With this it will be convenient to discuss the following:
Amendment 7, page 1, line 7, at end insert-
'(3A) Any loans made under this Act, and any repayment of principal or payment of interest received thereunder, shall be denominated in sterling.'.
Amendment 4, page 1, leave out lines 8 to 18.
Amendment 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.'.
Amendment 8, page 1, line 20, at end insert-
'(8A) All loans made under this Act shall be repaid by
Amendment 10, page 1, line 20, at end insert-
'(8A) Before any loan or binding offer of a loan is made, or guarantee given, under this section, the relevant agreement must be laid before, and approved by a resolution of, the House of Commons.'.
Clause stand part.
I have just abstained on Second Reading for one simple reason. I had intended to vote for it, but I remain gravely dissatisfied by the answer that I received from the Chancellor regarding the increase in the amount specified in clause 1. I do not want in any way to misrepresent what he said, but as I understood it, it was that that was all right because it was about exchange rates. However, anybody who examines clause 1 carefully will notice that subsection (4) states:
"The Treasury may by order made by statutory instrument substitute a greater amount for the amount for the time being specified in subsection (3)", which is £3.25 billion.
The next two provisions simply determine whether any increase will be subject to affirmative or negative resolution. An order would be made under the negative resolution only if the increase is to do with exchange rates, but I can see nothing to say that an increase under subsection (4) would be affected by subsequent provisions. I was bound to take great exception to that. It is a serious matter, because we simply do not know what the greater amount would be. We are totally exposed, subject only to affirmative resolution, which cannot be amended. Such a measure would simply go through on a whipped vote, just as the rest of the Bill doubtless will. That is why I abstained on Second Reading.
Amendment 3 addresses the definition of "Irish loan". I was staggered when I looked carefully at the Bill, because clause 1(2) states that "Irish loan" means simply
"a loan to Ireland by the United Kingdom."
The background is the recent debates on economic governance, and the origins of the European financial stability mechanism and the alternative eurozone facility, which as someone pointed out is as much as €440 billion, which is easily enough to cope with the Irish situation. There is a very close interconnect at all points between the so-called bilateral loan proposed in the Bill and the mechanism that I described.
The difficulty is that there is an overall determination to do as much as possible by way of integrating with Europe when it is quite obvious to anybody that this is the time for us not only to step back, but to desegregate from the European venture. I believe very strongly that the technique that is consistently employed in all spheres of activity is to say, "We don't like what goes on in the EU, but we can just go along with it. Alternatively, to satisfy the Eurosceptics or Eurorealists, as they prefer to be called, we can make parallel arrangements along the lines of what we would have done if we were in the eurozone."
The research paper helpfully supplied by the Library states:
"It is worth noting that the bilateral element"- assuming that that is what the Bill is-
"of the UK's support is broadly equivalent to what the UK would have provided if it were part of the eurozone-only EFSF."
In other words, we would have provided the loan anyway. The Minister may well say that that is not his intention, but that is what Library researchers believe, and they are often right.
Yes I am. Treasury civil servants are exceedingly clever and may know of pitfalls, but they might not fully explain them to Ministers. Of course, the Minister takes ultimate responsibility, but the question is: what is the effect on the daily lives of the people whom we represent? That is the issue on which we have to concentrate.
Under the circumstances, I am extremely dubious about the way in which the whole thing has been put together. In particular, I would mention what I will call the mechanism, as compared with the facility. I had an exchange earlier about the mechanism with the former Chancellor of the Exchequer, Mr Darling, who said, "This is all going to be done by qualified majority voting." However, that is not the case. Within the mechanism as it is set out, the request comes from the member state; it is only the final arrangement that requires qualified majority voting. Indeed, the EU sent in the European Central Bank and the International Monetary Fund in flagrant contradiction of the provisions of article 3 of the regulation in question.
In fact, the EU was operating the provision as if it were already law, when it was not. That it is typical of the European Union. It keeps on telling us about the rule of law, but when it suits, it completely ignores the law. What happened was unlawful. I also believe that it was unlawful in respect of article 122, which was the legal basis used to create the mechanism. I do not need to go into detail, but article 122 concerns natural disasters, energy supply and things of that kind. Anyone who looks at article 3, article 122 and the others provisions that they mention would reasonably conclude that they should not be used for the purposes of sorting out an unmitigated mess that was created by banks, as well as by the Government of Ireland and other parts of the European Union. Therefore, I am afraid that the answer that I received from the former Chancellor-that there really was no alternative to what was done, because such decisions are reached by qualified majority voting-does not stack up. If what happened was unlawful, it should have been resisted and, because of the consequences, it should, if necessary, have been taken to the European Court.
That is a very good question. I doubt very much whether an attempt to make the provision retrospective would remedy the mischief.
I am afraid that the question of illegality taints the Government's position as well, and I shall explain why-the Minister will know all the detail, because I think that he was the Minister responsible. There is provision for the European Scrutiny Committee under
Just before the proceedings began, we were presented with another document, which reinforces my concern. If my amendment 3 were accepted, the Bill would read: "In this Act, 'Irish loan' means a loan to Ireland by the United Kingdom other than a loan by virtue of any provision by or under the European Communities Act 1972." I am very familiar with the way in which interweaving goes on, not only as Chairman of the European Scrutiny Committee but because, for the past 26 years, I have watched this process of integration and the manner in which, by extremely clever and adroit manoeuvring, we get further and further integrated into these arrangements. The mechanism is an open-ended invitation until 2013, as I ascertained during an exchange with the Chancellor of the Exchequer. Until 2013, we are stuck with the present arrangements.
I am sometimes a bit of a Cassandra, in that I make prophecies-more like predictions-about certain events, find out that I was right and then find out that nobody took any notice until they had happened. On this occasion, I am going to say that it is extremely likely that, if Portugal gets into really deep trouble-and perhaps Spain, too-that will happen before 2013. If this greater amount is interwoven into the stabilisation mechanism, or even if it is not, the mechanism itself will entrap us in the arrangements which, although not yet permanent, will go on until 2013.
I also think that the Government are struggling a bit in relation to article 122, under which this measure was introduced-unlawfully, in my opinion-because the Commissioner responsible, a Mr Sefcovic, has stated that the Commission is still considering whether to use article 136 or article 122. Against that background, the Van Rompuy Committee is sitting and might already have concluded that it would be appropriate to have a permanent mechanism in place only under article 136, and therefore only by reference to the eurozone. That would be a plus, but it would not alter the fact that, between now and 2013, we are at risk.
I am concerned about the deficient wording in clause 1(2), because not excluding what might be done under the European Union effectively leaves it open to the European Union's continuing to weave its way into the arrangements, despite the fact that they are described as a bilateral loan. Some people might say, "Ah, but you have to understand that when the explanatory notes talk about a bilateral loan, they mean that." It does not say that in the Bill, however. Furthermore, we have had some unpleasant experiences with explanatory notes in the European Scrutiny Committee recently, as anyone who wants to read the report that we have just issued will see. The explanatory notes in question were positively misleading, and distorted the legal position. That is a matter that we will be pursuing in Committee, when we ask whether parliamentary sovereignty or judicial supremacy should prevail. I do not need to go into the detail of that now, but the fact that a bilateral loan is mentioned in the explanatory notes has been severely vitiated by our experience of the explanatory notes to the European Union Bill.
My concern is about the weaving-interlocking is probably a better word-of the loan that is provided for in clause 1(2) and the proposals that I have put forward, under the mechanism. Helpfully-at least I think it was helpfully-several hours ago, before the debate started, for the first time we were given a document described as "Summary of key terms: credit facility for Ireland." It says at the front:
"This document has been prepared for information purposes only in connection with Second Reading in the House of Commons...Without prejudice to the ongoing negotiations"- which might raise a few question marks-
"it contains a summary of terms agreed in principle and expected to be included in a credit agreement between Her Majesty's Treasury and Ireland."
I understand, although I am not certain, that the agreement has been signed off today, so perhaps it is now not for information purposes; it may now ne a concluded deal, but I will park that one.
Part of the problem is that the arrangements described in the document set down certain conditions precedent to the efficacy of the arrangements. Specifically, the conditions precedent include
"finalisation by the Borrower"- that is Ireland-
"after consultation with the Lender"- that is the UK-
That sounds to me positively a matter of interweaving with the mechanism, which comes within the jurisdiction of the European Union and the European Court of Justice. That is the point I want to make.
Furthermore, the document says that the information covenants
"will include, in addition to information relevant to the loans and information relating to the progress of the Borrower's economic stabilisation plan"- that is Ireland-
"copies of reports dispatched by"
"to the IMF, European Union or European Commission in respect of the Memoranda of Understanding."
The memoranda of understanding are also to do with arrangements within the framework of the European Union, and in that context in fact appear to be within the framework of the facility, which is the eurozone only. What we have here is a kaleidoscope of interacting, different fragments, which all ultimately seem to me to hang together.
Furthermore, the document goes on to say that the general covenants will include
" pari passu ranking of obligations"- a point that my hon. Friend Mark Reckless raised earlier-
"under the credit agreement with all other unsecured, unsubordinated obligations (recognising the seniority of"- but not different from-
"the support facilities provided by the IMF and European Financial Stability Mechanism)".
There are therefore two interacting, constantly interlocking arrangements, and I am left with the very deep worry that, in the absence of the clear wording that I have provided in my amendment, our so-called bilateral loan would effectively be part and parcel of the European jurisdiction. That is why I tabled the amendment.
Could it not simply be the case that the UK is providing a loan to Ireland in a time of need-a country that takes 7% of our exports and whose banks provide a quarter of the banking facilities in Northern Ireland? While all this is academic and interesting for those who are interested in it, could it not simply be the case that we are providing a loan to a friend in need at an important time?
I happen to agree with that, which is why I did not vote against the Bill, but I must say that this is not a matter of merely academic interest, because the consequence that I mentioned at the beginning of my speech, which led me to abstain, is that there is no restriction on the greater amount. I wait with enormous interest to hear whether the Minister will differ from the Chancellor of the Exchequer on that, but when it is an open-ended provision for a greater amount, I would like to know what that greater amount's limit would be.
In the context of the interlocking aspect to which I have just referred, I remain deeply concerned that the amount could be greater, and that this matter could get caught up in the complicated ongoing negotiations-I recognise that the Chancellor and his Ministers have had some very complicated negotiations. I remain worried about the direction in which we seem to be going, therefore. It would be so simple for the Government to give me either a direct assurance, which I would regard as a second-tier response, or a specific agreement to accept my amendment just to get me off their back. I would regard such an agreement as a useful way of dealing with the situation, but I bet I do not get that.
We will listen with interest to what the Minister has to say, but, just to be clear, is the hon. Gentleman's argument that the greater amount under clause 1(4) could be used to increase not only the amount of the loan to the Irish Republic, but interweaved with the financial stability mechanism to provide money for other countries? Is that his argument, or is it specifically about the loan to the Irish Republic?
The provision appears to apply to the Irish component, but because of the implications of what I am saying and the interlocking aspects in the kaleidoscope, it is extremely difficult to work out exactly what is intended by such opaque words. What I am asking for is very modest: simply the removal of all doubt by making it clear that any such loan would be
"other than a loan by virtue of any provision by or under the European Communities Act 1972."
If all doubt were to be removed in that way, it would be the end of the story and there would be no problem, so why not do it? I look forward to the Minister's response.
Another issue arises under paragraph 6 of the summary of key terms document. The paragraph covers events of default, and sub-paragraph (h) states that one event of default will be
"not being or ceasing to be a member of the European Union".
Why would such a provision be wanted if it were not integral to the fact that Ireland is a member of the European Union? I do not think I need to advance the case any further as it is very simple: if we would exclude Ireland from the arrangements by virtue of its ceasing to be, or not being, a member of the EU, that must have special significance, otherwise it would not be stated. That is another exceedingly worrying feature.
Paragraph 8 refers to the governing law, and it states:
"The credit agreement and any non-contractual obligations arising out of or in connection with it will be governed by English law."
Paragraph 9 is on enforcement, and the document's authors have clearly thought a lot about this matter, and the more they think about it the more worried I get, because they are transposing their thinking into the provisions of the Bill and this document:
"The English courts will have exclusive jurisdiction in relation to any dispute including a dispute relating to non-contractual obligations arising out of or in connection with the credit agreement."
That gets to the heart of the problem, because anything that within law is under the jurisdiction of the European Union and within the framework of the European Court under the European Communities Act 1972 cannot be excluded from that jurisdiction by such words in a document of this kind that is "for information purposes"-hence our European Scrutiny Committee report on the relationship between parliamentary sovereignty and the judiciary. Therefore, merely writing in such a document that something will be governed by English law and that the English courts will have exclusive jurisdiction in relation to any dispute is not worth the paper it is written on.
If it is within the European Union legal framework, that means the European Court will get its hands on it. It may be that if there was a dispute or default or any of the other difficulties that could arise from the agreement in the Bill as enacted-as I rather suppose it will be-that will in no way alter the fact that ultimately, as long as parliamentary sovereignty prevails in the light of the European Communities Act, the Supreme Court will not prevent it from falling within the framework of the European Court of Justice.
Of course, it would be open to any future parliamentary Bill to try to unravel the arrangement, but what a pity it would be if we found that the fast-track arrangements we are experiencing today led us to the situation that I have described, simply because we were not prepared to listen to the argument that could resolve the problem by excluding the European jurisdiction. The legal advisers, the Treasury officials and the Minister may well be wrong. If they are wrong, we are in deep trouble. If they are doubtful, perhaps they could listen to those of us who have been proved right on a number of past occasions.
These are my final words-not from Cassandra, but from me. When things go wrong, it is much better to have taken advice beforehand and keep ahead of the curve, rather than allowing the curve to catch up with us.
It is a pleasure to follow Mr Cash; I very much agree with what he has been saying. He is clearly much more erudite on these matters than me, but I understand what he is saying-that today, we are making to our closest friendly neighbour country a bilateral loan which has nothing to do with the European Union and which is not part of the panoply of EU arrangements. I am happy to go along with such an arrangement.
Mr Redwood has said many times that, if there are problems in the eurozone with the eurozone, they should be sorted out by the eurozone, not by countries outside the eurozone. I agree with him very strongly. This is a country that is our closest neighbour, with which we have deep, long historical relations-very friendly relations now, we are pleased to say. Indeed, I have many Irish constituents who are concerned about their country. We are making a friendly gesture to a neighbouring country-our nearest friendly neighbour-that happens to be in the eurozone, which we happen not to be.
We do not want to be in a situation where, if another country gets into difficulty, it says, "You made a loan to Ireland-you can make a loan to another country in the eurozone." That would not be acceptable.
That is exactly the danger. Under the present discussions about the permanent crisis resolution mechanism, the draft conclusions of the European Council state:
"Member States whose currency is not the euro will be associated to this work."
So the danger is that this Bill could be a precedent for the "Loans to Portugal Bill", the "Loans to Spain Bill" and the "Loans to Italy Bill", which may be just round the corner.
I thank the hon. Gentleman for his intervention. The amendments from the hon. Member for Stone will hopefully clarify the position and change the Bill to the way we would like it to be, so that it will not have implications for other members of the eurozone.
As I have said, however, if the Irish are to recover from their situation, they must remove themselves from the eurozone, re-create the punt, depreciate their currency and bring it into line with sterling, because we are their natural trading partners. Their economy and ours are the most closely integrated, and that is the sensible thing to do. I have said that before in this Chamber, and I have said it in private to senior Irish politicians on two occasions-I must say that it was not received in a very friendly way. Nevertheless, that is the logic, and even now we are looking towards a progressive deconstruction of the eurozone, partial or complete, in the not-too-distant future.
It would be better to deconstruct the eurozone in a rational and controlled way, rather than in a disastrous crash. So I hope that the eurozone members will be sensible and start to deconstruct it as practically and sensibly as they can and not allow it just to go into a massive crisis, which will benefit nobody. Even deconstructing it through country-by-country removals will cause problems, because many other countries have money in Irish and Greek banks, so it will be devalued and people will lose. Nevertheless, it is better to do that than to allow the situation to continue and the elastic eventually to break, causing the whole thing to come crashing down.
I strongly support the amendments tabled by the hon. Member for Stone, which I hope are accepted by the House. I hope that we make it clear that this is a loan from Britain to Ireland as a gesture of friendship to a fellow country in danger and that it is not to do with European Union arrangements. It is a friendship loan between two very close countries. Ireland is the country closest to us; it is a country with which we have deep historical links. I hope that all hon. Members will support the amendments if they are pressed to a Division-I certainly look forward to voting.
I wish to discuss amendment 6. It commands great interest across the House, although that may be difficult to believe given the swathe of green Benches that we can see, and I hope that we will have a chance to divide the House on it. It is right that we should be looking to help Ireland and debating how to do so, not simply because of this country's economic self-interest, but because of the close cultural ties between Britain and Ireland. It is fair to say that there is not a street in any town in this country where there are not close kith and kin connections between our two countries.
The question is whether the Bill helps us to do that. My hon. Friend Mark Reckless spoke eloquently, making the point that this deal is not tailored to help the Republic of Ireland, but has been imposed on it. It is not a case of our passing this to bail out Ireland, so much as our passing it to bail out the euro. My right hon. Friend Mr Redwood has said that, and he has blogged eloquently about how the European Central Bank triggered this crisis. It began when the ECB called into question Ireland's ability to finance loans. Why did it do so? It did so because the ECB sacrificed Ireland to staunch the haemorrhaging of confidence in the euro and deal with the growing storm around it. The ECB put preserving a paper currency without a state ahead of the well-being of millions of Irish households.
Ireland is in debt because she is a victim of a credit bubble caused by euro membership, but when we consider amendment 6 we must ask how pushing a potentially high-interest loan on a friend reduces her debts. How does extending a debt as overdraft help that debtor to repay their debts? That will dig Ireland deeper into debt. Each of the eight tranches of this loan is yet another step towards debt. It is time that we stopped digging Ireland into deeper debt. The bail-out will not reduce the debt. People sometimes talk about the bail-out as though it were a solution to debt, but it is a deepening of debt. We need to make certain that the rate of interest and the terms of this extension of Ireland's overdraft are in her interests and those of her people. To do that, we need to make sure that we in this House have the final say over the terms of the small print.
Amendment 6 seeks to ensure that the interest on this £3.2 billion overdraft extension is kept low. The small print is certainly not definitive on the subject. The summary of terms states:
"The rate of interest payable on a loan will be at a fixed rate per annum equal to the aggregate of:
(a) the Margin; and
(b) the Sterling 7.5 year swap rate at the date of disbursement."
We are told by the Chancellor that, at the moment, that would be 5.9% and the document suggests that figure, but it is not definitive. We need to give the House of Commons the final say on the rate, and we need a formal means to allow the House to ratify the rate of interest.
Hon. Members will have heard some discussion about how Iceland got a significantly lower rate. Why is that? Is Iceland a better friend? It is for public debate, public concern and the legislature, not technocrats in the Treasury and watery eyed officials, to decide the rate of interest that we charge our friend.
The explanatory notes have, I think, been issued so that we believe that they are close to what amendment 6 suggests. We are asking for something that is not a million miles away from the explanatory notes, so why not formalise the arrangements? Why not require the approval of an order under the affirmative procedure in the House? We have only the explanatory notes to go on- [ Interruption. ] I am delighted that those on the Front Bench are paying such attention. We only have the explanatory notes to go on, so why not enshrine these arrangements by order? The last time that we left EU matters to Sir Humphrey's explanatory notes, we were, bluntly, mugged. The explanatory notes to the Bill on sovereignty-the European Union Bill-were not even defended by the Minister in Committee. It is a cause of concern that we have only the explanatory notes. We must enshrine these arrangements in legislation to make certain that we in this House, who are accountable to the taxpayers who will ultimately have to stump up for this, are satisfied with the arrangements. That would be good for us and good for Ireland, too.
Over the past seven months, we have seen what happens when the House takes its eye off the small print. We have seen what happens when we leave it to Ministers, officials and Treasury negotiators to handle the small print. For example, we have seen how non-euro member countries, such as Britain, become liable through the small print for open-ended eurozone bail-outs until 2013. That is the price we pay as a House for taking our eyes off the small print. It would be quite wrong, incidentally, to blame the previous Government for that. The deal took effect after the coalition Government came to office.
When this House took its eye off the small print on Treasury negotiations on matters European, the Government managed somehow to sign us up to a European Council document that established a common legal framework for pan-EU economic governance. I suggest that this House should not form a habit of deferring the small print to the Treasury and its officials. It is prudent to require the Government to gain the approval of this House over the interest rate.
The amendment goes to the heart of why we are here and why we have a House of Commons in the first place. It is the purpose of us as MPs-and it has been for many hundreds of years-to oversee what Ministers do with our money. That should include the terms under which they lend our money and the terms under which they make taxpayers liable for debts incurred through such financial arrangements. The amendment is reasonable and in line with what the Government are seeking to do-or claim that they are seeking to do-in the explanatory notes drafted by officials.
The amendment would ensure that Ministers thought very carefully and wisely when they entered negotiations and finalised arrangements. It would also help to restore purpose to the House, which some of us would suggest has been in the past rather supine, submissive and spineless. Ultimately, it would ensure a fairer deal for our closest friend and our closest neighbour. I hope to press the amendment to a Division and to obtain the support of Members on both sides.
On amendment 3, tabled by Mr Cash, the amendment of itself does not preclude the fear that he and my hon. Friend Kelvin Hopkins have that at some point in the future there might be a loans to Spain Bill, a loans to Portugal Bill or something similar. The amendment would not preclude the possibility of any other such bilateral loans being arranged in future. I do not believe that the amendment, which is commended to us in those terms, will serve the purpose for which it was tabled.
I agree with that, but that is not what I have said. I have said that under this Bill, the consequence of not adding the words that I have provided puts the Bill in jeopardy of falling within the framework of European jurisdiction, which is a different point.
I know that the hon. Gentleman made that point, too, and I want to turn to it. He carefully quoted and referred to a number of points in the loan agreement, which was made available at the start of the debate. The summary of key terms refers to a number of matters, and the hon. Member for Stone seemed to say that those references alone mean that the bilateral loan is being interweaved with the wider EU and IMF support packages to Ireland. However, hon. Members should bear in mind a point that the Chancellor made on Second Reading-that one advantage of the bilateral loan arrangement is the place that it gives the UK at the table when it comes to arranging and overseeing the restructuring plan that is to take place in relation to the Irish banking sector.
The key terms include, under the heading "Other Terms", at paragraph 1(d):
"no amendments to the facilities provided by the IMF, European Financial Stability Mechanism, the European Financial Stability Fund or Sovereign bilateral lenders or to the Memoranda of Understanding that would have a material adverse effect on the Borrower's ability to restore its capacity to access the capital markets."
Given that the purpose of the loan arrangement is to make sure that Ireland can go to the bond markets on its own as soon as possible and get money at competitive rates, it is clearly in the House's interests, as the UK will be providing this loan, to make sure that the loan terms are protected against any undue terms coming from the other loans being made available in this context.
Several hon. Members have mentioned the role of the European Central Bank. We can look at the history to this situation and question the role of the ECB on a number of occasions. First, it kept interest rates very low-at times against the express wish and request of the Irish Finance Minister-which helped to contribute to the problem. Secondly, as many hon. Members have mentioned, there is the open-ended nature of the Irish Government's guarantee to the banks. Again, the ECB seems to have been the primary body urging a guarantee of that extent. Thirdly, there is the whole issue of the need for the bail-out and the creation of circumstances in which the Irish Government have had to seek it. Again, many people have questions about the precise role and performance of the European Central Bank in all that. Hon. Members have asked serious questions about the ECB, and we know that a much bigger loan facility is being granted through the EU and the IMF, so surely the House will want to know that the terms of the bilateral loan and its operation will not jeopardise the interests or purposes for which it is being made available. It therefore makes sense for the key terms that are summarised in the document to refer to the restructuring plan that is to be undertaken in relation to the banks.
The document makes it clear that "conditions precedent" will include "finalisation by the Borrower"-namely Ireland-
"after consultation with the Lender, of a restructuring plan in relation to its banking sector with the IMF, European Commission and European Central Bank".
That is not the interweaving that the hon. Member for Stone has discussed, but a sensible, diligent precaution on the part of the House in providing for money to be borrowed. The "Other Terms" also include at paragraph 1(c):
"no amendments to the Restructuring Plan that would have a material adverse financial impact on the UK operations of Anglo Irish Bank, Allied Irish Banks and Bank of Ireland".
Again, it makes absolute sense for the House and the Government, who are responsible to it, to make clear cross-reference to what else is happening under the restructuring plan and to what other lenders might urge in relation to other parts of the plan in terms of key interests that the House needs to protect, including those of the banking sector in Northern Ireland and the contribution of the Irish banks to the wider UK economy.
Unlike the hon. Member for Stone, I do not believe that the information covenants are a Trojan horse that will enable the House and its purposes to be subsumed in a variety of wider EU financial devices. They are there to ensure that any relevant information bearing on decisions relating to the restructuring plan, the wider stabilisation effort or the national recovery plan in Ireland is made available to the UK Government in an appropriate way. I believe that the other points in the summary of key terms reinforce the purposes of the loan rather than raising deeper, more sinister questions about the precedent that it creates.
I understand the motive behind amendment 6, given the fast-track nature of the Bill and the fact that amendments had to be tabled even before Second Reading. However, given that the summary of key terms gives us all the details relating to the interest rate, with which many people in Ireland will be uncomfortable and which, I am sure, is a matter of controversy even in the Dail this afternoon, I do not believe that the amendment is necessary. In my view, its purposes have been overtaken both by the summary of key terms and by the terms in which the Chancellor spoke earlier.
Let me take up some of the points made by my hon. Friend 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 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 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 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.
Amendment 3, which my hon. Friend Mr Cash has moved, 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 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.
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.)