§ [Relevant document: European Community Document No. 5962/90 on conclusion of the Articles of Agreement establishing a European Bank for Reconstruction and Development.]
§ 10.2 pm
§ The Minister for Overseas Development (Mrs. Lynda Chalker)
I beg to move,
That the draft European Bank for Reconstruction and Development (Subscription to Capital Stock) Order 1990, which was laid before this House on 13th July, be approved.I understand that it is agreeable that the House should consider at the same time the other motion on the Order Paper:That the draft European Bank for Reconstruction and Development (Immunities and Privileges) Order 1990, which was laid before this House on 13th July, be approved.
§ Mrs. Chalker
The explanatory memorandum circulated on the EC proposal—Document No. 5692/90—for a Council decision on the conclusion of the articles of agreement establishing a European Bank for Reconstruction and Development is most relevant and I greatly welcome the interest of the House of Commons Select Committee on European Legislation, which has recommended a debate at an early stage.
I spoke with the Chairman of the Select Committee, the hon. Member for Newham, South (Mr. Spearing) and explained that, in the short time available, it has not been possible to arrange the separate debate recommended. I look forward tonight to a thorough debate on the orders and on all aspects raised by establishment of the new bank. It may be helpful to the House if I also deal with points arising from the Community document.
The House will acknowledge the extraordinary change in central and eastern Europe. Yesterday's dictatorships have been replaced by today's reborn democracies. The spurious certainties of centrally planned economies have given way to the opportunities and disciplines of the free market. The free world has reacted quickly to this momentous process, and must continue to do so if it is to help and influence events. It would be difficult to find a clearer example of quick reaction and long-term commitment than this new European Bank for Reconstruction and Development, or EBRD, which we are to discuss today.
It was only in December last year that the European Council decided at its meeting in Strasbourg to establish, as soon as possible, a new European bank to further the implementation in central and eastern European countries 398 of democracy and economic reform. I shall have more to say about the purposes of the new bank in a moment. That decision in Strasbourg set in train a process of urgent, but careful, diplomacy. Preparatory discussions began in Paris in January this year, and continued almost unbroken until the articles of agreement establishing the bank were signed by representatives of its 42 prospective members in Paris on 29 May.
§ Mr. Bowen Wells (Hertford and Stortford)
Can my right hon. Friend tell us whether, during the course of the negotiations, any of the European countries involved ever consulted any of their Parliaments, or presented any document to any of their national Parliaments or to the European Parliament?
§ Mrs. Chalker
I remember that, after the European Council meeting at Strasbourg, my right hon. Friend the Prime Minister reported to the House on the sort of procedures that would be undertaken. Further to that, we got on with the basic organisational work—which was purely organisational. Subsequently, we have presented an explanatory memorandum to the Select Committee on European Legislation, and have carried out the work that was necessary to enable us to implement the decisions made at Strasbourg last December.
My right hon. Friend the Chancellor of the Exchequer and our ambassador in Paris signed the articles of agreement for the United Kingdom, and the European Commission and the Irish presidency signed on behalf of the Community. However, the House's approval of the two draft orders is requested tonight before the Government move to ratify the agreement. The agreement could not even have been considered further unless it had been signed by all the members back in May. Equally, the scrutiny aspect will need to be resolved to the satisfaction of the House, and it was on that matter that I consulted the Chairman of the Select Committee.
Members of the new bank will include the world's leading economic powers—all members of the Organisation for Economic Co-operation and Development—including Japan, the United States and, of course, all European Community member states, the European Economic Community itself and the European Investment Bank. All the emerging democracies of central and eastern Europe have signed and are potential recipients. Assistance from the new bank will be an important element in their continued progress towards political and economic reform.
However, the new bank has attracted support not only from the free-market West, but also from the old communist East. Egypt, Israel, the republic of Korea, Mexico and Morocco have also signed the articles; so it is truly an international effort, and we must ensure that the impetus of that effort is maintained.
The articles of agreement will come into force—and the bank will come into existence—only when ratified by signatories representing two thirds of the total voting power, including at least two countries from central and eastern Europe. It is thus imperative that the process of ratification be completed thoroughly but quickly: France has already done that.
We want to exercise our vote when the first decisions are made on bank strategy and investment proposals. As host nation, the United Kingdom wishes—with the consent of both Houses of Parliament to the draft orders 399 —to be among the first to ratify, so encouraging early ratification by others. The president-designate, Mr. Attali, wants the agreement to enter into force early next year, so that the bank can begin quickly to make its vital contribution to the development of eastern European economies, and hence underpin the emerging free-market democracies. That would be consistent with the leading role that the Government have taken in encouraging reform in eastern Europe, and in ensuring that the Community responds positively to it.
§ Mr. Nicholas Budgen (Wolverhampton, South-West)
Why does my right hon. Friend use the word "vital"? Is that a mere pun to try to excite us about the size or does it really mean that this will be a substantial and subsidised institution which will be spreading a lot of the taxpayers' money around eastern Europe?
§ Mrs. Chalker
I follow precisely what my right hon. Friend the Prime Minister has said in the matter. We intend that the bank should provide the stimulus for private investment in eastern Europe and not be a drain on the resources of the British or any other taxpayer. Instead, it should stimulate the development of the central and eastern European economies that we know they are well capable of.
The need to have capital to start up is obvious and understandable. However, I cannot divert from anything that my right hon. Friend the Prime Minister said in that respect on 1 May in the House, when she reported back from the European Council in Dublin which also discussed the matter, as did the European Council in Strasbourg last December.
§ Mr. Bob Cryer (Bradford, South)
As the money will be invested in eastern European economies as seed money and so forth, is it sensible for the Government to spend £10,000 million on Trident nuclear weapons which will presumably be aimed at those economies? Are the Government not investing money with the threat of mass extermination and destruction of that investment?
§ Mrs. Chalker
If I strayed into the realms that the hon. Gentleman tempts me into, I do not believe that I would have your support, Mr. Deputy Speaker. Therefore, I will not follow the hon Gentleman's path.
§ Mrs. Chalker
I want to get on with the debate. I have already given way to my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) and I want to continue, because we have only one and a half hours to debate the subject. I do not want to cut the time available for Back Benchers.
It would be helpful if I set out the Government's view on the proposal for a Council decision on Community ratification of the articles.
As I mentioned earlier, it was the Strasbourg Council of 8 and 9 December last year which set in train the detailed negotiations which led to the articles of agreement. It is thus very much an initiative of the Heads of Government of the Twelve. This is acknowledged in the majority shareholding specified in the articles for the member states of the Community, the Community itself and the European investment bank.
400 The board of governors of the EIB has already authorised its membership as it is entitled to do under the EIB statute. If approved, the proposed Council decision will authorise Community membership of the EBRD. As is usual in these cases, we think that the Community should ratify only when all member states have done so. The draft decision is presently before the European Parliament, and we expect it to come to the Council in the autumn. It will require unanimous approval by the Council of Ministers.
Under the proposal, the Commission would have the right to appoint the Community's own governor and director, and would represent the Community within the EBRD, alongside member states and other shareholders, including the European Investment Bank. The Community and EIB will each hold 3 per cent. of voting power.
The House will want to know the financial implications. The Community's capital subscription will be for 300 million ecu—about £225 million, of which the paid-in element will be 90 million ecu—about £65 million. Our share of the EC capital subscription—based on our current share of the EC budget—will be approximately £45 million, of which £15 million would be paid in.
I hope that the House will agree that it is important that the Community becomes a member of the new institution quickly, so giving it a voice in the new institution. The Community and its 12 members can take much of the credit for the bank's existence and future.
It is possible that the draft Council decision may come to the Council in the autumn while the House is still in recess. The United Kingdom may thus be asked to give agreement in the Council before Parliament reassembles in October. As host nation and a leading member of the new bank, the United Kingdom would not want to delay unduly its entry into force. I hope, therefore, that the House will agree, after tonight's full debate, when hon. Members have had the opportunity recommended by the Scrutiny Committee to examine the matter in detail, that we should proceed.
§ Mr. Nigel Spearing (Newham, South)
I thank the Minister for mentioning that point. As she will know, for reasons that she has explained, the orders have come before the final decision and ratification of the articles in the regulations, which we are not formally discussing tonight. Does she agree that, if discussions are necessary, there might be another debate after the measure is set up, which will not be before the decision but perhaps after, when the full details are known?
§ Mrs. Chalker
As the hon. Gentleman knows, I shall certainly bear in mind what he says. At present, the proposed Council decision is not likely to come back perhaps even until the October session of the Foreign Affairs Council. Obviously that is a matter that I shall consider with great care. It is subject to negotiation, but, given the work that has been done earlier in the year to prepare for this stage, I suspect that there is unlikely to be any great diversion from what we have already seen and what we know.
I should now address the significance of the two orders that I ask the House to approve tonight. The articles of agreement signed by the Chancellor on 29 May were presented in Parliament as Command Paper 1116 on 28 June. The orders commit the United Kingdom to certain 401 obligations which I ask the House to approve tonight before we can move to the ratification of the articles of the agreement.
I should like to discuss the subscription order first. The total authorised stock of the bank will be worth 10 billion ecu. The United Kingdom will subscribe to 85,175 shares in the new Bank—a total subscription of 851.75 million ecu, or about £600 million. That makes us equal-second largest contributor, along with France, the Federal Republic of Germany and Italy—that is, the four largest European Community members—and Japan. The largest shareholder will be the United States of America, with 100,000 shares
Much consideration was given to the question of what share of the capital should be paid in if the bank was to make an effective contribution to economic development. We think that the agreed figure of 3 billion ecu, or 30 per cent. of the capital stock, is the right one for the bank's initial operations, given that bank finance is intended to act as the catalyst for the generation of private investment.
Thirty per cent. of our subscription will thus be paid in, and the remainder will be callable, so our paid-in shares will be for 255.5 million ecu, or about £190 million. That will be payable in five equal annual amounts, the first of which must be made within 60 days after the articles have been ratified by the necessary two thirds of members and the agreement enters into force. Half our subscription can be paid in cash, and half in promissory notes. Each cash payment and each note would therefore be for just under £20 million.
As my right hon. Friend the Member for Bristol, West (Mr. Waldegrave) told the House on 2 July, we agree with the recommendation of the Foreign Affairs Select Committee in its recent report on Foreign and Commonwealth Office/Overseas Development Administration expenditure that our subscription to the EBRD should be paid out of the aid vote for eastern European support and not from the money voted for our contributions to multilateral organisations. Those funds, like our other assistance for eastern Europe, are additional to and quite separate from our traditional aid programme. I can assure the House that our support for eastern and central Europe is not at the expense of developing countries. The Government entirely agree that this should not be so.
As the House is aware, the new bank is to be based in London. There was a great deal of interest by other members in the question of location; and good cases were indeed made for several other European cities. I am very pleased, however, that London's advantages were clearly acknowledged to be compelling, when the final choice was made. I am sure that this will be good for London and for the bank. I should like to pay tribute to the negotiators, who put so much hard work into ensuring that the bank should come to London.
As a member of the bank, we shall, of course, need to grant it certain immunities and privileges. The draft order will give effect to the immunities and privileges set out in chapter VIII of the articles of agreement, and attested to by all signatories as necessary to enable the bank to fulfil its purpose and functions. All member states will grant the bank these immunities and privileges. The order will confer legal status upon the bank and give it certain exemptions from duties and taxation; its property will also enjoy certain immunities from seizure.
402 The officers and employees of the bank will be exempt from taxation on the salaries paid to them by the bank, although they will pay an internal tax for the benefit of the bank, and they will be immune from suit and legal process in respect of their official acts.
While the order cannot come into force until the date on which the agreement establishing the bank comes into force—that is, after ratification by members with two thirds of the total voting power—it is important that the draft order be approved now so that the United Kingdom can ratify as proposed.
We shall also need to negotiate a headquarters agreement with the bank, as an international organisation to be established in this country. This headquarters agreement will set out in detail the immunities and privileges of the bank and its employees, within the limits imposed by the International Organisations Act 1968, and will require a further order to be approved by the House when negotiations are completed.
The headquarters agreement, once approved by Parliament, will not have effect until the bank comes into existence, but as host nation, we would of course wish matters to be settled before entry into force of the articles of agreement. We would therefore expect to return to the House with the second order as soon as possible in the autumn.
The United Kingdom is already home to several important international organisations, but this is the first multilateral development bank to be established here. In basing the bank in London, the international community acknowledges and signifies its intention to make use of London's continuing pre-eminence as a financial centre. The bank will be able to draw on unrivalled banking expertise, and will be a part of the most important financial market in Europe.
This is not only to the advantage of the bank; we think that it is of tremendous benefit to the City also. Even the healthiest of bodies can benefit from new blood; and great institutions must attract important new players if they are to stay out in front. The location of the bank in London, with close access to its investors and its customers, is to our mutual credit and advantage. I look forward to the further strengthening of British financial involvement in central and eastern Europe.
That is why the Government have pledged support to the new bank in finding a home in London. We have already, at Mr. Attali's request, arranged a lease on temporary premises at Broadgate in the City, and the bank's transitional team of experts will start operations from there next month. We have also engaged a firm of London surveyors to help the bank locate a permanent headquarters, and I understand that steady progress is being made. The choice of a building is for the bank itself; I hope that an announcement will be possible soon on the bank's permanent location.
I should like now to put these detailed comments into context, by saying something of the purpose of the new bank. The EBRD is a notable first in another area too, which is of greater historical significance than those mentioned so far. The Government have insisted from the start of negotiations to establish the bank that it should make an explicit commitment to promoting democratic principles and acknowledging the importance of economic and political progress.
That commitment is clearly stated in the bank's articles. The countries of eastern and central Europe have missed 403 out on 40 years or more of the developments which we have experienced in the free world. Events of the past year have confirmed the essential health and vigour of the democratic spirit; but economic well-being is not easily or quickly restored.
It is worth a brief look at article 2 of the new bank's articles of agreement to see how it is intended to help. It intendsTo promote, through private and other interested investors, the establishment … of productive, competitive and private sector activities, in particular small and medium size enterprises … To mobilise domestic and foreign capital and experienced management"—
§ Mr. Budgen
The central question here is why the private sector cannot do these things. My right hon. Friend is using exactly the same language that the Labour Government used in promoting the Industrial Reorganisation Corporation. We are talking about a state bank interfering in European affairs.
§ Mr. Budgen
Yes, an unaccountable state bank.
Will my right hon. Friend please explain why private merchant banks cannot do the job?
§ Mrs. Chalker
It is interesting to be taking part once more in a European debate of the kind that so excites the interest of my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen). I find it slightly strange, after all the months that have gone by during which my right hon. Friend the Prime Minister has made it absolutely clear to the House—
§ Mrs. Chalker
My hon. Friend may not mind what the Prime Minister says; I happen to support my right hon. Friend and agree with her.
I believe that it is a good thing to have a bank that fosters and encourages private investment in the region because it will give a lead in eastern and central Europe. But the bank will not be in competition with the private sector. It will not lend when funding is available for project proposals from other sources on reasonable terms, but it will lend for a number of activities, one of which I should have been coming to shortly had my hon. Friend given me the opportunity to reach that point in my remarks.
The bank will enable things to be done which might otherwise not have been done but which are in the international interest. I refer, of course, to the control of pollution and the improvement of the environment. I have no hesitation in saying that I believe that it is right that the developed nations, which are economically active in a free market, should give help to the developing economies of central and eastern Europe to improve the environment, which knows no geographical bounds.
404 Let me return to what I was saying a few moments ago. It is important that the new bank's articles of agreement are well understood. I quoted one of them and I should like to mention two others. The second is the one that refers toenvironmentally sound and sustainable development".The other refers to fostering
productive investment in related infrastructure where that is necessary to support private and entrepreneurial initiative".Only people who have travelled in central and eastern Europe and who know of the dearth of such infrastructure will fully understand that that is necessary before certain other developments can take place which will involve, and be wholly funded by, the private sector. That is why there is a need for a mix of private and public sector involvement in advancing the economies of central and eastern Europe.
§ Mr. Anthony Nelson (Chichester)
The organisation is termed a bank, yet it is apparent from the documents that a significant proportion of the moneys may be applied to equity investment. Can my right hon. Friend explain why it is necessary to devote funds for risk capital being put up by the nation states? I am wholly in favour of the concept of a bank and if I catch your eye, Mr. Deputy Speaker, I shall seek to argue for that. But I cannot quite see why the bank needs to be investing in risk capital and equity participation.
§ Mrs. Chalker
If I may, I shall come to that point later.
It is important to understand that the bank has a broad and demanding remit. It is not to act alone; it is to act as a catalyst. It will not substitute for or supplant private finance. However, it will have a major part to play in promoting, co-ordinating and encouraging the investment of private capital and expertise without which economic regeneration cannot be achieved.
I draw the particular attention of the House to the new bank's stress on environmentally sustainable investment. As we all know, decades of under-investment have brought eastern Europe close to an environmental catastrophe that is not limited to the boundaries of central and eastern Europe. The west has learnt and is still learning from its own environmental experience. We have much to offer by way of industrial processes and expertise. We want the new bank to make a contribution from the very start to environmental regeneration.
Britain is already helping eastern Europe through our know-how fund. British electricity utilities are co-operating with Poland on ways of conserving energy and reducing the environmental damage done by burning brown coal. Similar help is envisaged for Czechoslovakia, and a reconnaissance team from the Department of the Environment recently visited Czechoslovakia for those purposes.
The priority now, then, is twofold. First, it is to establish the investment needs in eastern and central Europe; secondly, it is to get the new bank up and running as soon as possible, with a sound operational structure. As host nation and one of the principal shareholders, we undertake to play our full part. That has been our aim since we first became involved in the process.
Of course, while reports confirm that, throughout central and eastern Europe, private entrepreneurs have responded to the challenge to meet newly released consumer demand, it would not be realistic to expect a fully functioning private sector to emerge overnight on the scale required, which is enormous.
§ Mr. William Cash (Stafford)
My right hon. Friend referred to the scale of the resources required. Will the German Democratic Republic have access to these funds, having regard to the enormous cost of providing adequate finance for the nuclear reactors, which are of Chernobyl proportions? How much will that cost? To what extent will it absorb the funds that are available?
§ Mrs. Chalker
According to the envisaged time scale, the German Democratic Republic is likely to be part of a unified Germany. If that happens, she will not have access to the funds of the European Bank for Reconstruction and Development. However, she will have access to the funds of the European Investment Bank. What my hon. Friend has described is highly unlikely to happen in the time in which that matter will have to be dealt with. There are many other aspects that will need to be dealt with, in conjuction with other eastern and central European countries. I am convinced that the bank will be able to play a full role and that it will leave the European Investment Bank, and possibly the German banks, to cope with the enormous problems that exist in the current German Democratic Republic.
The bank will have to work hard to help its borrowers to reach the goal of emerging from the old regime into a new and fully-fledged market economy. Investment in the public infrastructure will be needed. That is why up to 40 per cent. of the bank's total committed loans, guarantees and equity investments will be available to the state sector for investment in the infrastructure that is necessary for the development of the private sector.
The greatest promise has already been shown in the smaller recipients with a previous tradition of economic initiative. Hungary, Czechoslovakia and Yugoslavia in particular have already made significant progress, and Poland is already implementing a programme of structural adjustment.
The needs of the Soviet Union are not yet clear, nor yet is the extent of its commitment to economic reform. I am glad to say that the Soviet Union itself acknowledges the potential problem. It has agreed for the first three years of the bank's operations to limit its access to bank resources to no more than the total amount of capital paid in by the Soviet Union. The arrangements thereafter will need to be decided by the governing board of the bank.
The reform process in central and eastern Europe poses one of the great political challenges of our time. Political courage and fortitude from within and firmness of purpose from without have combined to end the political impasse of the cold war. The European Bank for Reconstruction and Development can now help to provide the economic prosperity necessary to underpin that political freedom. We are certain that it can help turn swords into ploughshares. I commend the two orders to the House as modest but essential components of the United Kingdom's contribution to this great positive change in Europe.
§ Mrs. Ann Clwyd (Cynon Valley)
I agree with my hon. Friend the Member for Newham, South (Mr. Spearing). As a former member of the Select Committee on European Legislation, of which he is Chairman, I know how frustrating it is to find so often that a full debate in the House is not possible and that decisions are taken without the Committee's decisions being discussed first.
406 As the Minister said, the EBRD was agreed in principle. The decision of the European Council was reported. It did not arrive until late, and the Minister has given the Committee an explanatory memorandum dated 21 June 1990. The Committee considered that on 21 July, but its report has not yet been published. Therefore, the House has not yet formally agreed the principle of the bank. The orders are before us tonight because it will be set up before October and the Government need these measures in order to be party to the bank. I hope that the Government will take note of my hon. Friend's comments, which he has made many times before.
The amount of money involved is not that big compared with other international banks, but it could provide a useful focal point for expertise and coordination. As the Minister has admitted, many of the details are still quite vague—
§ Mrs. Clwyd
I should like to begin my speech before I give way. I have not completed one point yet.
Many of the details are still vague, so this is a good opportunity for us to press for what we think is important. This debate on the United Kingdom's financial contribution is being counted as a debate on ratification, so it is our only chance to comment before the United Kingdom ratifies the bank agreement.
The BERD—I use the French initials of the bank because I think that they will be more commonly used in future—will not be a major institution in the reconstruction of eastern Europe in purely financial terms, because its initial capital of $12 billion is small, less than half the estimated cost of cleaning up Poland's power industry alone.
This is not an institution on the scale of the Marshall plan; its significance lies in the fact that it is a new and rapidly created bank with the specific purpose of promoting the reconstruction of eastern Europe. The speed at which it has been set up reflects the importance that both east and west attach to the task. As Mr. Attali described it in a recent interview,BERD is the embryo of a confederation of Europe, as the European coal and steel community was the embryo of the Common Market in the fifties.".It is the political commitment, as much as the economic funding of BERD, that is significant. As M. Attali is well grounded in socialist principles, the next Labour Government will have no difficulty in working well with him.
As the Minister said, BERD is the first multilateral bank to have environmental protection written into its articles of agreement, which is very important. However, it is vital that strong environmental conditions are written into the byelaws and manual of operations, which are still being negotiated. The United States Congress has passed implementing legislation which says that the Government can subscribe only if the strictest environmental standards are used. I suggest that the United Kingdom Government too should not ratify the bank's statutes until they are sure that strict environmental standards are to be upheld.
The byelaws and operating manual must require environmental impact assessments of all projects before they are approved. Careful monitoring of projects will also be needed. This Government and others know full well that public participation and disclosure of information are essential for environmental concerns to be expressed and 407 to be taken into account. Yet there is no mention of that in the articles of agreement. Article 35 states that there will be an annual report on the environmental impact of BERD's activities, but it also states that copies of all reports, statements and publications made under that article shall be distributed to members. We know how secretive member Governments are about such reports once they have their own vested interests, so it must be agreed from the start that information about BERD's proposed projects will be publicly available, especially to those most affected by the proposals and to those best placed to provide information on their likely environmental impact.
§ Mr. Cash
The hon. Lady is prattling on about the extent to which the bank will operate in future. Has she looked at article 14? Has she looked at the terms and conditions for loans and guarantees? That is the crucial point in relation to this proposal. The terms and conditions on loans and guarantees lay down and prescribe the basis on which loans are to be made. I have no doubt that the hon. Lady will know the basis on which the loans will be enjoyed by the recipient countries. Does she know what the basis of those loans and guarantees will be? I think that she is talking through her hat.
§ Mrs. Clwyd
If there is any expert on prattling in this House, it is the hon. Member for Stafford (Mr. Cash). If he had allowed me to develop my speech, he would have had answers to his questions. However, I suspect that he does not want to stay to make his own contribution to the debate.
In May, the Czechoslovak Government produced a report on the country's environment which made clear the devastating effect of decades of uncontrolled production. As the Minister knows, almost one third of that country is ecologically devastated, according to the report. More than 70 per cent. of pregnancies in northern Bohemia result in miscarriages. Water supplies are contaminated with radioactivity from land fills and with phosphates, with nitrates and with a host of other chemicals which make it unfit to drink.
In Poland, 70 per cent. of the drinking water is polluted and an estimated 100 million trees have been destroyed, mainly by acid rain due to sulphur emissions from industry. Modern technology is desperately needed. Decades of third-rate technology have wreaked havoc on the health of the environment and on the people who live in it. We must ensure that that technology is replaced, but not with second-rate technology from the west which is sold cheaply to the east because it is too dirty for the west.
Although the development of the private sector is clearly an essential part of the reform process in eastern Europe, BERD must recognise that this will take time. It may prove difficult to meet the condition that 60 per cent. of all loans go the private sector in the first year. The BERD must avoid over-emphasising the free market simply for ideology's sake, if the practical situation calls for continued state involvement. That is particularly true of achieving environmental aims.
The private sector, based on western experience, does not deliver green, clean goods. Nor does the private sector worry much about social costs. As the Deutschebank stated in its special report on eastern Europe: 408Now that virtually all Eastern European countries are dismantling the system of planned economy, we need to ensure that the social costs accompanying such a major transition will not be aggravated by some of the less desirable features of market economies.It has taken a decade to learn the bitter lesson of developing countries, that economic adjustment must be combined with special attention being paid to the needs of the most vulnerable, and that ignoring investment in people carries long-term costs as well as short-term suffering. That lesson must be applied in our work in eastern Europe.
In its publication "Economic Outlook," the OECD warns that eastern Europe risks being asset-stripped by western investors. In promoting private sector participation, we must ensure that ventures are truly joint ventures and not just a way of subsidising western countries into buying up the best assets of eastern countries.
The bank's emphasis appears to be on large companies rather than on small firms, but the development of a range of small companies is equally important to their economic development, and I hope that we may have an assurance from the Government that small firms will not be ignored. In particular, we must be assured that when BERD assists in the development of capital markets, the capital needs of the smallest firms, as well as those of large companies, are taken into account.
Hon. Members in all parts of the House will join me in hoping that the bank's location in London will encourage British firms to widen their horizons to eastern Europe. So far, the Germans, Italians and French are there, but where are the Brits? In his evidence to the Treasury Select Committee, Mr. Crockett of the Bank of England—an institution hardly known for its recklessness—stated:British companies are erring too much on the side of caution in their approach to Eastern Europe.We know the markets are there, so where are the Brits?
§ Mrs. Clwyd
I share my hon. Friend's sentiments on that. We should like to hear more from the Prime Minister, rather than from some of the Government's more obscure Ministers, about the likelihood of a peace dividend. We need that information quickly because when we are talking about additional aid for eastern Europe this year, we need assurances about aid in subsequent years. We want some of the savings resulting from the peace dividend to go to developing countries and eastern Europe.
The leaders of the European Community, at their summit in Dublin recently, asked the Commission to see how the EC could help provide aid and credit to the Soviet Union to buy time for perestroika. At their summit in Houston, the leaders of the western world called on the IMF and the World bank to see how they could help. The leader of the Labour party outlined his plan at a meeting with President Bush to help the Soviet Union. We expect BERD to co-ordinate its efforts with the various institutions and, where possible, to provide expertise.
Numerous agencies and banks are now setting up work in eastern Europe, and co-ordination is essential. The World bank is lending between $5 billion and $7 billion over the next few years. The bank's international financial 409 corporation is already promoting private sector investment along the lines planned for BERD. The IMF has set up stand-by agreements with Poland and Yugoslavia.
All this makes it essential that there is close co-ordination between the banks. It also shows that BERD needs to be quite clear about its own role. Clearly, it will not be a massive new source of funds to overshadow all the others. Nevertheless, it could make a distinctive contribution by becoming the focal point for co-ordination among agencies and banks supporting eastern Europe and for providing expertise in the region. That will require strong leadership and commitment from BERD members.
For the Soviet Union, which is not a member of the IMF or the World bank, BERD provides an important stepping stone into the international financial community. It was thanks to the insistence of the United States that the amount that the USSR can borrow is strictly limited and that a minimum of 60 per cent. must be lent to the private sector. What attempts did the Prime Minister make to oppose those limitations that were imposed by the United States? How can she tell Mr. Gorbachev that we all support his attempts at reform and that we are delighted that the Soviet Union is a founding member of BERD but that, because we do not trust him to use the money well, the Soviet Union cannot be a net borrower?
Indeed, BERD must take care not to burden the east with eager loans. With a debt of $40 billion, Poland alone cannot afford to take out that new loan. Poland's ratio of debt to exports is overwhelming at over 500 per cent. Annual interest payments amount to nearly half a year's exports. Poland's biggest creditors are official—that means that it is Governments who now could and should give considerable debt relief.
In evidence to the Select Committee on the Treasury and Civil Service, the report of which is published today, Mr. Crockett of the Bank of England said:I think there is no question, however, but that normal services, that is to say, regular amortisation and interest payments on debt, is not possible given the size of Poland's debts.However, we have heard nothing from the Government about promoting debt relief. We all know that the Paris Club has rescheduled Poland's debt, but why not reduce it? Surely now is the time for a bit of imagination and initiative, if ever there was one.
Do the Government accept the recommendation of the Select Committee on the Treasury and Civil Service, paragraph 74 of which states:A sizeable chunk of Poland's debt should be written off"?As the east European countries still have a severe shortage of hard currency and their own currencies are not yet convertible, making loans in those conditions could present many problems.
I support the call in a recent European Parliament resolution that it is extremely important in allocating funds that specific attention should be paid to effective monitoring of the projects funded and the capacity of the economies of central and eastern European countries to absorb the investment.
I am sure that all hon. Members recognise that the development of market economies will take quite a long time. After all, it took 13 years for western Europe's major currencies to become convertible after the second world war. We cannot expect more of eastern Europe in the 1990s than we achieved in the 1940s and 1950s. As hon.
410 Members know, after the war, western Europe received a great deal of concessional assistance for our reconstruction. We must now give eastern Europe the same chance that we had.
Of course, BERD is only a small part of the massive west-east effort that is necessary. We must not allow it to divert attention from the need for grant aid, technical aid, debt relief, a re-examination of EC trade policies and other vital assistance.
There is obviously some confusion about BERD's terms of lending, and that is evidenced in the report of the Treasury and Civil Service Select Committee. Mr. Crockett of the Bank of England stated:A good project would probably finance itself from the BERD with a lower spread than a merchant bank in England would be able to offer.Can the Minister confirm that it is intended that BERD will be profit-making, but that, thanks to Government backing and AAA-rating, it will offer slightly lower interest rates than commercial banks? Can she explain why the issue has not been fully resolved when it is obviously of great importance? Can she say what the Government are doing to ensure that sufficient concessional aid is provided? The Select Committee's report questions the lack of clarity in the lending criteria of BERD.
Another grey area is the funding of Britain's contribution to BERD. On 15 June, the then Economic Secretary to the Treasury said in reply to a written question that the United Kingdom's contribution would be additional to the overseas aid budget until 1993–94, and that future contributions would be discussed in public expenditure surveys. Will the Government guarantee that not only will the initial cash instalment come from an additional line in the aid vote, but so will the encashment of promissory notes that the ODA's memorandum says will be met as they are incurred from sums voted for overseas aid?
Will the Minister also guarantee that contributions will continue to come from additional money after 1993? In particular, do the Government accept the recommendation of the Foreign Affairs Committee that BERD contributions should come out of the eastern Europe line, and not from funds for multilateral institutions?
In conclusion, I wish to say how much the Opposition welcome the setting up of the bank. I am pleased that it is to be in the United Kingdom, although I would have wished cities other than London to be considered. I hope that it means that the United Kingdom will play an important role in European Community development. That is what the public want. Alas, I fear that it is not what the Government intend—but it is certainly the role which the next Labour Government will adopt.
§ Mr. Anthony Nelson (Chichester)
I welcome the statement of my right hon. Friend the Minister, and I wish to say a few words about the European Bank for Reconstruction and Development. It is proper to begin by declaring what might be considered to be an interest in the matter, as I am consultant to a company that has explored some opportunities in Bulgaria and the Soviet Union, and also the director of another company that has explored some investment opportunities in Hungary. I do not think that it would be revealing any secrets to say that I strongly 411 advised those companies not to make such investments. They have not done so—not because of that advice, but for other reasons.
It is extremely difficult to make investments in some of those countries, as it is difficult to establish a title to corporate assets and to real estate. Quite frankly, it is difficult to envisage how one can get one's money out in hard currency. When investing private or corporate money or shareholders' funds as an entrepreneurial company, there is a duty to see light at the end of the tunnel and not just to invest on the wing of a hope. There must be a real prospect of a return. If there is not, other markets and other returns offer an immediate prospect for the funds deployed.
I hope that I will not offend those who intrinsically may find the bank's very existence offensive if I ask: if communism has failed those countries, and if capitalism then fails them, where will they go? Those countries face enormous problems, and if we fail them there will be either a return to nationalism or a militant solution. If their best aspirations are repressed, there may be anarchy. We have not only an opportunity but a major and immediate responsibility.
Although these loans may not compare with the best available on the international markets and with those in developed countries, they will undoubtedly offer a decent rate of return. The fact that an investment fund is devoted particularly to the eastern European countries will concentrate minds on investment and banking opportunities in those countries, because one is not having to compare investment in a chemical company or a loan to an agrochemicals company in Hungary with what it may make in other parts of the world. By setting up the bank, we are devoting it specifically to these countries as a sector, and as such it will make a contribution.
There will undoubtedly be—this point was touched on by my right hon. Friend the Minister—a significant element of pump-priming. Given all the attendant uncertainties in these countries, it is comforting for a private company making a major investment to be lent money or offered equity participation—although later I shall argue against that—by a major international bank such as this. A certain amount of money will sponsor substantial amounts of private capital investment. In principle, and in politics, the bank is necessary and a good idea.
However, I have two broad reservations about how the bank is being set up. First, I am concerned that 40 per cent. is being allocated to the public sector. If the idea behind the new bank is, as it says in the first sentences of the articles, to sponsor, encourage and lend money for entrepreneurial activities and free market processes in those countries, why allocate 40 per cent. of those enormous funds to the state sector? I have no interest in voting my limited taxpayers' money to propping up state-owned organisations in the eastern bloc.
Secondly, I have misgivings, as my earlier intervention showed, about the equity activities of the bank. Banks are not allowed to invest. Investment is an entirely different activity from lending money. The prudential judgment that one makes about a loan is different from the judgment 412 one makes about a risk equity investment. The bank should not be involved in equity investments, because that is the role of the private sector.
§ Mr. Nelson
But it is called a bank and the understanding is that a substantial proportion of its resources will be deployed on a commercial basis. The criterion in article 14 is the commercial basis of its loans.
If we want to give those countries money, let us have the intellectual and political honesty to say that we are giving them a loan. The hon. Member for Cynon Valley (Mrs. Clwyd) mentioned ecology, impure water and environmental aspects. As a business man or as an hon. Member voting my taxpayers' money for loans, I do not see how we will get a return. Setting up the bank may be a wonderful thing to do, but let us be honest and say, "We will not get a return on that investment." If we are giving the money or lending it only to write it off five years later in changed circumstances, let us recognise that reality from the beginning.
If we fail to do so, we run the danger of doing exactly what we and the commercial sector have done with the United Nations and numerous other multilateral fund agencies—lending money only for everyone to say, "Write off their debts," without any understanding of what that means for future indebtedness. It has a major impact on the willingness of banks and multilateral agencies to lend money in the future. It simply increases the cost of any loan made to developing countries. We should be honest from the beginning: we should work out whether we are giving money away, lending money or investing risk capital.
§ Mr. Budgen
That is particularly relevant to Poland. It would be ridiculous to pretend to be lending more money to an already grossly indebted Polish public sector: Poland would only say at some later stage that it wished to resile, and would find it extremely difficult to borrow money in the future.
§ Mr. Nelson
My hon. Friend may be right; but the bank's potential activities extend well beyond a single loan to the state of Poland.
It must be appreciated that much of the money will not find its way into the eastern European bloc. I do not know whether that is good or bad, but we must face the commercial reality: much of it will find its way into western commercial pockets, and rightly so. Investors seeking subsidy, a guarantee or, perhaps, foreign hard-currency collateral and support for their investment are interested in keeping that money outside the country. I suspect that a substantial portion of the funds will be recirculated within the investments of such countries.
Nevertheless, we should consider where the money will go; some of tonight's intervention have been relevant to that. I am very concerned about long-term heavy infrastructural loans and investments to be made by the new organisation. If we are to spend money in the best possible way, I believe that it should be directed first towards trade credit and secondly towards management expertise.
§ Mr. Nelson
Indeed: it should be directed towards the know-how that can assist developing countries with some of their logistical problems—for instance, the problem of transport to deliver their goods to the market.
I do not believe that the bank should lend money directly to such countries; it should not do what states should be doing. We should make international, or national, political decisions to extend sovereign loans or, indeed, grant the countries money in the form of a gift. If we could be more honest about that from the outset, I believe that the bank would make a real contribution towards sponsorship of entrepreneurial activities in new countries. If we fail to do that, however, we shall be left with a deadweight of an international bank which, 10 years later, will be asking the House of Commons for more money to pay off the debts that it has incurred. Let us pursue the same principles as we apply to our country and our entrepreneurial companies.
§ 11.7 pm
§ Sir David Steel (Tweeddale, Ettrick and Lauderdale)
The hon. Member for Chichester (Mr. Nelson) made an interesting speech; I agreed with parts of it and disagreed with other parts. I hope that he agrees with me, however, that, when the House has only an hour and a half to discuss the orders, it is a bit unfair for the Front-Bench spokesmen between them to take up most of an hour, leaving the rest of us only half an hour between us. I shall try to be as brief as possible, in fairness to others.
I think it right to give the measure a general welcome, and also to note the speed with which it has progressed from original promulgation to completion. I believe that President Mitterrand first suggested it in October last year; by May this year, the organisation was agreed on. This, surely, is a sign that the European Community is working with a sense of unity and urgency to tackle the serious problem of further aid for eastern European countries.
The hon. Member for Chichester made a valid semantic point: I, too, do not regard the organisation as a bank. It is not what is meant by a bank in normal parlance. Speaking from my experience, and having read the articles, I would say that it is much more like the Scottish Development Agency than anything else. That agency, which survived under successive Governments until very lately, has some quasi-banking functions, but it is an agency of government—in this case, we are discussing an agency of Governments in the plural—set up to carry out a specific programme of assistance.
§ Sir David Steel
It has been very successful indeed. The SDA has acted in mixture of ways to assist the private sector and to carry out some public sector investments. The new organisation is such a body, even though it is sailing under the banking flag.
There are some valuable lessons to be learnt by pursuing the SDA analogy. Like the hon. Member for Cynon Valley (Mrs. Clwyd), I hope that this new, great organisation will set up within it a small firms unit—as the SDA did—thereby giving valuable assistance not only to the great elements in investment but to the small entrepreneurs who will wish to emerge in the new companies in eastern Europe. I hope that joint ventures will be encouraged. I was interested in the comments by 414 the hon. Member for Chichester, because I have seen, from my limited experience in travelling in eastern Europe, the great scope that exists for joint ventures.
I take issue with the hon. Member for Chichester in that I believe that the private sector in these countries cannot be expected to thrive so long as elements of the public services are so woefully deficient—I think of telecommunications and transport facilities, both of which will require great improvement if private sector investment is to pay off. The hon. Gentleman talked about the return that some investments would get. Looking at the environmental perspective of the new bank—or agency, as I prefer to call it—I believe that the return will come not necessarily in financial percentage terms but in creating a healthier environment for the whole of Europe.
A few months ago, I had an interesting conversation with a West German politican who pointed out that there would be a serious problem for the Exchequer in a united Germany. It could continue to spend a fixed amount of money on environmental improvement in what was the Federal Republic for, say, a 2 per cent. improvement in the environment, whereas the same investment in the former German Democratic Republic might produce a 6 per cent. improvement—so bad has been the legacy of those Governments.
The hon. Member for Cynon Valley criticised the private sector record of lack of care for the environment, but she should have a care—the public sector in eastern Europe has the worst such record of any area. The problems of brown coal burning, pollution of the rivers—many of which flow from eastern Europe into western Europe and into our North sea—and the dangerous state of some nuclear power stations must be cleared up. I do not believe that that can be done on a straight commercial banking, percentage return basis. That is why, although the new organisation is called a bank, I support it. It will have a wider purpose in tackling these serious environmental issues.
The Minister has almost answered my first query. I hope that this and other items of assistance to eastern Europe will not affect the general ODA budget for assistance to underdeveloped countries. It is important to assert that reassurance. As well as approving of this new organisation, it is important to make it clear that the obstacles to east-west trade will be eliminated so that the new economies can benefit from export-led growth.
What have the Government done to get rid of COCOM? I do not see how the co-ordinating committee on multilateral export controls, as it is still called, with its restrictions on high-technology exports from west to east, can be justified when we are trying to persuade industries in the east to modernise. I hope that the Minister will comment.
Like other hon. Members, I believe that it is important that the western economies should come clean on our proposal to deal with the writing off of established debt. I agree that there is no point in piling on a new organisation that is willing to lend money on top of debts that are going to be resiled on in future. Although the bank positively does not have within its remit the tackling of existing debt, that should be cleared up before the bank gets going at full steam.
Two other points that have not been raised so far in the debate genuinely puzzle me. What will be the rates of interest and how are they to be determined? Are they to be determined by general European levels, or will they 415 operate in the London market? It is important that we know how the Governments imagine that the rates of interest will be determined.
The first article of the bank states:the purpose of the Bank shall be to foster the transition towards open market-oriented economies and to promote private and entrepreuneurial initiatives in the Central and Eastern European countries committed to and applying the principles of multiparty democracy, pluralism and market economics.Will priorities within the bank be determined by the European Governments or by all Governments contributing to it? Will it be made clear, for example, that Romania, so long as she continues to persecute leaders of opposition parties, will be low down the queue for assistance from the bank? How will article 1 be put into practice now?
I just want to reinforce a point made fleetingly by the hon. Member for Cynon Valley. While I welcome the creation of this bank in the United Kingdom, there is another great financial centre, as opposed to London, in a city called Edinburgh. I hope that the Government will avoid the trap of implanting all European institutions here in the south-east when there is a great opportunity for organisations and the offices and the employment that they bring to be located outside the City.
§ Mr. Bowen Wells (Hertford and Stortford)
I want to make a few constitutional points. It is an outrage that an agenda-less European Council should take decisions to create a bank which has no reference to the European Parliament or to national Parliaments and for the constitution of the bank to be presented to the House tonight in an hour-and-a-half debate in which we are supposed to ratify the entire principle of its establishment. That leads on directly to the problem that we will encounter in future with the institution as I understand it at present. To whom is it accountable? How will it be called to account?
The World bank and the regional development banks in other areas have proved disastrously unaccountable to the nations that established them, other than to a few civil servants in one or two ministries of finance or administrations for overseas development. For example, it is impossible to see the minutes or agenda of the World bank institutions in this country. To find out what it is discussing or what loans it has agreed or its policy, we have to go to the United States, which is the only country that deposits the agenda and the papers of the World bank in the trade development bank in that country. I suspect that this new institution will be equally secretive and unaccountable.
As I understand the constitution of the new bank, it will be similar to that of the other regional development banks, in that it will have a committed capital only part of which will be drawn down. The rest of the money to be made available to the eastern European countries will be raised on the open market value. That answers the point of the right hon. Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel) about interest rates. Of course, there will have to be a difference between the rate at which it raises money and the rate at which it lends it and, as with the open market—possibly on a AAA basis as in the World bank—we can rest assured that the interest rates will be 416 about 2 or 3 per cent. above the London inter-bank offer sale. That is in order to make a return on the bank's capital and to ensure repayment.
§ Mr. Budgen
It is all very well to say that, but, if this agency, as I prefer to call it, has the objectives that are being suggested—to support democracy and help environmental improvements—it is difficult to see how many of the projects can pay the interest rates that my hon. Friend suggests. It must mean that at least some of the profitable activities will have to subsidise some of the politically desirable activities. None of that is clear. It is all left in fairly socialist and interventionist vagueness.
§ Mr. Wells
My hon. Friend gives a good illustration of why the thinking of this bank is extremely woolly and is the result of an enormous rush to establish it, about which we have been told tonight.
If one is to borrow money at the rate of interest that I have suggested and then on-lend it, the question arises how one will make money out of promoting environmental issues, which I fully support. But one cannot be made to pay if one is borrowing money at high interest rates.
§ Mr. Andrew Hargreaves (Birmingham, Hall Green)
My hon. Friend makes a little too much of this. He should remember that the European Investment Bank will be one of the largest shareholders of the bank, and that for several years the European Investment Bank has been doing very much the same type of operation, with perhaps less environmental or political content, in a quite excellent fashion. It has entered the Euro-markets and has raised money. It has lent at very competitive rates and very successfully for some time. My hon. Friend could take that as a model of how the bank should work.
§ Mr. Wells
That leads me to another point. This institution will duplicate the efforts that the European Investment Bank and the World bank were established to undertake. As I understand it, large portions of the personnel of the eastern European branches of the World bank and the European Investment Bank have applied to join the bank. We shall have international civil servants who are accustomed to such matters simply joining the bank, thereby triplicating the effort of those institutions. That is why the bank is unnecessary. It could have been arranged through the World bank quite easily, and probably better, with greater expertise and understanding and with a higher and more secure financial base. The European Investment Bank is probably one of the least development-oriented of all the institutions. It is conservative in the way in which it lends. It certainly has not lent for environmental purposes and in promoting democracy.
The European Investment Bank's restraint in the light of the articles of association will be difficult to exact. In fact, I do not think that it will be able to do so in accordance with the articles of association. I envisage the bank losing a large amount of money. There is no way in which it can avoid doing so, given its objectives and the way in which it will be financed.
I accept that there is a need to assist the development of private enterprise and environmental concerns to be supported and cleaned up in eastern Europe. I agree with that. However, I cannot agree that this is the right institution to do it. The thinking is muddled. I do not believe that it is accountable in any way. When it begins to 417 make losses, presumably it will call on a guarantee of the country to which it has lent. It will lend money to an institution that it will think will be profitable. That institution may lose money or go bankrupt. The bank will then call upon the national Government to repay the unsound investment, and thereby add to the indebtedness of that country.
Although I welcome the objectives that the concept is trying to put into effect, it is disastrous and ill-considered. It is the product of ill-thought-out, rushed consideration without any in-depth understanding of what is required in eastern Europe.
§ Mr. Nigel Spearing (Newham, South)
I shall concentrate on the procedural matters that face the House, rather than on any of the merits of the new institution unveiled before our eyes.
It is necessary to consider the procedural matters, because, as the Minister said, the Select Committee on European Legislation has recommended a document produced by the Commission—a decision, 5962/90—for debate in the House. That document contains all the articles of the proposed bank.
I must correct my hon. Friend the Member for Cynon Valley (Mrs. Clwyd) because, on 27 June, we recommended that that document should be debated at an early date. Unfortunately, that has not happened, partly due to the dates of sitting in the House and the fact that Her Majesty's Government are also a party to the treaty as the United Kingdom, as distinct from being a member of the European Community, which is also a party to the treaty. That means that the Government must bring the statutory instruments before us for ratification this evening. Without that, participation in the venture will not be possible.
I will not venture too far into the reasons why we have got the orders before the debate, but we understand that, at this time of year with the long recess before us, difficulties arise. The report of the Select Committee on Statutory Instruments says that this is not a new situation. It states:There is no technical reason for the House not to approve the draft".It said that there had been similar circumstances early in the year,to which attention was drawn in the Select Committee's Sixth Report of this session. The House should merely be aware that it is acting, as before, on a ministerial undertaking.
§ Mr. Spearing
I note that the Minister is nodding. I understand that she will undertake that the orders will not be made until after the bank is established. I believe that that is the case, but if I am wrong, I hope that the Minister will intervene. If I have got it right, I hope that she will nod again, as that undertaking is of some constitutional significance.
I am not sure that the Select Committee on European Legislation, of which I have the privilege to be Chairman, will regard the resolution of the House about debates before decisions as having been discharged by this debate. The House has heard enough from Conservative Members, especially from the hon. Member for Hertford and Stortford (Mr. Wells), to understand that the 418 constitution of the bank and the way in which it will operate—the political and economic objectives that it will set itself—are of enormous significance. I suspect that, in years to come, people will look back on this debate to discover from which acorn that particular oak, well developed or not, grew. They will realise that the speed with which matters developed on the continent and in the bank presented us with some difficulties.
Reference has been made to the proposals for the bank that were made some time ago. A decision was taken in the Development Council or the Finance Council on 8 May to the effect that decision 5962/90, which includes 63 articles, should go ahead. That decision was sent to the Government on 8 May and on 21 June an explanatory memorandum was provided for the Select Committee on European Legislation. We reported on its contents on 27 June. The orders are now before us and no doubt they will be considered in due course.
This is a most unfortunate state of affairs. Although it is a matter for the Committee and not for me, I think that at some date we may need to have a look at the articles themselves and at the EEC regulations, which have received comment but no close examination.
§ Mrs. Chalker
With the leave of the House Mr. Deputy Speaker, I shall reply.
It would be impossible in two minutes to reply to all the points made in the debate. However, I shall write to those hon. Members whose questions I cannot answer in the time available.
I welcome the political commitment shown by the hon. Member for Cynon Valley (Mrs. Clwyd) to the establishment of the bank. It is right that we should show our commitment to the democratic processes that are now occurring in central and eastern Europe.
The decisions that have been reached are a considerable improvement on the original proposals that came before the European Council at Strasbourg last December.
When a Government have vested in them—as the Governments of member states have by the Acts that have been passed—the responsibility to discuss matters of this nature at Heads of Government level, it must be true that no work could proceed if every detail were brought back at every stage. My right hon. Friend the Prime Minister has reported to the House at every stage on what is going on and had my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) had a major objection, I should have known about it then. But my hon. Friend did not express his views. He waited until tonight's debate to come forward with them.
I have a good deal of sympathy with much of what the hon. Member for Newham, South (Mr. Spearing) said. Of course, it would always be better if we had more time to make decisions such as these. But we are not alone in reaching decisions. What we have to do is to ensure that the Council machinery is properly and thoroughly used. The debate has explored a number of the issues. We have made our position very clear and I hope that we shall be able to satisfy the needs of scrutiny—as the hon. Member for Newham, South knows full well I intend to do.
We can work through the process but only under the laws that we have been given. Moreover, all the negotiations on the establishment of the European Bank 419 for Reconstruction and Development have been undertaken according to what was decided at the heads of Government meetings. The resulting banks, about which hon. Members are concerned—
§ It being one and half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 14 [Exempted business].
§ Question agreed to.
That the draft European Bank for Reconstruction and Development (Subscription to Capital Stock) Order 1990, which was laid before this House on 13 July, be approved.
That the draft European Bank for Reconstruction and Development (Immunities and Privileges) Order 1990, which was laid before this House on 13 July, be approved.—[Mrs. Chalker.]