Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 100-102)


  Q100  Chairman: Chancellor, the Governor of the Bank of England when he was here previously was talking about the global international financial architecture and he mentioned in his discussions with you he had spoken about it. He said: "The monetary system internationally is something that we must talk about. I am sure the Chancellor would wish to push it. He has encouraged us to do that." I note in the G8 Summit Chairman's report there was no mention of global economic imbalances or international currencies, so how do you propose to tackle these issues in the latter half of the UK G8 Presidency?

Mr Brown: I think there was a separate statement issued on the international economy, separate from the statement on Africa and from the statement on climate change. I think we should send it round to the Committee. I think Mr Cunliffe has it here. I think it did draw attention to the global economic imbalances, but the way that we feel that action should be taken is America has got, as it recognises, to sort out its two deficits, Japan has got to sort out its financial sector, and Europe has got to engage in structural reform. It is called The Global Economy and Oil. I will send it immediately to the Committee. It says: "Challenges remain, especially persistent global imbalances and high and volatile oil prices. Differences in growth rates and investment patterns have resulted in a widening of global imbalances. To promote a transition to more widely shared global growth a comprehensive set of policy measures is needed." Then they list fiscal consolidation and savings in the States, actions to raise productivity in Canada, further structural reforms in Russia and the European Union to boost growth, employment and domestic demand, and further structural reforms including fiscal consolidation in Japan.

  Q101  Chairman: We do not have it but it would be good to have that opportunity. A last question Chancellor: the G8 finance ministers have reaffirmed their views that exchange rates should reflect economic fundamentals, how well do you think that the current fixed exchange rate regime operated by China reflects economic fundamentals?

Mr Brown: This is a long and very detailed question.

  Q102  Chairman: A simple question!

Mr Brown: And a discussion that is sometimes best carried out behind closed doors! However, in the interests of transparency I should say there are debates taking place about this. There is a new view being reached in the world community about the value of fixed and floating exchange rates. There is a general sense that China must make its own decisions about moving forward on this. There is a sense that, yes, one of the issues in the world economy that contributes towards the imbalances is exchange policies in Asia. I think we have got to recognise that China will have to take its own initiatives on this.

Chairman: Chancellor, that has been a very interesting session we have had. We are the first select committee to get off the blocks in terms of evidence sessions, so thank you for your attendance. The discussions on aid, trade and debt have been very interesting for us, particularly in developing countries, and we intend to keep an eye on that, as we do with the IMF and the World Bank changes. In our visits to America in the past we have scrutinised that and we wish to continue that process. We will be looking at the information that you have given us on public expenditure and the timing of the economic cycle in the PBR in November and December. If you can come back to us with early dates for the PBR, that will help us on that issue. One of the earliest inquiries we look to undertake is on financial inclusion, and we are looking at issues such as access to banking services, savings and assets as a trading gateway, affordable credit, and I know that you have made a number of comments on that issue, and also the work of the Financial Inclusion Task Force and Financial Inclusion Fund, and we hope to gather information on that issue. The Sub-Committee will be in the autumn having its hearing on the Treasury Annual Report with the new Permanent Secretary, and we hope to be in touch with the Department to visit yourselves to go over the work of the Treasury with the new Permanent Secretary and other officials in the Department. We have had a constructive relationship with Ministers and officials in the past and we thank you and your officials for that and we hope that that continues over the coming Parliament. Lastly, can I thank Sir Gus for the opportunities he has given the Committee in the relationship he has had and wish him every success in his new post. Thank you for your attendance this morning, Chancellor, and we hope to continue this constructive relationship.

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