The secretary general of the Department of Finance has admitted that his department failed to forecast the depth of the financial crisis in 2008.
Responding to questions on the 2008 Comptroller and Auditor General report at the Public Accounts Committee (PAC) today, Kevin Cardiff said the department had “made mistakes” but that the department’s projections were in line with forecasts from other agencies at the time.
During the three-hour hearing, Mr Cardiff was pressed by Sean Fleming TD to explain the discrepancy between the department’s budget deficit projection of €1.5 billion for 2008 and the actual budget deficit of €13 billion, an estimate that was “way off the mark” the deputy said.
Mr Cardiff said, like other agencies, the department had failed to forecast the extent of the financial crisis, but that the budget estimates for 2008 had also highlighted potential risks that were facing the economy.
“That same budget speech also outlined a series of risks that were possible. There were six or seven. Every one of those happened.”
Questioning whether forecasters “can ever” forecast major turns correctly, the secretary general said the department needs to have a system that deals more with risk, rather than economic projections, and suggested that a new role of risk officer be created.
Mr Cardiff strongly refuted a suggestion by Tommy Broughan TD, that the department was running “some sort of Ponzi scheme” in terms of stamp duty. Mr Cardiff said the suggestion that the department was involved in some kind of deliberate scheme was “insulting” and “unfair”
“There’s no doubt at all that the Department of Finance, and other parts of Government and the State system and other economic agencies made mistakes . . . but that sort of notion of a deliberate, almost traitorous scheme is unfair.”
Responding to a question by Jim O’ Keeffe as to whether the staff at the Department of Finance was sufficiently well-qualified to deal with the “complexity of modern finance”, Mr Cardiff said the department needs to increase its level of specialist skills, adding that the “generalist nature” of the service can be a weakness as well as an asset. He said that the department had taken professional advice from bodies such as Merrill Lynch, the Central Bank, the National Treasury Management Agency and the Financial Regulator.
Adding that he “was not in disagreement” with some critics of the department about the skills and skill mix of staff members, he said the very fact that the department hired outside staff to deal with the financial crisis shows it was not in a position to give good enough advice
On the subject of bonuses paid to staff at the assistant-secretary grade in the Department in 2008, Mr Cardiff said if he had been secretary general department at the time he “would have considered it better”.
Today was Mr Cardiff’s first appearance before the PAC as head of the Department of Finance. The former head of the taxation and financial services division within the department was appointed as new secretary general of the department in January. The secretary general of the Department of Finance is the most senior position in the Irish Civil Service. The holder is also chief of the entire Civil Service.
