Elaine Byrne, University of New South Wales: 23 July 2013
It is with no small irony that the Minister with responsibility for Small Business consented yesterday to a judgment for €2.47m against him and his wife at the Commercial Court over unpaid loans. John Perry’s long-running difficulties with Danske Bank raise underlying questions about Ireland’s ethics framework and the need to introduce a register of debt for politicians, as is the case in Canada.
The Irish public do not know the extent to which Ministers are in debt and the conflicts of interest, if any, that such debt may incur. John Perry is not the only Irish Minister who has experienced serious financial difficulties.
In 2012, the Minister for Health, James Reilly, defaulted on a €1.9m debt. He was one of four individuals who failed to comply with a High Court order on an investment in a Co Tipperary nursing home. He was the first minister since the foundation of the State to be listed in Stubbs Gazette. That the deputy leader of the main party in government has had a High Court judgment registered against him is not necessarily significant. Rather, the Irish public would never have known the extent of Reilly’s debts if the investor deal had not gone sour.
In July 2012, the Sunday Independent reported that the Minister for the Environment and Local Government secured loans of close to €900,000, which were personally approved by Irish Nationwide building society boss Michael Fingleton. Phil Hogan refused to respond to questions put to him about these loans. “I am not going to get involved in discussing my personal business,” the minister told reporters Tom Lyons and Daniel McConnell when asked about his loans. But the public do have a right to know about Hogan’s private business if, for example, the Cabinet is framing the terms of reference for a banking inquiry. Such an inquiry will more than likely scrutinise the activities of Fingleton in INBS, which cost the State a whopping €5.4bn.
A minister holds an office which demands the public’s trust. The same rules of confidentiality in private financial affairs do not therefore apply. In order to protect against conflicts of interest, politicians are compelled to disclose their ‘registerable interests’. Under the Ethics Acts, ministers, TDs and senators must disclose what income they have outside of politics and any shares, directorships, land, gifts and property interests they may have.
They do not have to disclose any liabilities, such as outstanding loans, debts or mortgages.
Yet members of the National Treasury Management Agency (NTMA), who are assigned to work for NAMA, are legislatively required to so. What’s more, if a civil servant is in financial difficulty “through bankruptcy, or insolvency, or by incurring a significant liability to any person, financial institution”, they are required under their code of conduct to report the matter to their superior.
There is no such provision in the outdated 2001 Code of Conduct for Office Holders. If there were, the Taoiseach would have known about the extent of Reilly’s financial difficulties before Stubbs Gazette was published. The Standards in Public Office Commission has recommended since 2009 that the law be changed. It argues that a public representative “who has significant liabilities to, for example, a financial institution, could be materially influenced in the course of performing their duties where such duties involve dealing with that financial institution”.
A register of debt is just as important as a register of assets.
In Australia, Finland, New Zealand, Poland, Spain and Canada , politicians are required to publicly disclose any debts they have. This is one way of ensuring that the integrity of government decision-making is not compromised by the private interests of politicians. In Canada, Reilly’s counterpart in Health, Leona Aglukkaq, has disclosed that she has four mortgages with two different banks. Her colleague James Flaherty at the Department of Finance has disclosed to the Office of the Conflict of Interest and Ethics Commissioner that he has two mortgages, a line of credit and is a guarantor on a mortgage with the Royal Bank of Canada.
There are anecdotal accounts of others who have made bad investment decisions, over-extended on property loans or have huge personal indebtness due to bank loans for election campaigns. According to the Register of Interests, at least a quarter of our TDs and ministers have holiday homes, rental properties or second properties. The Minister for Justice, Alan Shatter , has investment interests in 15 properties, including four in Florida.
The chair of the Public Accounts Committee, John McGuinness, is a landlord of nine properties, such as a nursing home, a pub, fast-food outlet and student accommodation. The Fine Gael TD Frank Feighan also rents out nine properties and has mortgaged properties in France, Budapest and Bulgaria. The Dublin North-East TD Terence Flanagan (minus the Fine Gael party whip) was forthright in his declaration. His half share in a house at Blanchardstown, he wrote, has “huge negative equity”.
Personal indebtedness has in the past made politicians financially exposed and susceptible to influence by vested interests. Emmet Stagg gave a very insightful interview with RTE back in 2009 about his experiences as a TD in the 1980s. “I was in constant debt arising from the costs of being a TD,” he said. “It left politicians and public representatives very vulnerable to awards of unauthorised money and that did occur. And it was very tempting because you were broke.” The ultimate legacy of three highly charged elections during an 18-month period between 1981 and 1982 was crippling personal debt for many politicians. The Mahon Tribunal exposed just how little it took to bribe public officials.
So let’s learn from the lessons of the past. We need to have a register of interests that reflects just how broke some of our politicians are and to protect them from any potential conflicts of interest that may arise.
Irish Politics Forum 
Elaine raises a hugely important issue here, namely the financial position of serving ministers and policy-makers, and the extent to which they were (are) vested in the model of financialization which is so implicated in the Irish economic collapse. She is absolutely right in arguing that we need a register of debt. In the period after the arrival of the Troika and, looking ahead at a vista of horrendous budgets for years to come, I wondered why the new FG/Labour government did not volunteer to dramatically reduce the salaries of ministers, TDs and senators. The rationale was that they would gain at least some political capital by ‘going further, faster’ than the rest of the public sector and thus set an example to the rest of the country of what ‘sacrifice’ could entail. Instead there was actually great resistance amongst TDs to the idea that their salaries could or should be cut. I suspected at the time that the reason for this was that a large number of them were themselves ‘on the hook’ for very large mortgages on residential or commercial properties. Well now we are beginning to find out more as some light is being shed on this dark corner of Irish politics. I would also be interested to know the extent of indebtedness of the individual members of the last FF-Green cabinet and of the broad spectrum of members of the previous Oireachtas. Given the fact that so many of them have left politics we may never know. But beyond the rather important point of protecting politicians in stressed circumstances from the malodorous attentions of rapacious developers and the like, we also could learn a lot about the extent to which our policy-makers buy into and are themselves part of a ruinous financial ideology which favours short term returns over long term investment, de-regulation and privatization of any and all public services, ‘public-private partnerships’ which are always and everywhere loaded with moral hazard and, above all, produces a mindset that thinks of Ireland exclusively as an economy rather than a society.
Great to see another dimension for public disclosure being set out with examples of jurisdictions in which this is already done, in some way or another.
Thanks, Elaine.
Thanks Donal and John for your kind comments.
This isn’t so much about the unfortunate circumstances that Minister John Perry finds himself in, not unique by any means given the current economic realities in Ireland. It’s more about protecting political representatives from the perception of a conflict of interest. Introducing a register of liabilities, akin to that in other jurisdictions, would reflect the myriad of interests within a decision maker’s private life. It is not just assets that potentially influence but debt.
Fiona Muldoon of the ICB has eluded to the fact that 40% of SME loans totalling in excess of 50bn are in default. The idea that John Perry must resign and many people are calling for his resignation is far from a cast iron case. The reverse can be argued. It can be said that his debts mean that he is acutely aware of the pressures that SME’s are under.
I believe the situation with Hogan and Reilly is very serious as they are in much more senior positions at cabinet and both have form when it comes to being economical with the truth. Reilly’s cabinet colleague found it necessary to resign her position because of the thrust of Reilly’s policies which she said amounted to driving people out of the public healthcare system, into private healthcare. The area coincidentally, that Reilly was invested in, along with a number of his colleagues ‘outside’ of politics. How can we square Hogan’s zest for the introduction of property tax, which is a direct result of reckless lending across the entire banking sector, with his own loans which he tells us are none of our business. Obviously, these loans and countless other loans given to civil and public servants are very relevant, they have come up again and again in discussions with regard to the possibility of cutting salaries, pensions and other perks. Ask Kieran Mulvey the reasons the unions said it was impossible to accept any cuts? Too much debt.
I agree with Elaine Byrne that such declarations of indebtedness should exist but just because people took risks should not necessary exclude them from public office. It may help to inform who is best suited to certain ministerial offices. Also it may inform some people where the soft targets are for influence because if someone is in debt there can be temptation for immediate income to alleviate their situation. It is not all one way traffic but in general I think the public have the right to know.
Nice post. I know little of John Perry’s specific situation, but, in general, given the two-way traffic between politicians (particularly some senior ones) and Irish banks over several decades (governments several times riding to the rescue of banks at taxpayers’ expense, e.g. the ICI debacle and the more recent bailouts of now state-owned/controlled banks, and debt write-offs/leniency being shown to some politicians, and seemingly special more lax lending procedures for politicians and other prominent figures), this is definitely an important issue. IMO politician’s debts should be public knowledge. Bankruptcy means a TD has to give up his seat. The recent insolvency bill (passed by the Dáil last year) set a very generous upper limit of 3 million euros (the IMF/Troika recommended a limit of just 1 million euros) for insolvency agreements with banks (presumably such an agreement avoids bankruptcy and having to resign a seat). If a TD was party to such an agreement, surely the voters should automatically know?