Voting by Prisoners

Debate between Bernard Jenkin and Alan Johnson

Thursday 10th February 2011 Commons Chamber

[Mr Jenkin]

rose—

[Alan Johnson (Kingston upon Hull West and Hessle) (Lab)]

Will my right hon. Friend give way?

Loans to Ireland Bill

Debate between Bernard Jenkin and Alan Johnson

Wednesday 15th December 2010 Commons Chamber

[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.