Loans to Ireland Bill

Obviously we are not going to prejudge the outcome of any Irish general election. Of course we—not just us, but the IMF and others—negotiate with the Government of the day. Although the principal Opposition parties in Ireland have concerns about the Irish budget and the like, I understand that they have accepted the principle of international assistance, and the IMF has been in direct contact, and has engaged in discussions with them. The international community, including the UK, is satisfied that we are in a position to make this offer to the Irish Government, which is why I am bringing the Bill to the House today. As I was saying, Ireland agreed to seek IMF and other support worth €85 billion, and the money will be used as follows: €35 billion will be used to support Ireland's banking sector, with €10 billion going towards immediate bank recapitalisation; and 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 eurozone facility and bilateral loans from the UK, Sweden and Denmark. I have agreed that our contribution should amount to €3.8 billion, or £3.25 billion at today's exchange rate. This significant package will help Ireland to deal decisively with its problems. It will help it to recapitalise its banks and set up a contingency reserve for future problems. It will also help the Irish authorities to cover the shortfall in their budget, which was passed by the Irish Parliament earlier this month. Their budget will see a fiscal consolidation of €15 billion by 2014, of which €6 billion will be implemented next year, as part of their strategy leading to a target budget deficit of 3% of gross domestic product in four years' time. Of course people ask why we are extending the loan to Ireland. We are doing so because it is overwhelmingly in our national interest to 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, and any increase in borrowing is matched, of course, by the commitment of the Irish to repay with interest. The answer to the question asked by my hon. Friend the Member for Stratford-on-Avon earlier is that if Ireland takes out all the loan that is being made available to it and pays it back with the interest that has been forecast, it would pay us £440 million in fees and interest over this period. Let us remember that Ireland is the fifth largest market for British exporters and accounts for 5% of our total exports abroad. An interesting way for the House to think about it is that every man, woman and child in Ireland spends an average of £3,600 per year on British goods—that is how connected our economies are. Indeed, as has often been pointed out, we export more to Ireland than to Brazil, Russia, India and China put together, although we are trying to increase our exports to those four very large emerging markets. For some of our industrial sectors, such as food and drink or clothing and footwear, Ireland is our top export market. Ireland is also the only country with which we share a land border, and in Northern Ireland our economies are particularly linked, with two-fifths of exports going to the Republic. I wish to reassure Members representing Northern Ireland that I am very aware of their constituents' worries and the difficulty they face as a result of the problems in Ireland. That is why my hon. Friend the Financial Secretary recently visited Belfast to discuss these issues directly. I am open to any discussions that Members from Northern Ireland wish to have with me or the Treasury about the economic situation and indeed the banking situation in Northern Ireland. Just as our two economies are linked, our businesses and banking sectors are also interconnected. More Irish companies are listed on London exchanges than companies from any other foreign country. The two main Irish-owned banks have an important presence in the UK, holding between them about £30 billion of customer deposits. In Northern Ireland, two of the four largest high street banks are Irish-owned, accounting for almost a quarter of personal accounts.