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Oral Answers to Questions
(14 years ago)
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Mr Gregory Campbell (East Londonderry) (DUP)
1. What recent discussions he has had on steps to deal with the past in Northern Ireland.
The Secretary of State for Northern Ireland (Mr Owen Paterson)
My hon. Friend the Minister of State and I have met with political parties, community organisations, academics and victims groups from across the community to discuss dealing with the past. We will continue to listen to the views of people in Northern Ireland to find a way forward on this sensitive and contentious issue.
Mr Campbell
The Secretary of State made a commitment, which he repeated several times, that there would be no more costly, open-ended inquiries. Any decision by him to hold a further, restricted inquiry—for example, into the Pat Finucane incident—would be opposed on the one hand by nationalists and republicans, but regarded by others as a prerequisite for long-standing grievances, against the Irish Republic’s Government, for example, to be inquired into. Is it not more sensible and consistent for the Secretary of State to say, “We’ve reached the end of the inquiry road”?
Mr Paterson
I am grateful to the hon. Gentleman for his question. He is quite right: our stated policy is that we do not want to see any more costly and open-ended inquiries. However, my right hon. Friend the Prime Minister said during the debate on the Saville statement that we would look at individual cases. Our position on the Finucane case—a contentious case, as the hon. Gentleman knows—was laid out clearly in my written ministerial statement on 11 November.
Peter Bottomley (Worthing West) (Con)
At the risk of broadening the question from the previous exchange, let me say to the Secretary of State that coming to terms with history is the responsibility of us all. Those who are British, those who are Irish and those who are both welcome the progress that has been made over the past few years and recognise that many have contributed to it.
Mr Paterson
My hon. Friend is absolutely right. We want to bring as broad a range of people as possible into the process of negotiation, so that when we arrive at a means of going forward, as many people as possible have bought into it.
Paul Goggins (Wythenshawe and Sale East) (Lab)
The Secretary of State will know that the Attorney-General for Northern Ireland is in the process of reopening a large number of historical inquests, which will place significant additional financial burdens on the Courts Service and the police service. Given the Government’s responsibilities in relation to the past, how does the Secretary of State intend to approach the sharing of those costs?
Mr Paterson
The right hon. Gentleman played a key role in seeing those powers devolved. He will know that the administration of inquests is a devolved matter that is entirely in the hands of the Attorney-General for Northern Ireland. It would not be for us to interfere in the mechanics and financing of his Department, which are entirely down to the local Executive.
Mr Shaun Woodward (St Helens South and Whiston) (Lab)
Given the commitments by the British and Irish Governments at Weston Park, and the commitment by those Governments to an inquiry into the death of Pat Finucane, does the Secretary of State recognise that it would be unwise for the British Government to act unilaterally?
Mr Paterson
The right hon. Gentleman knows perfectly well that this is not an easy case, as he had three years to resolve the matter, as the real Secretary of State. He effectively ended up with a Mexican stand-off, where the family wanted one thing and he wanted them to have an inquiry, as I understand it, under the Inquiries Act 2005. He knows that this is not an easy matter to resolve, and that is why I had a helpful meeting with Mrs Finucane and her son. I laid out the process that we intend to follow in my written ministerial statement of 11 November.
Mr Woodward
The right hon. Gentleman will know that I have also met with Geraldine Finucane. I pay tribute to the way in which she has conducted herself, as I know he has too. However, notwithstanding his remarks about future inquiries, now that he is the real Secretary of State—as he described it—is he beginning to understand the damage that could be done to community support for the devolved institutions and to the British Government if he were to renege on existing undertakings, made by a previous Government and supported by his party in opposition, to independently investigate the past?
Mr Paterson
I cannot fail to point out that the right hon. Gentleman did not meet Mrs Finucane when he was the Secretary of State. I wrote to her in June, and I had a meeting in November, which was the time that the family chose, and we had a very sensible discussion. He knows that this is not an easy issue to resolve, and I laid out very clearly in the written ministerial statement that a number of issues have to be considered. We are quite open-minded about this, and we are determined to try to find a resolution that is satisfactory to all sides.
Bill Esterson (Sefton Central) (Lab)
2. What recent assessment he has made of the likely effect of proposed changes to public expenditure in Northern Ireland on policing the threat to security from dissident groups.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
3. what discussions he has had with the Northern Ireland Executive on the likely effect of proposed changes to public expenditure in Northern Ireland on policing the threat to security from dissident groups.
The Secretary of State for Northern Ireland (Mr Owen Paterson)
I meet the Justice Minister regularly to discuss the policing of the terrorist threat and related expenditure. I welcome the publication this morning of the Northern Ireland Executive’s draft budget, with its significant allocation to the Department of Justice. I can assure the hon. Gentleman that this Government will ensure that adequate resources are available to meet the threat.
Bill Esterson
Does the Secretary of State understand the very real public concern, not just in Northern Ireland but elsewhere in the United Kingdom, about any cuts in front-line policing in Northern Ireland and the impact that they would have on security and public safety?
Mr Paterson
I am fully aware of the concern that the small number of terrorists presents. That is why the Government have made a fair settlement on the Executive, and I am very pleased today that they have agreed a draft budget with a substantial allocation to the Police Service of Northern Ireland. We have made it absolutely clear that, should the security position deteriorate, we will be open to further discussions with the Executive, as was agreed by the previous Government.
Gregg McClymont
The Minister will be aware that the issue of fleet renewal is causing considerable concern. Will he support any request for additional funds from the PSNI to meet the case for fleet renewal?
Mr Paterson
I think that I alluded to that a second ago. We are quite clear that, should the security position deteriorate, and should a good case be made by the Justice Minister and the Chief Constable—one of whom I talked to this morning; I spoke to the other yesterday—we will be prepared to consider going to the contingency reserve for extra funds in order to bear down on the terrorist threat.
Mr Laurence Robertson (Tewkesbury) (Con)
Can the Secretary of State confirm that, if the situation were, regrettably, to get worse in Northern Ireland, either immediately or over the course of the next few years, those extra resources would come from the UK Government, rather than from the money already allocated to Northern Ireland?
Mr Paterson
We are absolutely clear about that. It was part of the settlement made by the previous Government that, should there be a deterioration in the security position in Northern Ireland, the Government of the United Kingdom would be prepared to accept a bid, on security grounds, for resources from the contingency reserve. I repeat that emphatically today. I said that to the Justice Minister when I spoke to him this morning.
Mr Nigel Dodds (Belfast North) (DUP)
In view of the recent revelations on the WikiLeaks website—which were confirmed by the former Irish Prime Minister, Bertie Ahern—that Martin McGuinness and Gerry Adams had prior knowledge of the Northern bank robbery in 2003, can the Secretary of State confirm that co-operation will take place between the Garda and the PSNI, that a full investigation will take place, that no stone will be left unturned, and that the Historical Enquiries Team will be allowed to pursue this matter in the way that it is pursuing other cases in Northern Ireland?
Mr Paterson
I thank the right hon. Gentleman for his question. I think that the answer was well put by the party leader at the British-Irish Council in the Isle of Man earlier this week. We are quite clear that those who have a past can explain for themselves. For the present, however, we are content for those who adhere to the Mitchell principles and pursue their legitimate political aims by peaceful democratic means to play a part in the process. The other issues that the right hon. Gentleman raised are matters of law and order; they are matters not for elected Members but for the police and the prosecuting authorities.
Mr Dodds
I am grateful for that answer, as far as it goes. Of course, no one in the Chamber today was at the BIC meeting in the Isle of Man, so I would be grateful if the Secretary of State could elaborate on that point. Will he also make it clear that any resources that the Historical Enquiries Team needs to pursue these particular allegations will be forthcoming, and that the community in Northern Ireland can be assured of an equality of pursuit of allegations in Northern Ireland against dissident republicans and mainstream republicans if they were involved in terrorist activities, such as have been alleged not just by WikiLeaks but by the former Irish Prime Minister?
Mr Paterson
We are strong supporters of the work of the Historical Enquiries Team, who are looking at every one of the 3,268 deaths over the course of the troubles, and we are satisfied that they are absolutely colour-blind in approaching every one of these dreadful incidents. They have also been accredited with neutrality by European institutions, and we are happy that they should pursue their work, which is in the hands of the devolved Administration and financed locally. The Prime Minister and I have been on the record on many occasions, supporting the neutral work of the HET, because we know it does bring significant satisfaction to the families who have so far received reports.
David Simpson (Upper Bann) (DUP)
The Secretary of State will be aware that it has been announced that individuals from my constituency will stand trial next year for the murder of the soldiers in Antrim. Does the Secretary of State agree with me that the full rigour of the law needs to be applied and that the sentencing needs to fit the crime?
Mr Paterson
I think that is a sub judice issue. We support the rule of law and it should be pursued by the legitimate people in authority in the legal sphere and the judicial sphere. It is not for us as elected politicians to interfere.
Stephen Pound (Ealing North) (Lab)
I am grateful to the real Secretary of State for the comments he made earlier, but members of the PSNI tell me that two of their principal anxieties are the dissident threat and, obviously, financial uncertainty. On 10 November, the Secretary of State said that should the situation become worse, the PSNI would
“have the right to approach the Government”—[Official Report, 10 November 2010; Vol. 518, c. 276.]
—something which I think we all have. Today, he has gone a little bit further. Will he today stand four-square with the PSNI and say that, should the situation become more grave—which we hope it will not—he will support the PSNI in an application to the contingency reserve?
Mr Paterson
I welcome the hon. Gentleman to his new role. I will say emphatically, for the third time during this Question Time—and I said it to the Chief Constable yesterday and to the Justice Minister this morning—that should the security position in Northern Ireland deteriorate, we will adhere to the arrangements, which we have conceded were fixed by the previous Government, that given a deteriorating security position, the Justice Minister and the Chief Constable can come to the UK Government with a security case for funds from the contingency reserve.
Mr Jeffrey M. Donaldson (Lagan Valley) (DUP)
4. What discussions he has had with the Irish Government on arrangements for the proposed visit by Her Majesty the Queen to the Irish Republic.
The Minister of State, Northern Ireland Office (Mr Hugo Swire)
Responsibility for any visit by Her Majesty the Queen lies with my right hon. Friend the Foreign Secretary, in consultation with Buckingham Palace. I know that the Taoiseach, Brian Cowen, and the President, Mary McAleese, have expressed their support for a visit by Her Majesty and I very much hope that such a visit will be possible.
Mr Donaldson
In light of the debate that will take place in this House this afternoon and the valuable assistance that we are providing to the Republic of Ireland in its time of need, is it not past time that we had a visit by the sovereign to the Republic of Ireland? After all, the President of the Republic of Ireland has visited the United Kingdom on many occasions and I think it is time now for a degree of maturity and for this issue to be addressed.
Mr Swire
I completely agree with the right hon. Gentleman. There has been no formal invitation yet, but he is absolutely right to draw attention to the matter. The UK and Ireland have an entwined relationship: 870,000 Irish-born people live here in the UK and over 90,000 UK citizens live in Ireland, and I hope they will join us in hoping that this visit can go ahead.
Mel Stride (Central Devon) (Con)
Does my hon. Friend have any concerns about security issues in respect of the Queen’s proposed visit to the Irish Republic?
Mr Swire
I do not think it would be very responsible of me to comment on that, save to say that we work extremely closely with the Garda, they work extremely closely with the PSNI and I have complete faith that they would be able to see that a visit of that sort went off without any trouble whatsoever.
Mr Stephen Hepburn (Jarrow) (Lab)
5. What recent discussions he has had with the Northern Ireland Executive on future provision of prisons in Northern Ireland.
The Minister of State, Northern Ireland Office (Mr Hugo Swire)
The provision of prisons is now entirely a matter for the devolved Administration. My right hon. Friend the Secretary of State’s statement to the House of 4 November outlined the discussions he has had with Justice Minister David Ford on the recommendations in the Billy Wright inquiry report.
Mr Hepburn
Will the Government’s spending decisions have any impact on potential new capital projects such as Magilligan prison and the new police training college?
Mr Swire
The hon. Gentleman raises a good point. As we have said before in the House, we are committed to standing by the terms of the policing and justice financial settlement, which will enable the Executive to come to their own view about new capital expenditure, including on Magilligan prison, and we are closer to that with the announcement of the draft budget today, in respect of which we are very grateful to all the parties.
Jim Shannon (Strangford) (DUP)
In the last couple of days the Prison Service has received some adverse publicity from certain sections of the Northern Ireland media. The Prison Officers Association has stated that it accepts that some degree of change is needed. What discussions has the Minister had with the POA to bring the service forward and to get a balance, which is clearly what we need?
Mr Swire
I have, of course, followed those comments and seen the various interviews with the Justice Minister, David Ford. These are devolved matters: prisons are the responsibility of the Department of Justice. We follow these matters closely, but they are best left to those properly in charge of them.
Mark Reckless (Rochester and Strood) (Con)
6. What assessment his Department has made of assets held by the Republic of Ireland’s National Asset Management Agency in Northern Ireland; and if he will make a statement.
The Minister of State, Northern Ireland Office (Mr Hugo Swire)
We are not in a position to make a detailed assessment of these assets. The Northern Ireland Executive are in touch with the authorities in Dublin and NAMA’s Northern Ireland Advisory Committee, and my right hon. Friend the Secretary of State raised Northern Ireland interests in relation to NAMA with the Taoiseach on Monday.
Mark Reckless
Given the difficulty NAMA is having in managing these assets and the Republic’s already over-indebted situation, would it not make sense for us to take some of those assets off its hands, as consideration for financial support we may give?
Mr Swire
My hon. Friend will have an opportunity to make those and other points in the debate on the Loans to Ireland Bill—no doubt he will wish to take part in that. I think he should be proud of what we are doing, however. We are now part of the solution rather than the problem, and we believe it is right that we, as a country that has so much trade with the Republic of Ireland, should come to its support at this time, with no conditions.
Mark Durkan (Foyle) (SDLP)
The Minister has indicated that the Northern Ireland Office is not in a position to make an assessment. Does he believe that the Treasury is in a position to make an assessment, and has it done so?
Mr Swire
That is a good question. My hon. Friend the Financial Secretary to the Treasury has said that discussions continue with the Government in Dublin about NAMA and the way forward, so they are clearly in regular discussions. Again, no doubt my hon. Friend will inform the House about that in the debate this afternoon, and discuss it with those who wish to take part in that debate.
Dr Alasdair McDonnell (Belfast South) (SDLP)
7. What discussions he has had with the Secretary of State for Transport and the Northern Ireland Executive on the development of an air transport strategy for Northern Ireland.
The Minister of State, Northern Ireland Office (Mr Hugo Swire)
The Government fully recognise the importance to Northern Ireland of a suitable framework for air travel, particularly for the economy and export trade. My right hon. Friend the Secretary of State and I will continue to engage with colleagues in Government and the Northern Ireland Executive as the new aviation policy framework is developed in the new year.
Dr McDonnell
I thank the Minister for his answer, and endorse the point he makes about an air transport strategy and framework being essential to our economic recovery, particularly in respect of tourism. [Interruption.] Can he assure me, however, that he will do all in his power to work with those responsible—both the Secretary of State for Transport and the Department for Regional Development in Northern Ireland—to ensure that we get a functioning strategy that provides air links to Europe, Canada and the United States? [Interruption.]
Mr Speaker
Order. I wish to hear the Minister’s reply, and I am sure the House wants to hear it as well.
Mr Swire
I am most grateful to you, Mr Speaker.
The hon. Gentleman is right, and I know he represents his constituents well in these matters. A balance has to be struck between extending the amount of flights that are available and the environmental consequences of doing that. I should declare that I have had meetings with Flybe, which operates out of Belfast City, and is based in my constituency. It does an excellent job, and I know it is always looking for new routes. The hon. Gentleman is absolutely right: in order to grow tourism and exports, which we have to do to rebalance Northern Ireland’s economy, we have to make sure that we have transport links that are as good as any other part of the United Kingdom.
Robert Halfon (Harlow) (Con)
8. What recent discussions he has had on the threat to security in Northern Ireland from residual terrorist groups.
The Secretary of State for Northern Ireland (Mr Owen Paterson)
I meet regularly with my security advisers and David Ford to discuss the terrorist threat in Northern Ireland. The threat level in Northern Ireland stands at severe, meaning an attack is highly likely. So far this year there have been 206 arrests, both in Northern Ireland and the Republic, for acts of terrorism and serious criminal incidents related to terrorism.
Robert Halfon
I thank my right hon. Friend for his reply. How is he working with the Republic of Ireland to facilitate the cross-border strategy for dealing with dissident violence?
Mr Paterson
I am very grateful for that question. Co-operation with the Republic of Ireland on this issue is at an unprecedented level. I pay tribute to the outgoing commissioner, Fachtna Murphy, who has done a tremendous job, and I am delighted that Martin Callinan has been appointed as his successor. [Interruption.] A symbol of that was the cross-border strategy announced this week, showing the unprecedented collaboration between the PSNI and the Garda. [Interruption.]
Mr Speaker
Order. There are far too many noisy private conversations taking place in the Chamber. I call the Rev. William McCrea.
Dr William McCrea (South Antrim) (DUP)
Thank you, Mr Speaker. In the discussions held concerning the serious threat from republican dissidents, has the issue of police manpower been raised? Has due consideration been given to the representation made by the Police Federation concerning police numbers, especially the police reserve, and in light of the relevant extra financial resources that would be necessary?
Mr Paterson
I am delighted to see the hon. Gentleman back in his place following his illness, as always asking pertinent questions. He will know that police levels in Northern Ireland are the highest in the United Kingdom at 4.2 per 1,000. The numbers of police are for the Chief Constable to decide—it is an operational matter—but as I have said on several occasions already in this Session, we will stand by Northern Ireland and if the Chief Constable and the Justice Minister make a good security case, we will consider access to the contingency fund.
Mr Philip Hollobone (Kettering) (Con)
9. What recent assessment he has made of the effects on the Northern Ireland economy of recent financial developments in the Republic of Ireland.
The Minister of State, Northern Ireland Office (Mr Hugo Swire)
We are concerned about the risk that the current economic difficulties in the Republic of Ireland might have on Northern Ireland. We will continue to work closely with the Northern Ireland Executive on these issues. The Financial Secretary and the Secretary of State met the First Minister and Deputy First Minister on 24 November to discuss these matters.
Mr Hollobone
What steps can my hon. Friend the Minister take to do his best to protect the Northern Ireland economy from the worst effects of the financial crisis in the south?
Mr Swire
As I said before, we should be proud of being part of the solution, rather than the problem, and it is right to stress the interdependence of the two economies. Ireland accounts for 5% of the UK’s total exports. We export more to Ireland than to Brazil, Russia, India and China together, and it is incredibly important—40% of Northern Ireland’s exports go there as well. So a healthy economy in Dublin is important to a healthy economy in Belfast.
Steve Rotheram (Liverpool, Walton) (Lab)
10. What recent discussions he has had with the Northern Ireland Executive on the provision of resources to the Police Service of Northern Ireland to address security threats from dissident activity.
The Secretary of State for Northern Ireland (Mr Owen Paterson)
PSNI resources are primarily a matter for the devolved Administration. I am delighted that the Executive have agreed a draft budget. This Government will work to support the PSNI where exceptional security pressures exist.
Steve Rotheram
Can the Secretary of State tell the House whether he has given the Chief Constable of the PSNI a specific assurance that he will continue to have access to additional funds from the reserve, so that vital community-based policing does not suffer from a lack of resource?
Mr Paterson
I am very grateful to the hon. Gentleman for his question. Of course, in Northern Ireland, community policing is an absolutely vital part of moving the process forward. The Chief Constable has been allocated significant resources in the draft budget today, and it is up to him how to apportion those significant sums of money.
Jack Lopresti (Filton and Bradley Stoke) (Con)
11. What plans he has to make Northern Ireland an enterprise zone.
The Secretary of State for Northern Ireland (Mr Owen Paterson)
My hon. Friend the Exchequer Secretary is writing to the Northern Ireland Executive this week with a draft consultation paper on rebalancing the Northern Ireland economy. He and I will be meeting Executive Ministers in the new year to discuss the paper before publishing it for consultation.
Jack Lopresti
Does my right hon. Friend agree that Northern Ireland’s high dependence on the public sector is simply untenable, and that it is more important than ever that private sector innovation be promoted in the Province, in order to rebalance the Northern Ireland economy?
Mr Paterson
My hon. Friend is absolutely right on this, and I am very pleased to see his continued interest in Northern Ireland matters. We have been saying for three years now that an economy that depends for 77.6% of its GDP on state spending is wholly unsustainable. It will need rebalancing. That will take time. To do nothing is irresponsible; to move too fast is irresponsible, and I estimate that it will take, probably, 25 years. This week, we will be sending a paper to the Executive for discussion, looking at ways of turning the whole of Northern Ireland into an enterprise zone.
Heidi Alexander (Lewisham East) (Lab)
Q1. If he will list his official engagements for Wednesday 15 December.
The Prime Minister (Mr David Cameron)
This morning, I had meetings with ministerial colleagues and others, and, in addition to my duties in this House, I shall have further such meetings later today.
Heidi Alexander
Time and time again, the Prime Minister has said that he wants to protect the poorest and most vulnerable while reducing the budget deficit, so can he explain to me and to residents of my Lewisham East constituency why he is heaping huge cuts on local councils, which tend to spend half their overall budget on child protection, care for the elderly and services for the disabled?
The Prime Minister
Let me tell the hon. Lady what we are doing in Lewisham to protect the most vulnerable. The per pupil funding in our schools in Lewisham will be maintained at £6,951 per pupil—that is the 10th highest in the country, recognising the level of deprivation. On top of that, for the first time in our history we will be adding a pupil premium of £430 per child. That is an excellent policy.
Mark Reckless (Rochester and Strood) (Con)
Q2. The BBC reports that the German Finance Minister wants to set an interest rate to punish Ireland. Will the Prime Minister confirm that this country wants to help Ireland?
The Prime Minister
My right hon. Friend the Chancellor of the Exchequer will be setting out the details of the loan on Second Reading of the Bill today, but I think that it is worth standing back and asking ourselves, “Why is it that we are able to make a loan to Ireland? Why is it that people are asking us to do that?” It is because Britain’s economy is out of the danger zone and recovering. If we had listened to the Labour party, we would still be in a hole.
Edward Miliband (Doncaster North) (Lab)
May I start by paying tribute to our troops serving in Afghanistan? We owe them a huge debt of gratitude for everything that they are doing for us, and our thoughts will be with them and with their families, who will be apart from them at this time of year.
Does the Prime Minister recognise the concern that there will be about the rise in unemployment of 35,000 that we saw this morning? Does he understand that for all those families around the country, his confidence and indeed his restatement today that Britain “is out of the danger zone” will seem very hollow?
The Prime Minister
First, let me join the right hon. Gentleman in paying tribute to our forces in Afghanistan, whom I visited last week, and to all their families, who will be missing them at Christmas time. To be fair, under the Government of whom he was a part and under this Government we are making big improvements on their contact home—on fax time, telephone time and all the contact that they need—and that is absolutely right.
On the unemployment figures, of course everyone should be concerned—and I am concerned—by a rise in unemployment. When anyone loses a job it is a tragedy for that person, and we must do everything we can to help people into work. With the Work programme we will be launching the biggest back-to-work programme in this country for 70 years. To be accurate, although part of the figures are disappointing, they are mixed because we see that the claimant count has come down in the unemployment figures and we are also seeing an increase in the number of vacancies in our economy—every day there are another 10,000 vacancies. So, yes, we have to get the private sector going and increase the number of jobs available. Over the past six months, we have seen 300,000 new private sector jobs. We need more of them, and keeping our economy out of the danger zone is the way to get them.
Edward Miliband
The Prime Minister slightly sounds as though he paints himself as an innocent bystander in relation to the unemployment figures. He should not be pressing ahead with a rise in VAT on 4 January and £20 billion of public spending cuts.
I want to turn to another aspect of the Prime Minister’s financial plans. Can he confirm that the Government are now set to break the promise made in the coalition agreement:
“We will guarantee that health spending increases in real terms in each year of the Parliament”?
The Prime Minister
Being a bystander would mean having no plans to deal with our economic problems. This Government are cutting corporation tax, abolishing Labour’s jobs tax, reducing national insurance and increasing our jobs programme. No one should be complacent; complacency is having no answers. No one should be complacent, but we do see retail sales up, exports up, manufacturing up, interest rates coming down since the election and growth higher than expected. I am not in the slightest bit complacent about what we need to do, but let us not talk down the performance of our economy.
Turning to the NHS, we have increased the NHS budget by £10 billion in this Parliament. I must say to the right hon. Gentleman that only one party stood at the election on saving the NHS and its spending and that was this party right here. I am confident that we will fulfil our goal of real-terms increases every year in the NHS.
Edward Miliband
It is very interesting that the right hon. Gentleman says that he is confident. He should listen to what the Conservative-led Health Committee said only on Monday. It said that with inflation now higher,
“the Government’s commitment to a real terms increase in health funding…will not be met.”
We all remember those posters during the election and we all remember his face, airbrushed, on those posters. Will he now admit that he is breaking that promise?
The Prime Minister
We are not breaking that promise. We want to see NHS spending increase by more than inflation every year. Let me be clear about who supports this policy. The shadow Chancellor—this is not vague, but pretty clear—said, when asked whether it is right to protect NHS spending:
“There is no logic, sense or rationality to it at all.”
Let us be clear: on this side of the House, we want real-terms increases in health spending to ensure that we improve the health of our nation; the Opposition are committed to cutting the NHS.
Edward Miliband
I know that the right hon. Gentleman is good at the broad brush, that he is good at the airbrush and that he does not do detail, but he should read the report, which says that health service spending will be cut next year in real terms.
Let me turn to his next broken promise on the NHS. He pledged, and the coalition agreement says:
“We will stop the top-down reorganisations of the NHS that have got in the way of patient care”,
but that is exactly what the Government are forcing on the health service. Fewer than one in four doctors think that it will improve patient services and independent experts say that it will cost £3 billion. After six months, is not an old truth being confirmed? When it comes to the NHS, you cannot trust the Tories.
The Prime Minister
There are moments when I think I am up against Basil Brush. When it comes to protecting the NHS, only one side of this House is committed to protecting NHS spending and that is this side.
Now we come on to reforming the NHS. We are not reorganising the bureaucracy of the NHS; we are cutting and abolishing it. Because we are making a 45% saving in the bureaucracy of the NHS, that will save £1.9 billion. Because we are increasing the spending on the NHS, that money will go into hospitals, beds, nurses and doctors. All those things would be cut if it was up to the Opposition because they do not have a commitment to maintaining NHS spending.
Edward Miliband
The Prime Minister is breaking his promise and he does not want to admit it. What does he want to do? He wants to leave it to the back end of the pantomime horse, the Deputy Prime Minister, to break the promises. It is time that the front end of the pantomime horse took some responsibility.
I want to ask the Prime Minister about another broken promise, on the education maintenance allowance. Why does he not go a couple of miles away from here—I know that he does not talk to students, or only to those in China—to Southwark college and talk to the students and teachers there? The business teacher there wrote to me and said—[Interruption.] I would have thought that Government Members would want to listen to the fate of students and young people up and down this country. The teacher said:
“I see the benefits that the EMA provides for many of my learners. I see how they struggle to pay for transport…books and other essentials. How can we expect them to aspire to a better life if we deny them the means?”
The Prime Minister
The right hon. Gentleman wants to talk pantomime. I am afraid it will not be long before he is thinking, “Look behind you!”
The problem with the education maintenance allowance is that research shows that 90% of those who receive it would stay on at school anyway. As we are raising the school participation age to 18, it is right that we replace the education maintenance allowance with something that is better targeted. The right hon. Gentleman has to look at the bigger picture, which is that we inherited a completely wrecked set of public finances. His questions are always about this cut or that cut; we know which cuts he is against, but he has not made one single suggestion about how to dig the country out of the pit of debt that he left us in.
Edward Miliband
The truth is that the right hon. Gentleman began the year making promises and now he is breaking them. The promise on NHS spending—broken; the promise on the education maintenance allowance—broken; the promise on universal child benefit—broken; the promise on knife crime—broken; and the promise on new politics—broken. Should not his new year’s resolution for 2011 be to keep the promises he made in 2010?
The Prime Minister
It can be put quite simply: Labour started the year with a leader who was dithering and had no answers on the economy and it has ended the year with a leader who is dithering and has no answers on the economy. I suppose, in Labour terms, that is what passes for progress.
Iain Stewart (Milton Keynes South) (Con)
Q3. The Bletchley Park Trust in my constituency hopes to buy for the nation the personal papers of Alan Turing, the heroic wartime code breaker. It is confident of raising the funds to buy the papers, but there is a danger that the auction might take place before it has the chance to do so. Will my right hon. Friend do all he can to give Bletchley Park a fair chance to secure those important documents for the nation?
The Prime Minister
I would certainly like to do that, because I think my hon. Friend is entirely right—Alan Turing was a remarkable man. Many of the people who worked on cracking the enigma code at Bletchley Park during the war are still alive and we owe them a huge debt of gratitude. They made a decisive difference in winning the second world war and we should praise all of them. Of course I hope that private donors will generously support the fundraising campaign and I am very happy to work with my hon. Friend and do anything I can to make that happen.
Joan Ruddock (Lewisham, Deptford) (Lab)
Earlier, the Prime Minister expressed concern about unemployment. Unemployment in his constituency is 1.5% whereas in my constituency it is 7.3%. A full Jobcentre Plus service is available in Witney, but he has decided to close down the Deptford jobcentre. That cannot meet any test of fairness, so will he personally review that disastrous decision?
The Prime Minister
I will very happily look at the distribution of jobcentres, but the fact is that, through local government and other spending, we put a lot more money into deprived areas in our country. [Interruption.] Yes, we do. I had a little check before coming to Question Time and if we look at what is happening to grant changes—for instance, comparing my constituency with that of the right hon. Member for Doncaster North (Edward Miliband)—the cut in grant in my constituency is 27% greater than in his. I simply do not accept that the Government are not being fair and helping those who need help the most.
Nadhim Zahawi (Stratford-on-Avon) (Con)
Q4. All of us in the Chamber will have had tragic cases of late diagnoses of cervical and breast cancer in our constituencies—cancers that should and can be survived. The Prime Minister promised to do more when he was in opposition. Now that we are in government, what is he doing about the unacceptably low survival rates?
The Prime Minister
My hon. Friend is absolutely right to raise this issue. The first thing we did was to make good on our promise of a cancer drugs fund. We put money into that fund so that thousands of people who were without the drugs they needed can now get them. We want to see further improvements on cancer screening and much more focus on cancer outcomes, and unlike the Labour party we are prepared to put the money in to make sure it happens.
John McDonnell (Hayes and Harlington) (Lab)
According to the latest statistics, children of asylum seekers have been placed in detention centres on 665 occasions in the past year, which means that it is highly likely that there will be children in our detention centres this Christmas. This is not a party-political point. May I ask the Prime Minister, on behalf of the whole House, to give a commitment that by next Christmas, in 2012, there will be no children of asylum seekers in detention centres, and that there never will be again?
The Prime Minister
The hon. Gentleman has made an important point. In our coalition agreement we made a commitment to address the issue, and the Deputy Prime Minister will make a statement tomorrow about how we will end this scandal.
Mr Edward Leigh (Gainsborough) (Con)
Q5. As naval aviation celebrates its centenary, will my right hon. Friend guarantee that the promised transfer of 20 Merlin helicopters from the RAF to the Fleet Air Arm will indeed take place? Otherwise critical mass may well be lost, and the first 100 years of a service that has defended us in peace and war may be the last 100 years.
The Prime Minister
My hon. Friend is absolutely right to raise that point. Of course I will look into the issue of the Merlin transfer. However, we should be clear about the fact that Britain will still have the fourth largest defence budget anywhere in the world. The Navy will have seven Astute class submarines, 19 destroyers and frigates, 14 minesweepers and other vessels, the Royal Marines—obviously—and our nuclear deterrent. We will have a large and fit-for-purpose Navy of which the country can rightly be proud.
Mr David Lammy (Tottenham) (Lab)
The Prime Minister will be aware that there are two great football clubs in north London, Tottenham Hotspur and Enfield Town. He will also be aware that Spurs are considering moving across London to the east end—to the Olympic park. Will he join me, and the Spurs fans who signed a petition entitled “Say NO to ‘Stratford Hotspur’”, in urging the Spurs chairman to put the club and its history before shareholder value?
The Prime Minister
My recent experience has taught me to stay out of international football management. While paying tribute to the right hon. Gentleman’s club, to Enfield Town and, of course, to Arsenal as well—I think it right to do that—I will let the club make the decision. However, it is true to say that on the Olympic site there will be a fantastic stadium of which I hope one football club will take advantage.
Malcolm Bruce (Gordon) (LD)
Q6. Will the Prime Minister join me in thanking and expressing appreciation to the postal service workers across the United Kingdom—including those whom I visited in Inverurie, Dyce and Ellen—who are struggling through snow and ice to make their deliveries? Does he agree that the mail order firms that are cancelling Christmas in Scotland by refusing to accept orders should recognise that they cannot and do not match the universal postal service, and that for that reason it should be secured and protected?
The Prime Minister
The right hon. Gentleman has made an extremely good point. I am sure that all Members in all parts of the House—many of whom will take the opportunity to visit sorting offices this Christmas—will want to record our support and thanks for the very good work that postal workers do throughout the country in ensuring that everything is delivered in time for Christmas. I know that they are having a particularly difficult time in Scotland. Additional air and rail services have been laid on to speed the movement of mail in and out of Scotland, and Royal Mail itself has made a big investment—of £20 million—to try to deal with the most severe weather that it has faced for 30 years.
Again, let us all pay tribute to those who will ensure that cards and presents are delivered on time.
Mr David Hamilton (Midlothian) (Lab)
Q7. The right hon. Member for Gordon (Malcolm Bruce) is right. The situation has been horrendous in Scotland, and indeed in the north of England. The only people who are delivering are those in Royal Mail, as the private companies have offloaded their commitments on to it. The £20 million invested by Royal Mail is important. Will the Prime Minister give a straight answer to this question? Will he guarantee that universal service, and will he and his friend the Chancellor of the Exchequer, who is sitting next to him, review Royal Mail’s privatisation and step back from it?
The Prime Minister
The whole point of trying to get private capital and management involved in Royal Mail is to make the service better, and to ensure that it can go on doing all the things that we want it to do. Opposition Members—including the Leader of the Opposition—shake their heads, but the fact is that they were going to present plans in the last Parliament, because even they realised that this needs to be done.
Mary Macleod (Brentford and Isleworth) (Con)
Will the Prime Minister join me in paying tribute to the service of the Gurkhas and, especially, to my Chiswick constituent, Havildar Lachhiman Gurung, who died on 12 December aged 92? He won the Victoria cross while serving with the Gurkha Rifles in Burma in 1945, where he demonstrated
“outstanding gallantry and extreme devotion to duty, in the face of almost overwhelming odds”.
The Prime Minister
I certainly join my hon. Friend in paying tribute to the Gurkhas both past and present. Anyone who goes to Afghanistan and sees how many Gurkhas there are not just in the Gurkha Rifles but in some of the logistic regiments, serving our country extremely well, will know that we owe them the greatest debt of gratitude, and we must always make sure that it is paid in full.
Mr Ronnie Campbell (Blyth Valley) (Lab)
Q8. This has been a momentous week, with the trebling of tuition fees for students and the average decrease of 10% in grants for local councils. We have also been told this week that the Chancellor has to build up a war chest of £50 billion just in time for the general election—paid for by working people and their families. [Interruption.] That is right; that is the question.
The Prime Minister
I am not quite sure what the question is. Let me just answer the point about fees by putting this point on the record. The Institute for Fiscal Studies has looked carefully at our plans, and it finds:
“By decile of graduate lifetime earnings, the Government’s proposals are more progressive than the current system or that proposed by Lord Browne. The highest earning graduates would pay more on average than both the current system and that proposed by Lord Browne, while lower earning graduates would pay back less.”
I say to the Opposition, including the hon. Gentleman, if they want a progressive system for tuition fee reform, that is what we offer. In terms of dealing with the deficit, it is absolutely vital that we get on top of it. That is good for everyone in this country, his constituents included.
Miss Anne McIntosh (Thirsk and Malton) (Con)
Q9. Will the Prime Minister ensure that primary care trusts, strategic health authorities and all NHS bureaucracies serve patients, not their own interests? Will he further ensure that the Secretary of State for Health intervenes to stamp out any excessive failures caused by that unnecessary bureaucracy?
The Prime Minister
I agree with my hon. Friend, but the key is to try to get rid of so much of that bureaucracy. Under the previous Government, the number of managers went up faster than the number of nurses, and our aim is to reduce that bureaucracy, get rid of that bureaucracy and put power in the hands of GPs and their patients, so that the decisions taken in our constituencies about hospitals and services are driven by the choices our constituents make, rather than by bureaucrats. That is the key to those reforms and why I hope everyone in the House will support them.
Chris Ruane (Vale of Clwyd) (Lab)
Q10. Is there any truth in the rumour that tomorrow the Liberal Democrats will move the writ for the Oldham East and Saddleworth by-election for 13 January, thus denying the good people of Oldham a politician-free Christmas and new year? Is that unseemly haste over the festive season a cynical attempt by the Government to avoid the wrath of the public and especially students on tuition fees, school cuts and police cuts?
The Prime Minister
Do I gather that the Opposition are frightened of having an election? I would put the question the other way: why should the people of that constituency put up with not having a Member of Parliament, and what have you lot got to be frightened of?
Andrew Bridgen (North West Leicestershire) (Con)
Will the Prime Minister outline to the House the steps that the Government are taking to cut through the legacy of red tape and bureaucracy that we inherited from the previous Government in order to deliver real value-for-money front-line services?
The Prime Minister
There is no doubt that regulation has got out of control in this country. That is why my right hon. Friend the Business Secretary is introducing a new one-in, one-out rule—so that any time the Government want to legislate or regulate they have to remove a regulation first. That sort of discipline can make a real difference.
Dr Alasdair McDonnell (Belfast South) (SDLP)
Q11. May I put on the record my appreciation, and the appreciation of many, of the goodwill and practical neighbourly support that the Prime Minister and Chancellor have shown to Ireland at this difficult time? It makes very good sense, because the Irish economy, the Northern Ireland economy and the British economy are closely intertwined. But the economic indications are that Northern Ireland is still in decline and the economy is in serious need of a boost. May I ask the Prime Minister for his assessment of the possibility of a boost to the Northern Ireland economy by reducing corporation tax to 12.5%?
The Prime Minister
The hon. Gentleman makes a good point about the economy in Northern Ireland. We want to see it recover and grow, but everyone in Northern Ireland knows that the size of the state—the size of government—in Northern Ireland has become too big, and we have to see a private sector recovery. We are looking at all sorts of ideas, including the enterprise zone to which my right hon. Friend the Secretary of State for Northern Ireland referred. I should also like to put on record my thanks to those Northern Irish Members who are going to support what we are doing to help the Republic of Ireland in its time of need.
Sajid Javid (Bromsgrove) (Con)
Q12. The people of Bromsgrove are immensely proud of our brave servicemen and women. That is why Bromsgrove district council has decided to give the freedom of the district to the Mercian Regiment next month. Will the Prime Minister join me in congratulating the decision of the council, and does he believe that we can all do more to honour our heroes?
The Prime Minister
I certainly join my hon. Friend in doing that. Bromsgrove is absolutely right to honour the Mercian Regiment in that way. He brings out an important point. Yes, we have responsibility, as a Government and as a House of Commons, to deliver on the military covenant for our personnel in the armed services, but there is a broader responsibility on businesses, on the media, on us as individuals and on the whole country to work out what more we can do to recognise the bravery of these people who do so much on our behalf.
Hugh Bayley (York Central) (Lab)
Q13. There are 1,238 students at York college who come from families poor enough to qualify for a full education maintenance allowance. That is one in three at the college. The chair of governors describes the Government’s plans for EMAs as “totally unacceptable” and the replacement funding as “woefully inadequate.” I know that the Prime Minister visits North Yorkshire from time to time, will he show that he cares about social mobility and that he really is a one-nation Tory by meeting people from the college to discuss—
The Prime Minister
I absolutely accept that we have got to do more to help people to get from the very bottom to the very top. That is why we have saved the per pupil funding and why we are increasing the pupil premium. When we look at what happened over the last few years, since 2004, child poverty rose by 100,000, inequality reached the highest level since 1961, and 5 million people were stuck on out-of-work benefits. That is why we need to change the way that we help people to get on in life, and that is exactly what we are committed to doing.
Mike Freer (Finchley and Golders Green) (Con)
Q14. As we approach Holocaust memorial day, will the Prime Minister confirm that the Government will generously donate to the Auschwitz-Birkenau restoration fund?
The Prime Minister
I can do that. Auschwitz-Birkenau is a very powerful reminder of the ultimate consequences of intolerance, and it is only right that it should be preserved to bear witness to the deaths of the millions of victims who perished there and to act as a stark reminder of man’s inhumanity to man. The director of the Auschwitz-Birkenau Foundation has recently visited the UK to discuss funding with a number of Government Departments, and we are also involved in EU discussions. I think everyone in this House knows how important it is to maintain these memorials. We obviously remember the holocaust, but we must also remember that there have been other acts of gross inhumanity more recently. We have to go on remembering to stop that happening again.
Mr Kevin Barron (Rother Valley) (Lab)
Will the Prime Minister tell the House whether, when he appointed the ex-Member for Arundel and South Downs to the other place, he knew his thoughts on state benefits being an incentive to breed? Is that another example of the new politics the Prime Minister promised the country?
The Prime Minister
I do not know how long that one took to think up. The former hon. Member, who is now a Member of the House of Lords, completely withdrew those comments and apologised for what he said, which was completely unacceptable. I am prepared to leave it at that.
Andrea Leadsom (South Northamptonshire) (Con)
Q15. Is my right hon. Friend aware of the concern of many people at reports in the press that he plans to support high-speed rail regardless of next year’s consultation? Will he spread a bit of Christmas cheer by reassuring my constituents that he will keep an open mind and that he will not be railroading through a railroad?
The Prime Minister
I completely understand the concern that there is all the way along the proposed line. Obviously, people are worried about it and, yes, this is a proper consultation—it must be a proper consultation and it will be. As I have said before at the Dispatch Box, for 50 years we have been trying to deal with the north-south divide and have a more effective regional policy. I do believe that high-speed rail has a really effective role to play in bringing our country closer together and spreading economic benefit throughout all our country.
Alison McGovern (Wirral South) (Lab)
Students in Wirral tell me that they need their education maintenance allowance for travel to go to the sixth form or college of their choice. Catherine McCormack, the head of South Wirral high school, says:
“Without EMA, choice and diversity are not supported.”
Does the Prime Minister think that a choice of courses is only for those who can afford it?
The Prime Minister
I have to say to the hon. Lady that we looked very carefully at the study that was completed under the Government of the Labour party and it showed that nine out of 10 of those people receiving education maintenance allowance would have stayed on at school anyway. This is why the Labour party landed us in such a mess over the economy. We have to ask the question about value for money and whether we are spending money in the correct way. We are not abolishing EMAs: we are replacing EMAs with something more effective. At a time—[Interruption.]
Mr Speaker
Order. Members ask the question; they must listen to the Prime Minister’s answer.
The Prime Minister
At a time when we are legislating to raise the participation age to 18, we have to ask whether it is it is right to spend so much money on asking people to do something that by law they will be asked to do anyway.
Robert Halfon (Harlow) (Con)
Time and time again, we seem to be exporting extreme Islamist terrorists and suicide bombers to Afghanistan, Israel and now Sweden. What steps is my right hon. Friend taking to drain the poison of extreme Islamism from our country?
The Prime Minister
My hon. Friend raises an incredibly important point. If we are frank on both sides of the House, we have not done enough to deal with the promotion of extremist Islamism in our country. Whether it is making sure that imams coming over to this country can speak English properly, or whether it is making sure that we de-radicalise our universities, we have to take a range of further steps, and I am going to be working hard to make sure that we do. Yes, we have got to have the policing in place; yes, we have got to make sure that we invest in our intelligence services; yes, we have got to co-operate with other countries—but we have also got to ask why it is that so many young men in our country get radicalised in this completely unacceptable way.
Mr Speaker
We come now to the 10-minute rule motion. I call Nadhim Zahawi. [Interruption.] If the hon. Gentleman would just wait for a moment, may I, as always, appeal to right hon. and hon. Members who are leaving the Chamber to do so quickly and quietly so that the same courtesy is extended to the hon. Member for Stratford-on-Avon as they would want to be extended to them? [Interruption.] I hope that Members are on their way out, but large numbers of Members will of course be staying to listen to the hon. Gentleman.
St George’s Day and St David’s Day
Nadhim Zahawi (Stratford-on-Avon) (Con)
I beg to move,
That leave be given to bring in a Bill to designate St George’s Day, or the nearest working day, as an annual public holiday in England with effect from 2012; to designate St David’s Day, or the nearest working day, as an annual public holiday in Wales with effect from 2012; and for connected purposes.
In all three primary party manifestos, we vowed to promote national integration. One of the most effective ways of achieving that is to make the saints’ days of St George and St David bank holidays in England and Wales respectively. This is a subject that means a lot to me and to many of my constituents in Stratford-on-Avon. I stood up and promised the people of Stratford-on-Avon that I would not add to the legislative burden that they already face and that I would take away from it. I promised that if I had the chance, I would introduce this Bill.
Unlike our neighbours in Scotland, Northern Ireland and the Republic of Ireland, England and Wales do not currently celebrate our saints’ days as bank holidays, which is something that I wish to change. It is quite right that in 2011 there should be a special one-off bank holiday to celebrate the royal wedding, but from 2012 onwards, the royal wedding bank holiday should be replaced by bank holidays that celebrate our two countries’ patron saints.
We all know St George as the famous dragon slayer whose bravery freed a town from the tyranny of a vicious dragon and eventually led the townsfolk to Christianity. I have to point out, however, that St George was an immigrant to this country. St George is widely believed to have been born in Turkey and served in the Roman army before being taken into English hearts. My hon. Friend the Father of the House, who is an expert on that region, tells me that he may even have been of Kurdish origin—I speculate further that his skin may have been my shade of tan. St David is remembered not only for his miracles and for his close affinity to nature, but as a great unifying force for Christianity and for Wales. Both saints had a huge impact on the culture of their respective countries. What they stood for is just as relevant today as it was way back then.
We all know our patron saints, but why is it important to celebrate them? The best answer is simple: it is through national days that we can celebrate what makes our nation so great. On such days, we can be yet more proud of the best aspects of English and Welsh culture and society, such as our history of tolerance, acceptance and scientific innovation, and the huge impact that we have had on the history of the world. There is so much to be proud of in our past and so much that our children can learn from, both in our successes and our mistakes.
In recent years, I have been saddened to see the symbols of our patriotism hijacked by the fringe right-wing of our country. Today, this House can go a long way towards reclaiming them. We can ensure that all who live in Britain, whatever their background, can join together and celebrate all that makes Britain great. I am a firm believer in the supreme value of our culture and history, and we should never let anyone tell us not to celebrate them.
I will now put to bed the one argument against such a change, which I have heard time and again, that an extra bank holiday would be bad for our economy. As a business man and entrepreneur who has built strong and enduring businesses, I reject the idea that one extra bank holiday will affect productivity. The working people of this country will do the work that they need to do regardless of a new bank holiday. We must remember that the whole concept of work has changed. Work is no longer just about turning up at a particular place at a particular time and then leaving at a fixed time. One beneficiary of the proposal would be small shops and businesses in our town centres, which would benefit from extra custom during the holiday. Our local pubs will undoubtedly attract many people who wish to toast St George or St David. Through the creation of special events for those days, our leisure and tourism industries will do well.
To further put the proposal in context, we should consider the relatively few bank holidays that we receive compared with our European and north American neighbours. We are 16th in Europe with only eight bank holidays, whereas France has 11, Sweden has 11 and Germany has 12. Even our notoriously hard-working American friends have 13 bank holidays a year, although I accept that they take less vacation time overall.
Interestingly, and by a strange coincidence, YouGov recently commissioned a survey into the British public’s attitude on this issue. It discovered strong public support for an increase in the number of bank holidays. More than two thirds of adults—68%—think that it would be appropriate for Great Britain to have at least nine days of public holiday a year. Of the calendar occasions that are candidates for the extra bank holiday, YouGov found that St George’s day is the most popular with 22% of support. That is just ahead of Remembrance day on 21%, which is the other clear favourite. The battle of Trafalgar and the summer solstice came third and fourth respectively.
I am delighted that the Prime Minister heard my call for the flag of St George to be flown over Downing street in the summer. It is high time that the flag was taken back from those groups that are not worthy of it. Today could be a huge step in the right direction. If passed, the Bill could be of real benefit to social cohesion in England and Wales, and I hope that colleagues will join me in supporting it and making it a reality. It would be a very fine wedding present to both nations. I commend the Bill to the House.
Question put and agreed to.
Ordered,
That Nadhim Zahawi, Claire Perry, Nick Boles, Keith Vaz, Brandon Lewis, Andrew Rosindell, Jonathan Edwards, Simon Hughes, Sajid Javid, Mr Robert Buckland, Mr Brian Binley and Robert Halfon present the Bill.
Nadhim Zahawi accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 13 May and to be printed (Bill 128).
Point of Order
Chris Bryant (Rhondda) (Lab)
On a point of order, Mr Speaker. Yesterday, as noted at column 814 of the Official Report, the hon. Member for East Dunbartonshire (Jo Swinson)—I have notified her that I would raise the matter today—effectively said that I had misled the House in the previous Parliament on whether the Americans would be able to maintain cluster munitions on British territory, for instance in Diego Garcia. The Foreign Secretary wisely said that he had no evidence that the House had been misled, but that he had not been able to see the papers of the previous Government. For the complete avoidance of doubt, may I make it clear that it was our complete intention that there would be no American cluster munitions on British territories anywhere in the world? Can you advise me of how I can put that on the record?
Mr Speaker
The answer is that the hon. Gentleman has just done so, as he well knows.
Loans to Ireland Bill (Allocation of Time)
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
13:21 - The House divided: - Ayes: 293 / Noes: 22 - Question accordingly agreed to.
Mr Speaker
The amendment has not been selected, but there will be an opportunity for a debate, and if necessary a vote, on the main motion.
The Financial Secretary to the Treasury (Mr Mark Hoban)
I beg to move,
That the following provisions shall apply to the proceedings on the Loans to Ireland Bill:
Timetable
1.–(1) Proceedings on Second Reading, in Committee, on consideration and on Third Reading shall be completed at today’s sitting in accordance with the following provisions of this paragraph.
(2) Proceedings on Second Reading shall (so far as not previously concluded) be brought to a conclusion three and a half hours after the commencement of proceedings on the Motion for this Order.
(3) Proceedings in Committee, on consideration and on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption or six hours after the commencement of proceedings on the Motion for this Order, whichever is the later.
Timing of proceedings and Questions to be put
2. When the Bill has been read a second time—
(a) it shall (despite Standing Order No. 63 (Committal of bills not subject to a programme order)) stand committed to a Committee of the whole House without any Question being put;
(b) proceedings on the Bill shall stand postponed while the Question is put, in accordance with paragraph (1) of Standing Order No. 52 (Money resolutions and ways and means resolutions in connection with bills), on any financial resolution relating to the Bill;
(c) on the conclusion of proceedings on any financial resolution relating to the Bill, proceedings on the Bill shall be resumed and the Speaker shall leave the Chair whether or not notice of an Instruction has been given.
3.–(1) On the conclusion of proceedings in Committee, the Chair shall report the Bill to the House without putting any Question.
(2) If the Bill is reported with amendments, the House shall proceed to consider the Bill as amended without any Question being put.
4. For the purpose of bringing any proceedings to a conclusion in accordance with paragraph 1, the Speaker or Chair shall forthwith put the following Questions (but no others)—
(a) any Question already proposed from the Chair;
(b) any Question necessary to bring to a decision a Question so proposed;
(c) the Question on any amendment moved or Motion made by a Minister of the Crown;
(d) any other Question necessary for the disposal of the business to be concluded.
5. On a Motion so made for a new Clause or a new Schedule, the Chair or Speaker shall put only the Question that the Clause or Schedule be added to the Bill.
6. If two or more Questions would fall to be put under paragraph 4(c) on successive amendments moved or Motions made by a Minister of the Crown, the Chair shall instead put a single question in relation to those amendments or Motions.
7. If two or more Questions would fall to be put under paragraph 4(d) in relation to successive provisions of the Bill, the Chair shall instead put a single question in relation to those provisions.
Miscellaneous
8. Paragraph (1) of Standing Order No. 15 (Exempted business) shall apply so far as necessary for the purposes of this Order.
9.–(1) The proceedings on any Motion made by a Minister of the Crown for varying or supplementing the provisions of this Order shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.
(2) Paragraph (1) of Standing Order No. 15 (Exempted business) shall apply to those proceedings.
10. Standing Order No. 82 (Business Committee) shall not apply in relation to any proceedings to which this Order applies.
11.–(1) No Motion shall be made, except by a Minister of the Crown, to alter the order in which any proceedings on the Bill are taken or to re-commit the Bill.
(2) The Question on any such Motion shall be put forthwith.
12.–(1) No dilatory Motion shall be made in relation to proceedings to which this Order applies except by a Minister of the Crown.
(2) The Question on any such Motion shall be put forthwith.
13. The Speaker may not arrange for a debate to be held in accordance with Standing Order No. 24 (Emergency debates) at today’s sitting before the conclusion of any proceedings to which this Order applies.
14.–(1) Sub-paragraph (2) applies if the House is adjourned, or the sitting is suspended, before the conclusion of any proceedings to which this Order applies.
(2) No notice shall be required of a Motion made at the next sitting by a Minister of the Crown for varying or supplementing the provisions of this Order.
15. Proceedings to which this Order applies shall not be interrupted under any Standing Order relating to the sittings of the House.
16.–(1) Any private business which has been set down for consideration at 4 pm at today’s sitting shall, instead of being considered as provided by Standing Orders, be considered at the conclusion of the proceedings on the Bill today.
(2) Paragraph (1) of Standing Order No. 15 (Exempted business) shall apply to the private business for a period of three hours from the conclusion of the proceedings on the Bill or, if those proceedings are concluded before the moment of interruption, for a period equal to the time elapsing between 4 pm and the conclusion of those proceedings.
I do not wish to detain the House too long in moving the motion. It seeks the approval of the House to consider all stages of this important Bill in a single day. With the co-operation of the House, the Bill will make a major contribution to the United Kingdom’s declared international commitments.
Why do we need to expedite the Bill? The loan to Ireland is novel and large, and the Bill is needed to give the Treasury the necessary authority to advance funds to Ireland. The loan agreement will require the Government to obtain all necessary authorisations before the first draw-down on the loan can be made. The international package is to be discussed at the International Monetary Fund tomorrow, and it is important that the Government, the IMF and the other lenders can be sure that legislation will be passed so that they can assess the adequacy of the total support package, hence the desire to proceed as quickly as possible today. Passing the Bill will also provide certainty to financial markets that the UK’s funding package will be in place. It is in no one’s interest to create further instability.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
I do not think that anybody wants to waste time on the timetable motion unless necessary, but if my hon. Friend were to provide an assurance that the Bill can and will be used only for a single bilateral loan to Ireland, and that it will not be used for any other purpose, that might help it on its way.
Mr Hoban
I do not wish to pre-empt the remarks that my right hon. Friend the Chancellor of the Exchequer will make on Second Reading, but I can provide that assurance to my hon. Friend.
The Bill is needed to provide statutory authority for the Treasury to pay out the funds involved. Any loan agreement is contingent on obtaining that necessary authority. In improving the overall package of financial assistance to Ireland, our international partners need to be sure that the UK will have the necessary legislation in place to allow it to fulfil its part.
Lady Hermon (North Down) (Ind)
Will the Minister clarify one point that confuses me? The Bill is entitled the Loans to Ireland Bill, but the explanatory notes, which I know are not binding, keep referring to, and imply that there is, a single loan. How many loans will there be to Ireland? Is there a limit?
Chris Bryant
I, too, do not want overly to delay the House, but we are using an emergency procedure on a Bill that will not go through the same processes as other Bills. It is therefore all the more important that we ensure that we rarely use such a procedure. Will the Minister ensure that the Government do not use this procedure on future occasions, if similar arrangements have to be made for other countries?
Mr Hoban
It is important that there is proper parliamentary scrutiny of measures such as this. That is why we sought to agree the timetable through the usual channels, and to ensure that there is time to debate amendments and that the Bill goes through the normal process of scrutiny. Given that the Bill is shorter, it can be scrutinised in a shorter period of time without compromising scrutiny. That is why I believe that we can deal with it today. I urge the House to support the programme motion.
Mr Peter Bone (Wellingborough) (Con)
I have a lot of respect for the Minister; he is one of the most able in the House. [Hon. Members: “ Hear, hear.”] However, it was not his best speech.
The hon. Member for Rhondda (Chris Bryant) made a point about emergency measures, but the Minister did not call the Bill an emergency measure—he just said that it is an important Bill and that it be would rather nice to get it through quickly. It is absolutely true that the Bill is not an emergency measure and there is no such urgency for it. However, it is not the duty of the House to say to the Executive, “It will be jolly nice to get the Bill through quickly.” We are here to scrutinise the Bill. It matters not what team Back Benchers are on: they are here to hold the Government to account. I said that as an Opposition Member and I shall say it as a Government Member. The Minister remarked that the longer he spoke, the more he would eat into time on Second Reading, but the Government designed the allocation of time motion in that way. When we were in opposition, we said that that such remarks were appalling, and they are also appalling in government.
This motion contains one of the most draconian guillotines we have ever seen in Parliament. It contains 16 separate restrictions on debate, it is longer and has more words than the Bill itself, and it is designed purely to restrict debate and to remove the right to vote on amendments in Committee. I am afraid that it is as bad as those we used to see under the previous Government. It is rubber-stamping at its finest. The motion proposes to rush through legislation at a speed that would win approval in North Korea and to take Parliament for granted.
This is not my first time scrutinising a Government who are trying to rush a Bill through Parliament. Coincidentally, the circumstances of a debate on a Northern Ireland Bill on 4 March 2009 were very much the same, in so far as the Government tried to rush through a Bill in one day when, as now, it was not necessary to do so. Therefore, I feel that we have come full circle. Here we are with a different Government—a coalition Government—who are trying to rush through another Bill.
As a trained chartered accountant, I am rather partial to my numbers. Therefore, I would like to read out a few. Three and a half hours is the amount of time that Parliament is being given for the Second Reading debate of the Bill; £3.25 billion is the minimum amount that the Bill proposes to give the Republic of Ireland; and zero is the probable chance that the House of Lords will be able to scrutinise it, because it will most likely be certified as a money Bill. Let me expand on those three figures. Three and a half hours for Parliament to debate a Bill on Second Reading—actually, I should have said that three and a half hours is the maximum time that we are being given, because the time starts from the moment that the allocation of time debate starts. If the allocation of time debate runs its full course and there is a Division, the time for a Second Reading debate on a Bill that proposes spending £3.25 billion will be a maximum of 15 minutes. The Chancellor will not have cleared his throat in 15 minutes. In other words, we will be spending £216 million a minute during that debate.
One could argue that none of these things matters—we saw it all the time in the previous Parliament—because we have the backstop of the other place, which cannot limit debates, and Members can scrutinise the Bill clause by clause and vote on amendments. Unfortunately, that is not the case with this Bill: because it will be certified as a money Bill, there will be limited time for debate in the other place. We therefore do not have the backstop, so it is up to this House to scrutinise the Bill properly. This is a most draconian guillotine motion and is entirely unnecessary, and I intend to try to divide the House on this most important matter. Whether one is for or against the principle of the Bill—or, indeed, whether one is indifferent to it—we as parliamentarians must demand proper time for debate.
It is important to set out the reasons why all stages of the Loans to Ireland Bill should not take place on one day. Let us consider the circumstances under which the Government can legitimately push their legislation through all its stages in one day. I understand that in national emergencies, such as those relating to terrorism, the swift progression of a Bill through Parliament is needed. However, the Loans to Ireland Bill is not one of those Bills. Since 1997, only a handful of Bills have been pushed through the Commons in one day alone. The last one was the Northern Ireland Bill in 2009, which I referred to a few moments ago, but let us look at the typical Bill that has gone through in one day and the precedents that this motion creates.
On 4 April 2001, the Elections Bill went through all its stages in one day, owing to the national crisis caused by the foot and mouth epidemic. Clearly that is not a reason for the Loans to Ireland Bill to go through in one day. On 2 September 1998, Parliament was recalled from its summer recess to pass all stages of the Criminal Justice (Terrorism and Conspiracy) Bill, as an urgent response to the terrible Omagh bombing. Again, that does not apply to today’s Bill. On 19 February 2008, the Banking (Special Provisions) Bill was passed in relation to Northern Rock, and therefore needed to be rushed through the Commons. The House sat until midnight on that day, which I understand was because of market sensitivity. Again, that does not apply to today’s Bill. None of those exceptional circumstances applies to the Loans to Ireland Bill. If this guillotine motion goes through, the Government will have set a dangerous precedent for curtailing debate and excluding proper parliamentary scrutiny on controversial issues.
Jim McGovern (Dundee West) (Lab)
I was intrigued to hear the hon. Member for Harwich and North Essex (Mr Jenkin) say in his intervention on the Minister that we should not waste any more time on the motion than is necessary. Does the hon. Gentleman agree with his hon. Friend, and is he as intrigued as I am to know under what circumstances time wasting would indeed be necessary?
Mr Bone
This Government have put us in a Catch-22 situation, which the previous Government used to put us in too: time for debating guillotine motions is taken out of time on Second Reading. That never used to happen; it was something that the previous Government got into the habit of doing. That means that all these people on the Government Benches want me to shut up, so that we can get on with Second Reading. [Hon. Members: “Hear, hear.”] Well, my colleagues behind me are going to be disappointed. The newer Members of this Parliament are going to learn—I know that they are keen on this, because they want parliamentary scrutiny, not rubber-stamping—that there is a simple way for all my colleagues on the Government Benches and for Opposition Members to get into the debate, which is to defeat the guillotine motion in a vote.
Mark Reckless (Rochester and Strood) (Con)
We may have heard one or two “Hear, hears”, and I am certainly someone who wants to speak on Second Reading, but let me make clear my appreciation for what my hon. Friend is doing. Any responsibility for the curtailment of time for Back Benchers should rest squarely where it belongs, which is with those on the Treasury Bench.
Mr Bone
I am grateful to my hon. Friend for his support. If we do not get it right today, this coalition Government and future Governments will use the same trick again and again.
What I am doing is not a wrecking manoeuvre; nor is it about stopping the Bill from making progress. All we need to do is defeat the guillotine motion now, and then there will be a full Second Reading debate, followed by the Committee stage and Third Reading. The current situation is an abuse of Parliament and its democracy. Normal rules are being abandoned so that the Government can get things through on the nod. Surely I am not mistaken that the only possible reason for proceeding today would be if the Minister had written a cheque for £3.25 billion last night and handed it to the Irish Government. Then I might be inclined to agree that we should get on with things today. However, the Minister does not seem to be leaping to the Dispatch Box to confirm that.
One argument for pushing the Bill through could be the lack of space in the parliamentary calendar and an inability to spare any more time to debate it, but we all know that that is not true. Even with recess upon us, we could have abandoned the Backbench Business Committee debate tomorrow—Thursday—and had the Committee stage and Third Reading instead. However, if that was not the flavour of the will of the House, we could have used Monday, for which a general debate is listed. If the general debate were abandoned, Government business would not be lost, and the debate could be rescheduled for another time. Alternatively, if there really is an emergency and the Bill really does need to be progressed now, let the House sit this Friday until the business is complete.
Parliament could be allowed a full day on Second Reading, which would occur after the allocation of time motion were defeated, and the Government could then choose Thursday, Friday or Monday for Committee and Third Reading. That would in no way hold up progress; nor could it be interpreted as letting our friends in Europe down. Indeed, the idea that they do not take our word for it that the Government are serious is also, I have to say, not believable. If the Government say that they are going to give £3.25 billion to Ireland in a loan, they know that that is what will happen, so that argument is just an excuse to push the Bill through in one day.
Mark Hendrick (Preston) (Lab/Co-op)
Clearly the issue at hand is not whether the Government will give £3.25 billion to Ireland. However, the Minister did not necessarily make it clear in his response to the hon. Member for Harwich and North Essex (Mr Jenkin) whether money would be going just to Ireland, or to Portugal or Spain in future too. Could the hon. Gentleman give us his views on that?
Mr Bone
Mr Speaker, you would rightly tick me off if I answered that question. That is a matter for the Second Reading debate, because it is to do with the issues in the Bill. I am expressing no view on that at the moment. However, unless we have adequate time to discuss those issues, the hon. Gentleman’s point might not be clarified.
Lack of parliamentary time cannot be an excuse for this motion. The advantage of splitting the debate over two days is that it would allow a proper debate on Second Reading today. I believe that many Members would like to take part in such a debate. It would also allow amendments to be tabled in the normal way, and enable us to have a proper debate in Committee, with time for a debate and votes on each of the amendments. There would also be time for a Third Reading debate.
I understand that the Government have tabled a manuscript amendment today, although I have not seen it. That amendment has been tabled without allowing Members the time to consider it. That just shows the weakness of this procedure. If the allocation of time motion were defeated, we would have a full Second Reading debate and the Government would have to rearrange their business to provide for the Committee stage and Third Reading. The loan would still go through, but the Bill would have been properly debated and, if necessary, amended. Defeating the allocation of time motion would not wreck the Bill; it would simply give more time for proper scrutiny so that the Bill could be improved. We have already seen that the Government have tabled a manuscript amendment. What will happen if, during the 15 minutes of the Second Reading debate, a Member decides that they want to table an amendment? They just will not have time to do it.
How does the motion fit in with the principles behind parliamentary sittings? The present timetabling of our sittings is broadly based on the Jopling reforms and encompasses three principles. It is against those three principles that we should judge the Bill today. The first is that the Government must be able to get their business through, and, within that principle, ultimately control the time of the House. Secondly, the Opposition must have the opportunity to scrutinise the actions of the Government and to improve or oppose legislation as they think fit. Thirdly—this is of more interest to me—Back-Bench Members on both sides of the Chamber should have reasonable opportunities to raise matters of concern from their constituents. A number of my constituents have contacted me with concerns about this Bill.
A major role of Members of Parliament is to scrutinise and review legislation. It is a well-known fact—I doubt that anyone in the House would disagree with this—that the better the scrutiny, the better the Bill. It is also a major role of Members of Parliament who are not members of the Executive to hold the Executive to account, whichever party or parties make up that Executive. That is one of the most important roles we have as Members of Parliament. This motion removes that role. It is appalling that the coalition Government should try to stifle that essential function. I have long campaigned for more transparency and debate in Parliament. I strongly believe in strengthening the role of the Back Bencher. The erosion of parliamentary power to scrutinise legislation has been a long-adopted approach by successive Governments. This motion, I am afraid, is a step too far. Individual Members of Parliament attach a great deal of importance to scrutiny and accountability, and problems arise when the Executive try to deny us that right.
The Government have declared that amendments must be tabled before Second Reading, which is ludicrous. They ask MPs to table amendments before we have had a chance to hear what the Minister has to say. How can MPs properly table amendments when they have not heard the details and the arguments? Despite that difficulty, 11 amendments have already been tabled. The Government were forced to produce a three-page document—I have it with me—of amendments, and another five-page document on their justification for rushing the Bill through. These documents were produced only in the last few days. How can they, and the amendments, realistically be scrutinised if the Bill goes through all its stages today? It is just not possible.
The House of Lords got rather fed up with the Commons bouncing it, so it has now come up with a procedure whereby the Government have to answer a number of questions—I think it is eight—before they can get a Bill such as this through. Those questions are printed in the explanatory notes to the Bill. Let us look at some of them for a minute, and see whether the answers hold up to scrutiny.
The first question is: “Why is fast-tracking necessary?” The notes go on to explain that the proposal is for a bilateral loan, and that the timing of the UK’s proposed loan is currently unclear. They state:
“It is necessary to fast-track the Bill so that the UK’s international partners can be confident that the bilateral loan will be implemented.”
That is an absolutely hopeless answer to the question. It does not tell us why the Bill is being fast-tracked. It is ridiculous to suggest that our international partners would think that, because we had not taken another day or two to debate the Bill, the Government were not going to proceed with the loan.
The next question is:
“What is the justification for fast-tracking each element of the Bill?”
Again, there does not seem to be an answer. The notes state:
“The Bill is a short Bill, with few substantive provisions other than to provide for sums required by the Treasury”.
Yes, the Bill is short because many of the provisions deal with statutory instruments and affirmative resolutions. It is an important Bill, but it is short because many of the provisions do not go into detail. That is exactly why we need a proper Second Reading debate. I do not think that the Government have answered that question either.
The next question is a good one:
“What efforts have been made to ensure the amount of time made available for parliamentary scrutiny has been maximised?”
The answer is:
“The Bill is being published on the same day it is introduced and arrangements are being made for amendments to be accepted in advance of second reading in the House of Commons.”
How on earth does that answer the question about making time available for parliamentary scrutiny? It is like the Prime Minister being asked a question at Prime Minister’s questions and giving an answer to a completely different one. It might be a good answer, but it is not the answer to the question that was asked.
The next thing that the Lords want to know is this:
“To what extent have interested parties and outside groups been given an opportunity to influence the policy proposal?”
The answer talks about our European Union colleagues, but the key is in the last sentence, which states that
“there has been limited opportunity to give interested parties and outside groups an opportunity to influence.”
By the Government’s own admission, they have failed in regard to that question.
The next question asks whether the Bill includes a sunset clause. The Government can argue, with some justification, that it does, because it stipulates a period of five years. It does not tell us when the loans are to be repaid, but it places a five-year limit on the period in which they can be made. That is not what is normally understood by a sunset clause, however. Sunset clauses normally stipulate that in, say, a year’s time, Parliament will look again at the legislation to see whether it is correct.
The next question is:
“Are mechanisms for effective post legislative scrutiny and review in place? If not, why do the Government judge that their inclusion is not appropriate?”
The answer states:
“The Bill provides for regular reports”.
On that one, I will give the Government a tick. So far, they have passed one of the six tests. The next question is:
“Has an assessment been made as to whether existing legislation is sufficient to deal with any or all the issues in question?”
The Government do not really answer that one. They say:
“Statutory authority for such expenditure is required in accordance with the Concordat of 1932 between the Government and the Public Accounts Committee.”
I am unclear as to what that means, but it does not seem to answer the question that has been asked. The final question is:
“Has the relevant Parliamentary committees been given to opportunity to scrutinise the legislation?”
The explanatory notes were drawn up in such haste that the spelling of the question was incorrect, but the simple answer to it, as I hope my hon. Friend the Member for Stone (Mr Cash) might confirm, is that no such scrutiny has taken place.
In concluding my opening remarks, I want to say a few words about what I think is wrong. Let me state to the House how this mother of Parliaments should work in relation to timings of debates. The driving principle of reform should be the redistribution of power—from the powerful to the powerless. That means boosting Parliament’s power to hold the Government of the day to account. The House of Commons’ historic functions were to vote money for Governments to spend, and to scrutinise laws. It now barely bothers with the first, and does the second extremely badly. There was a time when legislation that had been formulated after months of civil service and ministerial deliberation was sent to the House of Commons which would pore over it, shape it and send it back, get it back, look at it again and improve it some more—Bill by Bill, clause by clause, line by line. Every piece of legislation would be put under intense scrutiny. Is it legally sound? Will it be effective? Is it worth the cost?
Let us compare that with today. Let me take Members on the journey of a piece of legislation as it passes through the modern House of Commons. It is likely to have been dreamt up on the sofa of No. 10. A Bill is drafted and it is sent to the House for a couple of hours of routine debate among a few MPs. Then the bells ring, the whips are cracked and suddenly, out of nowhere, all the Members turn up to vote. More often than not, they do not even know what they are voting for. The Bill limps through. Then it goes into Committee. The Committee’s duty is to look at the detail clause by clause, but it is packed full of people that the Whips have put there. So, surprise, surprise, the Government rarely lose a vote on any of the individual points of detailed scrutiny. Then it is back to the House to do it all again—debate, bell and then vote to wave the legislation through.
Every Bill now has a programme motion setting out how much time can be spent scrutinising and debating each part. There are automatic guillotines, and the time allowed for scrutiny is set in advance, before anyone can see whether or not a particular issue is contentious or complex. Watching a Minister in the Commons drawing out one point for an hour to fill the time, to an audience of dozing Back Benchers—that is not accountability. How can the mother of all Parliaments turn itself into such a pliant child?
Unfortunately, I cannot claim credit for that last section of my speech. It was in fact from a speech on fixing broken promises delivered on 26 May 2009 by my right hon. Friend the Member for Witney (Mr Cameron). I do not think that Ministers on the Front Bench today want to upset the Prime Minister. So they have an opportunity, before the conclusion of the debate, to say that they will withdraw the allocation of time motion, and that we will have proper debate.
For many years I have sat on the Back Benches imploring others to give more time for Parliament to scrutinise legislation. I believe that to be the fundamental role, not only of the Back Bencher, but of Parliament itself.
Steve Baker (Wycombe) (Con)
I am most grateful to my hon. Friend for giving me the opportunity to say just how much I stand behind the Prime Minister in his remarks, which my hon. Friend has so generously shared with the House. However, does my hon. Friend agree that if this bail-out is necessary at all, it is an emergency?
Mr Bone
My hon. Friend is tempting me to enter the debate, which I am not going to do, and as time is short, I shall conclude my remarks.
Time is all we have as Back Benchers, and if that is taken away from us, so is power. I urge all parliamentarians in the House to vote against the guillotine motion.
Mr Nigel Dodds (Belfast North) (DUP)
I shall be brief. I want to commend the hon. Member for Wellingborough (Mr Bone) for his absolute consistency. The speech that he has just delivered is one that he would have delivered, and perhaps did deliver—certainly the gist of it—many times when he sat on the Opposition Benches. The points that he raises are extremely important in the general context of how Parliament operates.
I do not want to say a great deal about the Bill because we shall come to Second Reading shortly, but I will say this. We are used to having Northern Ireland business rushed through—sometimes for good reasons, sometimes for not so good reasons. I have had various discussions with the Secretary of State for Northern Ireland and others relating to important matters that we believe require legislation, not least an issue that was extremely important during the run-up to the general election—the fact that Members of this House who do not take their seats continue to claim lots of money for parliamentary purposes—and we were told that time would be made available to debate that, and for the House to have its say. We were also told that legislation on the issue of dual mandates would appear. Yet I am now told that the Government cannot do any of that because “there isn’t any time”.
The only point that I want to raise is this. The hon. Member for Wellingborough has spoken at great length, but the bottom line is that the Government will do what they will. The notion that “there isn’t any time” to do the necessary things and important things that have been laid out by the Government in relation to Northern Ireland is simply not tenable, given the fact that here we are today, setting time aside to rush through all stages of a Bill—I will not get into the merits of it; we will come to those—in one day. I say to the Government, especially the senior Members on the Treasury Bench, that they should reflect on the fact that we are being told that other important things cannot be done. It is clear that they can be done and should be done, and I urge the Government to take action as soon as possible.
Mr Christopher Chope (Christchurch) (Con)
There is one element of the guillotine motion that I particularly resent. That is the provision that if a group of amendments is being discussed when the guillotine falls, it will not be possible to vote on any more than the question that was before the House at that time, whereas under a traditional programme motion it would be possible, with the leave of the Chair, to vote on more than one of the amendments in the group.
My hon. Friend the Financial Secretary to the Treasury says he thinks it is reasonable that we should have the opportunity to give the Bill proper scrutiny. In my submission, scrutiny includes having the opportunity to test the view of the House on amendments before it. My concern is that if all the amendments are grouped together, and if the debate on that group carries on until the guillotine falls, it will only be possible to vote on one narrow amendment—amendment 3—although of course the guillotine motion allows the Government amendment to be voted on as well, because those are the biased terms in which the motion has been drafted.
The Bill is a very significant measure. I have had letters from constituents asking, “How is it that we can afford to lend £3.25 billion to Ireland when the Government are saying that they cannot do anything to make more money go to small businesses that are crying out for loans?” That is the sort of question that our constituents are asking, and I would have hoped that the Government would be more co-operative with the House by providing a bit more detail in the Bill.
We have heard that the Chancellor will be telling us in due course about the terms of the loan, the interest rate and the repayment schedule. Why could not those details have been included on the face of the Bill, to enable us to make an assessment and decide whether to table amendments? If the Government are really saying, “This is so desperately urgent that we need to do it straight away,” why were they not prepared to co-operate with the House a bit more and give us the maximum amount of information to enable us to deal with it in a constructive way today?
I am very concerned, and my hon. Friend the Member for Wellingborough (Mr Bone) has articulated the wider constitutional implications. We know that the other place was very concerned about the fact that the Government were taking forward a lot of emergency measures without giving the opportunity for proper debate and consideration—and that applied not just to money Bills but to other Bills too. This is a money Bill, so it will not be possible for the other place to consider it in detail. That responsibility falls fairly and squarely on this House.
We got a guarantee from the Government that if there was going to be fast-tracking or emergency legislation, the justification for it would be set out in the explanatory notes. I do not think the justification given in these explanatory notes is a justification for what the Government are trying to do today.
If this Bill were to be considered tomorrow or on Monday, we would have more time to debate it. Incidentally, we would also be able to consider what the Members of the Irish Parliament are saying on this very subject in their House today. If, for example, many of them were to say that they would not wish to repay the loan given to them by the United Kingdom, I would have thought that would be a very material consideration in our debate on the matter, but this motion denies us the opportunity to consider the implications of what transpires today in the Irish Parliament. I suspect that is not an accident; I suspect it is by design. That is why I will vote against this guillotine motion.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
I wanted to intervene on my hon. Friend the Financial Secretary to ask for a further assurance. I am minded to support my hon. Friend the Member for Wellingborough (Mr Bone) by voting against this motion in the Lobby if there is a Division. However, I might refrain from doing so if my hon. Friend the Financial Secretary were to rise to his feet and assure me that the measures in the Bill could not be used to lend to Ireland through another international institution, such as the European Union. I would be grateful for that assurance.
Mr Speaker
No further Members are standing to show that they wish to speak.
Question put.
Loans to Ireland Bill
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
16:11 - The House divided: - Ayes: 523 / Noes: 7 - Question accordingly agreed to.
The Chancellor of the Exchequer (Mr George Osborne)
I beg to move, That the Bill be now read a Second time.
Two weeks ago I told the House that it was my intention to ask for authority to make a bilateral loan to Ireland as part of the multinational assistance programme for that country. I said that I judged it to be in our national interest, given our country’s close economic, financial and political connections to the Irish Republic, to be ready to help, and I want to thank all parts of this House for agreeing with that judgment.
Let me directly address the question of why we are taking this legislation through today, and why we are seeking to do it rapidly. The reason is that this week we expect the International Monetary Fund board to meet and agree the assistance package, the eurozone to sign off on its contribution, and the Irish Parliament to accept the international help that is offered. Let me say this to hon. Members in reference to the previous debate. I actually have the authority to make, under common law, a loan to Ireland and to seek at a much later date retrospective authority from Parliament. I decided—[Interruption.] Let me say that I decided that that was a wholly inappropriate thing to do, and that I should come to Parliament to seek its authority before signing the loan agreement. The loan agreement may be signed at any moment.
Mr Peter Bone (Wellingborough) (Con)
I am grateful to the Chancellor for giving way, but has he not let the cat out of the bag? He has just said that there is no urgency, because he had the power to do this anyway. If that had been said in the previous debate, the result of the vote might been different.
Mr Osborne
From what I could tell from what my hon. Friend was saying in the previous debate, he thought it important to have parliamentary scrutiny. It is true that I could have issued the loan under the common-law powers available to me, and come back at a later point to seek parliamentary approval. I thought the House would prefer me to seek parliamentary approval first, before making the loan—but there we go; you can’t please everyone.
Mr Douglas Carswell (Clacton) (Con)
The Chancellor suggested that it is at his discretion that he has brought forward this Bill. Is it not the case that the 1932 convention requires him to do so—and does not that, rather than his discretion, explain why this legislation is before the House?
Mr Speaker
Order. We cannot have an intervention on an intervention. We will hear from the Chancellor.
Nadhim Zahawi
I thank my right hon. Friend for giving way. Setting aside the technicalities of why we are debating this measure and how long we shall do so, and getting down to the substantive issue of the loan, can the Chancellor share with the House what the fees and the interest to the UK Government will be over the period of the loan if the Irish Government draw down the whole of the loan?
Mr Osborne
The second intervention draws me back into the rest of my speech, but in response to my hon. Friend the Member for Clacton (Mr Carswell), I have common-law powers to issue the loan and sign the loan agreement. I then have to seek statutory authority, but that could be done retrospectively. I thought it more appropriate to seek parliamentary approval first, and that was a discretionary choice that I had.
I will answer my hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi) directly a bit later in my remarks, when I get on to the terms of the loan that we are going to consider.
Mr Christopher Chope (Christchurch) (Con)
Will my right hon. Friend give way on that point?
Mr Osborne
I will give way to my hon. Friend, and then I really must make some progress.
Mr Chope
I am grateful to my right hon. Friend. If the point that he is making is such a good one—it may well be—why did he not include it in paragraph 14 of the explanatory notes, making a virtue of the fact that he was bringing this matter before the House now rather than seeking retrospective approval?
Mr Osborne
I said in an earlier statement to the House that I was seeking to do that, and I had hoped that hon. Members were paying attention to what I said at the time.
The legislation that we shall pass today will allow the UK to be ready in the new year to meet its commitments to one of our closest international partners. As has been noted, the legislation before the House is narrow in scope—it is explicitly a Loans to Ireland Bill—but it is still enabling legislation. It sits alongside the actual loan agreement, which sets out in detail what we will offer Ireland. To ensure that Members have as much information as possible available to them for today’s discussion, a summary of the key terms of the loan agreement, which was agreed with the Irish Government only this morning, has been available in the Vote Office for more than an hour now.
Mr Osborne
If my hon. Friend will allow me, I will make a bit of progress and then of course take some further interventions.
In my remarks today, I intend to address both the substance of the legislation and the loan agreement, but before that let me briefly say something about how we got here. Over the course of this year, it became increasingly clear that the situation in the Irish economy was unsustainable. Their sovereign debt markets had effectively closed and had little prospect of re-opening. Ireland’s market interest rates had risen to record levels, and Irish banks had become almost wholly reliant on central bank funding to maintain their operations, with no obvious prospect that that was going to change. This situation simply could not go on. We had been monitoring the situation for many months and had engaged in confidential discussions with our partners in the G7 and at ECOFIN about possible solutions.
Over the weekend of 20 November, Ireland’s Prime Minister made a formal request for international financial assistance. The UK, alongside the International Monetary Fund, the EU, the eurozone and some other member states—Sweden and Denmark—made an agreement in principle to take part in putting together an assistance package for Ireland. Since then, the various interested parties have been working round the clock with the Irish authorities to put together a package. Officials from the British Treasury have been in Dublin in recent days ensuring that our interests and concerns were represented, and I want to thank them for their hard work. At the end of November, Ireland agreed with the IMF and the EU a three-year financial assistance package worth €85 billion.
Mr Cash
The document to which my right hon. Friend just referred is “for information purposes only” and is clearly not intended to be construed as part and parcel of the Bill. So can he explain why in the document the “conditions precedent” to the arrangements interweave the so-called “bilateral loan” with the European financial stability mechanism, and why an attempt is then made to bypass that by referring to the “Governing law” as “English law”?
Mr Osborne
I am going to discuss some of the conditions attached to the loan. The particular condition that my hon. Friend refers to ensures that the UK is protected if other parties to this international agreement change their arrangement with Ireland in some way that materially affects our ability to be repaid. That condition gives us an ability at that point to step in.
Mr Osborne
I know that my hon. Friend is assiduous on these points, but I think that on this occasion he is not correct. This is simply a fall-back mechanism for us to say that if Ireland in some way renegotiates its loan from the eurozone, from the EU or from the IMF, it is a condition of our loan to Ireland that we can step in at that point and examine our situation. That protects the British taxpayer and has absolutely nothing to do with European law or anything else; it is simply there to make sure that other parties to this international agreement must have due regard to what they are doing, and how that might have an impact on the ability of the British taxpayer to be repaid.
Mr Andrew Love (Edmonton) (Lab/Co-op)
Two things are happening in Ireland at the moment. The first is that austerity reigns and the economy is going down on a daily basis. The second is that a whiff of elections is in the air. The right hon. Gentleman talks of renegotiation, but is it not a fact that renegotiation of a new Government in Ireland is very much on the cards?
Mr Osborne
Obviously we are not going to prejudge the outcome of any Irish general election. Of course we—not just us, but the IMF and others—negotiate with the Government of the day. Although the principal Opposition parties in Ireland have concerns about the Irish budget and the like, I understand that they have accepted the principle of international assistance, and the IMF has been in direct contact, and has engaged in discussions with them. The international community, including the UK, is satisfied that we are in a position to make this offer to the Irish Government, which is why I am bringing the Bill to the House today.
As I was saying, Ireland agreed to seek IMF and other support worth €85 billion, and the money will be used as follows: €35 billion will be used to support Ireland’s banking sector, with €10 billion going towards immediate bank recapitalisation; and the remaining €50 billion will be used for sovereign debt support. In terms of contributions to the cost of the package, Ireland itself will provide €17.5 billion towards the total. The remaining €67.5 billion will be split, with one third coming from the IMF, one third from the European financial stability mechanism, and one third from the eurozone facility and bilateral loans from the UK, Sweden and Denmark. I have agreed that our contribution should amount to €3.8 billion, or £3.25 billion at today’s exchange rate.
This significant package will help Ireland to deal decisively with its problems. It will help it to recapitalise its banks and set up a contingency reserve for future problems. It will also help the Irish authorities to cover the shortfall in their budget, which was passed by the Irish Parliament earlier this month. Their budget will see a fiscal consolidation of €15 billion by 2014, of which €6 billion will be implemented next year, as part of their strategy leading to a target budget deficit of 3% of gross domestic product in four years’ time.
Of course people ask why we are extending the loan to Ireland. We are doing so because it is overwhelmingly in our national interest to have a strong Irish economy and a stable banking system. This is not just about the Irish economy and Irish jobs; it is about the British economy and British jobs. A loan does not add to our deficit, and any increase in borrowing is matched, of course, by the commitment of the Irish to repay with interest. The answer to the question asked by my hon. Friend the Member for Stratford-on-Avon earlier is that if Ireland takes out all the loan that is being made available to it and pays it back with the interest that has been forecast, it would pay us £440 million in fees and interest over this period.
Let us remember that Ireland is the fifth largest market for British exporters and accounts for 5% of our total exports abroad. An interesting way for the House to think about it is that every man, woman and child in Ireland spends an average of £3,600 per year on British goods—that is how connected our economies are. Indeed, as has often been pointed out, we export more to Ireland than to Brazil, Russia, India and China put together, although we are trying to increase our exports to those four very large emerging markets. For some of our industrial sectors, such as food and drink or clothing and footwear, Ireland is our top export market. Ireland is also the only country with which we share a land border, and in Northern Ireland our economies are particularly linked, with two-fifths of exports going to the Republic.
I wish to reassure Members representing Northern Ireland that I am very aware of their constituents’ worries and the difficulty they face as a result of the problems in Ireland. That is why my hon. Friend the Financial Secretary recently visited Belfast to discuss these issues directly. I am open to any discussions that Members from Northern Ireland wish to have with me or the Treasury about the economic situation and indeed the banking situation in Northern Ireland. Just as our two economies are linked, our businesses and banking sectors are also interconnected. More Irish companies are listed on London exchanges than companies from any other foreign country. The two main Irish-owned banks have an important presence in the UK, holding between them about £30 billion of customer deposits. In Northern Ireland, two of the four largest high street banks are Irish-owned, accounting for almost a quarter of personal accounts.
Mrs Anne Main (St Albans) (Con)
My right hon. Friend has stressed the importance of the export market and our strong links with Ireland. So why did he find it necessary for paragraph 6(h), under the heading “Events of default”, in the summary document to set out that
“the Borrower not being or ceasing to be a member of the European Union”
would constitute a default? I would hope that we would support Ireland if we chose to do so, and not bind it into necessarily having to stay in the European Union, given the length and operation of the loan.
Mr Osborne
It is merely an observation that the fact that Ireland is a member of the European Union is not why we are making this loan; it has nothing to do with that. It has to do with the fact that Ireland is deeply connected to us. Indeed, we have just made a loan agreement with Iceland, which of course is not a member of the European Union, in order to seek to recover moneys that were spent on savers in Icelandic banks here in the UK.
Mr John Redwood (Wokingham) (Con)
As this crisis was triggered by the withdrawal of European Central Bank support for Irish banks, will the Chancellor give us an assurance that we will not be involved in any further refinancing of ECB liabilities should it do the same to another country?
Mr Osborne
I had a very specific choice. I had the opportunity—of course, I would have had to seek the authority of the House—to introduce a general Bill to allow me to make bilateral loans to any number of countries. That legislation would have been very easy to draw up, and it would have been easy to ask the House for its support. I have explicitly restricted this to a Loans to Ireland Bill because of the specific connections between our two economies.
Stewart Hosie (Dundee East) (SNP)
May I confirm what the Chancellor has just said? The UK contribution to the entire package will be about 5% of the non-Irish contribution—about £3.5 billion—and that stands in comparison with some £12 billion of exports to Ireland, and, as he said, the Irish banks holding some quarter of the deposits in Northern Ireland. Is that the broad summary of where we are?
Mr Osborne
It is a reasonable summary. Of course we stand behind the International Monetary Fund as a shareholder of it, as are most countries in the world. I shall come on to the European financial stability mechanism, which I have already talked to the House about on a number of occasions. Like other contributors to the EU budget, we stand behind it. In a sense, the loan that we are proposing today is the direct British taxpayer contribution—or rather, the money that is borrowed on behalf of the British taxpayer. I shall come to the terms of the loan, but of course we expect to be repaid, and repaid with interest. We are doing this because we think it is absolutely in our national interest, for some of the reasons that have been set out.
Charlie Elphicke (Dover) (Con)
On that point, may I welcome the fact that the Bill is before the House today and that approval is being sought before the loan is made? Will my right hon. Friend explain how we came to be part of the European financial stability mechanism, what approval the House gave to it and what level of debates there were about it?
Mr Osborne
As I explained to the House previously—my predecessor, the right hon. Member for Edinburgh South West (Mr Darling) is here, and might at some point want to give his own version of events—my understanding is that in the period between the general election and the formation of the Government, an emergency ECOFIN meeting was held to address the Greek situation and to provide confidence that the European Union and the eurozone stood behind other member states that were potentially in difficulty.
My predecessor ensured that we stayed out of the eurozone facility—I have acknowledged that in the House —but acquiesced in the use of article 122 of the treaty, which allowed the European Union to disburse funds when a natural disaster, such as an extreme weather event, was affecting a member state, to create a mechanism that could stand behind countries that got into difficulties. The decision on the use of that mechanism is taken by qualified majority voting, so although we could vote against its use in this situation, I did not think that that would achieve anything. I am focused, in a way that I shall describe, on trying to extricate the UK from the EU-27 mechanisms that stand behind eurozone countries. If hon. Members will bear with me, I shall talk about that later, and if people want to intervene at that point, that would be more sensible.
Let me move on to the connections between our banking sectors. Our banking sector has a considerable exposure to Ireland, but I should stress that in the opinion of the Financial Services Authority, the UK banks are sufficiently well capitalised to more than manage the impact of the situation in Ireland. For a long time now the devaluation in Irish asset values has been accounted for and priced in.
One thing is clear. It is undoubtedly in Britain’s national interest to have a growing Irish economy and a stable Irish banking system. In the judgment of both the Irish Government and the international community that was not going to come about without the assistance package we debate today. I would now like to explain to Members the principles of the Bill, and then take them through the heads of terms of the loan agreement.
The Bill has two substantive clauses. Clause 1 sets out the parameters under which the Treasury may make payments under UK loans to Ireland. As I explained earlier, the total international assistance package, including our contribution, is denominated in euros. However, we are making a bilateral loan in sterling so that Ireland bears the exchange rate risk over the coming years. Subsection (3) of the clause includes a cap on the total size of our bilateral loan. It is written on the face of the Bill that
“the aggregate amount of payments made by the Treasury by way of Irish loans...must not exceed £3,250 million”.
In other words, the £3.25 billion we originally agreed will be the maximum total size of our bilateral loan to Ireland. A sunset clause is also, in effect, built into the legislation. The period over which the loans may be offered begins on 9 December 2010, when the Bill was published, and ends on 8 December 2015.
Mr Osborne
My hon. Friend is pre-empting my speech. I shall get on and explain exactly what those two subsections mean.
As I said, there is no expectation that we will have to make further loans to Ireland in the future. Subsection (4) is intended to prevent an increase in the size of the loan, unless an order is made by statutory instrument, but because the loan is denominated in sterling, a mechanism is needed to accommodate potential changes in the exchange rate in the period between the publication of the Bill and the signing of the loan agreement—that answers my hon. Friend’s point—which could happen in a matter of days. This is not about the exchange rate risk over the coming years—that risk is borne by Ireland—but merely a mechanism to deal with the fact that we are publishing the Bill before we sign the loan agreement, for the reasons that I set out earlier.
The Bill allows the Treasury, under subsections (5) to (7), to make an order once the Bill is in force to increase the limit, as long as that is done solely to take account of exchange rate fluctuations between now and 30 days after Royal Assent, without further Parliamentary procedure.
Mr Cash
I am sure that my right hon. Friend will understand my saying that it would have been so much simpler if what he has just said had been specified in the Bill, instead of a blanket wording referring to substituting a greater amount. We would have then known that that was only intended to allow a margin of error depending on currency fluctuations. Subsection (4) is absolutely clear that there is no restriction.
Mr Osborne
No, let me explain. There are two separate subsections. Subsection (4) allows the loan to be increased substantively, but only with the authority and vote of this Parliament. If I were ever to seek a larger loan to Ireland, I would have to come here and get the vote of the House of Commons. That is what subsection (4) is about. I am making it clear that I have no intention at the moment of doing that, but subsection (4) provides for it, and would prevent us from having to pass further primary legislation. The protection for Members of Parliament is the same—they can keep a check on the Executive—because I would be required to get that affirmative resolution.
Subsections (5) and (6) refer to something different, which is the gap between the passage of the Bill and the signing of the loan agreement. There might be small movements in the exchange rate. We have signed up to this package of a contribution in euros, but we are making a sterling loan. As I explained earlier, I had the opportunity to sign the loan agreement and come retrospectively to seek parliamentary approval, but I am trying to do it the other way around because it gives Members of Parliament a much greater degree of control. That is why these two subsections are required.
Mr Laurence Robertson (Tewkesbury) (Con)
I will be supporting my right hon. Friend in the Lobbies tonight, but I am slightly concerned about clause 1(4), which is rather open-ended about the amount that could be paid. Even though a change would have to be passed by the affirmative resolution, I think the Chancellor would confirm that would be agreed by only a very small number of Members and not the entire House.
Mr Osborne
My hon. Friend has a deep knowledge and experience of issues in Northern Ireland, and indeed the Republic, and I know that his Select Committee will be interested in what is happening with those economies. Let me reassure him that there would be a vote by all Members of the House if I, or any successor of mine—should there be one before 8 December 2015—ever sought to increase the loan. A vote in Parliament would be required, so the effect is exactly the same as asking Parliament to pass another piece of primary legislation. It would involve a vote of the House, which means the legislature exercising its control over and acting as a check on the Executive.
Mark Reckless (Rochester and Strood) (Con)
Will my right hon. Friend confirm that, notwithstanding previous assurances, this loan will not rank pari passu with the EU funds extended under the mechanism, but will be subordinated to them?
Mr Osborne
There is a convention that multilateral loans, such as those involving the mechanism and the IMF, rank senior in any loan agreement. Let me reassure my hon. Friend that I have examined this with great care and interest. The convention is pretty clear and long-established in international law that multilateral loans are senior. That means principally the loan from the IMF, but also the loan from the European mechanism, which we stand behind, so it is also in our interest that it is repaid. However, our loan will rank pari passu with the eurozone and the other bilateral loans. That has partly shaped our judgment about the interest rate we will charge and the point at which we will start to disburse our loan. I shall come back to that.
We expect full repayment to be made over the term of the loan. Clause 1(8) sets out that repayments of both the principal and the interest will go into the Consolidated Fund. We want the whole process to be as transparent as possible, so clause 2 creates a requirement for the Treasury to prepare and lay before Parliament every six months a report on any payments made by the Treasury by way of a loan to Ireland, any sums received by the Treasury by way of interest or repayment of such loans, and the amounts outstanding, in the period to which the report refers.
As I have said, I welcome the agreement across many parts of the House about the need to make this loan, which is in our national interest. I thank the Opposition in particular for their support, and to reciprocate their co-operation I thought we should look favourably on their amendments. I therefore propose to accept in principle the Opposition’s amendment 1, which would modify the Government’s reporting requirements in relation to the bilateral loans. We have today tabled a more appropriately worded version of the amendment which achieves exactly the effect that the Opposition intended. May I explain to my hon. Friend the Member for Wellingborough (Mr Bone) that this is why there is a manuscript amendment? I am trying not to tempt him, because I am sure that he could speak for even longer, but I want to explain this point because he has raised his concern about it. The manuscript amendment has been drafted by the Government’s parliamentary draftsmen in relation to an Opposition amendment that we propose to accept and it has exactly the effect that the Opposition sought.
Let me update the House on the terms of the bilateral loan that we have now agreed in principle with the Irish authorities. I apologise that this information was not made available much further in advance, but the terms were agreed only this morning with the Irish Government and I wanted all Members of the House to have this information available to them. The loan will be drawn in eight tranches, each with a 7.5-year term. The length of the loan is in line with the terms of both the European and IMF loans. The first tranche of our loan will be available to be disbursed in September 2011, which is later than for some of the other tranches that are being drawn down from partners such as the IMF and the European Union.
The interest rate charged on each tranche of the loan will be fixed specifically for that tranche. It will be set by adding a fixed margin of 2.29 percentage points to the appropriate market-determined interest rate—the sterling 7.5-year swap rate—at the time of disbursement. For example, at the present time, the estimated—I stress estimated—interest rate on the first tranche of the UK loan would be the sterling 7.5-year swap rate in September 2011, which on Monday stood at 3.65 percentage points, plus 2.29 percentage points. That would mean a hypothetical interest rate of 5.9% for the first tranche of the loan. The rate on our bilateral loan will be slightly higher than the estimated rate of 5.7% for the first tranche of the IMF and European mechanism funds, so we are charging a slightly higher rate of interest, but it is lower than the estimated 6.1% rate that the eurozone facility will charge on its first tranche of lending. That reflects the different costs of funding and is a measure of international confidence in the UK’s public finances.
Mr Philip Hollobone (Kettering) (Con)
Will my right hon. Friend inform the House how that rate of interest compares with the loan he mentioned earlier that the UK Government agreed with Iceland?
Mr Osborne
The interest rate to Iceland is substantially lower because, frankly, needs must: I am seeking to recover money from Iceland. I am dealing with a situation that I have inherited—obviously the Iceland loan relates to events that happened under the previous Government—and I need the support of the Icelandic Parliament. The rate of interest we are charging is slightly higher than the Dutch, who have also entered into an agreement with the Icelandic Government, are seeking. People might remember the circumstances at the relevant time—there was a pretty acrimonious dispute between Iceland and the previous UK Government—and we have sought to repair broken bridges. The terms of the loan that we have come to with Iceland mean that this country will get its money back. My judgment was that other terms might have meant our not getting our money back at all and that would not have been very sensible.
Mark Reckless
It is enormously welcome that this country is working with Iceland and Ireland to support them in these very difficult times. The Chancellor has mentioned the current 7.5-year swap rate; can he tell us how much higher it is than when he first announced our participation in this bail-out?
Mr Osborne
I do not think it has materially changed. I have been quite focused on trying to land it at the 5.9% rate, because that sits between the 6.1% and 5.7% rates of the other international parts of the package. That rate reflects some of the circumstances that relate to my hon. Friend’s earlier intervention.
The IMF will charge a floating rate, with a margin above its funding costs, in line with its pre-existing loan terms for an extended fund facility. The European loans, like ours, will charge a fixed rate on each tranche set using a margin above their own cost of funds. We will charge interest every six months and there will be a repayment of the principal at the end of the 7.5-year term of each tranche.
In common with the IMF, we will also charge a commitment fee for making the loan. We will charge half a percentage point on the total amounts that may be drawn on under the loan agreement for the forthcoming 12-month period. If the loan is drawn on, the fee will be waived and effectively replaced with the interest charged on the loan.
There are two conditions, which are set out in terms to which I draw the House’s particular attention. The first is that the IMF, as well as the EU, must be satisfied that Ireland is complying with the agreed restructuring plan. I think that that is a very important safeguard for British taxpayers. The second, crucial, condition is that there must be
“no amendments to the Restructuring Plan that would have a material adverse financial impact on the UK operations of Anglo Irish bank, Allied Irish Banks and Bank of Ireland”.
Given the scale of those banks’ operations in the UK, that second condition is significant, and it shows in a practical way why I believe it was right for us to provide the loan. It allows us to have a say in a restructuring plan that could otherwise have had a major impact on the UK and its banking system, and could potentially have cost the British taxpayer considerable sums of money without our voice even being heard. Making the loan has enabled us to set that condition, and to be part of the discussion about the restructuring plan and its impact on the UK subsidiaries of banks which have significant presences in Northern Ireland. I know that there is concern about the potential impact of the plan on jobs and the availability of credit in Northern Ireland, and, indeed, about its potential impact throughout the UK, given that Bank of Ireland owns the Post Office card account.
Nadhim Zahawi
What the Chancellor is saying is particularly pertinent, given that the Post Office cash machine in Portcullis House was provided by the Irish banks.
May I ask a quick question?
Mr Deputy Speaker (Mr Nigel Evans)
No interventions on an intervention, please.
Nadhim Zahawi
Are we the only lender that is lending in a currency other than the euro?
Mr Osborne
Sweden and Denmark are at this moment finalising their loan agreement, and I do not think they have yet made that decision. As I have said, we decided to lend in sterling so that the exchange rate risk would be borne by the Irish rather than the British Government.
The official advice from the Treasury is that the loan agreement represents value for money for the British taxpayer. As I said earlier, it is also in line with the terms offered by both the IMF and the eurozone. I have laid before the House a summary of the key terms of the agreement, and a final written agreement will be forthcoming in the next few days—or, potentially, weeks—once the European and IMF assistance has also been agreed. I will, of course, keep the House informed.
One thing is clear: Ireland is a friend in need, and it is because our economy is currently in a stronger position than Ireland’s that we are able to offer it such reasonable and sensible terms for our bilateral loan.
Mr Mark Field (Cities of London and Westminster) (Con)
I understand all the Chancellor’s concerns about the close relationship between us and Ireland. He said it was important for this country to be at the table in terms of any restructuring. Does he understand the concerns of many of our constituents, who would say that a similar argument could be advanced if there were problems for, say, Santander in Spain, or for other European banks with significant interests in London? Will he make it very plain at this juncture that he considers this to be a case in its own right, rather than one to which we might have to return in the next six to nine months if further problems arose in the eurozone?
Mr Osborne
I have said that I regard this as a case in its own right—a very specific case. As I have explained, quite candidly, my officials offered me two options: a general, enabling piece of legislation allowing us to make bilateral loans to other countries, and the much more narrowly drafted Loans to Ireland Bill. I think that the clue is in the title.
Jim Shannon (Strangford) (DUP)
Over the past few days we have seen substantial growth in the economy of the UK mainland, but that growth has not been reflected in Northern Ireland, as some of its financial institutions—notably Ulster bank—have indicated. What assurance can the Chancellor give the Northern Ireland Assembly, the Minister of Finance and Northern Ireland Members in the House that, at every stage, full consideration will be given to how loans to the Republic of Ireland will affect the economy in Northern Ireland? At this stage, we feel apprehensive about what is being proposed.
Mr Osborne
I completely understand the hon. Gentleman’s apprehension, given the close connections between the economies of Northern Ireland and the Republic of Ireland. Let me make two points. First, as I said earlier, the loan has enabled us to be part of the international discussion about the restructuring of the Irish banks, some of which—as the hon. Gentleman knows even better than I do—are incredibly important operators in Northern Ireland. I appreciate that he will not have had a chance to study the loan agreement, as I have laid it before the House only within the last couple of hours, but one of the conditions is that there should be
“no amendments to the Restructuring Plan that would have a material adverse financial impact on the UK operations of Anglo Irish Bank, Allied Irish Banks and Bank of Ireland”.
That partly addresses the banking situation in Northern Ireland, and, as I have said, it gives us a seat at the table in discussions that affect the UK.
Secondly, as the Secretary of State for Northern Ireland said this morning during Northern Ireland questions, we want to engage with the Executive, with representatives of the Assembly and, indeed, with Members of Parliament about how we can enable the Northern Ireland economy to grow. A draft paper has been put to the Executive. I am very engaged in the process, as is my hon. Friend the Financial Secretary to the Treasury. I repeat the offer that I made earlier to hold a detailed discussion with Northern Ireland representatives, at any point, about some of the broader economic measures that we might be able to take in Northern Ireland to help its economy.
Mr Osborne
I give way to the right hon. Member for Belfast North (Mr Dodds).
Mr Nigel Dodds (Belfast North) (DUP)
I am grateful to the Chancellor, whose comments have clearly provoked a big reaction.
Corporation tax is a big issue in Northern Ireland. It worries people there that the Irish Republic wishes to retain its 12.5% corporation tax rate. We in Northern Ireland are arguing for a cut in our rate, but the Secretary of State for Northern Ireland tells us that that will cost us some £310 million of our block grant. In a way, we will be subsidising the Irish Republic to keep its corporation tax low, and penalising Northern Ireland if it wants to reduce its corporation tax. The Chancellor must take that into account in the context of this package of measures.
Mr Osborne
As I said to the House on a previous occasion, I did not think it right—others may take a different view—for one sovereign nation to try to dictate the tax rates of another sovereign nation. I did not think that that was a precedent that we particularly wanted to set. I entirely understand the competitive pressure that the Irish corporation tax rate puts on Northern Ireland, but ultimately it must be for the Irish Parliament to determine its own tax rates. It is, of course, having to take some very difficult measures to preserve the corporation tax rate in the Republic.
I know that there is a discussion to be had about the corporation tax rate in Northern Ireland, and about other measures that might be taken there. A document has been submitted this week. I hear what the right hon. Gentleman says, but let us have that discussion with the Secretary of State for Northern Ireland and Northern Ireland Members.
Mr Geoffrey Robinson (Coventry North West) (Lab)
I have listened with interest to what the Chancellor has been saying. I appreciate the measured way in which he has presented his proposals and, indeed, the cross-party support for them, and I have no wish to disturb that support. However, will the Chancellor think again about two aspects of what he has said?
First, there is the question of the terms on which the loan will be repaid. Given that the deal is currently quite advantageous to the Irish in terms of interest rate security and, indeed, the standing of the loan, would it not be possible to negotiate the option for the UK to be repaid in sterling should there be an interesting movement in the sterling-euro exchange rate, which is quite likely?
Secondly, given that the right hon. Gentleman rather alarmingly says that this might not be the end of the matter, and that therefore he has left the way open, through just the affirmative procedure, for more substantial loans—I think I understand the situation correctly from what he says—to be made to Ireland, will he look at making such action subject to new legislation in the House, which would attract more attention and scrutiny from this body?
Mr Osborne
We are being repaid in sterling, so that answers the hon. Gentleman’s first point. I have already dealt with the second point on a number of occasions, but I shall just point out that the effect would be exactly the same. Whether I brought to the House legislation or used the affirmative procedure, I would have to get the support of Members, so materially the impact would be exactly the same: the House of Commons would be able to stop such action taking place. I should stress that I have absolutely no intention of doing so at the moment, and there is protection.
David T. C. Davies (Monmouth) (Con)
I do not pretend to be an economist, but does the Chancellor share my concern that, if the European Union forces Ireland to put up its corporation tax, that might hold greater danger for us, as Ireland could be in less of a position to pay us back the money? For that reason alone, we should resist any attempt by outside bodies to impose a tax regime on Ireland.
Mr Osborne
My hon. Friend makes a very good point. A sudden flight of international investment from Ireland is not in anybody’s interest. All countries seek to compete against each other for such inward investment, but, as I say, it would set a poor precedent for the UK if one nation state or a collection of nation states started dictating to another nation state what its tax rate should be.
Mr Osborne
My hon. Friend will be very focused on what I am about to say, so if he does not mind I shall make a little progress, and then I shall be happy to take an intervention.
Let me turn briefly to the arrangements for a permanent stability mechanism for eurozone economies. The European Council this week is expected to discuss the matter. Both the Prime Minister and I are very clear that when it comes to putting in place a permanent mechanism, the UK is not part of the eurozone and so will not be part of that mechanism. The president of the euro group has accepted that the UK will not be part of the permanent stability mechanism, and that the European financial stability mechanism, which the previous Government agreed in May and of which we are part, will cease to exist when that permanent eurozone mechanism is put in place.
We will seek to bring to an end the use of the mechanism established in May for the resolution of sovereign debt problems. It was established under article 122 of the Lisbon treaty and originally intended to provide support for member states following natural disasters. European Finance Ministers, including my predecessor, chose to apply that article in May to deal with the eurozone crisis at that time, but that temporary solution should not become a permanent way of doing things, and the time has now come for the eurozone to put in place its own mechanism for dealing with the imbalances in the eurozone. That needs to be part of a comprehensive solution whereby countries address their own problems more decisively, including in their banking systems. We in Britain have shown the way.
Joseph Johnson (Orpington) (Con)
The Chancellor speaks of a comprehensive solution. Does he recognise that we face not only a crisis of liquidity in Portugal, Greece and Ireland, which we are assisting bilaterally, but a crisis of solvency? The solvency crisis will require us to address not just Irish bank restructuring, but Ireland’s sovereign debt—it is impossible to distinguish the two, given that the Irish state has guaranteed all the Irish banking system’s liabilities—and the solvency of other peripheral eurozone economies. We are helping with financing, but we have not yet addressed the fundamental solvency of those peripheral countries.
Mr Osborne
My hon. Friend makes a very good point. There was a debate—it was pretty widely reported, so I am not betraying anything that was not read by everyone throughout the world—about whether to address the solvency issues, and whether there should be a contribution—or a haircut, to use the jargon—from senior debt holders in the banks or, indeed, sovereign debt holders. The international community’s view, with which we absolutely agree, is that such a contribution risked a very serious contagion that might spread through many different banking systems, not just those of the countries to which my hon. Friend refers. So the decision was taken not to require a private sector bail-in from senior debt holders in the banks or, indeed, sovereign debt holders.
As part of a comprehensive solution, the eurozone needs to come to a rapid conclusion about its mechanism, draw a distinction, as it has sought to, between existing debt and potential future-issued debt, create a credible mechanism and work out how a single currency zone that does not have a single fiscal policy or a political union will deal with its imbalances.
Mr Osborne
I see the speed with which my hon. Friend leaps to his feet at that point, but I shall take his intervention in a moment.
The eurozone needs to address that situation, and we need to ensure that it gets it right, because that is absolutely in our interests. Individual countries also need to address their problems. Portugal has a long-standing problem with its economic productivity, which the Portuguese Government are determined to address. The Irish banking system has caused enormous problems for the Irish Government, who are now addressing that. In a bipartisan debate, this is a slightly partisan point, but I think that the UK has demonstrated over the past six months that, by its own efforts, a country can earn market credibility, improve its credit rating and improve international confidence in its economy. We need the eurozone to sort out its mechanism, but individual countries in Europe also need to take decisive steps to deal with the particular problems that their economies face. Let me give way to my hon. Friend the Member for Stone (Mr Cash), and then I must conclude to allow others to speak.
Mr Cash
I have put a number of questions, as yet unanswered, to my right hon. Friend on that very issue, but I am glad that he has given, at any rate, a partial answer to one of them. The mechanism’s transfer from what appears to be an unlawful basis in article 122 of the Lisbon treaty to the new proposals under article 136 will involve only the eurozone and represent an important step in the right direction. Does my right hon. Friend not accept, however, that much could happen over the next two or three years, between now and 2013, while the mechanism in which my right hon. Friend’s predecessor engaged, and which I believe to be unlawful, continues? We could be locked into a Portuguese or a Spanish black hole. We do not know yet, but there is a danger.
Mr Osborne
First, I am dealing with the situation as I found it, and as I found it we were committed to that mechanism under qualified majority voting, but I am trying to extricate us from that. Secondly, the permanent arrangements might come into play sooner than 2013. That is a subject for discussion at the European Council, and, certainly as far as we are concerned, the sooner we get on with it, the better. I am doing everything I can to ensure that the UK is extricated from the commitment that was entered into, and we are making good progress.
Mr Osborne
If the hon. Gentleman will allow me, I have already taken an intervention from him. Many Members want to speak, and I have spoken for an hour.
Alan Johnson (Kingston upon Hull West and Hessle) (Lab)
Get on with it, George.
Mr Osborne
Well, I took a lot of interventions. I’m sorry about that, but there we go—there’s no gratitude in this place!
Let me conclude. The Government have taken action to put our own house in order. We were once seen as part of the problem; we are now part of the solution. It is in our national interest to help Ireland, and I commend this Bill to the House.
Alan Johnson (Kingston upon Hull West and Hessle) (Lab)
We will support the Bill. The more I listen to the Chancellor, the more my admiration and respect grows for his predecessor, my right hon. Friend the Member for Edinburgh South West (Mr Darling). On 8 May, my right hon. Friend negotiated arrangements under which the UK remained outside the €440 billion European financial stability facility and ensured that we did not contribute as much as a rusty old drachma to the bail-out of Greece.
Alan Johnson
I will take interventions later.
In his statement on 22 November—repeated today—the Chancellor said that he counselled his predecessor against joining the European financial stabilisation mechanism, which was a pre-existing fund involving all 27 member states and was worth only a seventh of the larger facility. As the Chancellor said, my right hon. Friend the Member for Edinburgh South West is in his place and if he catches your eye, Mr Deputy Speaker, he can give his recollection of that conversation.
However, given that the mechanism—the smaller amount—was decided by qualified majority voting, it seems that agreeing to ensure that we stay out of the €440 billion EFSF was a good deal for our country, particularly as my right hon. Friend ensured that none of the mechanism of which we were part was used to bail out Greece. That was a good deal all round, and a lesson for our inexperienced Chancellor in the art of negotiation. Indeed, the quip going round a couple of years ago, when the collapse of the banking industry in Iceland was closely followed by what happened in Ireland, was: what is the difference between Iceland and Ireland? Answer—one letter and six months. A modern variation could be to ask, what is the difference between Darling and Osborne? Answer—five letters, six months and £6.6 billion.
Mr Cash
When the shadow Chancellor says, as the Chancellor said, that the process was triggered by a qualified majority vote, I am sure that he would agree that that is not strictly true, because it resulted from a request by a member state. The final solution or arrangements are made by virtue of a qualified majority vote at the end. That is a qualification, but it does not alter the fact that, on the basis it was explained to us, article 122 was almost certainly unlawful and the use of article 136 would have been a better route. However, we appear to be entrapped into article 122 for the current purposes.
Alan Johnson
I believe that the hon. Gentleman will seek to address that in his amendment to clause 3, which we will discuss later. On the specific issue, there is no doubt that the mechanism was decided by qualified majority voting. All 27 European member states were part of that. I know from experience of negotiating in Europe over many years that it is a pretty turgid process and one has to be on one’s toes. My right hon. Friend the Member for Edinburgh South West can speak for himself, but I think he got a very good deal for this country on Greece.
The Chancellor must take responsibility for the deal that he has negotiated and not try spuriously to blame his predecessor, as he did again in his evidence to the Treasury Select Committee on 8 December. He had a choice about whether the UK should contribute to the Irish rescue plan. In principle, he has made the right choice, but before us today is a hastily drawn-up Bill that does not set out the terms of the loan, the interest rate or the repayment schedule. Colleagues from all parties will want to explore and probe those matters in Committee, and we particularly want to get to our amendments on clause 2, so a goodly proportion of the time available to us this afternoon may be better spent on that. It is therefore not my intention to detain the House for long on Second Reading.
David T. C. Davies
Does the shadow Chancellor share my gratitude that the decision is being taken in this Chamber and not by a group of unelected bankers in Frankfurt? That is because we did not listen to Opposition Members—we have never supported joining the euro, which would have meant that the decision would not have been ours to make in the first place.
Alan Johnson
I always try to avoid sharing the hon. Gentleman’s pleasure. I shall come to the nature of the deal, because in debating the Bill we are discussing one element that constitutes a little more than half of the money that the UK taxpayer is putting into the deal.
The argument for treating Ireland as a special case is clear. I shall reiterate some of the points that the Chancellor made. Our two countries are intertwined in commerce, in trade, in banking, in culture and in sport. We share a language and a land border. Not only is Ireland one of our five largest export markets but, as the Chancellor said, one part of the United Kingdom—Northern Ireland—sends 40% of its exports across the border to the Republic. The situation in Ireland could cause significant damage to UK financial institutions and create instability in both sovereign and bank debt markets. The UK is Ireland’s largest creditor—we are talking about almost €112 billion—and I understand from a newspaper report last week that the Royal Bank of Scotland and Lloyds have Irish loan books worth 82% and 53% of net assets respectively.
In its report last month, the International Monetary Fund singled out Ireland to demonstrate what it called the “key underlying vulnerability” of UK banks’ exposure to foreign banks. The support programme assures the protection of senior bond holders in Irish banks from any losses, thus affording a greater level of protection to UK banks. For all of those reasons and many more, it is in this country’s interest to support this package.
I want to raise three concerns. The first, which was raised in a couple of interventions—including by the hon. Member for Stone (Mr Cash)—is the open-ended nature of the commitment. There is a distinct possibility of more money being required for Ireland after 2013, given the tendency of Irish banks to downplay the severity of their situation and the tough conditionality being applied alongside concerns about European growth. In those circumstances, should we not make it clear to our European partners that the EFSF must be used for any further financial support, rather than giving the impression that this is a well into which further buckets can be dipped?
That is particularly relevant to my second concern about the balance between the contributions made by the various mechanisms. The €440 billion EFSF—the facility— for eurozone countries only is being tapped for 4% of the total resources that eurozone countries have agreed to make available for Ireland. The smaller EFSM—the mechanism—of which we are part and to which we contribute, was not used at all for the Greek bail-out. The EFSM is offering 37.5% of its available resources for the Irish bail-out. Why was that formulation chosen and why is the total amount we are contributing double the amount that we would have had to pay if we were a eurozone country?
Mr George Osborne
I am not sure that the shadow Chancellor is correct in that assertion. First, our contribution has been calculated on the basis of what we would have paid if we had been part of the facility. That is how the £3.25 billion figure was broadly arrived at. Secondly, the mechanism currently in use was created after the bilateral agreement was put together for the Greek bail-out. It was never available to be used for the Greek bail-out, which took place as a series of bilateral loans across Europe. As I understand it, over the May weekend the facility was put in place to address the crisis and article 122 was drawn upon to create the mechanism, so it could not have been used for Greece at that point.
Alan Johnson
I am grateful to the Chancellor for that intervention. However, it does not explain why the £3.25 billion he has just mentioned is the bilateral loan. That is the equivalent of what we would have put into the Irish bail-out had we been members of the eurozone. However, we are also putting in £2.6 billion through the EFSM and £800 million through the IMF. With the bilateral loan added to the other donations of British taxpayers’ contributions that we are making through the mechanisms, we are putting in double the amount of money that other European Union countries are contributing.
Charlie Elphicke
Surely, the right hon. Gentleman’s point highlights the lack of wisdom in signing us up to the stabilisation mechanism on 9 May.
Alan Johnson
This may be news to the hon. Gentleman, but his party is in government now. As I said, my party ensured that we contributed nothing—not a penny, not a euro, not a drachma—to the Greek bailout. The Chancellor is coming before this House with a £6.6 billion contribution to Ireland, which we support, but the various aspects of the mechanism need to be explained and understood.
Alan Johnson
We have the €60 billion fund, about which the hon. Member for Dover (Charlie Elphicke) intervened, and we have a second fund of €440 billion. I am simply pointing out—the public deserve to know this—that only 4% is coming from the larger amount and 37% from the smaller amount. I am curious about that, and we need to understand the logic of it.
Mr Hollobone
Is the shadow Chancellor’s point that the European Central Bank is keeping these funds to rescue Portugal, Spain and perhaps Italy in due course?
Mr Mark Field
I will try to make a more helpful point. Given that the Opposition are supporting this loan arrangement, does the shadow Chancellor think it desirable that part of it should be bilateral and therefore agree with the structure that the Chancellor has put in place?
Alan Johnson
I do agree that part of it should be bilateral, for all the reasons that I have mentioned. As various members have commented, however, we need to understand why the formulation has been made—because it could be setting precedents; because there is a larger pot of money out of which a lesser sum of money is being brought; and because the Chancellor can come back to this House, by virtue of a statutory instrument and seek further money for Ireland. We need to be clear what we are letting ourselves in for.
Alan Johnson
No, I will not give way—perhaps later.
I am also curious about the following piece of distorted logic. In the Treasury Committee, the Chancellor said that it was okay to set austerity aside in order to make a loan to Ireland because of the promise of repayment. He said that this loan “adds to our debt” but
“We’re getting back a very important asset which is a commitment from the Irish government to pay us back with interest.”
What puzzles me is which part of that definition of a sensible loan did not apply to Sheffield Forgemasters. [Hon. Members: “Oh.”] I am sorry that Government. Members groan about British manufacturing industry. My right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett) raised this issue during the Chancellor’s statement on 22 November. Why does the Chancellor agree a huge loan to Ireland on the basis he cited but reject a modest £80 million that would be paid back with interest and boost the opportunity of British manufacturers to have a substantial stake in the civil nuclear energy supply chain, which is currently dominated by overseas companies? At a time when we are looking for jobs and growth, the logic of that escapes me.
My third concern is the prospect of each eurozone country being bailed out as its economy falls into crisis without addressing the root causes of the continent’s problems.
Mr Cash
Is the shadow Chancellor aware that serious discussions are going on about increasing the €400 billion facility, and probably doubling it? In response to my hon. Friend the Member for Kettering (Mr Hollobone), is not the whole European Union, not to mention the world at large, confronting a very dangerous and difficult situation?
Alan Johnson
Yes, but that is a matter for the eurozone. If the Chancellor is right in his prediction that perhaps this can ensure that we come out of the €60 billion mechanism, the facility and the other moneys, then fine, but as we are making a big contribution—more than we would have done had we paid the amount that a eurozone country would have paid to rescue Ireland—we must be in a position to influence this debate.
Mr George Osborne
I must correct this point. We are paying pretty much exactly what we would have paid if we had been a member of the euro; that is how the bilateral loan is being calculated. Germany is paying both through the facility and through the mechanism, and so are France and the other members of the euro. Other countries are paying twice. Ours is a bilateral loan like those of Sweden and Denmark, and they too have been calculated in a similar way.
Alan Johnson
I am grateful for that clarification; we will look at that very carefully. What the Chancellor is saying is that France and Germany, through their IMF contribution—[Interruption.] The Financial Secretary says no. The point I am trying to get at—perhaps the hon. Gentleman can clear this up when he replies to the debate—is that if the UK is putting in a bilateral loan that is equal to the amount that we would have paid as a eurozone member, and we are putting in money through the IMF as well as £2.6 billion through the mechanism, how does that relate to the money that France and Germany are contributing? As far as I am aware, they have no bilateral arrangements, so the money is going through the IMF, or through the stability facility which accounts for only 4% of the resources. That is a point that we need to hear about.
Claire Perry (Devizes) (Con)
The shadow Chancellor says that he supports the idea of a bilateral loan because Ireland is such an important trading partner for Britain. I am delighted to hear that he is going to support the Bill. However, will this be another situation like the graduate tax whereby he will say one thing and the rest of the shadow Cabinet will say another?
Alan Johnson
I will not bother to take an intervention from the hon. Lady next time, because that point does not even begin to be germane to this problem.
My third concern is how we are going to draw a line under this matter. We had the Greek bail-out, and now we have had the Irish bail-out. There is no sign of any real stability in the eurozone to stop such events happening again.
Andrew Gwynne (Denton and Reddish) (Lab)
Is it not important that Europe gets ahead of the crisis? As we saw with the Greek bail-out, such short-term measures do not solve the fundamental problems across the eurozone.
Alan Johnson
I am coming to exactly that point.
Some Conservative Members think that the root cause is the single currency. I do not share that view. The euro had nothing to do with the property boom and bust, and a failed euro would be an economic and political disaster with repercussions well beyond our continent. Ireland needs a healthy eurozone, or it will end up with years of deflation and unemployment, and we will be less likely to have our loan repaid.
As the loan that we are being asked to approve is equal to the amount of money that we would have contributed had we been a member of the eurozone, surely that gives us the right to influence the necessary debate on what action is needed to address the underlying causes of this recurring crisis. This bail-out buys time, but there is no sign that Europe’s leaders know how to put it to good use. In May, we had the Greek bail-out; six months later, we have to deal with Ireland. In neither case is there much sign that these countries have resolved the core dilemma, which is solvency.
Collective austerity across Europe offers countries with high debt burdens no way out. Cutting demand in Germany is the last thing that Ireland needs at the moment. What we are seeing in Europe bears out the IMF’s conclusion that fiscal austerity does not boost short-term growth and that deficit cuts are more painful if they occur simultaneously across many countries. Ireland needs a healthy eurozone with markets such as Germany consuming Irish goods, or it will end up with years of deflation and unemployment. Having engaged in repeated rounds of austerity, with VAT rises, welfare cuts and redundancies, Ireland still finds growth elusive: it has been consistently poor for the past three years. Indeed, the economy has shrunk in 11 of the 14 quarters since the beginning of 2007, and sluggish growth has made getting the deficit down much harder.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
When a country becomes over-indebted, it can either enslave itself to the debt or inflate and devalue. Is it not clear that the fundamental problem is that none of the countries in the euro can inflate and devalue to get out of their problems? That is why some Conservative Members are saying that it is only a matter of time before some of these countries fall out of the euro, and that we would be better off planning on that basis than pretending that we can hold back an unstoppable tide.
Alan Johnson
The hon. Gentleman is right that the single currency gives Ireland no mechanism to devalue its currency, and that that causes it a problem. However, there are two extremes to that argument. The first says that the eurozone is unfinished business; what started as a currency harmonisation needs to move to the next stage. I heard the president of the European Central Bank say on the radio last night that the next stage should be political integration. My party does not agree with that; nor I am sure does the hon. Gentleman’s. Further integration is one extreme that we should not go to.
The second extreme says that if Ireland simply withdrew from the euro or the eurozone, its problems would be solved. I do not believe that to be the case. The eurozone has to recognise the problem that its countries cannot devalue and must find a mechanism that ensures that this problem does not keep happening to country after country. The hon. Member for Harwich and North Essex (Mr Jenkin) has a view, as do many of his colleagues, on the answer to this ongoing problem. I do not agree with him, but I believe that it is central to stop this happening to other countries, and to stop it being a regular event. The fragility of the recovery, especially in Europe, emphasises the need for decisive action to resolve the underlying difficulties faced by eurozone countries.
The situation in Ireland is a huge embarrassment for the Chancellor, exposing as it does his poor judgment and rich hyperbole. At the time of the comprehensive spending review, he claimed that our country was on the brink of bankruptcy. He now proposes a loan of an amount that is well over half the cumulative debt interest savings that he claimed he would make over the spending review period. There is also the paradox of his support for Ireland’s banks, but his opposition to the previous Government’s successful measures to protect British banks.
Finally, there is the Chancellor’s frequently expressed belief that Britain should look to Ireland for inspiration, which he expressed both before the banking crisis, when he urged us to emulate the “Irish miracle”, and since the crisis, with his desire to copy some of Ireland’s painful austerity measures. His gloriously misjudged 2006 article in The Times is now well known:
“Ireland stands as a shining example of the art of the possible in long-term economic policymaking”.
He is in good company. I shall quote from the Prime Minister in the Belfast Telegraph on 26 October 2006.
Alan Johnson
No, I will not give way. The Prime Minister said:
“That is why a priority for any Conservative government led by me will be to create a much better environment for business… We know it can be done. Just look at the Republic of Ireland.”
Two years later, at exactly the time when Ireland’s six largest banks were forced to borrow €20 billion from the European Central Bank, the Prime Minister said that Ireland had
“a ‘future fund’ of assets, providing security against future liabilities and unknown shocks coming down the line.”
Perhaps those on the Treasury Bench will update us on how that future fund is doing in Ireland. Finally, in June 2008, at a Cameron Direct event in Harlow, he said:
“When it comes to the engine room of the country, the economy, you know you can look across to southern Ireland where they have created a dynamic economy. Well we’ve got to do that right here.”
Our message to the Chancellor as we prepare to support his Bill is not to replicate Ireland, but to repudiate the measures that put its economy in such a perilous position.
We understand that there is an O’Donnell circulating a plan B in Whitehall against the Chancellor’s wishes. As the Chancellor said in The Times, the Irish have
“much to teach us, if only we are willing to learn.”
Mr Deputy Speaker (Mr Nigel Evans)
Order. Because of the popularity of this debate, there will be a seven-minute limit for speeches by Back Benchers. The usual arrangements apply for interventions.
Mr Andrew Tyrie (Chichester) (Con)
Until the shadow Chancellor’s last few words, I was looking forward to saying that I agree with just about everything that has been said from both Front Benches. None the less, there is a good deal of cross-party consensus about what is being discussed.
The Chancellor is faced with a difficult situation: a regional currency crisis that is largely not of his making, a close neighbour with strong historical ties in the eye of the storm and an inherited financial commitment to assistance at the European level.
The Treasury Committee took advantage of the Chancellor’s appearance before us last week to cross-examine him on these matters in some detail. That appearance, his speech today and particularly the terms sheet, which we have just received, have given us a good deal of information, and I am grateful to him. I am relieved, according to that information, that any increase in the loan, which is permitted by the legislation, will be debated on the Floor of the House.
We now know the price of the loan for the first time, broadly speaking. It looks sensible, although I notice that it can be varied under the enabling legislation. As my hon. Friend the Member for Rochester and Strood (Mark Reckless) has pointed out, we have discovered from the terms sheet that the loan is junior in the debt hierarchy to support through the EU mechanism. It would be useful if the Minister, in the winding-up speech, told us whether the Irish can repay the loan early without penalty. I do not think that that is what is stated in paragraph 5(c) of “Other Terms” in the loan agreement—I have obviously had very little time to read it—but there is also a reference to “exceptions” in the bracketed part of the sentence.
A number of hon. Members and I would like to know whether the Government have considered purchasing assets held by the National Asset Management Agency, as an alternative to part or all of the loan.
As far as I know, this bilateral loan has no direct precedent. The UK has gone further than was needed to fulfil its legal obligations. The Chancellor made a strong and persuasive case, which was supported by the Opposition. However, I think that that decision needs close scrutiny, as does the decision, which straddled the previous Government’s tenure, that left the UK with extra contingent liabilities as a result of the mechanism. We may have been put in the unsatisfactory position of making EU budget payments to bail out the eurozone, even though we are not a member of it.
It is important to bear in mind that demand for a bail-out originated not with a request from Ireland, but from the fear among eurozone members of contagion spreading from Ireland to Portugal and Spain. Most hon. Members agree that bailing out the eurozone is primarily its business and not ours. It is true that the collapse of the zone would generate shockwaves throughout the region, and possibly the world. However, the eurozone does have the capacity to bail out weaker members and, to the extent that the stability of the whole financial system is at stake, our contribution should usually be made via the International Monetary Fund. It is for those reasons that I was relieved when the Chancellor confirmed before the Select Committee that the legislation will be unique to Ireland and does not contain enabling powers for further bilateral eurozone bail-outs.
Mr Tyrie
I appreciate that. The Chancellor has referred to 2013 on a number of occasions, and my hon. Friend has referred to the possible unlawfulness of the mechanism on a number of occasions, including in private discussions.
This is a crisis of the eurozone, for which UK taxpayers are footing part of the bill. The UK will have to engage with members of the eurozone to limit the damage now and to construct something better for the future. I will touch on a few of those points in the moments that remain. I recognise that the problems to which I refer may be intractable. First, as the Chancellor has said, the senior creditors have been exempted from a haircut. The Chancellor told us that this was because of the risk of contagion. He is probably right, but the resulting moral hazard is large and will have to be addressed.
The second issue that I wish to raise, which naturally none of the authorities wants to talk about, is the fact that even the measures for Ireland and for Greece may not prevent default. The crisis may be one of solvency, not liquidity. That has a bearing on the lender of last resort provisions for the eurozone. It is possible that a sovereign default could trigger a banking crisis and even failure in parts of the eurozone, because banks hold a large amount of sovereign debt on their balance sheets. Such a bank failure could be highly toxic.
It is worth bearing in mind that the great depression of the 1930s was triggered as much by bank failures after 1931 as it was by the stock market collapse of 1929. I do not want to play the role of Cassandra, but I plead that contingency planning at European level be done now for the risk of such a bank failure. On the basis of the eurozone’s responses to the crisis so far, I am not optimistic that that planning is being done. The eurozone is fearful of leaks, and those doing the work would be terrified of that possibility. I have no doubt that that would inhibit their work. In addition, pessimism on such issues in European circles does not exactly make such work a career-enhancing prospect for the eurocrats who would have to do it. Let us just hope that they are doing that work.
The third problem that I wish to refer to—I shall leave it at that given the time available—is the long-term future of the eurozone itself in a world in which the bond markets have discovered that the no bail-out clause is toothless. I should say at this point that I have never opposed the eurozone on ideological grounds or on grounds of principle, but I have been wary on practical grounds, particularly the ground that the no bail-out clause may turn out to have no clothes. That is exactly what has happened.
Mr Jenkin
Does my hon. Friend share the concern that because we are taking part in the Irish bail-out on equal terms with the euro members, we are setting a precedent that will put political pressure on the Government to take part in other bail-outs? Does he believe that the Government will be in a position to resist that pressure?
Mr Tyrie
I have no doubt that the Government are listening to my hon. Friend and others, who will put pressure on them to resist the pressure from other quarters. I agree with his point.
It seems to me that very little work is being done on the possibility of the euro crisis leading to more general examples of the no bail-out clause’s bluff being called. I would be surprised if there had been any such work. I cannot be sure, but it strikes me as highly unlikely. It is the Ark of the Covenant that the eurozone will continue indefinitely.
When the Chancellor came before the Treasury Committee, he assured us that eurozone members were
“having a discussion about the permanent eurozone bail-out mechanism.”
Mr Tyrie
I will not, because I am about to conclude.
Any new bail-out mechanism, however, may itself lack credibility in the absence of a common European fiscal policy. That is why the discovery that the no bail-out clause is a paper tiger will remain an enduring problem for the eurozone’s stability, a problem from whose consequences the UK will certainly not be immune.
Mr Alistair Darling (Edinburgh South West) (Lab)
I agree with the hon. Member for Chichester (Mr Tyrie) that we should be concerned about what is being done within Europe not only to deal with the immediate crisis in Ireland but in relation to the other problems that I believe will arise during the course of next year. The piecemeal approach that Europe has adopted, certainly in the past two or three years, has got to stop. I shall return to that point in the short time that I have available.
I support the Bill and agree with much of what the Chancellor has said. He may feel that that is of absolutely no comfort to him given what some hon. Members sitting behind him have to say. He is absolutely right that because of our interests in Ireland—particularly the interests of the British banks in the Republic of Ireland and the Republic’s banks’ interests in this country—we should be involved in any restructuring discussions. That is very important to us.
Before I deal with the wider problems, I wish to deal with the funding of the rescue, which has been the subject of the debate this afternoon. As the Chancellor has said, we are funding that rescue through the IMF, which we ultimately guarantee, and through a direct loan from the United Kingdom. We obviously hope that that money will be repaid in full, but there is a contingent liability. We are not part of the eurozone fund, and on the weekend of 9 May I spent many hours resisting every attempt from just about every quarter to get us to stand behind the euro. I did not think that was right for us.
We are also making a contribution, of course, through the European financial stability mechanism. That was the subject of a lot of discussion at the meeting of 9 May. I went to Brussels that weekend with no enthusiasm whatever. We had lost the election, but this country was in the unusual position that there was not a Government in place by the Friday, which was the normal situation over the past few decades. Frankly, I had no option but to go, because not to have done so would have been to empty-chair the UK, which would have been quite wrong. I spoke to the right hon. Member for Twickenham (Vince Cable) and the Chancellor, because I felt it appropriate to do so. I thought that in all probability they would both be in office within a couple of days.
I have to remind the House of the circumstances of that weekend. We were meeting at a time of crisis. There was a real sense that the markets were about to have a go at Portugal and Spain, and there is a sense of déjà vu about that, because we are back in that position now. In all probability, the IMF was going to make a loan. There had been a lot of discussions, prompted by the United States, urging Europe to do something about the growing crisis, yet nothing had happened throughout January, February, March and April. It took that emergency meeting in May, when we had to put together a rescue package to persuade the European Central Bank to start buying bonds. That was the critical decision taken that weekend. If it had not bought bonds, there would have been a real problem. That was why we were faced with the situation that we were.
I discussed with the Chancellor what we should do about the financial stability mechanism. He had his reservations and stated very clearly that he was against deploying it, and he asked me whether I should abstain, recognising that the decision was to be taken by qualified majority voting. Both of us recognised, I think, that if we had abstained, the proposal would still have gone through, because everybody else in the room wanted the mechanism to be deployed. I found myself in exactly the same position that he did just a few weeks ago when he was being asked to contribute. He made it clear in a statement to the House on 22 November that he did not believe we should make that commitment, but said:
“However, it operates according to qualified majority voting and so we cannot stop it being used, and to exercise that vote at this time would, I judge, be very disruptive.”—[Official Report, 22 November 2010; Vol. 519, c. 39.]
That was exactly the situation in which I found myself in May, which was why I agreed to go along with the proposal.
However, I have to say that that fund was not used at all when it came to the bail-out of Greece. That was entirely from the eurozone fund that was set up. Obviously I had left office by then and was not part of the discussions, but that is the simple fact of the matter. Once again, Europe was meeting in crisis, and we had to get a package of £500 billion together to get the ECB to meet. Otherwise, it would have done absolutely nothing.
Sajid Javid
The shadow Chancellor made the rather incredible statement in his opening remarks that he believes that Ireland’s euro membership has absolutely nothing to do with the predicament in which it finds itself. Does the right hon. Gentleman agree?
Mr Darling
The circumstances in which Ireland finds itself are complex, but there is no doubt that one problem is that a common interest rate right across Europe is perhaps inappropriate for an economy that is rapidly investing in an asset bubble. However, I do not have the same phobia about the euro that many Conservative Members still have, 20 years on.
Mr Cash
I am extremely grateful. Did the right hon. Gentleman take legal advice on whether, as I said at the time, the use of the financial stability mechanism was an unlawful deal? Article 122 of the treaty on the functioning of the European Union deals with natural disasters, energy supplies and so on, and it has absolutely nothing to do with financial mistakes or misjudgments. Really, the whole thing should never have gone through, and he should have repudiated it on those grounds.
Mr Darling
Yes, but as I said earlier, because of QMV, the deal would have gone through anyway. I also do not agree with the hon. Gentleman’s analysis or that the legal position was that clear-cut.
Mr James Clappison (Hertsmere) (Con)
Will the right hon. Gentleman give way on that point?
Mr Darling
No—I will not do so because of the time constraints.
I agree with many hon. Members that Europe urgently needs a robust and workable rescue mechanism. We cannot wait until 2013, which brings me to my second main point.
As I have said, I am concerned about the piecemeal way in which Europe as a whole, and the eurozone in particular, address the problems that they face. Even today, there is speculation that the credit rating agencies might revise Spain’s status, which would be damaging to that country and to the euro. However, the approach that has been taken so far, which fails to recognise that the single currency involves 16 member states and 16 Treasuries, will inherently be under stress in times such as these. We are simply storing up problems for the future.
Germany must recognise that if it wants to keep the single currency, which is important to it economically and politically, there are consequences in respect of transfer payments to help countries that are in difficulty. I also believe that simply telling those peripheral countries that the only remedy lies in austerity programmes that developed countries might baulk at implementing, runs the risk of them—far from being able to repay or service loans—finding themselves deeper and deeper in the mire. The IMF has discussed that problem. When Ministers in different parts of Europe are asked privately where all the growth will come from—for Greece, Ireland, Spain and Portugal—they say, “We don’t know. We can’t be certain.”
Consider the news today. There is rising unemployment. Most of the job losses are in the public sector, and there is precious little sign that the private sector is taking its place. We should be concerned about the “austerity first” programmes that are being imposed across Europe. The dominant political thought at the moment is that if Government’s cut enough, they will get through to salvation. That was tried in the 1920s and early 1930s, and it did not work.
I believe that countries that are in difficulty should look to mend their own houses and to take difficult and controversial steps, but we need to be watchful that we do not get into a situation in which those countries have no way out. If that happens, their consumer and business confidence will fall. Whom do they export to if other countries are shutting down?
The need for some sort of mechanism to address the problems that are inherent in the euro is absolutely urgent. Those problems were simply glossed over 10 or 15 years ago. Let no one think that this is a matter only for the eurozone. As many hon. Members have said time and again, the problem affects us as well, because we are so integrated with Europe and because it is such a big trading partner. Parliament and Ministers need to address the question of such a mechanism. Frankly, we cannot afford to carry on with the current piecemeal approach, which I believe threatens our recovery as much as that of other European countries.
Mr Christopher Chope (Christchurch) (Con)
I hope that the former Chancellor’s message to Germany is well received by the German people, because the fact that a price of eurozone membership was making transfer payments to sustain the currency in countries that are not so competitive was never sufficiently spelled out to them. This is essentially a eurozone problem and an Irish problem, and I do not think that we should put British taxpayers’ money into it other than to meet our obligations under our membership of the IMF. It is perfectly reasonable to contribute through that mechanism. As the Chancellor has said, in so doing, we get more security for our loan than we would from a bilateral agreement.
The proposed loan to Ireland is relatively soft. Interestingly, the Chancellor says that the proposed interest rate will probably be slightly less than that of the eurozone facility, and that that demonstrates the competitiveness of our economy. I see things differently. If we have such a competitive economy, why not make a profit on the interest rate and charge the same rate as the eurozone and get the benefit for the British taxpayer?
Mark Reckless
All we are doing is passing on to Ireland the quarter per cent. or so of benefit that we gain by being a better creditor than the eurozone. Most hon. Members feel that we should help Ireland, but I agree with my hon. Friend that it is not necessarily helpful to Ireland to have a huge amount of extra debt on top of the great debt it already has. On that basis, I understand his point.
Mr Chope
I am grateful to my hon. Friend for his observations.
None of my constituents, particularly those in the business community, understand how or why we can justify increasing our national debt to help Ireland. The line is that the Irish are friends in need, but I remind the House that there is a strong argument to suggest that the Irish Government exacerbated the original banking crisis. When we had problems with Bradford & Bingley and Northern Rock, and our Government limited the deposit guarantee to £50,000, the Irish increased their guarantee to all deposits. That helped the run on Bradford & Bingley and Northern Rock accounts, thereby developing our banking crisis. We did not get much help from the Irish when we were in need in that situation.
We must also not lose sight of the fact that the Irish people have received enormous sums of British taxpayers’ money through our membership of the EU. We make big net contributions to the EU, and a lot of that money was subsequently pushed into Ireland, enabling the Irish people to sustain for a time a much higher standard of living.
Mr Chope
I am sure that my hon. Friend is absolutely right. We are contributing to Ireland through our EU membership, so the Irish people should be very grateful.
When, on behalf of my constituents, I weigh up whether we can be pleased with how Ireland conducts its affairs, I must express renewed disappointment that Ireland caved in on the Lisbon treaty, with the consequence that this country has been landed with it.
Mr Hollobone
Does my hon. Friend recall Ireland’s position a few months ago, when the UK Government tried to bring the European Parliament budget under control and needed a blocking third to prevent the proposed budget increase? Where was Ireland at our time of need on that occasion?
Mr Chope
My hon. Friend asks a rhetorical question. The answer is that I am not sure where Ireland was at that time.
I agree with my right hon. Friend the Chancellor that we should allow the Irish to have their own domestic policy. That is why it would not be right for us to interfere with their low corporation tax policy—it should be for them to decide. However, the other side of the coin must be that we let the Irish take the consequences and accept the responsibility for what happens as a result. We cannot say, “We’re going to help pay for the consequences while not being able to influence the policy.” I find what is proposed very intellectually trying to deal with.
When we have a border—our hon. Friends from Northern Ireland have made their points about this—that low corporation tax policy makes things much more difficult. Indeed, it is possible to argue that we have lost the corporate headquarters of major international organisations from London to Dublin as a result of Ireland’s low corporation tax policy. Now we are subsidising that policy, the consequences of which are that the Irish have been unable to meet their financial obligations and are desperate for additional loans. I am not convinced that we should be getting involved with British taxpayers’ money. It would be different if we did not have an awful national debt crisis, but we do. One consequence of the Bill, if it goes through today, may be to send out a signal to our constituents that says, “Don’t worry, the debt crisis is not as bad as we’ve been telling you, because we can afford to add to that debt further by giving a soft loan to the Irish.” At the same time, we are having to argue to our constituents that we cannot put pressure on the banks to give more soft loans to businesses, even if those businesses go bust or cannot expand as a result, with all the damaging consequences for employment that that would have in our country, so I am not convinced.
Mark Durkan (Foyle) (SDLP)
Does the hon. Gentleman not acknowledge the scale of the exposure of British banks in the Irish Republic’s economy or the key dependence of Northern Ireland’s economy on the role of some of the Irish banks?
Mr Chope
Of course I acknowledge that, because it is a fact. However, my hon. Friend the Member for Chichester (Mr Tyrie) made the important point that, in negotiating a bilateral deal, we might have been able to deal with the debts owed to those banks and, in a sense, directed any money that we wanted to give into those British banks, rather than into the Irish coffers in general. We could have linked those things, if that was what was needed. However, I do not think that the difficulties of those banks are a justification for increasing our national debt further in the way that the Bill proposes.
Mr Nigel Dodds (Belfast North) (DUP)
It is a pleasure to follow the hon. Member for Christchurch (Mr Chope). He mentioned corporation tax, which I shall come to shortly. However, it is worth saying first that what is proposed is a generous act on the part of the Government and the people of the United Kingdom. Of course there are good, economic reasons why what is proposed should be considered in the national interest. As has been pointed out, there are strong arguments about Northern Ireland’s position, the involvement of banks from the Irish Republic in Northern Ireland’s economy, the exposure of British banks to Irish banks, and so on, which are reasons why we should engage in the loan.
However, it would be remiss of me and the people for whom I speak not to point out that the loan is being made merely months before the 90th anniversary of the secession of the 26 southern counties from the United Kingdom. For probably the vast majority of that time, and certainly in the past 30 or 40 years, politicians and others in the Irish Republic have spent most of their time denying the relationship between southern Ireland and the United Kingdom. However, the loan and all that has been said prove the interdependence of the Irish economy and the Irish Republic with—and, to a large degree, their dependence on—the United Kingdom. There are those who go around saying that the United Kingdom should keep out of their affairs and all that, but I think they now realise that in many ways the dependence is very great, and not just on Europe, but on the United Kingdom in particular.
It is also worth spending a minute or two recapping how we came to this position. For many years, people referred to the great Celtic tiger that was the Irish Republic’s economy, and that includes those now in government, as has been pointed out. Those who raised issues about the way in which that economy was lauded were criticised as being driven by petty political considerations and told that their criticisms were not justified. There were those of us who pointed out that there were domestic issues to do with the great concentration on property. However, a recent editorial in The Guardian summed up the position well:
“Politicians kept consumer demand buoyant with generous public spending, while rewarding developer friends with public works contracts. Ireland’s narrow elite ran the economy like a casino and awarded itself free chips. No one, save a few lonely economists, had much incentive to call time on the party. By 2007, around one in five Irish jobs depended in some way on the property market.”
The international mistake was to join the euro. Of course the problems are not entirely down to that, but the economic tools that could have helped to control some of the economic excesses, and some of the issues that arose as a result of the bursting of the property bubble, were not available to the Irish Republic as a result of its membership of the euro. Those tools include devaluation and the ability to cut interest rates. So when the crisis came, the Republic was virtually powerless to do anything in that context. That is well known.
We in Northern Ireland have had our disputes with the Irish Republic, but relations are now much better than they used to be, and we do not take any satisfaction from the crisis that has enveloped it. Someone asked where the Irish Republic stood in relation to recent debates on Europe. People will remind us in this House of the Irish Republic’s attitude during the long years of terrorist activity in Northern Ireland, when the Republic became a safe haven for terrorists and refused to extradite wanted criminals to Northern Ireland for justice. Some of our constituents are now saying, “Why should we help them now that they are in this situation?” They also remember the Irish Republic’s role in the formation of the IRA, back in 1969. They say, “We see all these inquiries, but what are we doing about that?” That is understandable, because lives were lost and families were bereaved as a result of the activities of Governments of all shades and opinions in the Irish Republic. All of them played a role, whether Fine Gael, Fianna Fáil, Labour or the rest of them.
Having said all that, we recognise that the Irish Republic needs to receive this loan at this critical time, for the reasons that have been set out. Two of the banks are owned by the Irish Republic and are active in Northern Ireland, and a quarter of all the personal accounts of people in Northern Ireland are in those banks. We have also heard about the exposure of British banks to Irish Banks, as well as the wider trade issues, given that 40% of trade in Northern Ireland is carried out with the Irish Republic. All of that means that, if the situation were to deteriorate even further, we would be in a very difficult situation in Northern Ireland. On balance, therefore, we will not vote against the Government, and we have made it clear that we support the Bill.
There are wider issues relating to the implications of the bail-out of other countries, which we shall discuss in Committee. On corporation tax, the Irish Republic should of course have the right to set its own tax rates; that is not the argument. The argument is that Northern Ireland is at a competitive disadvantage as a result of the lower rate in the Republic, because of the land border. The Irish Republic is our greatest competitor for foreign direct investment. For us to get the equivalent benefit, we are told that we would have to take a further cut in public expenditure of £310 million. In these circumstances, when a subsidy loan is being provided to the Irish Republic, the case for Northern Ireland should be looked at. Why should we be hit immediately with that cut when the Republic will be given years to pay back its loan, giving it a competitive advantage?
Mr Peter Bone (Wellingborough) (Con)
It is a great pleasure to follow the right hon. Member for Belfast North (Mr Dodds). He made many powerful points, especially his last one. I note that the Bill is called the Loans to Ireland Bill, not the Loans to the Irish Republic Bill. I wonder whether the Government have had some foresight, and whether some of the loans will actually be provided to Northern Ireland, to help to reduce corporation tax there. Perhaps there is some hope in that regard.
I want to start by saying that we have an excellent Chancellor of the Exchequer and a first-class Treasury team, including my hon. Friend the Financial Secretary, who has the misfortune to be at the Dispatch Box to listen to my remarks. On this particular issue, however, I think that they have got it wrong for a number of reasons. Everyone in the House wants to see the Irish Republic prosper, but the question is: which is the best way to help it? Its problem is that it is part of the euro. Government Members have always argued that the United Kingdom should not be part of the euro, because it cannot possibly work. It is not possible to have one fixed interest rate and one fixed currency covering a number of different countries. What we are witnessing is a crisis in which that problem has come to light.
If Ireland were not part of the eurozone—if it had its own currency—it could change its interest rate, but more importantly, its currency could depreciate, which would make it more expensive for exports to come into Ireland and cheaper for exports to go out. It is a market mechanism for self-righting an economic collapse, and because Ireland is part of the eurozone, it cannot do that.
I take the view that in the next few months the euro will collapse. It will not just be Ireland and Greece; it will be Spain, Portugal and possibly Italy. At that stage, it will be necessary to abandon the euro entirely or have two eurozones. If I am right in that assumption, it is a mistake to give £3.25 billion to the Irish at a time when it will do no good at all and that money will never be repaid. If we were paving the way for the Irish to have their own currency again, which would be part of the sterling area, we would be more of a help to Ireland. My argument is that we are sending the money in the wrong direction.
The second issue we have—to be fair to the shadow Chancellor, I think he was on to it—is that we do not know how the figure has been arrived at. Nobody has explained—at least, I have not heard anyone do so—why we have settled on £3.25 billion, but I think the Chancellor was arguing that that is the sort of amount we would have had to provide through the European financial stability facility if we had been part of the eurozone. Well, we are not part of the eurozone, so why should we be contributing to something that eurozone countries should be providing on their own?
Sajid Javid
Is my hon. Friend aware that recently the Prime Minister of Luxembourg made a proposal that the EU should issue EU-wide bonds, and does he agree that Britain should have nothing to do with such a proposal?
Mr Bone
Of course; I thank my hon. Friend for raising that.
I disagreed with the shadow Chancellor when he said that there were two extremes. One was to have a unified eurozone with central controls over taxation and spending. It is one option, and I accept that such a model would work, but I reject it completely. However, no one can pretend that the current system will ever work. We would just end up putting billions and billions more pounds into a system that will eventually collapse, and, in my view, that will happen earlier rather than later.
Let me return to how the €85 billion package is made up. We have €17.7 billion from the facility and €22.5 billion from the mechanism. The mechanism was designed for natural emergencies; it was never designed for this purpose, and yet we are taking more out of the mechanism, which has a total pot of €60 billion, than out of the one that has €440 billion. Why? The simple answer is that the United Kingdom has to contribute to the mechanism, but we do not contribute to the facility because it is all eurozone money. In my view we do not need to make this £3.25 billion loan; it should come entirely from the €440 billion that is available for exactly this reason. That is why the facility was set up.
I also did not follow the Chancellor’s argument when he said that because of qualified majority voting, we would not have voted against the use of the mechanism because we would have been overruled. I have to say to him that on a number of occasions I have voted on measures on which I know I will not win, but it does not mean that one should not vote that way; one should vote as one sees fit. I think on that small point the Chancellor has also made a mistake.
Many hon. Members will refer to the man on the Clapham omnibus, but in my case it is the man on the Wellingborough 46 bus, and such people make the following very simple point. My county council has announced that it will fire all its lollipop ladies and close a number of libraries, and those people say to me, “If we’re having to do that because we’re not allowed to increase the national debt, how on earth can you provide £3.25 billion to a country that is in the eurozone?” It is very difficult for me to give an answer. In fact, the answer I give is, “We shouldn’t be doing it.”
If the House divides on the Government’s proposal, I will, reluctantly, have to vote against it, not because I think the Government’s aim is wrong—because, yes, we want to have a prosperous Ireland—but because of the way this is being done and the way it is being funded. Nobody is suggesting that because we trade a lot with the United States of America, if there were a crisis there, we would suddenly lend it money. Ireland is a grown-up country. It decided to become part of the euro. The problem lies in the eurozone, and it should sort this out, not us.
Dr Alasdair McDonnell (Belfast South) (SDLP)
I congratulate the Chancellor on the proposal, which I fully support. It is my understanding that this step is being taken because there was a potential domino effect, in that any damage in the Irish Republic could have led to further damage to British banks that operate there and to damage to the Northern Ireland economy, and that in turn would have had a very significant effect on the British economy and British interests. I therefore see this as a generous move, but also a move of enlightened self-interest.
The Irish economy is in its current situation because it had a banking crisis, not an economic crisis. The underlying economy is sound; the potential for growth exists, and that growth will come forward. The pharmaceuticals and other major industries in the south of Ireland are thriving. The economy is expected to stabilise this year and to begin to expand at between 2.5 and 3% in the period 2011-14. The package of measures that is in place is required in order to restore the public finances and banking liquidity by 2014. The Irish Government have rapidly moved to curtail expenditure dramatically and to raise revenue themselves. The adjustment is expected to bring the economy back into balance within four or five years.
Ireland is a small open economy in which long-term sustainable growth depends on healthy international trading, and the conditions for export-led growth are in place: good infrastructure, high-quality human capital, a favourable taxation environment and available credit for viable businesses. The national recovery plan has been put in place, and it is tough and will be difficult. Export-led growth will foster recovery in domestic trading sectors. The growth in GDP is expected to bring unemployment down fairly rapidly, and certainly well below 10% within two to three years. The balance of payments will return to surplus in 2011, so Ireland will be earning its way out of the difficulty that it is in within the next 12 months.
Some Members have referred to Ireland’s membership of the eurozone as a major difficulty, but I do not agree. It is a handicap, but it is not as massive a disadvantage as some claim. Ireland’s membership of the eurozone obliges it to adhere to stability and growth rules and to bring the general Government deficit to below 3%. The Irish Budget contained a very tough package. Initially, the 2010 Budget presumed an adjustment of about €7.5 billion over a four-year period. With hindsight, we know that the figure proved to be almost double that—some €15 billion—as we crept towards the year end. Two thirds of that is coming out of budgetary adjustment achieved through reduced expenditure, and a third out of taxation. However, by 2014, Irish expenditure will be back to 2007 levels. Total Government expenditure as a percentage of GDP will be reduced from 49% to 36% in the next three years.
Mrs Main
I heard what the hon. Gentleman said earlier in his speech about why we should support southern Ireland, but I am struggling somewhat with his non-condemnation of membership of the eurozone. The euro seems to be a large part of the problems, but he seems to have glossed over that fact.
Dr McDonnell
Some of us see the euro as a problem and some of us do not. Being in the euro has been an advantage to Ireland for many years. It has become a handicap at present because of the restrictions and constraints, but the eurozone works and has worked very well for many years. In the present crisis it has its handicaps and limitations. Some people are predicting that the eurozone will collapse shortly; I do not accept that, and that is not the view of everybody.
The point I am trying to make is that Ireland’s underlying economy is healthy. Its membership of and involvement in the eurozone is healthy, and in the long-term it will come round and sort itself out. Ireland has a financial crisis—a banking crisis—that was brought about largely by a property bubble and a lack of liquidity, rather than a flaw in the underlying economy. I want to assure people that the money will be paid, in my opinion and assessment, and that in due course—
Mark Durkan
I thank my hon. Friend for giving way. Lessons will have to be learned, not so much about the euro per se but about the performance of the European Central Bank. There is a serious question to be asked about its insistence on low interest rates for a sustained period. That helped to feed the property bubble in Ireland, despite the valiant efforts of the then Finance Minister to find other ways of getting out of the economy the money that was fuelling the property bubble, such as paying off the national debt, putting big money into the national pensions reserve fund and introducing special savings investment accounts.
Dr McDonnell
I thank my hon. Friend, who puts it better than I could have done.
I want to come on to why international intervention was needed. Ireland did its best at an internal level. It is a small country in a very tough global marketplace, and it did its best to resolve both the banking and the deficit situations internally. However, the interdependence of the modern world, Ireland’s membership of the eurozone and large market movements put some of the solutions beyond internal domestic management. Indeed, as we all know, both the European Union and the eurozone are themselves facing fundamental challenges in devising a fair and equitable response to the financial crisis in other countries.
However, although the domestic measures in Ireland did not prove sufficient, that does not mean they were not necessary. Ireland did its best to solve the situation internally, and only in the end, when nothing more could be done internally, did it resort to international help.
There are major north-south implications within the island of Ireland. All of us in the island of Ireland remain convinced that north-south co-operation is a central element of the push for economic recovery—not just within the Irish Republic but within the north. Indeed, the Prime Minister referred to such matters at Question Time. Despite the difficulties, the Irish Government have maintained some €110 million of investment in the north in various things, including major infrastructure projects of importance to both the north and the south. I am referring to roads and other aspects that are central. All that is important, and works. For the future prosperity of the island economy it is essential to build on the peace that we have achieved and to create the economic opportunities for a new generation.
I wish simply to restate a number of points about the UK’s interest. The UK is strong and robust, as we have discussed in relation to trade and all the rest. Ireland, a small country, accounts for 5% of Britain’s total exports. We are told that the UK exports more to Ireland than to Brazil, Russia, India and China put together. Allowing that to collapse would have an immediate impact on this country. The two economies are particularly linked in Northern Ireland, with two fifths of Northern Ireland’s economy dependent on the Irish Republic. Just as the two economies are linked, the two banking sectors are linked. As other hon. Members have said, the two main southern Irish banks are very active in the north, and to some extent in Britain; they also issue sterling banknotes, so that all has an implication for the whole banking sector. If this banking liquidity crisis had not been sorted out, we could have ended up with 25% or 30% unemployment, not just in southern Ireland, but in the north.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I now have to announce the result of a Division deferred from a previous day. On the question relating to animal welfare, the Ayes were 304 and the Noes were 221, so the Ayes have it.
[The Division list is published at the end of today’s debates.]
We have about 15 minutes available and three more speakers to fit in. I would like to ensure that all three have the chance to speak, so I ask you to divide the time up, because the speeches from the Front Benches will begin at 4 o’clock.
David Rutley (Macclesfield) (Con)
As I watched a few minutes of the film “The Perfect Storm” recently, I could not help but reflect on the economic challenges encircling Ireland. The film buffs in the House today will recall how George Clooney tried his best to get his fishermen back to base through a once-in-a-generation storm, created by the coming together of three much smaller but still deadly storms. Just as in that story, we are seeing a clear convergence, and it is of economic crises engulfing the emerald isle. As we have heard, that confluence has far-reaching economic implications, not only for Ireland but for our trading partners in the eurozone and, as a result and most importantly, for the UK economy. That is why the Government are absolutely right to take this specific action in this specific situation to help steer us to a departure from that film’s finale and underpin a much more sustainable future for the Irish economy.
That is why it is important to reflect on some of the factors that have created this crisis, on why helping Ireland is so important to our national interest at that this point in time, and on why we are left with no option other than to make this bilateral loan to Ireland. We have talked about the three converging elements: the banking crisis, the sovereign debt crisis, and how the complicating factor of Ireland’s membership of the euro is exacerbating those issues. The credit crunch cruelly revealed the extent to which the Irish banks had overextended themselves, and the fact that they were no longer able to access funding on the open market. As a result, the European Central Bank had to step in. The Irish Government had sought to guarantee all the bank liabilities, and the €440 billion promise that they had put in place was twice the size of the Irish gross domestic product. Those losses brought about a complete loss of confidence in the markets, and finally the Government had no choice but to face up to a looming sovereign debt crisis and seek international assistance.
Joining the euro did not, in itself, cause the challenges that Ireland faces, but it exacerbated them; that is where I disagree with the hon. Member for Belfast South (Dr McDonnell). When the banks binge-borrowed on the back of lower interest rates, it created all sorts of problems that could not have arisen had the punt still been in place. Now, sadly, Ireland’s euro membership is acting as a straitjacket. Independent monetary policy and exchange rate flexibility are not an option; they are not available to help Ireland navigate its way out of this terrible crisis.
I am a confirmed Eurosceptic, and my mother happens to be Danish, so I am proud that when this country worked hard to save sterling, others with more Viking blood than me stepped forward to ensure that they kept their kroner—and quite right too. It is also important to note that both Denmark and Sweden will join the UK in offering loans to Ireland in this unique situation—loans of, I think, €1 billion, or £850 million in proper money.
Despite Ireland’s recent history and my views on the euro, I believe that in these unique circumstances the Chancellor is right to extend the bilateral loan to Ireland. The reason is simple: if the Irish storm gathers more momentum it will have major implications not just for the people of Ireland but for all of us in the United Kingdom.
We should help our neighbour in need, and it is in our national interest to do so. The recent Office for Budget Responsibility report underlined the strong contribution that will be required from net trade to help get us out of the crisis that we ourselves face. We have talked about the size of the UK’s exports to Ireland, but the report goes on to say:
“If recent events significantly reduced Irish demand for UK exports there would be a material impact on UK export growth.”
There is no question about that.
Furthermore, we must take the steps to protect UK banks. Again, the OBR estimates that the exposure runs at £82 billion, £4.6 billion of which is exposed in the Irish sovereign debt. In its November report, it states that its estimate of the direct net cost or benefit to the taxpayer of the Government’s interventions in the UK banking sector may be affected by the exposure of UK banks to Irish liabilities. There is a clear and important reason for us to take this step forward and mitigate the risk, as well as mitigating the risk of contagion. Given the lack of time available, I simply want to stress my belief that it is vital to support the Government in taking these steps.
Mark Reckless (Rochester and Strood) (Con)
The package is described as a bail-out of Ireland, but it is important that we recognise that Ireland has not asked for the bail-out and that it is not the package that the Irish would have wished. Ireland and the IMF proposed to write down bank senior debt—that is, default on an element of that debt—because they recognised that it would be very difficult, although not impossible, for Ireland to pay back its vast amount of debt. It is not clear to me that adding another €67.5 billion to those debts and subordinating the previous debts to that will help Ireland out of this crisis.
Let us consider why Ireland was pushed into the crisis. The European Central Bank threatened to withdraw finance for the Irish banks. The ECB had extended €130 billion at a 1% interest rate in temporary liquidity support to the Irish banking sector—a courageous and rather risky thing for it to have done. It would prefer that credit to be refinanced on a longer term basis and at a higher interest rate. If the eurozone wishes to do that, that is a matter for it to agree.
What is not clear is what interest we, or indeed Ireland, have in refinancing that eurozone debt into an EU-wide debt. We must consider the funding costs. My right hon. Friend the Chancellor has the proud achievement, for which he deserves significant credit, of reducing the long-term costs of borrowing in the UK. Unfortunately, that has gone into reverse over the last three weeks or so. When he came in, we did not give money to the Greek bail-out. We had a rescue package with €440 billion loans and only €60 billion of the dubious EU facility. Unfortunately, that is now being confused.
My hon. Friend the Member for Clacton (Mr Carswell) recognised back in May that this was the beginning of a European debt union, but it was only when I saw how the package was denominated that I began to share that view. Unfortunately, it is rebounding on our credit. The EU puts in €22.5 billion, the eurozone puts in €17 billion and we put in €3.5 billion or so. Rather than this appearing to be a bilateral arrangement that we have properly agreed, because it is in the interests of these islands, and that has been negotiated between the UK and the Republic, we give the markets the impression that we are being sucked into a wider EU package and those markets worry that we will do the same for Portugal or Spain. We have seen the back-up in interest rates in the past few weeks, but I ask the Treasury Front-Bench team to make it as clear as they can that this is a one-off involving Ireland. By doing that, we could at least potentially protect our credit from some of the assumptions that the market has built up in the past few weeks.
On Europe, I commissioned an opinion poll last month of 1,000 representative people in the Republic, and more than a third of that sample said that they would like to leave the euro and return to sterling. The Chancellor says that “I told you so” is not a policy and of course he is right, but he needs to recognise that there is a policy implication that we should not make the same mistake again. I shared with my right hon. Friends the Chancellor and the Foreign Secretary, back in 1998, analysis of what had been happening in Ireland—how bank lending was out of control and how there was going to be a most extraordinary boom and bust that would serve as a vivid lesson to this country. I also shared that analysis with Bertie Ahern, prior to his becoming Taoiseach. Like the Chancellor, he said he understood the analysis and that we might be right, but he wanted to join the euro for political reasons. We saw the impact of that decision in Donegal three weeks ago, where the successor seat of my grandfather, who was the Fianna Fail Member for that area, has now been taken by Sinn Fein.
This is Ireland’s decision, but I hope, in its interests and ours, that we will work together much more closely than we have been. There have been improvements in relations since the Prime Minister’s comments about the Bloody Sunday inquiry and, given what the right hon. Member for Belfast North (Mr Dodds) has said and given his very positive and supportive attitude, I believe we should work with Ireland on a bilateral basis to try to put things right and get a long-term sustainable solution for it and us that is better than the Carolingian settlement that is being imposed by the eurozone and the European Union on an Ireland that deserves better.
Mr Deputy Speaker (Mr Lindsay Hoyle)
The hon. Member for Kettering (Mr Hollobone) has three minutes, as we must finish at 4 o’clock.
Mr Philip Hollobone (Kettering) (Con)
I shall vote against the Second Reading of the Bill, I shall oppose the money resolution and I shall do my best to amend the Bill should it reach Committee because I think it is bad for the House.
What we are not talking about in this debate is whether we should lend money to Ireland or not. Instead, we are talking about whether we should double our loan to Ireland. Whether or not the Bill is passed today, this country will be lending the Republic of Ireland 3.5 billion quid, and if the Bill is passed, that loan will go up to 7 billion quid. My constituents in Kettering are saying to me, “Philip, we are having all these public sector cuts and despite the Government’s best efforts the national debt is going to double over the term of the coalition Government; what on earth are you doing lending money to the Irish Republic?”, and I share their view. Yes, we should play our part in the loans through the IMF, but we should not be entering into a secondary bilateral arrangement because the truth is not so much that we are lending money to the Irish Republic as that we are lending money to the European Central Bank. We are increasing our exposure to the eurozone at a time when it is in increasing crisis. Given that we decided a long time ago that we wanted nothing to do with the euro, that is a backward step.
Chris Leslie (Nottingham East) (Lab/Co-op)
Let me say on behalf of Her Majesty’s Opposition that we welcome the debate, in which plenty of views have been expressed from different parts of the Chamber on what is an incredibly important matter. Many Members in all parts of the House—including my right hon. Friend the Member for Edinburgh South West (Mr Darling), the former Chancellor of the Exchequer, and the hon. Member for Chichester (Mr Tyrie), the Chairman of the Treasury Committee—have voiced, perfectly reasonably, their anxieties about the loan to Ireland.
Clearly these are troubled times for the world economy and for the eurozone, and we must sincerely hope that we will not find ourselves here again. The Opposition recognise that there are interdependencies between Britain and the Irish nation in respect of economic trade, direct relationships between our banks and financial investments across Ireland. Moreover, it is our only land-bordered nation state. We therefore have a duty to support the principle and spirit of the legislation, because a failing Irish economy would create harm here in the United Kingdom.
Chris Leslie
I think we shall have to take the issues as they come before us. I understand the hon. Gentleman’s anxieties, but, on balance, given the choices that we face, we consider it incumbent on us, as a responsible Opposition, to support the Government on Second Reading.
Let me make a couple of points—briefly, because I am conscious of the time and the need for us to debate the amendments, not least those that I have tabled in respect of clause 2.
The events in Ireland remind us starkly of the principal facts that Ministers have, I am afraid, preferred to hide hitherto. First, the credit crunch was a worldwide, international crisis, not simply something in the United Kingdom. Secondly, the failures of banks that gambled excessively not just with our money but with the money of the Irish people and others are at the root of our present predicament.
The Chancellor of the Exchequer has done well in spinning the line that it was all the fault of my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), the former Prime Minister—that he was somehow personally responsible for single-handedly causing the credit crunch in the UK before jetting off to Washington and starting the banking collapse there, then flying to Ireland via Spain, Portugal, Greece and the rest of the developed world, spreading banking catastrophe from continent to continent. However, the Bill—perhaps uncomfortably for the Chancellor—reminds us of the ridiculousness of the coalition’s revisionism, and reminds us that the rewriting of history can occur only if we believe in the gullibility of the public, as I suspect the Chancellor does. Although the Government think that may be able to fool all of the people all of the time, the truth is now overwhelmingly obvious, and proves beyond doubt that the greed of profiteering bankers has required the poor, beleaguered taxpayer, here as well as across Ireland and Europe, to bail them out of the mess that they created.
I am afraid that we heard no apology in the Chancellor’s hour-long, technical speech, and no expression of regret in respect of his free-market deregulatory exaltations of the “shining example” shown by the Irish economy. Perhaps that was an error, but sadly he did not acknowledge it. We are not convinced, either, that the Chancellor stands chastened or reflective in regard to his ill-judged comments about the Irish economic miracle”. Perhaps even we could have expected him to have some conception of the risks posed by the simple “austerity at all costs” principle underpinning his economic policies, but that was not there either.
Fundamentally, the problem is this: if the Chancellor of the Exchequer does not understand the causes of the deficit, he is certainly not the right person to fix it. My constituents, like those of the hon. Member for Wellingborough (Mr Bone), find it difficult to understand how, given that we were supposedly on the brink of bankruptcy, we can find £3.2 billion for the Irish loan, but nothing for Sheffield Forgemasters.
Sadly, however, we must recognise that the measures before us today are a result of the fragility of the worldwide economy. We hope that, eventually, the Chancellor and the Prime Minister will step up and show a little more leadership, especially in Europe, rather than using bail-outs and loans as sticking plaster. We hope that they will pay more attention to the root causes of what is happening to the economy, and will recognise that we cannot just cross our fingers and pretend that collective austerity will do the trick in all cases. My right hon. Friend the Member for Edinburgh South West is absolutely spot on when he talks about the inadequacy of that proposition. How will the European Union regain the market’s confidence in a longer-term trajectory back to stronger revenues and economies? Where are the growth strategies to build longer-term prosperity?
We have to accept, however, that the case for the loan to Ireland outweighs the case against it. There are risks that need dealing with, including the risk of contagion throughout the eurozone bond market. The ongoing crisis risks shrinking our export market potential in the long run, and as a consequence that risks creating losses for banks in the UK—banks of course that we own. So on balance and for those reasons, we do not oppose the Bill at this time, but in the time remaining we hope to scrutinise the detail in Committee.
The Financial Secretary to the Treasury (Mr Mark Hoban)
This has been a good debate about the principles underlying the Bill, and I welcome the Opposition’s support for it.
I am sorry that the shadow Chancellor is not in his place. He made a typical speech: a couple of jokes, a few quotations and then a shaky grasp of the facts. I shall not match him on jokes, but let me give the House a couple of quotations. He talked about the views on Ireland, but let me quote a former member of Labour’s shadow Cabinet, who said:
“The whole purpose is to bring the Welsh economy up to the standards of those of other countries in Europe, so that we can follow the lead of the Irish economy and become, in a matter of 10 or 20 years, one of the most successful regional economies in Europe.”—[Official Report, 28 February 2002; Vol. 380, c. 868.]
The right hon. Member for East Ham (Stephen Timms), when he was Chief Secretary to the Treasury, said:
“The Irish economy has enjoyed a good deal of success over the past few years. The corporation tax regime has contributed to that, but there have been a number of other factors”.––[Official Report, Finance Public Bill Committee, 8 May 2007; c. 19.]
There we go: a record of Opposition Members’ hymns of praise to the Irish economy.
It struck me as remarkable, however, that the shadow Chancellor did not understand the mechanisms being used to support the Irish economy. He seemed to think that the UK would bear a higher share of the bail-out costs than other European Union members, such as France and Germany, and that they do not contribute to the IMF or to the stability mechanism. Let me make it absolutely clear to the House that the UK is contributing through the IMF, the stability mechanism and a bilateral loan. Other European countries are contributing through the IMF, the stability mechanism and, if they are members of the eurozone, the stabilisation facility.
Owing to their share of the contribution to European Union funds, Germany and France are contributing more than the UK: some 27% of the contribution is through the facility. France contributes 20% through the facility, compared with our 14%. And through the mechanism, the UK’s contribution is 14%, Germany’s 20% and France’s 17%. It is a pity that the shadow Chancellor does not understand how the package actually works. The right hon. Gentleman also seemed to deny that the euro made any contribution to the crisis facing Ireland. However, the right hon. Member for Edinburgh South West (Mr Darling), who made a very thoughtful speech about the challenges facing the European Union, punctured his view that the euro had nothing to do with it.
My hon. Friend the Member for Chichester (Mr Tyrie) asked whether we considered buying bank assets. We have in place an agreement by the Irish Government to repay our loan in full, but that could not have been guaranteed if we had sought to buy individual assets of Irish banks. He also asked whether Ireland could repay early without a penalty, and the answer is yes, but the Irish Government would have to make break payments.
The right hon. Member for Belfast North (Mr Dodds) and the hon. Member for Belfast South (Dr McDonnell) talked about the impact on the Northern Ireland economy of what is happening south of the border, and we recognise that. We recognise also that more work needs to be done to strengthen the Northern Irish economy, which is why we are in discussions with the Northern Ireland Office about the issues to do with enabling the Executive to set their own corporation tax rate. There is another part to that deal, however, because, if they have that power, they will need to bear the risk with the revenue and see a reduction in their block grant.
A number of hon. Members, including my hon. Friends the Members for Wellingborough (Mr Bone) and for Kettering (Mr Hollobone) and the hon. Member for Nottingham East (Chris Leslie), asked how we can afford to do this, given the fiscal position that we are in. Let me make it clear that we are not paying for the loan out of revenue or capital expenditure; we are going to borrow the money. The measure will not lead to a reduction in the money we can spend in my constituency or theirs. In fact, as my right hon. Friend the Chancellor said, we will end up making a small profit on the loan because of interest rate differentials. The loan will not affect how much can be spent in our constituencies, and if that is the only reason hon. Members are opposing the measure, I ask them to think again.
Mr Hoban
The debt is matched by an asset, which is the amount we expect to get from Ireland, and it does not impact on our deficit. We will actually make a return on the interest that will be paid.
Let me deal with three very brief points. First, there is no expectation that we will have to make further loans to Ireland in the future. Secondly, there is no reason to presume that full repayment will not be met over the term of the loan. Thirdly, ensuring Ireland’s stability is overwhelmingly in our national interest. That is why we are making the loan and this exception for Ireland. It is in our economy’s interests to ensure that the Irish economy is stable and we need to do all that we can to deliver that.
Question put, That the Bill be now read a Second time.
Joan Walley (Stoke-on-Trent North) (Lab)
On a point of order, Mr Deputy Speaker. Given that the Secretary of State for Energy and Climate Change has made an announcement this afternoon in respect of fuel poverty and the Warm Front scheme, saying that it is fully allocated, may I ask whether there has been any request from a Minister to make an oral statement to the House? Many people will be concerned about the cold weather and the urgency of having work done, and they will be fearful that that work cannot be completed before 31 March.
Mr Deputy Speaker (Mr Lindsay Hoyle)
As the hon. Lady is aware, that is not a point of order for me, but I am sure that the message is getting through to the Secretary of State as we speak. There are other channels that she may wish to use.
Loans to Ireland Bill (Money)
Queen’s Recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a),
That, for the purposes of any Act resulting from the Loans to Ireland Bill, it is expedient to authorise—
(1) the payment out of money provided by Parliament of any sums required by the Treasury for the purpose of the making of loans to Ireland by the United Kingdom; and
(2) the payment of sums into the Consolidated Fund.—(Mr Hoban.)
Question agreed to.
Loans to Ireland Bill
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
17:27 - The Committee divided: - Ayes: 243 / Noes: 301 - Question accordingly negatived.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
With this it will be convenient to discuss the following:
Amendment 7, page 1, line 7, at end insert—
‘(3A) Any loans made under this Act, and any repayment of principal or payment of interest received thereunder, shall be denominated in sterling.’.
Amendment 4, page 1, leave out lines 8 to 18.
Amendment 6, page 1, line 18, at end insert—
‘(7A) Before determining the interest to be charged on any payments under this Act, the Treasury must specify the rate of interest by order; and the Treasury may not make such an order unless—
(a) the House of Commons has determined by resolution the rate of interest to be charged; and
(b) the order provides for that specified rate to be charged.’.
Amendment 8, page 1, line 20, at end insert—
‘(8A) All loans made under this Act shall be repaid by 8 December 2040.’.
Amendment 10, page 1, line 20, at end insert—
‘(8A) Before any loan or binding offer of a loan is made, or guarantee given, under this section, the relevant agreement must be laid before, and approved by a resolution of, the House of Commons.’.
Clause stand part.
Mr Cash
I have just abstained on Second Reading for one simple reason. I had intended to vote for it, but I remain gravely dissatisfied by the answer that I received from the Chancellor regarding the increase in the amount specified in clause 1. I do not want in any way to misrepresent what he said, but as I understood it, it was that that was all right because it was about exchange rates. However, anybody who examines clause 1 carefully will notice that subsection (4) states:
“The Treasury may by order made by statutory instrument substitute a greater amount for the amount for the time being specified in subsection (3)”,
which is £3.25 billion.
The next two provisions simply determine whether any increase will be subject to affirmative or negative resolution. An order would be made under the negative resolution only if the increase is to do with exchange rates, but I can see nothing to say that an increase under subsection (4) would be affected by subsequent provisions. I was bound to take great exception to that. It is a serious matter, because we simply do not know what the greater amount would be. We are totally exposed, subject only to affirmative resolution, which cannot be amended. Such a measure would simply go through on a whipped vote, just as the rest of the Bill doubtless will. That is why I abstained on Second Reading.
Amendment 3 addresses the definition of “Irish loan”. I was staggered when I looked carefully at the Bill, because clause 1(2) states that “Irish loan” means simply
“a loan to Ireland by the United Kingdom.”
The background is the recent debates on economic governance, and the origins of the European financial stability mechanism and the alternative eurozone facility, which as someone pointed out is as much as €440 billion, which is easily enough to cope with the Irish situation. There is a very close interconnect at all points between the so-called bilateral loan proposed in the Bill and the mechanism that I described.
The difficulty is that there is an overall determination to do as much as possible by way of integrating with Europe when it is quite obvious to anybody that this is the time for us not only to step back, but to desegregate from the European venture. I believe very strongly that the technique that is consistently employed in all spheres of activity is to say, “We don’t like what goes on in the EU, but we can just go along with it. Alternatively, to satisfy the Eurosceptics or Eurorealists, as they prefer to be called, we can make parallel arrangements along the lines of what we would have done if we were in the eurozone.”
The research paper helpfully supplied by the Library states:
“It is worth noting that the bilateral element”—
assuming that that is what the Bill is—
“of the UK’s support is broadly equivalent to what the UK would have provided if it were part of the eurozone-only EFSF.”
In other words, we would have provided the loan anyway. The Minister may well say that that is not his intention, but that is what Library researchers believe, and they are often right.
Mr Redwood
A portion of the total loan package is contingent money for Irish banks—they may or may not need it. Is my hon. Friend worried that they could come back for even more, and that clause 1(4) could allow an extension of our loan for Irish banks?
Mr Cash
Yes I am. Treasury civil servants are exceedingly clever and may know of pitfalls, but they might not fully explain them to Ministers. Of course, the Minister takes ultimate responsibility, but the question is: what is the effect on the daily lives of the people whom we represent? That is the issue on which we have to concentrate.
Under the circumstances, I am extremely dubious about the way in which the whole thing has been put together. In particular, I would mention what I will call the mechanism, as compared with the facility. I had an exchange earlier about the mechanism with the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), who said, “This is all going to be done by qualified majority voting.” However, that is not the case. Within the mechanism as it is set out, the request comes from the member state; it is only the final arrangement that requires qualified majority voting. Indeed, the EU sent in the European Central Bank and the International Monetary Fund in flagrant contradiction of the provisions of article 3 of the regulation in question.
In fact, the EU was operating the provision as if it were already law, when it was not. That it is typical of the European Union. It keeps on telling us about the rule of law, but when it suits, it completely ignores the law. What happened was unlawful. I also believe that it was unlawful in respect of article 122, which was the legal basis used to create the mechanism. I do not need to go into detail, but article 122 concerns natural disasters, energy supply and things of that kind. Anyone who looks at article 3, article 122 and the other provisions that they mention would reasonably conclude that they should not be used for the purposes of sorting out an unmitigated mess that was created by banks, as well as by the Government of Ireland and other parts of the European Union. Therefore, I am afraid that the answer that I received from the former Chancellor—that there really was no alternative to what was done, because such decisions are reached by qualified majority voting—does not stack up. If what happened was unlawful, it should have been resisted and, because of the consequences, it should, if necessary, have been taken to the European Court.
Mr Redwood
My hon. Friend has great legal expertise. I understand that the European Union is trying to negotiate an amendment to article 122 of the treaty in order to put the matter beyond doubt. Would that be retrospective, or could that undermine the current position?
Mr Cash
That is a very good question. I doubt very much whether an attempt to make the provision retrospective would remedy the mischief.
I am afraid that the question of illegality taints the Government’s position as well, and I shall explain why—the Minister will know all the detail, because I think that he was the Minister responsible. There is provision for the European Scrutiny Committee under Standing Order No. 143 regarding scrutiny and scrutiny reserves. It so happens that the European Scrutiny Committee was not set up until November—a few weeks ago. However, I have here a table setting out the dates that shows that the date of deposit was 25 May 2010. The decision was taken on 9 May at ECOFIN, which happened to be 48 hours before the coalition was pushed through. In the case of ECOFIN’s decision on the financial stability mechanism, the table states unequivocally that there was an override of both the European Scrutiny Committee and the Lords. On both counts, the then Government and the current Government breached the scrutiny arrangements. Indeed, it is quite extraordinary that the explanatory memorandum that accompanies the documents in question, and which should have been presented much earlier, was presented on 15 July. I know that the Minister will not dispute that, because it comes from Government documents. There is a serious worry about the manner in which this matter has been manipulated.
Just before the proceedings began, we were presented with another document, which reinforces my concern. If my amendment 3 were accepted, the Bill would read: “In this Act, ‘Irish loan’ means a loan to Ireland by the United Kingdom other than a loan by virtue of any provision by or under the European Communities Act 1972.” I am very familiar with the way in which interweaving goes on, not only as Chairman of the European Scrutiny Committee but because, for the past 26 years, I have watched this process of integration and the manner in which, by extremely clever and adroit manoeuvring, we get further and further integrated into these arrangements. The mechanism is an open-ended invitation until 2013, as I ascertained during an exchange with the Chancellor of the Exchequer. Until 2013, we are stuck with the present arrangements.
I am sometimes a bit of a Cassandra, in that I make prophecies—more like predictions—about certain events, find out that I was right and then find out that nobody took any notice until they had happened. On this occasion, I am going to say that it is extremely likely that, if Portugal gets into really deep trouble—and perhaps Spain, too—that will happen before 2013. If this greater amount is interwoven into the stabilisation mechanism, or even if it is not, the mechanism itself will entrap us in the arrangements which, although not yet permanent, will go on until 2013.
I also think that the Government are struggling a bit in relation to article 122, under which this measure was introduced—unlawfully, in my opinion—because the Commissioner responsible, a Mr Sefcovic, has stated that the Commission is still considering whether to use article 136 or article 122. Against that background, the Van Rompuy Committee is sitting and might already have concluded that it would be appropriate to have a permanent mechanism in place only under article 136, and therefore only by reference to the eurozone. That would be a plus, but it would not alter the fact that, between now and 2013, we are at risk.
I am concerned about the deficient wording in clause 1(2), because not excluding what might be done under the European Union effectively leaves it open to the European Union’s continuing to weave its way into the arrangements, despite the fact that they are described as a bilateral loan. Some people might say, “Ah, but you have to understand that when the explanatory notes talk about a bilateral loan, they mean that.” It does not say that in the Bill, however. Furthermore, we have had some unpleasant experiences with explanatory notes in the European Scrutiny Committee recently, as anyone who wants to read the report that we have just issued will see. The explanatory notes in question were positively misleading, and distorted the legal position. That is a matter that we will be pursuing in Committee, when we ask whether parliamentary sovereignty or judicial supremacy should prevail. I do not need to go into the detail of that now, but the fact that a bilateral loan is mentioned in the explanatory notes has been severely vitiated by our experience of the explanatory notes to the European Union Bill.
Stewart Hosie
Could it not simply be the case that the UK is providing a loan to Ireland in a time of need—a country that takes 7% of our exports and whose banks provide a quarter of the banking facilities in Northern Ireland? While all this is academic and interesting for those who are interested in it, could it not simply be the case that we are providing a loan to a friend in need at an important time?
Mr Cash
I happen to agree with that, which is why I did not vote against the Bill, but I must say that this is not a matter of merely academic interest, because the consequence that I mentioned at the beginning of my speech, which led me to abstain, is that there is no restriction on the greater amount. I wait with enormous interest to hear whether the Minister will differ from the Chancellor of the Exchequer on that, but when it is an open-ended provision for a greater amount, I would like to know what that greater amount’s limit would be.
In the context of the interlocking aspect to which I have just referred, I remain deeply concerned that the amount could be greater, and that this matter could get caught up in the complicated ongoing negotiations—I recognise that the Chancellor and his Ministers have had some very complicated negotiations. I remain worried about the direction in which we seem to be going, therefore. It would be so simple for the Government to give me either a direct assurance, which I would regard as a second-tier response, or a specific agreement to accept my amendment just to get me off their back. I would regard such an agreement as a useful way of dealing with the situation, but I bet I do not get that.
Mr Dodds
We will listen with interest to what the Minister has to say, but, just to be clear, is the hon. Gentleman’s argument that the greater amount under clause 1(4) could be used to increase not only the amount of the loan to the Irish Republic, but interweaved with the financial stability mechanism to provide money for other countries? Is that his argument, or is it specifically about the loan to the Irish Republic?
Mr Cash
The provision appears to apply to the Irish component, but because of the implications of what I am saying and the interlocking aspects in the kaleidoscope, it is extremely difficult to work out exactly what is intended by such opaque words. What I am asking for is very modest: simply the removal of all doubt by making it clear that any such loan would be
“other than a loan by virtue of any provision by or under the European Communities Act 1972.”
If all doubt were to be removed in that way, it would be the end of the story and there would be no problem, so why not do it? I look forward to the Minister’s response.
Another issue arises under paragraph 6 of the summary of key terms document. The paragraph covers events of default, and sub-paragraph (h) states that one event of default will be
“the Borrower”—
Ireland—
“not being or ceasing to be a member of the European Union”.
Why would such a provision be wanted if it were not integral to the fact that Ireland is a member of the European Union? I do not think I need to advance the case any further as it is very simple: if we would exclude Ireland from the arrangements by virtue of its ceasing to be, or not being, a member of the EU, that must have special significance, otherwise it would not be stated. That is another exceedingly worrying feature.
Paragraph 8 refers to the governing law, and it states:
“The credit agreement and any non-contractual obligations arising out of or in connection with it will be governed by English law.”
Paragraph 9 is on enforcement, and the document’s authors have clearly thought a lot about this matter, and the more they think about it the more worried I get, because they are transposing their thinking into the provisions of the Bill and this document:
“The English courts will have exclusive jurisdiction in relation to any dispute including a dispute relating to non-contractual obligations arising out of or in connection with the credit agreement.”
That gets to the heart of the problem, because anything that within law is under the jurisdiction of the European Union and within the framework of the European Court under the European Communities Act 1972 cannot be excluded from that jurisdiction by such words in a document of this kind that is “for information purposes”—hence our European Scrutiny Committee report on the relationship between parliamentary sovereignty and the judiciary. Therefore, merely writing in such a document that something will be governed by English law and that the English courts will have exclusive jurisdiction in relation to any dispute is not worth the paper it is written on.
If it is within the European Union legal framework, that means the European Court will get its hands on it. It may be that if there was a dispute or default or any of the other difficulties that could arise from the agreement in the Bill as enacted—as I rather suppose it will be—that will in no way alter the fact that ultimately, as long as parliamentary sovereignty prevails in the light of the European Communities Act, the Supreme Court will not prevent it from falling within the framework of the European Court of Justice.
Of course, it would be open to any future parliamentary Bill to try to unravel the arrangement, but what a pity it would be if we found that the fast-track arrangements we are experiencing today led us to the situation that I have described, simply because we were not prepared to listen to the argument that could resolve the problem by excluding the European jurisdiction. The legal advisers, the Treasury officials and the Minister may well be wrong. If they are wrong, we are in deep trouble. If they are doubtful, perhaps they could listen to those of us who have been proved right on a number of past occasions.
These are my final words—not from Cassandra, but from me. When things go wrong, it is much better to have taken advice beforehand and keep ahead of the curve, rather than allowing the curve to catch up with us.
Kelvin Hopkins (Luton North) (Lab)
It is a pleasure to follow the hon. Member for Stone (Mr Cash); I very much agree with what he has been saying. He is clearly much more erudite on these matters than me, but I understand what he is saying—that today, we are making to our closest friendly neighbour country a bilateral loan which has nothing to do with the European Union and which is not part of the panoply of EU arrangements. I am happy to go along with such an arrangement.
The right hon. Member for Wokingham (Mr Redwood) has said many times that, if there are problems in the eurozone with the eurozone, they should be sorted out by the eurozone, not by countries outside the eurozone. I agree with him very strongly. This is a country that is our closest neighbour, with which we have deep, long historical relations—very friendly relations now, we are pleased to say. Indeed, I have many Irish constituents who are concerned about their country. We are making a friendly gesture to a neighbouring country—our nearest friendly neighbour—that happens to be in the eurozone, which we happen not to be.
We do not want to be in a situation where, if another country gets into difficulty, it says, “You made a loan to Ireland—you can make a loan to another country in the eurozone.” That would not be acceptable.
Mr Hollobone
That is exactly the danger. Under the present discussions about the permanent crisis resolution mechanism, the draft conclusions of the European Council state:
“Member States whose currency is not the euro will be associated to this work.”
So the danger is that this Bill could be a precedent for the “Loans to Portugal Bill”, the “Loans to Spain Bill” and the “Loans to Italy Bill”, which may be just round the corner.
Kelvin Hopkins
I thank the hon. Gentleman for his intervention. The amendments from the hon. Member for Stone will hopefully clarify the position and change the Bill to the way we would like it to be, so that it will not have implications for other members of the eurozone.
As I have said, however, if the Irish are to recover from their situation, they must remove themselves from the eurozone, re-create the punt, depreciate their currency and bring it into line with sterling, because we are their natural trading partners. Their economy and ours are the most closely integrated, and that is the sensible thing to do. I have said that before in this Chamber, and I have said it in private to senior Irish politicians on two occasions—I must say that it was not received in a very friendly way. Nevertheless, that is the logic, and even now we are looking towards a progressive deconstruction of the eurozone, partial or complete, in the not-too-distant future.
It would be better to deconstruct the eurozone in a rational and controlled way, rather than in a disastrous crash. So I hope that the eurozone members will be sensible and start to deconstruct it as practically and sensibly as they can and not allow it just to go into a massive crisis, which will benefit nobody. Even deconstructing it through country-by-country removals will cause problems, because many other countries have money in Irish and Greek banks, so it will be devalued and people will lose. Nevertheless, it is better to do that than to allow the situation to continue and the elastic eventually to break, causing the whole thing to come crashing down.
Mr Carswell
I wish to discuss amendment 6. It commands great interest across the House, although that may be difficult to believe given the swathe of green Benches that we can see, and I hope that we will have a chance to divide the House on it. It is right that we should be looking to help Ireland and debating how to do so, not simply because of this country’s economic self-interest, but because of the close cultural ties between Britain and Ireland. It is fair to say that there is not a street in any town in this country where there are not close kith and kin connections between our two countries.
The question is whether the Bill helps us to do that. My hon. Friend the Member for Rochester and Strood (Mark Reckless) spoke eloquently, making the point that this deal is not tailored to help the Republic of Ireland, but has been imposed on it. It is not a case of our passing this to bail out Ireland, so much as our passing it to bail out the euro. My right hon. Friend the Member for Wokingham (Mr Redwood) has said that, and he has blogged eloquently about how the European Central Bank triggered this crisis. It began when the ECB called into question Ireland’s ability to finance loans. Why did it do so? It did so because the ECB sacrificed Ireland to staunch the haemorrhaging of confidence in the euro and deal with the growing storm around it. The ECB put preserving a paper currency without a state ahead of the well-being of millions of Irish households.
Ireland is in debt because she is a victim of a credit bubble caused by euro membership, but when we consider amendment 6 we must ask how pushing a potentially high-interest loan on a friend reduces her debts. How does extending a debt as overdraft help that debtor to repay their debts? That will dig Ireland deeper into debt. Each of the eight tranches of this loan is yet another step towards debt. It is time that we stopped digging Ireland into deeper debt. The bail-out will not reduce the debt. People sometimes talk about the bail-out as though it were a solution to debt, but it is a deepening of debt. We need to make certain that the rate of interest and the terms of this extension of Ireland’s overdraft are in her interests and those of her people. To do that, we need to make sure that we in this House have the final say over the terms of the small print.
Amendment 6 seeks to ensure that the interest on this £3.2 billion overdraft extension is kept low. The small print is certainly not definitive on the subject. The summary of terms states:
“The rate of interest payable on a loan will be at a fixed rate per annum equal to the aggregate of:
(a) the Margin; and
(b) the Sterling 7.5 year swap rate at the date of disbursement.”
We are told by the Chancellor that, at the moment, that would be 5.9% and the document suggests that figure, but it is not definitive. We need to give the House of Commons the final say on the rate, and we need a formal means to allow the House to ratify the rate of interest.
Hon. Members will have heard some discussion about how Iceland got a significantly lower rate. Why is that? Is Iceland a better friend? It is for public debate, public concern and the legislature, not technocrats in the Treasury and watery eyed officials, to decide the rate of interest that we charge our friend.
The explanatory notes have, I think, been issued so that we believe that they are close to what amendment 6 suggests. We are asking for something that is not a million miles away from the explanatory notes, so why not formalise the arrangements? Why not require the approval of an order under the affirmative procedure in the House? We have only the explanatory notes to go on—[Interruption.] I am delighted that those on the Front Bench are paying such attention. We only have the explanatory notes to go on, so why not enshrine these arrangements by order? The last time that we left EU matters to Sir Humphrey’s explanatory notes, we were, bluntly, mugged. The explanatory notes to the Bill on sovereignty—the European Union Bill—were not even defended by the Minister in Committee. It is a cause of concern that we have only the explanatory notes. We must enshrine these arrangements in legislation to make certain that we in this House, who are accountable to the taxpayers who will ultimately have to stump up for this, are satisfied with the arrangements. That would be good for us and good for Ireland, too.
Over the past seven months, we have seen what happens when the House takes its eye off the small print. We have seen what happens when we leave it to Ministers, officials and Treasury negotiators to handle the small print. For example, we have seen how non-euro member countries, such as Britain, become liable through the small print for open-ended eurozone bail-outs until 2013. That is the price we pay as a House for taking our eyes off the small print. It would be quite wrong, incidentally, to blame the previous Government for that. The deal took effect after the coalition Government came to office.
When this House took its eye off the small print on Treasury negotiations on matters European, the Government managed somehow to sign us up to a European Council document that established a common legal framework for pan-EU economic governance. I suggest that this House should not form a habit of deferring the small print to the Treasury and its officials. It is prudent to require the Government to gain the approval of this House over the interest rate.
The amendment goes to the heart of why we are here and why we have a House of Commons in the first place. It is the purpose of us as MPs—and it has been for many hundreds of years—to oversee what Ministers do with our money. That should include the terms under which they lend our money and the terms under which they make taxpayers liable for debts incurred through such financial arrangements. The amendment is reasonable and in line with what the Government are seeking to do—or claim that they are seeking to do—in the explanatory notes drafted by officials.
The amendment would ensure that Ministers thought very carefully and wisely when they entered negotiations and finalised arrangements. It would also help to restore purpose to the House, which some of us would suggest has been in the past rather supine, submissive and spineless. Ultimately, it would ensure a fairer deal for our closest friend and our closest neighbour. I hope to press the amendment to a Division and to obtain the support of Members on both sides.
Mark Durkan
On amendment 3, tabled by the hon. Member for Stone (Mr Cash), the amendment of itself does not preclude the fear that he and my hon. Friend the Member for Luton North (Kelvin Hopkins) have that at some point in the future there might be a loans to Spain Bill, a loans to Portugal Bill or something similar. The amendment would not preclude the possibility of any other such bilateral loans being arranged in future. I do not believe that the amendment, which is commended to us in those terms, will serve the purpose for which it was tabled.
Mark Durkan
I know that the hon. Gentleman made that point, too, and I want to turn to it. He carefully quoted and referred to a number of points in the loan agreement, which was made available at the start of the debate. The summary of key terms refers to a number of matters, and the hon. Member for Stone seemed to say that those references alone mean that the bilateral loan is being interweaved with the wider EU and IMF support packages to Ireland. However, hon. Members should bear in mind a point that the Chancellor made on Second Reading—that one advantage of the bilateral loan arrangement is the place that it gives the UK at the table when it comes to arranging and overseeing the restructuring plan that is to take place in relation to the Irish banking sector.
The key terms include, under the heading “Other Terms”, at paragraph 1(d):
“no amendments to the facilities provided by the IMF, European Financial Stability Mechanism, the European Financial Stability Fund or Sovereign bilateral lenders or to the Memoranda of Understanding that would have a material adverse effect on the Borrower’s ability to restore its capacity to access the capital markets.”
Given that the purpose of the loan arrangement is to make sure that Ireland can go to the bond markets on its own as soon as possible and get money at competitive rates, it is clearly in the House’s interests, as the UK will be providing this loan, to make sure that the loan terms are protected against any undue terms coming from the other loans being made available in this context.
Several hon. Members have mentioned the role of the European Central Bank. We can look at the history of this situation and question the role of the ECB on a number of occasions. First, it kept interest rates very low—at times against the express wish and request of the Irish Finance Minister—which helped to contribute to the problem. Secondly, as many hon. Members have mentioned, there is the open-ended nature of the Irish Government’s guarantee to the banks. Again, the ECB seems to have been the primary body urging a guarantee of that extent. Thirdly, there is the whole issue of the need for the bail-out and the creation of circumstances in which the Irish Government have had to seek it. Again, many people have questions about the precise role and performance of the European Central Bank in all that. Hon. Members have asked serious questions about the ECB, and we know that a much bigger loan facility is being granted through the EU and the IMF, so surely the House will want to know that the terms of the bilateral loan and its operation will not jeopardise the interests or purposes for which it is being made available. It therefore makes sense for the key terms that are summarised in the document to refer to the restructuring plan that is to be undertaken in relation to the banks.
The document makes it clear that “conditions precedent” will include “finalisation by the Borrower”—namely Ireland—
“after consultation with the Lender, of a restructuring plan in relation to its banking sector with the IMF, European Commission and European Central Bank”.
That is not the interweaving that the hon. Member for Stone has discussed, but a sensible, diligent precaution on the part of the House in providing for money to be borrowed. The “Other Terms” also include at paragraph 1(c):
“no amendments to the Restructuring Plan that would have a material adverse financial impact on the UK operations of Anglo Irish Bank, Allied Irish Banks and Bank of Ireland”.
Again, it makes absolute sense for the House and the Government, who are responsible to it, to make clear cross-reference to what else is happening under the restructuring plan and to what other lenders might urge in relation to other parts of the plan in terms of key interests that the House needs to protect, including those of the banking sector in Northern Ireland and the contribution of the Irish banks to the wider UK economy.
Chris Leslie
Although most of the Opposition’s amendments relate to clause 2, these amendments deal with a number of incredibly important issues, and I am grateful to hon. Members for tabling them.
Let me take up some of the points made by my hon. Friend the Member for Foyle (Mark Durkan) about amendment 6 in particular. I understand what he said about the document that was presented to us about five minutes before the start of the debate, which, I have to say, was not only unfortunate, but verging on action that I would describe as morally out of order. It has been very difficult for the Committee to assimilate rapidly what is going on in the negotiations.
However, although I understand, at first glance, my hon. Friend’s impression that amendment 6 or others might have been overtaken by events, the more I think about it, the more I feel that it would be important to have an opportunity to debate the interest rate question in particular because it has such an important bearing not only on the British taxpayer, as the organisation making the loan, but on the Irish people themselves. There are a number of circumstances that can change from time to time. What we have before us is a summary of key terms of the credit facility, which does not necessarily give us the full picture. Although we support the principle of the loan, I am slightly uncomfortable about nodding through quite technical terms without our having had even a retrospective opportunity to air the details properly. That, I think, is essentially what amendment 6 is trying to rectify. I shall say more about that shortly, but let me first deal with amendment 3, because it makes an important point.
I entirely understand the attempt by the hon. Member for Stone (Mr Cash) to limit the way in which the current drafting of the Bill might affect all sorts of other unforeseen loan opportunities. He spoke of the European Union’s inveigling its way into other loan arrangements. In particular, he is worried about whether the Bill excludes what might be done under European law, because, as he sees it, this legislation leaves open opportunities for the EU to enlarge and change the mechanism, and to build on what we, at face value, know about the dimensions of the loan under discussion.
There are some interesting points about the jurisdiction of the European Court of Justice in the case of a default, and some questions probably merit further scrutiny, but I am not entirely convinced of the hon. Gentleman’s arguments or of whether his amendment to clause 1(2) would necessarily achieve much of great use. I am grateful to him, however, for at least tabling it.
We have not touched on some of the other amendments in the group. The Chancellor addressed the denomination in sterling issue in his opening comments, but the question about whether the loan should be repaid over a particular length of time is quite interesting, and the hon. Member for Kettering (Mr Hollobone) tabled a useful amendment involving the 30-year period. The Opposition have also tabled amendments on those matters, in our case to clause 2, but our proposals are about the reports having to comment on the duration of the loan. Amendment 10, on the terms of the credit facility being open to greater debate, is quite interesting, too.
Amendment 6 looks most interesting, however. Given the drafting of this quite hurried legislation, and the unusually conspicuous absence of certain dimensions of the loan, we have a duty to pay attention to what the hon. Member for Clacton (Mr Carswell) suggests. When one thinks about a loan, one should think about not just the sum of money, but the duration and the interest rate. The rate of return on the British loan is a fundamentally important fact that cannot be simply skimmed over by references in documents that are not currently official documents before the House. The Chancellor said that the Swedish and Danish bilateral loan arrangements have not yet been completed, so it is difficult for us to determine whether our prospective interest rate is more or less favourable than theirs. What would happen if there were a sudden spike in global interest rates? Where in the Bill is there any protection for the British taxpayer?
Conversely, where in the legislation is there any protection for the Irish if the current or any future Government decide to chop and change the rate from time to time, perhaps making a unilateral, Executive decision to raise the interest rate in future tranches of the loan arrangement? The Chancellor said that the interest rate will be fixed for the duration of each tranche, but there is no assurance of that in the Bill.
There is no harm in allowing the House the opportunity to debate and approve, by the affirmative procedure, a statutory instrument on the interest to be charged following the recommendation of Ministers. Our parliamentary democracy is often disregarded as some kind of rubber-stamping device, but perhaps these are good times to take back some of those safeguards, given the serious issues at hand. While Parliament votes on those moneys tonight, it must also consider taking greater ownership of the process, rather than delegating absolutely everything in absolutely every arrangement to the Chancellor of the Exchequer. I am certainly interested in amendment 6, and I commend the hon. Gentleman for his prescience in tabling it.
Mr Hoban
Amendment 3, which my hon. Friend the Member for Stone (Mr Cash) moved by, would ensure that the Bill did not apply to any loan made by the United Kingdom to Ireland under the European Communities Act 1972. Let me give him a second-tier assurance that the Bill applies only to the UK’s bilateral loan to Ireland. Any EU loan made to Ireland through the financial stability mechanism would not be a loan from the UK to Ireland and would not be subject to the Bill.
There is no interweaving or interlocking, and therefore the amendment is unnecessary. My hon. Friend referred to paragraph 6(h) of the loan agreement. I am sure he will understand that the funding Ireland gets is dependent on it being a member of both the International Monetary Fund and the European Union. If it were no longer a member, it would no longer receive the funding and therefore there would be a problem. Amendment 4 would remove the power to increase the cap on the loan and adjust the cap for exchange rate fluctuations. I hope that the comments made by my right hon. Friend the Chancellor remove the need for anyone to push that amendment further.
Amendment 6 would require the interest rate on the loan to be approved by Parliament. That is not appropriate. The interest rate for each tranche of the lending to Ireland will be a fixed rate that is set by adding a margin of 2.29% to the sterling seven-and-a-half-year swap rate at the time that the disbursement is made. That is set out in the loan agreement and gives certainty to us and to the Irish Government, who would want to have certainty when accepting and voting on this package.
My hon. Friend the Member for Clacton (Mr Carswell) said that the amendment would enable the loan interest rate to be reduced. It could also lead to the loan interest rate being increased to the detriment of the Irish Government and their economic recovery. It is important that there is a clear, definitive statement about what the rate is. We have published the summary of key terms of the loan agreement to help colleagues understand what the rate is and how it will be set. The rate is set with the Republic and within the range of interest rates agreed with other multilateral bodies. It would be a big mistake and irresponsible of the Labour party to vote for amendment 6, because it would create uncertainty and instability where we want certainty and stability for the Irish Government. I question whether what the amendment proposes is the right thing to do. The loan rate is agreed and clear, and it is in the summary of key credit terms. The Irish Government have signed off on those key terms. That is the rate they are expecting to get. Amendment 6 would create unnecessary uncertainty and I therefore ask my hon. Friend to withdraw it.
Mr Cash
For the time being, I have decided against pressing amendment 3 to a Division.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 6, page 1, line 18, at end insert—
‘(7A) Before determining the interest to be charged on any payments under this Act, the Treasury must specify the rate of interest by order; and the Treasury may not make such an order unless—
(a) the House of Commons has determined by resolution the rate of interest to be charged; and
(b) the order provides for that specified rate to be charged.’.—(Mr Carswell.)
Question put, That the amendment be made.
Mr Hoban
I beg to move manuscript amendment (a), page 2, line 16, at end insert—
‘(d) the remaining term of each Irish loan which is outstanding at the end of that period, and
(e) the original term of each Irish loan in respect of which a payment was made by the Treasury by way of an Irish loan in that period.’.
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
With this it will be convenient to consider the following:
Amendment 1, page 2, line 16, at end insert
‘, and
(d) the original term for any Irish loan and remaining terms for any outstanding Irish loans.’.
Amendment 5, page 2, leave out lines 17 to 26.
Amendment 2, page 2, leave out lines 18 and 19.
Clause 2 stand part.
Mr Hoban
In dealing with the issues emerging in Ireland, we have sought to keep the House informed as much as possible about the progress that was being made as the crisis emerged, and the role that the UK Government felt they should play in helping to resolve it and responding to the Irish Government’s request for help at the end of last month. We have done that through statements to the House and the publication of the Bill last week, and to aid debate, we ensured that before today’s debate started a copy of the loan agreement was placed in the Vote Office. I hope that hon. Members will recognise that we were not able to place the summary document in the Vote Office earlier—or, indeed, to place the full signed agreement there—because negotiations are still ongoing with the Irish Government. However, the principles that have been agreed were set out in the summary of key terms.
I think hon. Members would say, “Well, it’s all very well that you’ve been transparent and open in the run-up to the loan process, but what’s the next stage? Are you going to be transparent during the life of the loan? How are you going to keep the House informed of what’s happening, whether the Irish Government are drawing down each of the eight tranches, how far they’ve got with repayments, and so on?” For that reason, we decided that there should be a clause to deal solely with reporting. It states that the Treasury will
“prepare a report about Irish loans and lay it before the House as soon as practicable after the end of that period.”
The first period will end on 31 March 2011 and a report will be published for each subsequent six-month period. The clause states that those reports will include details of
“any payments made by the Treasury by way of”
the loan, and details of
“any sums received by the Treasury in that period by way of repayment of principal or the payment of interest”
and
“the aggregate amount of principal and interest in respect of…loans which is outstanding at the end of that period.”
Mr Hoban
I am pleased that my hon. Friend recognises the spirit of the new politics, but I am not quite sure where he will take the debate from there. I welcome his recognition of the Government’s flexibility. I do not know what his experience is, but my experience of opposition was that it was rare for a Government to accept an Opposition amendment even in principle. So this perhaps shows that the spirit of the new politics is now coursing through the House.
I should make some holding remarks on amendment 5, which my hon. Friend the Member for Stone (Mr Cash) tabled. I am pleased to see him in the Chamber, because he may be able to be clearer about the thinking behind his proposal than I could.
Subsections (4) and (5) are there to ensure that the duty to report does not continue indefinitely once all loans made under the Bill have been repaid and the authority to make further loans has lapsed. The way in which my hon. Friend has drafted amendment 5 would turn the requirement to report on the loan while sums are outstanding into an open-ended requirement to report every six months ad infinitum, even once all the loans had been fully repaid. I hope that the Committee will agree that this would be unnecessary and undesirable.
Amendment 2, tabled by Her Majesty’s Opposition, would do something slightly different. Whereas my hon. Friend seeks to amend clause 2 to ensure that reports appear ad infinitum, the Opposition seek to bring forward the date on which the duty to report would end, by removing the requirement to report where there were no outstanding liabilities, but where there had been repayments or payments of interest in the preceding reporting period. In effect, amendment 2 says that there should not be a report where there is no balance to be repaid at the end of the period, although payments have been received in those six months. It would seem odd to remove the need for a report on the period during which the last part of the loan was paid off. Clearly the Government should be required to report that that has happened, and that is what the Bill as drafted requires.
I hope that the Committee will accept amendment (a), and that the proposers of amendments 1, 2 and 5 will not press them to a vote.
Chris Leslie
I do not necessarily wish to pour more congratulations on to the shoulders of the Minister—that would not be doing my job correctly—but in the spirit of Christmas I have to acknowledge, albeit begrudgingly, my appreciation of manuscript amendment (a), which the Chancellor of the Exchequer himself has tabled. I like to imagine him poring over the Order Paper, happening upon my amendment 1 and immediately thinking, “I must accept that amendment, but the drafting is not quite right,” and therefore rewriting it in his own fair hand. However, I suspect that several dozen parliamentary draftsmen and women were involved in the process. As the Minister said, the intention was indeed to ensure that when we report every six months on what is happening with the loans, we are talking not just about the aggregate amount of the payments made and the interest, or about the sums that are returned, but about some of the other dimensions.
As the Minister said, the reporting arrangements as set out in the Bill do not exclude the ability to make the reports more comprehensive. Indeed, we ought to state at this stage that we would appreciate as much data being contained in them as possible. One piece of information that I would have found useful is the remaining term of the loan, although that is a small point; given how small it is, I am grateful that the Government have conceded it. Perhaps I should regard this as a famous victory for the Opposition.
Chris Leslie
I thank the hon. Gentleman. Just at what I thought was my moment of great glee, he took it away from me. Nevertheless, I will take some satisfaction from what the Government have decided.
I was trying to listen carefully to the Minister’s statement on amendment 2. As a lone traveller trying to amend the legislation, I might have misread the wording of clause 2, but I still do not quite understand the sequences of subsection (4), which states:
“No report is required to be prepared or laid in relation to a period if—
(a) no payments…are made…
(b) no sums…are received in the period, and
(c) no amount of principal or interest in respect of an Irish loan is outstanding at the end”.
I could not see any circumstances where paragraphs (a), (b) and (c) would simultaneously apply. For example, if no amount of principal or interest were outstanding, how could there be any circumstances where, under paragraph (a), payments had been made or, under paragraph (b), sums had been received? Surely if no report is required when no amounts are outstanding, the conditions under subsections (4)(a) and (b) are redundant. Looking at the drafting of subsection (4), it would be easy to imagine the parliamentary counsel becoming entangled in an arcane discourse on ontological logic. There are several twists to the double negatives set out in the drafting.
As a layman reading subsection (4), I could not see why paragraphs (a) and (b) were necessary, when they must be concurrent with subsection (4)(c), given that (4)(c) states that there is nothing left owing, according to my reading of it. If each of the three paragraphs were alternatives, or contrasting, perhaps using the words “either” or “or”, that might make sense. They are conjoined, however, by the non-contrasting linkage “and”, suggesting that each of the three conditions must be fulfilled simultaneously, and I am not quite sure that I follow that. Perhaps the Minister needs to walk me through it one more time. I do not wish to press this matter to a vote, because I am sure that there is a higher drafting power at work here, but as I read it, I could not see any circumstances in which paragraph (c) would be true simultaneously with paragraphs (a) and (b).
In general terms the reports will be important, not least because we need to see the terms of the loan that the people of Ireland will have to repay, as well as the amounts of money that the British people will have in return for adding to our national debt. There is a whole series of other questions to which I would eventually like answers. For example, what is the aggregate amount of interest that we expect to be paid by the Irish Government, and what is the impact for us in this country?
As I have said, it is a shame that the summary of the terms of the credit facility was deposited only at the eleventh hour, and I hope that we will have another opportunity to scrutinise it at another time. For the time being, however, that was the purpose of amendment 1, and I am grateful to the Minister for his acceptance of the first amendment that we tabled.
Mr Cash
I have much the same curiosity as the hon. Member for Nottingham East (Chris Leslie). I was a bit puzzled by the drafting of this provision, and I wanted to find out what the Minister had in mind. I am not sure that he has left me any more satisfied than I was when I started out, however, because my experience over the past 26 years of the dogged fashion in which Ministers operate is that they just say, “We’re not going to make the amendment.” They do not usually explain the position satisfactorily either.
Having said that, it seems to me that if there is nothing to report, we should just not bother with the reports. Subsections (1), (2) and (3) will be necessary. It is possible that, in due course, the concerns that I raised on an earlier amendment might need to be included in the report. That was the case, for example, in relation to the reports on the Maastricht convergence criteria, despite all the footling remarks that were made during the debate on Maastricht, when we were assured that this, that and the other would not happen. When we came to the convergence reports, and got into the whole business of the golden rule, the stability and growth pact and all the other shenanigans and wriggling, we were proved right over and over again.
Chris Leslie
I just want to pick up the hon. Gentleman’s point that if there is nothing to report, there is no need to have any reports. I believe that it would be of interest to the House if, even when no payments were made, a report were still produced to set out that fact. That might seem a small point but, for example, in the unlikely event that default became an eventuality, the lack of a payment being received might be of interest. That was also part of the rationale behind deleting subsection 4(a) and (b).
Mr Cash
I think I might agree with that too, but I think that is catered for by subsection (3)(a), which says that each report must include details of
“any payments made by the Treasury”.
One could have said, “payments, if any,” but for practical purposes I think subsections (1), (2) and (3) would be sufficient. I am not particularly fussed about it; I just wanted to table a probing amendment. I got the usual stonewalling operation from the Minister. I have got used to it over the years; it makes no difference to me and it makes no difference to him.
Mark Durkan
Like my hon. Friend the Member for Nottingham East (Chris Leslie) and the hon. Member for Stone (Mr Cash), I found clause 2(4) a bit tortuous. However, I can see the problem with amendment 2, because if paragraphs (a) and (b) were removed and the subsection read only
“No report is required to be prepared or laid in relation to a period if…no amount of principal or interest in respect of an Irish loan is outstanding at the end of the period”,
the point at which the loan is finally discharged—when a final payment is made—could be the one point when a report would not be necessary, whereas I would have thought that that was the one point where a report would have been relevant and necessary.
I therefore understand why subsection (4) is framed as it is and why there is a conjunctive that covers all three parts. It is only when no payment is made, no sum is received, and nothing outstanding is due at the end of the period, that no report is made. Otherwise, if all three conditions are not satisfied, there will be a report, as I understand it. Given what Members have said about the scrutiny and oversight that they want the House to have, although subsection (4) reads tortuously it seems to stand, so I would not be persuaded by amendment 2.
Mr Hoban
I think the hon. Member for Foyle (Mark Durkan) has a second career beckoning as a parliamentary draftsman. He has summed up the situation exceptionally well.
In subsection (4) all three paragraphs—(a), (b) and (c)—have to apply if no report is to be published. If amendment 2 were made, removing paragraphs (a) and (b), payments could have been made in the period but they would not be reported if there was no balance outstanding at the end. Therefore we must ensure that all three are true before we allow no report to be published. I hope that provides clarification.
I hope I am not seen by my hon. Friend the Member for Stone (Mr Cash) as someone who seeks to stonewall his inquiries, but having imposed a duty on the Treasury to report, it is right that that duty be extinguished when the loans are repaid; otherwise someone will say, “Yes, the loans have been repaid, but your Act requires you to make those reports.” It is right that the duty to report is extinguished when the loan has been repaid, and that is simply the purpose of—
Mr Cash
Perhaps a little bit of irritation, which is not usual in my case, is beginning to burgeon, because a number of questions that I tabled weeks ago about the legal advice regarding the stabilisation mechanism still have not been answered, and when I use the word “stonewall” I mean just that. When I do not get an answer, and I am told that I will get the answer as soon as possible but I still do not get it, and I have to put in a reminder but I still do not get it, there is something going on; I know that. They do not want to disclose the legal advice; they do not want even to disclose whether in fact it was given, or when it was given. I would like to know the answer to those questions because as Chairman of the European Scrutiny Committee—
The Second Deputy Chairman
Order. This is an intervention. It is a very long intervention. The hon. Gentleman has clarified what he meant by stonewalling, but perhaps we might leave the considerations about the European Scrutiny Committee for another day, because it is not particularly relevant to the amendment that we are discussing now.
Mr Hoban
It is right that the duty to report is extinguished when there is no principal outstanding, and that is the purpose of subsections (4) and (5).
I hope that, with that explanation, hon. Members will accept manuscript amendment (a) and will not seek to press amendments 1, 5 and 2.
Manuscript amendment (a) agreed to.
Clause 2, as amended, ordered to stand part of the Bill.
Clause 3
Short title, commencement and extent
Question proposed, That the clause stand part of the Bill.
Mr Bone
Can the Minister answer the following question, which has been raised several times during the debate: why is the Bill called the Loans to Ireland Bill rather than the Loans to the Republic of Ireland Bill? That seems very strange, as it gives others the impression that we are lending money to Northern Ireland as well as to southern Ireland.
Mr Hoban
That is an interesting question, as my hon. Friend the Deputy Leader of the House knows because he also recently asked it. I draw the attention of my hon. Friend the Member for Wellingborough (Mr Bone) to clause 1(2), which defines an “Irish loan” as
“a loan to Ireland by the United Kingdom.”
Of course the United Kingdom includes Northern Ireland. Therefore, the loan is clearly to what one technically might describe as the Republic of Ireland. I am grateful to my hon. Friend for raising that point, in order to enable me to put that clarification on the record.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
The Deputy Speaker resumed the Chair.
Bill, as amended, reported.
Third Reading
Mr Hoban
I beg to move, That the Bill be now read the Third time.
This has been a quick process; Bills are not usually dealt with so expeditiously. I thank all Members for their contributions and their co-operation during the course of today. The co-operation to enable the Bill to proceed so swiftly today has been particularly helpful because, assuming Third Reading goes according to plan, the passing of this Bill will send a clear signal that the UK is willing to play its part in the financial package to assist Ireland.
As my right hon. Friend the Chancellor said earlier, this package of measures has been discussed in the Irish Parliament today, and it has voted in favour of it. There are further international agreements to be reached over the course of the next few days including on International Monetary Fund assistance. Our progress today helps to ensure that there is a sense of progress in achieving the right outcome in respect of financial support for Ireland.
The Bill will allow Britain to provide up to £3.25 billion in lending to Ireland as part of the wider assistance package. The package will help to recapitalise Ireland’s banks, set up a contingency reserve to deal with any future problems and cover the current shortfall in the Irish Budget. As was discussed in the debate, ensuring Ireland’s stability is very much in our interests. A final written agreement on the various terms of the loans will be forthcoming in the next few weeks, but we have sought to provide a summary of the key terms that have been agreed with the Irish Government, in order to help to inform today’s debate. It is clear from the way in which the Committee stage of the Bill proceeded that the provision of that information was helpful.
I note the point made by the hon. Member for Nottingham East (Chris Leslie). I, too, wish that we could have supplied this information sooner, but when one is negotiating a deal with another Government, one cannot always deliver information as timeously as one would perhaps like. However, we are committed to keeping the House informed about the progress of those negotiations, and clause 2 will enable us to do so—rather, it will require us; we could have been enabled to do so anyway, through our own desire—through six-monthly reporting.
It is clear from the debate, particularly on Second Reading, that Ireland is a friend in need. Our economy is currently in a stronger position than theirs, which is why we are able to offer our support. It is clearly in our interests, because of the strong links we have with the Irish economy. Ireland is one of our key trading partners, and a strong Ireland will help to support growth, jobs and investment in the UK.
The Bill is straightforward: it gives the Treasury the power to make disbursements to the Irish Government. There is a mechanism in place to take into account any adjustments in exchange rates that emerge between 9 December and the signing of the agreement, which we expect to be within the next 30 days. We do not expect to increase our contribution beyond the €3.8 billion agreed with our international partners and the Irish Government, but there is a mechanism to do so if it is required. Again, that would be through the affirmative resolution procedure and would be voted on by all Members of Parliament. So the right safeguards are in place, and the use to which the facility will be put will also be subject to regular reporting under clause 2.
There is no doubting that this Bill is important, and I am grateful to Members from all parties for their support today—support that helped us to progress according to such an urgent timetable. I hope the Bill will now proceed to the other place and be enacted as soon as possible. I commend it to the House.
Chris Leslie
As the Minister has said, this is important legislation. We have been happy to support the spirit of the propositions before us, and in the spirit of bipartisanship, the Government were able to concede a small but beautifully formed manuscript amendment. Although the Minister perhaps has some longer-term issues in the form of disagreements that are increasingly emerging between him and his Back Benchers, by and large, there was support across the House for the Bill.
We have been clear that we will support the Government in providing help to Ireland. Ireland’s stability does matter to us: it is in our national interest as a trading partner, because of Ireland’s connections with our banks and its being our only land border. Events in Ireland remind us, though, of the inconvenient truths for the coalition in particular: first, that this was a global financial crisis; and secondly, that the banks, not Governments, were the root cause of the problem here.
The problems in Ireland make it clear how fragile the world recovery is and show how risky the Government’s gamble with growth and jobs is. Relying on exports alone delivering them is a risky economic strategy. However, going forward, Europe needs to get ahead of this crisis and the bail-out does buy time, but it does not offer a fundamental solution to the fundamental problem. In Greece, we saw markets calm temporarily, but six months later the Irish problem came to a head.
As part of the longer-term answers required, the Government have to realise that collective austerity across Europe offers countries with high debt burdens no way out. Although we of course support the Bill, we are therefore particularly anxious that the Chancellor of the Exchequer and the Prime Minister show greater leadership in tackling the root causes of the lack of confidence, and argue more fervently for a plan for growth and jobs across Europe and across the eurozone. We believe that that has to be the fundamental objective for the Government at this time; but we are of course happy to support Third Reading.
Mr Cash
I, too, hope that this Bill succeeds, because it is important to help Ireland. I would like to see Ireland as part of a new configuration of the European Union, rejoining this country on a different footing from the arrangements that currently prevail in the European Union. The European Union is increasingly in its death throes and I hope that this does not lead to an implosion. We have seen riots in the streets here in the United Kingdom, in Greece, in Portugal and in Italy—there were riots in Rome only yesterday. The situation is extremely grave and a lot of it results from the very point made by the hon. Member for Nottingham East (Chris Leslie) about growth. The plain fact is that under the current arrangements there is no growth. Until powers are repatriated we will not get the sort of oxygen into the small business community that will be able to fill the gap between the requirements of the Irish economy and those of the UK economy.
In the meantime, we are considerably exposed to the indebtedness of the Irish banks. The amount that we have made available, small as it is comparatively but great as it is from the point of view of the British taxpayer, has been justified, but that is without prejudice to my concerns. They are that the former Chancellor of the Exchequer’s explanation of how the financial stability mechanism came to be put through remains unsatisfactory. He could have referred the whole question to the European Court, because this was unlawful and remains so. I sent a note to the Chancellor of the Exchequer on this very question as he was going off to an ECOFIN meeting. I regret to say that the explanatory memorandum produced by the Government on 27 July—perhaps it was 25 July —endorsed the decision taken by the former Government, and that speaks for itself.
I am also deeply worried about this business of the “greater amount” under the provisions that we have already discussed because, irrespective of what the Chancellor said about the exchange rate, the reality is that the amount of the increase is simply a matter of whether or not it is carried by the affirmative resolution. It is only when the exchange rate issue comes into play and we are therefore just dealing with a fluctuation in the amounts to be made available that we revert to using the negative resolution. Therefore, the Bill still provides that this “greater amount” is an open-ended commitment, and I hope that the Government will keep this closely under surveillance. I have heard nothing from the Front Benchers to dissuade me from that view.
Finally, we need to deal with the question of the Euro-ectoplasm and the way in which the kaleidoscope of European legislation in conjunction with all the other arrangements that have been made parallel to this so-called “bilateral loan” weave together, because there is a serious risk that the European jurisdiction applies here. I did not press my amendment to a Division for reasons relating to another vote that did not, in fact, transpire along the lines anticipated.
Be that as it may, the Bill is understandable from the point of view of the Irish economy. However, the Irish Government and the Irish banking system have to take the blame for allowing their economy to get so far out of kilter, and that point needs to be made on the Floor of this House. We are helping them, but we are doing so without prejudice to the fact that they got themselves into the same kind of mess as the Labour Government did on our economy. This is not a day for excuses or congratulation; it is a day for a bit of sober reflection. If people spend what they have not got, they end up with it catching up with them. There is a great deal to be said for prudence, but not of the former Prime Minister’s kind.
Mark Durkan
I join right hon. and hon. Members in welcoming the passage of this Bill, which is a sad necessity. It has been a sad necessity for this House, and for Oireachtas Eireann, too, to undertake these arrangements for the reasons that many hon. Members have touched on in the debate.
I acknowledge the spirit in which the Chancellor and the Minister have spoken, not only today but on previous occasions and in the statements leading up to this Bill. Although this is a fast-track Bill, we have known that it is coming and that it is afoot; although in procedural terms it has been microwaved through the House, we know, understand and appreciate the background. I hope that we can have some shared hopes and confidences about what will come from it.
It is important to acknowledge that the Bill has raised questions. I tabled an amendment, which was not selected, on bonuses. This week, the Irish Minister for Finance has supervened—that was the word he used, which has been bandied about—to prevent bonuses being paid in Allied Irish bank just as it is about to benefit from this and the other loan measures. My amendment—I understand why it was not accepted—simply aimed to offer the House a chance to paravene in support of the supervention of the Irish Minister for Finance.
I am sure that, as we have been told, the Government will have a place at the table in some of the restructuring discussions. I hope that the Chancellor will ensure that the interests of Northern Ireland banking requirements will be held in due regard in the context of such restructuring. Although many of us, from all parties, have raised many issues about the banking of business in our constituencies, there is a fundamental question about the future of the business of banking in Northern Ireland. Northern Ireland is in the twilight zone between the British banking market and the Irish banking market. I hope that the Government will show due diligence and be protective of the needs of the Northern Ireland economy and the Northern Ireland banking sector as regards that restructuring.
We also need to recognise that there are clear UK interests at stake to do with the Irish economy and Irish banking in general. The Irish banks are not just significant players in Northern Ireland; they have significant lending in other parts of the United Kingdom, too. Of course, the UK banks lend £94 billion or more in the south of Ireland, too. For those reasons, this Bill and the debate about it reflect—to use an old phrase that was coined by Charlie Haughey in the days when he was creating Anglo-Irish engagement with Margaret Thatcher—the totality of relationships. In many ways, today’s debates and the arguments, justifications and explanations that have been given by the Chancellor and Treasury Ministers in recent weeks reflect the modern reality of the totality of relationships between these islands in economic and banking terms.
I understand the question asked earlier by the hon. Member for Wellingborough (Mr Bone) about the Bill’s title. As an Irish nationalist, I regard Ireland as the island of Ireland. My constituency of Foyle demonstrates another naming issue. It is the city of Derry or Londonderry, and so it is instead called Foyle, after the river. The issues are similar with the title “Ireland”. When I was Minister of Finance in Northern Ireland, I had to present statements and agreements on EU funds that were agreements between Northern Ireland and Ireland. Those terms struck me as odd and I could not get away with saying “between Northern Ireland and the south” because the proper title of the Irish state is Ireland. I assume that that is the explanation for the title of the Bill, uncomfortable though some of us, as profound Irish nationalists, might be with that.
Mr Peter Bone (Wellingborough) (Con)
It is a great pleasure to follow the hon. Member for Foyle (Mark Durkan). The Bill has, as he said, been microwaved through the House today, but the trouble with microwaved meals is that although they are quick and do a job, they are not healthy and are not of good quality. That is how I regard the Bill, but I certainly do not seek to divide the House on Third Reading. I have made it clear that I am against the Bill, but it would be wrong to claim any victory today. My remarks and those of some of my colleagues resulted in at least seven Members going through the same Lobby as me, but the Chancellor’s remarks got several hundred Members to go through the same Lobby as him, so it probably is not a good idea to divide on Third Reading.
Let me take this opportunity to congratulate the coalition’s Treasury team, who are doing an exceptional job. They are the part of the coalition that is dealing with the economic crisis and we have a collection of very good Ministers here, headed by the Chancellor. It is just my opinion that we have got things wrong on this particular measure; I am very much in the minority but at least I have made my point today.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Standards and Privileges
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Kevin Barron (Rother Valley) (Lab)
Before I turn to the three former Members who are the subject of the motion, I wish to make a few remarks about the behaviour of the people who duped them. They would no doubt argue that they have served the public interest, but they were also taking advantage of the need of retiring MPs in the run-up to a general election to provide for their future employment. They dangled the bait in front of our former colleagues and unfortunately some of them took it. If that was not entrapment, it was something close to it, and although I do not seek to excuse the conduct of those three former Members, I think the whole House will feel some sympathy for them because of the way they were deceived.
Three former Members—Sir John Butterfill, Patricia Hewitt and Adam Ingram—were cleared by the commissioner and the Committee that I chair of any breach of the rules. Whatever we may feel about the poor judgment they showed in agreeing to take part in the bogus interviews, and however ill-judged some of the remarks made in the interviews may have been, they did not break the rules and the Committee has therefore made no recommendations about them.
The remaining three former Members did break the rules, and the Committee has recommended sanctions accordingly. I will deal with each of them in turn, because although they were all part of the same deception practised by the media, their cases are different in important respects.
Stephen Byers has made a full and I would say gracious apology. He recognises that he made claims to the bogus interviewer that were untrue, and it is evident that he deeply regrets the damage he has caused not only to his reputation but to the reputation of the House. I do not dispute the genuineness of his apology, but unfortunately the seriousness of his offence means that saying sorry is not enough. That is why the Committee has recommended that Mr Byers’s entitlement to a parliamentary pass should be suspended for two years.
The Committee also found that Geoff Hoon committed a particularly serious breach of the code which, like that of Mr Byers, brought the House and its Members generally into disrepute. As those who have read the Committee’s report and the evidence will know, Mr Hoon has not accepted this conclusion.
He argued that the code of conduct should not apply because he was discussing his private life and what he might do after he had left the House. The Committee did not accept that argument. Mr Hoon was a Member of Parliament when he attended the bogus interview, and he talked in the interview about information that he had been given while he was a Member of Parliament, so the code applied.
Secondly, Mr Hoon suggested that the meaning of what he had said to the bogus interviewer had been misinterpreted. It seemed to come down to whether he had said “this” or “it”, or perhaps neither. Some of us refreshed our memory of what he said by watching a recording of the “Dispatches” programme, and he clearly said “this”. Ultimately, however, it is not so much about the exact words that he used as about the impression that he was giving. The Committee concluded that Mr Hoon was giving the clear impression that he could brief paying clients about defence policy on the basis of his inside knowledge. That is, as we said in our report, a particularly serious breach of the code, because it brings the House and its Members into disrepute. Unlike Mr Byers, Mr Hoon has neither accepted that he breached the code nor apologised. The Committee has therefore recommended that Mr Hoon’s entitlement to a parliamentary pass should be suspended for five years. Hopefully, the apology will ensue.
The Committee found that in Richard Caborn’s case there were several minor breaches of the rules in relation to his failure to declare an interest when arranging or taking part in functions in the House. They were most likely due to carelessness on Mr Caborn’s part; there is no evidence that he deliberately set out to break the rules. Mr Caborn accepts that that was the case, and he has apologised unreservedly for those breaches.
The Committee found that Mr Caborn committed a further breach when he failed to declare a financial interest in the course of a meeting with a senior NHS official at which a proposal was raised which might have benefited the members of an organisation for which he was a paid consultant. In our judgment and that of the commissioner, that breach was also due to carelessness. There is no evidence of intent on Mr Caborn’s part. The commissioner therefore described it in his memorandum to us as “less serious” than the breaches committed by Mr Byers and Mr Hoon, but that does not mean that it was not a serious breach. It was a breach both of the rules on declaration of interests and of paragraph 12 of the code of conduct, which covers all members.
The Committee took the view that, because that was a less serious breach than those committed by the other former Members, a less severe sanction was appropriate. We could have recommended just an apology, but Mr Caborn had written to us stating that he did not accept that he should have declared his interest and did not accept that he had breached the rules. As we pointed out in our report, we could have invited the House to summon Mr Caborn to the Bar to apologise in person, but if he did not accept that he had breached the rules, it was not clear what that would achieve. We therefore agreed that Mr Caborn should also lose his privileged rights of access, and, because his was a less serious case than the others, we set the tariff at six months.
Mr Caborn wrote to me on 12 December seeking a meeting with the Committee. I consulted my colleagues on the Committee, who agreed to offer him an opportunity to give oral evidence at its meeting on 14 December. We had, of course, invited Mr Caborn and the others to give oral evidence before we produced our report, but he had declined that initial invitation. We would not normally agree to a request to give evidence after the publication of a report, but in this case we felt that it was right to grant Mr Caborn’s request to have his say, because, as a former Member, he was unable to speak in today’s debate. The transcript of his evidence, and his letter to me of 12 December, are in the Vote Office, and I hope that Members have had an opportunity to read them.
I do not propose to go through Mr Caborn’s evidence in detail, but this is the nub of it. First, we are finding against him on the basis of a rule that we ourselves say is insufficiently clear and needs reviewing. Secondly, he is being treated in the same way as those who have committed particularly serious breaches of the code of conduct.
The Committee says that the rules on lobbying need to be reviewed. The 1974 resolution refers to
“transactions or communications...with Ministers or servants of the Crown”;
the guide to the rules refers to
“correspondence and meetings with Ministers and public officials”
and the code of conduct, article 12, refers to
“any activities...with Ministers, Members and officials.”
That all needs to be brought together and tidied up, but, as the Committee’s report states:
“Mr Caborn should have had greater regard to the purpose of the rule”.
The purpose of the rule is quite clear: it is to ensure that Members are transparent in their dealings with people who might be in a position to influence public policy or the spending of public money. Mr Caborn tried in his evidence to tie the rule very tightly to people who are in a position to influence legislation, but such a narrow interpretation is not one that most of us would recognise. To sum up: yes, the rules need reviewing and clarifying, but the purpose of the rules is clear and the evidence that Mr Caborn breached the rules is, in my Committee’s view, also clear.
Turning to the Committee’s recommendation, I have already explained that we felt that a sanction was appropriate. If Mr Caborn had apologised up front, that might have been enough, depending on what he said, but the fact is that, until I received a letter from him this morning, Mr Caborn did not accept that he had breached the code and had not apologised. In his letter today, Mr Caborn writes that the Committee has “given a new interpretation” of the rules and set a new precedent. I do not accept that, but in his letter he continues:
“Your Committee have come to its conclusion which I accept and in respect to the House, apologise.”
I welcome this apology, although I am disappointed that it has come so late in the day.
An apology was sought and has been given, but that still leaves the House with a decision to take on what sanction should apply. We could, as I said earlier, have recommended that Mr Caborn be summoned to the Bar of the House for a formal reprimand. That would have been humiliating for him, and I am not sure that it would have been all that great for the House. The media would have loved it, and the pictures no doubt would have been broadcast around the world, but it would have been a bit like a public flogging, and we did not think that right or appropriate, so we did not go there.
Given that Mr Caborn is a former Member, the only real option that the House is left with is to take away his pass. He told us that losing his former Member’s pass is just like being suspended from the service of the House. With respect, it is not. A serving Member who is suspended loses his or her pay and expenses for the period of suspension and is excluded from the precincts of Parliament. All that Mr Caborn will lose is his ability to enter the building without going through the visitors’ entrance and his access to certain facilities, such as the Strangers Bar. He can still come here as a member of the public. Some might say that losing those privileges for a period of just six months is a very light punishment. Well, it is intended to be light, because we recognised that Mr Caborn did not intend to breach the rules or to bring the House or its Members generally into disrepute. In that respect, his case is different from the other two.
In the view of the Committee, its recommendations in respect of those three former Members are regrettable but necessary. They are also proportionate. Once the period of suspension of the former Members’ privileged rights of access is over, and assuming an apology has been made, they will be free to re-apply for their passes. It is painful to have to take such action against former colleagues, but by agreeing to the Committee’s proposals today, the House will send an important signal that it does not tolerate breaches of its rules.
The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath)
The right hon. Member for Rother Valley (Mr Barron) has clearly set out the basis for the complaints, the commissioner’s findings of fact and the Committee’s recommendations.
These debates are never easy. The House can take no pleasure in imposing sanctions on Members and former Members who have breached the code of conduct, but it is something that we must do if we are to have any hope of restoring and maintaining public faith in the House. For those former Members who have breached the code, the Committee recommends suspending their entitlement to a parliamentary photo pass for a period ranging from six months to five years. There are those outside this place who might argue that such a sanction is not tough enough. As the Committee has noted, however, the power of the House to discipline former Members once they have left this place is severely limited. In fact, the Committee is not aware of any disciplinary action having been taken against a former Member in modern times.
As these cases do not relate to the misuse of allowances, there is no money to repay and the removal of access is, in effect, the only sanction open to the House to impose. Such a sanction sends a clear message about the strength with which the House deprecates the breaches carried out in these cases. We should not lose sight of the damage that this episode has done to the reputations of the former Members who have breached the code, as they seek to establish new lives and new careers outside this place.
As the right hon. Member for Rother Valley has said, I emphasise that three of the six former Members about whom complaints were made following the clandestine recordings by The Sunday Times and “Dispatches” were cleared of any breach of the code by the commissioner. The motion makes no reference to those Members, because no sanction is required in their cases, but it is important that the record shows that not every Member who is subject to media criticism has, in fact, breached the code of conduct for MPs, however unwise their actions may have been.
In the course of these investigations, the commissioner identified three areas where he felt that the code of conduct should be reviewed. First, the paid advocacy rule prohibits a Member from being paid for participating in any proceeding or from lobbying Ministers or officials, if in doing so they would be seeking to confer an exclusive benefit on the organisation that is paying them. However, the commissioner is not confident that the rule as currently expressed has the effect of ruling out lobbying on behalf of a wider business sector of which the organisation paying the Member forms a part.
Secondly, the code of conduct does not apply to former Members, although it does apply to discussions Members have while serving in the House about what they might do after they leave. The commissioner is concerned about contacts between former Members and serving Members, Ministers and officials based on previous working relationships. An issue arose in the case of Mr Richard Caborn about the scope of the rules relating to contact with public officials. Although the rule itself refers to “Ministers and crown servants,” the guidance refers to “public officials.” That is another area the commissioner feels should be clarified. The Committee proposes that the rules regarding lobbying should be reviewed as soon as time permits. I understand that that will be a wide-ranging review conducted by the commissioner, who will report to the Committee. The Committee will, in turn, make a report to the House.
I remind the House of the measures that the Government have taken and will take to raise standards in public life. The coalition agreement sets out the Government’s commitment to introduce a statutory register of lobbyists. We intend to take as many views as possible of those who are interested through a broad consultation on the introduction of a statutory register of lobbyists, before publishing a draft Bill before the end of this Session. We will introduce legislation in the next parliamentary Session. When Ministers leave office, they will be prohibited from lobbying Government for a period of two years. They must also seek advice from the independent Advisory Committee on Business Appointments about any proposed appointments or employment they wish to take up within two years of leaving office. The ministerial code is also clear that former Ministers must abide by the advice of the advisory committee. In conclusion, on behalf of the House, I thank the right hon. Member for Rother Valley, other Committee members and the Parliamentary Commissioner for Standards for their work. I hope that the House will feel able to support its Committee.
Helen Jones (Warrington North) (Lab)
I echo the thanks given to the Select Committee on Standards and Privileges and to the commissioner for their work on investigating these matters. These were very difficult issues to get to grips with. As my right hon. Friend the Member for Rother Valley (Mr Barron) has said, they have arisen from the contact that former Members had with a fictitious company set up by journalists. It is worth noting that the commissioner obtained full certified transcripts of those meetings before making his report, and that he did not rely simply on the parts that had been broadcast or that had appeared in the media. I think we are all grateful for the thoroughness of the investigations that have been carried out.
It is important to put on the record the fact that the report is not concerned with whether former Members were unwise in their dealings, with whether they exaggerated their claims, or even with what they planned to do when they had left the House; it is concerned solely with whether they breached the rules while they were Members of this House. That is the only question before us. Indeed, in some cases the Committee found that Members who had been reported to the commissioner for investigation had not breached those rules, and they were exonerated through the investigation. In three cases, as we have heard, they upheld the complaints and have recommended that parliamentary passes be withdrawn for different periods.
Labour Members support the Committee’s recommendations on this matter. As has been said, however, we believe that the case involving Richard Caborn, who, it is fair to say, was and is widely respected in this House, raises some issues that need to be looked at in future. The report clearly states that
“Mr Caborn…did not bring the House and its Members generally into disrepute”.
We agree with that. However, the Committee found that he had breached the code of conduct. As the Deputy Leader of the House has said, this case raises some important issues. First, the rules need to be clarified. Members need clear rules that they can obey, in which case there is no dispute about whether they have been breached. Secondly, the definition of “a public official” needs to be the same as that in the rules, in the code and anywhere else that it is mentioned. Thirdly, there is the whole problem of what Members who are planning to leave the House may and may not do when they are planning their future careers. Again, clear guidelines are needed.
We also need to consider whether former Members should have a right of appeal. Any existing Member of this House who is subject to a report by the Standards and Privileges Committee can stand up in this Chamber and make their case; clearly, that is not possible for former Members. I welcome the fact that the Committee decided today to hear evidence from Richard Caborn, but that is something that we will perhaps need to consider formalising in future.
I, too, hope that the House will support this motion, and I look forward to a proper debate on the issues that have arisen during the investigation of these cases.
Mr Alan Meale (Mansfield) (Lab)
Let me say to my right hon. Friend the Member for Rother Valley (Mr Barron) that I welcome all aspects of his Committee’s report apart from one, to which I will refer in a moment.
As the Deputy Leader of House has said, it is never easy for the House to discuss such matters. It is even less easy for someone to stand up and say that they do not agree with parts of a report such as this, because inevitably those comments will be picked up by whoever is out there and played against them. However, I feel absolutely obliged to do so in respect of the case of Richard Caborn. Richard Caborn is a person who gave 27 years of honourable service in this place. In the past few weeks, people from both sides of the House have told me that what he and other colleagues are going through is absolutely appalling.
What about the three former Members who were exonerated entirely? We must, as a House, look to see what they have been put through over the past few weeks and months by people outside this place. Perhaps, as the Chair intimated at the beginning of his address, we need to look at how people treat this place and how they portray it to the general populace, as that is not in the interests of the democratic process.
I turn to what the Chair of the Select Committee said in respect of Richard Caborn. The Committee’s recommendation states:
“Like the Commissioner, we accept that there is no evidence to suggest that any of these breaches were intentional. Mr Caborn did not bring the House or its Members generally into disrepute.”
As its Chair said, the Committee accepts in its conclusions that the rules and associated guidance need to be clarified and amended, and that the rules relating to lobbying must be reviewed as a matter of urgency.
I conclude as I started by reminding the House of Richard Caborn’s long years of honourable service in this place. He served at all levels of Government and served the House well—as did Sir John Butterfill, who was exonerated in this examination. Richard Caborn spent most of his working life in this place, serving the people of this country and the people of Sheffield, only to be admonished at the end of it by this place because of our lack of rules, the sting that was referred to by the Chair of the Select Committee, and that Committee’s findings, which state that he brought neither the House nor Members into disrepute. The six-month suspension that he has been given is, frankly, disproportionate to his so-called crimes. It would have been enough to say that it was unsatisfactory that he did not make a full apology to this House at an earlier stage. If we are going into the business of bringing stings performed by people outside this place to the Floor of the House and of purging our own Members, something wrong is happening.
Question put and agreed to.
Mr Speaker
I call Neil Parish to present a public petition. He is not here, so we will move on.
Water Supplies (Developing World)
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
That the draft Mutilations (Permitted Procedures) (England) (Amendment) Regulations 2010, which were laid before this House on 8 November, be approved.
The House divided: - Ayes: 304 / Noes: 221 - Question accordingly agreed to.
Mr Don Foster (Bath) (LD)
After many years of campaigning on water, sanitation and hygiene, I am grateful for this opportunity to debate the topic. Far too many people in the world lack safe clean water. Globally, just short of a billion people struggle without access to it. That is more than the population of Europe. In places such as Zambia, Ethiopia, Tanzania and Mozambique, I have seen personally that when clean water is not available there are minimal opportunities for good health, gaining an education, looking after crops or animals, or developing a business. If a major part of the day is taken up with walking many miles to collect water, there is no time for a child to get an education, and no time for a parent to earn a living.
Similarly, far too many people do not have decent sanitation or hygiene provision. The figures are frightening. Whereas the number of those who lack safe water is dreadful, 2.6 billion people go without access to decent sanitation. That is twice the population of China. Without decent sanitation or hygiene, the chances of a healthy life are minimal. Diarrhoea is the biggest child killer in Africa. On that continent alone, almost a million children aged under five died from diarrhoea in 2008. Worldwide, some 1.3 million infants die as a result of diarrhoea every year. Ninety per cent. of those cases are down to inadequate sanitation, unsafe water or poor hygiene.
It is clear to me that one of the most important ways in which we can help the poorest people in the world is by providing support in the areas of water, sanitation and hygiene, collectively referred to as WASH. Many of the other targets of our aid provision—education, agriculture, business development and health—need, as a starting point, people to have access to decent water, sanitation and hygiene.
I have seen at first hand the impact that help with those facilities can make. I have seen, for example, a health clinic in the bush in Ethiopia that was almost deserted because of the improvements in the health of local people following the installation of water pumps in local villages. In many other places I have seen the impact of the excellent work done by the UK-based charity WaterAid. I have even done a bit of well building for it in Zambia.
Fiona Bruce (Congleton) (Con)
I thank the hon. Gentleman for introducing a debate on this important subject, on which I support him. I have to declare an interest: my father spent his entire professional career as a water engineer, building and maintaining water and sanitation projects both in the UK and in many countries abroad. Does the hon. Gentleman agree that if we are to ensure the sustainability of projects in the developing world such as those provided by WaterAid, it is essential that community groups and church groups on the ground are trained to maintain the projects commenced by voluntary organisations and ensure their continuity?
Mr Foster
The hon. Lady is absolutely right. Like me, she has probably seen examples of totally unsustainable aid development. In Zambia I once saw a brand-new fire engine that had been donated to Lusaka urban district council by another country. Within 24 hours nobody could use the fire engine, because its engine was designed to use a fuel that was not available in Zambia. I have seen video recorders provided by other countries with videotapes in a language that was not understood by the population. She is right: there is no point in installing a water pump without involving the villagers in learning how to maintain it and ensuring that they will be able to get parts for it. They can possibly even go further by making a small charge for the water from the pump, so that there can be paid attendants to ensure that it is well looked after and serviced, and the project is sustainable. I agree that involving local people is critical.
As I said, I have seen some excellent work by WaterAid, but many other charities such as Tearfund and Pump Aid work in the field and deserve our praise. Given the importance of that aspect of the UK’s aid work, I was pleased by the Government’s promise in the coalition agreement, which stated:
“A key aim of our aid is to make sure everyone gets access to the basics: clean water, sanitation, healthcare and education.”
Those words are encouraging, but delivering that aim will not be easy.
One of the United Nations millennium development goals is to halve, by 2015, the proportion of the world’s population without sustainable access to safe drinking water and basic sanitation. Sadly, that goal is not going to be met. According to a UN report this year, the number missing out on proper sanitation will actually grow to 2.7 billion by 2015, if current trends continue. Although the safe water target is on track globally, there are parts of the world where it will be missed by miles, not least in sub-Saharan Africa, where it is predicted that 350 million people will remain without access to safe water.
The UN report says:
“the safety of water supplies remains a challenge and urgently needs to be addressed.”
That warning becomes even more pressing in the context of climate change. The problem is not just hotter weather, causing more frequent droughts that in turn limit access to water. Climate change also disrupts weather patterns, resulting in more frequent and powerful floods. Flooding leads to overflowing latrines, contaminated drinking water, waterborne diseases such as cholera and all kinds of other sanitation problems. The problem is extremes of water shortage and water excess, and that problem will intensify as climate change continues to progress. That is part of the reason why we need to do even more.
Rather than discuss the work of my right hon. Friend the Secretary of State for Energy and Climate Change and his Department, however, I wish to concentrate on what I believe the Department for International Development can do. In recent years water and sanitation have not been given the priority that I would wish them to have. As a proportion of the UK’s aid budget, spending on water and sanitation has dwindled to just 2.2%, yet if I am right, and if water and sanitation are a vital plank in delivering all our aid goals, increasing the proportion of aid money dedicated to them would be money well spent. WaterAid made that argument powerfully in its recent submission to the Department—
Mr Foster
The argument was well made by WaterAid, and I hope the Minister has had a chance to read its submission. It considers each of the millennium development goals in turn in the context of WASH.
The first goal is to eradicate poverty. The World Health Organisation estimates that for every £1 invested in WASH, £8 is generated. That is because people save time on water collection, so they can be more productive, and WASH provision limits the number of days lost to illness.
The second goal is universal primary education, but children who are busy fetching water do not have time to go to school. The education of young girls ends up suffering the most, as that task more often than not falls to them. Sanitation also has a role to play in education. Dedicated girls’ toilets and menstrual hygiene facilities are important in making schools accessible for older girls.
DFID already knows that. It published a girls’ education strategy in January 2005, which prioritised
“non-education programmes such as clean water supply and sanitation facilities”.
There were two updates on implementing this strategy—the first in December 2006 and the second in July 2009—but when I asked the Library for further reports, I came away empty-handed. I therefore hope that the Minister can tell us what progress has been made in the year and a half since the second report was published, and that he confirms that the education of girls still an important part of his Department’s programme—which brings me neatly to MDG 3, which is to promote gender equality and empowerment.
Seventy-two per cent. of water fetching is done by women and girls. The task takes up an average of 14 hours a week—I have seen it take very much longer—and distracts girls and women from education and other potentially productive activity, such as building their economic independence. That is a significant barrier to gender equality.
The fourth goal is to reduce child mortality rates. As I have already said, diarrhoea is the biggest child killer in Africa, and 90% of cases are caused by inadequate sanitation, unsafe water and poor hygiene. Poor water quality will always undermine our investment in health. We would be horrified if our own local clinics had only dirty water coming out of the taps, or if the only water available for swallowing medication was contaminated.
Clean water is a fundamental part of health, including maternal health, which is the subject of MDG 5. WASH poverty causes the most significant health risks for women. A hygienic environment for childbirth and post-natal care will increase the survival chances of mothers and newborns.
Finally, MDG 6 is to combat HIV/AIDS and other diseases. HIV/AIDS patients require more water—up to five times as much as normal water consumers—because the most common diseases caused by AIDS are diarrhoeal and skin-related. My point is not that MDG 7 and the water and sanitation goals that I mentioned earlier should be prioritised at the expense of all the others. Rather, I believe that prioritising WASH will increase our chances of delivering on both the UK’s aid pledges and the MDGs. Until we fund WASH better, our investment in health and education will be less effective: the money will only ever achieve a part of what it could otherwise achieve.
Some progress has been made. Spending on WASH has gone up slightly in recent times, and we recently became part of the Sanitation and Water for All international global partnership. I look forward to a progress report. However, that will not be enough without more UK investment, so I am calling for two things. First, by reordering or rebalancing priorities, the Department should increase the sum spent on water, sanitation and hygiene to £600 million per annum. That would lift 100 million people out of water, sanitation and hygiene poverty.
Fiona Bruce
When Governments are looking to make a real difference, they invest in huge infrastructure projects. One of the challenges that they face in doing that—as opposed to what happens when charities invest smaller amounts in, say, village wells—is to ensure that the governance of those involved in partnering in those projects is sound. I would be interested in hearing the Minister’s response to that point, but does the hon. Gentleman agree?
Mr Foster
I entirely agree. Indeed, with the work that I have seen, particularly in Africa, I have been incredibly impressed by the way in which the various charities involved work with local communities, empowering and involving them, before ultimately moving away and leaving those local community organisations to run by themselves what has been put in place. That is important.
The hon. Lady talks about large sums, and that is the crucial point that I am trying to make. We welcome the increase in the aid budget—I will mention that briefly in my summation—but I am talking about reprioritising that money. For example, we have just increased the amount of money used to tackle malaria by £500 million. That may seem like an enormous sum going to do something important, but we know that diarrhoea causes more deaths than malaria, HIV/AIDS and tuberculosis combined, and as I said earlier, 90% of cases are caused by poor water, sanitation and hygiene. Therefore, the £600 million that I am arguing for to lift 100 million people out of that situation would be money well spent.
Secondly, water, sanitation and hygiene issues need to be mainstreamed into our wider development, public health and poverty reduction efforts. Again, that will require a big shift in thinking. We are still trying to break down the divide between sanitation and water, which is hard enough. For instance, DFID’s business plan promises that regular reports will be published on the number of sanitary facilities built or upgraded with DFID funding. Those extra data will no doubt be useful, but that promise indicates something of a silo mentality. We should not be thinking in terms of either water or sanitation. That is why I am asking for enough money to bring those things together.
However, I also think that we should go further. Such issues should become an important part of our strategies for dealing with infant mortality, maternal health and other global issues. Departmental advisers working on water and sanitation should be properly linked to colleagues working on health or poverty reduction. We should be breaking down the sectoral divides that still exist in the aid world. In all, we need a truly integrated approach—for instance, by ensuring that new schools are always built with suitable hygiene and sanitation facilities; or, as the hon. Member for Congleton (Fiona Bruce) suggested, by recognising the importance of transparency and accountability when a Government make decisions about major capital projects and services, such as their water systems. All that depends on facilitating and encouraging better co-operation between those in different sectors.
All of us in this House should be proud of the way in which our country contributes directly, and through international organisations, to help alleviate poverty and ill health in some of the poorest countries in the world. We should be proud of our commitment to increase further the money spent on aid. However, we need to ensure that we get the best possible value for that money. We need to ensure that the way in which it is spent provides the best possible route towards the reduction of poverty and ill health. That can best be done by rebalancing our aid budget in favour of water, sanitation and hygiene. A modest change in that area would reap huge rewards. I hope that my right hon. Friend the Minister agrees.
The Minister of State, Department for International Development (Mr Alan Duncan)
I am grateful to my hon. Friend the Member for Bath (Mr Foster) for raising this topic. Achieving the millennium development goals, including the two vital targets on clean water and improved sanitation, is at the very heart of the coalition’s agenda on international development. I recognise and respect his interest in water and sanitation, and in particular his high regard for WaterAid, which we, too, consider a valued partner in our work.
Speaking personally, I am also convinced of the importance of water, sanitation and hygiene. In Hoa Binh province in Vietnam, I have seen how these simple interventions can make a remarkable difference to people’s health and opportunities. One local woman showed me the new latrine in her garden that had vastly improved her life, and told me that she had pinned up a hygiene advice sheet in her house to educate her whole family. I have also inspected at close quarters some latrines—of variable quality, I have to say—in rural Bangladesh. Indeed, I am proud to say that I am fast becoming something of a ministerial latrine expert. I commend to the House the UNICEF booklet entitled “Low-cost latrine options”, which contains an encyclopaedic list of various designs, including the Blair pit latrine. Known as a VIP latrine, it is a ventilated, improved pit, designed and used, as it happens, in Zimbabwe.
Furthermore, I am proud that the United Kingdom is the first country in the G20 to set out how we will meet our promise to spend 0.7% of our gross national income on aid from 2013. This also places a serious responsibility on us to use the money well, and water, sanitation and hygiene fit squarely within that agenda. Each pound of taxpayers’ money in this area can bring direct, tangible benefits for poor people. As many will know, we are currently reviewing all our bilateral and multilateral aid. I cannot therefore make any detailed announcements on numbers today, but we have a high level of ambition in this area and my right hon. Friend the Secretary of State has already stated in the House that we know we will support tens of millions of people in gaining access to sanitation over the next four years.
Today I can outline seven principles of how we, the British Government, will respond to this global crisis. First, we will ensure excellence in our Department for International Development country office programming. A vital part of our efforts will be through our bilateral programmes. Our current programmes in Bangladesh will affect up to 30 million people by 2011. Our current programmes in Ethiopia, Sierra Leone, the Democratic Republic of the Congo and Nigeria will provide up to 17 million people with access. We will also be making new commitments under the bilateral aid review. We will of course ensure that there are sufficient and qualified staff in DFID country offices to deliver our programmes. There will be close co-ordination with our climate change work, including work on water management, and we will continue to ensure an excellent humanitarian response, dealing with issues of water storage, water supply, health care in emergencies and cholera pandemics.
Secondly, we will link our work on water, sanitation and hygiene especially closely with our work on health. We cannot achieve other key millennium development goal targets in the absence of action on something as fundamental as basic water supply, sanitation and hygiene promotion. Recent articles in the Public Library of Science medical journal, launched last month by the Under-Secretary of State for International Development, my hon. Friend the Member for Eddisbury (Mr O’Brien), conclude that 2.4 million deaths each year could be prevented if people had adequate access to hygiene, sanitation and drinking water. They emphasised, as has my hon. Friend the Member for Bath, that diarrhoea is the biggest killer of children in Africa, with about 4,000 under-5s dying every single day. Yet simply washing hands with soap can reduce the risk of diarrhoeal diseases by 42% to 47%.
This issue was once much closer to home. It was John Snow who, in London in 1854, first traced a cholera outbreak to a contaminated water source in Broad street in Soho. This very institution of Parliament was brought to a standstill in 1858 by the “great stink” of inadequate sanitation. In 1862, Florence Nightingale, through her meticulous statistical analysis, showed that high death rates in the British Army in India were actually due to poor water, sanitation and hygiene. Today, globally, we must follow in the great British tradition of investing strongly in water, sanitation and hygiene to deliver the health gains that we need. Clearly, as diarrhoea is today the main killer of children in Africa, we cannot achieve the MDG on child mortality without that, and the evidence shows it will also play a major role in improved nutritional status, as well as reductions in pneumonia, maternal and neonatal infections and preventable blindness. So we will complement and co-ordinate our direct actions on health, and our sizeable new commitments on malaria, reproductive and maternal health, with substantial and closely linked actions on water, sanitation and hygiene.
Thirdly, we will increase our focus on gender and disability. Currently in the developing world, too much time is wasted, day in and day out, collecting water. That time could be spent in other productive, caring or educational activities. Women lose out most, as they are twice as likely to fetch water and they also face indignity, and often the risk of violence, because of a lack of sanitation facilities. Clean toilets in schools can contribute to keeping girls in school, and that alone is a reason to take action. Standard designs for water and sanitation may be inaccessible for people with disabilities, but simple modifications can solve that. They can reduce stigma and the burden of care, and increase dignity and social integration. So we will support innovation and scaling up of what works, to benefit women, girls and people with disabilities.
I have already alluded to the fourth principle: ensuring cost-effectiveness and value for money. Water, sanitation and hygiene are among the most cost-effective health interventions, according to the World Bank and the World Health Organisation. Hygiene promotion comes out as just $5 per disability-adjusted life year, known as DALY, averted—a measure of the impact of the intervention on reducing sickness and death. Sanitation promotion is also within the top 10 interventions, at $10 per DALY. We will work to ensure that whether we are working through multilateral, non-government or Government partners, we further improve the value for money we are achieving with UK taxpayers’ money.
Fifthly, we will directly empower communities and help them to hold their Governments to account. The community-led sanitation programmes which the UK and others have supported, first in Bangladesh and now spreading rapidly in Asia and Africa, have shown the powerful influence of shared action. Once communities start to work together on ensuring latrines and hand-washing for all, not just the few, experience shows that they go on to work together in addressing other problems. Natural community leaders emerge and they gain confidence to do more.
We have also been supporting citizens to hold their own Governments to account. We fund a global network of southern civil society organisations, the Freshwater Action Network, in south Asia and Africa. Local groups, for example, are carrying out citizen audits to investigate whether there are latrines in schools and presenting the findings to their local Governments. Lessons on what works are being shared via the global network. The network is also taking part in regional intergovernmental conferences, bringing the views of poor people who are demanding water and sanitation directly to the decision makers, and we will continue to support and develop such innovative and empowering approaches.
The sixth principle is that we will build further evidence and test innovative approaches. We will keep building evidence regarding both the cost-effectiveness of our interventions and what really works at scale. The British Government are funding the largest research programme in the world on sanitation and hygiene in the developing countries—the SHARE consortium—bringing together leading researchers and practitioners. We are supporting a major trial in Zimbabwe, examining the link between sanitation and nutrition. Not having latrines and not washing hands can cause intestinal infections and long-term malabsorption of nutrients, and so damage the long-term growth and development of children. This research is potentially vital to achieving global targets on nutrition. We will also investigate how we can use the entrepreneurship of the local private sector for providing and maintaining water supplies. The results from these will not just inform our programming but that of other donors too and, most importantly, the investments and policies of developing countries themselves.
Finally, we will work with others in the sector to ensure a collective response to this global crisis. We know it is possible to achieve results at scale: 1.3 billion people have gained access to sanitation since 1990, but particularly in Africa our collective efforts and resources have still not been enough.
The sanitation MDG target is likely to be missed by 1 billion people, and Africa is off-track for both water and sanitation. The UK is already the largest donor to basic water and sanitation systems in low-income countries. These simple systems reach people in rural and peri-urban areas where there are the lowest levels of coverage, and so are targeted well to the poorest people. Globally however, aid to basic systems has declined from 27% to just 16% of aid in the sector over the last five years, and only 42% of the sector’s aid goes to low-income countries. I am pleased that DFID supports an annual report, known as the GLAAS report and produced by UN-Water and the World Health Organisation, giving a global picture of how aid to water and sanitation is allocated. That will help us to hold each other to account, and assist better targeting in the future.
We must be realistic. We alone cannot solve all the problems. We also need others to play their part in focusing aid resources on the people who need them most, and this is not just about aid. Developing country Governments have the leading role to play in ensuring action on water and sanitation, backing it with their own policies, programmes and resources. In this way, donors can support countries to achieve their own targets in the way that they want.
Sometimes, however, there is not the political will or capacity to develop credible investment plans. We will therefore work closely with all our partners in the sector to solve this global crisis together, including through the UK leadership role in the sanitation and water for all initiative, where we are at the forefront of helping to address some of these wider issues. This global partnership of 31 developing countries, six donor countries, nine multilaterals and development banks and countless southern and northern civil society networks has come together with the common goal of ensuring both results on the ground and accountability in respect of them. The sanitation and water for all initiative has already achieved changes that should lead to improved results in Ghana, Burkina Faso, Senegal and other countries.
We will find new ways to work jointly with other donors. Specifically, we are looking for ways to enable fragile states, and those that are most off-track on the targets, to develop the capacity and plans to ensure access to water, sanitation and hygiene. It is imperative that we find ways for these countries to attract and use the finance for achieving results at scale.
The British Government know how important this agenda is, and we have a clear picture of the needs. We are ready to play our role in a global effort, complementing our leading role on health. In the coming weeks, we will finalise our commitments across the board and our policy support to this vital area. I can already confirm, however, that the Government have great ambition in water, sanitation and hygiene, and that that will continue to be an important part of DFID’s business.
Question put and agreed to.