Former minister for finance Charlie McCreevy “just laughed” when his predecessor Ray MacSharry told him spending budget surpluses “without giving a second thought” was a mistake, according to Mr MacSharry’s contribution to a new book on Brian Lenihan.

Mr MacSharry, a Fianna Fáil grandee, tells how Mr Lenihan sought him out for a private meeting upon his appointment to the Department of Finance by then taoiseach Brian Cowen, in 2008. He says Mr Lenihan had to “pick up the can” for the economic approach of the Fianna Fáil-Progressive Democrats governments during the boom, which he describes as “all wrong”, “short-sighted” and “never strategically sensible”.

The book, Brian Lenihan: In Calm and Crisis, features contributions about Mr Lenihan from people who knew him.

Mr MacSharry, who was nicknamed “Mac the Knife” for overseeing sharp reductions in public spending during his period as minister for finance in the late 1980s, says he met Mr Lenihan to offer advice. “We arranged to meet privately in a hotel in Enfield, Co Meath, and we talked for several hours,” he says, adding that he “took Brian through the many decisions we had taken . . . to reduce public expenditure, to cut borrowing and to tackle unemployment”.

“A big problem for Brian was that because of benchmarking, the public wage bill had gone through the roof. I have always maintained that Charlie McCreevy . . . was short-sighted in the scale of expenditure he sanctioned.

“Brian Lenihan was left to pick up the can for the ‘when the money’s there, we’ll spend it’ philosophy, which was never strategically sensible. The focus of that Fianna Fáil-PD government was all wrong.”

Attention

Mr MacSharry, who also served as an EU commissioner, says not enough attention was paid to “the sustainability of the revenue stream”.

“That government felt that they could afford both massive increases in public pay and huge reductions in income tax because of the enormous revenues that property-related taxes were bringing in.

“The culture of the time seemed to be to spend this revenue without giving a second thought as to whether this level of revenue would be available the following year. When I suggested this was a mistake, McCreevy was far from happy.

“In one conversation, he said to me: ‘I have two billion of a surplus. Do you think I should leave that there?’ I replied, ‘Yes, I do,’ but he just laughed at me.”

Mr MacSharry’s contribution provides a broadly positive assessment of Mr Lenihan’s record in office.