Ireland: Financial Assistance

Lord Eatwell Excerpts

Monday 22nd November 2010 Lords Chamber

[Lord Eatwell]

My Lords, I am most grateful to the Minister for repeating the Statement made by the Chancellor of the Exchequer in another place. I welcome the Statement on the provision of financial assistance to the Republic of Ireland. It should be clear to all noble Lords that this is in the best interest of the British economy. After all, not only is Ireland one of the UK’s most important trading partners, more important, as the Statement acknowledged, than Russia, India, China and Brazil put together, but British financial institutions have substantial exposure to Ireland. Can the Minister confirm that the exposure of UK institutions to Irish banks exceeds £50 billion and that the overall exposure of the UK to Ireland exceeds £100 billion? In these circumstances, providing support is a price well worth paying to assist in the economic recovery of our neighbours and friends and at the same time to secure the position of our own financial institutions.

The story of the financial pressures brought to bear on Ireland in the past few weeks should be a salutary lesson to Her Majesty’s Government—the lesson that careless talk costs confidence, and loss of confidence spells economic disaster. As is now well known, careless talk by Chancellor Merkel, suggesting that extra costs should be borne by bondholders, was the last straw that broke confidence in the Irish markets. However, this was against the background of continuous deficit hysteria, promoted not just by the traditional deficit hawks in Germany but also by Her Majesty’s Government. Instead of promoting deflation, will Her Majesty’s Government learn from the Irish experience and, as well as developing a sound growth strategy at home, promote growth strategies abroad?

There is some confusion in the Statement as to which part of the UK’s assistance is a contingent liability—that is, a guarantee only to be drawn in the event of default—and which part is to be up-front money. Will the bilateral loan that is contemplated be a contingent provision or an up-front loan? Once the funding is agreed, how and when will the provision appear in the Government’s accounts? Will this unexpected expenditure alter the Government’s declared objective of reducing the deficit to zero in four years? What measures are being taken to recapitalise the Irish banks—key measures such as those that were instituted by Mr Darling so successfully for Britain’s banks?

The big question that arises directly from this Statement is: if the Government can afford to commit substantial funds to the Irish recovery, why cannot extra funds be found to promote the recovery of British industry? A national investment fund of equivalent size would transform the financial circumstances of Britain’s entrepreneurs. It would be a timely boost to confidence and would ease the financial logjam that is holding Britain back. If there is money for Ireland, why is there not money for Britain?

Finally, is the noble Lord aware that if Britain were on the brink of bankruptcy, the Government would not be making the Statement we have heard today?