British-Irish Parliamentary Assembly

Esther McVey Excerpts

Thursday 21st June 2012 Commons Chamber

[Esther McVey (Wirral West) (Con)]

The British-Irish Parliamentary Assembly’s mission is to promote co-operation between political representatives in Britain and Ireland. It is a much-needed group, promoting not only co-operation but an understanding of our cultural links and our broader interdependence. As has been mentioned, 42% of Irish exports are to the UK and Ireland is Britain’s fifth largest trading partner. That underlines our financial interdependence.

I come from Liverpool, where almost all of us have Irish roots—hence the city’s name, “the capital of Ireland.” We have deep family ties. In common with many other families, my ancestors will have landed at Liverpool port in the 1800s. Two brothers married two sisters and so the family journey began.

There are now new ties as a result of Liverpool, Dublin and Cork all having become the capital of culture—Liverpool became the capital of culture in 2008. This led to an explosion in construction in those cities. The consequent property boom was fuelled by massive lending by the banks. When the property market collapsed, the Irish banking system was plunged into crisis. There is much to learn from that.

The Irish Government carried out a sizeable fiscal consolidation, which they are continuing. Ireland’s success in cutting its deficit, shrinking its banks and returning to modest economic growth has distinguished it from other parts of the eurozone that were also built on a construction boom. Given our links with Ireland, it is important that we have constant dialogue so we can learn from each other.

What have the Irish done to get out of their economic crisis? They have developed their small and medium-sized enterprises, and they have been increasing exports. Ireland’s exports rose by 4% in 2011, and went on to grow strongly in the first months of 2012. Most of that has come from SMEs, but it also comes from the pharmaceutical and chemical sectors.

As I have an interest in the SME sector, I elected to serve on the economic affairs group, along with the hon. Member for Glasgow North West (John Robertson). We looked at how well the Irish are adapting. There are 198,500 SMEs in Ireland, employing 1.2 million people. Ireland’s central bank says SMEs face significantly tougher lending conditions than similar firms elsewhere in the eurozone. It also says that demand for credit is no different in Ireland from elsewhere in Europe, but the Irish SME sector faces challenges in paying back its borrowing, with problems in respect of 30% of loans. The latest research by central bank economists shows that while demand for credit among Irish firms is at, or above, the eurozone average, the lending conditions imposed by the banks are significantly tougher in terms of collateral requirements, interest rate charges, size of loans available and rejection rates. BIPA has been addressing those issues of late.

We are looking at the impending funding gaps, too. Between now and the end of 2016, banks will be unable to supply between £84 billion and £191 billion of the finance needed to support the growth in the UK economy.

[John Robertson]

The report that was produced was very good, but does the hon. Lady agree that the Irish side seemed to take it much more seriously than the British side, and that we would like the Minister and the British Government to be a wee bit more enthusiastic about what BIPA is trying to do?

[Esther McVey]

I am not sure that I agree that the Irish are looking at it more seriously, but they are ahead of the curve. They have been through the turmoil in advance of us, and there is much that we can learn from what has happened there. They also realise how tough it is for small companies to get money from the banks. I hear similar stories from small businesses in the UK, including locally in Wirral West.

[Stephen Lloyd]

Across the water, Labour is in coalition with Fine Gael, because Labour recognises that difficult decisions need to be made in respect of the economy. Does my hon. Friend agree that politicians in southern Ireland are being more inclusive and constructive in dealing with the serious problems they face?

[Esther McVey]

We will all deal with our economic difficulties in different ways, and we all have to agree about the difficulties, admit to them and see what is on the horizon. We are looking here at how we move forward and what we are going to do. There is no point putting our heads in the sand and thinking that conditions are easy for small and medium-sized enterprises, because they are very tough indeed. What is reported can sometimes be very different from the actual practicalities and realities of the situation, which some of us are probably hearing about from our small businesses. That was very much reflected in the conversations in BIPA’s economic committee, as well as in what we are hearing over here. People were looking forward, and that is what we have to do. We have heard the issues and we know the economic turmoil we are going through, but we need to work out the steps to take to move forward.

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

Does my hon. Friend agree that this is not just about trade, because a series of issues associated with our relationship with Europe, fishing and other such matters, are very important?

[Esther McVey]

I do agree with that, and I shall now discuss my recommendations. What we were looking for was: the aggregation platform to give SMEs access to the capital markets; an increase in the number of private placement investors in the UK market through an industry-led initiative; encouragement for more retail investment in corporate bonds issued by UK companies; and more private equity and support for all businesses, which we are in fact doing here in the UK with all the latest seed investment funds. So I think it is important for Ireland and the UK that we continue with our co-operation and continue learning from each other, because we are so interdependent and both countries need that for our continued growth and prosperity.