asked Her Majesty’s Government:
Whether any consensus was reached with other Governments at the World Economic Forum in Davos on major changes to the world’s financial system.
My Lords, Davos is a useful platform for key decision-makers to discuss a range of policy interests, but it is not traditionally a forum for international agreement and action. The EU, the G7 and the international financial institutions remain the most appropriate forums. The Prime Minister met heads of state and government from France, Germany and Italy as well as the head of the European Commission, President Barroso, in London on 29 January to discuss the appropriate international response to the financial markets’ turbulence. The G7 Finance Ministers, meeting in Tokyo on 9 February, will take these issues forward.
My Lords, I assume that means no. Does my noble friend accept that, while a consensus is clearly needed to deal with the global problems of the world at the moment, in practice a new crisis may not wait for action to be taken whether by consensus, by legislation or by any other means? The Treasury apparently issued a consultation document the other day, as my noble friend will be aware. In it, powers are proposed for the FSA to take action without necessarily involving legislation. However, does my noble friend accept that the FSA was the only body that did not know what Northern Rock was doing? Can we now be assured that the FSA will have the staff at the right levels to deal with the kind of problems covered by the consultation document?
My Lords, the FSA is some distance away from Davos. I answered on Davos because, as my noble friend knows only too well, it is a more general forum for discussions on economic and financial issues along with other issues that affect the whole world.
The FSA has lessons to learn from last summer and autumn. It has indicated that it is currently doing a great deal of work to produce a document in March on how it intends to go further. There is no doubt that we need to look at these issues in fundamental terms, which is why we need to engage on the international level. The problems that occurred in Britain are reflective of the problems that have affected the major economies of the whole world.
My Lords, does the Minister recall that in 1998 the then Chancellor, Mr Gordon Brown, called for the international,
“financial architecture … to be rewritten”?
He trotted out exactly the same line at last weekend’s EU mini-summit. Does the Prime Minister have any capacity for new ideas?
My Lords, as the House will recognise, the Prime Minister is a key figure in international discussions at this level. That is why he met the four key leaders of the leading economies of the European Union and President Barroso last week, and why they are taking those discussions forward. There is no doubt that there has been massive turbulence in the international markets over the past eight months or so, which has shaken them. The noble Baroness seems to indicate that somehow that could be laid at Britain’s door. Where does she think one of the great French banks is at present? What sort of difficulties does she think some of the great American institutions are having? Directing the question solely at the British initiative underestimates the importance the Prime Minister must attach to his work alongside other world leaders.
My Lords, the Minister mentioned the upcoming G7 Finance Ministers’ meeting. What proposals will the Chancellor take to that meeting to enhance global financial stability? Would he accept that his position is significantly weakened by the fiscal balance in this country, which runs the risk of the Government breaking their own fiscal rules?
My Lords, my right honourable friend will also be going to the meeting as a custodian of one of the strongest economies in the western world. The noble Lord has only to think of the unemployment levels in some of our major competitor countries to realise the robustness of the British position in coping with what we all recognise is a major challenge to our economy. That is why the Chancellor will go to the meetings with the confidence of presenting to them constructive proposals on how we deal with what we all recognise are fundamental problems. None of us thinks that the solutions to these problems will emerge over the next two to three months. It is clear that the world has to think its way through the shocks to the financial system that have occurred over the past six to eight months, and that some fundamental restructuring is necessary.
My Lords, does the Minister not feel that there is a certain lack of symmetry here? When the world economic climate was benign and the British economy was doing very nicely in those circumstances, all of it was the doing of the present Prime Minister, according to him; but when the water gets choppy and we get into difficulties, it is all the world’s fault.
My Lords, the noble Lord has not presented these issues with his usual intellectual sophistication. I am sure he will appreciate that a great deal of the structural change in the British economy over the past decade has reaped important rewards in performance which marks our economy out as successful when compared with other economies. That does not alter the fact that the shocks to the financial system sustained over the past few months have been on a scale that we have not witnessed for several decades. It is right, therefore, that all international leaders recognise that they need to come together to present fresh solutions to these issues.