Loans to Ireland Bill

Mark Durkan Excerpts

Wednesday 15th December 2010 Commons Chamber

[Mr Chope]

My hon. Friend asks a rhetorical question. The answer is that I am not sure where Ireland was at that time.

I agree with my right hon. Friend the Chancellor that we should allow the Irish to have their own domestic policy. That is why it would not be right for us to interfere with their low corporation tax policy—it should be for them to decide. However, the other side of the coin must be that we let the Irish take the consequences and accept the responsibility for what happens as a result. We cannot say, “We’re going to help pay for the consequences while not being able to influence the policy.” I find what is proposed very intellectually trying to deal with.

When we have a border—our hon. Friends from Northern Ireland have made their points about this—that low corporation tax policy makes things much more difficult. Indeed, it is possible to argue that we have lost the corporate headquarters of major international organisations from London to Dublin as a result of Ireland’s low corporation tax policy. Now we are subsidising that policy, the consequences of which are that the Irish have been unable to meet their financial obligations and are desperate for additional loans. I am not convinced that we should be getting involved with British taxpayers’ money. It would be different if we did not have an awful national debt crisis, but we do. One consequence of the Bill, if it goes through today, may be to send out a signal to our constituents that says, “Don’t worry, the debt crisis is not as bad as we’ve been telling you, because we can afford to add to that debt further by giving a soft loan to the Irish.” At the same time, we are having to argue to our constituents that we cannot put pressure on the banks to give more soft loans to businesses, even if those businesses go bust or cannot expand as a result, with all the damaging consequences for employment that that would have in our country, so I am not convinced.

[Mark Durkan (Foyle) (SDLP)]

Does the hon. Gentleman not acknowledge the scale of the exposure of British banks in the Irish Republic’s economy or the key dependence of Northern Ireland’s economy on the role of some of the Irish banks?

[Mr Chope]

Of course I acknowledge that, because it is a fact. However, my hon. Friend the Member for Chichester (Mr Tyrie) made the important point that, in negotiating a bilateral deal, we might have been able to deal with the debts owed to those banks and, in a sense, directed any money that we wanted to give into those British banks, rather than into the Irish coffers in general. We could have linked those things, if that was what was needed. However, I do not think that the difficulties of those banks are a justification for increasing our national debt further in the way that the Bill proposes.

--- Later in debate ---

[Dr McDonnell]

Some of us see the euro as a problem and some of us do not. Being in the euro has been an advantage to Ireland for many years. It has become a handicap at present because of the restrictions and constraints, but the eurozone works and has worked very well for many years. In the present crisis it has its handicaps and limitations. Some people are predicting that the eurozone will collapse shortly; I do not accept that, and that is not the view of everybody.

The point I am trying to make is that Ireland’s underlying economy is healthy. Its membership of and involvement in the eurozone is healthy, and in the long-term it will come round and sort itself out. Ireland has a financial crisis—a banking crisis—that was brought about largely by a property bubble and a lack of liquidity, rather than a flaw in the underlying economy. I want to assure people that the money will be paid, in my opinion and assessment, and that in due course—

[Mark Durkan]

I thank my hon. Friend for giving way. Lessons will have to be learned, not so much about the euro per se but about the performance of the European Central Bank. There is a serious question to be asked about its insistence on low interest rates for a sustained period. That helped to feed the property bubble in Ireland, despite the valiant efforts of the then Finance Minister to find other ways of getting out of the economy the money that was fuelling the property bubble, such as paying off the national debt, putting big money into the national pensions reserve fund and introducing special savings investment accounts.

[Dr McDonnell]

I thank my hon. Friend, who puts it better than I could have done.

I want to come on to why international intervention was needed. Ireland did its best at an internal level. It is a small country in a very tough global marketplace, and it did its best to resolve both the banking and the deficit situations internally. However, the interdependence of the modern world, Ireland’s membership of the eurozone and large market movements put some of the solutions beyond internal domestic management. Indeed, as we all know, both the European Union and the eurozone are themselves facing fundamental challenges in devising a fair and equitable response to the financial crisis in other countries.

However, although the domestic measures in Ireland did not prove sufficient, that does not mean they were not necessary. Ireland did its best to solve the situation internally, and only in the end, when nothing more could be done internally, did it resort to international help.

There are major north-south implications within the island of Ireland. All of us in the island of Ireland remain convinced that north-south co-operation is a central element of the push for economic recovery—not just within the Irish Republic but within the north. Indeed, the Prime Minister referred to such matters at Question Time. Despite the difficulties, the Irish Government have maintained some €110 million of investment in the north in various things, including major infrastructure projects of importance to both the north and the south. I am referring to roads and other aspects that are central. All that is important, and works. For the future prosperity of the island economy it is essential to build on the peace that we have achieved and to create the economic opportunities for a new generation.

I wish simply to restate a number of points about the UK’s interest. The UK is strong and robust, as we have discussed in relation to trade and all the rest. Ireland, a small country, accounts for 5% of Britain’s total exports. We are told that the UK exports more to Ireland than to Brazil, Russia, India and China put together. Allowing that to collapse would have an immediate impact on this country. The two economies are particularly linked in Northern Ireland, with two fifths of Northern Ireland’s economy dependent on the Irish Republic. Just as the two economies are linked, the two banking sectors are linked. As other hon. Members have said, the two main southern Irish banks are very active in the north, and to some extent in Britain; they also issue sterling banknotes, so that all has an implication for the whole banking sector. If this banking liquidity crisis had not been sorted out, we could have ended up with 25% or 30% unemployment, not just in southern Ireland, but in the north.