With your permission, Madam Deputy Speaker, I should like to make a statement about the G20 summit, which was held today in London. The Prime Minister is still concluding business at the ExCeL centre.
First, may I explain to the House that the communiqué was signed off about an hour ago? For that reason, while I would normally have arranged for copies to have been placed in the Vote Office, that will not be possible for another half hour or so. They will be placed there at the earliest opportunity. I am also grateful to the shadow Chancellor and the hon. Member for Twickenham (Dr. Cable) for understanding that I was able to provide them with a copy of my statement only very recently—in fact, about five minutes ago. However, I was able to provide them with the communiqué a short time before that. I should also explain that, in addition to the communiqué, I shall refer to a declaration in relation to financial services, which is still being finalised at the summit. It will be available at the earliest opportunity.
May I extend the Government’s thanks and appreciation —and, I am sure, that of the whole House—to the police for their professionalism and for being so effective in managing this huge policing and security operation while continuing to meet London’s wider police needs?
Today, leaders and Finance Ministers from countries all over the world have come together in an unprecedented show of unity to take action on the greatest economic crisis of modern times. That crisis has deepened since the last G20 summit and it is now affecting the lives of people in every country. Today, we have agreed to do whatever is necessary to restore confidence and growth in our economies, to repair the financial system, to restore lending, to strengthen regulation and supervision, to rebuild trust in the financial system, to fund and reform the international financial institutions to overcome this crisis and prevent further ones, to promote international trade and reject protectionism, and, crucially, to build an inclusive, green and sustainable recovery.
There are no quick fixes, but, because of the progress that we have made today, by agreeing to work together we can begin to restore confidence, save jobs and bring the world economy out of recession.
First, we agreed to deliver the scale of sustained fiscal effort necessary to restore growth. That does not mean that all countries will act in exactly the same way or at exactly the same time, but it does mean an agreement has been made to take whatever action is necessary to restore growth. We are confident that the action that has been agreed today will accelerate a return to trade growth.
Since the summit in Washington in the autumn, G20 countries have announced and are now implementing the greatest macro-economic boost the world has ever seen. The combined fiscal expansion across the G20 will put an additional $5 trillion into the world economy by the end of next year. That will save or create millions of jobs across the world this year alone.
Central banks across the G20 countries are also taking exceptional action, cutting interest rates aggressively in most countries and using all levers available to put money into their economies to support growth. We have already made available significant support for individual banking systems through liquidity, recapitalisation and dealing with problem assets in line with our agreed framework for restoring lending. In all the actions to support the economy, there is a determination to ensure long-term sustainability and price stability, as well as exit strategies for Governments’ involvement in the banking sector.
The immediate cause of this crisis is a failure in the global financial sector and in global financial regulation. It is imperative that we rebuild trust and clean up the global banking system. As part of that, we must build stronger regulatory systems that support growth and serve the needs of people and business. Domestic financial regulation must be reformed to promote integrity, guard against all types of risk, discourage excessive risk taking, dampen rather than amplify the effect of financial shocks and protect consumers as well as investors.
We also want a more globally consistent regulatory system. To that end, we agreed today to establish a new financial stability board, with a wider group of developed and emerging countries, which will work together with the International Monetary Fund to spot risks and provide early warning. We also agreed to endorse and implement new tough principles on pay and compensation and to expand regulatory oversight to all systemically important financial institutions, including hedge funds.
We will also take action to protect the world’s financial system—and, therefore, our public finances—by cracking down on tax havens, and we note that the OECD has today published a list of countries assessed by the global forum against the international standard for exchange of tax information.
We must give international financial institutions such as the IMF and the World Bank the legitimacy and the power to provide surveillance and support. It is crucial that emerging and developing economies can continue to receive the flows of capital on which they depend. Over the past few years, some 70 per cent. of world economic growth has come from those economies, and we must not let them down now.
We have agreed a trebling in resources available to the IMF, from £250 billion to £750 billion. We also support a substantial increase in lending of at least $100 billion by the multilateral development banks, including to low-income countries.
Madam Deputy Speaker, I think that I referred to the IMF in terms of pounds sterling: it should, of course, be dollars.
We have also agreed to support an injection of a further $250 billion into the world economy, increasing global liquidity through a greater allocation of IMF special drawing rights. These steps will provide an additional $850 billion of financing to support growth in developing and emerging countries, which will be able to continue trading with us and other G20 economies, in turn supporting global growth and employment.
Hand in hand with more resources will come reform of the IMF and the World Bank. Emerging and developing countries need to be represented too, so we agreed that the next review of IMF representation should be concluded by January 2011, while World Bank reforms must be completed by next spring.
World trade has underpinned rising prosperity for half a century, but today it is falling for the first time in 25 years. So we have agreed to support international trade as a crucial driver of growth in countries everywhere. International trade is currently being undermined by a shortfall in trade finance, on which 90 per cent. of all world trade depends. So we have agreed today to make available over the next two years not $100 billion but $250 billion through G20 export credit and investment agencies.
So in total, we have agreed over $1 trillion of additional support for the world economy, and this will support trade, growth and jobs.
We remain committed to reaching an ambitious and balanced conclusion of the Doha development round, as we believe that this could boost the global economy by a further $150 billion a year.
The fifth element of the agreement today is a commitment to help the world’s developing and emerging countries. We reaffirmed our historic agreement to meet the millennium development goals and to each achieve our respective pledges on aid, debt relief and development. This action, and the decisions that we have taken today, will increase the resources available to low-income countries by $50 billion—for social protection and long-term food security, for example.
We will act and do everything possible to build a fair and sustainable recovery. We agreed also to make sure that when we support our economies, we do so in a way that also protects the environment. We will support investment in clean, innovative and resource-efficient low-carbon technologies.
We will also support those affected by the crisis by creating job opportunities and through income support measures. We will support employment by stimulating growth and investing in education, and through active labour market policies that focus on the most vulnerable.
This is a global crisis, and today there has been a global response. We will play our full part, and I commend this statement to the House.
I sincerely thank the Chancellor for coming to make this statement today, before the House rises for the Easter recess. I speak for Members on all sides of this House when I join him in thanking the police for the very good job that they have done, in very difficult circumstances. We are grateful to them for keeping London safe.
I turn now to the communiqué which, as the Chancellor said, has only just been published. What has been achieved by today’s meeting, and what has not? Those are the questions, and I shall deal with both.
The substantial increase in the resources available to the IMF was widely trailed and is very welcome. It will help economies in trouble at a time when credit is scarce, and $500 billion is pledged from member states. Of course, it is a credit facility, so is there an estimate of how much of it is expected to be drawn on over the coming year, as that will determine how much individual countries’ taxpayers—including British taxpayers—might have to provide?
Will the Chancellor confirm that the $250 billion increase in the IMF special drawing rights is in effect a form of quantitative easing, or creating money, on a global scale? What analysis has been made by the G20 of the long-term risks for inflation? What conditionality will be attached to those funds for the poorest countries? That has long been an issue of concern to development organisations and those countries themselves.
The Chancellor mentioned a timetable for reform of governance and voting rights in the IMF, as he has before. He mentioned 2011. Is that timetable now actually matched by a hard commitment from some of the countries with large voting rights— because they had larger economies relative to the rest of the world in the 1940s—that they will give up those rights and make sure that the IMF reflects in every sense the true balance of economic power in the world?
Earlier today, the Financial Secretary said that he wanted to reduce the stigma of going to the IMF. Exactly what did the Chancellor have in mind when the Financial Secretary said that?
The commitment on trade finance is welcome, too, but how much of the $250 billion in credit lines and guarantees that the communiqué talks about has actually been announced already by national Governments and how much is a new commitment? Clearly, it looks as though the $50 billion for the World Bank is, but what about the remaining $200 billion?
When will all that finance be available? As we have all seen in Britain, announcements are all well and good but what saves businesses and jobs is schemes that are actually up and running and operational. When will that happen?
Trade finance will help to reverse the dramatic fall in global trade that is doing so much damage. Of course, rapid completion of the Doha trade round would have done even more and provided a huge stimulus to the world economy. It is a shame that—in my view—the issue was ducked in the communiqué, rather than directly addressed. Indeed, the communiqué talks of reaffirming the commitment made in Washington not to raise new barriers to investment or to trade in goods. However, since Washington, 17 of the 20 countries that sat round the table there and signed the communiqué have increased trade barriers and protectionist measures.
The Chancellor talked about new World Trade Organisation reporting requirements and the like. Well, the WTO has reported that 47 protectionist measures have been taken around the world, so why will this communiqué be any more effective than the communiqué signed in Washington last autumn?
On financial services, the regulation of the shadow banking system and systemic hedge funds—I suspect the word “systemic” will be important—action on tax havens and principles on bankers’ bonuses are all welcome, although of course it smacks a bit of closing the stable door after the horse has bolted. [Interruption.] Those who supported the Government over the past 12 years should reflect on that.
There is a distinct lack of detail. Will the Chancellor tell us whether there is now a clear timetable for introducing at international level some co-operation on counter-cyclical capital rules and reforming the pro-cyclicality of the current Basel 2 accords? Has he, and indeed the world, now taken the view that the Greenspan approach of waiting for the boom to turn to bust and then mopping up is not wrong?
One of the principles the Chancellor set out was on toxic assets. So far, different countries have adopted different approaches. Switzerland has tried a bad bank, the US is trying to leverage in private finance and the UK has its insurance scheme. If those are all encompassed by the new principles, just how meaningful are they?
Finally, the great thing missing from the communiqué is the one thing that the Prime Minister lobbied hardest for—that is, a new commitment to a significant second fiscal stimulus, so that the Chancellor would have cover to announce one in the Budget later this month. That commitment is very obviously not there. Indeed, the $1 trillion being trumpeted today is $1 trillion of loans, credit lines and guarantees. We welcome that, because we, too, have talked about loans and credit guarantees. What it does not contain is a single extra dollar or pound of additional fiscal stimulus. In the communiqué it is explicitly left to individual countries to decide for themselves what their own public finances can support.
The communiqué says that the signatories should put in place “credible exit strategies” from the fiscal position that they are in. That is exactly as it should be. It is a vindication of the argument made by the Conservative party in recent months. It must mean that the Chancellor now pays attention to the advice of the Governor of the Bank of England and rules out a significant second fiscal stimulus in the Budget.
It is right that the richer countries of the world come together to help those most in need, and we support the commitments entered into today, but the question that the British people will ask tonight is what it all means for them, once the world leaders have left. There is still the small business that cannot get credit. There is still the mother working in the high street shop who fears for her job. There is still the family who fear for their home. The G20 will seem very remote for them. No $1 trillion boost for the IMF and trade finance will help us to deal with a £1 trillion national debt, which we are leaving to our children, thanks to this Government. The truth is that Britain will be clearing up the economic mess created by this Government long after the G20 show leaves town.
The hon. Gentleman raises nine very sensible points, and one that is not terribly sensible, but let me deal with all of them. First, he asks about the IMF and the figures. He rightly says that there was an expectation that the IMF resources would be increased; many people thought that they would be doubled. Actually, we have substantially increased the IMF resources by more than that. That is a tribute to the work that my right hon. Friend the Prime Minister has done over the past few weeks and months, at times being widely criticised by the Opposition. Having seen the proceedings today, I can tell the House that he was able, even in the last few hours, to extract from those there more commitments to helping people throughout the world, and he deserves support for having done that.
The hon. Gentleman asked about special drawing rights, and he also asked a question about conditionality, which is important and has been debated in this House many times before. I think that there is a general feeling that at this time, it is important to get money into those emerging and developing economies as quickly as possible, and that to spend month after month discussing terms and conditions might be counter-productive. That is not to say that conditionality is not important. We have got to be sure that the money is spent in the right way, and we have got to have safeguards, but it is important that we make sure that the support comes through fairly quickly.
The hon. Gentleman asked about a timetable for reform; I said that in terms of the quota, the next review needs to be brought forward by the beginning of 2011. I should add that in addition to looking at the resources and the governance of the IMF, the summit also agreed that we should consider the terms of reference for both the IMF and the World Bank, because there is a feeling that, more than 60 years after they were established, what they actually do needs revisiting as we enter the second decade of this new century.
On the question of stigma, the hon. Gentleman will have noticed, as I am sure others have, that Mexico was able to access funds largely without comment, because, I think, people are beginning to realise that it makes sense at times for the IMF to intervene earlier, and to help countries and provide them with support. It does not necessarily mean that there is any sign of an immediate problem. That is where we want to get to—a position where the IMF helps countries as a matter of course.
On additional funds, the hon. Gentleman is right: the test will come when making sure that those funds are made available as quickly as possible. He also raises the important matter of the trade round and Doha. That was discussed, both at the preliminary meetings and at a meeting this morning. The House will be aware that there were times, during the course of the last year, when many people thought that it might have been possible, if we had been prepared to go the extra mile, to get an agreement.
Principally, there are problems on the part of the United States and India. President Obama made it very clear this morning that the US Government are anxious that the matter should come back to the G20. He says, however—and it is probably not an unreasonable request—that they are a new Administration and that they need to take stock of where they are and to consider how best to proceed.
Equally, India is facing a general election this year. That means, I suspect, that for the next few months those countries will want to take stock. But no one in that room was in any doubt that it is in all our interests to get an agreement on the Doha round as quickly as possible. I hope that that explains why the reference to Doha was more limited than it might otherwise have been.
The hon. Gentleman asked about the WTO and the need to police protectionism. He is right; we are signed up to a strong declaration opposing protectionism, but that will work only if it is honoured by countries and if the WTO can act where there is a breach.
The hon. Gentleman asked about financial services and the inclusion of hedge funds. I deliberately said that those were of systemic importance. I note what he said about pay and horses bolting; I am bound to say, though, that a fair number of Conservative Members were supporters of some of the horses that did the bolting. The hon. Gentleman should be careful about what he says on that. There is reference to the reform of the Basel II agreement, and that is important. Equally, the point made about reform of accounting standards is very important because we need to address the problem where the operation of the rules could exacerbate the situation. We need to address that.
The hon. Gentleman asked about the different approaches to impaired bank assets. He is right; the approach we have adopted with the asset protection scheme is different from the approach in the United States and Switzerland. But at the end of the day, they are all doing the same thing—trying to isolate the bad assets. As I have said to the hon. Gentleman on many occasions, I do not think that there is an ideological right or wrong on the issue; what is important is that we find a way to get bank credit flowing again.
The hon. Gentleman’s penultimate point was about fiscal stimulus. For the last few days, and even before that, there has been much speculation that there was somehow a stand-off between the Germans and the French on the one side, and the Americans and us on the other. The truth is that there is support right across the G20 to make sure that we both strengthen and reform the financial services and banking systems and do whatever it takes to support our economies at this time. The declaration explicitly commits the G20 countries
“to deliver the scale of sustained fiscal effort necessary to restore growth.”
The only people who oppose that are the Conservative party.
The hon. Gentleman asked what difference this makes for men and women throughout this country. I will tell you, Madam Deputy Speaker, what difference it makes. This is an absolutely essential step, here and across the world, to protect jobs and make sure that we do everything we possibly can to help people at this time of extraordinary difficulty. We are prepared to play our full part; I am sorry that that is not a view shared by the Conservative party.
I thank the Chancellor for his help in getting the information this afternoon. This was a crucial meeting, part of a process of restoring confidence in a great crisis. The Prime Minister and the Chancellor deserve some credit for some of the positive outcomes; they would get rather more credit if they had not exaggerated expectations in advance of the meeting. None the less, there were some good results in respect of the funding of the IMF and the World Bank, in terms of trade credit and the commitment to fighting protectionism.
I want to ask a series of specific questions, one of which relates to what was evidently a failure—the inability to realise an accord on the stimulus needed to growth and employment. If the French and Germans are not able to agree to a fiscal stimulus, have they specifically agreed to a monetary stimulus in Europe? Can the European Central Bank engage in quantitative easing, as described in paragraph 7? If so, how much is it proposing to do?
In relation to the so-called “credible exit strategies” mentioned in paragraph 11, can the Chancellor explain why the British are proposing an exit strategy in 2010-11 given that the Government are committed to reverting to a deflationary fiscal policy while all the other major countries are committed to expanding it beyond that date?
Paragraph 27 refers to a “green” stimulus as part of the fiscal package. Why is the British environmental stimulus as part of that package half the international average?
In relation to tax havens, I welcome the agreement as far as it goes. Can the Chancellor say how many of the countries listed today by the OECD as non-compliant are British dependent territories? Why, over the past 10 years, have the Government tolerated tax evasion and criminal money laundering in British territories, and will that now stop? Can the Government give an assurance on tax policy that no company, bank or otherwise, will come for help from the British taxpayer, be it in cash or guarantees, unless it gives an absolute assurance that it will stop tax avoidance and the use of tax havens, which companies have used in the past?
Paragraph 15 of the communiqué has an ambitious commitment to what it describes as
“tough new principles on pay and compensation”.
What does that mean for the British banks, particularly the nationalised banks? I was told today that the Royal Bank of Scotland is proposing to double the pay of its senior management from an average of £150,000 to £300,000 to compensate for the loss of bonuses. Is that true, and, if so, will the Government stop it?
One of the clear conclusions to emerge from this meeting is that we now have a fundamentally different international order in which there are two superpowers—the United States and China—and other countries, such as Russia, Brazil and India, which are very firmly part of the major powers as regards economic and other matters. Was not, however, the European Union badly divided, with grandstanding and squabbling on a major scale? Does the Chancellor agree that if the European Union, including Britain, is to be listened to in this fundamentally changed order, there must in future be a unified approach, which was manifestly lacking on this occasion?
I thank the hon. Gentleman for his appreciation, albeit qualified, of the efforts that we put in. We need to be realistic about what we have achieved today, but there are also grounds for optimism. Even six months ago, I would have found it difficult to imagine that we would be able to get together 20 countries representing 80 per cent. of the world’s largest economies and come to a substantial agreement that will, over time, make a significant difference to the prospects of the world economy. That is a very important step.
The hon. Gentleman asked about fiscal stimulus, particularly in relation to Germany and France. He will know—I think that he made this point the other night—that Germany has put in not just one fiscal stimulus but two, and has put in slightly more than us, even taking into account the automatic stabiliser effect of increased benefits and reduced tax take that both our countries show. France has also put in a fiscal stimulus. It is not a case of their saying, “Do nothing”, as some argue—they have done something. As I have said on many occasions, it must be up to each country to decide how much it does and when it does it.
The hon. Gentleman asked about credit easing—quantitative easing. Of course, within the eurozone that would be a matter not for Germany and France but for the European Central Bank, which is yet to make any proposals in that regard.
The hon. Gentleman referred to sustainability and the exit strategy. As I said to the House on Tuesday, whatever we do and wherever we do it, we must support our economy now, but we must also be sure that in the medium term, as we come out of this, we live within our means. All countries have to do that. The exit strategy specifically refers to the banks, in which regard the Government’s policy remains, as I have stated before—I think that the hon. Gentleman and I are in complete agreement— one of returning these banks to the private sector, commercially operated albeit properly regulated and supervised, when we can do that.
The hon. Gentleman asked about tax havens, on which action is necessary, and he asked why we did not take action before. That is another example of the fact that, for years, many countries—many of which were represented at the G20 today—did not want to know about taking action on tax havens, as he well knows. That mood has changed. One of the planks of President Obama’s election campaign was that America should do something about the issue. We now have an environment in which it is far easier to take action, and it is interesting to note that in the past few weeks, when countries have known that they might be named and shamed, there has been a flurry of activity as countries have said, “We’ve decided we’re going to sign up to international obligations.” That shows that action works.
The hon. Gentleman made a general point about the European Union, and I believe that where it is possible to reach agreement, we should. Having spoken to people over the past 48 hours or so, I found that the differences between various countries in the EU, the United States, ourselves and anyone else were far less significant than it may have appeared in reporting to the public. What was announced and achieved today will be seen as a significant step forward, provided that we make sure that we implement it, and make sure that the benefits are passed on to the people who elect us.
Many Members are hoping to catch my eye. I will, therefore, insist on a brief single question so that we can have a concise reply. More may then be successful in making a contribution.
The sterile debate about whether to have a fiscal stimulus or not has been put into context today by these welcome measures to reflate the world economy and kick-start trade. But the Chancellor knows that this crisis has a human face, with millions of people becoming jobless over the coming months. According to the World Bank, 54 million people in the low-income countries will be put into absolute poverty. Does he agree that there is a moral imperative to continue policies that alleviate such distress to individuals, and will that be taken up in the G20 meeting in the autumn?
I certainly agree with my right hon. Friend. It is estimated that 90 million people throughout the world were at risk of falling into poverty if we did not take action. That is one of the reasons today’s outcome is to be welcomed. We now have to make sure that we see the process through. One of the purposes of the second meeting later this year will be to ensure that pressure is kept on countries to deliver what they have signed up to.
Would the Chancellor explain more fully why the Prime Minister said at his press conference that there had been an agreement on a common approach to the toxic assets, when that is not in the communiqué? Some countries are isolating their assets, others are trying to sell them off, and here at home the right hon. Gentleman is trying to insure them. Where is the common approach?
The common approach is that all of us agree that we need to isolate and then remove the effect of toxic assets on the ability of banks to lend. That can be accomplished through insurance, which is what we are doing here, or through the so-called good bank-bad bank split, which we have taken here on two occasions. It can involve a combination of the public and private sector—something that we are doing partially, and which the Americans are doing. It is important—and the Chairman of the Select Committee is looking at this—that we use the right approach. It will vary from country to country, and it will vary from bank to bank, but the right approach must be to get lending going. That is a common approach.
Is my right hon. Friend aware that we on the Government Benches very much congratulate the Prime Minister and him on the stunning success of getting this G20 conference held, and on the results they have obtained, particularly the $5 trillion increase in the funds put into the world economy? That is key to generating the confidence that we badly need to sustain us coming out of the recession.
I am grateful to my hon. Friend. It is a major step forward, but, as I said before, it is important that as people leave London tomorrow, they start to make sure that everything we have agreed is delivered.
As one who genuinely hopes that today’s understandable euphoria will be followed by lasting satisfaction, may I ask the Chancellor a specific question about his statement? He says that the immediate cause of the crisis is a failure in the global financial sector and in global financial regulation. Is he completely confident that the regulations that will be imposed in countries around the world are mutually compatible?
First, I am grateful for the hon. Gentleman’s comments. I have been accused of being euphoric on very few occasions, but I am none the less grateful to him. He asks a perfectly pertinent question. It is important that we now accept that there need to be common rules because we have a global financial system. I think that there is much agreement about that. In Europe, our attitudes must change—there need to be common rules and a common approach, but that is not inconsistent with having national supervisors and regulators, because we need a regulator near the ground and the people they regulate. Everything that we have experienced demonstrates in huge amounts the need for closer co-operation. I hope that we can achieve that on a global basis and in the European Union.
I thank my right hon. Friend the Chancellor and my right hon. Friend the Prime Minister for holding their nerve in the past few months, when the Opposition have poured buckets of abuse over them on a daily basis. Without holding their nerve, the G20 would never have happened and we would not have the stimulus we have got.
In the statement, my right hon. Friend talked about assisting the poor. In his busy schedule in the next few weeks, will he meet me and some colleagues to discuss additional measures to help poor borrowers in the United Kingdom, who are suffering extremely difficult times, especially in the home loan and high street sectors?
I am extremely grateful to my right hon. Friend. He is right that we need to do everything we can to help people, especially those on low incomes, in this country. Throughout his time as a Minister and in the many jobs that he held in Government, he spent considerable time trying to ensure that we did more to help low paid people, not only those who had lost money, but those who were in fear of exploitation. It is equally important to have exactly the same approach to people on low incomes throughout the world. I am glad that the need to tackle that was specifically addressed in the communiqué.
In answer to the questions of my hon. Friend the Member for Tatton (Mr. Osborne) and to the hon. Member for Twickenham (Dr. Cable) about the fiscal stimulus, the Chancellor set out what others had already done. He knows that, in the run-up to the G20, the Prime Minister went round the world talking about a further stimulus, not what had been done. Is not the reality that the G20 was originally set up around the further stimulus and the Prime Minister’s desire for the world to follow that? He has not succeeded—Germany and France have clearly got their way. Does the Chancellor, who is recorded as possibly being in favour of being against that further stimulus, think that it is a good or a bad thing that France and Germany won?
I am not sure whether it is possible to be in favour of being against something, but I shall ponder that. The right hon. Gentleman is plain wrong. It is clear from the discussions this morning and from the declaration that:
“We are committed to deliver the scale of sustained fiscal effort necessary to restore growth.”
Every country signed up to it. The Conservatives are the only people who are against that.
My right hon. Friend referred in cautiously optimistic terms to getting a kick-start to the world trade talks. The Prime Minister has been consistent in his support for development and for fair as well as free trade. How confident and optimistic is my right hon. Friend that those talks, when they restart, will help encourage the principles of fair trade and the sustainability of developing economies?
We have to be optimistic because it is important to get a satisfactory conclusion. President Obama has made it clear that he takes that extremely seriously—he understands his country’s obligation on that. I appreciate the obvious problems of an incoming Administration; they want to take stock of several matters. However, the President’s commitment to what my right hon. Friend raises, and his support for what we agreed today, is important. America has a key role to play in the world and I am glad that President Obama has made it clear that he intends to play his full part.
Now that, by his account, the Chancellor has had his day of glory, what is the point of this Government?
The hon. Gentleman has asked some ridiculous questions in his time in the House. Given the scale of what we are facing and the scale of the problems faced by people in this country and across the world, particularly people in emerging economies, people who are living in poverty and people who run the risk of falling back into poverty, I would have thought that anyone looking at the situation would say that now is the time for Governments to act and support them, not to turn their backs on them and walk away.
I congratulate my right hon. Friend and the Prime Minister on the excellent work that they have put in to ensure the success of the G20. Is the issue now not about ensuring that the benefits that come from what has been agreed today get to people as quickly as possible, including those in Halton who are losing their jobs and houses, and to businesses, so that they have hope for the future, and about ensuring that the institutions that are responsible for getting that help to them are brought together quickly and that action is taken?
I agree with my hon. Friend that that is important. That is why we should continue to do everything we can here to help people who lose their jobs. It is important, too, that we remember the effect of public investment in transport, for example, of which he will be well aware. And who knows? One day, I hope not in the too distant future, we might get to visit the bridge that he has advocated for so many years. I certainly look forward to seeing it one day, as I think that I approved it.
In answer to my hon. Friend the Member for Twickenham (Dr. Cable), the Chancellor did not clarify whether the European Central Bank had the power to introduce quantitative easing if it so wished or whether the Royal Bank of Scotland would be doubling pay rates to get around the fact that it would not be paying bonuses.
In relation to RBS, I need to get back to the hon. Gentleman. In relation to the ECB, which is a slightly different matter, the bank would need to consider what options it had. It would also have to discuss the matter with members of the euro group. However, I am sure that they recognise that they may have to look at other options—the interest rates were cut again today in Europe—although that is a matter for them. We are not in the euro; we are responsible for our own Bank, and we shall have to see what the ECB decides to do.
My right hon. Friend is right to be cautious, but surely it is already clear that the London G20 summit has been a success. Although it is true that there are still toxic assets in the banking system, which is a problem, and that unemployment will continue to rise for a good many months yet—and not just here, but elsewhere—are we not beginning to see grounds for some optimism? He is right to refer to the position six months ago. Are we not seeing a situation in which it looks as though the 1930s will not be repeated in this global downturn?
My right hon. Friend is right: there are certainly lessons to be learnt from the 1930s, when there was an attempt, which failed, to get countries to come together. It was not until the end of the second world war that countries sat down and started to plan for the peace and look at the international institutions and the action that they might need in future. What has happened shows that we can take action and that we can take it quickly.
There is some way to go yet—I am naturally cautious about these things—but the measures and the agreement reached today will be a significant help, provided that we see them through to conclusion. I think that they will be a significant help and I think that Governments can make a difference. If I did not, I, like many others, would not be here anyway. Governments can make a difference; perhaps the difference between us in this House is that I think that Governments need to make a difference and that they need to act.
Although the steps announced by the Chancellor are broadly to be welcomed, does he agree that they all have a tendency to be inflationary and that the situation could change quite quickly, especially as the amounts of money borrowed by this and other Governments are so large that Governments may tolerate inflation, because that will help them to reduce their debt burden? Will he promise never to take his eye off the ball and ignore the risk that explosive inflation could cause?
I am grateful to the hon. Gentleman. He is right that we always have to be vigilant about inflation. When he has an opportunity to look at the communiqué—I appreciate that he will not have seen it for perfectly understandable reasons—he will see that it acknowledges that risk.
My right hon. Friend may be aware that last year I introduced a ten-minute Bill that would have prevented the awarding of PFI contracts to companies that avoid UK tax through the use of tax havens. Can he tell me how the G20’s excellent start on tackling tax havens will be progressed, so that Bills such as mine will become unnecessary and billions of additional pounds will flow into Government coffers worldwide?
The agreement that we reached today made it clear that we wanted to have a crackdown on tax havens. The OECD has published a list of the countries that it regards as compliant, those that have indicated that they are ready to comply, and those that have not. Over the next few weeks and months, it will be important as we move to the next stage that we bring pressure to bear on those countries, using whatever sanctions are thought appropriate, to ensure that we end these tax havens. They are grossly unfair and grossly inefficient, and we need to stop them.
Following up on the question from my hon. Friend the Member for Gosport (Sir Peter Viggers), may I ask the Chancellor where all this money is coming from? How will it impact on inflation in the short and medium term? Will there be any benefit whatever—
Order. I did ask for single questions.
Well, I am very quick—much quicker than some other Members. Will there be any benefit for savers—
The hon. Gentleman will know that the Bank of England has a responsibility to target the Government’s inflation rate and that it is for the Bank to decide what action is appropriate to ensure that we support that target.
The Government—and especially the Prime Minister—deserve congratulations on achieving a broad range of agreements from such a diverse range of countries. Given sterling’s competitiveness internationally at the moment, what, if anything, in today’s agreement will help those sectors of our economy—such as agriculture and manufacturing—that would in normal circumstances expect to benefit from a growth in exports?
I am grateful to my hon. Friend; he is right to say that we have an opportunity to capitalise on our exports. We produce very good quality exports and it is therefore important that we have markets in which to sell them. For example, one of the reasons we support Germany putting money into its economy is that we sell goods into Germany. We also sell goods into developing countries. When people ask why we are concerned about what is going on in these other economies, the answer is quite simple. It is because our exports, and therefore our jobs, depend on them.
The effectiveness of a complex package such as this lies in the detail of its implementation, so who among the G20 has taken responsibility for ensuring that all parties that have made commitments in the agreement today actually deliver what they have committed to?
The right hon. Gentleman raises a perfectly pertinent point. The test will be in the implementation of this agreement. The answer to his question depends on the particular measure, but the IMF, for example, has now been given a commitment of more funds by certain countries. There have been commitments in respect of China, Japan and the European Union, though it must be ensured that it gets the rest of the money. It is the IMF’s job to ensure that it can negotiate quickly with countries seeking help, and to ensure that the money gets there. Equally, there has been agreement to get money to the development banks. We contribute quite substantially to them through the Department for International Development. The right hon. Gentleman is absolutely right: we have to ensure that all the organisations involved—many of them international—actually implement what they have signed up to.
As well as thanking the Prime Minister and the Chancellor of the Exchequer, I hope that we will also give our thanks to the noble Lord Malloch-Brown, the G20 envoy, who has done sterling work. The question that my constituents will be asking this evening is: is the G20 the new G8? They will wonder what the point of the G8 is, if we also need China, India and Brazil. My question relates to the financial stability board. Will the four major audit companies of the world have new regulations and be part of a new corporate governance approach?
In relation to the profound question, “What is the meaning of the G8?”, I am tempted to answer, “Discuss.” That subject has been discussed for many years. At the risk of stating the blindingly obvious, I may say that the advantage of the G8 is that there are fewer people round the table to have a conversation with. The G20 brings in a lot more, and recognises the reality of today’s economic power, which is why the G20 meeting has developed a great deal of momentum. However, these discussions will continue. There are also sensitivities among countries not in the G20 that believe that they, too, need a greater voice in some of these international discussions.
On behalf of the Scottish National party, may I, too, welcome the measures to boost aid and action for developing countries, and the announcement in the communiqué about stronger financial regulation? The Prime Minister spoke at the ExCeL centre today about the world joining and acting in concert, and today’s communiqué talks about doing what it takes to restore global growth. In the United States, President Obama is also investing in a fiscal stimulus, as the Chancellor will know, but Barack Obama seems to have a greater understanding of how to spend it at state level rather than adopt the centralised approach of the UK, which hardly represents acting jointly. In the UK, the Governments of Wales, Scotland and Northern Ireland are unhappy at this time that their budgets are to be cut in the next two years. To achieve meaningful effects for ordinary people, surely the Scottish, Welsh and Northern Irish—
Order. I hope that the hon. Member has now completed his remarks.
I think that the hon. Gentleman was largely being complimentary about what has been done. At the risk of being churlish, I put one point to him: that this matter rather demonstrates, does it not, what the United Kingdom can achieve in helping to shape the destiny of the world. What has happened over the last few months and in today’s meeting demonstrate that the UK can deliver a lot, not just for the people that live in this country, but for the wider world.
How much additional revenue does the Chancellor expect to get as a consequence of the crackdown on tax havens, and what happens to countries that refuse to co-operate in the exchange of tax information?
On the first question, I cannot provide an estimate today because much will depend on the way in which the agreement is actually implemented. Equally, on sanctions, we will need to discuss what happens, but it is important to maintain the momentum. As I said to the House earlier, under threat of being named and shamed, many countries were coming forward after years of saying they did not want to co-operate, to say that they wanted to sign up, and sign up quickly. That does help us, but it will work only if we maintain that momentum and do not let people think that once the storm has blown over, they can go back to the old ways.
The whole House supports greater transparency in offshore financial centres, but will the Chancellor confirm that the British publicly owned banks will remain free to set their own policies in relation to tax, within the law, or will he seek to direct their decisions?
The banks in which we have shareholdings, just like any other banks or institutions, have to obey the law. In relation to tax, they have to comply with the tax law of this country.
Given that the world currently consumes each year the resources that the planet takes one year and four months to renew or replace, does my right hon. Friend agree that it is just as important that the G20 should have examined not only the credit bubble and fallout in the global economy, but the credit bubble in the global environment?
My hon. Friend raises a very important point. It is important to take account of the sustainability of everything we do, and this is an opportunity. I cannot remember which Opposition Member raised the point, but we have done a great deal over the last few years to increase the amount of money we spend in order to tackle climate change and protect our environment. We have introduced legislation—I think we are the only country so far legally to bind itself to meet demanding targets—providing another example of what can be done. As my hon. Friend knows, there is reference to the need to have regard to the long-term sustainability of what we do, so perhaps today’s event should give heart to those who are aware of the importance of the Copenhagen meeting at the end of the year, when we really will need to sign up to some ambitious targets and be bound by them.
My constituency is one of those with a greater number of people out of work now than in February 1997, so getting jobs and trade going is important. It also has many pensioners. Will the Chancellor publish a review of the impact of the present crisis on pensioners and people soon to be pensioners, and on their savings, their income and the prospects of inflation taking away from them the income they have tried to squirrel away for their old age?
The hon. Gentleman is right that we need to ensure that we support older people—people who have retired. That is one of the reasons we introduced pension credit, which helps about half the pensioner households in the country. It is also why we made a £60 payment to pensioners earlier this year in order to put more money in their pockets. I am sorry that he opposed that.
Will the Chancellor convey my congratulations to the Prime Minister on bringing forward this world response to the global crisis? Does he accept, however, that it was the private investment banks that brought about the crisis by engaging in reckless speculation and building up toxic loans? My constituents want an assurance that conditions are in place to prevent those banks from doing that ever again. Can the Chancellor give that assurance?
My hon. Friend is right that we need to ensure that there is more robust supervision and regulation of these institutions. The only point I would raise—I would not disagree with him on it, but simply make an observation—is that, sadly, it was not just the investment banks that were responsible; it was also banks that were largely engaged in retail lending, such as Northern Rock. As we saw earlier in the week, part of the building society sector has been affected as well. I think that there are lessons to be drawn right across the financial services sector.
Does the Chancellor recognise that our ability to meet the millennium development goals to which he referred in his statement may be very adversely affected by the impact of climate change on the world’s poorest countries? What hope does he have for a serious global deal at Copenhagen, given that the statements about the environment that emerged from the G20 today appear to be disappointingly vague?
Today’s meeting reaffirmed the commitment to the millennium development goals. It is also important for countries not just to sign up to such goals, but to do what is necessary. I very much hope that Copenhagen is a success, but as the hon. Lady will know, while most Governments accept that climate change is a reality and that we need to do something about it, that view is not universally held. Moreover, some countries which acknowledge that climate change is a problem are not willing to do as much about it as they should. Today’s meeting, however, showed that if there is a will, there is a way of getting through this, and the same spirit must be shown in Copenhagen later this year.
As a result of the G20, to what extent will the growth in the United Kingdom’s economy be restored sooner than would otherwise be the case? Can the Chancellor put a figure on that, in terms of days or months? This is the sort of question to which my constituents want an answer, given that unemployment in my constituency has risen by 184 per cent. in a single year.
I agree with the hon. Gentleman that we should be concerned about anyone who loses a job, but my answer is rather different from his. I think that we actually need to do something about it. As for my forecast, he will have to wait until the Budget.
I hope that I am not reading too much into the Chancellor’s desire to remove the stigma of going to the International Monetary Fund. If he has been checking the IMF’s phone number, perhaps he should let us know.
The Chancellor said that the communiqué dealt with bank regulation. May I make a suggestion to him? I think that what is needed is not heavier or lighter or more expensive regulation, but more intelligent regulation. Regulators tend to regulate the problem that happened before, rather than looking forward and paying attention to things that are happening that may produce problems. We have never had a bigger regulatory apparatus than the Financial Services Authority, and it has failed. Will the Chancellor ensure that whatever reforms are instituted, nationally or internationally, include an effort to make regulation more intelligent and more forward-looking?
I have said on many occasions that what we need is effective regulation. That is the test, so I agree with the hon. Gentleman’s point.
In his statement, the Chancellor referred to an extra $250 billion in export credit. What additional export credit will come from the United Kingdom Government for UK manufacturers and other people in business?
We are looking into that at the moment, and I hope that we shall have something to say about it in the not-too-distant future.
The Chancellor referred to national supervision in relation to financial regulation, but in reply to my hon. Friend the Member for South Staffordshire (Sir Patrick Cormack) he also referred to common European rules. Will he categorically rule out the idea that the supervision of financial services and banking will be handed over to the European institutions and, ultimately, to the legal jurisdiction of the European Court of Justice? Yes or no?
I thought that the hon. Gentleman would ask a question like that. As soon as I mentioned the word “Europe”, he perked up.
We probably will not agree on this, but I think that, especially when we know that there are banks and insurance companies trading in this country and throughout Europe, it makes sense for there to be a greater degree of co-operation—in the event of failure, for example—in the form of a common approach and a common set of rules. However, I also said that I believe that we do need to make sure that we have national supervisors and regulators who are responsible for regulating institutions based in this country. All I say to the hon. Gentleman is that at some stage, surely, he and his colleagues should recognise that the world has moved on; we are part of the European Union and he should wake up to that reality.
My hon. Friend the shadow Chancellor asked a specific question to which he did not receive an answer. He asked how much of the finance that is proposed is new money and how much is money that is recycled and has already been announced. Will the Chancellor kindly address that question and give a precise breakdown?
I thought I had given the indication in my statement when I set out the money that was additional in relation to the International Monetary Fund, and other areas as well.
What assurances can the Chancellor give me that some of this vast increase in money will go to hard-pressed manufacturing in the midlands, which is finding things so difficult at present, and will he give the House an assurance that it will not go to supporting public sector jobs, which do not create wealth?
In relation to the hon. Gentleman’s first point, I think it is important that we support industry in the midlands and in other parts of the country as well. Indeed, part of what we have been trying to do in the banking system to get credit flowing again is precisely to help businesses. I disagree with him in relation to the public sector. The public sector does support jobs, and each and every one of us relies to one degree or another on the public sector. I would also just say this to him specifically: if it were not for public sector construction at present, the construction industry would be facing an even tougher time. So I think the public sector does help, and I disagree with his party’s proposal to take £5 billion out of the public services, starting yesterday.
Why is the Chancellor optimistic about concluding the Doha development round now in a recession and when countries are introducing protectionist measures, when it could not be concluded when economies were growing?
What I said was that we have to be optimistic because the alternative is much worse. Rather like exuberance, optimism is another thing that I am not accused of every day of the week. The hon. Gentleman’s second point is important—although perhaps he did not intend to put it in the way that he did. He said that this is more difficult to do especially at a time like this when there is a downturn. The lesson from the 1930s is surely this: when there is a downturn, the temptation is to erect barriers, and that is what happened in the 1930s, with the result that the recession lasted right the way through, and it was really only at the time of the second world war that countries sat down and realised what had happened. That is why I say we have to be optimistic: we need, especially at this time, to look at breaking down trade barriers, because if we cannot sell goods and services to other countries, all of us will be poorer. That is why I think this is so important.
I am extremely grateful for your indulgence, Madam Deputy Speaker.
Restoring confidence is key. The Chancellor said in answer to a question from one of my hon. Friends that we all need to live within our means. Now, after the Chancellor has ripped up his predecessor’s fiscal rules, what confidence can the markets, and particularly the gilt market, take from today’s statement that this Government will live within their means?
It is important that all Governments—[Interruption.] I am sorry that the hon. Gentleman has lost interest already; I know he has been standing for a long time, but having asked his question, he might at least wait for the answer. I think it is important, first, that Governments support their economies just now, but also that they recognise the need to make sure they live within their means. That is recognised in the communiqué as well. There are two parts to this approach, and I disagree with the hon. Gentleman that it is somehow wrong to support the economy and that we should just wait and hope for the best. That was tried in the ’80s and the 1990s and it did not work.