Oral Answers to Questions — Prime Minister – in the House of Commons at 12:34 pm on 23rd May 2012.
I welcome your announcement, Mr Speaker. Daw Aung San Suu Kyi is a remarkable woman, who for so many years has been effectively imprisoned in her own country. It is an incredible testament to change in that country that she is now able to travel and speak freely, including in this Parliament.
With permission, Mr Speaker, I would like to make a statement on the G8 and NATO summits, which I attended in America last weekend. The common theme across both summits was economic stability and international security.
At the G8, we reached important conclusions on dealing with our debts, growing our economies and dealing with the risks in the eurozone. Let me take each in turn.
Deficit reduction and growth are not alternatives. We need the first to deliver the second. There was absolutely no debate about this: it was my view, Chancellor Merkel’s view, President Obama’s view and President Hollande’s view. Indeed, France will balance its budget at a faster rate than Britain.
In Britain, in two years, we have cut the deficit we inherited from the last Government by more than a quarter. Our approach has been endorsed again by the International Monetary Fund this week, and by the OECD. At a time of tight budgets, a proper growth plan requires not just a credible fiscal policy, which secures the low interest rates about which I was speaking just a moment ago, but structural reforms to make our economies more competitive, active monetary policy, and innovative use of our hard-won credibility to ensure investment in long-term infrastructure. We are taking all those steps in the UK and promoting them in Europe as well. In every area, we need to do more.
Prime Minister Monti and I have gathered 10 other EU leaders to call for the completion of the single market in digital and services—classic structural reform to our economies. President Hollande is coming forward with creative proposals, such as project bonds, and, as the House knows, in recent months the European Central Bank has helped supply liquidity to European banks. I will pursue all those elements at the informal European Council tonight, and at the formal Council in June, after which I will of course make a statement to the House.
Growing our economies also means doing everything we can to get trade moving. At the end of the G8 meeting, there was a serious and substantive discussion about the potential for an EU-US trade deal. The EU and US together make up half the world’s GDP. There is a huge amount of work to be done—and a further effort will be made and a report will be produced at the G20 next month—but that could have a positive impact on both sides of the Atlantic.
The greatest risk facing the eurozone and, indeed, the world economy, is clearly the situation in Greece. The future of Greece is for the Greek people to determine. It is for them to decide what is best for their country. However, we cannot afford to allow that issue to be endlessly fudged and put off. The Greek election should in effect be a straightforward choice between staying in the eurozone—with the responsibilities that that entails—or taking a different path. The eurozone—and Europe as a whole—needs to have contingency plans in place for both eventualities. That should involve strengthening banks, protecting financial systems and ensuring decisive action by European institutions to prevent contagion. Whatever the outcome, this Government will do whatever is necessary to protect this country and secure our economy and financial system.
Alongside the discussion on the economy, I had two further priorities at the G8: to continue the good work of the G8 on development, and to support the Arab spring and the promotion of democracy and reform.
On development, the New Alliance for Food Security and Nutrition is an important initiative that aims to help 50 million people lift themselves out of poverty over the next 10 years. For countries to receive help, they need to show a real commitment to transparency and good governance. In return, they get substantial support to generate private sector investment in food production. I believe that that is a great combination of promoting good governance and helping Africa feed its people. I will be building on this with a major event on hunger during the Olympic games in the UK.
Encouraging the private sector to create jobs is one of the best routes to sustainable, equitable growth in poorer countries. However, aid still has a vital role to play. For the first time in a decade the amount of aid given by the world’s richest countries to the world’s poorest countries has fallen back. Promises are being broken, and that is wrong. Britain continues to honour its commitments. Other nations should do likewise, and in the G8 that we will chair next year, we will once again produce the report that shows who has and who has not kept their promises.
The G8 also reached important conclusions on Libya, Iran and Syria. Specifically on Syria, there was backing for the Annan plan, and for further UN measures if Assad does not change course. It was significant that the Russians agreed to that text.
I raised Burma and the need to support the foundations of a lasting and irreversible transition to democracy. I want to make that a feature of our G8 next year. I am sure the whole House looks forward to welcoming Aung San Suu Kyi when she addresses Parliament next month.
Let me turn briefly to the NATO summit. Some people write off NATO as a relic of the past, but I believe it is vital to our future security. The threats NATO countries face largely come from beyond our borders—from failed states, terrorism and nuclear proliferation. Because of that, it makes sense for NATO to be prepared, to link up with partners around the world, to act out of area, and to spend less on the weapons of past conflicts such as battle tanks and more on the technology needed for tomorrow’s conflicts. All those things were agreed at the summit.
That is not to say that NATO should not take steps to defend Europe and north America—it should, and we declared at the summit that the interim ballistic missile defence capability to protect Europe is operational. It was particularly good to have a special session with the partners who work with NATO around the world, and in particular the 50 countries that make up the NATO-led alliance in Afghanistan.
NATO’s military commanders set out the progress in the campaign. Attacks by insurgents are down and transition to Afghan control is on track. Over the next few weeks, we will reach the point at which 75% of the population will be living in areas where Afghan forces are in the lead for security. The vital next steps are to deliver the final stages of transition, and to continue the build-up of the Afghan national security forces and ensure they are properly funded for the future. Britain is pledging £70 million—$100 million—a year, but it is right that other countries should step up and contribute to the future of Afghanistan, irrespective of the role they have played so far. The summit marked a turning point in those contributions, with almost $1 billion being pledged to support the Afghan national security forces.
Britain has played a leading role in the alliance for reasons of our own security. Three years ago, some three quarters of the most serious terrorist plots against Britain had links to Afghanistan and Pakistan. I am now advised that that figure has fallen to around a half. Our aim is an Afghanistan that is able to take care of its own security without the need for foreign troops, and an Afghanistan that can prevent al-Qaeda returning and posing a threat to us and to our allies around the world.
The tremendous hard work of our courageous servicemen and women is making that possible. After 10 long years, they will finally be coming home. I pay tribute to them. Their service and their sacrifice is beyond measure. We remember in particular all those who have given their lives in this vital task to keep our country safe, and I commend this statement to the House.
I am grateful to the Prime Minister for his statement. Let me start with the NATO summit. On Afghanistan, the Opposition welcome the summit’s confirmation that the transition of full security responsibility from the international security assistance force to the Afghan national security forces is set for completion by mid-2013, and that British combat operations are set to end by the end of 2014.
Let me echo the Prime Minister’s words about our troops. They have served heroically in Afghanistan for more than a decade now, and we owe them enormous gratitude. I am sure I speak for the whole House and the Prime Minister when I say that we want to see them home with their families in the right way—one that respects the professionalism they have shown and the sacrifices they have made. To that end, will the Prime Minister give the House a clear indication of the timetable for the expected draw-down of British combat troops between now and 2014? Will he tell us how many British service personnel he expects to remain in Afghanistan after 2014 and which services they are likely to be drawn from, and will he confirm that they will remain under a NATO command and control structure? Will he also tell the House whether he has had discussions with President Zardari on the important issue of land access across Pakistan, which is so vital for British military and ISAF supplies?
On the political situation in Afghanistan, does the Prime Minister agree that honouring the sacrifices and bravery of our troops means taking the political challenge there as seriously as we take the military challenge? Given that the final stage of the military campaign is under way, what concrete steps will now be taken that were not already in place before the Chicago summit to secure an inclusive political settlement within Afghanistan and between Afghanistan’s regional partners? Does he agree that the international community has talked for a long time about talks about talks on the political settlement we need, and that we need far greater urgency in seeking that settlement for when our troops come home?
On the G8 summit, we join the Government in calling for an immediate end to violence to stop the continuing bloodshed in Syria, and I join the Prime Minister in his remarks on Burma.
On the global economy, we desperately needed a plan for growth, for both Europe and the international community. The Prime Minister entertained Opposition Members with his description of President Hollande as his new best buddy, given that he endorsed the President’s opponent in the most fulsome terms. The Prime Minister told Le Figaro:
“Nicolas Sarkozy has my support. I say it clearly.”
The Foreign Office was a bit perturbed and started briefing about that, saying:
“We put all the chips on one card and it turned out not to be the ace...It was an error of judgment and not what was advised”.
Perhaps he will tell us whether he was advised to see President Hollande but twice refused to do so? The Foreign Office also said something that, after today, I think we can all concur with:
“The Prime Minister has a habit of shooting from the hip.”
That is certainly true.
In reality, we did not get the conclusions and action we needed from the summit because the international community is divided—not united, as the Prime Minister said—between those who believe we must have a decisive shift towards growth, such as President Obama, now joined by President Hollande, and those who believe that the answer lies in more of the same, such as the German Chancellor and this Prime Minister. For two years he has been the high priest of austerity, telling the world that austerity alone is the answer, but now the recognition has dawned that it is not working, and he finds himself on the wrong side of the argument. That is why he is desperately scrabbling around to say that President Hollande is his great friend.
What has the Prime Minister delivered at home? The recovery has turned to recession, there has been no growth for 18 months and 1 million young people are out of work. He was fond of quoting yesterday’s IMF report, but he did not quote this from Christine Lagarde:
“Growth is too slow and unemployment—including youth unemployment—is too high.”—
[Interruption.] Hang on a sec. I am getting to it. She continued:
“Policies to bolster demand before low growth becomes entrenched are needed”.
That is not his position. His position is: more of the same. So we have the ultimate irony of a Prime Minister who has delivered a double-dip recession lecturing other people on how to get growth.
What did the Prime Minister actually achieve at the summit? We know some of the things he did. He watched the football—nice pictures! He went to the gym. He even squeezed in some sight-seeing. The only thing there is not a photo of is of him making a difference to the world economy—in other words, doing his job. At the G20 last November, he signed a communiqué stating that if “global conditions materially worsen”, countries will take action “to support domestic demand.” Well, global conditions have worsened, so where is the action for growth? Where is the decisive shift we need across the global economy? Why has he not delivered it? He has not delivered it because he does not believe in it.
The Prime Minister is actually making things worse, not better. Last Sunday, the Chancellor went on television and said that speculation about the break-up of the euro was damaging Britain’s economy. He said that
“it’s open speculation…about the future of some countries in the eurozone which I think is doing real damage”.
Will the Prime Minister explain, then, why he decided to do just that last Wednesday and say, “Make up or break up”? It might have rhymed, but does he not understand that it did nothing to help our economy or anyone else’s?
Given the seriousness of the position in Greece, does the Prime Minister really believe that for him to deliver an ultimatum to Greek voters over the weekend about their election was such a good idea? I would have thought that after his experience of the French election, he might have realised it was not such a good idea to get involved.
Finally, on tonight’s European summit, euro bonds are important and a stronger firewall would make a difference, but the crucial thing is demand. Does he not accept that without a plan for growth and demand in Europe, we cannot get a solution on deficits across Europe that is either politically or economically sustainable? The problem with this Prime Minister is that he can only offer more of the same. He cannot be part of the solution because he is part of the problem. All he offers is more austerity. It is not working in Britain, and it is not working in Europe. It is a failed plan from a failing Prime Minister.
Five minutes and absolutely no plan! The Leader of the Opposition had nothing positive to say. It was a good joke about Sarkozy, but let me say this: we all have our faults, but I would rather have a reputation for being loyal to my friends than for knifing my brother.
The right hon. Gentleman started with NATO and asked some serious questions, so let me give him some serious answers. He asked for a clear indication about the draw-down. We will go down to 9,000 troops by the end of this year. Clearly, we need to set out a pathway between now and the end of 2014. I want it to be based on the conditions on the ground and on how well the transition is going in the three provinces for which we are responsible. Obviously, I will keep the House updated on that. We do not want a great cliff edge at the end.
The right hon. Gentleman asked what would be left at the end of 2014. We have made a clear decision on this. President Karzai asked us to provide an officer training college in Afghanistan and we will be doing that. We have the assistance of the Australians and the
New Zealanders on that, and we hope that others will be joining in. That is the baseline of our commitment, but clearly we will listen to any other requests. The right hon. Gentleman asked whether it would be a NATO-led operation in terms of training: yes it will, but there will not be NATO combat operations after 2014.
The right hon. Gentleman asked about the relationship with Pakistan and about the vital issue of the ground lines of communication—the so-called GLOCs. It is essential that they are reopened. I spoke to Prime Minister Gilani about this when he visited the UK a week or so ago, and I spoke to President Zardari at the conference. I am confident that progress will be made but, frankly, it needs to be made more rapidly than is currently the case.
The right hon. Gentleman asked about the political challenge, and he is right about that. I have said all along that, alongside the military surge, we need a political surge. We are working very hard with the Afghans and the Pakistanis to deliver that. We have made a very clear offer to the Taliban that if they lay down their weapons and join a political process, that process will be open to them. But we have to be prepared for the political process not advancing as far as we would like, and that is why we must ensure that the build-up of the Afghan national security forces goes according to plan so that we can hand over in good order, as I believe we will.
I welcome what the right hon. Gentleman said about Syria and Burma. On President Hollande, let me make this point. President Hollande said something that I think the right hon. Gentleman should perhaps adapt slightly, then repeat. He said:
“The national debt is the enemy of the left and of France.”
We have never heard the right hon. Gentleman say anything as clear as that before. Let us look at what President Hollande is doing. When he was asked how he would stimulate growth, he said:
“The means cannot be extra public spending, since we want to rein it in”.
The right hon. Gentleman asked about our approach on growth. We agree with the Italian Prime Minister that we need structural reform in Europe. We agree with the French President that we need a more active monetary policy in Europe. We agree with the German Chancellor that deficit reduction is vital in getting interest rates down. The problem is that Europe has not had all three, but we support all three of those things.
Finally, I would just say to the right hon. Gentleman that nobody I can find in Europe, not even the left-wing party in Greece, backs his idea of putting an extra £200 billion of borrowing into the British economy. That is the Labour policy. It would put up interest rates, it would wreck our economy and it would wreck our prospects—which is exactly what Labour did in office.
Did anyone at the G8 summit emphasise that the basic cause of the economic and political crisis in Europe was not the Greek debt but the single European currency and its lack of a lender of last resort, which is now a threat to the global stability of the banks? May I put it to the Prime Minister that, until the leaders of the great nations grasp that fact and act upon it, the turmoil in Europe will continue?
My right hon. Friend makes an incredibly important point, which is that a single currency requires an active, interventionist central bank behind it. That is something that we have been saying for a very long time, and it is one of the reasons I have always been sceptical about the single currency. There is a growing realisation that, alongside plans to deal with deficits to provide fiscal credibility, there is a need for a more active monetary policy. That is what we have in the UK, with our single currency across our nations, and if Europe is to have a working single currency, it needs that sort of monetary policy too.
While I welcome the change of rhetoric over the weekend, particularly from the Prime Minister, in recognising that austerity alone will not work—at least, from his point of view, in Europe; he might apply that here, too—will he tell us whether the German position has changed at all? It does not seem to have done so, but until it does, I shall find it hard to believe that the eurozone can come up with anything convincing or credible before the Greek elections on
I have great respect for the right hon. Gentleman, and he raises absolutely the right point. I would say that the German approach is changing, to an extent, because the Germans know that alongside deficit reduction plans, in a single currency, there needs to be greater co-ordination of that single currency. Their concern is that they do not want to take their foot off the deficit reduction until they have more of a political system around the single currency. I understand their concern. This is one of the reasons that I never wanted to join a single currency; I have always believed that a single currency involved a sort of single economic government. The struggle is to try to convince countries in Europe that, alongside deficit reduction, they need a more active monetary policy, a European Central Bank that stands behind the currency, and the structural reforms, such as completing the single market, that we have always argued for.
I welcome the emphasis on growth. Does the Prime Minister agree that the Bank of England and the banking regulators in the UK need to amend their method of operation to ensure that sufficient money and credit are available to fuel a private sector-led recovery, rather than simply providing more cheap money for the state? Could they not learn from America, which is doing that very well, in order to avoid the problems that Europe is being plunged into by doing it far worse than we are?
My right hon. Friend makes an important point. When I say “active monetary policy”, I do not simply mean a central bank that engages in quantitative easing, or whatever. We need to ensure that all the monetary institutions of a country, including its banks, are properly capitalised and properly working. Around Europe, there is a lot of work that needs to be done on that.
With regard to the Prime Minister’s discussion with the President of Pakistan, does he deplore Barack Obama’s offensive discourtesy towards the President, the sovereignty of whose country the United States has violated with deadly effect? Will he confirm that Britain stands shoulder to shoulder with our Commonwealth partner in defying American colonialism?
I have to say that I would not put it like that. We need to work very closely with our American allies, within our special relationship, to try to deal with the terrorism that has come out of Afghanistan and is still coming out of parts of Pakistan. It is in our national interest to do that, but I always urge all international friends and partners to show patience and understanding with Pakistan because it is the biggest victim of terror of all. It has complex politics, and it needs to be given the space to resolve some of those issues. It also needs to know that its friends, such as Britain, will not leave it after the Afghan conflict is over, and that we are there for long-term partnership, friendship and support.
Of course I associate myself and my colleagues with the tributes to our serving forces, particularly in Afghanistan, and to those who have given their lives. On the global economy, will the Prime Minister continue to make it clear that, although we are not in the eurozone and should not wish to join the eurozone, it is in our interests that we support the other countries in Europe that are in it—including, as the Father of the House said, by supporting their structural reform? Does he also agree that an increase in the internal market across Europe is in their interest and ours, and that construction at home is the best way of creating the growth that we need in this country as an immediate priority?
My right hon. Friend is entirely right. It is in Britain’s interests that the problems in the eurozone are dealt with. We have consistently made a whole series of suggestions about firewalls, about strengthening banks and about consistent and strong contingency plans. The point that I was making at the weekend is that it has become ever more urgent to make those contingency plans because, frankly, it is not in our power to determine whether Greece decides to stay in the eurozone. We have to prepare for every eventuality, however difficult that might be.
This morning, the European Parliament passed, by a very large majority, a call for a financial transactions tax. Can the Prime Minister foresee what his stance, and that of other leaders, will be on that matter this evening?
My view is very simple: I am against a financial transactions tax, for the simple reason that the European Commission did a piece of research into such a tax and found that it would cost hundreds of thousands of jobs. While it might sound as though it would tax the bankers and all the rest of it, it would actually put up the cost of people’s insurance policies and pension policies and drive all that activity offshore. I am not surprised that some other European countries support it, because they see it as a good way of taking a lot of tax out of the UK and spending it in Europe. Well, I am not falling for it.
There is increasing pressure for political union between certain member states. Whether this is achieved by enhanced co-operation, by separate intergovernmental treaty or by other stealth measures, does my right hon. Friend accept that, irrespective of the European Union Act 2011, such a fundamental change in the relationship between such member states of the European Union and the United Kingdom would necessitate a referendum?
I do not agree with that position. I think the right position for the UK is to say that we should hold a referendum only if power were to pass from Westminster to Brussels or if we were to join some new treaty or political construction that involved the passing of that power. I agree with my hon. Friend, however, that the single currency clearly has within it the seeds of greater political union, so we have to work out—in this country, in our coalition and in the Conservative party—how to respond to that and how to get the best deal for Britain as the situation develops.
The Prime Minister talks about the continued importance of NATO and about some of the things that have been agreed, but the agreed changes are largely peripheral and the need for reform is profound. Is there not a danger that the understandable focus on the economic crisis is sucking the life out of the need for reform in NATO? Will he focus on that? Notwithstanding the understandable needs of the economy, will the Prime Minister make sure that the change programme that is so badly needed to get decent interoperability within NATO does not lose its momentum?
The right hon. Gentleman speaks with great knowledge of this subject. I would be a little more optimistic: one NATO reform, which I know he would welcome, aimed to cut the bureaucratic and headquarters posts around Europe. To be fair to Secretary-General Rasmussen, he has done an excellent job in delivering that. We have also delivered the ballistic missile defence in interim capability, which is another important step forward for NATO. Where I am perhaps more optimistic than the right hon. Gentleman is that I think the reality of the situation will drive us towards reform. Everyone faces tough budgets, and the fact that America is now providing almost three quarters of NATO’s funding and assets is unsustainable, so other countries are, frankly, going to have to step up to the plate, look at their arrangements and co-operate more, as we are with the French, to deliver more of the teeth and less of the tail.
May I warmly endorse the Prime Minister’s view that NATO is vital to our security and congratulate him on the very positive role he played at the summit as the leader of one of NATO’s most important countries? Does he agree that the Secretary-General’s programme for smart defence is key to the future reform of NATO and that Mr Ainsworth spoke a great deal of sense?
I thank my right hon. Friend for his remarks. The truth is that there is duplicated defence capacity all over Europe, much of which is not deployable.
We need all countries to undergo the difficult and painful things we have done in strategic defence reviews to work out what weapons and systems are needed for the conflicts of the future, recognising that NATO is less likely to fight land invasions and much more likely to have to deal with failed states and terrorism, so the needed capacities are different. Even that will not be enough, as we then need a lot more co-operation—particularly, I think, between the leading members of NATO, which is why we are working so closely with the French—so that we can deliver complementary capabilities and get more done as a result.
With the aim of achieving growth, the IMF specifically recommended yesterday that UK banks slow their acquisition of capital buffers, thereby making more money available to British businesses and small businesses. Do the Government agree with that recommendation, and will they work with the Bank of England to implement it as soon as possible?
The hon. Gentleman raises an important point. This is a difficult issue to get right. We are rightly discussing two problems: the need for growth, and the need for financial stability and ensuring we are safe, with the headwinds of a potential eurozone storm approaching. I think the best approach is to work hand in glove with the Bank of England and the Financial Services Authority to get that balance right. That is what the Government will do.
I congratulate the Prime Minister on his stamina, as I calculate that by this evening he will have done three summits in two continents in five days. I reiterate the points made by my right hon. Friend Nicholas Soames and Mr Ainsworth. We have to impress on NATO members that the conclusion of the Afghanistan campaign is no justification for cutting defence budgets. It is essential to have a full-blooded review of NATO strategy, with a full-blooded commitment from all its members.
I thank my hon. Friend for his remarks about my summitry. By the end of tonight, that will be enough summits for quite some time, although the G20 will soon catch up on us. What he says about NATO is right. We need reviews from all NATO countries, which need to go through their budgets and work out what is necessary for national defence. We need to ask what more we can all do to make sure that NATO has the capacities it needs for the future.
I endorse what the Prime Minister said about the importance of NATO to our national security and the need to spend more on the technology of tomorrow. Cyber-terrorism poses an ever-greater threat. Will the Prime Minister assure us that within NATO intense focus will be devoted and resources given to that big and growing problem across the world?
One of the things the UK did in the strategic defence review was to invest some of the savings made—from memory, I think it was £900 million—in a cyber-defence programme. That is being co-ordinated with GCHQ, but also involves the private sector. We hope to work with other NATO members on that capability to make sure that we share best experience and endeavours, and that should lead to savings for us and for others.
The euro is as dead as Monty Python’s parrot: it is no more, it has ceased to be, it has expired. So why do the euro elite continue to claim that it is alive and well? Is it not essential that Europe implements an orderly break-up of the eurozone before the markets force an economic tsunami?
Like my hon. Friend, I have always been a genuine euro-sceptic—sceptical about the euro—which is why I did not want to join it. We have to recognise, however, what is in this country’s interest, which is for the eurozone to sort out its issues and difficulties. I believe that will involve greater fiscal transfers and it must involve eurobonds over time. As I have said, it involves a more active monetary policy in Europe. We should encourage our European partners to go down this road to make sure that their system works properly. There are real dangers from disorganised exits from the euro. It is not just that countries would devalue, which would have an impact on us, as we have to think about the impact on financial institutions and banks around Europe, including on British banks. It is very important that the eurozone takes the necessary steps to put in place the contingency plans to keep it safe.
Now that the Prime Minister is lecturing Greece about the need for growth and that we need a little bit in Spain and the eurozone, so he says, for the sake of clarity can we get to the bottom of growth here? Will he repeat these words after me: “I’m going to drop the austerity plan and go for growth in Britain”? Now’s your chance.
I am afraid that I do not agree with the hon. Gentleman. I deeply regret that my last encounter with him was perhaps a bit sharper than it should have been, and I hope he will accept my apology. He is a tremendous ornament to this House, and that will always remain the case. I do not agree with him because I think a deficit reduction plan is necessary to deliver the low interest rates we need, which are essential for growth. I make the point again that when this Government came to power, our interest rates were the same as those in Spain. Today, ours are less than 2% and Spain’s are over 6%. One reason for that is that we have a credible fiscal policy.
Will my right hon. Friend give the House an absolute cast-iron assurance that while he is Prime Minister this country will never, ever join the euro—unlike the Leader of the Opposition, who seems very open to the idea?
I am very happy to give that pledge. I note that the Leader of the Opposition said that whether we joined the euro would depend on how long he was Prime Minister; I am not sure which prospect is the more terrifying.
Young people in Merseyside see their friends suffering from a lack of opportunities, and they feel distressed when they see huge unemployment rates among young people in Greece and Spain. Will the Prime Minister say specifically what discussions he had with G8 colleagues about infrastructure development as part of a global plan for growth?
We did discuss the issue of infrastructure development, because I think that it can be part of what needs to be done. The rise of unemployment is tragic in any country, but the figures in Greece, Spain and elsewhere in southern Europe are eye-watering: 50% of young people are unable to find work.
As I have said, I think that the elements of the plan that we need are the fiscal credibility that provides low interest rates and the active monetary policy that supports demand in the economy, as it has in the UK, but combined with structural reforms. There is a need for proper structural reforms in Greece and other countries so that they can have competitive economies. The extra element is using the credibility that we have earned, and the strength of the Government’s balance sheet, to try to deliver innovative finance to infrastructure and credit. That is obviously an option that is open in Europe as well, and I think that it is what President Hollande is referring to when he talks about project bonds. Those are the elements of a growth plan. We have them all in the UK, and we need them in Europe as well.
Does my right hon. Friend agree that when we look at the scale, and the time scale, of the burden that fell on what was then West Germany at the time of German reunification, we have a sense of the awesome challenge that would face any German Chancellor trying to achieve fiscal union in Europe?
Yes, I think that my hon. Friend is entirely right. Some people imply—it was implied in the question from the former Chancellor, Mr Darling—that German stubbornness is unreasonable. It is understandable. Obviously, for the success of the eurozone we need everyone to adopt approaches such as those I have described in terms of monetary policy, eurobonds and the rest of it, but it is important to understand people’s motivations and difficulties, because they are what lie behind the current impasse.
It is good that the Russians shared in the motion on Syria, but even if we leave aside the rigged elections in the Russian Federation, there are still major human rights abuses in Russia. For instance, Mikhail Khodorkovsky’s second trial has been universally condemned by every international organisation in the world and, indeed, by many organisations in Russia. He tried to secure an appeal, but it was turned down only last week by Judge Alexander Voronov, who is not an ordinary judge but a military judge in the military chamber of the Supreme Court. When the decision was handed down that there could be no appeal, it was done on the Russian armed forces website. Does that not show that Russia has a great distance to go before it can really embrace being part of the humanity of nations?
We discuss the importance of freedom, human rights and democracy regularly with Russian colleagues. When I visited Russia, I met civil society organisations to discuss precisely those issues. However, I think that it is very worthwhile to have Russia in the G8. When we are discussing issues such as Iran and Syria, in which Russia has an interest—and, frankly, we want it to join in the efforts we are pursuing—I think that it is helpful to have the Russians there.
In the absence of progress towards a global trade deal through the Doha round, an EU-US deal could be a decent second-best if it meaningfully reduced tariff and non-tariff barriers to trade. Can the Prime Minister give an indication of a plausible time frame for the conclusion of such a deal, and perhaps also an indication of how much the UK economy in particular might benefit from it?
I think that there is still something salvageable from the Doha round—all the elements of trade facilitation, such as helping to reduce customs times and charges, rather than the bigger Doha package—and I think that we should pursue that. We had a conversation at the end of the G8 in which we agreed to go away and look at our “issues paper” for the G20, and to establish whether there was a small enough distance to be closed between the EU and the US to make a deal worthwhile. I am very hopeful. Britain is one of the most open trading nations. There are real concerns on both sides—obviously there is a French position on agriculture, and an American position on many services and other issues—but I think that we will have a good look at this at the G20 and see whether we can fast-track it.
Is the Prime Minister aware that Greece spends 50% more on defence than ourselves, France or Turkey, and is the biggest arms importer in Europe? Is he aware that the Greek shipping industry, which accounts for 7% of Greek GDP, and the Greek Orthodox Church, which is the biggest land and property owner, do not pay a penny in tax? When he talks to the Greek Prime Minister, will he ask him to scale down defence spending and get the oligarchs and the Orthodox Church to pay a little bit to solve the Greek crisis?
The right hon. Gentleman makes a good point. However much one can look at the Greek situation and feel for the people who are suffering as a result of unemployment and living standards, there is a crying need for genuine reform in Greece, and for more straightforward and honest politics when it comes to dealing with those problems. That means making sure that people do pay their taxes, and making sure that industries are competitive.
The issue of defence spending is obviously more complex because of the relationship between Greece and Turkey, but as we are now both NATO members and Turkey is an aspirant EU nation, there should be an opportunity to decrease Greek spending on national defence, while of course encouraging it to be a good NATO member at the same time.
At the G8 summit, did any of the leaders advance the argument that dealing with the deficit and supporting growth were alternatives, or did they argue that it was necessary to bring about growth through monetary policy, by supporting the banks and by getting trade going? Did anyone advance the argument that it was necessary to borrow one’s way out of debt?
My hon. Friend makes a very important point. Absolutely no one suggested that dealing with deficits and securing growth were alternatives. They are complementary: we need both. That is the view of everyone around the G8 table. There is only group of people who have their heads in the sand and are complete deficit deniers, and they are the people who gave us the deficit in the first place.
The Prime Minister rightly drew attention to the level of youth unemployment in Greece, which is more than 50%. More than a quarter of adults are unemployed, and the economy is set to contract by a further 6% in the current financial year. The Prime Minister has preached austerity in this country and all around the world. That is exactly what has been done in Greece, and that is exactly what the result has been. Is the Prime Minister prepared to put pressure on the European Central Bank, in so far as he can, to stop the austerity oppression in Greece and start supporting the needs of ordinary people who have worked very hard and do not deserve this misery?
This is where I part company with the hon. Gentleman. In this country, we have consistently said “You need to have deficit reduction, which delivers low interest rates and enables your central bank to pursue an active and expansionary monetary policy”—which is what we have had in this country—“and at the same time you need the structural reforms to ensure that your businesses are competitive and can take on more people and grow.” That is what we are seeing in Britain, with 600,000 more private sector jobs. It is a world away from what is happening in Greece or in many other parts of the eurozone, which do not have the monetary policy accompanying the fiscal policy and which have not undertaken the structural reforms we are undertaking.
I am sure that my right hon. Friend will agree that the biggest threat to our country at present is indeed the crisis in the eurozone, but almost parallel with that is the possible pending crisis in the middle east. Given that a very important conference begins today in Baghdad, did my right hon. Friend manage to find time at the weekend to emphasise to the Russian and Chinese leaders the importance of their role in trying to ensure a peaceful outcome of the Iranian situation?
My hon. Friend is right to raise that issue. A good portion of the G8 was spent discussing the situation in Iran, and specifically discussing the talks that are under way in Baghdad today. It was heartening that the Russians signed up to a pretty tough text on Iran, and I think that the path is very clear. Europe has rightly adopted the oil sanctions, and the pressure is beginning to tell on the Iranian economy. This is the moment at which to maximise the pressure, to encourage other countries around the world to join in with the sanctions, and to say to the Iranians “There is a different pathway. You can have civil nuclear power; you can have a more decent relationship with other countries of the world; but you must give up the ambition of enriching uranium to such an extent that it could deliver a nuclear weapon to you.”
Whatever the structural deficiencies and other problems that exist in Greece and have existed there for a number of years, this problem was not caused by that; it was caused by the banking and economic crisis in the world, and the way in which the eurozone has dealt with it. The suffering and austerity in Greece is on a completely different scale from what we have even envisaged in this country, and it is untenable for it to continue. Will the Prime Minister go back and ask the euro partners—not least, of course, the Germans—to think again about what we can do to bring about a different plan there? I remind him that Greece is a very proud nation. It is a very important ally of ours, it stood by us alone in 1941 against the Nazis, and we should do what we can to help it.
Of course I agree that Greece is an important ally. Relations between Britain and Greece are very strong, and the historical analogy the hon. Gentleman draws is absolutely right. I do not agree, however, that the problems in Greece are caused only by the euro or by the banking crisis. There are deep and profound problems in the Greek economy that need to be dealt with. There must be the right combination: there need to be deficit reduction plans; there needs to be an active monetary policy; there need to be reforms to the eurozone; and there need to be structural reforms. In the end, however, it will be for the Greek people to decide whether they want to do these things inside the eurozone our outside the eurozone. Clearly, a disorderly exit would be very bad for Britain, and we should do everything we can to avoid that, but we need to plan for every eventuality and have proper contingencies in place.
In the absence of much-needed supply-side reforms in the eurozone, I suggest a day of reckoning is fast approaching. Given that since the second world war there have been 80-plus cases of countries leaving a currency bloc and the vast majority of them have benefited from that, does the Prime Minister think that we are fast approaching a time when we should stop talking about the need to save the euro, because it can create uncertainty and hit confidence and investment in this country?
My hon. Friend makes an important point, but I am not entirely sure I agree. There are, of course, examples of countries that have left currency pegs, and suffered in the short term but then recovered. There have also been countries that split their currency in two; Czechoslovakia managed that process well. There is a substantial difference, however, between such cases and situations where there is a potential breakaway from a currency zone with a single currency. That is a different situation because the banks are so intertwined. That is why we must think very carefully about the contingency plans for such situations.
The Prime Minister paid tribute to the troops who have come home from Afghanistan. Recently, my wife, Norma, and I welcomed a Black Watch battalion home to Dundee. Can the Prime Minister assure me, current serving personnel in the Black Watch, Black Watch veterans, my family and my constituents that on his watch there will always be a Black Watch?
I very much want us to keep the regimental structure; that is very important. At the same time, however, we need to deliver this big change in our armed forces—which, actually, will deliver a larger Army, but also a better balance between a professional Army and a territorial Army. We are looking at exactly how that can be done, while saving the important regiments about which people rightly feel so strongly.
At the G8 summit, my right hon. Friend the Prime Minister discussed development, with the aim of lifting 50 million people out of poverty in the next 10 years. May I therefore urge him to do even more in respect of microfinance as a way of creating sustainable economies over the long term, and to use charities such as the MicroLoan Foundation in Chiswick, which gets a 99% return on the money it gives to women in Africa to create businesses for themselves and their families?
My hon. Friend makes an important point. We are, of course, committed to aid and development, and to expanding the new alliance for food security and nutrition programme that Barack Obama launched. Microfinance is important because it not only helps to grow small businesses, but it empowers women, which can make an enormous difference to the success of development.
Was there any discussion about the situation in Yemen? The Prime Minister will know that on Monday a bomb exploded in the middle of the unity day celebrations, killing 96, and this morning aid agencies have said that half the population is going to starve to death. I appreciate what the Prime Minister and his Government—and successive Governments—have done. However, while the Prime Minister has made Burma a priority for his chairmanship of the G8—I also acknowledge your role, Mr Speaker, in championing the cause of Burma—can he not also find a little space for Yemen, because a stable Yemen is in our interests? If we do not support that country, al-Qaeda will take it over and it will bleed to death.
The right hon. Gentleman knows that I absolutely agree with him on this. At the G8 summit, I talked about the next G8 and said it was very important that we address the security and development priorities of the future. I think both Yemen and Somalia fall squarely into that bracket. The recent hideous bomb attack and loss of life in Yemen was extremely distressing. We must focus a huge amount of effort on the country. A development effort is going in: I think the Department for International Development will today announce an investment of £26 million in that country. We must also give an enormous amount of national security assistance to the country, and I discussed that in my bilateral with President Obama.
May I echo what the Prime Minister said about our brave servicemen and women, who continue to strive to bring peace and stability to Afghanistan? Sadly, agreement was not reached on reopening the supply routes through Pakistan. Will the Prime Minister comment further on that, and on the role of Pakistan as a key ally in our efforts to leave Afghanistan on a stable footing at the end of 2014?
That is a key point. We need to ensure we have northern routes as well, of course, and I had a good meeting with the President of Azerbaijan to discuss that issue. On Pakistan, Members are absolutely entitled to feel frustrated. We are enormous aid donors to Pakistan, and we have a very strong relationship with the country. It is frustrating that the lines of control are still closed, but there are ongoing discussions and I am confident they will be reopened. We have to show an understanding about how this country has suffered from terrorism, about the complexities of its politics and about the need to show real respect for its sovereignty and its democracy. The message we must give to both Afghanistan and Pakistan is that long after this war is over, we will be there supporting both of them as strong independent countries, diplomatically, politically, through trade, through aid—through all the means we have—and we will not desert them.
In a recent visit to Nigeria, I saw at first hand the great opportunity for agri-investment in that amazing country. However, the all-party group that I chair has heard a lot from British businesses about the logistical challenges and security concerns of investment in Nigeria. While the new alliance for food security and nutrition is a good step, what support will the Prime Minister pledge to British companies looking to invest there, so we get the win-win of both growth in British business and food and jobs for Nigerians?
When I went to Nigeria and met the UK Trade & Investment team in Lagos, I was hugely impressed by its work and its dedication, and also by the incredible links between British Nigerians and Nigerian British, as it were, working between the two countries. We work very closely with the Nigerian Government on security, because there are considerable security challenges, particularly in the north of the country. Security training and counter-terrorism co-operation between the UK and Nigeria can help produce major dividends both for that country and for trade and investment.
Given that increasing exports to emerging economies needs to be a key part of the growth strategy of many of the G8 nations, will the Prime Minister update us on any discussions he has had with other European leaders on progress on the pending free trade agreement between the EU and India?
We had a number of discussions about the free trade agreements. There is a series of such agreements: the Indian one; the Canadian one; the chance of getting one going with Japan. My view is that all of them are good news. The Korean one has been a success, and we need to drive them all forward—and we are certainly in the vanguard of doing that.
May I echo the comments of those colleagues who expressed concern at the scale of the cuts and the retrenchment being forced on Greece—the ordinary people of Greece, not the Greek Government? While I agree with the Prime Minister that there need to be structural reforms and the changes he has suggested, would it not be better to have a bit more flexibility—a bit more European solidarity—rather than end up forcing Greece into a situation that leads not only to the collapse of that country, but immense consequences for the eurozone and the entire world economy?
Obviously, we are not a participant in the eurozone bail-out of Greece. We are supporting Greece through the IMF, however. The hon. Gentleman must consider this point: other European and eurozone countries, some of which are not particularly rich themselves, have had a series of agreements with Greece about what needs to be done and what money will be put in, and effectively he is asking them to go back repeatedly to their own Parliaments and say, “Well, I promised I wouldn’t ask for any more for Greece, but here I am again asking for more.” That is very challenging for them. As I have said, in the end it will be for the Greek people to decide, in their election, whether they want to stay in the euro and keep to the undertakings they have given, or whether they want to choose a different path. We in this country must be clear that we should support all and any contingency plans to make sure that either scenario can be safely delivered.
The Prime Minister cited in his statement the extraordinary statistic that the EU and the US together make up more than half the world’s gross domestic product. Does he accept that this may well be the last generation for whom that is the case, and that it is therefore more vital than ever that we reach out further and faster into developing markets to support our exporters and build on our strengths as a country?
My hon. Friend is right that the share of world trade and the share of the world economy taken by the EU and America together is likely to decline as that of China and India rise, but I was always taught in business that going back to one’s best and biggest customer to get that extra deal is often a very good strategy, so we should be thinking exactly about that in terms of EU-US trade.
At a time when defence budgets are constrained right the way across the alliance, is it not important for NATO itself to demonstrate, in the same way as its member states, that every pound it spends is well spent? Will the UK therefore support proposals being considered by the NATO secretariat to ensure that the external audit service for NATO is entirely independent of NATO, that accounts are published in a timely fashion—say, within six months of the year- end—and that they are available for parliamentarians in this and other Parliaments in NATO states to scrutinise, in the same way that we scrutinise our own defence expenditures?
The hon. Gentleman, who has great knowledge of these things, makes a series of sensible suggestions and we should look carefully at them. Let me again commend Secretary-General Rasmussen for what he has done in reforming the huge number of command posts and headquarters posts in NATO. I suspect that there is more to be done on that front, as well.
Currently, Britain has only some 3% of the European market in services. Can the Prime Minister confirm just how important completing the services market is for British services?
On completing the single markets in digital, in services and in energy, each of them can add, I believe, more than a percentage point on European GDP. The services market is particularly important because it is an area that Britain excels at—not just financial services but everything, including construction and architecture. On opening up services in other countries, a number of countries are currently in breach of their undertakings, so the pressure for this, particularly in countries such as Germany, should be very great.
We all know the expression, “Give a man a fish and he can eat for a day; give him a rod and he can eat for life.” Therefore, why is some of the money being used to pay down the debt in Greece and not instead being invested in solar forests across Greece so that they can provide Europe with energy; being invested in rail links, so that people can travel between Greece and other European countries and thereby boost tourism; and being invested in universal broadband, so that we can connect Greece to the world? We have a politically acceptable and economically sustainable solution, instead of putting half a fish on the table, leaving the Greeks hungry and angry by lunch time.
The Greeks have had a very special deal—an enormous private sector haircut on their debt, through which creditors have been asked to take a share of the burden. The money that Greece has received in the last decade from the European Union could have gone into many of the projects that the hon. Gentleman points out. Part of the problem in parts of the eurozone is that the early years of the euro saw wage rates and unit costs of labour rise, rather than their being fundamental changes to make these countries more competitive.
It seems that there is a strong possibility that Greece will be forced out of the eurozone, and we are obviously concerned about the impact on the economy that a disorderly exit may have. Does my right hon. Friend agree that we need to hold discussions with our European partners and develop contingency plans to ensure that such an exit has the minimum possible impact on the United Kingdom?
My hon. Friend is entirely right. Obviously, this is not something we want to see happen, and it is in our interests that the eurozone deals with its issues, strengthens its firewalls and strengthens its banks, and that we start to see the high interest rates in parts of Europe come down. But it would be irresponsible not to prepare proper contingency plans, and that is what the Treasury and others have been doing. As I say, whether Greece stays in the euro or not is not within our power, and we must prepare for all eventualities; but obviously, a disorganised exit would cause real difficulties.
Our country has invested a lot in Afghanistan—a lot of sacrifice and a lot of resource. So, along with many others, I am increasingly concerned at the lack of progress in the critical issues of politics and governance in Afghanistan, which, by nearly all accounts, are getting worse, not better. Will the Prime Minister therefore pledge to re-energise this process in order to give Afghanistan the best chance of surviving as an entity post-2014, ensuring that our efforts and sacrifice are not wasted?
I respect the hon. Gentleman’s views, not least because he served in the military and knows about what he speaks. Regarding the political surge in Afghanistan, he is perhaps being a little too pessimistic. In Helmand province, the area for which we have been responsible, we have seen the excellent Governor Mangal make some real steps forward in governance. There are district governors in almost all the province now, and we have seen a huge amount of progress in wheat seed distribution, building schools and hospitals and providing basic levels of service. But clearly we need to do more, and what happens politically and in terms of reconciliation will determine the nature of the outcome we achieve in Afghanistan.
I welcome the declaration at the NATO summit on the interim ballistic missile defence system. Russia, however, remains hostile to the scheme. Has progress been made in persuading Russia that the scheme’s primary point is to protect Europe from ballistic missile threats from rogue nations, not from Russia?
Obviously, it is still a difficult discussion between NATO and Russia, but I think there is a level of understanding that the point of having a ballistic missile defence shield is to protect Europe from potential threats, including, for instance, Iran. It is important to remember that this is not instead of nuclear deterrence—it sits along side nuclear deterrence, which remains a key part of our defence posture.
The International Monetary Fund confirms in its article IV report published yesterday—if we needed it confirmed—that plan A is not delivering growth. It has also made a number of suggestions and recommendations, many of which have been discussed in the Chamber today, and some of them will be implemented in the coming months. The report goes on to suggest—recommend, even—a plan B to boost growth and temporarily cut taxes. Is the Prime Minister listening?
I listen very carefully to what the IMF says, and to me, two things stand out. First, it says that reducing the high structural deficit over the medium term remains essential and that the UK has made substantial progress towards achieving a more sustainable budgetary position—alongside saying that the situation we inherited made the IMF shiver. Secondly, and importantly, it forecasts that the UK will grow faster this year than France, Germany or the eurozone, so it is predicting that things will improve, not get worse.
As our brave troops come home from Afghanistan, one of the key issues is the long-term sustainability of the Afghan economy. In the past, its biggest export has been the poppy crop, which has fuelled the illegal drugs trade worldwide. However, that self same product could be used to alleviate medical suffering worldwide. What consideration has been given to purchasing the poppy crop, so that we can use it for beneficial medical aims and sustain the Afghan economy as well?
I have looked at this issue in some detail. The key thing is that if proper governance, proper rule of law and proper transport networks can be delivered in a country, then what might be done with its ability to grow poppy might be considered; that is what happened in Turkey. But I have a feeling that if a poppy-purchasing project were suddenly introduced now, rather like in “Blue Peter”, you would buy one and they would produce another one they had made earlier, so I do not think it would work. But I do believe that the Afghan economy can develop, and that is one of the reasons that we are spending a serious amount of money not just on supporting the Afghan national security forces but on economic development in Afghanistan, and clearly, that will be key to its future.
Recently, I had a meeting with Afghan Sikhs in my constituency. Under the Taliban, they were forced to wear yellow ribbons and were prohibited from cremating their deceased loved ones. They have raised with me grave concerns about their freedom in the future and women’s freedom in Afghanistan. Can the Prime Minister update the House on any discussions that took place in Chicago on minority rights and women’s rights, so that we do not see a rolling back of social progress?
The hon. Lady raises a very important point. I had a good meeting with President Karzai in Chicago, and one of the points I made to him was that the quality of Afghan democracy, Afghan rights and Afghan justice will be absolutely key in delivering success. The Afghan constitution does guarantee some basic rights. That is why we say that, of course, if the Taliban put down their arms and stop fighting, they can discuss a future political role, rather as IRA-Sinn Fein have done in Northern Ireland, but they have to accept the basic tenets of the Afghan constitution.
I am immensely proud of the commitment to international aid made by this country, but I am concerned about the levels of some of the other members of the G8. May I urge the Prime Minister to use next year’s presidency to remind some of the other members of their Gleneagles commitment?
I would be delighted to do that. One of the strengths of the G8 is that it produces this accountability report, and I will make sure that a copy is put in the Library of the House of Commons because it is very compelling. It really holds countries to the promises they made about aid, about spending and about the different bits of that spending. People can see it there, in black and white: who has met their promises and who has not. We will continue to do that next year.
There are nearly 25 million people unemployed across the EU at the moment, and economic demand is continuing to fall in the eurozone and in this country, whereas in America it is rising this year. Will the Prime Minister therefore follow the lead of the US and Japanese Governments, and the advice of the IMF yesterday, and bring forward much-needed capital spending to boost infrastructure and get the construction sector off its knees?
We have said that we want to use the hard-won credibility we have, the low interest rates we have and the strong national balance sheet we have to encourage that private sector investment. We have made a series of important announcements about housing, including backing mortgages of up to 90% loan to value to try to get the housing market working again, because the housing market is not functioning. I would just say that if we look at America’s deficit reduction plans, we find that it actually has plans to reduce its deficit faster than we do.
Does my right hon. Friend agree that the G8 decision to create the capital markets access initiative will help Arab spring countries to tap into international capital markets, bringing them both stability and prosperity?
My hon. Friend makes an important point. I think it is still a net bonus to the world that there has been the Arab spring, and we need the wealthy countries of the world and the European Union to get behind it. One of the problems we face is that those north African and Arab countries that have set themselves free were told in the past that they had experienced a free enterprise economy, whereas in fact they had really been having a sort of crony capitalism economy. We need to work very hard with them to encourage them to take a path that will make sure that their economies grow for the future.
I welcome the Prime Minister’s alert on the levels of aid going from the richest to the poorest countries. In following through on the commitment to sustainable hunger reduction, will he promote more support for smallholder farmers, who number more than half the world’s 1 billion hungry people, so that they and their families can grow and eat more and better food, can trade produce and can employ others, thus helping communities to thrive?
The hon. Gentleman makes an important point; part of the presentation given to the G8 by the New Alliance for Food Security and Nutrition was that through the proper use of fertilisers and of things such as exchanges, we can actually make sure that smaller farmers become more sustainable, grow their yields and can not only feed their families, but build a small business.
Last, but not least, we must hear from the voice of West Worcestershire, Harriett Baldwin.
I was so pleased to hear the Prime Minister announce a day for discussing global hunger during the Olympics. Does he agree that the agenda should cover not just food security and food production, but the hidden crisis of malnutrition, which literally stunts the growth of so many children around the world?
My hon. Friend is absolutely right. It just seems to me that while we have the eyes of the world on Britain for the Olympics—and many African leaders will be coming to support their Olympic teams—we have a good opportunity to bring people together to say, “Here we have a great initiative in the New Alliance for Food Security and Nutrition. Let’s take it to the next level. Let’s encourage more countries to join. Let’s make sure that we lift more people out of hunger and out of poverty.” But the point she makes about nutrition is absolutely crucial for the future of the planet.
I thank the Prime Minister and colleagues.