Clause 1 — United Kingdom loans to Ireland

Part of Loans to Ireland Bill (Allocation of Time) – in the House of Commons at 5:00 pm on 15th December 2010.

Alert me about debates like this

Photo of Mark Durkan Mark Durkan Shadow SDLP Spokesperson (Foreign and Commonwealth Affairs), Shadow SDLP Spokesperson (Home Affairs), Shadow SDLP Spokesperson (Justice), Shadow SDLP Spokesperson (Treasury) 5:00 pm, 15th December 2010

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.