistribution. The integration bargain is based on assistance to the less developed countries and regions of the EU to ‘catch-up’. It was never intended as a platform for permanent inter-regional transfers and does not have a role in inter-personal transfers. The euro area was designed without a mechanism for fiscal transfers because a political consensus was not available to agree such a system. With the onset of the euro area crisis, the question of a ‘transfer union’ was back on the agenda.

On 26th June 2012, the President of the European Council, Herman Van Rompuy presented a seven page report to the European Council entitled Towards a Genuine Economic and Monetary Union. The purpose of the report, drafted in conjunction with the Presidents of the Commission and ECB, was intended to set out a vision and working method for the further development of the euro area.

The report identified four essential building blocks that would constitute the completion of the currency union. These were:

• • An integrated financial framework;
• • An integrated budgetary framework;
• • An integrated economic policy framework;
• • Ensuring the necessary democratic legitimacy and accountability of decision making in EMU (Van Rompuy     Report, 26 June 2012).

The second pillar, an integrated budgetary framework, argued that ‘a qualitative move towards fiscal union’ was a necessary part of the currency area. Fiscal union was identified in the report as requiring a further ‘pooling of decision making on budgets commensurate with the pooling of risks’ and effective mechanisms to prevent and correct unsustainable fiscal policies. The report referred to collective agreement on upper limits of domestic budget balances and government debt limits. This marks a further pooling of budgetary decision making. The report went on to specify other dimensions of a fiscal union such as the issuance of common debt in the medium term provided that there was a robust framework in place for budgetary discipline and competitiveness. The report suggested that different forms of fiscal solidarity (unspecified) could be envisaged at some future date.  The creation of a treasury office (Finance Ministry) was also identified as part of a fully-fledged fiscal union.

Fiscal union was also the subject matter of a report published by Notre Europe in June 2012 under the patronage of Jacques Delors and Helmut Schmidt. It was dedicated to Tommaso Padoa-Schioppa, an Italian European steeped in the construction of the EU as senior Commission official, member of the European Central Bank and Italian minister. A report published in 1987 as the output of a study group on the future economic system of the EU was very influential in its time prior to the establishment of EMU. The 2012 report on Completing the Euro offered a number of prescriptions on a fiscal union for the euro area. It called for a ‘sui generis form of fiscal federalism’ guided by the principle of ‘as much political and economic union as necessary, but as little as possible’ (Notre Europe, June 2012). The latter principle was at the heart of the integration process from the outset. However, the establishment of a single currency and its maintenance requires deeper political and economic union than envisaged in the Maastricht treaty. The report identifies two elements of a fiscal union to buttress the single currency. First, it argues for a cyclical stabilization insurance fund to assist the currency union in the event of an asymmetric shock to any one part of the currency area. Countries would pay into the fund in good times and be able to draw on it in the event of a down turn. The purpose of such a fund would be to assist in the process of internal devaluation. According to the authors, the receipts from the fund could serve as ‘buffers in a downturn’ (Notre Europe, June 2012, 31). The scheme is not intended as a ‘hidden instrument of permanent transfers’ (ibid). Second, the report advocates the establishment of a European Debt Agency. The agency would act in a flexible manner to deal with all kinds of situations from facilitating the issuance of debt in normal times to the worse-case scenario whereby a country needs bailing out. In the latter case, a country would only be bailed out in exchange for ‘a nearly complete transfer of sovereignty’ (ibid, 38). The tenor of the report on fiscal union is to reassure the stronger countries by establishing institutions and rules to establish boundaries on risk sharing.

Even if the euro area could agree elements of a fiscal union that went beyond fiscal rules, fiscal union would not be sufficient. As the crisis deepened, the ties between sovereigns and banks have strengthened with the result that insolvent banks have damaged sovereigns and vice versa. It could be argued that the fragility of Europe’s financial system poses the greatest threat to the euro area at this juncture. The June euro area summit acknowledged the problem of the sovereign/banking nexus in Europe when in the opening line of its statement, the HoSG affirmed ‘that it is imperative to break the vicious circle between banks and sovereigns’ (Euro Area Summit Statement, 29 June 2012). The ECB has argued consistently for a banking union in the euro area which would consist of a banking supervisory authority, a deposit insurance scheme and a bank resolution mechanism. The June summit may or may not be the first steps on the road to fully fledged banking union. The decision that the ESM may inject capital directly into banks is a move in that direction but this may only happen when a European wide supervisory capacity exists. In the aftermath of the summit, it appeared as if Germany was back-tracking from the summit commitments when Finance Minister Schauble suggested that this may take a long time. The Van Rompuy report was far more specific on the dimensions of an integrated financial area than a fiscal union. The Notre Europe report also argues strongly for a banking union.

The politics of keeping the show on the road

The crisis in the euro area is the deepest crisis in the history of European integration. It is a systemic crisis of the euro area and if the euro area cannot be maintained or implodes, it will also prove systemic for the EU as a whole. If the single currency survives, it will survive on the basis of more integration within the euro area as the ‘hardest of hard cores’ and hence deep divisions between the ‘ins’ and ‘outs’. The politics of maintaining the euro through the crisis are profoundly challenging and again if the crisis is stabilised and resolved, the political consequences are likely to represent a step-change in political integration.

By and large in most euro states, however, voters have opted for the available opposition of either the centre left or right to form the next government rather than putting  ‘challenger parties’ in power. Only in Greece was a crisis election followed by a failure of government formation and the holding of new elections.  In the second election, New Democracy narrowly beat Syriza, a challenger party.  If the crisis endures, the impact may go well beyond a rotation of parties in power to further fragmentation of party systems, substantial losses for established governing parties and more electoral success for extreme populist parties. See Table 1. Greater voter volatility, poor performance by incumbents and the success of populist parties were evident in Europe’s party and electoral systems before the crisis but have been greatly accentuated by it. Fiscal consolidation which is inevitable given the debt overhang from the 2000s has been met with protests and electoral volatility.  Precisely at the time when political elites throughout Europe require a capacity to engage with their electorates on the choices that they face, is precisely the time when trust in politicians is weakest.

The politics of constrained choice is much more difficult for parties and electorates than the politics of ‘you can have it all’. Ireland experienced a decade of the politics of ‘you can have it all’ and thereby squandered a once in two hundred year chance to set Ireland on course for a prosperous and stable future. The societies in Europe that will have a stable and prosperous future are those societies that have the political and institutional capacity to identify problems in time, to address them and to ensure that ‘vested interests’ and ‘rent seekers’ do not benefit disproportionally from the public coffers. To date, Irish politics and the Irish state elite have failed far too often to identify, protect and promote the public good. For its part, the Irish electorate has not demanded that the public good be protected.

The crisis has placed demands not just on the vulnerable states but also on the creditor state, or those states that can borrow at affordable rates in the financial markets. There remains deep resistance in the creditor countries to risk sharing without guarantees and they are unsure which rules and institutions would afford them adequate protection. Germany is the swing country among the creditor states as it is the largest euro area economy and would carry a higher risk than other states. The German government is operating in a highly constrained environment. The institutional constraints emanate from the Constitutional Court which has become very active in the crisis and the Bundesbank which acts as a watch-dog for monetary orthodoxy.  The German government and its Chancellor remain adamantly opposed to the mutualisation of debt in the form of euro bonds. Prior to the June European Council, the Chancellor said that she did not ‘see total debt liability’ as long as she lived at a meeting with her coalition partners, the Free Democrats. She has also referred to euro bonds as ‘economically wrong and counterproductive’ (EurActive, 27 June, 2012). In addition, euro bonds are considered unconstitutional in Germany. Furthermore, a civil society group opposing redistributive policies in the euro area has emerged under the title, Nein zur Transferunion. Opposition to fiscal union remains strong in the Netherlands and Finland. In thinking through what the policy toolkit needs, it is imperative to identify what Germany in particular might agree to and how such proposals are framed. Framing is crucial in a crisis as there is a high degree of uncertainty about means and ends.

Political Order in the Longer Term

If the euro is to survive in the long term, it will necessitate a deeper level of political integration than exists at present in the EU. The issue of the ‘finalité politique’ of the EU is back on the agenda, twelve years after Joshka Fischer’s Humbolt speech in May 2000 on the future of Europe. The Van Rompuy report acknowledged the need for greater democratic accountability and legitimacy but just how this might be delivered is very challenging.  Liberal democratic politics evolved within states based on a high degree of congruence between bounded territory, bonded people and a set of agreed functions for public policy and public power. Democratising political space above the state is the challenge of the 21st century given the level of internationalisation that characterises contemporary economies and societies. The EU has built democratic institutions, norms and practices over the last thirty years but these do not amount to a democratic polity at EU level.

Developing political union at EU level must be attentive to the continuing importance of national democracies in Europe. National elections remain the most legitimate channel for selecting political office holders in Europe. European parliament elections are second order political events. As the euro area assumes more responsibility for banking, budgetary and economic policy accompanied by the intrusion of euro level actors into domestic policy making, the functional dimension of political union is strengthened.  The key challenge therefore is to strengthen accountability structures at EU and national levels and to provide channels for national and euro wide discussion about budgetary and economic policies and priorities. There is also the deeper question of the consent of the people. If the euro area reaches a federal moment and a federal question, then the consent of Europe’s peoples must be sought at least within the euro area. This suggests a euro wide referendum on any major step change. The referendum would have to be euro wide as no one member state should have the possibility of vetoing such a development.

Conclusions

If the euro is to survive, it will necessitate the development of a fiscal union that has a capacity to stabilise the euro wide economy and assist countries facing asymmetric shocks. This should not amount to permanent transfers to any one country but a system to assist countries adjust when faced with a severe down-turn. A fiscal union is not sufficient given the interdependence of Europe’s financial systems. The euro needs a centralized banking system and bank resolution mechanism. These two steps are both technically difficult to design and deliver politically, but have been recognized by the Presidents of Europe’s three supranational institutions as the building blocks of a genuine EMU. Such developments must be underpinned by enhanced accountability and legitimacy within the euro area which places the question of the finalité politique firmly on the agenda. And this in turn brings the consent of Europe’s peoples sharply into focus. Greatly expanding the policy reach of the euro area should not be embarked on without the consent of Europe’s electorates. Consent will be difficult to achieve given the euro crisis but without it the currency would not be sustainable in the longer term.

History tells us that monetary unions that have survived have been embedded in a political union. Fiscal, banking and political union are questions for the medium to long term. The euro area cannot conjure them up overnight. This leaves the question of how to bring stability now, given the level of contagion in the system and the vulnerability of Spain and Italy. Given the political difficulty for creditor state governments of major policy initiatives, the euro crisis will come down to the action of the ECB. Italy is too big to fail and too big to bail. The euro will not survive a situation whereby the markets leave Italy.

________

References

Dyson K., 2000, The Politics of the Euro-Zone: Stability or Breakdown, Oxford: OUP.

Gourevitch P., 1992, Politics in Hard Times: Comparative responses to Economic Crises, New York: Cornell University Press.

Laffan B., 1997, The Finances of the Union, Macmillan: London.

Laffan B., O’Donnell R. and Smith M., 1999, Europe’s Experimental Union,  Routledge: London

McNamara K., 1998, The Currency of Ideas: Monetary Politics in the European Union, CornellUniversity Press: New York.

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PUBLIC SERVICE REFORM — THE BALANCE SHEET

Patricia King, Vice-President, SIPTU

A considerable amount of heat but not too much light has been generated in the on­going debate on public service reform and the Croke Park Agreement in particular.  Behind much of the noise posing as informed comment invariably lurks an agenda that is based on a false premise that slashing public services and the pay and conditions of those who provide them is some ‘quick fix’ solution to this country’s deep economic crisis. Since the banking and economic collapse of 200, there has been a prolonged attack on workers in the public service from some quarters, including voices that should know better in business and politics, and reflected in sections of the media. The dominant narrative has been that this workforce, unlike that in the private sector, are cosseted and protected with jobs for life and gilt edged pensions.  Instead of looking at the real causes of the financial mess we are in, the blame is put on those who were nowhere near the scene of the crime that has indebted the Irish people for generations ahead.

A key part of this agenda is to achieve, in the absence of fiscal autonomy, an internal devaluation by cutting wages across the economy, public and private sector alike. One obstacle to this agenda is clearly the Croke Park Agreement which offers the prospect of fundamental change in the manner in which public services are provided and a real reduction in their cost. Clearly, the challenge of public service reform is far wider than the Agreement but for the purpose of this forum I am going to examine whether the arrangement, now approaching its third year, is delivering on its promise.  Under the deal agreed in June 2010, the government as the employer was promised industrial peace and time bound arbitration whereby changes can be put in place on foot of a simple Labour Court recommendation.

For their part, workers in the public service were guaranteed that no further pay cuts and no com­pulsory redundancies would be unilaterally imposed by the employers in the public sector while re­deployment would be curtailed to a maximum of 45 kilometres.  Put simply, this Agreement is an enabler which allows decisions by ministers or management to be implemented in a more seamless, efficient and less bureaucratic manner. The objective of the exercise is the wholesale transformation of the way in which public services are delivered. The aim is to achieve an integrated public service across the health, education, local authorities and the civil service, that is cost efficient and reliable. In short, it is to deliver what any modern self-respecting democracy should be judged by and that is its ability to provide quality essential public services to its citizens. In comparison with most of our EU partners the Irish public service is not the bloated monster some claim it to be nor was it ever that way. Back in 2008, when public sector employment peaked, the Irish numbers were ranked below the OECD average and were only two thirds of the public sector share that existed, for ex­ample, in France and the Nordic countries. Given the large scale reduction in numbers that has taken place here over the past four years, the Irish ranking is likely to be even lower again.

I believe that there has been good and competent management of our public service over the years even though there are, as in any large organisation or system, those who do not or cannot meet their responsibilities or the demands placed upon them. These deficiencies have, if anything, been exposed more starkly over the past three years as public service management has been faced with its most serious challenge since the foundation of the State. What has also been exposed in this hostile new environment brought on by the banking and financial collapse is that the traditional public sector management tools are neither appropriate nor adequate to meet these challenges. The Croke Park Agreement is the means by which fundamental reforms can be delivered. In that sense it is an enabler of what should be a long term programme that will have effects in terms of public service provision for decades to come. In my view, it may indeed be ahead of its time in that it has too often asked difficult questions of people and systems in the public service that are still entangled within what I might term the management by circular culture.

What we need is a co-ordinated management strategy approach, and more importantly the necessary leadership to apply it across the public service. To effect a transformation of this scale also requires vision. Unfortunately, that vision is sadly missing where it is needed most. Indeed it is evident in some key instances that workers are more advanced when it comes to identifying the changes nec­essary to advance the Agreement and its objectives than many of those further up the management food chain. In the health sector for example, it is clear that a blueprint is required where all the stakeholders have a clear vision of the end goal and a timeframe to achieve it. Such a co-ordinated strategy is simply not in place while workers in the health service have delivered substantial savings and transformations that will have a lasting and positive impact. There are real savings and sacri­fices being made by our already low paid members in the health services that have resulted in sig­nificant hardship for them and their families. In contrast, hospital consultants continue to supplement their very generous public salaries through lucrative private practice. Meanwhile, the moratorium on recruitment in the public service is also having a damaging effect on the ability of our members to deliver quality services.

The Agreement provides a framework within which the necessary strategy and blueprint can be de­veloped and applied to ensure that its enabling function can be realised. Yet it is not being done. Look at the situation where we have 27 local authorities providing a fire service. We have proposed that a single service could achieve consistency in training, cut down on administrative costs and end the obstacles placed by county boundaries. It would provide for a co-ordinated and developed emergency response which would reduce costs and, more importantly, save lives. Some months ago, we presented this proposal to the Minister for Public Expenditure and Reform who responded posi­tively. He recommended that we bring it to the attention, which we did, of the Minister for the En­vironment. The response, to date, has been tardy to say the least.

Such change proposals at least deserve to be considered unless of course they are a threat to those who already control too much power in local government and are reluctant to loosen their grip on the empires they command. Is this the leadership that is required to fundamentally change the pub­lic service? I, and I’m sure many of those present, could point to several other points of resistance to change on the part of those whose function it is to lead the transformation. The government is seeking a reduction in public service staffing to 282,000 by 2015, involving a further decrease of 12,000 workers over the next three years. It is seeking cuts of 3.5 billion in spending for each of the next two years.

This can only be done without a diminution, or the destruction of core public services, through the co-operation of public service employers and their workers. The Agreement offers the opportunity, and the only opportunity, to achieve such challenging objectives. There are, no doubt, others who think it can be done by taking the gains they have pocketed to date and then going back to the same well for more attacks on the working conditions of mainly low paid public service workers. Such thinking is flawed short termism and will endanger what is possible through this agreed transformation process. We have already witnessed a situation where management across the public services could not find imaginative and new ways to make the necessary savings and returned to the same well of low paid workers? Well I can assure you that this particular well is dry and there is no point in going back there anymore.

We need to think outside the box on this one and be careful that we do not endanger the advances we have made or what can be delivered to those who will depend on our public services in the decades ahead in order to achieve short term savings.

Let me take another example of the failure to utilise the enabling function of the Agreement. In the local authority sector there are 34 main employers each with their individual administrative systems. Surely this is a case for a sharing of services in a way that upholds the principle of local democracy while delivering it with greater efficiency. Where is the resistance to this obvious innovation? Could it be possible that senior management, including the county managers, are protecting their individual fiefdoms and refusing to concede to change that affects their interests? Does it mean it is ok to take the allowances and strip the wages of the man or woman with the shovel as long as it does not impinge on the pay packet of someone earning ten times more? More importantly, is this the type of leadership that such a fundamental transformation of public services requires?

As you are aware, the latest review of the Croke Park Agreement confirmed that significant reductions in payroll and staff numbers in the public service have been achieved over the period from April 2011 to May 2012. A total of 819 million in annualised payroll and non-pay savings were delivered for the second year of the Agreement. The report confirmed that public sector workers are continuing to provide essential services despite the significant drop in staff numbers by 17,300 over the past two years. It confirmed that those workers at the lowest pay levels across the public service have contributed substantially to the reforms in work practices to date through roster changes, redeploy­ment, the extended working day and loss of allowances. They have also suffered from the loss of reg­ular, rostered overtime which, in the majority of cases, is calculable for pension purposes. That the lower grades in the public service have taken the biggest hit is clearly illustrated by an analysis of Labour Court recommendations in relation to public sector claims over the past two years. Any future strategy will have to give credit to those who have contributed the most to the savings and transfor­mation achieved to date.

To address the question put to us today there has been real reform in the public services on the basis of industrial peace and that could not have happened without this Agreement. But the real threat to the Agreement comes from those unwilling to embrace the necessary transformations. Inevitably, the temptation at the top will be to return to the low hanging fruit if what I have identified as man­agement resistance to change is not overcome. That is the real challenge facing the Agreement. It comes not just from those who seek to bring it down in order to enforce a deeper wage cutting agenda across the whole economy but from those who are charged with leading the transformational change required. Finally I would say to those who will influence the key decisions on these matters over the coming months; do not sacrifice the potential of future transformation in public service provision for the quick fix solution of short term, but short lived, cost savings.

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Alan W. Gray, Chairman of London Economics, Managing Partner of Indecon Economic Consultants

Introduction

As we know to our cost in Ireland policies can be introduced without an assessment of their full economic consequences or even without clearly understanding what problems the policies were designed to address.  It sometimes appears that someone thinks up a policy intervention and then retrofits it to a problem rather than the other way around.  The disastrous and unjustified extensive property based tax incentives in Ireland which fuelled an already unsustainable property bubble is but one example of this.   So in considering the necessity or the merits or otherwise of fiscal union let us not start with the policy proposal but with what problem it might be focused on solving.

Within Europe my view is that there are four distinct but related problems all of which would not all be solved simply by fiscal union.  These are:

1. Recession or low growth in European countries and escalation of high levels of long term unemployment.
2. A dramatic sovereign debt crisis whereby even rich and large European countries are being excluded from borrowing at reasonable rates on international bond markets.  This is in part due to the toxic link between bank and sovereign debt and uncertainty re financial outcomes.
3. Near collapse of the banking sector in most EU countries combined with recognition of the scale of undercapitalization.
4. A crisis in the public finances in many countries, with painful austerity adjustment programmes under way.

A key issue in deciding on whether fiscal union is a necessary or a sufficient solution to these problems is to have a clear understanding on what fiscal union might mean.

What is Fiscal Union?

There are many different policy initiatives which could be called fiscal union and their consequences would be very different as is the likelihood of implementation.  So let’s first consider what are the current EU proposals and also the potential options for the shape of such a fiscal union.

Current EU Proposals

The proposals from the European Council along with the Commission and the European Central Bank involve:

• • Setting upper limits on member states’ annual budgets.
• • Prior approval for issuing government debt beyond levels agreed.
• • Issuance of common debt as a medium term option.
• • Setting up an EU Treasury office.
• • Closer coordination on labour mobility and taxation.

They also involve moves towards a banking union, and further steps towards political union.

The EU proposals represent a sub-set of four general options for fiscal union. The main potential options are as follows:

Option 1:   Centralised EU fiscal policy with centralised expenditure and tax decisions.  This is the United States model.

Option 2:   Fiscal transfers between Member States.

Option 3:   Co-ordination of aspects of taxation including VAT, excise duties, income tax and possibly corporate tax.

Option 4: Centralised co-ordination of fiscal budgets.  This is already in place to some extent but the key is what sanctions or mechanisms would apply to countries which do not meet targeted deficits.

Is Fiscal Union Feasible?

It is useful to consider whether any significant form of fiscal union is likely to be feasible.  We need to be careful on this, as what would have appeared like fantasy five years ago no longer appears so.  This includes the ECB investing billions to support sovereign bonds, establishment of a major euro emergency bail-out fund, common stress testing of banks, and most dramatically the likelihood of EU emergency funds being lent directly to banks rather than to sovereigns.  We therefore need to be very humble in forecasting likely outcomes and in recognising the limits on our knowledge and the extent of future uncertainties.  The tendency for humans to be obsessed with always being right and in attacking people who are proved wrong, has led to a dangerous arrogance and a revisionary approach to interpreting past events.  Maybe this is why people always pretend they are certain of their views in a world of bewildering uncertainty.

While recognising the uncertainties, my own view is that we are likely to have some form of fiscal union in Europe and this will be characterized by a number of features.  At the core I think we will see some fiscal decisions taken centrally, but nationally governments will continue to decide on most government expenditure and taxation within certain rules.  A centralised EU fiscal policy with centralized expenditure and tax decisions, as per the United States, is very unlikely to happen.

There will however be more centralised control on aspects of fiscal policy and this will be a condition for larger more successful countries providing future fiscal transfers to countries most in crisis.  The extent of financial transfers will be less than we might think appropriate in Ireland unless the level of political intervention and integration in Europe changes fundamentally.   This is because of major tensions in Europe.  This was evident in the reaction of the German deputy foreign minister to the current proposals by the European Council.  For example, he indicated that “parts of it read like a wish list”.  He argued that the proposals lead “towards various models for mutualising debt.  What comes up short is improved controls”.

I however believe that there will be elements of a fiscal union involving fiscal transfers between member states but this will require Europe to overcome two major political problems:

• • Political opposition by taxpayers in countries who are paying the bill for what they see as incompetence and profligacy in supported countries.
• • Also opposition in countries receiving aid to what their citizens see as unjustified conditions on spending and reforms.

The outcome on fiscal union will be messy, piecemeal and less than ideal.  The only comfort one can take is that full fiscal union is probably neither necessary nor sufficient to solve the four crises in the EU or to prevent speculation on sovereign debt.

For example in addressing the sovereign debt crisis many changes will be required.  These include the possibility that we will have to move to a world whereby potentially vulnerable countries such as Ireland operate with near balanced budgets and lower debt.   This would restrict the rate of growth in Ireland but could make us less vulnerable to external shocks.

The reason why I believe full fiscal union will not happen is that fiscal policy is very value-based and is primarily although not exclusively distributional in nature, and probably can only be accommodated in the context of a nation state.  While I believe we will see aspects of a fiscal union, most German fiscal decisions will remain in the Bundestag and in Ireland with the Dáil.  Certain narrow fiscal decisions will however be centralized within a given percentage of EU budgets.

We could also have a scenario whereby fiscal deficits beyond levels agreed would result in an adjustment mechanism whereby public expenditure or taxation would be automatically adjusted. Randall Henning and Kessler (2012) have suggested a scenario whereby “By law, public salaries, social transfers and gross transfers” would be adjusted.  Gruen (1997) suggested a similar idea on the tax side by proposing to achieve budget targets by varying the tax rates. Thus while a full fiscal union is very unlikely, Europe needs to move quickly to elements of a fiscal union and there is a need for radical change in thinking.  In this context Ireland should support a form of fiscal union, and recognize the likely shape of future developments and position our policy to influence and adjust to such outcomes.

Recommendations

I outline below a number of recommendations which I believe could be of benefit to the survival of the euro and to Ireland’s future.

Recommendations For EU Action

1. Europe needs to implement additional automatic measures to ensure budget targets are met.   The current EU plan involves a requirement that national governments would collectively agree “upper limits” for each member state’s annual debt and deficit levels.  The key issue however is how to ensure targets are met.  There may be merit in considering the introduction of automatic mechanisms which would confirm adherence to fiscal discipline, and a mainly expenditure based mechanism may be least damaging.  Ireland should consider unilaterally introducing such mechanisms which could help change perceptions of our sovereign risk and could provide a model for Europe.  This could have very positive signaling benefits.
2. Europe should also start long term planning for nearly balanced budgets and lower debt in euro states likely to be subject to risk in sovereign debt markets.  This should be combined with increased measures to support certain fiscal transfers between EU states to deal with the banking crisis. This will require further fiscal co-ordination and Ireland should be willing to agree to this.
3. The EU should consider partially financing the bail-out by common European taxes.  After the American War of Independence common debt was serviced by customs duties and excise taxes and it may be necessary to have some centralized federal taxes as an element of the solution in Europe.   Ireland is however right in ensuring that there is no change in the co-ordination of corporate taxation.
4. Europe should also move quickly to a euro area deposit insurance combined with effective EU banking supervision.  In this context Ireland should support the immediate establishment of an EU banking supervisory agency which is likely to be a condition for direct funding to Irish banks.
6. To address unemployment, larger countries should start stimulating their economies and this should be included in the design of any fiscal union plan.

Institutional Recommendations

1. Ireland’s input to EU policy formulation should be based on ensuring that policy changes which would benefit Ireland recognizes the longer term interests of major countries as well as of smaller member states.  In most policy areas we no longer have an equal voice to major players but we can punch above our weight if we have better ideas and work smartly in developing relationships and understanding in Europe.
2. To do this, Ireland needs to invest much more resources in understanding and influencing thinking in Germany, France and Italy.  At a simplistic level the scale of change in focus needed can be seen by asking a few simple questions.  How many Irish government senior officials and advisers are fluent in German, French and Italian? More fundamentally, how many have worked full time or even worked on secondment in these countries?  How many have completed undergraduate or post graduate degrees in Germany, France or Italy?  How many German or French nationals have been recruited into central government or to our policy making institutes in Ireland?  How many German officials have been facilitated to undertake training or specialized education in Ireland? How many leading German economists have been invited to address the Cabinet or government officials on emerging thinking on Europe? Ireland needs to have an ambition to replicate in Germany, France and Italy the benefits we have secured in US/Ireland relations from the familiarisation, personal contacts, common language, shared culture and deep understanding between Ireland and the US.  The significance of this is evident to me every time I work with economists in Germany and I am struck by the divergence of their views compared to the views of Irish economists.
3. Ireland’s most effective approach will be to continue to build common positions with EU partners and to secure support from IMF and European Commission as well as other EU countries. This co-operative approach has been used effectively by the government and was also used by the European Council President in his recent report which he co-authored with the President of the European Commission, the head of the European Central Bank and the head of the Eurozone finance ministers.
4. As a country we should have an ambition to take a leadership role in developing intellectual thinking on the solution of Europe’s problems.  We should have the confidence and vision to invest in and engage with the best economic minds in the world, including leading Nobel Prize winners and should actively be seen as a catalyst in disseminating such ideas.  We do not have an equal voice in Europe’s decisions but we can facilitate the generation of new ideas which will influence policy. Keynes was undoubtedly correct in suggesting that ideas rule the world both when they are bad ideas as well as good ones.
5. Ireland may also need to find a mechanism which has public support to prevent the necessity for numerous referenda to the Constitution for any EU changes which might be deemed to result in any diminution of our economic sovereignty.  We are faced with a situation whereby Irish governments are free to make decisions without referenda on issues with fundamental long term national consequences such as the decision to agree the IMF/ EU programme. Much more minor decisions such as recent so-called Fiscal Treaty required a national referendum. This does not make sense to me, and unless changed, could constrain our effectiveness in influencing EU policy.

Concluding Remarks

In considering any fiscal union proposals it is important to recognize that the issue must not be allowed to be exclusively, or even mainly, about government debt and public finance deficits.  Part of the story is that Europe introduced a single currency before having the conditions necessary for a sustainable euro. A single currency was set up but there were inadequate banking policies and fundamentally no mechanisms to deal with a crisis.   Even as far back as 1996 the German economist Jorgen von Hagen and the US economist Barry Eichengreen were questioning the credibility of the ECB restriction on acquiring any public debt.   The ECB will therefore need to play a more significant role in sovereign bond markets while reforms are being implemented, but a fiscal union in some form is also probably inevitable.

Does this mean that Europe will become more like the US so that if, for example, there is a property collapse as happened in Florida, then the FederalState largely picks up the bill?   The answer is ‘no’, but aspects of US fiscal policy will to some extent be reflected in Europe.  This will require more centralised decision making and Ireland needs to be at the heart of the generation of ideas on what precise changes are needed.

In considering fiscal union, even in the narrow sense of tighter rules on deficits, there is a real danger that a one-size-fits all approach will be used, which would lead to an inappropriate fiscal consolidation plan.  Indeed under current policies it is likely that the UK and most of Northern Europe may be cutting too much too quickly and Ireland should attempt to build alliances to highlight these risks.  Finally, Ireland should be willing to change our policies concerning some aspects of fiscal union and refocus on influencing central decisions on the future of Europe.  We have done very well in our European policies over the past year but the extent of the ongoing challenges requires new thinking. This must recognise the interdependence of the various challenges faced by the euro area and the scale of the problems yet to be overcome.   It should also be based on the recognition of the need to understand and influence thinking in the major countries who dominate decision making.

________

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Lucinda Creighton TD, Minister of State for European Affairs

The Eurozone crisis is complex, that’s no surprise given the European Union, and the Eurozone itself, are among the most complex political and economic frameworks in the world. They involve a difficult balance between 27 member states (17 in the case of the Eurozone) as they work together to take crucial decisions every day – decisions that impact on their citizens and on the rest of the world.

Why is it all so complicated? The many conspiracy theorists out there might suggest that this is because of a dangerous Machiavellian plan to strip countries like Ireland of our sovereignty, to vest in ‘faceless bureaucrats’, undemocratic powers to set our tax rates and send us to war. They might claim that certain countries are trying to dominate others or worse, take over the continent completely.

I don’t share any such conspiracy theories. The EU is complex and often laborious by necessity. Bringing 27 Member States together to take common decisions on key issues such as economic policy, energy policy, foreign relations and so on is not easy. 27 sovereign countries, with 27 governments and 27 parliaments to whom they are accountable, have 27 distinct sets of national priorities. Negotiation and decision-making are arduous, painstaking and often much slower than we might like. This is not due to any grand conspiracy on the part of a so-called elite, but rather is a reflection of the immense task of trying to broker agreement among so many countries.

A legitimate question, then, is; is it all worthwhile and would we be better off being released from the shackles of the EU decision-making process, with more flexibility and autonomy, and a lot less compromise with others? The answer to that of course is an unequivocal no.

There are two very simple but compelling reasons for Ireland and the other European countries to continue sharing sovereignty, making sacrifices in exchange for common gain. One is historical, though I think it is worth reiterating, the other relates to the present and the future, and is of absolutely vital importance to all countries in the European Union.

On the first point, it is always worth recalling the genesis of the European project. Too many people take for granted the stability and peace we enjoy in Europe. It is too convenient to forget about the bloodshed and slaughter that characterised the first part of the 20th century. We have worked hard to build peaceful cooperation in Europe.  It has always involved sacrifice and difficult decisions.

Sometimes, we like to think that the idea of compromise is a new one. It’s not. It was from compromise that European cooperation was born, and the massacre and economic obliteration of the First World War and Second World War was left behind.

It is worth remembering the words of Winston Churchill speaking in Zurich in 1946 where he described the tragedy of a broken continent: “over wide areas a vast quivering mass of tormented, hungry, care-worn and bewildered human beings gape at the ruins of their cities and homes, and scan the dark horizons for the approach of some new peril, tyranny or terror.”

Compromise is tough, but it bears fruit. If those who today advocate pigheadedness, divisiveness and isolation, had had their way in 1951, there would be no peace in Europe, we would not have enjoyed the economic growth and prosperity that characterised the EU for the past 60 years, we would not be able to live and work and study all over the Union, we would not have benefitted from structural funds and the common agricultural policy.

The politics of ‘No’ achieves nothing. The politics of engagement shapes the world and makes the unimaginable become reality.  Besides the historical successes for Ireland and all of Europe in pursuing a path of deeper integration, there are obvious, but often underrated, reasons to continue on this path of cooperation. In this increasingly globalised world, we need each other. We Europeans take our position of dominance for granted. The United States and Europe have ruled the roost for as long as any of us can remember. We have enjoyed economic might that set the global agenda. It may not always feel like it, but we have enjoyed wealth and prosperity that could only have been dreamed of in countries like India, Brazil and China. Our standards of living are far above the rest.

Just one stark example of this is that the European Union Member States spend more on social supports than the rest of the world combined, including the United States of America. This European social model is under serious pressure, and we must urgently realise that if we wish to protect it, we desperately need one another. I don’t just mean the small countries. Even the ‘big’ countries of the EU, France, Germany are small potatoes in today’s global economy. They are dwarfed by China, Brazil and others. They also have a rapidly aging population and are challenged by countries that are far more productive and competitive than they are. This is a common challenge, which the EU countries must face together.

Alone we cannot hope to compete with emerging economies. Together we can realign and reshape our European economy, so that European citizens, including Irish citizens can continue to enjoy a decent standard of living, with, most importantly, prospects, opportunities and hope for future generations. This is not just an aspiration of mine. I consider it to be the absolute moral duty of our government and our counterparts in positions of authority all over the European Union.

So that brings me to the question contained in the title of this session. ‘Is Fiscal Union the only solution to the Eurozone Crisis’? If I may say so, the title is a little limited. The Eurozone crisis is only a symptom of a much greater problem and challenge which we face. That is, how do we reshape our European Union, and thereby our country, to meet and measure up to the unstoppable force that is the emerging economies? How do we create a European Union and a currency union that is robust, that can take decisions fast, that is competitive, that sets standards for the rest of the world and that caters to the economic and social needs of its citizens? That is a burning question, and one which only in a very small part can be answered by the creation of a Fiscal Union.

We need a more ambitious and comprehensive solution than that. We need a competitive federal Europe. Often, the word federal is deemed in Ireland to be a bad word. I fundamentally disagree. Federalism is a very pure and transparent form of democracy. It means adhering to principles guided by a commitment to governing at the level closest to the people. It means decision making at the most appropriate level. It is based on a transparent social contract entered into by states. I am passionately in favour of this type of governance in the European Union.

If the economic crisis has taught us anything it is that the EU system we have is too slow and too difficult to cope with the fast moving pace of our globalised world. We have repeatedly lamented that fact in Ireland. We complain that there is no leadership and that ‘Europe’ has failed to act swiftly to deal with the crisis. The crib is legitimate, in the sense that European response to the crisis has been too slow and too disjointed. But we have to face the fact that we have not empowered Europe or our European leaders to take action. If we want a European response, we have to change the system of decision making because we are the ones who can and must enable the EU to act. Only we, the citizens and the sovereign states of the European Union, can give the authorization necessary for swift action. The word ‘federation’ comes from the Latin word foedus, which means pact or contract, and is an agreement by which states assume reciprocal and equal commitments to perform certain specified or enumerated tasks.

I don’t advocate a federation like that in the United States of America. That would not work in a union of sovereign states as we have in Europe. Rather I favour a federation of nation states, one which is built on the basis of the diversity of its members. I see a new federal system as providing a vehicle for Member States to assert their economic sovereignty in the global economy. They may even regain some of the sovereignty that they’ve lost to globalisation through greater coordination and added economic might. States would benefit from such a federation as they would in fact gain for themselves more rights, more liberty, more authority, more opportunity than they might abandon.

The time for muddling through is long past. This is sadly not the first time I have said this, but time is running out. We need an ambitious redesign of the European Union and especially of the Eurozone if we are to secure its future for our citizens. What can a federalised system of governance in Europe achieve? Firstly, it can enhance the democratic legitimacy and transparency of the European Union. It could bring Europe closer to its citizens.

Crucially, it would enable the EU to address some of the shortcomings in the currency union and the single market. Many of the changes we need, and we know we need, are currently either impossible, or will take too long to achieve. Time is not on our side.

Most people accept that the euro project was flawed from the beginning, not because it was a bad idea, but because the economic and fiscal integration that was needed to make it a success was absent. We now need to inject urgency and impetus into this process. A federalised system would make it much easier to achieve progress in areas that are vital to the survival of our currency. It would reduce the potential for countries to veto important decisions and make it easier to progress vital ‘big ticket’ initiatives like a European bank resolution scheme, a bank deposit scheme and a mechanism for debt mutualisation such as Eurobonds – all of which are proposals that I consider to be vital to achieve stabilisation of our currency and to secure its long term future.

Let me be frank. The entire conception of the single currency was predicated on the presumption that the governments would be prudent, the good times would roll on and eventually everyone would join the club. The rules were weak but synergy, both political and economic, would sort that out later.

The time has arrived to finally put in place the architecture required to secure the currency. Key to the solution is a strong, democratically accountable political centre, an adequate central budget with access to its own resources acting as a shock absorber and, as I mentioned, a true banking union.

A federalised system would also help to promote swift decision making in areas vital to the European Union as a whole, not just the Eurozone. The most obvious example here is the single market. The single market is one of the European Union’s greatest achievements. Restrictions between EU countries on trade and free competition have been eliminated, with the result that standards of living have increased. The single market has been the greatest driver of growth in the EU, and holds the key to future growth. However, progress on the single market in recent years has been frustratingly slow and much of the momentum has been lost. On a simple issue like a unitary EU patent, it took the Council decades to arrive at a decision on its creation and location, and the saga is not over yet. Bickering and protectionism on the part of certain member states held up an initiative that was of vital interest to the economic development of the Union as a whole.

We cannot continue to limp along, with 27 member states, struggling to take decisions in an environment which forces them to value short term national gain over medium and long term Europe-wide gain. A form of constructive and competitive federalism can, on the other hand, give birth to a proper political and social Europe, whose institutions can ensure a balance between fiscal and monetary policies, an economic growth agenda, the structural reforms needed to enhance competitiveness, and greater social cohesion. This is the sort of long term vision we need.  The survival of the Eurozone requires robust economic governance and a workable European growth agenda. Federalism is the only way to avoid the disastrous consequences of the potential disintegration of the European Union and the Eurozone and thus disintegration of our standards of living. It will pave the way for a Europe of justice, solidarity and democracy, capable of holding its place in the world.

Now is a time when solidarity and unity at European level are more vital than ever. At times of crisis it is a risk that we retreat into ourselves or withdraw behind our borders. This would be the very worst option for Ireland and for Europe. To survive this storm, we must jointly forge a course with our European neighbours. Isolation is not an option. I will conclude with the famous words – “So powerful is the light of unity that it can illuminate the whole earth.”

________

Leo Varadkar TD, Minister for Transport, Tourism and Sport

We have experienced massive upheaval in our economy with the arrival of the IMF, major adjustments in our public finances, and the rebalancing of our economy from one based on construction and property, back to one based on productivity and trade.  Few, two years ago would have predicted the huge upheaval in our democracy that overturned the traditional two-and-a-half party order of Fianna Fáil, followed by Fine Gael and Labour.  And few, two years ago, would have predicted that Ireland’s once wealthy and powerful men could be facing jail or that the euro, the second reserve currency of the world, would be at risk.  And, while most of us knew the internet was the future, who really foresaw the rise of Twitter and the impact that it would have on the public sphere, public debate and indeed, electoral contests?

Who can predict where we will be in two years’ time?  As the old Chinese saying might describe it, we are destined to live in interesting times.  What we can be sure of is that the media will be there to report, inform and analyse, and indeed to influence whatever takes place.

The topic of this session is the ‘The Media and Democracy – rights and responsibilities’.  This discussion could be a wonderful opportunity for a politician, at the end of a long and busy parliamentary session, to have a go at the media and settle a few scores. Indeed it is tempting, but I am not going to do that (well I might a little bit later on!) but what I do want to do is to tease out the essence of the debate – the media and democracy: rights and responsibilities.

Politicians and journalists have a co-dependent, almost symbiotic relationship.  We don’t always like each other or trust each other but we need each other to survive.  Politicians need journalists as the medium through which we can communicate to the public our ideas and policies.  Journalists need politicians to give them information and content for their articles and broadcasts. The starting point of this debate should be the recognition that there can be no democracy without a free press.  As Thomas Jefferson said :-

Were it left to me to decide whether we should have a government without newspapers or newspapers without a government, I should not hesitate for a moment to prefer the latter.

Secrecy is the enemy of democracy.  And democracy is predicated on the belief that the public, properly informed, will make the right decisions in their own interest and that of society. 

As John F Kennedy said in his famous address to newspaper editors:

In a free and open society, there can be no place for secrecy, secret societies, secret oaths or secret proceedings.  We decided long ago that the concealment of the truth or pertinent facts and relevant information far outweighed the dangers which are cited to justify it. 

Today, around the world, there are societies in which the news is censored, debate is stifled, mistakes are covered up and facts that the public have a right to know are withheld.  We see in many parts of the world, that the force of the State is used to ensure that policies are concealed not published, mistakes are buried not headlined, dissenters are silenced not praised, societies in which no expenditure is questioned, no rumours printed and no secret revealed.

No government should fear scrutiny of its plans and actions.  For from that scrutiny comes understanding, and from that comes support or opposition, and both are necessary.  Without debate and criticism no government will succeed and nor will the country which it serves.  Indeed, in days of the Greek city states, the first republics, it was decreed a crime for any citizen to shrink from controversy and fail to speak his mind.  And that should be our motto too.  At least it is my motto, even if it ruffles a few feathers from time to time!

We should recall that our constitution, and I quote, ‘guarantees the liberty for the exercise of the following rights subject to public order and morality.  The right of citizens to express freely their convictions and opinions …. including criticism of the government’ 

The rights we afford to the media are not given so that the public can be amused and entertained, nor so that they can emphasise the trivial and sentimental, but to inform, to educate, to stimulate and to reflect on the great threats and opportunities that challenge our society, to explain our choices, identify our crises, and even to cause anger when necessary.  The greatest courage is not to tell the people what they want to hear or to give them what they want.  The greatest courage is to tell them the truth and give them what they need.

We can think of many examples in which the media and media classes exercised these rights to great effect.  These include the early photojournalists reporting on the Great Depression and Dust Bowl in the 1930s, war reports from Vietnam and Bosnia that changed public opinion and policy,  Watergate, the exposure of child sex abuse scandals in Ireland, and investigations into the finances of some of our most senior political figures.

But we can also think of many other examples where the sole objective was to get good ratings or simply to claim a scalp.  These extend from newspaper reports about the children of public figures (such as a politician’s child being suspended from school) to the unfair hounding out of office of Peter Mandelson merely for passing an immigration query onto to the relevant authorities.  They include the infamous Prime Time Investigates controversy and the false accusations made against Fr Kevin Reynolds, or the general sense that current affairs programmes must be dumbed down in order to reach a sizeable audience. The media has a responsibility to democracy, to uphold the sort of free and pluralist society which makes a free press possible. Yet too often the media has failed to live up to this responsibility.

Some politicians rather cruelly regard the media as a parasite that feeds on the body politic. I don’t agree. But I am concerned that the media now risks harming itself by damaging the body politic which sustains it.  The most recent Edelman trust barometer, for example, shows that the media in Ireland (at 35%) is no more trusted that the government.  That is unusual in Western society.  Usually the media is more trusted than government.  The trend is interesting too.  Public trust in government actually rose in 2012.  But in the media, public trust fell.  And at 35%, of course, neither the media nor the broader government sector are trusted very much.

I think in some ways, at the heart of it, is the fact that the media do not always understand the public in the way we do.  To them, public opinion is reflected only by the person who rings into talk shows, or writes letters to the editor, or by those who take an active interest in current affairs.  When you spend time knocking on doors or just talking to everyday people at meetings, matches or public events, you get a very different impression. Tony Blair, in his autobiography, sums it up well:

‘To the media, a person is not a ‘real’ person unless there is anger and preferably rudeness, yet the truth is most real people don’t behave in that way at all.  Most people are polite, they may disagree but they do so reasonably.  You meet plenty of them, but they aren’t ‘real’ because they are not combustible.  What we have more and more is the celebration of the protest by the media and the more people realise it, the more they tend to disrupt.  Any argument conducted in heat is a clash of views not an exchange of views.  But, no matter, it’s news.’

One of the more frustrating aspects for government ministers has been the demand from the media for ‘real political reform’ coupled with their total disinterest in it when it happens.  Objectively, this government has implemented more political reform in a year than the last one did in three five year terms.  There were symbolic but important measures like a further reduction in ministers’ salaries, getting rid of State cars, reducing the number of junior ministers and Oireachtas committees and reducing the size of the Dáil and the number of local authorities, but there have also been substantive reforms.  For example, all newly-appointed Chairpersons of state companies and agencies must now be approved by an Oireachtas committee and all appointments to State boards are publicly advertised.  Ministers take their own adjournment debates in the Dáil and Seanad and take follow-up questions for the first time.  They can no longer get away with reading a script or getting a colleague to do it for them.  The Dáil sits longer and later than ever before and important legislation goes to Oireachtas committees in draft form (Heads of Bill stage) before it is published, thus giving backbenchers a much more important legislative role should they choose to take advantage of it.  Watching Oireachtas Committees scrutinise public appointees or examining line-by-line the Heads of a Bill, whether it is on labour relations or private clamping, is watching legislators doing the business they should be doing.  But the loneliest places in Leinster House are the seats reserved for members of the press down in the committee rooms.  The twenty minute show at Leaders’ Questions makes better news.

For the first time in decades, a slate of independent Senators were appointed by the Taoiseach.  Friday sessions are used to allow TDs to bring their own Bills to the floor of the house, some of which have actually been accepted for the first time in decades.  Funding for political parties is being linked to gender quotas, an effective ban on corporate donations is on the way, lobbying will be regulated and whistleblowers protected.  The Freedom of Information Act is being strengthened, not weakened.  And a Constitutional Convention has been established.

Yet, if you spent too much time reading the papers or listening to the radio, you’d think nothing has been done to bring about a new politics in our State.  Of course, a lot more needs to be done, and this must only be a start, but for those of us who believe in reform, who really embrace the new politics, it is harder and harder to maintain momentum and win the internal battles for reform, when we are given no credit for what has already been achieved. 

Another issue is that of conflict in government.  There is conflict in government and so there should be.  We have tough decisions to make, and differences of opinion between two parties, among 30 ministers and over 130 parliamentarians, can be profound.  They are real but regularly exaggerated.  I learn about most of them from the press rather than from my colleagues and often conflicts or disagreements that arise on a Monday morning and are resolved by Tuesday afternoon are still being analysed in the Sunday papers and Sunday radio shows five days later, when the protagonists have long since moved on.  The fact that there are differences should not be the story.  It is the right of the media to report on natural and normal differences in government but it is a responsibility to expose and challenge groupthink in government and consensus in society.  This does not happen enough. 

I think, also, politicians are not willing enough to stand up for themselves.  Take the government jet for example and, incidentally, I haven’t ever been on it.  The government jet now carries ministers so rarely that the pilots now have to go on training flights with no passengers just to keep up their hours.  To feed the lions, Ministers travel out the night before for meetings in Luxembourg, stay in a hotel and lose most of the next day traveling home just to attend a two or three hour meeting.  In the process, Dáil debates are missed and important meetings at home are put off.  With a European Presidency coming up, and the demand to spend a few days a week in Brussels, Luxembourg or Berlin, it is hard to see how continuing the current policy will allow us to do our job as Presidents of Europe properly, let alone well.

I think the debate about Special Advisers has also become rather absurd.  Yes, we mishandled the issue of the pay scales.  Whatever rate was set, it should have been adhered to.  But the whole issue of Special Advisers is a broader one and Special Advisers are essential if government is to function.  First of all, the title is a misnomer.  Special Adviser does not sound like a real job, it sounds like someone who sits in an office all day and dispenses advice now and then.  In truth, Special Advisers do work that civil servants cannot.  They might be your Press Officer, someone who has a background in politics and media and knows how to deal with journalists in the way that a civil servant who passes through the Department press office on a rotation between a policy office and front office simply cannot.  They might be your Parliamentary Liaison staffer, the person who deals directly with committees, committee chairpersons and TDs to ensure that they understand and get behind what you are trying achieve.  Again, a highly political role that cannot and should not be done by a career civil servant.  Or they might be your Programme Manager, the one person in the Department making sure that the whole Department prioritises your Programme for Government, the one you got elected to implement rather than the Department’s own priorities.

These are the people who lose their jobs when you lose yours and the only ones totally committed to achieving and implementing the Programme for Government.  They may often be the only ones in the Department, other than you, who really believe in it.  That is why in most democracies it is the norm for ministers to bring their own ‘cabinet’ of people in with them and they bring many more than we do. The system is essential to effective government.  And everyone in the system, and those who write about it, know it, but we are all just afraid to say so.

Before I finish, I just want to mention two important points.  The first relates to media ownership. No society can benefit from an excessive concentration of media ownership in the hands of one individual or one company and legislation to address this is long overdue.  But in doing so, we should not overlook other dominance in the media market.  No company enjoys a more dominant position on radio, on TV and on the internet than RTE.  RTE has a unique standing in Irish life. It performs an essential role, and in many ways it provides an excellent service. However, it also has the unique privilege of the licence fee. This carries its own responsibilities: namely the need to maintain high standards, consistent neutrality and proven objectivity. There have been huge changes in RTE in recent months. But we must always ensure that the regulatory structures in place for such a dominant player in Irish media are sufficient, and effective.

Of course, there can be no stronger challenge to dominance than diversity and this is why it has been such a shame to lose so many newspaper titles in recent years, and I sincerely hope we will not lose anymore.  We also need to guard against excessive foreign ownership of our press and broadcast media.  There is plenty of room in Ireland for British-based and British-owned press but we must also ensure that we maintain a vibrant Irish-owned and Irish-based press.

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