Haughey had a clear three-stage monetary-industrial-partnership plan. Engaging the “partners” in protracted planning gave him space to implement radical monetary adjustment while integrating the major social forces by involving them in the detail of what could be committed to. He avoided repeating his mistakes of 1982 by making it clear to the unions that this was how he would proceed, but also promising to achieve an agreed integrated recovery plan by September. What they did not know was his determination also to pre-determine aspects of that plan by proceeding immediately with industrial initiatives.
Haughey would later state the view that real political power rested not in the party or on the backbenches, but in cabinet. An authoritative Taoiseach managing a cabinet united on a clear strategy could marshal the support of backbenchers and party. While geographic factors were unavoidable in forming a government, the key figures must be able for the task. Irish politics were constrained by PR and multi-seat constituencies, exaggerating clientelist influences, but a strong cabinet could overcome these. In a small country, “where you sort of know everyone well”, personalities and connections were vital in strategy building and implementation. Fianna Fáil would unite behind government once convinced it was advancing the national welfare. These were principles he followed in asserting his authority over government in 1987.16
Haughey first moved to establish his authority over government and his own ministers. He reinstated the Department of the Taoiseach to a commanding role, elevating its Secretary, Ó hUiginn, to the centre of government and investing him with “plenipotentiary powers” to re-organise departments, integrate agencies - particularly the IDA - in the planning process, and ensure ministers’ compliance. 15 “revisited”, [Ó hUiginn], hand-written note, ‘CII/FUE Mtg. 19/5/87’, DTA: S25875; ‘Joint Government- FUE/CII Statement’, 14/05/87, GIS: D/Taoiseach; ‘Discussions with Social Partners on National Programme for Growth and Economic Recovery’ n.d., DTA: S25281-E; D/Finance: ‘Briefings for Taoiseach’s meeting with the CII/FUE 26/04/87’, DTA: S25875 16 Interview Haughey, 2005
He formed an inner cabinet of himself, MacSharry and Ahern to work with Ó hUiginn in driving policy. It was largely the same group, strengthened by the union-friendly Ahern, that had produced the Way Forward in 1982, a “cabal” he had previously attempted but failed fully to achieve in 1982, and which Ahern and Cowan would later replicate in their governments.17
The new strategy was driven home to ministers at a meeting on 13 April, the day before Haughey’s first meeting with ICTU. Ó hUiginn circulated a memo synthesising Haughey’s priorities. Monetary autonomy was essential for the first year and ministers were to report, on a monthly basis, their progress in achieving targets and, to relieve interest rate pressures, postpone spending plans. Ministers of state, meanwhile, were to develop “quick practical action on development proposals”, “fleshed out urgently” with the IDA. All such initiatives were to be tailored to fit with a later negotiated social partnership plan and, while kept strictly within current resources, should emphasise their employment potential, a “key input into the discussion on a Plan with the social partners”. The Departments of Education, Labour, Health and Welfare were to develop low-cost reforms reflecting NESC priorities that could be implemented immediately, such as moving from institutional to community care in health, job-friendly school curriculum reforms, social employment initiatives in place of “ephemeral” training, and reforming welfare to benefit “lower-incomes, bring greater equity and reduce costs”. On tax, Finance was to plan for two thirds of workers to move to the standard tax rate over a series of budgets, a key manifesto commitment and “quid pro quo for pay restraint”. On industry, state supports were to be redirected from fixed assets to marketing and modernization, and the Finance Act should include provisions to encourage multinationals to re-invest, as currently “most of them keep their funds off-shore”. McSharry was to prepare a 1988 “budget profile” as a “key to the Plan discussions”, encompassing spending reductions but also making “a start on PAYE tax concessions etc.” to facilitate “social partner agreement to changes”. All measures were to be complete by
17 Cruinniú Rialtais, 13/03/87, ‘Changes in Governmental Structure’, DTA-OHP; on inner cabinet group,
September, which, Ó hUiginn told Haughey, would put him “in a very strong political position” in securing a partnership deal.18
Ministers were ordered to report to a meeting with MacSharry by 22 May, after which expenditure decisions by the core cabinet would issue on a weekly basis. Proposals were to involve “radical” cuts, “the elimination or reduction” of programmes, “rooting out overlaps and duplications”, and “the disposal of physical assets that are no longer productively used”. A final programme was to be ready by September for discussion with the “social partners”. Haughey did “not want a series of justifications of the status quo or special pleadings”. This clear if somewhat humiliating message to ministers was deliberately leaked to the media to add further pressure and signal government’s determination.19
Haughey even acted to slow down the working-party policy process with the social partners, first delaying appointing them. On 21 May Ó hUiginn instructed officials to treat the “working groups” for the moment as purely “exploratory”, gather “costed” proposals for later consideration at “Ministerial-social partner level” but “without prejudice to decisions at that level and clearly subject to budgetary constraints”. The framework for an eventual plan would be the “emerging macro-economic and budgetary scenarios for 1988 and the years beyond, to be agreed by Government on a submission next week by the Minister for Finance”, and then “put to the social partners as the framework”.20
In another move, possibly both to put ICTU on the defensive and deflect opposition criticism of a revived tripartitism, Tánaiste Lenihan told the Dáil that ICTU’s engagement reflected its “agreement” to continuing the previous government’s public pay policy. Government was determined “to get order into the public sector” which was why it had agreed “these working committees” with ICTU, with private sector pay a purely “separate operation”. An alarmed ICTU, who Lenihan had portrayed as hapless collaborators, demanded that Haughey distance himself from Lenihan’s comments, which he promptly but tactfully did in a statement to the Dáil. With ICTU on the defensive over its engagement with 18 Secretary [Ó hUigin] to Taoiseach, 13/04/1987, ‘Subject: Meeting of Ministers’, DTA-OHP 19 Taoiseach to all Ministers, 13/05/87, ICTU Archive: GS-PA-1a; on leaks to the press, Bew, Hazelkorn and Patterson 1989 and ‘Bombshell’ (editorial), IT 27/05/1987 20 Ó hUiginn to Paddy Mullarkey, D/Finance, 21/05/87 [with h/w note: “letters in similar terms” issued to Secs. of all relevant Departments], DTA: S25281-E
government, the weekly announcements of drastic cuts continued into the summer. They met with growing unrest in the public service, especially health, and opposition in the Dáil, but widespread media approval.21 Government thus moved simultaneously on monetary planning and a parallel process of industrial policy initiatives while also engaging the “social partners”. The approach was agreed at an inner cabinet meeting on 27 April, just days after Haughey’s second meeting with ICTU. The cabinet meeting was attended by agency officials, notably Pádraic White of the IDA, and reviewed industrial policy options compiled from various Ministers’ reports by Ó hUiginn’s staff.
The review described the performance of indigenous industry as “disastrous”, its “management, marketing and product development … poor”, domestic market share down “sharply”, investment down by two thirds since 1980, and employment a third since “we joined the EEC”. Despite 1960s planning, Ireland had failed “in creating strong indigenous companies based on our natural resources” and companies remained “production rather than market led”. Dairy coops, for example, with “large unwieldy boards dominated by production rather than market interests”, were performing poorly commercially. Policies prioritising indigenous industry had to be “called into question” and incentives redirected and “concentrated on fewer firms with high growth potential to the exclusion or benign neglect of many small firms which soak up a good deal of time, effort and resources of the State with little return”. But internationally traded FDI had proved uniquely successful, greatly outperforming domestic industry and providing high quality jobs, linkages to the economy and know- how, and was an “area of growing opportunity suitable to our highly-educated work-force”. “A shift of resources to this area”, it concluded, “is justified”.
To drive the policy shift, state agencies were to be rationalised and supports re-directed to growth sectors on a “company development plan” basis. Supports should shift from fixed assets to marketing, upgrading technology and product
21 Lenihan in Dáil debates 21/05/1987; ICTU EC meeting 20/05/87; Nevin to Haughey, 21/05/87, and
Nevin to EC members, 05.06.87 ‘ref. 1030’, GS-PA-1a; Haughey’s “tactful” statement in Dáil 27/05/87; “opposition”, in Dáil 04/06/87; “media approval”, IT editorials, 27/05, and 04, 26/06/1987
development. International and financial services, and natural-resource based exporting firms with growth potential should be “selected” and assisted.22
This reflected NESC proposals, though in much starker language, as well as IDA thinking, especially its robust defence of the FDI sector against Telesis’s criticisms. The targets identified revealed Haughey own preferences and Departments were given two weeks to come up with appropriate costed plans. On 26 May Haughey publicly announced several major projects to proceed immediately, notably the financial services centre (IFSC), expansion of the beef industry, a commercially funded gas pipeline, and initiatives in forestry, horticulture, tourism and maritime policy, again all private-sector driven. By playing down the partnership “working parties” but announcing these initiatives, he was pre-determining the thrust of industrial strategy.23
Government also proceeded with a policy to radically commercialise the farming sector. Responsibility for the food industry was moved from Industry and Commerce to an expanded Department of “Agriculture and Food”, which was henceforth to be industry- rather than producer-driven, and a horticultural marketing board, Bord Glas, was established. A plan for the food industry was produced by IDA in its first ever collaboration with that Department.24