Together the Governor and I attended last month's G7 meeting in Washington. Next Friday, the Governor and I will both attend the Ottawa meetings of the International Monetary Fund, the World Bank and the G20. We are determined to take action to maintain the conditions for stability and growth. We will also agree at those meetings new measures to cut off the supply of funds to terrorism.
This morning, the Bank of England has frozen the accounts of many individuals or companies on the latest terrorist suspects list, consisting of 46 organisations and 16 individuals. I can report that, after seizures of $10 million, more than $100 million—£70 million—of suspicious assets in 38 accounts have been frozen in Britain alone.
When the Governor and I meet the IMF committee next week, we shall ask all 183 member countries to ratify in their domestic law the eight principles governing surveillance and seizure of suspicious transactions. As chair of the United Nations counter-terrorism committee, we will also offer to co-ordinate a central register for technical assistance to countries implementing anti- terrorist measures. Now that asset-tracking centres are being set up in all major financial centres, we will offer London as an international clearing house.
We ourselves will appoint an accountant from the private sector to head our anti-money laundering and terrorist finance unit. As I announced to the House on
I am delighted to hear from the Chancellor that such firm action is being taken against terrorist finances. However, will he confirm reports this week from Government sources that the costs of the Afghan conflict have so far been relatively small? Has he discussed with the Governor of the Bank of England the warnings of the Institute for Fiscal Studies and other bodies that, even without the Afghan conflict, if the current rate of Government expenditure continues to increase as it has, taxes will have to increase?
I do not accept the hon. Gentleman's assertion. I have regular meetings with the Governor of the Bank of England. As the hon. Gentleman will know, the Bank of England Monetary Policy Committee is meeting today and will announce its decisions in due course.
As for public spending, we will meet all the necessary costs of military action. We will also meet the costs of international development responsibilities in Afghanistan and Pakistan. Those costs have been £60 million in the past few months. In addition, we will meet the costs for additional home security. All those costs will be met, and they will be met within the fiscal rules that we have established. We shall keep to our fiscal rules, as I told the Confederation of British Industry on Sunday.
The hon. Gentleman says that we are spending more than the country can afford. Consequently, he wants to cut public spending. He will have to tell the House which hospitals and schools and how many nurses and doctors will be cut. He will have to face up to those questions if he makes such proposals.
I congratulate the Chancellor on his prominent role in co-ordinating a strong international response to combat particularly international terrorism. What progress has he made in attempting to agree international standards for combating the financing of terrorism? What help will he provide to poorer countries, particularly financial and technical help, to implement those standards?
I am grateful to my hon. Friend. Those are important issues on which I believe that Britain has a responsibility to take the lead. Yesterday, I spoke to Paul O'Neill, the American Secretary of the Treasury, about measures that we will propose at next Friday's IMF meeting. It is important that we have a co-ordinated international action plan to deal particularly with the offshore financial centres that have not previously had in place the proper regulatory machinery.
I am encouraged by the fact that all British dependent territories and Crown dependencies have said that they too will immediately implement legislation to curb the sources of supply to terrorist finance. I am also encouraged by the fact that, last week, at the Financial Action Task Force, where Britain was represented, 40 countries agreed that they would apply new principles to govern banks and the way in which they deal with suspicious transactions involving terrorism.
It is now our duty to help some of the poorer countries to implement those measures properly, as my hon. Friend says. We will work through the UN committee that we chair to ensure that special help is given to countries that want to have such anti-terrorist legislation and to set up monitoring units. I believe that all those measures will be agreed next Friday and Saturday when the IMF meets. The Conservatives should recognise the importance of those measures: I believe that they will want to support them.
I trust that the Chancellor will not be blown off course by what may be the short-term effects of
In the past few days, £7 million has been frozen, which makes a total of more than £70 million. We are now working through the list agreed with the American authorities in the past few days, and further announcements will be made as a result. The hon. Gentleman is absolutely right—he raised the issue in our recent debate in the House—to say that we have to get the balance right between the need for security, which many people believe requires us to take further action, and the protection of civil liberties in our country. That is what we intend to achieve.
There are three sorts of approved court order which have to be gone through before all the actions that I set out two Mondays ago can be taken. Under the court order to asset freeze or restrain, banks are asked to freeze a particular asset. The information order will require a bank to disclose information on accounts if it is not prepared to do so. Finally, there is the further process of the monitoring order, the details of which I have announced. In other words, when we take action—except action in respect of a sovereign state, in which case we would come to the House to explain that action—we will go through the proper procedures where it is necessary and as long as it is possible to do so.
Just over a week ago, with fellow Select Committee members, I met the Governor of the Bank of England when we discussed the sound economic platform that we have in this country. To use his words, we are particularly concerned to build a constituency for low inflation to maintain our good economic progress. Far from the economic statistics being bad, they show a sound economic platform in this country. I congratulate my right hon. Friend on his action on terrorist funding. What does he intend to do through the FATF to ensure that proper sums are spent on tracking terrorist funds?
I applaud the work that my hon. Friend and the Select Committee on the Treasury, which he chairs, do to examine the condition of the economy. It is correct to say that 10 years ago, when the world economy slowed down and an international conflict was taking place, it was impossible for the Government of the day to reduce interest rates because inflation was running at 10 per cent., so the action necessary to get the world economy moving could not be taken by this country at that time. It is possible now to reduce interest rates, as has happened six times this year, because we have kept our inflation target for the past four years.
On issues of terrorist finance, I believe that we will get international consensus on the need for action, but that consensus will require countries to take the necessary action. That is why we offer London as a clearing house for the exchange of information on the activities of terrorist groups which are seeking to launder money or to use underground banking. I believe that it will be necessary to build up an international database on the subject, so that we can take effective action against all the groups which are involved in terrorist action and using the legitimate processes of banking to launder money through this country and others. I assure my hon. Friend that we will take the necessary action, and that in the next few days we will make proposals that will involve the UN taking further action.
In his discussions with the Governor, I am sure that the Chancellor has referred to the devastating economic consequences for public-private partnership in the rail industry of the actions of the Secretary of State for Transport, Local Government and the Regions. Will he now tell the House how much money was owing to Railtrack this year under the
Will my right hon. Friend the Chancellor ask the Governor to carry out a study into the financial difficulty of waging war that faces a country that does not have sole control over its currency or over the central bank, and if the power to borrow is restricted by treaty?
My right hon. Friend has made his views on the euro known on many occasions, and I do not think that he has changed his views this morning. I know that the Conservatives say that they will not get over-excited about the euro, but whenever the word is mentioned, a new frenzy erupts on the Opposition Benches. The position is as I set out on Sunday. We will carry out the assessment against the five tests in the proper way. On the basis of the assessment, we will make a judgment on the questions that my right hon. Friend has put.
Does the Chancellor agree that we should not exaggerate the degree of threat to the world's economic prosperity that is posed by acts of terrorism? Stock markets are often good indicators, and it is my experience that when there is an overriding mood of anxiety and caution, the bottom of stock markets is usually passed. Will he bear it in mind that the huge amount of liquidity being pumped into the system means that there is a real danger of inflation two or three years hence, and that we should not now abandon our inflation targets?
We will certainly not abandon our inflation target, and the Governor of the Bank of England and his MPC are making their decisions on the basis of that target. However, I hear what the hon. Gentleman says about the challenge posed by terrorism. It is important that we stand up militarily to terrorism, and that we keep moving the economy forward as best we can and are not diverted by terrorist threats.
However, the world economy faces challenging times—times that will test us. To give an example, world trade was rising by 12 per cent. last year, whereas this year it is rising by only 2 per cent. or less. As a result, the benefit that we and other countries gain from exports is substantially limited. What happens to consumer expenditure and public investment in the UK is therefore all the more important. There are risks—even dangers. It is important that the world comes together, which is why, when the IMF and the World Bank meet next week, we will seek countries' agreement on what each continent can do to maintain stability and growth in the world economy.
As the Chancellor knows, we fully support measures to cut off terrorist funds. However, does he agree that there was cause to be concerned about the United Kingdom economy before
First, I welcome Mr. Howard with his debating skills to his position as shadow Chancellor—the fifth Tory shadow Chancellor in four years. I know that to have someone with all the experience of being at the heart of the last Conservative Government delights the Conservatives, but it delights us too, and we look forward to comparing the record of the last Conservative Government with ours.
The right hon. and learned Gentleman quotes the world competitiveness league, but I seem to recall that under the last Tory Government we fell to 23rd in that league. He makes the point that we are spending more than we can afford. That must mean that he wants to cut spending. It has been his stated aim for a long time to cut public spending to 35 per cent. of GDP.
The right hon. and learned Gentleman shakes his head. Let me tell the House what he said:
"I believe our aim should now be to reduce the proportion of national output taken by the state towards 35 per cent. I believe that 35 per cent. is a realistic and obtainable long-term goal."
That was from the speech of the right hon. and learned Gentleman to the British Chambers of Commerce on