Loans to Ireland Bill

Sajid Javid Excerpts

Wednesday 15th December 2010 Commons Chamber

[Mr Tyrie]

I have no doubt that the Government are listening to my hon. Friend and others, who will put pressure on them to resist the pressure from other quarters. I agree with his point.

It seems to me that very little work is being done on the possibility of the euro crisis leading to more general examples of the no bail-out clause’s bluff being called. I would be surprised if there had been any such work. I cannot be sure, but it strikes me as highly unlikely. It is the Ark of the Covenant that the eurozone will continue indefinitely.

When the Chancellor came before the Treasury Committee, he assured us that eurozone members were

“having a discussion about the permanent eurozone bail-out mechanism.”

[Sajid Javid (Bromsgrove) (Con)]

Will my hon. Friend give way?

[Mr Tyrie]

I will not, because I am about to conclude.

Any new bail-out mechanism, however, may itself lack credibility in the absence of a common European fiscal policy. That is why the discovery that the no bail-out clause is a paper tiger will remain an enduring problem for the eurozone’s stability, a problem from whose consequences the UK will certainly not be immune.

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[Sajid Javid]

The shadow Chancellor made the rather incredible statement in his opening remarks that he believes that Ireland’s euro membership has absolutely nothing to do with the predicament in which it finds itself. Does the right hon. Gentleman agree?

[Mr Darling]

The circumstances in which Ireland finds itself are complex, but there is no doubt that one problem is that a common interest rate right across Europe is perhaps inappropriate for an economy that is rapidly investing in an asset bubble. However, I do not have the same phobia about the euro that many Conservative Members still have, 20 years on.

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[Mr Peter Bone (Wellingborough) (Con)]

It is a great pleasure to follow the right hon. Member for Belfast North (Mr Dodds). He made many powerful points, especially his last one. I note that the Bill is called the Loans to Ireland Bill, not the Loans to the Irish Republic Bill. I wonder whether the Government have had some foresight, and whether some of the loans will actually be provided to Northern Ireland, to help to reduce corporation tax there. Perhaps there is some hope in that regard.

I want to start by saying that we have an excellent Chancellor of the Exchequer and a first-class Treasury team, including my hon. Friend the Financial Secretary, who has the misfortune to be at the Dispatch Box to listen to my remarks. On this particular issue, however, I think that they have got it wrong for a number of reasons. Everyone in the House wants to see the Irish Republic prosper, but the question is: which is the best way to help it? Its problem is that it is part of the euro. Government Members have always argued that the United Kingdom should not be part of the euro, because it cannot possibly work. It is not possible to have one fixed interest rate and one fixed currency covering a number of different countries. What we are witnessing is a crisis in which that problem has come to light.

If Ireland were not part of the eurozone—if it had its own currency—it could change its interest rate, but more importantly, its currency could depreciate, which would make it more expensive for exports to come into Ireland and cheaper for exports to go out. It is a market mechanism for self-righting an economic collapse, and because Ireland is part of the eurozone, it cannot do that.

I take the view that in the next few months the euro will collapse. It will not just be Ireland and Greece; it will be Spain, Portugal and possibly Italy. At that stage, it will be necessary to abandon the euro entirely or have two eurozones. If I am right in that assumption, it is a mistake to give £3.25 billion to the Irish at a time when it will do no good at all and that money will never be repaid. If we were paving the way for the Irish to have their own currency again, which would be part of the sterling area, we would be more of a help to Ireland. My argument is that we are sending the money in the wrong direction.

The second issue we have—to be fair to the shadow Chancellor, I think he was on to it—is that we do not know how the figure has been arrived at. Nobody has explained—at least, I have not heard anyone do so—why we have settled on £3.25 billion, but I think the Chancellor was arguing that that is the sort of amount we would have had to provide through the European financial stability facility if we had been part of the eurozone. Well, we are not part of the eurozone, so why should we be contributing to something that eurozone countries should be providing on their own?

[Sajid Javid]

Is my hon. Friend aware that recently the Prime Minister of Luxembourg made a proposal that the EU should issue EU-wide bonds, and does he agree that Britain should have nothing to do with such a proposal?

[Mr Bone]

Of course; I thank my hon. Friend for raising that.

I disagreed with the shadow Chancellor when he said that there were two extremes. One was to have a unified eurozone with central controls over taxation and spending. It is one option, and I accept that such a model would work, but I reject it completely. However, no one can pretend that the current system will ever work. We would just end up putting billions and billions more pounds into a system that will eventually collapse, and, in my view, that will happen earlier rather than later.

Let me return to how the €85 billion package is made up. We have €17.7 billion from the facility and €22.5 billion from the mechanism. The mechanism was designed for natural emergencies; it was never designed for this purpose, and yet we are taking more out of the mechanism, which has a total pot of €60 billion, than out of the one that has €440 billion. Why? The simple answer is that the United Kingdom has to contribute to the mechanism, but we do not contribute to the facility because it is all eurozone money. In my view we do not need to make this £3.25 billion loan; it should come entirely from the €440 billion that is available for exactly this reason. That is why the facility was set up.

I also did not follow the Chancellor’s argument when he said that because of qualified majority voting, we would not have voted against the use of the mechanism because we would have been overruled. I have to say to him that on a number of occasions I have voted on measures on which I know I will not win, but it does not mean that one should not vote that way; one should vote as one sees fit. I think on that small point the Chancellor has also made a mistake.

Many hon. Members will refer to the man on the Clapham omnibus, but in my case it is the man on the Wellingborough 46 bus, and such people make the following very simple point. My county council has announced that it will fire all its lollipop ladies and close a number of libraries, and those people say to me, “If we’re having to do that because we’re not allowed to increase the national debt, how on earth can you provide £3.25 billion to a country that is in the eurozone?” It is very difficult for me to give an answer. In fact, the answer I give is, “We shouldn’t be doing it.”

If the House divides on the Government’s proposal, I will, reluctantly, have to vote against it, not because I think the Government’s aim is wrong—because, yes, we want to have a prosperous Ireland—but because of the way this is being done and the way it is being funded. Nobody is suggesting that because we trade a lot with the United States of America, if there were a crisis there, we would suddenly lend it money. Ireland is a grown-up country. It decided to become part of the euro. The problem lies in the eurozone, and it should sort this out, not us.