Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 274 - 279)



  Q274  Chairman: Chancellor, good morning to you and your colleagues. Can you introduce your colleagues for the shorthand writers please?

  Mr Brown: Yes. I have with me Jon Cunliffe, who is head of Macroeconomic Policy and International Finance, Dave Ramsden, Tony Orhnial, Mridul Brivati and Michael Ellam.

  Q275  Chairman: Thank you. Firstly, Mr Orhnial, thank you for your paper which arrived this morning. I know we put a lot of pressure on your staff and we are very grateful. Chancellor, I want to ask you about the World Trade talks in Hong Kong, because you said that you have always said that with movement on trade we would make significant progress but that would be undermined if there is not any agreement, and your old soul mate, Mr Peter Mandelson, for whom I suppose absence makes the heart grow fonder, said that you were missing the point in pressing for cuts to the Common Agricultural Policy and that you had gone over the top in that demand. Are you going over the top in pressing for these cuts as part of a deal on the trade talks, or would developing countries gain from a liberalised agricultural market in the EU?

  Mr Brown: I am grateful, Chairman, for the chance to talk about the trade talks. Pascal Lamy, who is the head of the World Trade Organisation, has said that agricultural protectionism is at the root of both the problem and the solution that he faces in trying to get a negotiated settlement on trade. What we saw at the weekend was an interesting development in that Brazil offered to make concessions on a number of areas, including services, and those manufactured goods where they were under pressure. It was said they would move to what they said was a simple Swiss formula, which in a sense means that those with the highest tariffs will make the greatest concessions. India then made a statement at the weekend that they are under pressure on services in particular, that they would be prepared to move if the others moved. Then of course the onus is on Europe and America. America has made an offer of 73% reductions, the Europe offer at the moment is lower than that. The question really now is whether the four different groups which are the essential element of the negotiated settlement can come together and by each making proper concessions we can get a settlement at the trade talks. I believe that all people who want to see the world economy grow faster—because the trade talks and a settlement might be worth about 300 billion dollars of growth—all those who, as you rightly point out, want to have the developing countries benefiting from a reduction in agriculture protectionism, will actually want to see this happen. I hope even at this time the trade talks can move forward.

  Q276  Chairman: You would not agree with, say, Professor Joe Stiglitz who said maybe no deal was better than a bad deal?

  Mr Brown: I think we have to hope that the negotiators can come together. I think Professor Stiglitz's point—who interestingly enough is going to become the professor at Manchester University and set up a new department, and he is after all a Nobel prize-winning economist and used to be head of economics at the World Bank—is that he does not want to lock the world into a position over the next ten or 15 years because there will be no trade round for another ten or 15 years, which is less advantageous than the one which could be achieved if people kept talking. But equally, the sooner this agreement is reached, the better, because the world economy has suffered a great deal of volatility and instability over the course of this year, and I think it is very important that we send a signal that we are all determined to get the trade talks moving.

  Q277  Chairman: Can I take you on to the G8 deal on debt relief and aid? The G8 research centre at the University of Toronto has indicated that the documents issued at the Gleneagles contained 212 separate commitments. Who is responsible for monitoring these commitments to ensure they are delivered?

  Mr Brown: To some extent, the G8 has got to continue to monitor what it has decided, because if it does not secure the implementation of its agreement then the credibility of the G8 is in issue. Equally the G8 is passing on a number of decisions to other world organisations, for example, it is the IMF and the World Bank that has to implement the debt relief deal and soon the shareholders of the World Bank and the IMF will be asked to vote directly on these issues. There is a mandate now out to the shareholders of the IMF to do so and I was urging all my European colleagues to vote on this settlement when we met on Tuesday. So to some extent the IMF and the World Bank have to implement the decisions of the G8 and that requires us to get other countries on board.

  Q278  Chairman: Your announcement on unclaimed banking assets is a welcome announcement, but how much progress has been made in that scheme and when are we likely to see the first of these assets being used for the community and will we require legislation for that?

  Mr Brown: This is essentially an agreement that has been reached between the banks and the Government and the details of this, including the final amount of money, have to be sorted out in the next set of discussions. The agreement in principle was that the money went to finance education and to youth and community services. I believe that the agreement is one, reached on a voluntary basis between the two sets of negotiators, which will survive and endure.

  Q279  Chairman: As you know, in the Republic of Ireland they have a similar scheme and I note that UBS and Lehman Brothers, the investment banks, pledged to turn over their unclaimed assets to the Balance Charitable Foundation, as they call it in the Republic of Ireland. Have you any plans to extend this scheme in the country, mirroring what happens in the Republic of Ireland?

  Mr Brown: Our agreement is with the banks and building societies and there are other financial institutions which have unclaimed assets, and there have to be further discussions in these areas. There was a debate about where the money should be spent, and it would be a considerable number of millions each year, and it was agreed that youth and community services, which after all have not had the investment they deserve over recent years, should get this. I look forward to a new youth and community services policy in this country. We are introducing the national youth community service over the next few months. This is the result of the Russell Commission. This has been long planned over some years. It will give people the chance to do part-time or full-time community service as young people in their own communities. It will validate what they do and there is now a considerable amount of private sector money and now public sector money behind it and, aligned to the National Sports Foundation, the youth budgets we are creating, and the youth pass which has been created, I believe the release of these unclaimed assets can guarantee funding for the kind of youth and community services we want to see in the future years and do so in a way which is sustainable for decades.

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