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Secondly, we agreed measures to put to the G20 for global agreements to reshape the regulation of banks and financial services. We agreed that all systemically important institutions should be subject to appropriate regulation and oversight; and that this would extend to include hedge funds and the shadow banking sector. We pledged to protect the world’s financial system from non-transparent, non-co-operative and loosely regulated jurisdictions, including offshore centres and tax havens. We welcome the progress which has already been made by Switzerland, Austria, Andorra and Lichtenstein, and look forward to seeing them implement the international standard rapidly. We call on those countries yet to endorse the international standard to do so urgently.

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The Council agreed to improve supervisory co-operation by pushing forward with colleges of supervisors for all major cross-border financial institutions. We also agreed to adopt international principles on remuneration in the financial sector, based on an approach which rewards long-term success rather than excessive risk-taking. We called on the Council and the European Parliament,

At its next meeting in June, the Council will take the first decisions on regulation and supervision in the EU following the Larosière report. Our policy is that regulatory rules should be set at an international level but that direct supervision is a matter for our national authorities. The Council was clear that, by acting together, the EU can,

as well as helping to build a stronger economy for the future.

The Council also welcomed the Commission’s proposal to double, to €50 billion, balance of payments assistance so that those within the European Union have the support they need to deliver the fiscal stimulus required to ensure their recovery. But with global capital flows in 2008 down by more than 80 per cent compared with 2007, and the financing gap for emerging economies this year up to $800 billion, this is not just an issue for the emerging economies. Because of the continuing risk of contagion, this is an issue for every country in the world, so it is vital that we increase the resources available to the IMF in order to ensure that it can intervene to stabilise economies, stop the crisis spreading, and return the global economy to growth. The Council called for a very substantial increase in resources available to the IMF; and agreed that, for their contribution to this increase, as a first step EU member states should provide, on a voluntary basis, a fast temporary support of IMF lending capacity in the form of a loan of €75 billion or over $100 billion.

The Council called for continued,

It agreed that,

and that while we must ensure fiscal sustainability in the medium term,

The Council also agreed a further €5 billion to be invested for stimulus projects in energy security, renewable energy and broadband. This agreement provides for at least €220 million of additional investment in UK carbon capture and storage, and offshore wind projects.

We have seen an unprecedented fiscal injection in every major economy—in France a package worth €26 billion with further, more recent, measures worth €2.6 billion; in Spain, an infrastructure package worth €11 billion alongside other measures, with the

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IMF estimating a total stimulus spend of 2.3 per cent of GDP; and, in Germany, not one but two fiscal stimulus packages, together totalling €82 billion; 1.5 per cent of its GDP this year and 2 per cent of GDP in 2010.

As the Council concluded, its determination is

The Council also reached important conclusions on energy security and climate change, on the Eastern Partnership and on relations with the United States. The Council remains committed to working for a worldwide and comprehensive climate change agreement in Copenhagen later this year. Following last December’s Council, Europe became the first continent in history to make legally binding the detailed policies required to set itself on a path to a low-carbon economy, with a commitment to a 30 per cent reduction in emissions, provided that other countries make comparable commitments according to their capabilities. Our success in Copenhagen, however, will depend also on unlocking negotiations with developing countries. The Council therefore agreed that the European Union will, within the framework of a future comprehensive climate agreement, take on its fair share of financing for green technologies, reducing deforestation and protecting the poorest from the impacts of climate change.

The global economic downturn is no time to walk away from our commitments to the developing world. The Council agreed that Europe should continue to play a leading role in supporting developing countries in order to avoid jeopardising the progress achieved in recent years and undermining their economic and political stability, and that commitments to increase development assistance and deliver on the millennium development goals must be honoured. The Council also emphasised the importance of promoting stability, good governance and economic development in its eastern neighbourhood.

Finally, in looking ahead to the informal EU-US summit to be held in Prague next month, the Council welcomed the inauguration of President Obama and reaffirmed the strategic importance of transatlantic relations. At this moment of international economic crisis, we are showing that Europe and the world can work together to achieve co-ordinated interest rate cuts, a substantial fiscal stimulus, banking reform, new rules for tax havens and remuneration. I commend this Statement to the House”.

My Lords, that concludes the Statement.


Lord Strathclyde: My Lords, I thank the Leader of the House for repeating the Statement. Within it, and in its conclusions, there is much reference to the forthcoming G20 summit. Can the noble Baroness indicate what arrangements she will be making to report to Parliament on that summit, since it meets on that same day that we rise for the Easter Recess?

We welcome renewed commitments on climate change, but was the EU trading emissions scheme addressed at the summit, when the price of carbon is plummeting, which actually encourages more carbon emissions?

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Was there discussion of our renewables target of 15 per cent by 2020? The Guardian today says that everyone knows that that target is “hopeless”.

Can the noble Baroness explain the strategic purpose of the Eastern Partnership, involving nations with dubious regimes such as Belarus and stretching to the Caspian Sea? The Eastern Partnership excludes the three strategic powers impacting on that region, namely: Russia, Turkey and Iran. What talks have there been with those nations about the Eastern Partnership, and what have been their reactions? Also, what is meant by full visa liberalisation with Ukraine, Belarus, Georgia, Armenia, Moldova and Azerbaijan? What timetable do the UK Government advocate for that, and what thought was given to the risks of easing human trafficking from nations such as Moldova?

In this Statement there are, naturally, ringing phrases about the Doha round. We can all agree on those, but can the noble Baroness give us even one view of what specific progress has been made since the last summit? Were any questions raised at the summit about threats to free trade: for example, French comments on repatriating jobs to France from Slovenia?

It is vital to restore confidence in the financial sector. I know that the Government feel that we are fortunate, in this country, to have the noble Lord, Lord Myners, on the case. There was talk in the communiqué of tightening action on lightly regulated tax jurisdictions; perhaps the noble Lord will lead the Government’s drive on that.

It is right to explore areas of capital adequacy and transparency. Would that such key policy issues had been addressed earlier, and the present discredited and confusing regime of tick-box regulation had not been put in place by the Prime Minister.

Within the EU, we already have a common fisheries policy with rules laid down by countries with no serious fishing interest. We can all see the results of that in the North Sea. Will the noble Baroness assure us that she will save us from the nightmare of a City of London regulated from Tallinn and Bucharest or, perhaps even worse, from Frankfurt and Paris? We can all foresee the potential dangers of that. Better co-ordination may be desirable, but are there not real dangers in a single European regulator that overrides national regulation?

We are told that the Prime Minister is forging a world consensus behind the British solution. Is the noble Baroness aware that it is not the British solution that other nations are commenting on but the British disease? We are back to the humiliation of the 1970s. Other countries are talking of massive fiscal stimulus. Has the noble Baroness seen today's comments from the CBI that,

Paragraph 12 of the conclusions says the Council,

The noble Baroness has enormous experience of the European Commission. Does she think that that bit was drafted by our own Prime Minister or by Mrs Merkel?

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Last week saw the worst set of public finance figures in our peacetime history. We are forecast to have the largest budget deficit of any G20 economy next year—twice as large as the average for the G20 as a whole. We are in no position to lecture anybody. Is the noble Baroness aware that Europe is unanimous that cutting VAT was not the way ahead? Can she list any country in the EU that has copied this move?

Britain is in the humiliating position of having the worst deficit in Europe. The Prime Minister is now forecast to have delivered a longer recession than the United States or the eurozone; the deepest peacetime recession since the great depression; and, last week, the fastest rise in unemployment since records began. The policies that led the country into such a mess are not the policies to get us out of it.

Finally, does the noble Baroness know if there was any discussion at the summit about the sustainability of the euro? Are we not fortunate—here I give credit to the Prime Minister—that we are not caught like so many nations in the EU in the straitjacket of the euro and unable—dare I say it?—to find British solutions for British problems? As long as the Government stick to their no-euro line, they will be supported by the Conservative Party.

3.58 pm

Lord McNally: My Lords, I sometimes think of the old ITMA character who used to say:

“It’s being so cheerful as keeps me going”.

Certainly, when the noble Lord, Lord Strathclyde, reads out the litany of problems, with none of which I disagree, it is only fair that we face these issues firmly and resolutely.

The noble Lord, Lord Strathclyde, referred to the depression in the 1930s. Europe faced the issues in disarray and competitive beggar-my-neighbour trade policies. It is encouraging, and something to be welcomed, to find that, at a moment of not only national crisis but of world crisis, the Europe of today has been able to meet, as it has done, and the Prime Minister has been able to come back with positive gains in terms of co-ordinated action. We certainly welcome them. I do not think it is churlish to point out that it might have been even better if Europe had not been lectured for a decade or more both by the Prime Minister and Mr Blair about the successes of Anglo-Saxon capitalism as against the weaknesses and failings of old Europe. However, we shall let that pass. The co-ordination that is going on is really to be welcomed.

A little commercial: I welcome the statement on tax havens and hope that when we debate them in this House on Thursday on a Liberal Democrat Motion, whichever Minister comes along will be able to give us specific examples of how the Government are taking action on British-ruled tax havens.

On the Doha round, I recently went to a briefing by our own noble Baroness, Lady Ashton, who was quite optimistic that we could get Doha back on track. She estimated that something like 20 per cent of the issues were still to be decided. Of course, they will be the difficult 20 per cent. Nevertheless, do the Government have a timetable for the completion of Doha?

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On eastern Europe, I share the desire of the noble Lord, Lord Strathclyde, for clarification on the Eastern Partnership. However, I feel strongly that one of the great triumphs of the EU has been shepherding and helping former east European communist dictatorships into democracy under its wing. Some of those democracies are extremely fragile, so it is important that the EU keeps up its responsibility for both good governance and economic stability in those areas. Similarly, we welcome the ongoing commitment to Africa. In the recent debate on aid, it was pointed out that this crisis might drag some 60 million people back into absolute poverty. It would be a tragedy if the positive actions on Africa were a case of one step forward and two steps back.

On the green agenda, it was interesting at Oral Questions today when the noble Baroness, Lady Symons of Vernham Dean, raised the German example of scrapping old, polluting cars with a payment as an encouragement to buy new ones. I wonder whether, rather than our simply point scoring over other countries, an exercise in best practice and good ideas would not be worth while.

The noble Lord, Lord Strathclyde, is right about the situation in the City of London. We must be alert to the fact that, in trying to get both European and global control of these now-tainted captains of the universe, we should not bring in a plethora of regulations that cripple what is still a great asset: the skills of the City of London. On the other hand, I say to the City of London that it must not believe that it can have its cake and eat it in this respect. It must realise that some of the exposed faults need genuine responses, and we would support the Government in those.

As for the euro, let us wait and see. I had always suspected that the noble Lord, Lord Strathclyde, was a closet Guardian reader, and I noticed today that Mr William Hague, also in the Guardian, says “never, never, never” to membership of the Guardian.

Lord Strathclyde: The euro.

Lord McNally: “Never, never , never” to membership of the euro, my Lords; although he probably says the Guardian as well. He goes on to say that that is not an ideological position. If it is not an ideological position, I do not know what is. We remain convinced that there may come a time when it is massively in British interests to be in the euro. Talking about cake and eating it, I suspect that the City of London cannot permanently get all the benefits of being the major trader in the euro from outside the eurozone. The City should think about those consequences.

This is a good work-in-progress Statement and we support it in that respect, particularly since, perhaps a decade too late, the Prime Minister seems to have discovered Europe.

4.05 pm

Baroness Royall of Blaisdon: My Lords, I am grateful for the support for this “work-in-progress” Statement, as the noble Lord, Lord Strathclyde, put it.

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Lord McNally: It was me.

Baroness Royall of Blaisdon: Lords, I am sorry; I beg the pardon of the noble Lord, Lord McNally.

This is an important Statement which very much leads up to the G20 summit, mentioned by the noble Lord, Lord Strathclyde, who asked how I would report on it to Parliament. The G20 summit is on a Thursday, which means that there will be no immediate opportunity for me to report orally, but I am sure that the Prime Minister will make a Written Statement, and I will make sure that it is provided to noble Lords in the usual way.

The noble Lord, Lord Strathclyde, began by asking various questions about the carbon price and the renewables target. The December 2020 package committed the EU to reduce centrally the carbon targets. This will deliver substantial cuts in emissions and will place limits on the number of credits that can be bought in. This means that action will need to be taken in European countries. The economic context, of course, means that as output reduces, demand for carbon will fall, and we are confident that the tightening up of the EU ETS under the 2020 package will still deliver emissions reductions. Renewables were not discussed because the focus was on climate finance. We believe that the UK target of 15 per cent is ambitions in itself. I should draw noble Lords’ attention to the fact that in respect of renewables €40 million will be allocated for an Aberdeen offshore wind testing centre as part of the EU economic recovery plan. That is a very welcome step forward.

The noble Lords, Lord Strathclyde and Lord McNally, mentioned the Eastern Partnership which will be launched in Prague under the Czech presidency. This is a very welcome move because, as the noble Lord, Lord McNally, said, many of the democracies in those countries are very fragile, and for the peace and stability of our continent it is important that we work with them and assist them in whatever ways we can with democracy building, capacity building and so on. Essentially, that is what the Eastern Partnership relates to. I well understand the concern expressed that major countries such as Russia are “excluded”, but they can be invited on a case-by-case basis to take part in meetings or projects, although Russia will not be invited to the summit. Russia has decided not to take part in the European neighbourhood policy.

On Doha, my noble friend Lady Ashton was, in fact, in Washington last week. As I understand it, she had rather successful conversations with her new counterpart in the US Administration, but clearly their position on Doha will not be clear for a short while. There are also elections in India, the other key country in which there were problems in the earlier phase of negotiations. Until India has a new Government, we will not really know where the Indians are coming from. The Government are working very hard to ensure a successful conclusion to the Doha round.

The Government, like both noble Lords, believe that the City of London is a jewel in the crown and that we have to preserve it. Of course, it cannot have its cake and eat it. It must accept that there has to be better regulation. Both the Government and the European Council are clear that regulation and supervision must

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be strengthened. We have made it clear that this includes the sovereignty of national supervisors, such as the FSA. The key is for the EU as a whole to work together better. We are clear that the City of London should remain the jewel in the crown.

The noble Lord, Lord Strathclyde, asked whether anybody else has announced cuts in VAT. There was an agreement last week on new general areas where VAT can be cut. It includes the long-standing French priority of reducing VAT on restaurant bills. We expect a VAT cut this year in time for summer holidays. This is new information that has just arrived for noble Lords who are going on holiday to France. We must remember that there truly was consensus at the summit that fiscal stimuli, such as the one that we are engaged in, are important in safeguarding the economy of the European Union. It is great that the Government are working together with their partners and are not trying to work in isolation.

Manoeuvrability for possible future fiscal stimuli is a matter that the Chancellor will consider in the forthcoming Budget. I draw noble Lords’ attention to the fact that the IMF has said that there is room in our economy for further fiscal stimuli, should they be necessary. Tax havens are a matter that the G20 will, of course, address. The noble Lord, Lord Strathclyde, raised more general principles, asking whether the Government were isolated in the European Union by what they are doing about fiscal stimuli, and so on. I draw the noble Lord’s attention to a table that I have before me, which I will make available to him and the noble Lord, Lord McNally. It shows that we are not at all on a limb and very much in the mainstream, working on projects similar to those of our colleagues in the European Union. I look forward to further questions.

4.13 pm

Lord Hannay of Chiswick: My Lords, I thank the Leader of the House for the Statement. Before the European super-regulator joins the European army among the men of straw that get set up and knocked down regularly in this House, will she confirm that there is extraordinary consistency and coherence between the ideas put forward for regulatory reform in this country by my noble friend Lord Turner and those put forward by Monsieur de la Rosière to the European Union and endorsed by the European Council? If that is the case, I am not sure what we are all so frightened about. There is consistency between those approaches. My noble friend Lord Turner dealt with the European dimension in his report and he believes that it is reconcilable with continuing to regulate the City of London ourselves.

I have a couple of questions about the climate change and energy security parts of the European Council. I welcome the fairly modest progress that was registered there, but will the Leader of the House confirm that the European Union will quite soon need to come forward in the global negotiations on climate change with a rather clearer picture of what the European Union is prepared to put into the kitty to help developing countries to make the adaptations and transfer the technology that is needed if they are to undertake

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obligations too? I am sure that tactically there is a good case for not putting out a figure at this stage of the year but that will not last for very long. If it does, the negotiations will get nowhere.

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