Colley is the son of Harry and Christina Colley. His father is a veteran of the 1916 Easter Rising and a former adjutant in the Irish Republican Army (IRA), who is elected to Dáil Éireann in 1944, as a Fianna Fáil candidate. He is educated at St. Joseph’s Secondary C.B.S. in Fairview, where one of his classmates and closest friends is Charles Haughey, who later becomes his political arch rival. He studies law at University College Dublin (UCD) and qualifies as a solicitor in the mid-1940s. He remains friends with Haughey after leaving school and, ironically, encourages him to become a member of Fianna Fáil in 1951. Haughey is elected to Dáil Éireann in the 1957 Irish general election, ousting Colley’s father in the process. This puts some strain on the relationship between the two young men.
Colley is elected to the Dáil at the 1961 Irish general election, reclaiming his father’s old seat in the Dublin North-East constituency. Furthermore, he is elected in the same constituency as Haughey, thereby accentuating the rivalry. Thereafter, he progresses rapidly through the ranks of Fianna Fáil. He becomes a member of the Dáil at a time when a change from the older to the younger generation is taking place, a change facilitated by Taoiseach Seán Lemass.
Colley is active in the Oireachtas as chairman of some of the Joint Labour Committees, which are set up under the Labour Court, to fix legally enforceable wages for groups of workers who have not been effectively organised in trade unions. He is also leader of the Irish parliamentary delegation to the Consultative Assembly of the Council of Europe. His work as a backbencher is rewarded by his appointment as Parliamentary Secretary to the Minister for Lands in October 1964.
Following the return of Lemass’s government at the 1965 Irish general election, Colley joins the cabinet as Minister for Education. He introduces a plan to establish comprehensive schools, set up an advisory council on post-primary school accommodation in Dublin, and introduces a school psychological service.
Colley is promoted as Minister for Industry and Commerce in a cabinet reshuffle in July 1966, and he continues the government policy of economic expansion that had prevailed since the late 1950s.
In November 1966, Seán Lemass resigns suddenly as party leader. Colley contests the subsequent leadership election. He is the favoured candidate of party elders such as Seán MacEntee and Frank Aiken, the latter managing Colley’s campaign. Charles Haughey and Neil Blaney also declare their interest in the leadership, however both withdraw when the Minister for Finance, Jack Lynch, announces his candidacy. Colley does not back down and the leadership issue goes to a vote for the first time in the history of the Fianna Fáil party. The leadership election takes place on November 9, 1966, and Lynch beats Colley by 59 votes to 19. When the new Taoiseach announces his cabinet, Colley retains the Industry and Commerce portfolio.
In the wake of the Arms Crisis in 1970, a major reshuffle of the cabinet takes place, with four Ministers either removed, or resigned, or simply retired from the government due to the scandal. Colley remains loyal to the party leader and is rewarded by his appointment as Minister for Finance, the second most important position in government.
In 1973, Fianna Fáil are ousted after sixteen years in government when the national coalition of Fine Gael and the Labour Party come to power. Colley is appointed opposition Spokesman on Finance, in the new Fianna Fáil front bench. As the 1977 Irish general election approaches, Colley and Martin O’Donoghue are the main architects of Fianna Fáil’s election manifesto.
Fianna Fáil sweeps to power at the 1977 Irish general election, with a 20-seat Dáil majority, contrary to opinion polls and political commentators. Colley is re-appointed as Minister for Finance and Minister for the Public Service, and is also appointed as Tánaiste, establishing him firmly as the heir apparent to Taoiseach Jack Lynch.
In December 1979, Jack Lynch resigns unexpectedly as Taoiseach and as Fianna Fáil leader. Colley and Charles Haughey seek the leadership position and are evenly matched. A secret ballot is taken on December 7, 1979. The Minister for Foreign Affairs, Michael O’Kennedy, announces his support for Haughey on the eve of the election. This apparently swings the vote, and Haughey beats Colley by 44 votes to 38. Colley remains as Tánaiste, but demands and receives a veto on Haughey’s ministerial appointments to the departments of Justice and Defence.
Fianna Fáil loses power at the 1981 Irish general election. Haughey delays naming a new opposition front bench, but Colley remains a key member of the Fianna Fáil hierarchy. The party regains office at the February 1982 Irish general election. He demands the same veto as before on Haughey’s Defence and Justice appointments, but is refused. When it is revealed that Ray MacSharry is to be appointed Tánaiste in his stead, he declines another ministerial position. This effectively brings his front bench political career to an end, but he remains a vocal critic of the party leadership from the backbenches.
When the Fianna Fáil government collapses and are replaced by another coalition government after the November 1982 Irish general election, a number of TDs and Senators express lack of confidence in Haughey’s leadership once again. Several unsuccessful leadership challenges take place in late 1982 and early 1983, with Colley now supporting Desmond O’Malley and the Gang of 22 who oppose Haughey.
Colley dies suddenly on September 17, 1983, aged 57, while receiving treatment for a heart condition at Guy’s Hospital, Southwark, London. He is survived by his wife, three sons, and four daughters, one of whom, Anne Colley, becomes a TD as a member of the Progressive Democrats party.