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 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 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.