With permission, Mr Speaker, I would like to make a statement on last week’s G20 summit. There were three key aspects to the summit. First, agreement on an action plan for growth and jobs, with specific countries agreeing to do specific things in order to maximise overall growth in the world economy. Secondly, the G20 continued with its work to identify and remove some of the key obstacles to growth, including imbalances between surplus and deficit countries, to stop the slide to protectionism, to improve global governance, and to protect the world’s poorest from the current economic problems. Thirdly, there was, of course, the main issue of instability in the eurozone. Let me take each in turn.
First, the action plan for growth and jobs. This includes many of the things that Britain is already doing, from fiscal consolidation and monetary activism to removing the barriers in the way of business and job creation. The G20 recognised yet again the importance of implementing
“clear, credible and specific measures to achieve fiscal consolidation.”
It also clearly identified a group of countries that have the space to borrow for additional discretionary measures. I have to tell any Members of the House who would like to see the UK borrow more that no one was proposing that the UK should be in that group of countries. We are determined to deal with our debts, not to leave them to our children and grandchildren. The need to press on with our plan for fiscal consolidation has now been recognised by the G20, as well as by the International Monetary Fund and the OECD.
Secondly, obstacles to growth. The imbalances that did so much damage in the run-up to 2008 are growing again. This matters, because if we are to maximise global growth and avoid some of the speculative bubbles of the past, countries with a trade surplus need to increase domestic demand and ensure that they keep their markets open, while those with a trade deficit have to undertake structural reforms to improve competitiveness. There was some real progress. For instance, Russia is making changes to its foreign exchange regime, and China agreed to increase its exchange rate flexibility. Both of those are reflected in the communiqué, but more needs to be done.
The greatest mistake that the global economy could make is to enter into a slide towards protectionism. The World Trade Organisation report sets out all the protectionist measures that have been taken in G20 countries over the last year, and they are a cause for concern. So the G20 reaffirmed its pledge not to take protectionist actions, committed again to roll back any new protectionist measures that might have arisen, and reaffirmed its determination to refrain from competitive devaluation of currencies. We also welcomed the fact that Russia, the last G20 country outside the World Trade Organisation, is now set to become a member of the WTO by the end of the year.
On Doha, I have said it is time to look at working with groups of countries in so- called “coalitions of the willing” to drive new trade deals. Together with five other G20 leaders, I wrote to President Sarkozy ahead of the summit to call for new and innovative approaches to trade liberalisation. That is what was agreed in the communiqué.
On improving global governance, I presented a report, which I am placing in the Library today. We secured agreement for the key proposals. First, we agreed that the G20 should continue as an informal, flexible gathering rather than attempting a complete reordering of the system of global governance. What is needed is not new institutions, but political will. Secondly, we agreed that we should make the now established Financial Stability Board a separate legal body to give it the authority and capability that it needs. Thirdly, we agreed that we should strengthen the WTO’s role as the guardian of the world trade system. Further progress was also made on cracking down on tax havens and tax evasion and on having a proper regulatory system for banks to make up for the woeful system that has existed in so many countries, including ours, over the last decade.
On development, Bill Gates gave a presentation suggesting ways of mobilising resources to help the world’s poorest. This included helping some developing countries to help themselves through proper systems for collecting taxes and transparent revenues for natural resources. At the same time, he gave strong support to the UK’s own record on the development agenda.
On the financial transactions tax, I have been clear all along that we are not opposed in principle to such a tax if one could be agreed at the global level, but we will not unilaterally introduce a new financial transactions tax in the UK. Neither will we support its introduction in the European Union unless it is part of a global move. Britain has introduced a bank levy and we are meeting our global agreements on overseas aid. If other countries want to introduce new financial taxes at home, including to raise revenue for development, that is for them to decide. What they should not do is try to hide behind proposals for an EU tax as an excuse for political inaction on meeting targets, whether they be for spending on development or, indeed, climate change.
The current proposals for a financial transactions tax in Europe are so deeply confused that different European countries, and indeed European institutions, have talked about spending the revenues of such a tax in five different ways: on development, on climate change, on social policy, on resolving the banking crisis, and, most recently, as the best way to supplement the EU budget. I have to say that that would be a bit of a stretch even for Robin Hood.
Let me turn, finally, to the problems in the eurozone. It is clearly in our national interest for the eurozone to sort out its problems. As the Chancellor has said, the biggest single boost to the British economy this autumn would be a lasting resolution to the eurozone crisis. That is why Britain has been pressing the eurozone to act—not just at the G20, but for many months. The deal in Brussels 10 days ago was welcome progress, and it reflected the three essential elements that Britain has been calling for: first, reinforcement of the bail-out fund by eurozone countries to create a proper firewall against contagion; secondly, recapitalisation of weak European banks; and, thirdly, a decisive resolution to the unsustainable position of Greece’s debts.
The Euro area countries now need to do everything possible to implement their agreement urgently. Of course, the rest of the world can play a supporting role, but in the end this work has to be done by the eurozone countries themselves. No one else can do it for them. As I have said before, Britain will not contribute to the eurozone bail-out fund—whether that be through the European financial stability facility or a special purpose vehicle. And while the International Monetary Fund may administer a fund, it cannot and will not contribute to it.
The IMF does, however, have a vital role to play in supporting countries right across the world that are in serious economic distress. There are 53 countries currently being supported by the IMF, of which only three—Greece, Ireland and Portugal—are in the eurozone. It is essential for confidence and economic stability that the IMF has the resources it needs. So, at the G20, Britain, the US, China and all the other countries round the table made it clear that we are willing in principle to see an increase in IMF resources to boost global confidence. There was no agreement about the timing, the extent or the exact method through which this could be done. However, Britain stands ready to contribute within limits agreed by this House. Those who propose that we walk away from the IMF, or who oppose even the increase in IMF resources agreed by the last Government, are not acting responsibly or in the best interests of Britain.
It is in our national interest for countries across the world that are in distress to be supported in their efforts to recover. The collapse of our trading partners, whether in the eurozone or not, would have a serious impact on our economy. Businesses would not invest, British jobs would be lost, and families across Britain would be poorer. Through the IMF, we can help other countries in a way that does not affect our own public finances—but let me be clear: it is for the eurozone and the European Central Bank to support the euro, and global action cannot be a substitute for concrete action by the eurozone. The G20 withheld specific IMF commitments at this stage precisely because we wanted to see more concrete action from eurozone countries to make their firewall credible and to stand behind their currency. In short, the world sent a clear message to the eurozone at this summit: “Sort yourselves out and then we will help, not the other way round.”
These are very difficult times for the global economy. The Government are completely focused on one objective: to help Britain to weather the storm and safeguard our economy. Because of the tough decisions that the Government have already taken to get to grips with our deficits, Britain has avoided the worst of this stage of the global debt crisis. In 2008, under the last Government, UK bond yields were about the same as those in Greece; today, although we have the second highest deficit in the EU—second only to Ireland’s—our bond yields are almost the same as those in Germany, and around the lowest that they have been since world war two. That is because we have a credible plan to deal with our debts, and the resolve to see it through. The situation in Italy further emphasises the importance of a credible plan to deal with debts and ensure confidence in the markets more generally.
The eurozone must now do what is necessary, and see through the agreement that it reached in Brussels 10 days ago, Britain, and all our G20 partners, will continue to press for that to happen. I commend my statement to the House.