The hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) is right—I cannot add a chorus of praise for the order, although it has potential. We need to examine what that potential is and how it is to be exercised. There is some confusion about the nature of the fund and how it will be organised and run.
My hon. Friend the Member for Oxford, East (Mr. Smith) is right to say that this is a relatively simple piece of paper, but I remind hon. Members and anyone who may be listening or who may read the debate that a single paper of this sort can authorise a complete treaty. This is not all that long. It is not called a treaty. It is rather confusingly called an Act. In the early days of this procedure, I arrived in the Chamber with a heap of treaties this high, which were being authorised by a single statutory instrument. At lease we have this opportunity to scrutinise, and if my questions to the Minister appear naive it is not for want of reading the literature that has been supplied to us.
It is a pity that the explanatory note is highly constitutional and does not tell us much about the fund. I understand that it is a fund, but not necessarily one that will give loans, although other hon. Members have suggested that it might. As I understand it, its purpose is to provide guarantees, thus stimulating activity that would not otherwise take place in the realm of trans-European networks and small and medium-sized enterprises. A gentleman in Denmark once said to me, "Mr. Spearing, in Denmark all our firms are small or medium-sized enterprises." There are volumes of Government commissioned documents according that definition, which is pretty elastic to start with.
I am concerned because the explanatory note on the order does not take us far down that road, although the explanatory memorandum on the Commission document does. It makes it fairly clear. It says that the fund is for
assuming and managing more specific risks without jeopardizing its credit standing and mainstream lending.
That refers to the European investment bank. I assume that the fund is not a fund from which we can borrow and earn income but is a form of guarantee. The explanatory memorandum later says that the fund will
facilitate private infrastructure financing by providing a complement or alternative to recourse to government guarantees for infrastructure financing. The viability criterion will also be an essential ingredient in its approach to SMEs.
That confirms that it is a mechanism for creating guarantees that give confidence to those who subscribe capital, rather than for subscribing capital itself.
The Act is a mini-treaty, agreed in Brussels in March 1993 and awaiting ratification, of which this debate is part. Article A explains that, at present, the protocol of the European investment bank is not wide enough to fulfil that function. Paragraph 2 of new article 30 of the European investment bank statute says:
The Board of Governors shall establish the Statute of the European Investment Fund by unanimous decision. The Statute shall define, in particular, its objectives, structure, capital, membership, financial resources, means of intervention and auditing arrangements, as well as the relationship between the organs of the Bank and those of the Fund.
So all is there to be decided. By what means will the statute be made known to the House and the public? The objectives exist in broad terms and will, I presume, be part of the statute setting up the fund.
On the mysterious question of membership, the explanatory memorandum says that membership will be tripartite: member states; the Commission—30 per cent.; and other private organisations. I assume that those private institutions mentioned in paragraph 4 can be banks or other funds already in the private sector within the Community. I presume that members, who are appointed in proportion to their risk, must manage the fund and decide to whom, and for what purposes, guarantees are to be made.
The knock-on effect appears to be considerable, because other parts of the memorandum say that we will not have to pay much to the fund. Britain's paid-up amount is relatively small and we therefore take a proportion of the risk, in proportion to our national sector. How can the Commission take a risk separate from that of member states?
This does not seem to be a fund in the normal sense of the word, unless it is a fund for guarantees. It appears to deal with insurance, akin to institutions in the City that take on risks. Is it not essentially a risk-bearing mechanism, to be controlled partly by the bank—the Minister mentioned our representative on it—but also by other persons, as yet unnamed, and representing world institutions that would take the risk? Can we know more about who they are likely to be? Will there be people from the United Kingdom? What qualifications will they have? How will those matters be reported? I presume that they will be reported first to the bank, then from the bank to member Governments, then from member Governments to the House—if they get that far.
I am less enamoured of this set-up than some of my hon. Friends, who may assume that it will have the effects that they hope, but I cannot see the connection. It may deal with large projects—the channel tunnel was mentioned earlier —and various small and medium-sized enterprises may benefit. I assume that they must put up a case, saying that they are part of the European single or internal market. I understand that another purpose of the fund is to stimulate the said market.
I am also a little worried about the extent to which this is not just a complement to Government guarantees but a replacement for them. Indeed, the explanatory memorandum said:
The existence of the Fund will thus facilitate private infrastructure financing by providing a complement or alternative to recourse to government guarantees for infrastructure financing. The viability criterion will also be an essential element".
The question asked by my hon. Friend the Member for Oxford, East about the proportion of public sector borrowing is relevant here. Will decisions on financial guarantees for large projects be transferred away from Her Majesty's Government and handed to those who govern the running of the fund? I take it that that is what the memorandum means. If the Minister cannot answer that question now, I hope that he will tell the House the answer at some stage.
I close on a topical note. At a time of great unemployment and when there was a need for transport expansion and co-ordination in London, following the first world war, the House passed an Act known as the Trade Facilities Act 1921, which resulted in guarantees for the extension of the Northern line south of Clapham to Morden, and the western extension of the Central line, which was not actually built until after the next war. Could such guarantees be given now to British Rail or to any private firm by the Government without transgressing any European treaty? If not, and if this fund is the only way of assisting such networks, especially the channel tunnel, the House should know about it. If the Minister cannot reply tonight, I intend to table a written question on the subject tomorrow.