Loans to Ireland Bill

Mark Hoban Excerpts

Wednesday 15th December 2010 Commons Chamber

[Chris Leslie]

Although most of the Opposition’s amendments relate to clause 2, these amendments deal with a number of incredibly important issues, and I am grateful to hon. Members for tabling them.

Let me take up some of the points made by my hon. Friend the Member for Foyle (Mark Durkan) about amendment 6 in particular. I understand what he said about the document that was presented to us about five minutes before the start of the debate, which, I have to say, was not only unfortunate, but verging on action that I would describe as morally out of order. It has been very difficult for the Committee to assimilate rapidly what is going on in the negotiations.

However, although I understand, at first glance, my hon. Friend’s impression that amendment 6 or others might have been overtaken by events, the more I think about it, the more I feel that it would be important to have an opportunity to debate the interest rate question in particular because it has such an important bearing not only on the British taxpayer, as the organisation making the loan, but on the Irish people themselves. There are a number of circumstances that can change from time to time. What we have before us is a summary of key terms of the credit facility, which does not necessarily give us the full picture. Although we support the principle of the loan, I am slightly uncomfortable about nodding through quite technical terms without our having had even a retrospective opportunity to air the details properly. That, I think, is essentially what amendment 6 is trying to rectify. I shall say more about that shortly, but let me first deal with amendment 3, because it makes an important point.

I entirely understand the attempt by the hon. Member for Stone (Mr Cash) to limit the way in which the current drafting of the Bill might affect all sorts of other unforeseen loan opportunities. He spoke of the European Union’s inveigling its way into other loan arrangements. In particular, he is worried about whether the Bill excludes what might be done under European law, because, as he sees it, this legislation leaves open opportunities for the EU to enlarge and change the mechanism, and to build on what we, at face value, know about the dimensions of the loan under discussion.

There are some interesting points about the jurisdiction of the European Court of Justice in the case of a default, and some questions probably merit further scrutiny, but I am not entirely convinced of the hon. Gentleman’s arguments or of whether his amendment to clause 1(2) would necessarily achieve much of great use. I am grateful to him, however, for at least tabling it.

We have not touched on some of the other amendments in the group. The Chancellor addressed the denomination in sterling issue in his opening comments, but the question about whether the loan should be repaid over a particular length of time is quite interesting, and the hon. Member for Kettering (Mr Hollobone) tabled a useful amendment involving the 30-year period. The Opposition have also tabled amendments on those matters, in our case to clause 2, but our proposals are about the reports having to comment on the duration of the loan. Amendment 10, on the terms of the credit facility being open to greater debate, is quite interesting, too.

Amendment 6 looks most interesting, however. Given the drafting of this quite hurried legislation, and the unusually conspicuous absence of certain dimensions of the loan, we have a duty to pay attention to what the hon. Member for Clacton (Mr Carswell) suggests. When one thinks about a loan, one should think about not just the sum of money, but the duration and the interest rate. The rate of return on the British loan is a fundamentally important fact that cannot be simply skimmed over by references in documents that are not currently official documents before the House. The Chancellor said that the Swedish and Danish bilateral loan arrangements have not yet been completed, so it is difficult for us to determine whether our prospective interest rate is more or less favourable than theirs. What would happen if there were a sudden spike in global interest rates? Where in the Bill is there any protection for the British taxpayer?

Conversely, where in the legislation is there any protection for the Irish if the current or any future Government decide to chop and change the rate from time to time, perhaps making a unilateral, Executive decision to raise the interest rate in future tranches of the loan arrangement? The Chancellor said that the interest rate will be fixed for the duration of each tranche, but there is no assurance of that in the Bill.

There is no harm in allowing the House the opportunity to debate and approve, by the affirmative procedure, a statutory instrument on the interest to be charged following the recommendation of Ministers. Our parliamentary democracy is often disregarded as some kind of rubber-stamping device, but perhaps these are good times to take back some of those safeguards, given the serious issues at hand. While Parliament votes on those moneys tonight, it must also consider taking greater ownership of the process, rather than delegating absolutely everything in absolutely every arrangement to the Chancellor of the Exchequer. I am certainly interested in amendment 6, and I commend the hon. Gentleman for his prescience in tabling it.

[Mr Hoban]

Amendment 3, which my hon. Friend the Member for Stone (Mr Cash) moved by, would ensure that the Bill did not apply to any loan made by the United Kingdom to Ireland under the European Communities Act 1972. Let me give him a second-tier assurance that the Bill applies only to the UK’s bilateral loan to Ireland. Any EU loan made to Ireland through the financial stability mechanism would not be a loan from the UK to Ireland and would not be subject to the Bill.

There is no interweaving or interlocking, and therefore the amendment is unnecessary. My hon. Friend referred to paragraph 6(h) of the loan agreement. I am sure he will understand that the funding Ireland gets is dependent on it being a member of both the International Monetary Fund and the European Union. If it were no longer a member, it would no longer receive the funding and therefore there would be a problem. Amendment 4 would remove the power to increase the cap on the loan and adjust the cap for exchange rate fluctuations. I hope that the comments made by my right hon. Friend the Chancellor remove the need for anyone to push that amendment further.

Amendment 6 would require the interest rate on the loan to be approved by Parliament. That is not appropriate. The interest rate for each tranche of the lending to Ireland will be a fixed rate that is set by adding a margin of 2.29% to the sterling seven-and-a-half-year swap rate at the time that the disbursement is made. That is set out in the loan agreement and gives certainty to us and to the Irish Government, who would want to have certainty when accepting and voting on this package.

My hon. Friend the Member for Clacton (Mr Carswell) said that the amendment would enable the loan interest rate to be reduced. It could also lead to the loan interest rate being increased to the detriment of the Irish Government and their economic recovery. It is important that there is a clear, definitive statement about what the rate is. We have published the summary of key terms of the loan agreement to help colleagues understand what the rate is and how it will be set. The rate is set with the Republic and within the range of interest rates agreed with other multilateral bodies. It would be a big mistake and irresponsible of the Labour party to vote for amendment 6, because it would create uncertainty and instability where we want certainty and stability for the Irish Government. I question whether what the amendment proposes is the right thing to do. The loan rate is agreed and clear, and it is in the summary of key credit terms. The Irish Government have signed off on those key terms. That is the rate they are expecting to get. Amendment 6 would create unnecessary uncertainty and I therefore ask my hon. Friend to withdraw it.

[Mr Cash]

For the time being, I have decided against pressing amendment 3 to a Division.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 6, page 1, line 18, at end insert—

‘(7A) Before determining the interest to be charged on any payments under this Act, the Treasury must specify the rate of interest by order; and the Treasury may not make such an order unless—

(a) the House of Commons has determined by resolution the rate of interest to be charged; and

(b) the order provides for that specified rate to be charged.’.—(Mr Carswell.)

Question put, That the amendment be made.

--- Later in debate ---

Reports

[Mr Hoban]

I beg to move manuscript amendment (a), page 2, line 16, at end insert—

‘(d) the remaining term of each Irish loan which is outstanding at the end of that period, and

(e) the original term of each Irish loan in respect of which a payment was made by the Treasury by way of an Irish loan in that period.’.

[The Second Deputy Chairman of Ways and Means (Dawn Primarolo)]

With this it will be convenient to consider the following:

Amendment 1, page 2, line 16, at end insert

‘, and

(d) the original term for any Irish loan and remaining terms for any outstanding Irish loans.’.

Amendment 5, page 2, leave out lines 17 to 26.

Amendment 2, page 2, leave out lines 18 and 19.

Clause 2 stand part.

[Mr Hoban]

In dealing with the issues emerging in Ireland, we have sought to keep the House informed as much as possible about the progress that was being made as the crisis emerged, and the role that the UK Government felt they should play in helping to resolve it and responding to the Irish Government’s request for help at the end of last month. We have done that through statements to the House and the publication of the Bill last week, and to aid debate, we ensured that before today’s debate started a copy of the loan agreement was placed in the Vote Office. I hope that hon. Members will recognise that we were not able to place the summary document in the Vote Office earlier—or, indeed, to place the full signed agreement there—because negotiations are still ongoing with the Irish Government. However, the principles that have been agreed were set out in the summary of key terms.

I think hon. Members would say, “Well, it’s all very well that you’ve been transparent and open in the run-up to the loan process, but what’s the next stage? Are you going to be transparent during the life of the loan? How are you going to keep the House informed of what’s happening, whether the Irish Government are drawing down each of the eight tranches, how far they’ve got with repayments, and so on?” For that reason, we decided that there should be a clause to deal solely with reporting. It states that the Treasury will

“prepare a report about Irish loans and lay it before the House as soon as practicable after the end of that period.”

The first period will end on 31 March 2011 and a report will be published for each subsequent six-month period. The clause states that those reports will include details of

“any payments made by the Treasury by way of”

the loan, and details of

“any sums received by the Treasury in that period by way of repayment of principal or the payment of interest”

and

“the aggregate amount of principal and interest in respect of…loans which is outstanding at the end of that period.”

--- Later in debate ---

[Mr Hoban]

I am pleased that my hon. Friend recognises the spirit of the new politics, but I am not quite sure where he will take the debate from there. I welcome his recognition of the Government’s flexibility. I do not know what his experience is, but my experience of opposition was that it was rare for a Government to accept an Opposition amendment even in principle. So this perhaps shows that the spirit of the new politics is now coursing through the House.

I should make some holding remarks on amendment 5, which my hon. Friend the Member for Stone (Mr Cash) tabled. I am pleased to see him in the Chamber, because he may be able to be clearer about the thinking behind his proposal than I could.

Subsections (4) and (5) are there to ensure that the duty to report does not continue indefinitely once all loans made under the Bill have been repaid and the authority to make further loans has lapsed. The way in which my hon. Friend has drafted amendment 5 would turn the requirement to report on the loan while sums are outstanding into an open-ended requirement to report every six months ad infinitum, even once all the loans had been fully repaid. I hope that the Committee will agree that this would be unnecessary and undesirable.

Amendment 2, tabled by Her Majesty’s Opposition, would do something slightly different. Whereas my hon. Friend seeks to amend clause 2 to ensure that reports appear ad infinitum, the Opposition seek to bring forward the date on which the duty to report would end, by removing the requirement to report where there were no outstanding liabilities, but where there had been repayments or payments of interest in the preceding reporting period. In effect, amendment 2 says that there should not be a report where there is no balance to be repaid at the end of the period, although payments have been received in those six months. It would seem odd to remove the need for a report on the period during which the last part of the loan was paid off. Clearly the Government should be required to report that that has happened, and that is what the Bill as drafted requires.

I hope that the Committee will accept amendment (a), and that the proposers of amendments 1, 2 and 5 will not press them to a vote.

[Chris Leslie]

I do not necessarily wish to pour more congratulations on to the shoulders of the Minister—that would not be doing my job correctly—but in the spirit of Christmas I have to acknowledge, albeit begrudgingly, my appreciation of manuscript amendment (a), which the Chancellor of the Exchequer himself has tabled. I like to imagine him poring over the Order Paper, happening upon my amendment 1 and immediately thinking, “I must accept that amendment, but the drafting is not quite right,” and therefore rewriting it in his own fair hand. However, I suspect that several dozen parliamentary draftsmen and women were involved in the process. As the Minister said, the intention was indeed to ensure that when we report every six months on what is happening with the loans, we are talking not just about the aggregate amount of the payments made and the interest, or about the sums that are returned, but about some of the other dimensions.

As the Minister said, the reporting arrangements as set out in the Bill do not exclude the ability to make the reports more comprehensive. Indeed, we ought to state at this stage that we would appreciate as much data being contained in them as possible. One piece of information that I would have found useful is the remaining term of the loan, although that is a small point; given how small it is, I am grateful that the Government have conceded it. Perhaps I should regard this as a famous victory for the Opposition.

--- Later in debate ---

[Mark Durkan]

Like my hon. Friend the Member for Nottingham East (Chris Leslie) and the hon. Member for Stone (Mr Cash), I found clause 2(4) a bit tortuous. However, I can see the problem with amendment 2, because if paragraphs (a) and (b) were removed and the subsection read only

“No report is required to be prepared or laid in relation to a period if…no amount of principal or interest in respect of an Irish loan is outstanding at the end of the period”,

the point at which the loan is finally discharged—when a final payment is made—could be the one point when a report would not be necessary, whereas I would have thought that that was the one point where a report would have been relevant and necessary.

I therefore understand why subsection (4) is framed as it is and why there is a conjunctive that covers all three parts. It is only when no payment is made, no sum is received, and nothing outstanding is due at the end of the period, that no report is made. Otherwise, if all three conditions are not satisfied, there will be a report, as I understand it. Given what Members have said about the scrutiny and oversight that they want the House to have, although subsection (4) reads tortuously it seems to stand, so I would not be persuaded by amendment 2.

[Mr Hoban]

I think the hon. Member for Foyle (Mark Durkan) has a second career beckoning as a parliamentary draftsman. He has summed up the situation exceptionally well.

In subsection (4) all three paragraphs—(a), (b) and (c)—have to apply if no report is to be published. If amendment 2 were made, removing paragraphs (a) and (b), payments could have been made in the period but they would not be reported if there was no balance outstanding at the end. Therefore we must ensure that all three are true before we allow no report to be published. I hope that provides clarification.

I hope I am not seen by my hon. Friend the Member for Stone (Mr Cash) as someone who seeks to stonewall his inquiries, but having imposed a duty on the Treasury to report, it is right that that duty be extinguished when the loans are repaid; otherwise someone will say, “Yes, the loans have been repaid, but your Act requires you to make those reports.” It is right that the duty to report is extinguished when the loan has been repaid, and that is simply the purpose of—

[Mr Cash]

Perhaps a little bit of irritation, which is not usual in my case, is beginning to burgeon, because a number of questions that I tabled weeks ago about the legal advice regarding the stabilisation mechanism still have not been answered, and when I use the word “stonewall” I mean just that. When I do not get an answer, and I am told that I will get the answer as soon as possible but I still do not get it, and I have to put in a reminder but I still do not get it, there is something going on; I know that. They do not want to disclose the legal advice; they do not want even to disclose whether in fact it was given, or when it was given. I would like to know the answer to those questions because as Chairman of the European Scrutiny Committee—

[The Second Deputy Chairman]

Order. This is an intervention. It is a very long intervention. The hon. Gentleman has clarified what he meant by stonewalling, but perhaps we might leave the considerations about the European Scrutiny Committee for another day, because it is not particularly relevant to the amendment that we are discussing now.

[Mr Hoban]

It is right that the duty to report is extinguished when there is no principal outstanding, and that is the purpose of subsections (4) and (5).

I hope that, with that explanation, hon. Members will accept manuscript amendment (a) and will not seek to press amendments 1, 5 and 2.

Manuscript amendment (a) agreed to.

Clause 2, as amended, ordered to stand part of the Bill.

Clause 3

Short title, commencement and extent

Question proposed, That the clause stand part of the Bill.

[Mr Bone]

Can the Minister answer the following question, which has been raised several times during the debate: why is the Bill called the Loans to Ireland Bill rather than the Loans to the Republic of Ireland Bill? That seems very strange, as it gives others the impression that we are lending money to Northern Ireland as well as to southern Ireland.

[Mr Hoban]

That is an interesting question, as my hon. Friend the Deputy Leader of the House knows because he also recently asked it. I draw the attention of my hon. Friend the Member for Wellingborough (Mr Bone) to clause 1(2), which defines an “Irish loan” as

“a loan to Ireland by the United Kingdom.”

Of course the United Kingdom includes Northern Ireland. Therefore, the loan is clearly to what one technically might describe as the Republic of Ireland. I am grateful to my hon. Friend for raising that point, in order to enable me to put that clarification on the record.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill, as amended, reported.

Third Reading

[Mr Hoban]

I beg to move, That the Bill be now read the Third time.

This has been a quick process; Bills are not usually dealt with so expeditiously. I thank all Members for their contributions and their co-operation during the course of today. The co-operation to enable the Bill to proceed so swiftly today has been particularly helpful because, assuming Third Reading goes according to plan, the passing of this Bill will send a clear signal that the UK is willing to play its part in the financial package to assist Ireland.

As my right hon. Friend the Chancellor said earlier, this package of measures has been discussed in the Irish Parliament today, and it has voted in favour of it. There are further international agreements to be reached over the course of the next few days including on International Monetary Fund assistance. Our progress today helps to ensure that there is a sense of progress in achieving the right outcome in respect of financial support for Ireland.

The Bill will allow Britain to provide up to £3.25 billion in lending to Ireland as part of the wider assistance package. The package will help to recapitalise Ireland’s banks, set up a contingency reserve to deal with any future problems and cover the current shortfall in the Irish Budget. As was discussed in the debate, ensuring Ireland’s stability is very much in our interests. A final written agreement on the various terms of the loans will be forthcoming in the next few weeks, but we have sought to provide a summary of the key terms that have been agreed with the Irish Government, in order to help to inform today’s debate. It is clear from the way in which the Committee stage of the Bill proceeded that the provision of that information was helpful.

I note the point made by the hon. Member for Nottingham East (Chris Leslie). I, too, wish that we could have supplied this information sooner, but when one is negotiating a deal with another Government, one cannot always deliver information as timeously as one would perhaps like. However, we are committed to keeping the House informed about the progress of those negotiations, and clause 2 will enable us to do so—rather, it will require us; we could have been enabled to do so anyway, through our own desire—through six-monthly reporting.

It is clear from the debate, particularly on Second Reading, that Ireland is a friend in need. Our economy is currently in a stronger position than theirs, which is why we are able to offer our support. It is clearly in our interests, because of the strong links we have with the Irish economy. Ireland is one of our key trading partners, and a strong Ireland will help to support growth, jobs and investment in the UK.

The Bill is straightforward: it gives the Treasury the power to make disbursements to the Irish Government. There is a mechanism in place to take into account any adjustments in exchange rates that emerge between 9 December and the signing of the agreement, which we expect to be within the next 30 days. We do not expect to increase our contribution beyond the €3.8 billion agreed with our international partners and the Irish Government, but there is a mechanism to do so if it is required. Again, that would be through the affirmative resolution procedure and would be voted on by all Members of Parliament. So the right safeguards are in place, and the use to which the facility will be put will also be subject to regular reporting under clause 2.

There is no doubting that this Bill is important, and I am grateful to Members from all parties for their support today—support that helped us to progress according to such an urgent timetable. I hope the Bill will now proceed to the other place and be enacted as soon as possible. I commend it to the House.