Loans to Ireland Bill

Mark Hoban Excerpts

Wednesday 15th December 2010 Commons Chamber

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

This has been a good debate about the principles underlying the Bill, and I welcome the Opposition’s support for it.

I am sorry that the shadow Chancellor is not in his place. He made a typical speech: a couple of jokes, a few quotations and then a shaky grasp of the facts. I shall not match him on jokes, but let me give the House a couple of quotations. He talked about the views on Ireland, but let me quote a former member of Labour’s shadow Cabinet, who said:

“The whole purpose is to bring the Welsh economy up to the standards of those of other countries in Europe, so that we can follow the lead of the Irish economy and become, in a matter of 10 or 20 years, one of the most successful regional economies in Europe.”—[Official Report, 28 February 2002; Vol. 380, c. 868.]

The right hon. Member for East Ham (Stephen Timms), when he was Chief Secretary to the Treasury, said:

“The Irish economy has enjoyed a good deal of success over the past few years. The corporation tax regime has contributed to that, but there have been a number of other factors”.––[Official Report, Finance Public Bill Committee, 8 May 2007; c. 19.]

There we go: a record of Opposition Members’ hymns of praise to the Irish economy.

It struck me as remarkable, however, that the shadow Chancellor did not understand the mechanisms being used to support the Irish economy. He seemed to think that the UK would bear a higher share of the bail-out costs than other European Union members, such as France and Germany, and that they do not contribute to the IMF or to the stability mechanism. Let me make it absolutely clear to the House that the UK is contributing through the IMF, the stability mechanism and a bilateral loan. Other European countries are contributing through the IMF, the stability mechanism and, if they are members of the eurozone, the stabilisation facility.

Owing to their share of the contribution to European Union funds, Germany and France are contributing more than the UK: some 27% of the contribution is through the facility. France contributes 20% through the facility, compared with our 14%. And through the mechanism, the UK’s contribution is 14%, Germany’s 20% and France’s 17%. It is a pity that the shadow Chancellor does not understand how the package actually works. The right hon. Gentleman also seemed to deny that the euro made any contribution to the crisis facing Ireland. However, the right hon. Member for Edinburgh South West (Mr Darling), who made a very thoughtful speech about the challenges facing the European Union, punctured his view that the euro had nothing to do with it.

My hon. Friend the Member for Chichester (Mr Tyrie) asked whether we considered buying bank assets. We have in place an agreement by the Irish Government to repay our loan in full, but that could not have been guaranteed if we had sought to buy individual assets of Irish banks. He also asked whether Ireland could repay early without a penalty, and the answer is yes, but the Irish Government would have to make break payments.

The right hon. Member for Belfast North (Mr Dodds) and the hon. Member for Belfast South (Dr McDonnell) talked about the impact on the Northern Ireland economy of what is happening south of the border, and we recognise that. We recognise also that more work needs to be done to strengthen the Northern Irish economy, which is why we are in discussions with the Northern Ireland Office about the issues to do with enabling the Executive to set their own corporation tax rate. There is another part to that deal, however, because, if they have that power, they will need to bear the risk with the revenue and see a reduction in their block grant.

A number of hon. Members, including my hon. Friends the Members for Wellingborough (Mr Bone) and for Kettering (Mr Hollobone) and the hon. Member for Nottingham East (Chris Leslie), asked how we can afford to do this, given the fiscal position that we are in. Let me make it clear that we are not paying for the loan out of revenue or capital expenditure; we are going to borrow the money. The measure will not lead to a reduction in the money we can spend in my constituency or theirs. In fact, as my right hon. Friend the Chancellor said, we will end up making a small profit on the loan because of interest rate differentials. The loan will not affect how much can be spent in our constituencies, and if that is the only reason hon. Members are opposing the measure, I ask them to think again.

[Mr Bone]

I entirely agree with what my hon. Friend is saying. However, the measure will increase our debt, which is something we are trying to get down. In addition, his comments are based on the assumption that the loan will eventually be repaid.

--- Later in debate ---

[Mr Hoban]

The debt is matched by an asset, which is the amount we expect to get from Ireland, and it does not impact on our deficit. We will actually make a return on the interest that will be paid.

Let me deal with three very brief points. First, there is no expectation that we will have to make further loans to Ireland in the future. Secondly, there is no reason to presume that full repayment will not be met over the term of the loan. Thirdly, ensuring Ireland’s stability is overwhelmingly in our national interest. That is why we are making the loan and this exception for Ireland. It is in our economy’s interests to ensure that the Irish economy is stable and we need to do all that we can to deliver that.

Question put, That the Bill be now read a Second time.