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23 Jan 2003 : Column 420—continued
International Monetary Fund
3. Kali Mountford (Colne Valley): What proposals he will make to the International Monetary Fund at its next meeting to change its regulations. [92735]
5. Mr. John McFall (Dumbarton): What progress he has made on the international financing initiative. [92737]
The Chancellor of the Exchequer (Mr. Gordon Brown): While there is insufficient support in the international community for new IMF regulations that would increase special drawing rights to release new funds for international development, there is now interest from the IMF, the World Bank, the United Nations and IMF member countries in the United Kingdom's recommendation of a new international finance facility. Today, therefore, the Secretary of State for International Development and I are publishing our detailed proposals for that facility, which would release $50 billion a year in additional aid for investment for the poorest countries to tackle problems of health, education and poverty. I hope that we have all-party support for that British initiative.
Kali Mountford : I am delighted with my right hon. Friend's answer. If long-term investment stability and growth are good enough for the British economy, they must surely be right for developing nations. Is it not therefore right to tell the IMF that, instead of always looking to the short term, it must look at long-term relationships in developing nations between donor and
recipient states so that they can make proper economic decisions in their own right and have the economic growth that we enjoy?
Mr. Brown: My hon. Friend is right. In return for a commitment from developing countries to pursue policies for stability, growth and the opening up of trade and investment, the international community, particularly the richest countries, should be prepared to say that we will help to meet the millennium development targets: ensuring that poverty is halved by 2015; that every child gets primary education, instead of 120 million being without it; and that infant mortality is cut by two thirds, as is possible with available medical technology. I hope that Britain says unanimously that that is both necessary and urgent.
Mr. McFall : I thank the Chancellor for that initiative. He knows that we have seen a reversal in the fortunes of poor countries over the past few years that has made them even poorer, which is why long-term commitment is essential. What progress has the Chancellor made with his international partners in ensuring that they accept the proposals? We know that aid and debt issues are popular with our constituents, and many thousands of people in our constituencies are signing up on that, so what can we do to ensure progress on that humanitarian objective and achieve our millennium development goals by 2015?
Mr. Brown: I am grateful to my hon. Friend, who has taken an interest in the matter as Chairman of the Treasury Committee. I believe that the International Development Committee will also take an interest in the progress of the initiative. I have talked to almost all the Finance Ministers who will be present at the G7 meetings and European Finance Ministers' meetings about those matters, and I believe that it is possible to gain support. I hope to be able to announce later what initiative we can take at the G7 meeting in February and the IMF meetings in April.
The fact of the matter is that aid per person in sub-Saharan Africa was $33 a year 20 years ago, but is now only $20 a year, which is simply insufficient, even with all the reforms to meet health and education needs and anti-poverty programmes in those countries. I hope that we can galvanise opinion around the world, but it is also important that the Churches, faith organisations, local groups and non-governmental organisations play a major part, not only in persuading people in Britain of the importance of this but, as they did in the debt campaign, in persuading other countries round the world to support the initiative.
Sir Peter Tapsell (Louth and Horncastle): Will the Chancellor look at the IMF regulations on gold in the light of his disastrous decision, against the making of which I repeatedly warned him at the time, to sell most of Britain's gold reserves at the bottom of a long bear market and at $100 a fine ounce below yesterday's close at $360? How much of the taxpayer's money has been lost as a result?
Mr. Brown: The purpose of the sale of gold was to rebalance the holdings of Britain's reserves. It should have been done 20 years ago, so that we had proper
balancing and proper risk sharing. I think that the hon. Gentleman will reflect on the question about international development, and agree that he might also wish to support our international finance facility to help the poorest countries.
Mr. John Redwood (Wokingham): When discussing international economic stability, will the Chancellor—having presided over a bigger stock market boom and bust here than in many other parts of the world, thanks to his rapacious policies against the corporate sector—take some advice for a change to stave off a boom and bust in the housing market, which could be deeply damaging to many of our constituents?
Mr. Brown: I know that the right hon. Gentleman is trying to tell the shadow Chancellor how to run Opposition policy on the economy, but we will take no lectures from the former Cabinet Minister on boom and bust policies—15 per cent. interest rates under him.
Ms Oona King (Bethnal Green and Bow): When I met the head of the IMF in Rwanda five years ago, he told that me that although IMF policies had been satisfactory, unfortunately all the human capital had been destroyed—very unfortunate. Does my right hon. Friend agree that the IMF has changed beyond description since then, but that it must change further? Could he encourage it to take even greater account of what the IMF terms "human capital"?
Mr. Brown: My hon. Friend is right. I praise the work that she has done in international development and her visit to Rwanda, which was important in alerting this country to some of the problems. We are right to praise the IMF for leading on debt relief over the past few years. There was only one country likely to get debt relief; the number is now 27, and it could be 35. There could be $100 billion of debt relief. With regard to the problems of Rwanda, the way forward is the poverty reduction strategy reports that would enable the country to pursue economic policies with the programme of social reconstruction that are in the best interests of that country. On that basis, I believe that we should be providing far more extensive aid for education, health and the anti-poverty programmes of the country. My hon. Friend is right to highlight the importance of education for the future.
Rev. Martin Smyth (Belfast, South): The Chancellor's statement is to be welcomed. Does he accept that the IMF must bear some responsibility for letting people know how it is dealing with issues? Many people in our country are confused about what has happened in Malawi. Does the Chancellor agree that the Governments of Malawi and other countries must take some responsibility for their mismanagement of their economies? Having referred to faith communities, does he recognise that hospitals run by faith communities in Malawi are in dire straits partly because the western nations have been recruiting staff here to look after our interests, whereas those staff are needed in countries such as Malawi?
Mr. Brown: I am grateful to the hon. Gentleman for giving his party's support to the international finance
facility. I believe that, throughout the United Kingdom, parties may wish to support what we are trying to do. He is right that our proposals are not designed to allow Governments to abdicate their responsibility for what happens in their own country. They are designed to strengthen Governments as they try to make the reforms that are necessary. I think that the hon. Gentleman will agree that when only $20 per head is going in aid to the poorest countries, and only 7.5 per cent. of that is going to education and only 3.5 per cent. to health, those are insufficient resources to enable us to say to those countries that we can reach our side of the bargain with them—that we will help tackle the health, education and social problems. It is a bargain—a deal. The countries must reform to make it possible for aid to be used well. We must increase the amount of money that we are prepared to provide. I am grateful to the hon. Gentleman for his support.Foreign Direct Investment
4. Mr. Nigel Beard (Bexleyheath and Crayford): If he will make a statement on recent trends in foreign direct investment into (a) the United Kingdom and (b) the European Union. [92736]
The Chancellor of the Exchequer (Mr. Gordon Brown): Our year-to-year figures are influenced by a number of factors. Britain's stock of foreign direct investment is at 19 per cent. of the total—the highest in Europe and, after the USA, the second highest in the world. A detailed analysis of recent trends in foreign direct investment will be published shortly.
Mr. Beard : Is there any implication in the figures of a preference for the eurozone at the expense of the United Kingdom among foreign direct investors?
Mr. Brown: I know that this is a controversial issue among some people, but we must consider a range of factors that are in play. The main influence of foreign direct investment is mergers and acquisitions. That is 90 per cent. of foreign direct investment. In the recent stock market changes, there has been very little merger and acquisition activity. Equally, the figures are affected by relative exchange rates and by what decisions are being made in the United States, as opposed to decisions being made in Asia and Japan. It is a complicated picture, which is reflected in the fact that there has been a big change in the relative position of manufacturing and financial services over the past few years. The fact of the matter is that foreign direct investment has risen dramatically over the past 10 or 20 years, but trends are at work, including the restructuring of the international economy, that must be looked at. That is why we plan to publish a full paper on this issue in the near future.
Mr. Mark Prisk (Hertford and Stortford): As the Chancellor said at the beginning of his reply, inward investment is vital for the UK economy, but to compete, we must have an attractive regulatory and tax regime. Given that, and the fact that business taxes here are already higher than in competing nations such as the United States, Ireland and indeed Germany, why are the Government raising taxes yet again with a £1.7 billion
increase in national insurance contributions? Does the Chancellor not realise that this tax on jobs will simply create another burden that business cannot afford?
Mr. Brown: I am surprised at the hon. Gentleman. First, we have cut corporation tax from 33 to 30 per cent. Secondly, we have cut capital gains tax from 40 to 10 per cent. in most cases. Thirdly, we have cut small business tax from 23 to 19 per cent. Those are proportionately bigger cuts than have happened in the United States of America. What also surprises me is that the shadow Chancellor, speaking at a meeting only two days ago, praised us and said that our labour market was more flexible than in other European countries. How can the Opposition have two different views at once, or is that merely the basis on which they now proceed?
Mr. James Plaskitt (Warwick and Leamington): Foreign owners of companies in my constituency tell me that they came to the UK because of factors relating to our flexible labour market, regulatory climate and low tax regime. Does my right hon. Friend agree that while those will continue to be the dominant factors in such decisions, foreign investors in the UK will not indefinitely run a currency risk with the rest of Europe?
Mr. Brown: As I said, a number of issues will determine the future of foreign direct investment. That is why a full analysis is being carried out. It will be published as part of the euro assessment, as I announced to the Select Committee on the Treasury in our evidence at the beginning of September. My hon. Friend must also bear it in mind that one reason why the UK is attractive is not only our tax rates, but the stability of the UK economy. We have now had low inflation for a long time, and while there has been a recession in America, Germany and Japan, our economy has continued to grow. That is one of the reasons why 1.5 million more people are in work than under the Conservatives.
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