Lessons from the process of government formation after the 2010 general election - Political and Constitutional Reform Committee Contents

Written evidence submitted by Rt Hon Alistair Darling MP

  I refer to my e-mail of 22 December in reply to Graham Allen's letter of 1 December.[1] I understand the Committee has not yet concluded its inquiry and I can therefore add the following in relation to the meeting of the European Council of Finance Ministers which was held in Brussels on 9 May last year.

  Firstly, it's important to recall the circumstances of that meeting. Once again there was real concern that if the European Council of Finance Ministers didn't reach a decision in relation to support for the weaker economies in the Eurozone area, then the markets would have had a real go at both Portugal and Spain as well as Greece. The meeting was urgent and decisions had to be reached by the time markets opened on the Monday morning.

  This meeting was arranged at very short notice. I took the view that the United Kingdom had to be represented notwithstanding the fact that the General Election had been held on the previous Thursday and that whilst the outcome was inconclusive, it was more likely than not that a new Government would be in place within a few days.

  At all times I sought my officials' advice and I was advised that the Cabinet Secretary had expressed the view that the Government remains in place until such time as a new Government is formed. .

  That said, I was conscious of the fact that I was going to attend the meeting in Brussels at a time when it was very possible that a different government would be in place within a few days. I therefore made a point of talking to both George Osborne on behalf of the Conservatives and to Vince Cable on behalf of the Liberal Democrats prior to the meeting taking place.

  Both George Osborne and Vince Cable made the point that I remained the Chancellor of the Exchequer. Both were happy to be informed as to what was likely to happen at the meeting but that their view was that I was still the Chancellor they were not offering an opinion as to what I should do.

  Briefly, I explained to both George Osborne and Vince Cable (in separate telephone conversations) that there was a real concern about the position with regard to Portugal and Spain as well as Greece. I said that there had been two recent G7 calls which demonstrated that this was an international concern and that the United States was particularly exercised.

  Indeed, the matter had been discussed at an IMF meeting in Washington during the General Election campaign which I had attended representing the United Kingdom. I further explained that the real problem was there was no consensus or clarity across Europe or the.

  Eurozone as to what should happen. I went on to explain that the Commission was still meeting as was the European Central Bank. Action from the latter on liquidity and support and other efforts were likely to prove insufficient and that whilst the IMF would make facilities available, it was necessary for further support measures to be agreed and announced before the markets opened.

  There were two proposals. One was £60bn worth of support to Euro area countries building on existing facility available to non Euro area members but which would not currently require IMF involvement. I said that my view was the IMF had to be involved.

  The second proposal was a larger European stabilisation fund with an unspecified amount which would apply to the Euro area only.

  I explained that I had made it clear in a telephone conversation with Commissioner Rehn (responsible for this area) that the UK could not be part of this and that there could be no question of a residual liability.

  This is very important. Throughout the meeting repeated attempts were made by the Commission and others to get the United Kingdom to contribute to this fund. Had we not been there we could well have been forced to contribute either directly or indirectly.

  A question did arise as to whether or not it was open to the United Kingdom to abstain due to election purdah. However, the proceedings were subject to QMV and as I said in the House of Commons in the debate on the Loans to Ireland Bill on 15 December, for us to have abstained would have meant we would have been outvoted anyway but we would have lost our influence in the other matters which would be regarded as important such as the possible contribution to the European Stabilisation Fund.

  I have replied at some length as I think it is important that the Committee should understand that both the issues at stake and the reason that I took the decisions that I did. We were not committed to the European Stabilisation Fund but we did agree to the £60bn worth of support to the Euro area countries building on the existing facility which had been available to non Euro area countries.

  Finally, for the sake of completeness, the package that we agreed in relation to Greece on that day did not involve contribution from the United Kingdom.

  Whilst there is no formal obligation to consult, I believe that it is a matter of courtesy that it was right to ensure that the then Opposition was fully informed.

  If the Committee would like any further information then I would be happy to provide it.

17 January 2011

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