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Turning to the $250 billion of special drawing rights, can the Minister confirm that this is the IMFs form of printing money? The small print says that there will be a general allocation of SDRs and that $100 billion will go to emerging markets in developing countries. Where is the rest of the $250 billion going? Can the Minister explain where the liquidity for the SDRs will come from and what controls the IMF will exercise over their use?
The Government have been talking up taking the stigma out of applying to the IMF. We have no wish to stigmatise those countries which, through no fault of their own, have seen their economies hit by the collapse in global trade. However, we have a problem if the Government are rolling the pitch for an application by the UK. If we have to go down the 1976 route again, the Government will most certainly deserve blame. Will the Minister today rule out the Government applying to the IMF for funds?
Lastly, the Statement talked about saving or creating millions of jobs across the world in this year alone. Do the Government not realise that statements such as that demonstrate more than anything else that G20 meetings and the like have no resonance for the people in this country? Unemployment in this country is now over 2 million, rising at the fastest rate since records began and likely to hit a peak of over 3 million. How many jobs are being saved here? People will not be fooled by headlines created by a passing caravan of world leaders. At the end of the day, fine words and smiles from world leaders have no meaning if jobs are still being lost and houses are being repossessed. The task of fixing the UK's economy remains a massive one and that is the task by which the Government will be judged.
Lord Newby: My Lords, we are grateful to the Minister for repeating the Statement, albeit after such a long interval. For those noble Lords who are not avid readers of every last bit of your Lordships Hansard, I can say that the Minister, the noble Baroness and I spent the afternoon of Thursday 2 April, when we might have been taking this Statement, happily engaged in Committee on the Saving Gateway Accounts Bill, to which we return tomorrow. That is presumably why we did not take the Statement then.
Two and a half weeks later, the Statement already reads like an historical document, but we should accept as a starting point that the summit, by the standards of these events, was quite a success. That was for two reasons. First, arguably for the first time ever, the key developing economies participated on an equal basis with everybody else. The benefit of operating through the G20 rather than the G8 on major international economic issues was amply demonstrated in this summit. The second reason why the summit was a success was that it reached agreement on a raft of issues, which, if implemented, could have a substantial impact on the global economy. Obviously, as the noble Baroness said, it does not solve every last issue facing global leaders in economic management, but it dealt with a substantial number of the most urgent of them.
However, I am aware, and I am reminded of it by the noble Baronesss response today, that there is a considerable degree of cynicism about such summits, not because of what they agree at the time but because of the extent to which agreements reached at the time are then carried out when the leaders go home. I have a question for the Minister on the process that now follows the summit. I gather that there is to be another, follow-on summit in September or some time in the
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On the specific issues that arose, the Statement talks about exit strategies, as the noble Baroness mentioned, including involvement in the banking sector. I will say something about the banking sector in a minute, but in the mean time I would welcome a commitment from the Government that, until we have an exit strategywe certainly do not at the momentfor those banks that are now in the public sector, they will be treated as if they were in the public sector with government direction rather than as if they were in the private sector and therefore incapable of being so directed.
Secondly, there was a welcome reference to cracking down on tax havens, which is an issue that we debated recently in your Lordships House. The question is, again, whether the momentum will be maintained. In the UK, on Wednesday, we have the publication of the Foot report on tax havens in those territories for which we have some responsibility. I rather regret that the report is being published on Budget Day, when it will get the least possible coverage. I would welcome an assurance that that does not mean that the Government will let up on their new-found desire to be tough on tax havens.
The summit agreed to $1 trillion of additional support for the world economy. In its minor way, that is a great achievement for the Prime Minister, because he said that he wanted the summit to agree to a boost to the global economy of at least $1 trillion. He did not mean this kind of $1 trillion; he meant a fiscal stimulus. However, he has managed to cobble together $1 trillion of worthwhile support by the IMF. Like the noble Baroness, we hope that that $1 trillion will be put to use rather than sit on the books of the IMF. I share her concern that there was but a passing reference to Doha at a time when we need far more impetus on it.
The summit discussed briefly the need to do everything possible to build a fair and sustainable recovery in a way that protects the environment. There has been quite a lot of criticism that the summit did not do more in that respect, but I was cheered by statements over the weekend by the Chinese suggesting that they may set energy efficiency targets and CO2 targets way beyond anything that they have done before. I wonder whether the Minister could say anything further about
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However, the Government need to look to their laurels in respect of the environmental agenda. In particular, their foot-dragging on carbon capture and storage over the past two or three years has been absolutely pathetic. Can the Minister tell us anything today about when serious decisions will be taken to get pilots on carbon capture and storage moving ahead? There is no reason to delay.
Finally on the specifics, the Statement talked about tough new principles on pay and compensation. When the Statement was read in another place, my colleague Mr Cable asked the Chancellor what that meant for British banks, particularly the nationalised banks, in respect of pay. He pointed out that the Royal Bank of Scotland was proposing to double the pay of its senior management from an average of £150,000 to £300,000 to compensate for the loss of bonuses. He asked whether that was true and, if so, whether the Government would stop it. The Chancellor did not begin to give an answer and I wonder whether the Minister may do so today.
Generally, does the Minister accept that, across the broad swathe of issues covered by the summit and the communiqué that he read out today, the best way in which Britain can exercise its influence on a global stage is by taking the action that the summit requires of everybody, so setting a lead that others may follow?
Lord Myners: My Lords, I start by responding to the final comments of the noble Lord, Lord Newby. I believe that the G20 made major progress in establishing a basis for restoring confidence and growth in the worlds economies and repairing the financial system and, in so doing, restoring the availability of credit, which is so important to economic activitybut restoring a growth of credit in an environment of strength, regulation and supervision, which will address the core causes of much of the serious problem that the global economy currently faces. If we do that successfully, we will rebuild trust in our financial system and in our financial institutions. To do this, we also need to fund and reform the international financial institutions: the IMF and the World Bank in particular. That was an important area of shared agreement in the G20 announcement. We will also work hard with other member countries of the G20 to promote international trade and to reject protectionism.
I welcome the strong endorsements by the noble Lord, Lord Newby, for the G20. For far too long, these international fora have been dominated by the old world order built around dominant countries from the developed world. We have now brought into this forum a much broader membership, which is absolutely critical. The next stage is to ensure that the importance of the worlds developing economies is reflected in the governance of the IMF and the World Bank.
The noble Baroness, Lady Noakes, quite correctly pointed out that I did not include the words that my right honourable friend the Chancellor used in advance of reading his Statement to the other place, which
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The noble Baroness referred to a number of achievements, particularly the strengthening of resource for the IMF and the World Bank, and I am grateful to her for those comments. There are, of course, no quick fixes; this is a global problem of truly enormous scale and is quite unparalleled in modern times. However, we saw in the G20 a commitment to sustained fiscal effort across G20 countries. There was a commitment on the part of all countries to recognise that no one country can lead us out of global recession through its own fiscal policies and that there is a need for each country to determine, as part of a global commitment, a series of domestic programmes appropriate to its own particular circumstances.
I share the noble Baronesss concern about Doha. I know that many in this House, and certainly in government, wish to see real progress on Doha. There have been a number of changes in international leadership and in the heads of Governments of major economies in recent months, and we are hopeful that those changes may presage a change of attitude to bring Doha to a conclusion. It is simply unacceptable for Doha to continue to lie in the work pending basket rather than being put into the work completed basket.
The noble Baroness asked about trade barriers. There is an incipient tendency towards protectionism under the guise of patriotism. The G20 was clearly alert to this and charged the WTO specifically with drawing to the attention of G20 leaders and monitoring any steps that they regard as protectionist.
The noble Baroness asked a number of questions about IMF resources, in particular whether they represented a printing of money. The SDR issuance is not simply an increase in the global money supply; it is closer to global liquidity insurance programmes. A substantial SDR allocation will increase EME access to liquidity and will therefore provide an important source of credit and liquidity to keep the global economy operating in an efficient manner.
The noble Baroness also asked about the $250 billion of additional short-term trade financing, which will be made available over the next two years. Of that sum, approximately $50 billion will come from public/private sector commitments via a new IFS facility. Nearly $200 billion of world trade support will come from G20 members bilaterally, predominantly via their export or investment agencies. Whether the UK will benefit from this, or the extent to which the UK will benefit, will depend on how well we compete in international markets for the provision of products and services. I am confident that our outstanding skills in manufacturing and export services mean that
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In her closing remarks, the noble Baroness referred to a passing caravan of world leaders having little impact on peoples lives. I believe that that is to understate the consequence of the G20. The G20 brought together the worlds major leaders in a quite unparalleled commitment to address a global shortfall in demand and to be frank about the causes of that shortfall; to bring forward specific programmes to address deficiencies in the governance, leadership and regulation of financial institutions; to broaden the span of institutions to be brought under regulatory control; to address tax avoidance through tax havens; and to ensure that in doing this we remained alert to the needs of those who were not represented at the G20, including those in the poorest countries of the world.
I am pleased that the noble Baroness referred to concerns about people in this country, including those who have lost their jobs or have had houses repossessed. It is pleasing to hear the Conservative Party finally acknowledge that these are real issues, even though it does not seem to have policies that will do anything to ameliorate the concerns of those who are most exposed at the moment. The Government, through their international and domestic policies, are clearly driving an agenda to address the source of the problems, which are essentially global.
I share the admiration of the noble Lord, Lord Newby, for the work of my noble friend Lord Malloch-Brown. I do not think that we could possibly have a better Sherpa, but the noble Lord raises some interesting questions about whether the G20 may need or would benefit from some form of permanent establishment or facility to support its work. In the mean time, we should not lose sight of the fact that, in taking forward the work of the G20 ahead of the next meeting later this year, the IMF, the World Bank, the new Financial Stability Board and the World Trade Organisation have all been given specific mandates and responsibilities for aspects of the G20 communiqué.
The noble Lord, Lord Newby, raised questions about UK banks. The UK banks in which the public, through the Government and UKFI, have significant shareholdings remain in the private sector. They will continue to be managed in a way that is appropriate to all their shareholders, rather than denying the rights of the other shareholders by using them as a tool of public policy. I assure the noble Lord that there is no question of a doubling of salaries at the Royal Bank of Scotland in order to compensate for the loss of bonuses. I can also assure the Liberal Benches that, contrary to a quotation in the papers last week from the noble Lord, Lord Oakeshott, there is no suggestion that the making of loans to employees of RBS and Lloyds Bank is a way of providing covert bonuses.
The noble Lord, Lord Newby, makes an important point about tax havens. I can assure him that the Government are as committed as the Government of any country in the G20 to addressing the issue of jurisdictions that provide protection for tax evasion.
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Finally, I am sure that I am going to be tempted to speculate on the content of the Budget announcement this coming Wednesday afternoon. I will say nothing more about it other than to address the comments made by the noble Lord, Lord Newby, about environmental taxes and carbon capture and to note that this will be the first Budget in the world to set a carbon target enforceable under law. Otherwise, we will await the Statement of my right honourable friend the Chancellor on Wednesday.
Lord Lamont of Lerwick: My Lords, I welcome the Statement that the Minister has repeated, in particular the increase in resources for the IMF and the World Bank, which is extremely important for emerging markets with their own banking crises. Did the Minister notice the statement by Dominic Strauss-Kahn, the managing director of the IMF, on the eve of the G20 summit in which he said that the lesson of 122 banking crises which the IMF had overseen was that until the banks were cleaned up, there could be norepeat, norecovery. By cleaned up, he did not mean future regulation: he meant the removal of toxic and impaired assets from the banks. Since the Minister is deeply involved in this, can he give the House an update on the position of the Governments asset insurance scheme? I know that this is a complex problem, but there is an impression that it is overly complicated, is taking too long, and is not as definitive as the scheme put forward by the Irish Government where every bad asset is being put in one bad bank. Can he assure us by setting out what are the next stages in the insurance scheme and how it is working?
Lord Myners: My Lords, I was aware of the statement made by M. Dominic Strauss-Kahn immediately before the G20 summit. Cleaning up the banks is a term that can mean many things to many people, but I agree with the noble Lord that it is about addressing the issue of bad assets, and I do not think that one should limit them to the term toxic assets either. There are issues around assets that are impaired in terms of credit and which may or may not improve with time, and there are issues where the core problem is one of liquidity. Various jurisdictions have adopted different approaches. The American approach, led by Mr Timothy Geithner, is focused on using the limited resources available to the American Government to leverage them up in order to buy bad assets off banks through hedge funds and private equity. That was announced three or four weeks ago, but to date there has been no further progress. There are also doubts about how the scheme will operate in practice, whether it is structurally at risk of being gamed by participants, and whether there are inherent risks around agreeing the valuation of the assets that will go into the scheme.
Elsewhere, other methods have been adopted. In Switzerland, loans have been taken off the balance sheet of UBS, while in Ireland the Government have
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Our own asset protection scheme is now closed in accordance with the timetable we set at the end of March and we have agreed conditional access for the Royal Bank of Scotland and Lloyds Banking Group. This has been hugely welcomed by markets. The share prices of those institutions have risen, the claw-back share price for Lloyds Banking Group being now well below the current share price, and the availability of credit to those institutions and the cost of credit has fallen. So we have already achieved a positive step forward in confidence. We said that it would take three to four months to complete documentation because these are enormously complex programmes. I previously said to the House that in each case we would be talking about several billion data points for each of the banks. But we remain on timetable to complete documentation and I am encouraged by the fact that the banks, their customers and the markets are taking considerable comfort from the robustness of the model that we have introduced and will be completing, as I said, before the summer.
Lord Haskel: My Lords, one of the things to which everyone at the G20 agreed was the need for more integrity and fairness, not only in banking but in business generally, in trade and in company and individual taxation. Does the Minister agree that this is one thing on which everyone was agreed? If so, how is it going to be achieved?
Lord Myners: My Lords, I thank my noble friend for that question. We have witnessed a profound collapse in standards of integrity and purpose on the part of a small number of people at the top of a small number of important international banks. This is the consequence of the adoption of a new model of banking in which banks no longer regarded themselves as having a long-term relationship with their clients but instead preferred to originate and follow a composed portfolio and distribute model which meant that their loans were passed on to other people. With the benefit of hindsight, this weakened the sense of ownership and commitment and the fundamental understanding of a shared interest which had previously typified the relationship between a bank and its customers. That is now being reversed as a consequence of the very expensive lessons that have been learnt, but it will require more engagement on governance, supervision and regulation.
I, for one, strongly endorse the broad issue of the importance of high ethical standards and integrity in all aspects of commercial and government life. We need to return to better standards of conduct and a broader sense of responsibility than has characterised an era of greed which has brought so many fine banking names to a point of acute weakness.
why on earth does the Minister expect us to believe the figures he gave today repeated from his right honourable friends Statement in the House of Commons earlierand that the resources to be given to the IMF are extra, new resources when he must have known that this was not the case? This is another confirmation of numerical inflation. Does he share the view expressed by the former senior economist at the IMF, Professor Subramanian, that these figures were wrong? Does he also share the professors view that the statements connected with the figures for the IMF were all spin and lacked substance?
Lord Grenfell: My Lords, in intervening in this debate I should probably declare an interest as I am going to mention the Bretton Woods institutions: I spent 30 years at the World Bank and am in receipt of a pension from it.
I am looking for some reassurance from the MinisterI apologise if this is a rather esoteric pointabout the real purpose of the new Financial Stability Board and how its mandate will be strengthened in contrast to the Financial Stability Forum, of which it is the successor. I was never totally convinced of the Financial Stability Forum in the first place; that body seemed to be largely second-guessing what the outcomes might be.
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