Examination of Witnesses (Questions 1-19)
RT HON
GORDON BROWN
MP, SIR GUS
O'DONNELL, MR
JON CUNLIFFE,
MR NICK
MACPHERSON, MR
JONATHAN STEPHENS
AND MR
MICHAEL ELLAM19
JULY 2005
Q1 Chairman: Chancellor, good morning
to you and your team. Welcome to this, the first evidence session
of the new Parliament. We have friends old and new for you this
morning to question you. Can I congratulate Sir Gus O'Donnell
both on his knighthood and elevation to Cabinet Secretary. Welcome,
everybody. Chancellor, this is about the G8 and other international
issues and a number of the papers that you have given us this
morning. Can I start on the international agenda. Sorry, Chancellor,
could you introduce your team.
Mr Brown: Thank
you very much, Chairman. Can I start by saying how pleased I am
to be able to meet this new Committee so early on in the Parliament
and to welcome the new Members of the Committee and also congratulate
you and Mr Fallon on your re-election as Chairman of the Committee
and Chairman of the Sub-Committee. I wanted, if I may, to introduce
my team and to make some opening remarks that I think you will
find relevant to the discussion today. On my right is Sir Gus
O'Donnell, who is Permanent Secretary of the Treasury, of course,
but, as you rightly say, will be head of the Home Civil Service
from 1 August. On his far right is Nick Macpherson, who is the
Managing Director of Public Finances. Next to him is Jon Cunliffe,
who is the Managing Director of Macroeconomic Policy and International
Finance. To my immediate left is Mike Ellam, the Director of Policy
and Planning. To his left is Jonathan Stephens, the Managing Director
for Public Spending. If I may give some initial remarks which
I think will inform the Committee's discussion. We are submitting
to Parliament today the Government's Annual Report on the IMF.
It sets out the G8 decision on debt relief agreed at Gleneagles.
We appreciate the all-party support for debt relief, aid and trade,
as we progress from the G8 at Gleneagles to the UN Special Summit
in New York in September and the World Trade talks in Hong Kong
in December. On debt: first 18, then 27 and potentially 38 highly
indebted countries will benefit from the offer of 100% debt relief
on the 55 billion of debts owed to the IMF, World Bank and African
Development Bank. We will not support new conditionalities being
added to this debt relief. I can confirm that for up to 30 other
countries, subject to our assurance that resources will be used
for effective poverty reduction, Britain will unilaterally pay
its share of World Bank debts, and we invite other countries to
join us in doing so. The Communiqué of the G8 states aid
for Africa will double by 2010. In pledging to reach 0.7% of income
by 2015, European Union countries have stated that they will double
aid from 40 billion to 80 billion by 2010. I can tell the Committee
that looking forward to the UN Special Summit and beyond we want
to work in partnership with African and other countries to prepare,
develop and play a part in financing universal free primary school
education and the attainment of the Gleneagles Summit's objectives
for building health capacity, including as close as possible to
universal access to treatment for AIDS sufferers by 2010. Maximising
the availability and minimising the costs of vaccines and drugs
is a central issue, so a G7 report on advance purchase mechanisms
for drugs will be published by the end of the year. Within the
next few weeks we expect the go-ahead for the International Finance
Facility for Immunisation, and the G8 have agreed a working party
on the setting up of the proposed International Finance Facility
which would help some countries meet their aid targets and help
others move faster in reaching them. On climate change, following
the Communiqué I can announce that a major review of the
economics of climate change will be undertaken by Sir Nicholas
Stern, the head of the Government Economic Service. We will work
with the World Bank in an innovative project to institute new
funds supported by fresh incentives for energy efficiency and
alternative sources of energy for developing countries. In expressing
its outrage against the terrorist bombings in London, the G8,
and then the European Union Finance Ministers, also discussed
counter-terrorism and counter-terrorist finance. I can announce
that Britain will give support to do what we can to ensure that
across Europe there will be no hiding place for those who finance
terrorism. We have an undertaking from the European Union that
they will make an offer to other countries who need advice and
technical assistance to build up anti-terrorist finance capacity.
A group of experts on tackling global terrorism financing set
up under our G8 Presidency will report to Finance Ministers in
September. Within Britain, assets for 45 accounts have already
been frozen and we have established a group across Government
to identify and vet further targets. While four years ago just
30,000 reports of suspicious transactions were sent to the NCIS,
last year there were 15,000 and, of those relating to terrorist
finance, more than 20% either led to a longer term investigation
or contributed substantially to an existing one. It is essential
that the suspicious transactions regime be both proportionate
and effective. The Home Secretary and I have asked Sir Stephen
Lander to report by March 2006 on how these investigations of
suspicious transactions can be best pursued under the new Serious
and Organised Crime Agency. The House is being told separately
that we are making available today 20 million from the reserve
to the Home Office for the exceptional costs of providing support
to victims and for policing and other activities that arise from
the attacks in London on 7 July. This will include funds to cover
the donation to the London Bombings Relief Charitable Fund which
the Home Secretary announced yesterday. Overall spending on counter-terrorism
and resilience, which was one billion in the year of September
11, was 1.5 billion last year and will be 2.1 billion by 2007-08;
rising substantially, therefore, in the next few years. Chairman,
the Committee will also be interested in a further matter on which
the Chief Secretary is making a written statement to the House
today and I thought I should inform the Committee because it is
the first chance I have of doing so. As the Committee will be
aware, the start of the next spending period will come ten years
after the first Comprehensive Spending Review. To ensure we are
equipped to meet the challenges of the next ten years, we are
now instituting a second Comprehensive Spending Review to consider
from a zero base the next stage of meeting our public service
objectives. With this long-termist approach, which rejects the
short-termism of the past, a report will be made on these public
spending challenges in 2006. The Government will report on the
next three-year Spending Review covering 2008-11 in 2007 and will
hold departmental allocations to the agreed figures already announced
for 2007-08. The Committee also asked the Government to "inform
Parliament in a timely fashion of its preliminary analysis that
the (economic) cycle has ended" and said that to delay making
an announcement, potentially for several months, to the next Budget
or Pre-Budget Report, "would not be in the interests of informed
public debate". I have no announcement to make about the
end of the current cycle, but following the significant historical
updating by the Office of National Statistics on 30 June, it is
right to update what has been a provisional judgment that the
current economic cycle started in 1999-2000. Growth of non-oil
gross value added, the relevant measure of output used by the
Treasury in assessing the economic cycle, was thought to have
grown by 3.4% in 1997, 2.4% in 1998, 1.8% in 1999 and forecast
growth of 2.9% in 2000. The ONS now believe that gross value added
grew far higher and more substantially by 3.2% in 1997, 3.4% in
1998, 3.1% in 1999 and 4.2% in 2000, significantly faster growth
above 3% in every year. With the average figure for growth between
1997 and 2000 previously assessed at 2.6%, but now known to be
3.5%, all the evidence now points to the conclusion that the economic
cycle started in 1997-98. I will ask the NAO to audit the end
date of the previous cycle as to whether our judgment is reasonable
and cautious. We will continue to ask the NAO to audit trend economic
growth to check that it remains a reasonable and cautious assumption.
Thank you, Chairman.
Q2 Chairman: Thank you, Chancellor.
In your report, Evidence of the UK Economic Cycle,
I note you say: "It is a positive response to the view expressed
by the Treasury Committee that the Treasury should not confine
publication of material relating to its assessment of the cycle
to the Pre-Budget and Budget Reports". I think that is a
good start for the new Parliament and I hope we continue those
sorts of measures.
Mr Brown: I will
be happy to answer any questions you have got.
Q3 Chairman: On the issue of terrorist
financing, you mentioned NCIS. Certainly in the last few years
there have been representations made to me and other Members of
the Committee by the financial institutions that when reports
are made to NCIS there is little feedback and there seems to be
a lack of co-ordination throughout Government on this issue. I
hope Sir Stephen Lander takes those issues on board and we get
more coherence throughout Government Departments on issues such
as that. That is certainly a view that has been expressed by the
banks and the financial institutions, Chancellor. I wonder if
you could consider that.
Mr Brown: Perhaps
I should say on that, Chairman, that if there were 150,000 suspicious
transaction reports submitted in the last year and 20% at least
of these have been proven to be of some use, you are talking about
30,000 that have been of some use and that is a very substantial
figure. What we want to do is to look at how in future we can
have a better system for dealing with this. This is what Stephen
Lander will look at and I will pass your views on to him as well.
Q4 Chairman: Thank you very much.
You mentioned the UN Millennium Declaration Review Summit, which
is obviously a very important landmark on the debt issue. What
message will you be taking to that Summit and what outcomes do
you hope to achieve there?
Mr Brown: As you
know, the UN Special Summit is to deal with the reform of the
Security Council as well as with the meeting of Millennium Development
targets. As you have already seen, a lot of the debate running
up to the Security Council meeting is about the composition of
the Security Council in future. I do believe, however, that the
Secretary-General with the report that he presented on the Millennium
Development Goals is intent on making further progress on all
the issues that were discussed at Gleneagles. I hope by that time,
in advance of the IMF and World Bank meetings at the end of September,
we will have full agreement from all the shareholders of the IMF
and the World Bank about the debt relief package that we have
been discussing over the last few months. It was approved in detail
by the G8 at Gleneagles and it is now being discussed by the IMF
Executive Board and by the World Bank Board. I am confident that
there is goodwill about resolving these issues. I think when we
get to the UN Special Summit and the World Bank and IMF meetings
the debt relief issue, which has been a burden on the countries
and an unsolved problem for really 20 years, may be an issue that
we can bring to a successful conclusion, at least in the case
of these 38 countries. Our offer to give another 30 countries
debt relief is very important, in my view, and I hope that other
countries will follow us. On aid, the issue is the delivery of
the promises that have been made and, if possible, speeding up
the promises. That is why our International Finance Facility proposal,
which will be discussed in September, is very important to that.
I hope when we get to the IMF and World Bank meetings we will
also have agreement that to meet the Millennium Development targets
on primary education for all, which I mentioned in my opening
remarks, and the reductions in infant and maternal mortality,
there will be a new impetus given to the fast track initiative
of the World Bank on education and we will be able to report progress
on advance purchase initiatives on health.
Q5 Chairman: Thank you for that.
One aspect of the debate that concerns me a little bit is the
expectation that this issue of debt, aid and trade, can be solved
pretty quickly. What are you doing to, in a sense, dampen the
expectations, to indicate to people that this is a long, arduous
and tortuous road? I am scheduled shortly to go out to Ghana to
look at the Poverty Reduction Strategy of that country. I know
progress has been made but I am assured before I go that there
is a long road ahead on this. How can we ensure that we keep the
confidence of the public whilst making the slow progress that
is inevitable on issues such as this?
Mr Brown: I think
it is very important to explain to people that the target of universal
primary education, which is one of the Millennium Development
Goals, would not be met under existing rates of progress in Sub-Saharan
Africa for 100 years. While we have enormous progress in countries
like Tanzania where they will have 100% primary education involvement
by next year, in Uganda where educational involvement has trebled,
and in Kenya where I think it is true to say one million children
turned up for school out of the blue almost the minute that they
announced primary education was free, there are many countries
that are still way behind the target for 2015 who need exceptionally
increased resources. They will be part of this new fast track
initiative that has been agreed by the World Bank where, in addition
to countries that have already been chosen for the initiative,
another 20 countries will be added and I hope we can agree that
further money will be put into this fund both by individual countries
and by some of the international organisations. There is an impetus
needed to the fast track initiative and the complacency that people
may be tempted to have after Gleneagles is dented by this one
fact, that it would take 100 years to meet the Millennium Development
objective.
Chairman: Chancellor,
thank you.
Q6 Mr Fallon: Chancellor, thank you
for your kind words at the beginning. Turning to your Economic
Statement, would you confirm that eight years after the event
by moving the start of the cycle forward by two years, that helps
your figures by around 10 million?
Mr Brown: You are
talking about the Golden Rule actually. I would update that at
the time of the Pre-Budget Report. As you know, the cycle has
not ended.
Q7 Mr Fallon: By moving the start
of the cycle forward by about two years you are giving yourself
the advantage of around ten million, is that right?
Mr Brown: We would
meet the Golden Rule irrespective. This is an exercise that was
required of us in the Treasury because the statement about the
cycle was always a provisional one. Sir Gus O'Donnell was before
the Committee and he was emphasising when this was discussed last
by the Committee that this was a provisional judgment. In fact,
many of the academic experts outside this Committee and outside
the House—the Independent Institute of Fiscal Studies, Mr
Weale of the NIESR—have said that their view was probably
that the cycle had started in 1997 and not 1999. The most recent
historical data is something that you as a Committee might want
to look at, but it is absolutely clear when you look at it that
instead of us going through a cycle from 1997-99, the growth rate
in each of these years was above 3%. On a superficial glance that
would make you want to reconsider it. On the detailed work that
is contained in this document, we are giving historical accuracy
to what other people have suggested was something that we should
look at. Now what had been a provisional judgment turns out to
be one where the cycle started in 1997. As far as its affect on
the Golden Rule, on the fiscal position, that is a matter for
the Pre-Budget Report.
Q8 Mr Fallon: But the redefinition
of the cycle does help you meet the Golden Rule, not make it more
difficult.
Mr Brown: My view
is it would meet the Golden Rule anyway. Maybe Sir Gus wants to
explain the historical revision and why it is significant and
why it is in the form of this paper today.
Sir Gus O'Donnell:
If you remember, when I came before you in 2002—quite a
long time ago now—basically I explained that we were making
a provisional judgment of 1999 as the start date, but I said then
the ONS was capable of changing the GVA figures quite substantially
and I said: "When that happens, we will have to go back and
revise when we think cycles were". I actually warned the
Committee very clearly that if there were changes to the GVA numbers
we would revise our position. At that time, Martin Weale was arguing
that 1997 might well be the start date and I said that was quite
possibly true because what happened was we had this growth period
and it had slowed a little, got towards trend, but now on the
GVA numbers that the ONS have produced we know that it did not
slow very much, it never went decisively through tend, so it has
basically been one long upswing since 1997.
Q9 Mr Fallon: On your other decision
to postpone the Spending Review, how will you dispel the suspicion
that bad figures take longer to add up?
Mr Brown: It is
nothing to do with that. This was exactly what we did in 1997.
We decided in 1997 that we needed a long-term Comprehensive Spending
Review to look from a zero base at both the trends in public spending
and the challenges. Ten years on, because the next Review would
start in 2008, it is the right time to do exactly the same again.
I would have thought the whole Committee would applaud the idea
of a zero-based review and look at the challenges ahead. I have
got to say, in looking at the challenges ahead, and I would have
thought this is subject to cross-party agreement, if you take
what is happening to the British economy and British society,
the demographic trends are a very substantial rise, 250% actually,
in the population of over-85s between now and 2030, and a 50%
rise in the numbers of 65 year-olds between now and 2030, so a
very substantial demographic shift has got to be taken into account
in future spending rounds. The other thing I think we have got
to look at is the effect of competition from Asia and whether
our priorities for investment are right. As a result of that previous
Comprehensive Spending Review, we raised spending from 0.8% of
GDP on investment to 2.2% now, so we have trebled the share of
GDP going to net public sector investment. Again, in my view at
this point it is important to look at whether the investment that
we are making in infrastructure or science, where it is capital
investment, is at the right level or whether, facing the trends
and the changes that are resulting from competition from Asia,
we either have to do more or less. That is a big question that
a long-term review has got to address. I would have thought there
should be no difference between the parties on this need to look
long-term, to take a ten year perspective. If you take research
and development and innovation, we are spending 1.8% of our GDP
as European nations on R&D but Japan is spending 3% and America
is spending more than us as well. Again, it is a good question,
looking forward ten years ahead, what sort of Government expenditures
alongside the private sector are going to be necessary because
in a world where global production is moving we are going to be
tested on whether we have the value added, we have the knowledge-based
industries, so that is an issue for a future spending round as
well. I do not think there is any doubt that these long-term trends
have got to be looked at. You need to do it in the way that we
did in 1997-98 with a Comprehensive Spending Review and that is
the background to our decisions. As far as confirming the allocations
for 2007-08, that is exactly what we did in 2004-05.
Q10 Mr Fallon: Thank you. Turning
to the IFF, which of the major EU countries have actually signed
up to the IFF?
Mr Brown: Of the
four members of the G7, France and Italy have indicated their
support for it. There is a group of France, Britain and Italy
who have been supportive of moving ahead on the International
Finance Facility out of the four members of the G7. We have still
to persuade Germany to sign up to this in detail. We are discussing
this with the rest of our European Union colleagues but our first
discussion was to be in the G7 and then our discussion was to
take place beyond the G7. I may say that the International Finance
Facility for Immunisation, which is the pilot project, which is
the project that if we front-loaded four billion of expenditure
on vaccines could save five million lives between now and 2015
according to all the reports that have been done on this, including
by the Gates Foundation, has got the support of a large number
of countries both inside and outside the G7. It includes countries
as far spread as China, South Africa and Brazil who are supporting
this IFF, Canada is supporting it, and many of the European countries.
It is a joint partnership with the Gates Foundation. The level
of support for an International Finance Facility as reflected
in the one on immunisation is very wide indeed.
Q11 Mr Fallon: Okay. Finally from
me, the Gleneagles' work programme includes work on an air ticket
tax. Can you clarify the UK's position on this? Would this be
hypothecating the revenue from our existing Air Passenger Duty
or would it be increasing it?
Mr Brown: No, it
would be hypothecating revenue from the existing—
Q12 Mr Fallon: So it would not increase
our Air Passenger Duty?
Mr Brown: The issue
for other countries is quite different because they do not have
an air ticket levy.
Q13 Mr Fallon: We would not increase
ours?
Mr Brown: That
is not the plan. The plan is to hypothecate existing revenue for
the International Finance Facility but it would be dependent on
an agreement to the International Finance Facility going ahead.
Q14 Angela Eagle: The US has been
very sceptical about how the IFF proposals would fit into their
budgetary constraints. Is it possible that the IFF could proceed
without US involvement? Do you feel that you are at the stage
where that might be happening and, if so, when?
Mr Brown: The great
advantage of the International Finance Facility is that it allows
countries to front-load their commitments to aid. It is not too
dissimilar from other mechanisms that have been used in the past
and it is certainly a bold initiative. The American view is that
their budgeting is on an annual basis and it cannot be on a multi-annual
basis. We wanted to wait until the G8 discussions were completed
to decide how we should proceed. It is clear that there is a group
of countries who wish to move forward and a group of countries
who feel it is difficult for them to move forward and that is
what we are now discussing. The G8 actually agreed to a working
party of all its members to look at these issues and that working
party will report. There seems to be very little difficulty on
the technical feasibility of it. There is an issue about its scoring
for public spending purposes which is being discussed at the moment
by the European statistical authorities. I am in no doubt that
if we are to meet the European target of doubling aid by 2010
we will need this International Finance Facility for the contributions
that other countries are making and it would enable us, as Britain,
to speed up our contributions and make them more effective in
the short run.
Q15 Angela Eagle: The idea of front-loading
is good to get things going and, particularly where so many lives
are at risk, it makes a great deal of sense. Do you worry that
if there is a success in front-loading there might then be a shortfall
later on in the medium-term with people's aid?
Mr Brown: No. I
can't see that is an issue. First of all, we are committed as
the major objective to meeting the Millennium Development Goals
by 2015. If we cannot front-load money between now and 2015 our
major objective of meeting the Millennium Development Goals will
not be achieved and, therefore, it makes absolute sense to front-load
your finance to do so. As far as what happens after 2015, it seems
to me obvious that there are many additional countries who will
become donors. In the last few years, countries have moved from
being recipients to being donors. Russia is a classic case where
it is now a donor in ODA. There are other countries in the next
few years who will become donors. I have got no doubt that the
ability to finance Overseas Development Aid after 2015 is safeguarded
both by that and by the announcements that we have made that we
will not let our contributions to the IFF affect our ability to
give aid in the future.
Q16 Angela Eagle: In terms of the
more specific IFF for Immunisation, you have been able already
to announce that the UK, France and Sweden can go ahead and provide
this £4 billion in partnership with the Gates Foundation,
et cetera. Could you say a bit more about how you see that
proceeding. Do you think that it is the first example almost of
approaching an international hypothecated tax or agreement that
might actually form a model in the 21st Century for dealing with
transfers across the globe in order to assist those countries
that have particularly fallen behind?
Mr Brown: I think
the innovative things that are happening are, first of all, the
International Finance Facility for Immunisation, which we hope
will get the go-ahead in the next few days actually. The second
thing that is happening which is innovative, which has cross-country
co-operation, is the discussion about advance purchase mechanisms
for vaccinations or for other forms of healthcare, drugs and treatments.
If you look at it this way: if in countries like Mozambique, Tanzania
or Kenya, some of the countries I visited a few months ago, suffering
from high numbers of people with malaria needing either a vaccine
or treatment, a vaccine becomes available they are not able to
afford it, but if there is an international purchase agreement
to guarantee the purchase of a certain amount of drugs in advance
then not only will the development of that drug happen but we
will be in a position at the end of it to see the price of that
drug come down. That is why the work that is now being done on
advance purchase mechanisms, like the IFF, is revolutionary in
my view and it means that the international community can finance
the development of drugs in partnership with the pharmaceutical
companies but by the methods by which it finances the development
of these drugs it can get the price down. By guaranteeing a market
for these drugs for countries that otherwise could not afford
them, many lives will be saved as a result. As far as the International
Finance Facility for Vaccination, that is unrelated to the air
ticket levy, it is not going to be financed by that means, it
is going to be financed directly by contributions.
Q17 Angela Eagle: Finally, you have
talked about the meeting in New York and looking at the future
shape and reform of the Bretton Woods institutions. Do you think
that some of the innovative agreements that are going on cross-country
have lessons for how we might be able to reform the Bretton Woods
institutions to make them fit for the 21st Century rather than
a reflection, as they are at the moment, of the situation that
existed after the Second World War?
Mr Brown: We have
put forward quite detailed proposals for the reform of the IMF
and the World Bank. We believe in contrast to what the purpose
of the IMF seemed to be after the Second World War as dealing
with balance of payments problems of individual countries in a
fairly sheltered international economy, the main role of the IMF
in future is to ensure that there is proper transparency in the
operation of the world economy. Individual countries by codes
and standards are encouraged through the surveillance of the IMF
to be transparent in the way they operate their fiscal, monetary
and other policies. I believe that the IMF should have a stronger
independence for that surveillance function for the future. I
believe that if you look at Africa, but also Asia, where there
have been financial crises that have never been identified in
advance over the last few years where simply the publication of
information and a requirement to do so would have prevented a
problem becoming a crisis, the case for the IMF reforming itself
is very strong. I think some of the allocation functions of the
IMF and the World Bank could then be brought together. If you
are looking ahead, clearly the world is so different from what
it was 50 years ago. It is a global open economy where before
it was sheltered and protected, but the problems that countries
have to deal with I think require greater transparency in the
future. Anybody looking at corruption in Africa, far less looking
at fiscal failures, knows that transparency and the incentive
to transparency that an international institution could provide
would be one central means by which some of their problems could
be addressed.
Q18 Chairman: Chancellor, can I ask
you, on the IMF we have the report, A Stronger Global
Economy, from HMT and in that you mention: "The UK will
support the strengthening of country ownership as the IMF reviews
its conditionality and also seek closer collaboration between
IMF and World Bank, particularly implementing the new joint debt
sustainability framework". What do you mean by "strengthening
of country ownership"? The debate on poverty reduction strategies
and others is that there is an imposition from outwith, particularly
demands for privatisation, for example, and some of these countries
when you visit them say, "We cannot have a hope of getting
up to standard on trade when we have got these impositions put
on us". There is this dichotomy between what the World Bank
and IMF are saying they are going to do and what the reality on
the ground is. What do you mean by that?
Mr Brown: First
of all, I think there are some misunderstandings about what happened.
For example, I know that the Tanzanian water programme is one
that is regarded as an example of the World Bank, the IMF or international
institutions forcing upon the Tanzanian Government a course of
action it did not want to take. In actual fact, I have heard President
Mkapa explaining that it was their decision and their wish to
organise the supply of water in that particular way. We must be
sure when people talk about the conditionality sometimes they
exaggerate the extent to which the IMF and World Bank have done
it. Generally, our view is that conditionality to donors is less
important than what should be happening and that is accountability
of these countries to their own people. The issue is transparency.
It comes back to the point that Angela Eagle raised with me on
the future reform of the international institutions. We should
have mechanisms in place that encourage rich and poor countries
alike, non-discriminatory between rich and poor, to be transparent
in their dealings. That is the key conditionality that we are
talking about. It has happened in our policy towards aid, we have
removed a lot of the old conditionality and certainly the tying
of aid, and gradually I think it is going to happen in the way
the international institutions work as well. I see a change in
the environment here where instead of ever-increasing conditionality
and accountability of poor countries to the donors, what people
are saying is, "Let's have transparency between you and your
own people" and that would be the key test of whether the
policy is acceptable.
Q19 Peter Viggers: Switching to oil
prices, in your Budget you said: "the risks to the global
outlook of higher oil prices have diminished". What do you
think of that judgment now?
Mr Brown: As you
know, I think I have always said in every Budget that oil prices
are volatile. That is the judgment I would make generally and
that has been the consistent view of the Treasury. We have had
oil prices at $10 during this period of government and we have
had oil prices at $60. I do not think any government has seen
such a huge shift in oil prices. In any other decade a doubling
of oil prices would have brought inflationary pressures into the
world economy, particularly into an economy like ours, that would
have made it very difficult for a government to overcome them.
I think it is a remarkable feature of the last year or two that
even when oil prices have doubled, inflation in the world economy,
particularly inflation in the British economy, has been kept low.
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