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G20 Summit

Volume 738: debated on Monday 25 June 2012


My Lords, it may now be a convenient moment for me to repeat a Statement that has just been made by the Prime Minister in another place on the G20 conference that took place last week. The Statement is as follows:

“The G20 needed to address the five big threats to the global economy. First, the problems in the eurozone; secondly, the mountain of debt and persistence of imbalances in the world economy; thirdly, the lack of growth; fourthly, the rise of protectionism; and, fifthly, the failure to regulate our banks properly. Let me take each in turn. First, the eurozone. Britain is not in the eurozone and we are not going to join, but when 40% of our trade is with the eurozone, its future affects our future. It is in our national interest for the eurozone to resolve its difficulties. As a full member of the European Union and a significant net contributor to its budget, it is not only vital, but also quite right that we speak plainly about what needs to happen.

In the short term, we need rapid action by the core of the eurozone, including the European Central Bank, to restore financial stability and confidence to the countries on the periphery of the eurozone as they undergo their vital structural reforms. This needs to be reinforced in the medium term by improvements to the governance of the eurozone that recognise the remorseless logic of being in a currency union.

This clearly was not a eurozone summit: it was a G20 summit. None the less, at this summit, the eurozone countries made some steps towards both. First, they agreed to take all necessary policy measures to safeguard the integrity and stability of the eurozone, including breaking the link between sovereign debt problems and bank instability.

Secondly, they committed to take further steps towards fiscal and economic integration, including through a banking union. Britain does not want to stand in the way of these measures towards closer integration of the eurozone but we will not be part of them. We did not join the eurozone precisely because we did not want to give up the kind of sovereignty over our national economy that is essential to making a currency union work. We have been clear that whatever long-term decisions are made about the governance of the eurozone, the rules that govern the single market must always protect the interests of all its 27 members. This is a red line for Britain: it is vital to our national interests. The eurozone now needs to get on with implementing the agreements reached at the G20. I will be working at the European Council this week to make sure that the eurozone takes these steps in a way which protects the UK’s interests.

To deal with the wider risks of contagion to the global economy, the G20 also welcomed the commitments to increase the resources available to the IMF by more than $450 billion. It is a basic principle of the IMF that the help it offers is for countries not for currencies. Indeed, almost all the IMF’s 50 programmes are for countries outside the eurozone. No country has ever lost money lending to the IMF. Britain’s contribution is a loan on which interest is payable and it will be used only if troubled economies meet strict conditions to get their economies back on track.

Thirdly, on debt and imbalances, as at the G8, there was absolute agreement that deficit reduction and growth are not alternatives. You need the first in order to get the second. The G20 also reaffirmed its commitment to reduce global imbalances with deficit countries strengthening their public finances and surplus countries taking further actions to increase demand and move towards greater exchange rate flexibility.

We welcomed in particular China’s commitment to allow market forces to play a larger role in determining movements in its exchange rate, and to continue reform and increase transparency in its exchange rate policy. This is an important advance for the G20 in dealing with global imbalances—one of the underlying causes of the crisis in 2008.

In a debt-driven crisis where many countries lack the fiscal space to stimulate their economies, the most powerful tools for growth that we have are monetary activism and structural reform. The G20 agreed that monetary policy should continue to support the economic recovery and every G20 country has put on the table specific structural reform commitments to strengthen global demand, foster job creation and increase growth potential.

The Los Cabos growth and jobs action plan includes mechanisms to hold G20 members accountable for delivering on the reform commitments made. Vitally for Britain, this includes completing the European single market. The G20 did not just focus on growth in the largest economies; it also reaffirmed its vital commitment to supporting private-sector-led growth in the poorest countries as the best way of helping people to lift themselves out of poverty. Britain led a significant breakthrough on two of the biggest barriers to a successful private sector in developing countries.

We drove forwards the G20’s anti-corruption plan, including securing agreement on important new principles which will deny entry to all G20 countries by corrupt officials or those who corrupt them. On the inability of farmers to access the technology that makes their farming viable, Britain made a substantial contribution to the Ag Results initiative which will harness the creativity of the private sector to help put new technology in the hands of the world’s poorest farmers. We will be building on this further at our special event on hunger at the Olympics in London in August.

Fourthly, on trade, we expressed our deep concern about rising instances of protectionism around the world. The President of Argentina had a number of arguments during this summit—not just with me—and it was made very clear to her that recent behaviour by Argentina on both investment and trade protectionism was not acceptable. At this G20, free trade again won the day. We extended our commitment to avoid any new protectionist measures until the end of 2014 and agreed to roll back new protectionist measures that have arisen, including new export restrictions. Most significant of all, the US and the EU reached a ground-breaking political agreement to move forward with a deep but credible trade agreement with a clear and agreed timetable. The EU-US High Level Working Group will now produce recommendations for taking this forward by the end of this year. The EU and the US make up half of the world’s GDP, so completing a deal here could provide an enormous boost to growth across the world—meaning jobs and growth for Britain.

Fifthly, on financial regulation, this G20 maintained the political impetus behind the reform of regulation across the global economy. We endorsed the strengthening of the Financial Stability Board in holding all G20 countries to account for delivering on their commitments: something specifically recommended by the UK report on global governance at the Cannes Summit last year. We also agreed to push forward with completing the implementation of Basel III.

Finally, in the margins of this summit, I had useful discussions on some of our key foreign policy priorities. On Syria, where the regime continues to pound civilian areas with mortars, attack helicopters and snipers, the EU is today, as a result of UK efforts, extending sanctions to ban any EU companies from insuring ships taking arms to Syria. We will continue work with our international partners, including through the United Nations, to stop the appalling slaughter and to help forge a political transition to a democratic future, which protects the rights of all its communities.

On the Falkland Islands, I took the opportunity to emphasise the importance of the planned referendum to President Kirchner. The islanders have to put up with endless attempts at endless summits to put a question mark over their future. They want to determine that future themselves. No one should be in any doubt that, as far as the British Government are concerned, it is the Falkland Islanders who will determine the sovereignty of the islands and their view will be respected by this House, by this country and by the world”.

I commend this Statement to the House.

My Lords, I thank the noble Lord, the Leader of the House, for repeating a Statement given in the other place by the Prime Minister on the recent G20 meeting. Unusually, I did not see a copy of the Statement in advance. I am not complaining, but it does make life rather difficult.

I will start with the foreign policy issues. On the Falklands, there is support from this side of the House for the absolute need to protect the principle of self-determination of the islanders. On Syria, there is deep concern on all sides of the House about the continued failure of the Annan plan to deliver a cessation of violence, and there is cross-party consensus on the appalling nature of the Assad regime and the need for the toughest sanctions against Syria. We welcome today’s extension of EU sanctions but given the urgent need for an immediate end to the dreadful and escalating hostilities, does the noble Lord the Leader of the House agree that it is now vital that the wider international community unites around the need for the toughest sanctions against Syria?

The Prime Minister said in his press conference that:

“President Putin has been explicit that he is not locked into Assad remaining in charge in Syria”.

If correct, this clearly represents an important step forward. However, Foreign Minister Lavrov said afterwards in a statement that these comments did not “correspond with reality”. Can the Leader of the House clarify the position?

I now turn to the main business of the summit—the economy. With our country in double-dip recession, with world growth slowing and with the eurozone crisis, if ever there was a time for the international community to come together and act, this was it. All we got from this summit was more of the same: drift and inaction in the face of a global crisis. The Prime Minister claimed afterwards that the summit had made “important progress” on a number of issues,

“on the Eurozone, on the lack of global growth and on the rise of protectionism”.

This sounded familiar. Then we realised why—because the Prime Minister said exactly the same after the last summit, in Cannes last November.

The Prime Minister now says:

“In terms of the slide towards protectionism, I think that has been halted”.

Can the Leader of the House confirm that the Prime Minister told us precisely the same thing in November? That summit was a success because action had been taken to,

“stop the slide to protectionism”.

That was a great triumph—the slide that had been stopped last November has been halted again.

On global growth, the Cannes summit communiqué said that,

“should global economic conditions materially worsen”,

countries should,

“agree to take discretionary measures to support domestic demand”.

Well, global conditions have worsened and therefore, being true to that communiqué, this G20 should have been a coming together of world leaders to work for a co-ordinated plan for jobs and growth. And what did we get? The communiqué just repeated the same words:

“Should economic conditions deteriorate significantly further, those countries with sufficient fiscal space stand ready to coordinate and implement discretionary fiscal actions to support domestic demand”.

No change, no action.

On the eurozone, I note that the Statement says:

“As full members of the European Union, and a significant net contributor to its budget it is vital that we speak plainly about what needs to happen”.

I think that our partners would have listened to us more if the Prime Minister had not decided to use the veto that never was in December. Actions for short-term political gain have long-term consequences.

The Prime Minister said that while this was not a European Council meeting, progress was made with,

“significant agreements. Now the eurozone countries need to get on and implement them”.

But is not the reality that there is no agreement on the main issues of substance, such as how to recapitalise Spanish banks; how the European Central Bank can stand behind member countries; how to prevent the escalation of problems in bond markets; or how to boost the size of the firewall fund to make it work? Instead, we had more of the same.

For people here at home, the economic reality is that things are getting worse, not better, and there is nothing in this summit’s conclusions to make any difference to that. And there is a simple reason why there was nothing for Britain at this summit: because we have a Prime Minister, and a Government, who simply argue for more of the same. What a contrast with France, where the president is passionate about growth, understanding that it is a prerequisite for dealing with deficits. Austerity is not working; with Britain in a double-dip recession, one of only two G20 countries in that position, can the Leader of the House tell us whether at the G20 the Government were actually arguing for anything different from what they were arguing for last November? From today’s Statement, it does not look as though they were.

Can the Leader of the House confirm that at the time of the Cannes summit, UK growth for 2012 was forecast to be 1.2% and that now the average of independent forecasts is just 0.3%? On the world economy, what this summit needed was a co-ordinated plan to generate greater growth, but the international community is divided between those who want a move towards greater growth and jobs and those whose answer to the failure of the last two years is simply more of the same. I fear that, on this issue, this Government and this Prime Minister are on the wrong side of that argument.

There is one important lesson for the Government from the last week. A global summit in the face of an economic hurricane needs action, not words. The reality is that the Government and the Prime Minister have come back from this summit with nothing for Britain—nothing to cope with double-dip recession, nothing to help Britain’s families and nothing to ensure growth in the world economy. I trust that when the Prime Minister returns from the European summit next week he has growth at the top of his Statement and agenda. Britain deserves more than was achieved at the G20 summit, and we deserve a change of direction; a change of economic strategy; a change that puts action first, not words; and a change that puts jobs and growth first.

My Lords, the noble Baroness the Leader of the Opposition is on good form today. Typically, she sees a socialist president being elected in France, looks over the water and believes that everything over there is going swimmingly. However, she has not read what the good president has said. He said that,

“national debt is the enemy of the left and the enemy of France”.

We agree with that. Mr Hollande would balance France’s budget faster than the coalition plans for the United Kingdom. When asked how he would stimulate growth, the French President said, “The means cannot be extra public spending since we want to rein it in”. We can agree with that; the noble Baroness and her party cannot.

We very much welcome the noble Baroness’s support on the Falklands and Syria. The situation in Syria is immensely dangerous, difficult and complicated. We are still discussing with key partners what more we can do, including in the United Nations, to support the Annan plan. There remain differences over sequencing and the exact shape of how a potential transition can take place but we have put in place a strong EU arms embargo, are closely tracking other shipments to Syria and want to work with countries and companies around the world to stop them. We have had useful conversations with Russia but the key thing is to get together, to work together and to try to implement the Annan plan, if at all possible.

I rather admire the fact that the noble Baroness’s research led her to spot that some of the words in this communiqué were the same as those used at the Cannes summit. She read that as signifying that nothing had changed. However, it may also prove some admirable consistency emanating out of G20 summits in that there are still common problems with which to deal, and they are going to be dealt with.

The noble Baroness took a pot shot at what my right honourable friend the Prime Minister did at the EU summit at the end of December, which was not to sign up to the communiqué. As I said at the time, the reason my right honourable friend did not sign that communiqué was because he believed in protecting British interests, which is what he did. The noble Baroness and her party would have signed it and, we believe, would have sold vital British interests down the river.

The G20 was a success in the sense that many of these gatherings are a success as an opportunity for the leaders of different countries to discuss some of the key issues facing the world and to try to come to an agreement. There was no shying away from the fact that one of the most difficult issues facing the world at the moment is the problems in the eurozone. We have come up with what we believe to be helpful and constructive words to try to encourage the eurozone to find a solution in preparation for the European Council later this week. However, in the end, the countries in the eurozone have to make those decisions themselves.

My Lords, I remind the House of the benefit of asking short questions in order that my noble friend the Leader of the House can answer as many questions as possible.

After £325 billion worth of quantitative easing and consecutive quarters of zero growth, is it not evident that the monetary activism of which the Prime Minister spoke earlier cannot get any traction without substantial fiscal stimulus? Therefore, why do the Government continue to resist the proposition that they should establish a national investment bank that through the use of public funds will attract private investment in order to stimulate growth, employment and development in this undergrowing economy? Secondly, when it is clear, as the Prime Minister said, that deficit reduction is not an alternative to growth but is contingent on growth, why do the Government continue to advocate expansionist growth policies in the eurozone but firmly resist exactly the same approach in the United Kingdom, which sorely needs those policies? Is it not clear that the Government’s maxim of securing growth through austerity is oxymoron economics?

My Lords, I do not agree with what the noble Lord, Lord Kinnock, has said. Neither do I accept his characterisation of what we are doing in the United Kingdom and what we are exhorting our colleagues in the eurozone to do. I take his point about a national investment bank in order to try to encourage growth, but our solution has always been to try to encourage the private sector—and private sector banks—to have the confidence to invest in British business.

The UK economy is recovering from the deepest recession in living memory. It was even deeper than was previously thought: over 7% was wiped off the economy. Inevitably, recovery will be choppy, and by historical standards subdued, because household business and government debt rose unsustainably. Naturally, the eurozone crisis is making the recovery even more difficult.

The main point is that we have managed to maintain the lowest interest rates that this country has seen in modern times; a one percentage point rise in our interest rates today would add £10 billion to family mortgage bills alone. You only have to look at the interest rates in Spain, Italy and of course in Greece, to see just how much better off we are today than those nations. Despite having a deficit similar in size to that of Greece, the UK has interest rates at historic lows, similar to those in Germany; France’s interest rates are more than 50% higher, and Italy’s interest rates more than three and a half times higher. We can have a philosophical debate—even an economic debate—as to whether or not austerity and growth go together, but our firm view is that they can.

My Lords, will the Minister accept my thanks for that Statement? I must say that I found it a trifle Panglossian, but I do not wish to take issue with what was in it.

Are the Government not concerned that these G20 meetings are becoming of rather waning relevance, and that as each meeting succeeds each other the hopes that the world placed in the G20 when it was set up at the height of the crisis are not really being realised? Are they not, increasingly, simply photo opportunities and things of threads and patches that make no overall effort to get to terms with the challenges that confront us? If the Government are concerned about that, do they have any thoughts about how the G20 machinery could be made to work a little bit better?

Perhaps as an illustration of that, the distinctly disappointing outcome of the Rio meeting on the environment, which was held only shortly after the G20 meeting, was perhaps highlighted by the fact that the G20—the economies that are responsible for between 80% and 90% of the world’s emissions, because they are responsible for 80% or 90% of the world’s economic activity—did not even find time to talk about this subject. No effort was made to prepare a position that might have provided the 193 countries that went to Rio—which could not possibly have produced, in one or two weeks, a very meaningful outcome—with some guidance and momentum. That, too, seems to be lacking from the G20’s present agenda.

My Lords, the noble Lord makes an interesting point, particularly with his background and experience, on the role of the G20 and, indeed, of the G8. The role of these organisations has changed, particularly over the course of the last five or six years, given the economic situation. However, there is a very important role in their meeting—both G8 and G20—to work through an agenda and come forward with conclusions. The important thing in those conclusions is that they make sure that there is a vibrant system that can check back to see who committed to doing what and to make them accountable. I am sure that the noble Lord, Lord Hannay, has views on how to streamline the secretariat, or indeed to make it more strategic, and I would encourage him to put those down on paper.

Do we believe that the G20 has made no difference at all on climate change? No; all G20 countries were committed to implementing the outcomes of the COP 17 in Durban, and we made it clear that we wanted a successful outcome to the COP 18 in Qatar later on this year. As far as Rio is concerned, the deal delivers much of what the UK wanted and worked hard to achieve, and it puts the sustainable development agenda very firmly back on the map.

My Lords, I thank the Leader of the House for repeating the Statement. I declare an interest as a member of the La Pietra Coalition, which is a group of international NGOs and global corporations that came together three years ago to try to influence the G20. Among the items on which we have been trying to influence the G20 is access to finance for women and youth around the world. I am very grateful to officials in Treasury and DfID who have worked very closely with us over the past three years, and I am pleased that at long last there is the following phrase in the communiqué:

“We recognise the need for women and youth to gain access to financial services and financial education”.

It is stated that the OECD and one or two other international organisations will be responsible for this. Given that this Government have played such a part in this matter over the past three years, we should officially take this policy on board, keep an eye on it, and ensure that that access to financial services and financial education does happen, because we know that the GDPs of countries change enormously when women have access to finance and can educate their children.

My Lords, the noble Baroness is quite right and I very much welcome her welcome for the initiative. The Government are very pleased to receive these independent reports from NGOs, particularly regarding the extremely important areas of access for women and financial education. We certainly should keep an eye on it and I shall make sure that officials in the departments are aware of what the noble Baroness said.

My Lords, I am grateful for the particular stress that the Leader of the House put on support for the poorest countries of the world. As I understand it, there were three strands to that support and to the UK’s part in creating it. The first was an anti-corruption plan. Can he be more specific on how corruption can be tackled within the poorest countries of the world and how the UK can contribute to that? The second strand relates to the inability of the poorest countries to access modern technology. What sort of help can be provided by the UK and does that have implications for our aid budget and aid policy? Thirdly, welcome though the hunger event at the Olympics, to which reference was made, would be, how is that intended to support the poorest countries of the world?

My Lords, I thank the right reverend Prelate for his general welcome. I cannot add anything more on the anti-corruption plan because G20 officials have been asked to come forward with details over the next few months. We will have to wait and see what will happen on that. As to food security and technology, the UK met its L’Aquila financial commitments in full and will continue to provide broadly equivalent resources to help food security. We made welcome progress at the G20 on implementation of commitments made last year at Cannes, including rolling out the Agricultural Market Information System to improve transparency, endorsing the Scaling Up Nutrition movement, and pledging to continue our work in other areas, such as the platform for agricultural risk management. This is an area to which a substantial amount of importance is given, as is the hunger event at the Olympics in London during August. I think that the idea is to hold a conference to concentrate people’s minds on the issue of hunger around the world, but if I can add more I shall let the right reverend Prelate know.

My Lords, is my noble friend the Leader of the House aware that when a great democratic socialist—namely, Roy Jenkins—served as Chancellor of the Exchequer, he was of the view, and remained of the view when he became Home Secretary in the second Wilson Government, that the national debt should not occupy more than about 40% of GDP? That view was expressed by Mr David Laws in an interesting article in the Sunday Telegraph this weekend. Is my noble friend aware that it is possible to have that view and yet be a democratic socialist?

My Lords, I think my noble friend is trying to be helpful. Indeed, he is being very helpful. Our net debt to GDP is considerably higher than 40%. My noble friend is right: as President Hollande has shown, the answer does not lie in increasing debt.

My Lords, I am delighted that the Prime Minister was able to make it quite clear to the President of Argentina that the British people and the British Government stand beside, and behind, the people of the Falkland Islands in deciding their own future.

Can my noble friend the Leader of the House let us know whether, in the margins of the G20 meetings, the Prime Minister was able to talk with political leaders in Mexico, given the importance and vitality of the Mexican economy, and in view of the forthcoming elections there?

Yes, my Lords. Certainly, on the first question, my right honourable friend the Prime Minister made a point on the future of the Falklands which he has made continually, which I know the whole House will agree with. We do not see that this question should be put into any doubt whatever. We have made the proposal that there should be a referendum. We believe wholeheartedly in self-determination. That is the right way forward and we encourage the people of Argentina and its Government to agree with us on this vital matter.

I can also confirm that my right honourable friend had a further meeting with Mexico, and an inward investment meeting of British businesspeople in Mexico. It was extremely successful and useful, and showed again this Government’s firm desire to demonstrate our need to grow our economy through exports.

The Leader of the House will recall that the verdict of the Office of Budget Responsibility on all of the growth measures announced by the Government is that they will have no impact. Now that the Prime Minister has signed up to the growth plan for the G20, when will the Government bring forward measures to give that some substance?

My Lords, the Government are continually bringing forward all sorts of plans and prospects—not least the speech my right honourable friend the Chancellor of the Exchequer made at the Bank of England only 10 days ago, where he made a specific commitment to try to improve liquidity of the banks, so as to increase lending, which will also lead to growth.

My Lords, in the Statement, there was a repetition of the conviction that only the Annan plan will lead to peace in Syria. Is the Leader of the House aware that since it was first announced, the situation has not got better? It has got worse and worse. There is a dreadful parallel here with what happened in Libya. Will he assure us that we are not interested primarily in regime change, and that there have to be intense discussions at a very high level to bring this slaughter to an end?

My Lords, I have a lot of sympathy for what the noble Lord said about Syria. I said earlier that the situation was extremely difficult and complicated, and continues to be appalling. Syria is descending rapidly into a bloody and tragic civil war, with potentially irreparable consequences for its people and for the future.

We are continuing to discuss with key partners, including in the UN, exactly what the best way forward will be. We still believe that the essential framework of the Annan plan is the best way forward, and that is what we will continue to discuss. We have put forward a strong EU arms embargo, which we are currently tracking, and we will maintain that. The EU has announced further sanctions against the Syrian regime today. The UK is at the forefront of imposing the 16 rounds of EU sanctions against 129 individuals and 49 entities.

I cannot be sure that those things in themselves will work. As the noble Lord said, the international community at the highest level is aware of what is going on. There is a lot of activity and pressure is being applied to the Syrian regime. We have to hope and believe that in due course we will reach the end of this appalling conflict.

My Lords, like other noble Lords, I believe that the Statement is rather bland. I also agree with the noble Lord, Lord Hannay, that the influence of the G20 appears to be declining. My only question concerns the speech that Mr Barroso made to the G20 in which he blamed the United States for the economic and financial problems that we have today. Was he speaking for all the nation states of the European Union, including our own? Such a statement is hardly likely to improve relations between the United States and the EU.

My Lords, I speak on areas for which I am responsible and Mr Barroso speaks on areas for which he is responsible within the European Union. I do wonder whether what he said will influence relations not just with the United States but with the UK, and whether there is enough of a fundamental understanding of the problems that have occurred over the past five years, and therefore of the solutions that will need to be taken into account.