EU: Financial Assistance

Lord Taverne Excerpts

Wednesday 15th December 2010 Lords Chamber

[Lord Sassoon]

My Lords, first, there will be no hypothecated borrowing by the Government to back up—as far as I am aware—the loan to Ireland. Of course, the loan to Ireland—as and when it is drawn down—is subject to approval in legislation if and when it comes to your Lordships’ House. We might return to it over the next few days. The loan has to be approved by Parliament. It is then drawn down. Of course funds have to come from somewhere, but there is no intention to back that up with a specific loan.

It will not be for the Government to determine the accounting, but the intention is that the bilateral loan will carry an interest rate that is 2.29 per cent higher than the sterling seven and a half year swap rate that applies at the time. On this week’s figures, that would be an interest rate of 5.9 per cent, which would be considerably in excess of the UK Government’s borrowing rate. My understanding—as I say, it is not the Treasury’s decision—is that the net interest margin, which would of course be a gain because the receipts from Ireland would exceed the costs to the Exchequer, would indeed be a positive contribution on the fiscal balance.

[Lord Taverne]

My Lords, is it not inevitable that to make the rescue operations effective, and at the same time to avoid a treaty amendment, the stability mechanism will increasingly become an intergovernmental eurozone mechanism? What plans do the Government have to avoid the United Kingdom being increasingly bypassed in key decisions in the European Union?

[Lord Sassoon]

My Lords, I do not think there is any question of us being bypassed on key decisions in the European Union, as our participation in recent debates about Ireland and the wider crisis have demonstrated. It will be up to Europe to decide how the permanent arrangements are put in place. The October European Council resolved that there should be a crisis resolution mechanism, and there has been a verbal commitment that the UK will not be asked to be part of it.