Eurozone Financial Assistance

John Redwood Excerpts

Tuesday 24th May 2011 Commons Chamber

[Mr William Cash (Stone) (Con)]

The Government amendment—they have not tabled it in their own name, but that is what it is, to a great extent—reflects badly on the integrity of the coalition. It has nothing whatever to do with the national interest. It also says a great deal about a commitment to Liberal Democrat ideology, and it is primarily about numbers. The Liberal Democrats, and certain elements in the Conservative party at a very high level, are quite prepared to allow further European integration. There are alternatives that would allow us to renegotiate the treaties and/or to say no, but they are simply not doing so.

Indeed, only a few days ago, the Prime Minister made it abundantly clear that the object of the coalition was to stabilise the economy. We understand that. The problem is that this is about numbers, not about principles or policy. There are many people in the Conservative party, outside and inside the House, who know that the arguments we are seeking to address in a reasonable fashion are in the interests of the country. There is no question about that; the press outside believe it as well. The bottom line is that those of us who have relentlessly pursued the issue of the eurozone bail-out and have tabled many questions have invariably received what could reasonably be described as somewhat evasive answers.

Why should the British taxpayer or British hospitals and schools in our constituencies in any way underwrite what goes on in Portugal, or indeed any other country in the eurozone, particularly in times of austerity? It is nothing to do with the question, as suggested on a number of occasions, of qualified majority voting. This is completely contrary to the assertion made in reply to me today by the Financial Secretary. Article 122 is not compatible with the treaty and cannot possibly be used to support the European financial stability mechanism. Indeed, in their acquiescence, as shown in the amendment, the Government accept that the position is legally unsound. By saying that, they completely undermine their position. The Government know it and everyone knows it: it is not compatible with the treaty, and the Minister is wrong.

[Mr John Redwood (Wokingham) (Con)]

My hon. Friend makes a powerful legal point. Does he agree that what these states in trouble need is a work-out, not a bail-out? We do not give alcoholics more drink; we cure the alcoholism. We should not give the over-borrower more borrowing.

[Mr Cash]

I could not agree more, and a course of Alcoholics Anonymous would not be out of place.

It is not just the European Scrutiny Committee that said the position was legally unsound or unlawful. Madame Lagarde herself, the prospective head of the IMF, said on this issue on 17 December:

“We violated all the rules because we wanted to close ranks and really rescue the eurozone.”

This is a stitch-up of the British people to maintain the so-called solidarity for further integration of a failing European project. That is what lies at the heart of the matter.

Why are people protesting and rioting all over Europe —in Madrid, Greece, Italy and the list is growing? What is not growing is the European economy and the reason is that the sort of policies needed—here and in all the other countries—to engender growth to deal with the deficit that the Government rightly say we have to address are impossible to achieve without generating the growth that is needed by repealing legislative burdens and generating policies that the integrationists in Europe simply refuse to allow. I would go further and say that the coalition in this country cannot achieve growth simply because the Liberal Democrats, as part of the coalition, have silenced the Prime Minister’s promise to repatriate burdens on business. It is called 56 votes and the keys to No. 10.

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[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

I am pleased to follow the hon. Member for Clacton (Mr Carswell), because he talked about something that should be discussed more in this place: the plight of the people who are suffering problems because of their own Government’s mismanagement. My Eurosceptic colleagues on the Labour Benches are still against the common market—they are not really against the European Union as such—whereas the Eurosceptics on the Government Benches are, honourably, against the EU as a project. As they know, the problem I have with this whole debate is that all these manifestations have nothing to do with our being in the eurozone; they are to do with the failure of Governments to use the money that they had available, their own economic powers and the money made available to them by the EU in their period of transition into the EU to do the right things and invest correctly in the skills of their people and in the supply side of their economy, rather than spending the money on large economic projects.

For example, when we go on a cheap holiday to Portugal we can drive on excellent motorways directly from the airport to the place where we will lie in the sun, and the hotels and large boulevards will have been paid for by EU money. However, the young people of that country fail to get a decent education, proper skills and university places. The reality of these countries is that they have under-invested in their own people. That criticism cannot be levelled at the UK.

The eurozone offers these countries a way out of their dilemma that, as a socialist, I do not particularly find attractive; they will be asked to cut further their budgets, which should be invested in their social infrastructure and the supply side of their economy. That will cause them great harm, but that offer will be made to them by the International Monetary Fund, the World Bank and so on because it is the capitalist model. That model says, “When you are in trouble, slash your budgets in the public sector.” Now, where have I heard that before? I have heard it from those on the Government Front Bench and from every Government Back Bencher. They have been told that every time they get up they should use the mantra about how they have to slash and burn the economy of this country—thus denying the young people of this country the chance to look for a better future—because of the problem of debt.

That situation will be the consequence for Greece, Portugal and Ireland. It is what is happening in Ireland, and the young people in Spain are worried that it will happen to them. That country is a good example of a place where major infrastructure projects have been financed by the EU and the supply side of the economy has been run down. I have met many young people in Spain who say, “It was easy to leave school at 16 and get a job building houses, but nobody can afford to buy them now. It was good money, the sun was shining and everything was going to be fine.” Suddenly, these people find that they have no skills, no jobs and no future.

[Mr Redwood]

rose—

[Michael Connarty]

I will give way in a moment.

Everything I am discussing is the consequence of the things that the Governments of these countries did; this was not about the EU being in existence and not about their being members of the eurozone. These things were done by those Governments. The offer is that the IMF, the World Bank and the eurozone countries, mainly, will bail out those countries.

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[Michael Connarty]

I am about to give way to the right hon. Member for Wokingham (Mr Redwood). A small part of the bail-out will be a fund, to which we have signed up, that will give a loan to those countries to help them to get over this unattractive prospect of having to face down their own people and cut their own services because of the lack of good Government management, so that they can be bailed out.

[Mr Redwood]

Does the hon. Gentleman not see that these countries are locked into a currency at a rate that makes them completely uncompetitive, which is why they have mass unemployment and why lending them money does not get them out of the mess?

[Michael Connarty]

I do not see that. What the right hon. Gentleman says may be a good indicator of where this debate is coming from. This is not about the European mechanism; this is about wanting to destroy the euro, to see it bust and to see it fail. If that is what it is about, people should stand up and say so; they should not lie to the people of the UK or mislead them by saying that it is about something else. People should be told the truth. I know that some Labour Members would certainly like to see the European monetary project and the euro completely collapse. If that is the agenda of Members on the Government Benches, they should say so.

The prospect I was describing is not one that I find attractive. In the modern world economy we clearly need to have a large trade bloc, probably united in some way around a monetary discipline, that faces down the problems coming from the United States of America, which is in the most unbelievable debt to the rest of the world. That country is run on the basis of its economy always being indebted to other countries. What will come from China and from Africa? That is part of this whole issue, and I hope that one day we will have the courage to move into that area, but what we are talking about is a very small loan of £4 billion, which will come back to the people of this country eventually when these countries are resettled in a new economic environment.

We hear hon. Members go on and on as if they are doing something wonderful in defending the UK, but they are not. We are talking about “beggar your neighbour” politics here and I am not prepared to vote for that. I applaud the Government for being honest and sincere about the fact that this European project either collapses or it is supported by all of us in different ways. I believe that the interest of the people of the UK lies in maintaining the eurozone and the euro, and helping countries when they fall into indebtedness. I hope that the Government will persuade hon. Members to reject the proposals before them.

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[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I congratulate my hon. Friend the Member for Rochester and Strood (Mark Reckless) on securing the debate. I will start by setting out our view, which is that responsibility for sorting out the problems of the euro area ultimately rests with euro area Governments. We are not members of the euro area, so it is not our responsibility to deal with all its problems. However, no one should be under any misapprehension about the importance of the euro area to the UK economy.

A strong euro area means a growing market for our goods and services. A weak euro area puts at risk jobs and businesses in our constituencies, as my hon. Friends the Members for Orpington (Joseph Johnson) and for Bristol West (Stephen Williams) noted in their contributions. More than 40% of UK exports are to the euro area, and we know, as has been repeated ad nauseam, that we export more goods and services to Ireland than we send to Brazil, Russia, India and China combined. We have a clear interest in ensuring that the problems in the euro area are resolved and that the right mechanisms are in place to do so, but it is not our responsibility to sort them out and it is right, as the amendment makes clear, for us to find a permanent solution that does not require us to contribute to this.

[Mr Redwood]

Will my hon. Friend give way?