Loans to Ireland Bill
House of Lords, 21 December 2010.
Second Reading (and remaining stages)
Lord Sassoon (Conservative)
My Lords, it is the Government's intention to ask for authority to make a bilateral loan to Ireland as part of the multinational assistance programme for that country. This is the right action to take, given our country's close economic, financial and political connections to Ireland. By passing this Bill today, the UK will be ready, come the new year, to meet its commitments to one of our closest international partners.
The legislation before the House today is narrow in scope but it is still enabling legislation. It will sit alongside the actual loan agreement, which will set out the details of what we offer Ireland. I intend to address the substance of both the legislation and the loan agreement. Before that, however, I would like to remind the House of how Ireland ended up in its current predicament.
Over this year, it became increasingly clear that the situation in the Irish economy was unsustainable. Irish banks had become almost wholly reliant on central bank funding to maintain their operations. At the same time, Ireland's market interest rates rose to record levels and its sovereign debt markets have now effectively closed, with little prospect of reopening.
This situation cannot go on. So, on the weekend of 20 November, Ireland's Prime Minister, Brian Cowen, made a formal request for international financial assistance. The United Kingdom, alongside the IMF, the EU, the euro area and other member states, made an agreement in principle to take part in an assistance package to Ireland. At the end of November, Ireland agreed with the IMF and the EU a three-year financial assistance package worth €85 billion. The money will be used as follows: from that total, €35 billion will be used to support Ireland's banking sector, with €10 billion going towards immediate bank recapitalisation. The remaining €50 billion will be used for sovereign debt support.
In terms of contributions to the cost of the package, Ireland itself will provide €17.5 billion towards the total. The remaining €67.5 billion will be split, with one-third coming from the IMF, one-third from the European financial stability mechanism and one-third from the euro area facility and bilateral loans from the UK, Sweden and Denmark.
This is a significant package that will help Ireland deal with its problems and restore stability to its economy. It will help it recapitalise its banks and set up a contingency reserve for future problems. It will also help the Irish authorities cover the shortfall in their budget, which was presented to the Irish Parliament earlier this month.
I understand that some noble Lords may have concerns about the size and the timing of the loan. Indeed, some may be asking why we are extending a loan to Ireland in the first instance. We are doing this because it is overwhelmingly in our national interest that we have a strong Irish economy and a stable banking system. This is not just about the Irish economy and Irish jobs; it is about the British economy and British jobs.
A loan does not add to our deficit; any increase in borrowing is matched by the commitment of Ireland to repay it with interest. Ireland is the fifth largest market for British exporters, and accounts for 5 per cent of our total exports. Ireland is also the only country with which we share a land border, and in Northern Ireland our economies have particularly close ties.
Just as our two economies are linked, our business and banking sectors are also interconnected. More Irish companies are listed in London than companies from any other foreign country. In Northern Ireland, two of the four largest high-street banks are Irish-owned, accounting for almost a quarter of personal accounts. Our own banking sector has a considerable exposure to Ireland.
I should stress, however, that the UK's banks are sufficiently well capitalised to more than manage the impact from the situation in Ireland. But one thing is clear: it is undoubtedly in Britain's national interest that we have a growing Irish economy and a stable Irish banking system. That is the purpose of this Bill.
The Bill has two substantive clauses. Clause 1 sets out the parameters under which the Treasury may make payments under UK loans to Ireland. The total international assistance package, including our contribution, is denominated in euros. However, our bilateral loan will be made in sterling. Subsection (3) includes a cap on the total size of our bilateral loan of £3.25 billion. This will be the total size of our bilateral loan to Ireland, and the period over which these loans may be paid out will end on 8 December 2015, five years after the Bill was first published.
I would like to make it clear that there is no expectation that we will have to make further loans to Ireland in the future. This is reflected in subsection (4), which is intended to prevent an increase in the size of the loan unless an order is made by statutory instrument. But because the loan is denominated in sterling, a mechanism is needed to accommodate potential changes in the exchange rate in the period between the publication of the Bill and the signing of the loan agreement. Therefore, the Bill allows the Treasury, under subsections (4) to (7), to make an order once the Bill is in force to increase the limit, as long as this is done solely to take account of exchange rate fluctuations between now and 30 days after Royal Assent without further parliamentary procedure. Let me be clear: any increase in any other circumstances or for any other reason would require approval in another place. This is something that I and my right honourable friend the Chancellor of the Exchequer do not envisage happening. We also expect full repayment to be made over the term of the loan.
We want the process to be as open and transparent as possible. Clause 2 therefore creates a requirement for the Treasury to prepare and lay before Parliament a report every six months on any payments made by the Treasury by way of a loan to Ireland, the original term of each loan, any sums received by the Treasury by way of interest or repayment of such loans, the amounts outstanding, and the remaining terms of any outstanding loans.
I would like to update the House on the main terms of the bilateral loan, which we have agreed in principle with the Irish authorities and have made available in the Libraries of the House. The loan will be drawn in eight tranches, each with a seven-and-a-half-year term. This is in line with the terms for both the European and IMF loans. The first tranche of our loan will be available to be disbursed in September 2011 and the interest rate charged on each tranche of the loan will be fixed specifically for that tranche. This will be set by adding a fixed margin of 2.25 percentage points to the appropriate market-determined interest rate, the sterling seven-and-a-half-year swap rate, at the time of disbursement. For example, at present, the estimated interest rate on the first tranche of the UK loan would be the sterling seven-a-and-a-half-year swap rate in September 2011 plus 2.25 percentage points. That margin was set to give an estimated interest rate of 5.9 per cent for the first tranche of the loan.
The rate on our bilateral loan is slightly higher than the estimated rate of 5.7 per cent for the first tranche of IMF and EFSM funds, but it is also slightly lower than the estimated 6.1 per cent rate the EFSF will charge on its first tranche of lending. This reflects the different costs of funding and is a measure of the international confidence in the UK's public finances. We will charge interest every six months and there will be a repayment of principal at the end of the seven-and-a-half-year term of each tranche. As with the IMF, there will also be a commitment fee for making this loan. We will charge half a percentage point on the total amounts that may be drawn down under the loan agreement for the forthcoming 12-month period. If the loan is drawn the fee will be waived, effectively replaced with the interest charged on the loan.
There are two conditions on the loan set out in the terms, to which I would like to draw the attention of the House. The first condition is that the IMF as well as the EU must be satisfied that Ireland is complying with the agreed restructuring plan. This is a very important safeguard. The second crucial condition is that there are to be no amendments to the restructuring plan that could have a material adverse financial impact on the UK operations of Anglo Irish Bank, Allied Irish Banks and Bank of Ireland. Given the scale of their operation in the UK, this is vital.
The official advice from the Treasury is that this loan represents value for money for the British taxpayer while being in line with the terms offered by both the IMF and the euro area. A summary of the key terms of the agreement and a final written agreement will be forthcoming shortly.
One thing is clear: Ireland is a friend, and a friend in need. Because of the steps we have taken, our economy is currently in a far stronger position than Ireland's; that is why we are able to offer such reasonable and sensible terms for our bilateral loan to Ireland.
I should like to talk briefly about a related matter which I know is of interest to this House: the proposed permanent stability mechanism for euro area economies. Both my right honourable friends the Prime Minister and the Chancellor of the Exchequer have been very clear that when it comes to putting in place a permanent mechanism, the UK should not be part of it. The time has come for the euro area to put in place its own mechanism for dealing with the imbalances. It needs to be part of a comprehensive solution that sees countries addressing more decisively their own problems, including in their banking systems. As my right honourable friend the Prime Minister said yesterday, it is clear from the recent Council conclusions that the mechanism will be for,
"Member states whose currency is in the euro".
Britain therefore will not be part of it.
Since our coalition Government came into office, we have taken action to put our own house in order. We are now in a strong position that enables us to help Ireland, our closest neighbour, in its hour of need. As I have said, this is clearly in our national interest. A strong Ireland-indeed, a strong Europe-is vital to the success of the British economy. Today's Bill will help to ensure this. I beg to move.
Lord Liddle (Labour)
My Lords, first I apologise most sincerely to the Minister for not being in the House for the start of his speech. I was trying to catch what his ministerial colleague Mr Lidington was saying to us in evidence in the EU Committee about the permanent mechanism.
I support very strongly the principle of helping Ireland in its hour of need. The case seems self-evident given the interconnectedness of our economies, with 5 per cent of our exports going to the Republic, and the consequences for us of a collapse of its economy, which would be serious, not least for British banks.
No simple solution such as coming out of the euro is available for Ireland, as a lot of people who opposed the legislation seemed to think. It is worth bearing in mind that, were a member state to try to come out of the euro, there would be a very big devaluation. That would cause a collapse in living standards and purchasing power, which would have knock-on economic consequences particularly, in Ireland's case, for Britain. Moreover, its debt would continue to be denominated in euro. As the new currency had depreciated, there would almost certainly be a default that required a restructuring of that debt, again with very severe consequences for the British financial system.
However, while I fully support the objectives of the Bill, I dislike it considerably. I dislike it because of its bilateral nature. The Government are profoundly wrong in the working assumptions that lie behind this bilateral Bill: that the euro problem is a problem for the eurozone, that it is for the eurozone to sort itself out, and that it is none of our business. That is profoundly misguided and not in the UK's national interest.
It is wrong for three reasons. First, as we in Britain seek the necessary rebalancing of our economy towards exports and investment, it is absolutely clear that we are dependent on very strong growth in the euro area, which is our biggest market. I know that the rest of the world is growing much more strongly and Asia is growing very strongly indeed, but Germany, more than the United Kingdom and other members of the European Union, is getting the most benefit out of that global expansion. We will be the beneficiaries of that German growth in the eurozone. We live in Britain today in an economy that is deeply integrated into the rest of Europe. Our fortunes are dependent on the rest of Europe. It is completely misleading to talk about their problems over there and think that we can sort out our problems over here as though they are completely separate questions.
Secondly, our banks are extremely interconnected. I was reading the Bank of England's report on financial stability, which was published last week. It states:
"UK banks' holdings of sovereign debt issued by countries under heightened strain are relatively small. But total claims on these economies, including lending to households and businesses, are larger ... Losses on such lending could increase were heightened sovereign concerns to be accompanied by weakening economic conditions. Credit risk could also be amplified by the interconnectedness of European banking systems. UK banks have claims of almost £300 billion on France and Germany, whose banking systems are more heavily exposed to the most affected economies".
The Bank of England argues that there is strong interconnectedness, and we must think in those terms, not that we are something separate and apart.
Thirdly, when there is a crisis, we will end up paying for it just as if we were in the eurozone. I looked at the Hansard report of the debate in the other place on this subject and at what the Chancellor of the Exchequer had to say about it. He said that,
"our contribution has been calculated on the basis of what we would have paid if we had been part of the facility".-[Official Report, Commons, 15/12/10; col. 946.]
In other words, it is a bilateral contribution but it is based on a calculation of what we would have paid if we had joined. Mr George Osborne goes on to say:
"We are paying pretty much exactly what we would have paid if we had been a member of the euro".-[Official Report, Commons, 15/12/10; col. 948.]
We cannot avoid our obligations to the rest of the European Union by pretending that this is something apart from us.
What is going on here is that UK politics is taking priority over the national interest. Clearly, we in Britain are in this up to our necks. Our banks are in it up to their necks and our prospects for growth are dependent on the euro area. Instead of the Prime Minister saying, "This is nothing to do with us", he should be doing today what Gordon Brown did in October 2008; he should go to the summit of the eurozone countries and say, "Here is the plan to rescue the banks in the area. Britain has a vital interest in being part of this". Instead, we get a washing of the hands of Britain's role. It is clear that this policy will not last. I looked at what various economic experts were saying about the likely pattern of what was likely to happen in the eurozone. It is difficult for the Government to comment on this because no Government can forecast that there will be defaults.
I looked at an article by the one professor who forecast the crash of 2007 and 2008-Professor Roubini. In his view, what he describes as the current strategy of kicking the can down the road will soon reach its limits. He goes on to argue that,
"Europe must ... implement early orderly restructurings of distressed sovereigns' public debt".
The consequence of the orderly restructuring of distressed foreign debt would be the necessity also to carry out another restructuring of the European banking system, in which Britain's banks are intimately involved. Instead of doing these bilateral things, we should be putting ourselves at the heart of Europe and of the argument about what needs to be done in order to rescue the European economy. What we are seeing here is a policy for marginalising Britain that is profoundly against our national interests. We will pay a very high price for it in future, because when the new mechanism is set up the key economic decisions will be taken by the eurozone, which will go along to ECOFIN, and Britain will be forced to agree with what the eurozone has decided because decisions are taken by qualified majority voting.
This principle of staying out and doing bilateral deals is a very bad policy for Britain. It is putting playing the politics of the Daily Mail and Rupert Murdoch before a real, patriotic sense of where our national interest lies.
Lord Pearson of Rannoch (UKIP)
My Lords, during the noble Lord's remarks I think that I heard him say that British prospects for growth depend on the eurozone. Could he enlighten us as to his views on the prospects for trade in the rest of the world?
Lord Liddle (Labour)
I touched on that subject, because I said that Germany was taking far better advantage of global growth than we are at present. The Prime Minister is absolutely right to try to expand our exports in India, China and other countries, but the fact is that German export success benefits us in the growth in the eurozone, which accounts for half our exports.
Lord Newby (Liberal Democrat)
I thank the Minister for his very clear introduction to the debate. I was slightly concerned, however, that he did not refer the House with the degree of attention that it may deserve to paragraph 21 of the Explanatory Notes, which deals with the compatibility with the European Convention on Human Rights. I was tempted to ask him whether the law officers had been consulted before the Chancellor of the Exchequer made the statement that,
"pursuant to section 19 of the Human Rights Act 1998 ... the Bill is compatible with the Convention rights".
As this is the first time that we have debated the Bill, the Minister has not had the chance to give any undertaking to speak to the law officers, and it would be invidious to ask him to do so. However, one hopes that that will not be necessary.
Was there any alternative to the loan and the Bill? As the noble Lord, Lord Liddle, has explained, there was not. If the EU had not intervened in the dramatic way in which it did, it is almost certain that Ireland would have had to default and leave the euro. That would have been bad not only for the eurozone but for the UK. It would have been bad for the UK for trade reasons-I shall come back to the point made by the noble Lord, Lord Pearson, a bit later in my speech-as we have a large volume of exports to Ireland. Indeed, 40 per cent of Northern Ireland's exports go to the Republic. I am sure that the noble Lord, Lord Bew, will expand on that point.
The prospect of Northern Ireland, as a depressed region of the United Kingdom, suffering significantly as the result of a major crisis in the Republic would have had not just a severe impact on Northern Ireland but, obviously, a severe knock-on effect here, including to the public finances. We would have had, in effect, to have filled in some of the hole that would have been knocked in the Northern Ireland economy. Such a crisis would also have been bad for the UK because of the exposure of UK banks. Again, as the noble Lord, Lord Liddle, pointed out, the Bank of England has set out starkly the scale of that issue. A default would have led to instability in sovereign debt markets more generally and could have increased the costs of UK government borrowing.
That does not necessarily mean that we agree with absolutely everything that is being done to restructure the Irish banking system. The arguments for establishing the National Asset Management Agency can be made either way. Effectively nationalising all the risks taken by all the Irish banks raises moral-hazard issues, which we have sought to avoid to a considerable extent in the United Kingdom.
Another issue is whether, even with all this activity, we will have been successful in stabilising the Irish economy. To pose the question that Martin Wolf posed in the Financial Times recently, the question is not whether the Irish banking sector is too big to fail but whether it is too big to save. Hopefully, the answer is that the Irish banking sector can be saved as-heaven knows-it is not lacking resources. The amount that has gone in both from the Irish Government and, via them, from the EU is now considerable.
It would have been irresponsible for the UK not to participate in the Irish bailout, but the Irish problem is not the only issue facing the eurozone. There are broader issues that relate to Greece, Portugal and now Spain and Italy. Given that we are outside the eurozone, it is a logical if inglorious position for us not to commit to taking part in any further bailouts of other member states.
When contemplating this debate, I cast my mind back to the debates that we had a decade ago on whether Britain should join the euro subsequent to, as many noble Lords will remember, the famous five tests. I am pleased to see the noble Lord, Lord Morris, in his place. Uniquely in my hearing, he was able to make a joke-which at least I laughed at at the time-about whether we should join the euro. At a TUC summer reception, he said that, having been asked by the then Chancellor, Gordon Brown, what he thought about the five tests, he had replied, "Well, we've won one, we've lost one, we've drawn one, but I think we might win the series in Sydney". A decade on, a lot has changed both in cricket and in our perceptions of the euro.
At that time, many of us on these Benches supported Britain's attempts to join the euro. One of the joys of doing a considerable amount of work with Charles Kennedy, as I was doing then, was that we were summoned from time to time to see the Prime Minister for an uplifting talk on matters of common interest and concern, of which the euro was one. At that point, Charles Kennedy was keen to press the case for British membership of the euro on a Prime Minister who was keen but extremely nervous about that prospect. Indeed, he said at the time that he would like to join the euro but he thought that it was impossible to beat both public opinion and the popular press-he could beat one, he thought, but not both-so he did not attempt it. As a result, we are now in a situation in which nobody seriously thinks that we should join the euro in the foreseeable future. Although it is inconceivable-for the reasons given by Tony Blair among many other reasons-that we should join the euro at this point, some of us at least are not absolutely convinced that we took the right decision a decade ago.
However, if I were to dilate on that argument and those tests, I would no doubt keep your Lordships here all evening. I know how much Members-particularly those opposite-hate overlong speeches. The noble Lord, Lord Hunt, is clearly already extremely impatient with me, and I can understand why that might be the case.
Even though we are agreed that we should not join the euro, two interlinked questions need to be considered-we cannot amend the Bill, and it would be foolish to attempt to do so-in this discussion on the Bill, which gives us an opportunity to range slightly wider. Realistically, what should our role be in terms of ensuring financial stability within Europe? And what should the eurozone do now? As I say, the two issues are inextricably linked, but the first principle should surely be to support eurozone members in doing whatever they agree is prudent to strengthen the working of the eurozone. For example, it would surely be perverse and ridiculous if the Government committed themselves to having a referendum on changes to the EU treaties that eurozone members decided were necessary to allow eurozone members to support each other more effectively. Can the Minister assure us that, as a non-eurozone member, we will wave through any proposed changes to the EU treaties without requiring a referendum in the United Kingdom?
As the noble Lord, Lord Liddle, has pointed out, the Chancellor is more generally in an extremely odd position when considering the development of the eurozone. The eurozone's success or failure is obviously of crucial importance to the future of the British economy, as has been exemplified by the situation in Ireland. However, as the noble Lord pointed out, there are three reasons why the success or failure of the euro and the eurozone is important to us. The first of those reasons, to which he referred-and on which he was challenged by the noble Lord, Lord Pearson of Rannoch-relates to trade. It seems to me bizarre and sad that we export more to Ireland than to the BRICs combined. However, that may be a slightly misleading figure, as I suspect that the figure includes all the re-exports of goods that come from the rest of the world to Ireland via the UK. For example, I suspect that goods that are shipped from France to Ireland by road through the UK count as UK exports to Ireland. I may be wrong on that, but that may slightly inflate the figure. Even if that is not the case, the figure is still very high.
However, if one wants suddenly to change gear completely and export significantly greater amounts to the BRICs, the problem is that, frankly, that is easier said than done. It is not easy for a small business suddenly to decide to sell its products in China or Brazil, given the problems of language and distance. Therefore, even with the best will in the world, it would take a while before we could re-orientate our trade significantly away from the eurozone, particularly given that our strength rests in exports of services, many of which are easier to export to the eurozone than to the BRICs. That is particularly the case in countries where there are institutional barriers to exports of services. It is not simply that a lawyer or accountant seeking to open an office in India has their work cut out for them but that they cannot do it. Therefore, it would be an extremely difficult challenge for the UK simply to do a handbrake turn and suddenly start newly exporting huge quantities of goods to the BRICs. Therefore, we need the eurozone to do well, because that is where many of our exporters already have links and where, as we grow, they could develop those links significantly more.
Lord Pearson of Rannoch (UKIP)
My Lords, of course I admit that our trade with the eurozone is important, but is the noble Lord aware that our trade with the rest of the world-both inwards and outwards-is in fact increasing very much faster than that with the eurozone? Surely that points the way to the future rather than to the past.
Lord Newby (Liberal Democrat)
My Lords, the fact that such trade may be increasing more quickly is not surprising for two reasons. First, it is increasing from a smaller base, so it is easier to achieve a higher percentage increase. Secondly, most of those economies are growing more quickly than the eurozone, so you are feeding into a more buoyant economy. I completely accept that, but my point was slightly different. Incidentally, another problem about exporting to some of those other countries is that the newly passed Bribery Act is making many companies, not least small-to-medium-sized companies, very wary about their ability to export to China or India, for example, because they fear-sometimes rightly and sometimes, no doubt, incorrectly-that they may be faced with business practices there which they need to follow in order to gain access to a market but which they would not have to follow in the eurozone. In the medium term, I am extremely optimistic about the prospects for exports to the BRICs, but in the short term, given that we are starting from a relatively low base, it is a forlorn hope to think that the BRICs can solve our export problems.
Lord McAvoy (Labour)
My Lords, I hope that the noble Lord will forgive me, but I will be extremely brief. In the interests of transparency, would the noble Lord care to share with your Lordships' House the contents of the note that he has received from his Chief Whip?
Lord Newby (Liberal Democrat)
I may be mistaken-I do not know the noble Lord desperately well-but I think that, in a former incarnation, he was a Whip. It is not normal, when asked a question, to pose a question back, but I would be inclined to ask the noble Lord, if the House so allowed me, whether, when he was a Whip, he thought it a good idea that everyone who received a note from him in another place be required to divulge the contents of that note. My guess-I may be wrong-is that he would not necessarily have been desperately happy at that.
Lord McAvoy (Labour)
I did not have to send notes. I just looked encouraging.
Lord Newby (Liberal Democrat)
Well, as I am sure the noble Lord is learning, we do things differently in your Lordships' House. I realise that I must make progress.
Lord Pearson of Rannoch (UKIP)
Even in your Lordships' House, I believe that I am right in saying that the Companion suggests that Second Reading speeches should be curtailed to some 15 minutes. We are now in the 17th minute of the noble Lord's peroration.
Lord Newby (Liberal Democrat)
My Lords, I am extremely grateful to the noble Lord for making that point. He will be aware that I have been interrupted on a number of occasions. However, I am well aware of the conventions of the House and will happily draw my speech to a conclusion by saying, as I said at the beginning, that we support the Bill.
Second Reading (and remaining stages) (Continued)
Lord Bew (Crossbench)
My Lords, I thank the Minister for the skilful way in which he introduced the Bill. I approach this subject from a slightly different angle. Both in this House this afternoon and in the other place the main focus of the discussion on the Bill has been, for entirely excellent reasons, economic matters. A case has to be made for the British taxpayer supporting such a loan and it has been very well made in terms of the interdependence of the two economies, particularly the fragility of the Irish banking system and the possible negative knock-on effects within the United Kingdom. Indeed, if I may put it even more bluntly, so far as concerns Northern Ireland there is a great deal to be feared from an implosion of the Irish economy. Therefore, the steps that have been taken on Treasury advice with respect to the Bill seem entirely reasonable and entirely worthy of support.
Although I accept the economic argument that was put so effectively today by the noble Lord, Lord Sassoon, I suggest that we should look at the Bill in a wider and more historical context. The fact is that historically there has been a traditional Irish suspicion of Britain and its role, which has been reflected in Irish support for whoever the enemy of the United Kingdom has been at a given time, going back to Philip II of Spain and Napoleon of France. In 1916 at the time of the Easter Rising, the insurrectionists made an appeal to their gallant allies in Germany. Therefore, at different points in Irish history, there has been an explicable yearning for an alliance with major continental powers against Britain.
In February 1920, Eamonn de Valera said that if Ireland became independent, it would become the closest possible ally of Britain,
"in a moment of real national danger to either".
The fact is that Ireland did become independent shortly thereafter but, for much of the time since then, that has not been true. It is hard to say that in the summer of 1940, for example, Ireland acted as the closest possible ally at a moment of real national danger, and there are many other such instances.
However, in recent years there have been attempts to bring about better relations between the two countries. Following what, in the end, turned out to be a false start with the Anglo-Irish agreement of 1985 and the Good Friday agreement of 1998, we have moved to a new and better place. Not the least of the reasons why it is right for the British Government to take the step that they are now taking is that we are, when faced with dissident terrorism, now dependent to an unusual degree on the excellent security support that we receive from the Irish Government. That is one of many reasons why it is indeed in our national self-interest to behave in the way that the Government now propose.
So we are now in a somewhat better place and we are in a moment when we can, on our side, try to fulfil de Valera's promise to be the closest possible ally in a moment of real national danger. To make it absolutely clear, this is a moment of real national danger for Ireland and the Irish people. There are moments of great political and economic uncertainty ahead. It is also an interesting moment in that in Irish public debate over the past month there has been much criticism of things that have been said by the German Chancellor, the governor of the Portuguese bank and the governor of the Spanish central bank, but there has been no criticism of substance of anything said by senior politicians in London. In fact, there has been a recognition that the British Government have behaved well in this matter. The noble Lord, Lord Cope, who will speak after me, is the co-chairman of the British-Irish Parliamentary Assembly and he will recall the warmth with which the Irish Members of Parliament responded to the initiative taken by the Chancellor of the Exchequer.
Therefore, we are in a new moment-a potentially more benign moment-and I want to talk about politics and history, as well as economics, because I think that it is very important that we build on the politics of this moment, as well as fulfil the economic commitments into which we are about to enter. It is very important that we now try to achieve a new relationship between Britain and Ireland-often promised but often illusory following agreement after agreement. That relationship has not been delivered in the way that it was supposed to be. However, since 1998 we have been steadily getting to understand each other better and this is an important moment. At present, I offer my support for the Bill, but I ask the Government not simply to confine their actions here to the narrow economic sphere but to build on all the other political options that are open to them in order to strengthen the association with Dublin and to turn a new page in the history of the relationship between Ireland and Britain.
Lord Cope of Berkeley (Conservative)
My Lords, first, I should perhaps confirm that I am indeed the British co-chairman of the British-Irish Parliamentary Assembly, although in what I say this afternoon I am speaking entirely for myself and not in any way for the assembly. I do not think that this is an interest in the strict sense that your Lordships' House understands, but for that matter, a lot of the interests that are declared in the course of your Lordships' debates are not, in the strict sense, interests either. The House is quite right to err on the side of disclosure in that matter.
As the noble Lord, Lord Bew, has just indicated, as it happened, our last joint meeting as representatives of the legislatures of these islands occurred on 20 and 21 November, at exactly the time that the crisis which is the reason for the Bill was coming to a head. Our Irish colleagues were, indeed, somewhat distracted during our meetings over those days, as your Lordships will guess. It certainly gave us all a greater insight into the stresses that they were under and the political as well as the economic effects of the crisis. I can confirm, as the noble Lord, Lord Bew, has just said, that a great deal of gratitude was expressed by our Irish colleagues for the attitude of UK Ministers and, in particular, for some of the Chancellor's remarks at that time. That has a political importance quite separate from the economic importance of the Bill and the loans it allows.
I strongly support the Bill. As my noble friend the Commercial Secretary has explained, the Bill and the loans it permits are part of the underpinning of the economy and banking system of the Irish Republic. It is important, as other noble Lords have said, for our economy and particularly for the economy of Northern Ireland. It is difficult to express that aspect of this too strongly.
I go along with the noble Lord, Lord Liddle, to the extent that this is not, of course, the end of such matters. We must expect further strains within the eurozone and, clearly, EU Finance Ministers, including our own, are right to seek agreement on a debt restructuring mechanism, and so on. We in Britain are necessarily involved because our banks are involved, as has been said, but that does not make the Bill wrong. On the contrary, it is right and I support it.
I also support the use of the fast-track procedure, which was devised, after all, by our Constitution Committee and which has proved its worth in this case, although it was questioned in debates in another place. Her Majesty's Government are to be congratulated on seeking specific legislative authority before signing up to the loans, rather than relying on so-called common-law powers and coming to Parliament afterwards for ratification, which is something that they could have done. The previous Government were accused of having breached the spirit and, arguably, the letter of the Public Accounts Committee Concordat of 1932 which governs these matters. This Government were right not to have risked such condemnation in this case. At the same time, if the Bill had followed normal timings through Parliament, it would have been delayed until well after the loan agreements were likely to be agreed. That is the first reason for the fast-tracking.
The Government also say in the Explanatory Memorandum that fast-tracking is necessary to give confidence to our international partners. I understand that, but it is only part of the matter. The important fact which underlies all this is that markets these days move very swiftly and fast, firm decisions are required to deal with that. I was a Treasury Minister at the time we left the ERM-although I was not involved with that side of the department-so I need no convincing about the power of the markets and the speed with which they can influence events.
Incidentally, there is a tendency to dismiss currency market operations as purely speculators speculating. Of course, there are some operators within those markets who are pure speculators, but the foundation of currency markets-the size of them reflects this-is legitimate traders trying to offset potential currency fluctuations. A board deciding to invest in a new major plant whose operations and building will extend over decades to come needs to insure itself as much as it can against possible currency fluctuations during the time taken to bring it to fruition. Similarly, someone buying or selling large items which take time to deliver can easily find that the profit or loss on the exchange rate can be greater than the profit on the goods themselves. They need to ensure that they are not penalised by currency fluctuations by buying or selling forward. Which of us planning a holiday overseas has not thought about buying some local currency in advance if rates are likely to change? That is not speculation; it is prudent foresight.
I make one further point before I sit down. My right honourable friend the Chancellor of the Exchequer was not quite accurate when, in debates in another place, he compared the affirmative procedure in Clause 1(4) for agreeing any increase of these loans to new primary legislation. He said that the effect is exactly the same, but it is not; certainly not in this House, which is not involved in the affirmative procedure in Clause 1(5)-quite rightly, given the nature of the Bill. The effect of affirmative orders and primary legislation is not the same, and certainly was not when I was a Member of another place a decade and a half ago. I realise that the timetabling of Bills in another place has made things rather different from when I was there. It means that there is less distinction between affirmative orders and Bills in another place, but what a commentary that is on the way in which primary legislation is now scrutinised there.
However, that is by the way. I support the making of these loans to our friends and neighbours in the Republic and I support the mechanism by which it is being accomplished; namely, this fast-tracked Bill.
Lord Davies of Stamford (Labour)
My Lords, I begin by asking the Minister a question. I would have intervened on him earlier, but since I was hoping to speak in the debate I did not want to interrupt him unnecessarily. I think I heard him say that this potential transaction by which we lend three point something billion pounds to the state of Ireland will not increase our borrowing, because the Irish have an obligation to repay. I see the Minister shaking his head, so perhaps I misheard him. If I misheard him, I apologise. Clearly it may not increase net borrowing, because we have a corresponding asset-the Irish obligation to repay-but government borrowing figures are always stated on a gross basis, otherwise they would not be positive at all, because we always have substantial net assets. I thought that there was some confusion about that one phrase that the Minister used, but perhaps he will deal with that in his response. I am grateful to him.
I am very much in favour of the Bill. It seems to me to be absolutely the right measure for two reasons. One reason, which the Government seem rather to dismiss, is that Ireland is a neighbour, a great friend for all the reasons that the noble Lord, Lord Bew, set out, and a member of the European Union. I believe in the notion and the value of solidarity among nations, as in other branches of human affairs. I believe in soft power as well as hard power, in friendship and in good will. I believe in the value of these things, in the value of creating and maintaining them and that it is a mistake if you throw them away. That is an important consideration and I shall come, in a moment, to what I think of the Government's attitude on that subject.
Secondly, I approve for the reasons that the Government appear to approve of it, which is that we have a very specific, practical and concrete interest in avoiding the kind of systemic crisis which could well be generated by a default by the Irish Government on its bond and other financial obligations, or, indeed, a default by the Irish banks, which are currently being guaranteed by the Irish Government. One default could well trigger another. Clearly, that would create a very difficult situation for us.
My regret about the Bill, how it has been brought before the two Houses of Parliament and the way in which the whole issue has been conducted by the Government is that the Government have given away a lot of the good will that might have been achieved by this gesture by an extremely grudging approach to this transaction. As my noble friend Lord Liddle pointed out, we deliberately decided that we do not want to be part of a collective solution; we want to do these things individually and bilaterally. The Government's is a rather strange gesture to make, a rather strange signal to send. The Chancellor has been at pains to make clear that he was not responsible for Alistair Darling's agreement that we should join the stability mechanism back in May. Indeed, the Chancellor said in another place:
"I am doing everything I can to ensure that the UK is extricated from the commitment that was entered into, and we are making good progress".-[Official Report, Commons, 15/12/10; col. 944.]
He said elsewhere in that debate that we will certainly not be part of the permanent mechanism when that is established.
I regret all those things for two reasons. The first is the practical and concrete reason of hard financial national interest; the other relates to my point about good will. In the first instance, there may well be other crises in future. It would be idiotic to exclude the possibility of our need to take part in such support operations in future to avoid some systemic crisis. It is always foolish in life to give up any flexibility. You want to maintain flexibility to respond in different ways. Excluding the idea of being part of a collective mechanism in the EU makes no sense. The other reason, as I said, is that it sends quite the wrong signal, and to my mind reduces the good will created by our decision to support Ireland in this way.
All that reflects an uneasy compromise in the coalition Government. I suspect that the Lib Dems in the Government very much take the view that I take and would have been in favour of this whole operation instinctively on principle in the first place, would then have wanted to negotiate details with our EU partners jointly, and would have had no inhibitions about doing that because they are European partners or members of the eurozone.
I suspect that the advice that the Government received from officials in the Foreign Office was that it would be disastrous, particularly after the centuries of Anglo-Irish history to which my colleague, the noble Lord, Lord Bew, referred-many incidents that are very much to the shame of this country. If we were the only major EU country that declined to take part in the support operation, it would have the most appalling effects on our relationship with Ireland. I imagine that the Foreign Office took that line-at the official level, at least. I imagine that the Treasury and the Bank of England were concerned with the potential systemic crisis and therefore urged the Government to take part.
I suspect that, against that, there were the Tories who, for Eurosceptic and chauvinistic ideological reasons, were reluctant to become party to this transaction and were certainly very keen to ensure that it had nothing to do with our European Union membership or the existence of the eurozone.
That uneasy compromise is reflected in the very grudging way in which the money has been advanced and the very grudging statement that I have just cited from the Chancellor, which I very much regret. I am sorry that I cannot come up with entirely effusive, uncompromising congratulations for the Government on this move, but I am glad that they have taken the right decision, however grudgingly, and I shall be delighted to support them if there is a vote on the subject, which I doubt that there will be.
I have a couple of remarks to make about the general context. So much complete nonsense, and dangerous nonsense, has been talked about the relationship between the euro, the banking crisis and the sovereign debt crisis that we have faced over the past year or two that I feel inspired to comment on it in this debate. It has been said openly and frequently in the Eurosceptic press in this country and by a number of Conservatives in the House of Commons that it shows the weakness of the euro system. It has also been suggested that the solution would be the break-up of the euro and that the countries with substantial debt should leave the eurozone. I regard both those comments as either completely incompetent, if people really do not understand what the logical consequences would be of the actions that they are urging, or frankly irresponsible and unpatriotic, because they do not take into account the interests of this country or are willing to sacrifice the interests of the people of this country for purely ideological, emotional or symbolic reasons.
Of course, the euro had nothing whatever to do with the banking crisis or the sovereign debt crisis. In fact, the sovereign debt crisis would almost certainly have been worse if the euro had not existed. I should be the first to admit that the fiscal rules in the Maastricht treaty-the maximum 3 per cent fiscal deficit unless there was the consent of the Union, and so forth-have not been enforced sufficiently strictly. We all know that now, and we need a tougher and tighter regime with proper monitoring and sanctions in future. Nevertheless, if that regime had not existed at all, people would have had even greater deficits. There is no doubt about that.
There was possibly some accounting fraud in the case of Greece, but if there had been no rules, constraints or restrictions at all, the situation would have been a great deal worse. The euro, far from contributing to the crisis, might-albeit too modestly to have greatly affected the outcome-have had a benign influence. As for the idea that the solution lies in breaking up the euro, my noble friend Lord Liddle has already commented on that. I thoroughly agree with him that that would be an astonishingly self-destructive, and therefore I say advisedly irresponsible and unpatriotic, view.
Undoubtedly, if the countries that are affected by the sovereign debt crisis-Spain, Ireland, Portugal or Greece- were to leave the euro, their currencies, whatever they might be, the successor drachma or punt No. 2, would suffer the most tremendous devaluation. As their liabilities are largely denominated in euros, they would find it completely impossible even to begin to meet the burden of that indebtedness. The result would be defaults or a massive restructuring that was far greater than any restructuring that might take place in an orderly fashion in the context of agreement within the EU or the eurozone. That would mean that our banks would have to write off substantial assets, reduce the size of their balance sheets and reduce their credit creation in this country; that the economy would suffer; that jobs would be lost; and so forth. That would be a deeply regrettable state of affairs and it is thoroughly irresponsible to wish that to happen.
I trust that people will be guided by a rational assessment of the national interest rather than by an emotional desire to see the eurozone collapse irrespective of the consequence for either our partners in the eurozone or us. There is no doubt that the euro is not a part of this crisis. It is not a part of the problem and it is not a contributor to the problem. It has been at least a minor reducer of the scale of the problem. It must be an essential part of the solution.
Lord Lamont of Lerwick (Conservative)
I do not disagree with much of what the noble Lord has said, but I think he is slightly overstating his case. It reminds me of when I went to Brussels and the European Commission told me that absolute disaster was going to follow when the rouble broke up into individual countries. The Commission sounded just like the noble Lord. However, let us leave that aside.
The noble Lord slightly overstated his case. Does he not think that the convergence of bond yields within the eurozone was a contributor to what happened, because the bond markets ceased to look at countries individually and the convergence of yields encouraged countries to spend too much and to borrow too much? The failure of the markets to distinguish between countries and that convergence of bond yields, which came from the view that Germany would ultimately bail out the other countries, was a contributing factor.
Lord Davies of Stamford (Labour)
I agree entirely with the noble Lord's indictment of the financial markets and a lot of lenders. I should say that I was a banker myself and sat on the board of a bank, Morgan Grenfell, which had a considerable lending book as well as being an investment bank at the time, and frequently sat on the credit committee meetings we had. I am appalled by the mistakes made by professional bankers in not wanting to look at the nature and unravel the packages of a class of asset-securitised debt packages, essentially, which were becoming very important as a class of their assets. I equally quite agree with the noble Lord that the bond markets were failing to price risk correctly in exactly the way that he describes. The rating agencies bear a tremendous part of the failings, the fault and the guilt for creating this crisis. Many bankers' excuse is, "We thought we were buying paper with an AAA credit rating and in fact the credit agencies weren't doing their job properly in unravelling these packages and seeing that what was in them was absolutely rubbish".
I agree totally with-I think of calling him "my right honourable friend"-the noble Lord in what he said in indictment of the financial markets. I think that is the problem. It is not an indictment of the currency in existence at the time any more than you can say that the enormous failings of the American banking markets, the American bond markets or the American rating agencies were the fault of the fact that they have a currency called the dollar.
Lord Lamont of Lerwick (Conservative)
I hesitate to remind the noble Lord, but I remember him making speeches telling us that if only we were in the euro, we, too, could enjoy these very low bond rates.
Lord Davies of Stamford (Labour)
Undoubtedly had we been in the euro-and I totally agree with the noble Lord that I was, and remain, a partisan of our joining the euro-as a result we would have had to adopt tighter fiscal policies. The noble Lord may feel that the result of that might not have been entirely unfortunate for the future history of the country. Nevertheless, we would have done, and the counterpart to that would have been that we would have had lower nominal and real interest rates throughout that period. I happen to think that that would have been a good thing as well.
Lord Pearson of Rannoch (UKIP)
My Lords, I am sorry to press the noble Lord, but is he really saying that the predicaments in which economies such as Ireland or Greece, which would have kept their own currency, which would have over a period of years-in Greece's case, 10 years-floated down on the international markets and which would have their own interest rates and exchange rates, find themselves now have nothing to do with their participation in the euro?
Lord Davies of Stamford (Labour)
I am very happy to give, I hope, a very unambiguous answer to that as well. I do not believe that there is any virtue in the fluctuation of exchange rates. I believe that exchange rate markets, like other asset markets, fluctuate quite irrationally. They swing far too far, an enormous amount of damage is created, they are never at the theoretical point of equilibrium which some people read about in their textbooks 50 years ago and enormous economic costs are caused by these fluctuations. If you can replace them with a stable currency system, as we did before 1914 with gold, as the eurozone has done, as the United States has done with the dollar and so forth, that is a very good idea, all other things being equal. We can get into the "all other things being equal" on another occasion perhaps. I think that if you take the long 20-year view, Greece, Ireland and Spain have all benefited enormously from their membership of the European Union and the eurozone, and that will continue to be the case. We now have a momentary crisis, which looks very grim at present, but we should not throw the baby out with the bath-water.
Lord Tugendhat (Conservative)
My Lords, like other noble Lords who have spoken, I applaud the Government's decision to offer Ireland a loan, and I also applaud the manner in which it was done. I do not agree with the noble Lord, Lord Davies of Stamford, that it was grudging or anything of that nature. I rather agree with the noble Lord, Lord Bew, that the Irish reaction has shown that they recognise that this was done in a full-hearted and generous fashion, and I am very pleased about that. It was done without strings, it was done quickly and the Chancellor of the Exchequer was quite right to emphasise that it was done in the British interest. Britain and Ireland are two neighbouring countries, their economies are very much bound up with each other, what is good for Ireland in terms of prosperity is good for Britain, and it is right that this should be recognised. Others have spoken of the extent to which Ireland is a major export market, of the way that the economies of Northern Ireland and the Republic are very much bound together, of the number of British companies that operate in the Republic and, of course, of the exposure of British banks, especially the Royal Bank of Scotland, to the Irish financial sector. In helping Ireland, the Government are not diverting money from worthy causes in the United Kingdom, but are acting to safeguard British jobs, British interests and British taxpayers' money. The sooner Ireland can return to prosperity, the better for us that will be.
I got the impression, but perhaps I am wrong, that the Minister felt that the measures that have been taken would secure that. I hope he is right, but I have to say that I am not so sure. I feel that further pain may be on the way and that some of the pain may be felt by private lenders. That remains to be seen, and I certainly hope that the measures taken by us and by the other participants in the rescue operation have the desired effect. Like the noble Lord, Lord Bew, I see this very much in the context of the Anglo-Irish relationship, both present day and historical.
There are some who suggest-it may even be that the noble Lord, Lord Pearson of Rannoch, will express this view-that because Ireland is a member of the eurozone, and we are not, we should somehow stand aloof from it. I think that is absurd. The Prime Minister and the Chancellor of the Exchequer, as well as the Minister this evening, have repeatedly said that it is in Britain's interest that the eurozone should be a success. Of course, that does not mean that we have the same responsibilities towards each other as the members of the eurozone, but it does mean that we should recognise the nature of our links with it and the existence of our exposure to it. We are not an offshore island in that sense with a financial system separate and distinct from that of our European neighbours. The whole apparatus of British financial services and the City of London as a great international centre are intimately bound up in the wider European financial system. They are, of course, intimately bound up in the global financial system, but most intimately and most directly they are bound up within the European, and through the European, in the global financial system. The two are not mutually inconsistent. This has been a great source of profit to the United Kingdom. It continues to be so, and Mayor Boris Johnson never ceases to point out the benefits that derive to London as well as to the United Kingdom.
It is very much in our interest that we should participate, but I part company from the noble Lord, Lord Liddle, so far as the permanent mechanism is concerned, and I find myself much closer to the position of the Minister. As I said, we do not have the same obligations and responsibilities to the members of the eurozone as they have to each other, so I feel it is right for us not to sign up to something that would involve us in a permanent obligation. I do not mean by that that we would necessarily wish to stand apart on some future occasion. We might, or we might not. I felt that the noble Lord, Lord Liddle, drew too much on the Irish example. Our relationship with Ireland is quite different from our relationship with any other European country. However, I can well imagine that circumstances might arise-
Lord Davies of Stamford (Labour)
It is not surprising that as a man of the world and a former European commissioner, the noble Lord is not someone who is so foolish as to want to exclude any possibility in the future and lose flexibility, but does he not agree that if we are not part of the permanent mechanism, we will not be part of the conversations, we will not be part of the analysis and we will not be part of the decision-making mechanism? We might have the opportunity to come in later on to a deal that has already been put together by others or to try to find some bilateral solution in the face of a much bigger multinational arrangement, but surely that is not a very sensible way of conducting our country's affairs.
Lord Tugendhat (Conservative)
No, I do not agree with the noble Lord. He draws too clear a distinction between membership and non-membership. I do not want to get diverted, as others have, from the main theme of my speech, but I think that Britain is a substantial member of the European Union. Therefore, conversations do not take place in one room with Britain being excluded entirely. People need to know what Britain is thinking and there has to be a certain interchange.
There are people who thought that if we did not join the euro, we would somehow be excluded from a lot of discussions. There are certainly discussions in which we do not take part and it may be that Ministers are rather relieved sometimes that they do not have to. But Britain is too big an entity to be entirely excluded and only brought in at the end of the discussion when everything has been decided. If Britain is to play a role in a future crisis, people will want to know beforehand what our attitude is likely to be, how far we might be able to go and under what terms we might be able to participate.
That brings me back to my line of march. When perhaps future problems arise, we should look at each of them and take a decision on their merits-certainly recognising our considerable interests in the eurozone; certainly recognising the importance of our membership of the European Union; and certainly recognising our interests in the political stability of different countries. But we should look at these things on their merits, decide our position on each one as it comes along and ensure that the decisions we take are subject to parliamentary approval. We are much more likely to carry confidence in the country and have support from the electorate if we are seen to do it on the merits, rather than if we are seen to have signed up to a certain automaticity.
Lord Liddle (Labour)
My Lords, I have a great deal of respect for what I have described as the pro-European pragmatism of the noble Lord, Lord Tugendhat. He has shown that over the years in many of his contributions to the European debate. But what is being ignored is the point that came out in the Bank of England report from which I quoted; that is, the interconnectedness of our banking systems. Although it may not be the case that British banks have a lot of sovereign debt in Greece, Portugal and Spain, they have a lot of relationships with French and German banks, which have those obligations. Therefore, we would be inextricably bound up if there was a crisis. We should be trying to take a lead in sorting this out, not waiting for the telephone call from Mrs Merkel.
Lord Tugendhat (Conservative)
Again I am grateful for the kind words of the noble Lord, but I do not think that the world works that way. Perhaps I might refer to his former distinguished leader, Gordon Brown. We were not of course part of the eurozone, but, as the noble Lord says, our financial centre is intimately bound up with the rest of Europe. It is a considerable interest of ours. It is a source of profit and a great many things.
When the crisis hit, and the Lehmann Brothers went down in the September, the fact that we were not part of the eurozone did not stop President Sarkozy calling Gordon Brown over to Paris or stop Gordon Brown playing a considerable role in the decisions which were taken. We are not going to have a situation in the European Union where a country as big as this, and as significant as this, is in one place and everyone else is huddled in another, and they do not talk until they have made up their mind. They need to know what we think, they need to know what terms we would come in on and they need to know whether we would be willing to help at one level or at another level.
Of course, I recognise our interconnectedness. Like the noble Lord, I have devoted a good deal of my life to trying to make the interconnectedness greater. But I do not think that if we are not members of the eurozone, we ought to sign up to something which carries with it the automaticity of the permanent mechanism.
I do not entirely expect the Minister to make a comment on my final point. What goes around comes around. I am delighted that the Chancellor of the Exchequer can claim that on this occasion we are not part of the problem, but that we are part of the solution. He is right. On this occasion, we are part of the solution.
All of us in this House have long memories. All of us know that there have been many times when the United Kingdom has needed support from its friends. All of us know that there have been moments when the United Kingdom has run into difficulty and has looked to others for help. It would be a brave man or woman who would assert that such a situation could never occur again. I am sure that under the stewardship of the Chancellor of the Exchequer and my noble friend Lord Sassoon, it will not occur under this regime. But who knows when it might and it certainly behoves us in dealing with others to do as thou wouldst be done by.
Lord Pearson of Rannoch (UKIP)
My Lords, I start by confirming the clear illegality of bailing out the eurozone, which includes these loans to Ireland. I do so by quoting the French Finance Minister, Christine Lagarde, from two days ago. She said:
"We violated all the rules because we wanted to close ranks and really rescue the euro zone. The Treaty of Lisbon was very straight-forward. No bailout".
She went on to add that the Greek and Irish rescues, as well as the creation of the bailout funds, are,
"major transgressions of the treaty".
Perhaps I may ask Her Majesty's Government whether they agree with her.
The fact that what it is doing is illegal has never stopped or troubled the EU juggernaut. I have previously regaled your Lordships with its illegal use of Article 308 of the treaty of Nice. Students of the history of the eventual collapse of the European Union may care to look up a summary of that abuse in our debates on the Lisbon treaty at col. 1073 on 18 June 2008. More recently, we have the EU's legislation on hedge funds-the alternative investment fund managers directive-which is designed to do much damage to the City of London and hence our tax base. That directive depends for its legal base on Article 53.1 of Lisbon, which is about the mutual recognition of diplomas. Can you believe it?
There is no point in appealing to the Luxembourg Court about any of this because it is not a court of law at all. It is merely the engine of the treaties, as it has often proved in the past. Even so, history suggests that trouble lies ahead when a regime is free to break its own laws with impunity; when it is supported by a puppet court and Parliament; and when its people are powerless to remove it.
I have a couple of questions that were not answered by the Government yesterday in our debate on last week's European Council. The first came somewhat surprisingly and most welcomely from the noble Lord, Lord Hunt, on the opposition Front Bench. He reminded the Prime Minister of his promise that, if he got any chance of reopening the Lisbon treaty and having a referendum on it, he would take it. The Prime Minister also promised that we would take the first opportunity to repatriate powers to this country, especially social and labour policy, but he has broken that promise, too. Will the noble Lord explain that behaviour today?
The second unanswered question yesterday came from me. It was on whether the Government have made any estimation of the cost for Ireland and in due course, no doubt, for Portugal, Greece, Spain, Italy and Belgium to return to their national currencies. What would the cost be? The Government tried to say that this would not be a decision that would affect the United Kingdom, so they refused to answer the question, as they have done in their response to a Written Question. But of course such a decision would affect us, because Ireland and the other countries could devalue their currencies and fix their own interest rates and then have a sporting chance of trading their way out of their present impossible situation. That would mean that we would no longer have to go on pouring billions down the hopeless euro drain, so we are interested in at least knowing the cost involved. Perhaps we could even help them with it. That might be a tremendous bargain, especially as the Government made it clear yesterday and again today that they do not at all rule out sending even more colossal sums to the other countries that I have mentioned. Therefore, I look forward to hearing the answer today.
The Government keep making great play of our trade with the eurozone and with Ireland in particular. It is to safeguard this trade, they say, that we have to borrow such huge sums, which we probably will not get back, when we are cutting our own services at home in an attempt to reduce our deficit and debt. The Minister said in his opening remarks that 5 per cent of our total exports go to Ireland, but do the Government realise that only about 1 per cent of our GDP-of our total economy-goes in trade with Ireland? That is because only 9 per cent of our GDP goes in trade, in deficit, with the EU overall, of which Ireland accounts for about 10 per cent, so that makes 10 per cent of 9 per cent, or 1 per cent to be generous. Then 11 per cent of our GDP goes to the rest of the world, in surplus, and 80 per cent stays right here in the domestic economy. Yet the wonderful deal that we have done as a member of the EU means that Brussels diktats apply to and strangle the whole 100 per cent of our economy. Would the Government care to justify this position? Why is it worth borrowing so much money to safeguard only 1 per cent of our GDP, which would not be lost if we did not? Are we really saying that we would lose all that trade if we did not do this? It is not realistic.
The Government and the Martians in Brussels talk much about growth, how they are stimulating growth and how their bailouts and loans will help it along. Every now and again, I read the Government's Written Statements about the meetings of the so-called Competition Council in Brussels and I must say that they make me weep. I have yet to detect any bureaucrat or council member contributing to those meetings who has the slightest experience of international competition in the real world. That is no doubt why they and their colleagues in the vast bureaucracy of Brussels have lumbered us with perhaps the most overregulated and least competitive regime in the world. Indeed, even their own Competition Commissioner, Mr Gunter Verheugen, said a couple of years ago that EU overregulation was costing all EU economies some 6 per cent of GDP, or over £60 billion per annum in our case. Just to be jolly, the demographic trend is moving against the continent of Europe as well, so I do not see much hope for growth. I fear that we are on the "Titanic".
It is not just wild-eyed Eurosceptics like me who are saying that the euro cannot survive and that the sooner it goes, the better. Just yesterday, the head of the world's largest bond fund called on Greece, Ireland and Portugal to leave the euro and restructure their debts, unless the eurozone is to submit to complete fiscal union, which seems unlikely. He went on to say that EU leaders were too quick to congratulate themselves on saving the euro last week, with a permanent bailout fund from 2013, which in his view comes far too late. But the EU strategy of forcing heavily indebted countries to undergo draconian fiscal austerity without offsetting stimulus is unworkable. The austerity policies are stifling the growth that is needed to stabilise debt levels. He is not alone in that. The chief European economist at RBS says that last week's Europe summit failed to grasp the nettle:
"None of the policy responses put in place in Europe since the start of the crisis provides a credible backstop to prevent further contagion".
Those policy responses include our loans to Ireland. We should not be making them.
It is not just the euro that was designed for disaster; so was the whole project of European integration, for which the euro was supposed to be the cement to hold it together. The idea behind the great project was honourable enough, but it has turned out to be misguided. That idea was that the nation states had been responsible for the bloodshed of two world wars and the long history of carnage in Europe. Those nation states therefore had to be emasculated and diluted into a new form of supranational government, run by bureaucrats. That is the big idea. That is why the Commission still has the monopoly of proposing and enforcing EU laws, which I remind noble Lords are made in secret. It is why there is a sham Parliament and a sham court, with all of their denizens interested only in the gravy train which rolls on without the consent of the people.
If there is one small candle of light in all this gloom, I hope that it is that more of the people of Europe will come to see that the whole EU project is also misguided. Those who are suffering from the euro are already getting very angry. The riots and strikes in Greece, Portugal, Ireland and Spain are entirely caused by the project of European integration and its misguided currency and, alas, there is more to come.
In conclusion, I invite your Lordships to stand back for just a moment and consider a Europe without the European Union, without Brussels and Strasbourg, without the Luxembourg Court of so-called Justice. Consider a Europe of 27 national democracies trading freely among themselves and with the other 190 or so countries of the world, none of which has been foolish to join anything like the EU or the euro. What benefit does the EU bring that we could not have through genuine democracy, free trade and friendly collaboration? None, I submit. I hope that none of your Lordships will suggest peace, which was secured by NATO, and for which the EU gets no credit at all. So the EU emperor has no clothes and the quicker the people of Europe realise it, the better for all of us. If the collapse of the euro helps them to do so, that may yet prove to be a blessing in disguise. In the mean time, we should not be helping to prop it up.
Lord McFall of Alcluith (Labour)
My Lords, I commend the Government for this loan to Ireland initiative and I commend in particular the speech of the noble Lord, Lord Bew, which emphasised the social relationships. I come from Dumbarton, which has a very big Irish population. Indeed, my own family is part of the Irish diaspora. For many years, we have had very solid social contacts, and there is a part of my former constituency that is known as "Little Donegal". When the 2001 election was put off until June due to the foot and mouth outbreak, I was advised to go and knock on a number of doors in Donegal to shore up my support, but I felt that my majority was big enough that I did not have to cross the Irish Sea, which proved to be the case. So these social contacts are very important. There have been many fine Irish men and women living in my community for many years, a lot of whom fought with the British Army in the Second World War. They adapted to and assimilated the culture of the UK, notwithstanding the problems existing at a wider level between Ireland and the United Kingdom.
In its latest manifestation, we see the concept of a private debt crisis being transferred to a sovereign debt crisis. To repeat a phrase that has been used a lot in the other place, we are all in this together. That is because what is happening in Ireland affects every other country in the EU, including ourselves here in the UK. The situation is that the banks in Ireland have brought that country to the verge of bankruptcy. The tensions in Ireland that were mentioned earlier have been experienced in other countries. Ireland itself is contributing €17.5 billion from its pension funds to the very important €67 billion bailout, so the people of Ireland are already saying, "It is our money. We are contributing to this. The problem started off in the banks, but as a result of that situation, it has ended up on the streets".
We all have a responsibility to ensure that we manage this economic process well, taking account of the social instabilities, so that we end up with a sound economic system and a stable social system. As was said earlier, there are good reasons for the UK to provide the loan, not least of which is the fact that Ireland is a major trading partner and that UK banks are exposed in Ireland. Only last week, Lloyds and HBOS declared a £4.3 billion loss on the banking group's Irish loans. Lloyds said that it had sufficient capital to withstand the loss, but that situation is an illustration of the interdependence that exists between the UK and the Republic of Ireland.
As a former Minister for Northern Ireland, I am very much aware of the border between Northern Ireland and the Republic-it is so porous that it really is not a border. I well remember chairing an inquiry into the euro in 2002, when I chaired the Treasury Select Committee. One of our visits was to Newry, where the currency in use included the euro because people were travelling there from across the border. That interlink between Northern Ireland and the Republic should make certain that we provide a friend in need with a loan.
If instead of doing that we were to sit on our hands, economic stagnation would take place. We need a strong Europe if we are to make the most of our competitive exchange rate. That is what the Bank of England said. The loan makes historical, economic and social sense, so I commend the Bill to the House.
Lord Davies of Oldham (Labour)
My Lords, I suppose that, as it is almost the last day before the Christmas Recess, it is right that the Minister should have a good day. He got the Consolidated Fund Bill through the House in four minutes and here he has another Bill that has produced consensual responses from all parts of the House. Indeed, Her Majesty's Opposition support the measure that the Minister has introduced, which means that he can bask in the general approval of the House for doing so.
However, the Minister would not expect to sit through an hour and a half's debate without having to reply to a few questions. He would not expect an entirely straightforward ride. I am glad that tonight's debate has ranged so widely and that we have heard so many expert and considered opinions. The Minister will have a tough job in responding to it. The debate has put the Bill and the Irish loan into context, and for that we should be grateful.
Indeed, I was grateful to the noble Lord, Lord Bew, who put our relationship with Ireland into an historic context. Other noble Lords, including my noble friend Lord McFall, emphasised the ties between the United Kingdom and Ireland. It is right that we should come to the aid of a nation in great need with which we have close ties and, as the Minister said in his opening remarks, that is also in the British national self-interest. It is important that we put a stop to the catastrophic developments that have set the world back during the past two to three years. Unless those are tackled in a forthright and effective fashion, they will adversely affect our own people in the years to come.
I am grateful to my noble friend Lord Liddle for emphasising that there are no easy solutions to the situation-and certainly not for Ireland. We see the price that has to be paid for the loan. It is also important to recognise that, given the degree of interconnectedness of our economies, the British response to the situation needs to be one of concern for our neighbours. We have already heard of the significant role that the Irish economy plays in relation to the British economy, but, in terms of a wider Europe, we recognise that without growth in Europe there is no possibility of the British economy developing on an export-led basis out of the present position and into a degree of prosperity and security. We should recognise just how much this Government have invested in such a strategy and that, without growth in Europe, there is no possibility of the British people being able to enjoy the fruits of the sacrifices that we can see are being made on all sides following the Government's fiscal tightening, of which we have seen only the first stages.
The Minister must also respond to the wider debate reflected in the points made by my noble friend Lord Liddle and, from a different perspective, by my noble friend Lord Davies of Stamford. As regards the different issues that the noble Lord, Lord Tugendhat, mentioned, we recognise that there was a sophisticated debate about the nature in which Britain should relate to Europe-two somewhat different perspectives about future possibilities. I must say that Her Majesty's Opposition are more in favour of the analysis put forward by the noble Lord, Lord Tugendhat-namely, that of course Britain must be close to Europe and integrate with Europe in crucial economic decisions. That is bound to be the case as a result of the sheer size of the British economy in relation to the European position and the levels of trade that we carry on. However, there is a strong case for a degree of independence that gives us a position in relation to Europe and also enables us to pursue our own strategies.
The noble Lord, Lord Pearson of Rannoch, takes that point to the outer extreme by calling for withdrawal from the EU. We are all familiar with the onslaught on the European Community that he has presented tonight with his usual fervour. It is as though he does not recognise that the American economy, which is bigger than Europe's, has been in colossal trouble over the past couple of years. It is as though only Europe is being faced by these challenges. Of course, that is not so. Another big, major continental economy-the United States-has been suffering the most acute strains. One does not have to go anywhere near Detroit or any of the other major cities-
Lord Pearson of Rannoch (UKIP)
My Lords, the noble Lord makes an interesting point. However, can he tell us who bailed out the United States?
Lord Davies of Oldham (Labour)
Well, who has bailed out Europe? We are talking about an economy in Europe that is receiving some assistance-that is the Irish economy. I hope that the noble Lord, Lord Pearson, is not forecasting that it will not be long before the British are bailing out the German economy, or anything as ridiculous as that.
Given that many great economies have suffered serious difficulties in the past few years, we should recognise that this Irish crisis is reflective of a global crisis. The problem means that we have to have solutions wider than the national perspective. It also means that the solution proposed for Ireland is not in fact a solution but a bailout. The bailout creates time for the Irish economy and prevents it from descending into the abyss that it had faced. However, let us not pretend that the package is a solution to the needs of the Irish economy and the Irish people or that we will see health in European economies without more obvious programmes and developments on a more extensive scale than we have seen thus far.
I hope that the Minister will recognise that, in the early days of the crisis when Lehman Brothers was in collapse and when the British banks were under tremendous pressure, the previous Administration adopted a global process in response. The then Prime Minister, Gordon Brown, was concerned to obtain a degree of consensus that would enable the world economies to come to each other's aid and to present a development that gave some security about growth. We are still looking for that. The Bill is important to one beleaguered economy in Europe but-as the strength of the debate on all sides has shown-it has to be put in the context that we need wider solutions to the issues than bailouts. We are faced with a global crisis.
It is also quite clear that, despite the myth which the Opposition seeks to perpetrate about the British economy, the crisis was not caused by government overspending but by the banks, which had got their structures and investment wrong. That is a common feature across all the significant world economies, and that needs to be recognised.
The Irish are of course to be involved in some degree of austerity, as are the British people under this Government's perspective-excessive austerity in the view of Her Majesty's Opposition in comparison to what is needed. The Government have set a limited time in which fiscal balance has to be achieved, but it must surely be recognised that austerity alone is not the answer. After all, the Irish have been through several years of austerity and for 17 continuous months their economy showed negative growth, but they have not been able to avoid the need for a bailout despite the fact that they have been subjected to exactly the fiscal solutions that this Government suggest are the answer for this economy.
I have one or two key questions for the Minister, who I know will enjoy himself before Christmas only if there is sufficient challenge in the debate. He has already been blessed by the consensual approach, on which the whole House is to be congratulated, but I should like to ask him one or two questions. First, is he aware that the size of the UK's contribution to the rescue package will, over the spending review period, more than outweigh the debt interest savings of which the Chancellor made such play in the spending review Statement? On the basis of the Chancellor's approach, we are loaning that which we have saved. Secondly, why are we able to find billions for Ireland but could not afford £90 million of strategic investment for Sheffield Forgemasters and the role that it could play in the future of our economy? Thirdly, when will the Government accept the obvious point that, unless we have an approach to the broader issues faced by Europe, we will not get the growth necessary because the markets will not be there to purchase the goods that we hope to produce?
Finally, does not the crisis in Ireland remind us all that the economic crisis was global and that the Government, with their full responsibility for the economy and the welfare of the British people, must recognise that the solutions lie only within a global framework and not in one pursued alone?
Lord Sassoon (Conservative)
My Lords, it has been an interesting debate and I am grateful for the contributions. The noble Lord, Lord Davies, referred to the range of contributions made by noble Lords but I think that there has been some polarisation: on one pole, a noble Lord stands in rather lonely isolation, whereas most of the rest of the speakers have been closer to a dramatically different pole.
Lord Pearson of Rannoch (UKIP)
The Minister is very generous, but is he aware that the majority of the British people now wish to leave the European Union?
Lord Sassoon (Conservative)
My Lords, I was talking about where Members of the House stood on the Bill, which is where I ought to concentrate if the noble Lord will permit me.
I began to feel grateful to the noble Lord, Lord Davies of Oldham, when he started his response to the debate; I thought that he was going to relieve me of some of my responsibilities. However, his comments then turned in a different direction. He went into an analysis of the UK's economic challenges-an essay that I do not quite share with him-and then he asked some questions. I shall attempt to respond to his questions and to those of other noble Lords.
The starting point, clearly, is that over the past two years Ireland has faced a series of extraordinarily difficult economic and financial challenges which have resulted in the country having debts of more than 90 per cent of its national income, high unemployment and low levels of growth-and the Irish economy, of course, remains on the brink.
The noble Lord, Lord McFall of Alcluith, reminded us of the centrality of the Irish banking situation to the Irish crisis and how the Irish banks became increasingly reliant on central bank funding. In his analysis, the noble Lord, Lord Pearson of Rannoch, referred to trading but made no mention of the interconnectedness of our two banking systems, which is central to the Irish problem and to why it is so important to the UK that we should contribute to finding a solution.
In contrast to Britain's situation, Ireland's credit rating remains under threat and its economy continues to struggle. The package we are discussing today is designed to contribute towards Ireland's solution to its problem. It starts by contributing to the recapitalisation of Ireland's banks; sets up a contingency reserve to deal with any future problems; and covers the current shortfall in the Irish budget. My noble friend Lord Tugendhat quite rightly questioned whether Ireland will grow sufficiently out of its problems. However, I remind noble Lords that the IMF has been central to the construction of the package and, from its wide experience of similar situations, it understands the importance of growth in an economy such as Ireland's. I recommend to noble Lords the IMF's interesting, well written and cogent analysis of the reasons for Ireland getting into this situation, and the logic for the construction of the package which is central to putting the Irish economy back on its feet.
The Bill gives the Treasury the statutory authority to deliver the UK's bilateral contribution to the package. In this way, the UK will be ready in the new year to help one of our closest international partners in its hour of need. I was particularly grateful to the noble Lord, Lord Bew, and to my noble friends Lord Cope of Berkeley and Lord Tugendhat for pointing out the good will that has been created in Ireland by our response. We are doing this because it is in the economic interests of the UK to do so; nevertheless, it is good that we are doing it for a close friend. The noble Lord, Lord Bew, succinctly put the matter into its Irish historical context. I very much take his point that we need to think about how we build on the good will that has now been created. That point was indirectly touched on by the noble Lord, Lord McFall. It sits somewhat at odds with the stance taken by the noble Lord, Lord Liddle, who painted a picture that I do not recognise. He tried to paint us into an "our problems, their problems" situation. I thought that my noble friend Lord Tugendhat, who has deep and distinguished European experience and contributions to draw on, painted a much more nuanced and balanced picture. Of course, we are at the centre of the European debate. We are engaged with our European partners, not least for the reason that my noble friend gave: that we are one of the largest economies in Europe. Whether it is leading the way on bank stress tests and getting Europe to follow where the UK started on short-term stabilisation, or looking at the other end of the range of issues that needs now to be considered-for example, questions about structural reform programmes, the Europe 2020 vision and the lessons of this crisis-the UK is absolutely at the centre of the discussions.
Lord Liddle (Labour)
What plan have the British Government and the Prime Minister put forward for the eurozone? Why does the Prime Minister keep saying that it is for the eurozone to sort out its problems, while knowing that so much of the growth that is being forecast, which is absolutely essential to British interests and his own prospects of re-election, requires there to be robust export growth to the eurozone?
Lord Sassoon (Conservative)
These are all factors that mean that we need, with the EU 27, to make sure that the structural reforms are driven through and that we get the benefits of completing the single market project and so on. However, my noble friend Lord Tugendhat again got it exactly right-I would not agree with every nuance of his analysis, but he got the essential point right-in saying that just because we are very positively engaged at the centre of all those other issues does not mean that there are not critical differences, because we are not part of the eurozone and this Government will not take us into it. It is therefore for the eurozone to sort out its own permanent mechanism for dealing with any other issues that arise out of membership of the euro. That is the fundamental difference between the UK's position and that of other of our partners in Europe. I genuinely fail to see why the noble Lord, Lord Liddle, seeks to paint the position in such stark colours. The fact is that we are in a different position from that of a number of the largest trading partners in Europe, which needs to be reflected in the permanent arrangements that will be put in place. My noble friend Lord Tugendhat explained that in much more masterly terms than I will ever be able to do.
Some questions were asked about the economic and market analysis of the situation, not only of how we got here but how we go forward. I listened with interest to the exchange between the noble Lord, Lord Davies of Stamford, and my noble friend Lord Lamont of Lerwick. The rather succinct and pithy remarks of my noble friend better encapsulated the situation in which Europe finds itself and in which it is clear that the fact of the euro cannot be ignored. That takes us back to why the eurozone needs to think about the consequences and the lessons of this crisis for a permanent mechanism.
In answer to the specific question of the noble Lord, Lord Davies of Stamford, I restate that the loan to Ireland does not add to our deficit. It increases the borrowing on one side of the UK's balance sheet, but we have an asset in terms of the money that will be owed to us by Ireland. There will be an increment to the fiscal position by the net interest margin, estimated at current interest rates to be some £440 million. That is the only element that should go through the current balance.
One or two comments were made on the process of the Bill. I am grateful to my noble friends Lord Cope of Berkeley and Lord Tugendhat for their endorsement and recognition of the fast-track approach that we have taken. It is necessary that we give confidence to our European partners and the IMF in putting this package together that the UK is ready at the earliest time to deliver on our commitments. I accept my noble friend Lord Cope's analysis of the constitutional position in another place.
Lord Davies of Stamford (Labour)
Perhaps may I press the Minister a little more on what he said about this Irish loan not adding to the fiscal deficit. I understand that he is saying that it does not add to the fiscal deficit because he is setting off one financial asset against a financial liability. Will he confirm, however, that it will add to the public sector borrowing requirement? Some £2.5 billion will have to be borrowed on the financial markets and be accounted for as part of the public sector borrowing requirement which otherwise would not.
Lord Sassoon (Conservative)
Indeed, my Lords, the money advanced to Ireland needs to be funded, but it is precisely because we have stabilised the fiscal position and secured the UK's AAA credit rating that this matter is not a cause for particular concern.
I have already said why the Government believe that it is right that we should not be part of a permanent bailout mechanism-indeed, this is recognised in the recent Council conclusions. My noble friend Lord Newby asked about the process for adopting the treaty amendment that will be necessary. Parliament must of course give its approval to any treaty change that is agreed by member states, and ratification in the UK will be subject to the terms of the EU Bill that we are bringing forward. A treaty change will be subject to primary legislation. Since there is no question of transfer of competences in this case, the question of a referendum does not arise.
Lord Pearson of Rannoch (UKIP)
I do not know whether the Minister will come to some of my questions later, but this might be a convenient point to remind him that the amendment in fact gives the Prime Minister the opportunity to fulfil his promise that, if there were to be any treaty changes, he would use them to repatriate powers, particularly social and labour policy. Why does he not do that?
Lord Sassoon (Conservative)
The position is as I have explained it. There is no question of change of competencies in this case and therefore no referendum is required, but it will be the subject of primary legislation. This is not the time, if the noble Lord will permit me to say so, to start talking about other things that may or not may not be done in our relationship with Europe. We are talking about the Loans to Ireland Bill and its consequences and the position is completely clear. If the noble Lord would like me to give way, it will only eat into the time to answer his questions and other points that noble Lords have made. I am grateful to him.
I will come to his points immediately. The noble Lord, Lord Pearson, questioned the legality of this operation. The first thing that I hope we are completely clear about is that the bilateral loan is being made under domestic UK legislation. That is why we are here today. Provided that your Lordships see fit to give this Bill a clean passage, the question of the legality of this loan will not arise.
If the noble Lord was also, as I suspect he was, harking back to the question of the so-called no-bailout provision in Article 122(2) and the creation of the €60 billion fund, that was agreed by the previous Government. We said at the time that we did not approve of the use of this provision, which was originally intended for natural disasters, to create this mechanism. But it was, and we are where we are. The critical thing is that the current coalition Government have a clear commitment that when in 2013 the new mechanism is put in place this will fall away and not be used again. The question of illegality does not arise. It may be regrettable, but the position is legal.
Lord Pearson of Rannoch (UKIP)
My Lords, the noble Lord is being a little unfair to the previous Government. Surely, the decision was taken under Article 122(2) which is by qualified majority vote. That is the very reason the Eurocrats chose the clause that allows mutual support in the event of natural disasters to pass this Act. Through our membership of the European Union and the terms of the treaties that we have signed, there was nothing that the previous Government could do about it. I asked the Minister whether he agreed with the French Finance Minister who said that the whole bailout process is illegal.
Lord Sassoon (Conservative)
The noble Lord is possibly putting a spin on Madame Lagarde's words that she would not entirely accept. If he wished to correspond with her I am sure she would explain her position. All I can do is explain the Government's position. I was not trying to be unfair to the previous Government but merely stating the facts of the situation as to when the €60 billion bailout fund was agreed. Yes, I accept that if the UK had opposed it, it would have been a matter dealt with under qualified majority voting.
I will spend one minute responding to points made by the noble Lord, Lord Davies of Oldham. I am grateful to him for being clear about the Official Opposition's support for the Bill. He asked about the amount of the loan and why, if we could devote this amount of money to Ireland, we could not devote it to other causes. He quoted one possible use of funds. As I explained, the loan to Ireland does not affect the fiscal position. We are able to make it without in any way affecting the fiscal position. If it did affect it, we might need to look for other savings, but we are in a position that that is fortunately not required.
The noble Lord mentioned the global dimension. We have talked a lot about the need for the UK to be at the heart of the European debate on this. I completely agree that the global dimension is an important one. We have heard about the importance of global growth and we will continue to engage with the G20 and the other international forums which will reinforce the ongoing drive to make sure that we learn all the lessons on fiscal and financial stability.
It has been an interesting debate and it is understandable, given the size of the proposed package, that the importance of what we are discussing to Ireland, to our economy and to the wider European context has been fully debated. The financial crisis has shown just how closely linked the economies of Europe and the world have become. In times of prosperity we reap the rewards but in times of hardship, one nation's problems can quickly extend beyond its own borders. That is why we must act now and early to restore stability to Ireland's economy. That is why we must be prepared and have been prepared to take the necessary steps including through the Bill. It is good for the recovery and good for growth and I ask the House to give the Bill a Second Reading.
Lord Pearson of Rannoch (UKIP)
Before the noble Lord sits down, there was one other important question that I asked him and I have asked it also in a Question for Written Answer. Have the Government made any estimation of the cost of Ireland going back to the punt, and if not will they do so?
Lord Sassoon (Conservative)
No and no.
Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.