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Mr. Francis Maude (Horsham): That statement was less about the global financial architecture than about distracting attention from Britain's looming downturn and the Chancellor's four basic blunders, which created it. Not once did he admit that there is a problem, and not once did he admit his responsibility for it. The House will have thought it surprising that, although the Chancellor announced this morning to the Confederation of British Industry a date for proposed British membership of the euro and the establishment of a parliamentary body to prepare for it, he has not found time to announce it to the House.
In view of the concern that the Chancellor expressed in the agreement about the performance of domestic financial regulators, will he give an absolutely clear undertaking that the financial services Bill that would create Britain's financial regulator will be in the Queen's Speech, or confirm that the legislation is in such a mess that he is not in a position to include it?
How does the Chancellor square the greater openness and disclosure about which we have heard much--including the repeated use of the word "transparency", in the belief that constant repetition makes it true--with the impenetrable thicket of changed definitions and fiddled statistics with which he has surrounded our public finances? The central point that the Chancellor failed to address was that the IMF was set up to encourage national Governments to pursue sensible economic policies. His predecessors in the previous Labour Government know that only too well.
Today's economic downturn in different parts of the world is primarily due to different domestic policy blunders in each country. Will the right hon. Gentleman tell the House how British businesses are supposed to cope with £40 billion of extra taxation and regulation? Is he merely going to say that they all have to sharpen up their act, while he lectures the world about their deficiencies?
Gavyn Davies of Goldman Sachs has said:
When will the Chancellor stop lecturing others, and tell us what he intends to do here in Britain to prevent our sliding into a recession that will have been made in Downing street?
Mr. Brown:
I knew that the Conservative party wants to opt out of Europe; it now seems to want to opt out of the whole world. When we have an agreement that has been signed by Governments of right and left throughout the world; when the central banks in America, Europe and Japan recognise the need for action; when growth in world trade is set to fall by two thirds this year, from 11 per
We supported the previous Government when they considered heavily indebted poor countries and international debt and when they went to Lyons to sign an agreement tackling unemployment. I believe that, on reflection, Conservative Members will think that all-party support for an agreement signed by everyone from Alan Greenspan and President Chirac to the Prime Minister of Japan and the new President of Germany would be a more sensible approach.
Let me deal with the right hon. Gentleman's individual points, such as they were. He says that constant repetition of "transparency" will bring no answers in itself. That is precisely why all countries have now agreed to follow a code of transparency. It would have been far better if the previous Conservative Government had taken the action that might have avoided some of the crises in the first place.
Yes, it is true that the International Monetary Fund was set up primarily to deal with balance of payments crises affecting individual national Governments, because of the risk that they would spill over into other national economies; but the world has changed since 1945, and we are dealing with global financial markets that need supervision and transparency not only nationally but globally. It is hardly surprising that central bank governors and international regulators are prepared, despite the shadow Chancellor's advice, to meet and consider big reforms in the international financial system.
When the shadow Chancellor sees the result of the work being done by the Basle committee, the International Monetary Fund and the World bank to reach agreement on a new mechanism for financial regulation that can spot problems before they arise in individual economies; deal with some of the current gaps in the regulatory system; and spot some of the difficulties that arise from the international operation of hedge funds, he will think twice about pouring cold water on a very sensible idea.
The crisis resolution system--the special facility of the IMF--was an idea originally proposed by America as a temporary facility to deal with crises arising from current events, and the House agreed the funding of the IMF behind it last July, so it ill befits the Conservative party to oppose a measure that is of good use to the international system.
When Japan has to nationalise many of its banks; when the public sector is buying shares in private companies in Hong Kong; and when the United States has had to mount a rescue operation for a hedge fund that was exposed to $1.3 trillion, it ill befits the Conservative party not to take seriously the problems of our international system. I hope that, on reflection, it will think again.
Mr. Robert Sheldon (Ashton-under-Lyne):
Is my right hon. Friend aware that his role in getting the G7 to provide the £90 billion has been widely applauded? Will he say something about the problems of contagion of perfectly respectable economies from some of those in crisis, and in particular about some of the hedge funds? We are dealing with very large sums, and at times of
Mr. Brown:
I am grateful to my right hon. Friend, and I agree with him that the issues are complex and detailed. The Conservative party should face up to that when it examines the issues.
The crisis prevention facility--the supplemental reserve facility, which has been set up by the IMF--is designed so that countries pursuing sound economic policies are not brought down by international events beyond their control. The emergency facility and the resources behind it should be accompanied by bilateral help from individual countries willing to contribute and a serious contribution from the private sector, which should now play its part--on this as on other issues--in helping to resolve some of the crises that arise from the operation of the financial markets.
On hedge funds, I assure my right hon. Friend that the measures that I have outlined this afternoon--including a code of standards, the examination of dependent territories and rules of capital adequacy--are being pursued urgently. The Financial Services Authority is taking a great interest in the issue, as is the Basle committee, which brings together all the banks, and I am confident that, although it is difficult to deal with the problems caused by the operation of hedge funds, those who invest in them will be prepared to follow codes of conduct requiring higher standards of transparency and disclosure.
Mr. Malcolm Bruce (Gordon):
I welcome the Chancellor's statement and his recent work on trying to tackle global market turbulence. Does he agree that we in the United Kingdom have a responsibility to address our domestic problems as part of the solution, including getting down our overvalued pound and exchange rates? He mentioned the monetary and fiscal codes included in the G7 agreement, but will he consider the connection between the two? In his Budget statement, will he undertake to avoid any fiscal easing, to make it possible for the Bank of England to bring down interest rates in accordance with the approach that he advocated on his summer tour of world capitals?
We all wish to see greater stability in the exchange rate. I welcome the Government's proposal for a parliamentary committee to prepare for the single currency, and, whatever difficulties the official Opposition have with the issue, we will be happy to co-operate. However, does the Chancellor accept that serious private sector preparation for the single currency will not happen unless there is evidence of serious public sector commitment to joining it? The two must go together.
The Chancellor pointed out the fall in exports to Asian markets, but does he accept that we trade more with the Netherlands than with the whole of Asia, Russia and South America combined? In those circumstances, he cannot blame our current problems on difficulties in those regions, and he must pursue an action plan at home to bring down our uncompetitive exchange rate and high interest rates.
Mr. Brown:
I am grateful to the hon. Gentleman for being more generous than the shadow Chancellor in
It was announced some time ago that the Government were preparing a draft national changeover plan for the single currency. The Conservative party is, of course, free to use one of its Opposition days to debate its new policy on the European Union, and I would enjoy that very much.
"the UK is teetering on the brink of recession".
Will the Chancellor tell the House what he is doing to avoid such a recession? Has he not read the surveys that put Britain at the bottom of the European growth league for next year? Is he aware that the poll of forecasts published by The Economist shows British growth of less than 1 per cent. next year, while even Australia, which is heavily dependent on Asia for its trade and prosperity, is set to grow by 2.2 per cent?
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