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Mr. Stuart Bell (Middlesbrough): Does the Chancellor agree that the British Government, and our friends in the G7 countries, are acting so that nation states can come to terms with their own economies and seek to deal with the financial contagion of speculation that has spread across the world? Long-Term Capital Management was able to raise $100 billion on $4 billion of capital. At one point, it was $3 trillion in debt. Japanese banks were not regulated properly, according to the Basle agreement. Derivatives trading has stripped the world's economies of good money made by manufacturers. Does my right hon. Friend agree that what he has said today puts the emphasis back on the real economy, on manufacturing, on services, on sales and on exports by getting a grip on the financial economy?
Mr. Brown: I agree that, if a Japanese bank fails or a Korean industrial company is unable to continue its investment, there will be an effect on jobs in the United Kingdom. If a Japanese manufacturer, or even an American or Latin American one, cannot maintain investment, that too affects our ability to invest and to create jobs.
People are coming to recognise that events in individual economies, and the fragility of the banking systems in some developing economies, can have a powerful effect on the world economy. To deal with that is not just in the interests of one country; it is in the interests of all. That is
why global financial regulation is a central issue. It was not an issue when capital flows were so small in the 1940s, but it is bound to be an issue in the 1990s, and that is why the international financial institutions must be reformed.
Mr. John Townend (East Yorkshire):
I have been in the House for 20 years, and I have never heard a statement from a Chancellor that contained so much waffle and so little detail. Is not the right hon. Gentleman's statement basically a diversionary tactic that will give him an alibi tomorrow when he will announce to the House that our growth rate next year will be way under 1 per cent. while growth rates in France and Germany are way over 2 per cent? Is not that due to the failure of his economic policy of spending too high, taxing too high and imposing too much regulation, which has forced the Bank of England to keep interest rates sky high, and has created a growing depression? The right hon. Gentleman talked of transparency, but there is none in the European Central bank, which he is keen to join. Will he advocate that the bank's minutes be published? How much will his package cost the British taxpayer?
Mr. Brown:
I do not know what has happened to the Conservative party. [Hon. Members: "Answer."] Answer? The hon. Gentleman made a statement of prejudice against the world, and he failed to recognise that what happens in Britain is affected by what happens round the world. If he were criticising a statement that I had made without the agreement of our G7 partners and of central bank governors, that would be all very well.
However, I have worked on the statement with the Chairman of the Federal Reserve bank in the United States, Alan Greenspan, the governors of all the central banks in Europe, and the Finance Ministers of those countries. That includes Ministers of right-wing views and left-wing views, all of whom agree that international financial reform is necessary. The only people who do not agree with that, it seems, are in the Conservative party.
Mr. Dale Campbell-Savours (Workington):
I warmly congratulate my right hon. Friend on his statement, and I pay tribute to the expert, confidence-inspiring way in which he set about it--[Laughter.] Oh yes, people all over the world will wish to thank the British Chancellor of the Exchequer for what he has done.
May I ask about a tax on speculative flows? Is that idea completely ruled out, or might it perhaps be on the agenda at some future point?
Mr. Brown:
The key problem of a tax on speculation is how it would be applied, given the numerous financial centres that exist. We think that disclosure is the better answer to some of the problems that have arisen from the effects of speculative activity around the world, when it has become excessive. People must disclose the activities in which they are engaged, there must be proper international bodies that can deal with managing disclosure issues, and there must be proper standards that people have to follow.
I believe that even the Conservative party will see that that is the proper way forward. It wants to keep laughing, but we are talking about an international crisis that has left scores of millions of people in poverty. I wish that it would recognise what is happening around the world.
Mr. Peter Viggers (Gosport):
Does the Chancellor accept that he has a problem in the growing gap between income and expenditure, and that, at the heart of his statement, despite all the appeals for private sector support, is an announcement that the Government will commit more money to the International Monetary Fund? Will that commitment increase his problem by increasing public expenditure, or will it not count as public expenditure? If it does not, would it not be more honest if it did?
Mr. Brown:
In the traditions that have been followed by Governments of both parties, the contributions to the IMF count as coming from foreign exchange reserves. Our IMF quota has been voted by the House. America was the last country that had to make a decision on whether to go ahead with it. There has been a great welcome around the world for the American decision that makes it possible to create the new reserve facility. Under the previous Government, the then Chancellor of the Exchequer, who seems to have become very unpopular on the Conservative Benches, supported these measures. I think that, on reflection, the Conservative party will again support them, but it is a pity that it cannot do so today.
Mr. Tom Clarke (Coatbridge and Chryston):
Does the Chancellor accept that, in any other forum in Britain, what he said would have been welcomed unanimously as sheer common sense? His two major points--the vulnerability of developing nations and the problem of debt, and the need for transparency in the IMF and the World bank--are surely self-evident. If people cannot be persuaded of the social and moral grounds that underscore his arguments, cannot we point out that economic interdependence means, for example, that, because of the meltdown in Asia, 1 million fewer Asian tourists are using the services of the British tourism industry than previously? On transparency, can he assure us that, with Oxfam and other non-governmental organisations, he believes that there should be separate representation at both the IMF and the World bank?
Mr. Brown:
I am grateful to my right hon. Friend, who has long taken a great interest in development. I agree with what he says about transparency and the effect of what is happening all around the world on European economies. The agreement sets up a new emergency World bank facility that can give additional help to the poorest groups, particularly in Asia. The World bank is investing an extra $17 billion to help deal with social problems in Asia: 2.5 million children in Indonesia are being helped; a special employment programme is being developed in Thailand; in Korea, special adjustment finance is being provided. All those things are necessary to avoid not only unemployment but, in some cases, starvation. I hope that the whole House supports the measures.
Sir Teddy Taylor (Rochford and Southend, East):
One of the key recommendations in the statement is the
Mr. Brown:
As the hon. Gentleman knows, the Government propose to reform the common agricultural policy. Conservative Members should welcome the fact that there is growth in Europe, and that the projections are for higher growth next year than in America, for example. [Interruption.] Conservative Members do not like it when Europe is growing, and they do not like it when Europe is not growing. Europe is set to grow next year. The employment action measures that we propose to adopt in Britain to deal with the structural problems of youth and long-term unemployment are increasingly being adopted in Europe. That will help to bring down unemployment.
Mr. Harry Barnes (North-East Derbyshire):
In an economic crisis, the weakest go to the wall first. In this case, the weakest are some of the world's poorest nations, which are looking for the removal of their international debt. Will the debt rescheduling measures that my right hon. Friend mentioned--new rules for the IMF and the World bank--begin to tackle that problem?
Mr. Brown:
At the recent meetings of the IMF and the World bank in October, the United Kingdom proposed a number of measures that would help to get more countries into the debt reduction process. We are confident that, if action is taken both by them and by the world authorities, all countries can be part of the debt reduction process by the millennium.
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