Examination of Witnesses (Questions 100-102)
RT HON
GORDON BROWN
MP, SIR GUS
O'DONNELL, MR
JON CUNLIFFE,
MR NICK
MACPHERSON, MR
JONATHAN STEPHENS
AND MR
MICHAEL ELLAM19
JULY 2005
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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