Eurozone Financial Assistance

Ian Davidson Excerpts

Tuesday 24th May 2011 Commons Chamber

[Jim Shannon (Strangford) (DUP)]

I rise to support the motion before the House and to add some comments to the debate. I want to give a couple of examples—fishermen and the farming industry—where the EU is creating more hassle than can be justified. I am of the school of thought that we should make the best of a bad job, and on many occasions we have to do that. The EU, along with the way in which it is run, is most certainly a bad job, yet at present we are in it whether we want it or not. It therefore falls on this House, MEPs and another place to do our best to hold the EU to account as far as possible for the events that take place over in Brussels. We have an opportunity today to debate that and vote on it.

It is clear that the European financial stabilisation mechanism is not fit for purpose; owing to this, the UK could be held liable as a member state. On 9 May 2010, the European financial stability facility was created, and it is a special purpose vehicle agreed by 16 members of the eurozone and aimed at preserving financial stability in Europe by providing financial assistance to eurozone states in economic difficulty. Thus far, we are not at all involved, but no to the euro meant no to the EFSF. The tricky part came with the notion that the facility may be combined with loans of up to €60 billion from the European financial stabilisation mechanism, which is again reliant on funds raised by the European Commission using the EU budget as collateral, and up to €250 billion from the IMF, all to secure a safety net of €750 billion.

If there is no financial operation in activity, the EFSF would close down after three years, on 30 June 2013. If there is a financial operation in activity—which of course there is—the facility would exist until its last obligation had been fully repaid. There has indeed been activity, and a good deal of it involving the EFSM, despite the fact that it should not have been involved to the extent that it had an equal if not greater share of the bail-outs. The purpose of the European financial stabilisation mechanism is to provide an emergency funding programme that is reliant on funds raised on the financial markets and guaranteed by the European Commission using the European Union budget as collateral. I want to give some examples of where things have gone pear-shaped, to use that terminology.

It seems abundantly clear that, as a non-eurozone member, we can be held accountable only for the EFSM, yet for some inexplicable reason it was this funding that bailed Ireland out—to the tune of €5 billion—as opposed to the eurozone funding, which should have borne the brunt. We are neighbours of Ireland, and I do not wish to be harsh. Of course we want to help out where we can, as a healthy Irish economy could benefit the Northern Ireland economy, owing to the shared land border. However, it is hard to grow this sense of neighbourliness when we see the fund enabling Ireland to undercut us on corporation tax, which subsequently encourages business investment in the Republic as opposed to Northern Ireland, or when we see that it has enabled fuel duty to be reduced, which has also taken flight business away from the Province. So, we bail them out and then they use that to our disadvantage. Why should we doubly lose out—through access to European funds, along with increased competition for our business in Northern Ireland within the United Kingdom—when the eurozone fund should have been responsible for bailing Ireland out all along?

[Mr Davidson]

That point is of significance to Scotland as well, because the pressure from Northern Ireland to reduce its corporation tax to compete with the Irish Republic is being replicated in Scotland. Does the hon. Gentleman have any idea why this Government are using British taxpayers’ money to fund an opportunity for the Irish Republic to undercut us on corporation tax in that way and thereby cannibalise British revenues?

[Jim Shannon]

The hon. Gentleman makes an appropriate intervention. We in Northern Ireland certainly do bear the brunt of that, and we feel the pain more than most, as does Scotland. Perhaps when the Minister responds we will get an idea of exactly why that has happened.

The second example is from Iceland—there is more than one cloud hanging over Iceland, by the way—and the second referendum there. Iceland rejected a proposed deal to repay €4 billion that Britain and Holland spent in 2008 to reimburse savers hit when Iceland’s banks collapsed. Meanwhile, I am hearing complaints from my constituents about the amount of fish that fishermen can catch and the number of days that they can work being restricted by EU legislation, as opposed to the Icelandic raiders—they are certainly not an ice hockey team—who are sweeping in, despite Euro-protests, and fishing mackerel that belong to our fishermen. Those are just two simple examples of the failure of the bail-out system in Europe. It is passed the time that this be brought to a head and we ensure fairness for all in Europe.

The hon. Member for Rochester and Strood (Mark Reckless) has stated that the legality of the EFSM is called into question by the current wording of the treaties, which must be changed accordingly. That is exactly the issue that we are trying to address. Therefore, the answer is very clear: use the upcoming meeting of the Council of Ministers or the European Council to vote against the continued use of the EFSM unless a eurozone-only arrangement that relieves the UK of liability under the EFSM has been agreed.

For far too long we have slavishly followed the dictates of Europe, throwing pound after pound into that deep hole that is Brussels and awaiting some kind of recompense for doing things the right way. For too long we have watched other countries prosper—and not too far away from us, either—with bail-out funding, while we cut funding to schools, hospitals and infrastructure in order to remain solvent and claw our way back to a sound financial footing. Everyone in the Chamber today will be able to give examples of that from their constituencies. For too long we have paid in while watching our farmers and fishermen flounder under the weight of European dictates, at the same time as we watch other nations flout the very same rules that our officials seem to have an almost evangelical zeal in enforcing. Indeed, we have been fined £60 million in Northern Ireland for mistakes in bureaucracy and forms that have been filled in.

We need to assert ourselves by saying to the EU that we will no longer be Europe’s nodding dog, making do with a pat on the head every now and again, as if that is okay. We more than pay our way. Others must be held to the dictates that we adhere to. That should start with the matter of this funding and how it is used. I fully support the motion and urge every Member here today—those who embrace Europe and those who oppose it alike—to state that from now on we will make a better job of what is currently a bad job and demand our rights as a member state, beginning with the right to exclude ourselves from the euro without paying for it through the back door.

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[Mr Ian Davidson (Glasgow South West) (Lab/Co-op)]

The wider question we need to address is why it appears that this Government are consistently going soft on the European Union. When they were elected, the impression was given that they were going to be much tougher on Europe than the previous Government had been, and I welcomed that different position, on that issue if on no other. I welcomed the fact that the Conservatives gave the impression they were going to stand up to Europe much more than the previous Government, and that they were going to seek opportunities not only to repatriate powers but to reduce the amount of money we give to the EU and to pursue all possible ways to clip the European Commission’s wings. Why, therefore, has it come to pass that they seem to be simply acquiescing in so much that goes on in the EU?

I do not for a moment accept that the current Government should be allowed to hide behind the playground argument that a big boy did it and then ran away. I accept that the previous Government were not without fault in this matter, but simply to say that they did it so there is absolutely nothing whatever we can do about it now is not acceptable. To their credit politically, this Government have said in respect of a whole number of policy areas that they wish to reverse the previous Government’s line, and they are taking steps to do so. Where they believe it is important, they have taken steps to undo the previous Government’s work—and I oppose what they have done—yet in this area they seem unwilling to do so. I simply do not understand that, unless they have struck a secret deal with the Liberals whereby the Liberal tail is wagging the Conservative dog.

Today’s debate appears to be largely a row among Tory Eurosceptics, with the provisional wing arguing against the official wing. I cannot accept that people I have heard speaking in a Eurosceptic fashion on other issues seriously believe that the Brussels bureaucrats are going to be terrified by the prospect of the British Government raising the issue—I can just see them running off into the bars to have a stiff drink in fear lest this issue be raised! Goodness me, if the drafters of this amendment had been serious they might have said that they urged the Government to “Stamp their foot on the floor if they do not get their way,” or “Write rude words on the toilet wall if nobody pays any attention,” because that would have much the same impact. This is a bit like a child in the classroom threatening to hold their breath until they are sick unless teacher gives them an apple. It is weak and miserable, and smacks of the Yosser Hughes phrase, “Gissa job.”

Those who drafted and signed the amendment have been far too easily bought off by the Government Whips. Perhaps some among them are deluded, but perhaps the others have set their price too low. If Members show our party Whips that we are prepared to be resolute, even though they might have told us that their current offer—or bribe—is the only one available, they will ultimately find another that might be more to our liking.

We must recognise that the eurozone’s problems are economic manifestations of political problems. The eurozone—its creation and membership—is clearly a political construct, and the admission of Greece was politically, rather than economically, decided. I think we all know that the Greeks lied about their economy in order to get into the eurozone. The problems that have now arisen have not come out of a clear blue sky; not only were they predictable, they were predicted. It was predicted that these problems would arise. Therefore, those who are now running about like headless chickens pretending it is all the fault of bad snow, leaves on the line, sunspots and other events that could not possibly have been foreseen, are doing themselves and this House a disservice. We must recognise that these are political issues that have to be handled in a political fashion.

I recognise that we have an economic interest in the well-being of the eurozone, but the Liberal position seems to be that because this is a political construct they wish to support, we have to keep shovelling in money regardless of how much it costs. I agree with those who say that we have spent enough and we must spend no more. I certainly agree with the position of the previous speaker, who seemed to be saying that we are looking for great things from this Government in terms of freezing or reducing the overall level of the EU budget. This debate should be a prelude to that argument that we must have. We should be taking a robust and vigorous line on this, in order to ensure that there are no concessions on the EU budget.

I will vote with whoever I think is most extreme on this matter. It seems to me that that is the only way we can gain Europe’s attention. Simply threatening to stamp our feet and indicate our displeasure will be brushed aside, as will simply acquiescing in the Government Whips’ bidding. This is an issue on which we must vote extremist, so that the UK Independence party does not come and get many of the Members on the Government Benches.

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[Chris Leslie]

I will not because I have only a few minutes left.

The situation has changed markedly since last May. The circumstances under which the EFSM was then agreed have altered, casting doubt on whether it is being used appropriately, as many hon. Members have said. Because of the various weaknesses shown by the current Administration in Europe, we have ended up increasingly paying more than our fair share in relation to the EFSM facility, especially as time and again the junior EFSM fund in the bail-out package has ended up shouldering up to a third of the bail-out costs, as some hon. Members have pointed out. We have found that the agreement in May regarding the EFSM sum of €60 billion would represent only 12% of the non-IMF contribution, with the remaining €440 billion being borne by the wider eurozone fund. The British liability for that was going to be only 12.5%, but the proportion contributed from the EU-wide EFSM to the Irish bail-out was greater than the eurozone proportion. The Portuguese bail-out was hardly an improvement, with one third coming from the EFSF, one third from the EFSM and another third from the IMF.

The Minister must explain to the House why the EFSM, which makes up only 12% of the non-IMF contribution, is being drawn upon to the same extent as or more than the EFSF. That forms a crucial part of the motion tabled by Back Benchers. The Minister is under an obligation at least to say why we are using the EFSM to such a high degree. That is incredibly important. It has been in the gift of Ministers to answer that question, but so far they have neglected to do so.

The EFSM was supposed to be a temporary mechanism all along. The failure of the Government to push forward with a permanent mechanism, despite opportunities to do so, is an abandonment of UK interests. The temporary emergency EFSM was only ever meant to be a short-lived interim arrangement. We should have been moving on as quickly as possible to a permanent eurozone-only mechanism. Why has the Chancellor failed to press his European colleagues to sort out a permanent eurozone-only fund more urgently?

The Chancellor attended an ECOFIN meeting on 18 May. The Financial Secretary attended ECOFIN on 8 June last year, the Chancellor on 13 July, the Chancellor again on 7 September and the Financial Secretary again on 30 September, yet the press releases from each of those ECOFIN meetings suggest that not once did Ministers raise the issue of pressing forward with that permanent arrangement. Can the Minister explain why not?

[Mr Davidson]

The shadow Minister is rightly attacking the Government for being weak and vacillating. Will he tell us what bold, straightforward and clear position he is urging us to take on the vote?

[Chris Leslie]

I am happy to do that. Unfortunately, the wording of the motion refers to the legality of the EFSM, and I do not think the former Chancellor, my right hon. Friend the Member for Edinburgh South West (Mr Darling), would have acted illegally to sign up to it. I accept that that is a small point, but it is for that reason that we will abstain today.

We will have to revisit the issue time and again. It is hugely important that hon. Members understand the situation. We have not yet seen any occasion on which Ministers have raised the subject of moving to the permanent arrangement as swiftly as they can. They claim that they are responsible for having secured a commitment to move to a permanent arrangement in 2013. The temporary arrangements were always going to expire in 2013 anyway. So much for the famous victories claimed by the Prime Minister, the Minister and other hon. Members.

Too often we have an empty chair at the European table. Only a few weeks ago, on 6 May, Britain was excluded again from a meeting that took place in Luxembourg—the empty-chair approach was very evident when ECB officials met the Finance Ministers of Germany, France, Italy, Spain and Greece. Will the Minister say whether there was an active decision by the Treasury to continue to take an empty-seat policy, or were we simply not invited? We see in the Financial Times that Swedish officials are concerned that the Prime Minister is not pressing harder to prevent key decisions from being made only among eurozone members. Will the Minister say what we are doing to stop being sidelined at that European level?

We know very well that that temporary fund was needed. We recognise that it was part of a concerted pan-European action, standing together against the global forces that threatened the bond market with contagion. That is especially the case now in the eurozone. We have to acknowledge that we have trading partners in Europe and it is in our interest to support their continued economic stability, but Britain has already paid its fair share in the stabilisation process in the case of Ireland and Portugal. The time has come for a stronger voice with real influence in Europe to ensure that British interests are properly served, which must mean a swifter move to a permanent eurozone-only bail-out mechanism.

The fund was always due to expire in 2013. That was not Ministers’ doing; it was the original design. We know that Ministers were involved in the cross-party consensus during the transition from the previous Government to the present one. Ministers cannot wriggle out of their responsibility now in relation to the EFSM. The Government are on extremely shaky ground and even their natural allies are questioning the coalition’s leadership. The issue will no doubt return on another day.

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[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I recognise that there is a lot of frustration at the way the motion was dealt with today. However, things have been carried out in order. I am sure that the Leader of the House will reflect on the hon. Gentleman’s comments and think about them, but I am also sure that he will speak to the Committee to see whether there is a way forward for everybody. Hopefully, some amiable agreement can be reached in future, if that is the desire of the Committee.

[Mr Davidson]

Further to that point of order, Mr Deputy Speaker. Does that not demonstrate quite clearly that this set of Government Whips is just as bad as the previous one?

[Mr Deputy Speaker]

I thank the hon. Gentleman for that non-point of order.