My Lords, "Much Ado About Nothing" says the noble Baroness, Lady Noakes. It is quite the contrary in my view. A considerable amount has been achieved over a short period, which will have a very real impact on the lives of people here and throughout the developed and developing world. I salute the Chancellor of the Exchequer, the other Finance Ministers and the central bank governors for a thoroughly industrious and worthwhile outcome from a weekend of work here in the United Kingdom.
The report, far from achieving little, is full of initiatives. There was significant agreement about the importance of fiscal stimulus and recognition that that is critical to driving the world out of this global recession, but also recognition that each nation has its own issues in terms of fiscal management and that a single solution does not fit all. It will depend on the precise circumstances of the fiscal regime in each country, but the key thing is to have a continued, concerted and effective fiscal stimulus that provides demand from the public sector to absorb the capacity which is no longer being used because of the crisis of confidence in the private sector. There will be detailed reviews of fiscal stimulus and calls to report to the G20 and the IMF on the actions that are being taken globally on fiscal stimulus in recognition that this needs to be done by nearly all countries if we are to pull the world economy out of this global downturn. Similarly, there are clear commitments on monetary policy from central bank governors throughout the G20 countries: to keep interest rates low for as long as necessary and—to follow the lead set by the United States of America and the United Kingdom—to consider and, if necessary, implement credit and quantitative easing, with or without complex formulae.
There was also a series of co-ordinated actions on regulatory issues. On the macro front, there is reform to the IMF, enlargement of the financial stability forum—a small, under-resourced unit that has achieved a great deal and which I, and others, believe can play an important role in future—and a commitment from the full G20 group to root out the deleterious effect of tax havens. On the micro level, much was achieved through agreement: on bank lending ratios, on liquidity management in addition to capital management—a clear deficiency of the Basel approach to managing bank capital—and on embracing within the regulatory regime the non-banks that have had such a damaging effect on the downturn of the global economy. I refer to the shadow banking sector— organisations that looked and behaved like banks but were not regulated like banks. Clearly, there was also agreement that this is a real global challenge, not one linked to a few countries but, rather, one which the world has to unite behind to find solutions.
The noble Baroness said that she is picking up some suggestions that the Chancellor is now of the view that further attempts at fiscal stimulus would be reckless; we shall await the judgments he reaches on that in the Budget, but whatever they are, we are committed to sustainable fiscal management. That is why we have taken the quite extraordinary step of spelling out changes that will be introduced once the economy is recovering in terms of slowing the pace of growth in public expenditure and identifying tax increases that will then be introduced. There is a clear statement on protectionism, which I welcome. As the noble Lord, Lord Newby, said, it is important that that comes at the top of the G20 communiqué.
The noble Baroness, Lady Noakes, said that people have not benefited from car and mortgage schemes. Goodness me: the fiscal stimulus has been very significant. The noble Baroness also asked, on the mathematics, why the figure given by the Chancellor differs from the IMF calculation. That is because the IMF includes the fiscal stabilisers in its calculation of 3.4 per cent. As we have previously discussed in this House, the UK economy has some of the world's most powerful fiscal stabilisers, as a consequence of our very real programmes to support those who find themselves in need during an economic downturn. The car industry and those borrowing for house purchases are benefiting from the fiscal stimulus, from a good and sensible monetary policy introduced and maintained by an independent Monetary Policy Committee, and as a consequence of our support for banks—through capital, through funding and liquidity and, now, through the asset protection scheme. I have already praised the comments on protectionism made by the noble Lord, Lord Newby. His observations about the need to avoid a move toward protectionism are absolutely right, and the Government clearly share that concern.
Regarding the taxation of banks, it would probably be inappropriate for me to comment in detail on allegations made in yesterday's Sunday Times in connection with Barclays¸ but in his Statement today the Chancellor was absolutely right to make clear the spirit that banks are required to recognise. In my view, there is no difficulty about that spirit; banks, and all corporations, must behave as responsible members of society and make the contribution through taxes that we expect them to. Quite frankly, some schemes and structures that banks and other companies have pursued do not pass the "Can I look at myself in the mirror?" test, being the behaviours of people acting in a way that would command the respect of their peers and of others in society.
The noble Lord, Lord Newby, also asked about Glass-Steagal. My own sense is that the report by the noble Lord, Lord Turner, which we are expecting, and other thinking on bank regulation, will mean that we will, effectively, see a move back to more specialist institutions. The cost of capital being placed behind the proprietary dealing, derivative and exotic trading sides of banks has been far too low in the past. We need to put much more significant capital and liquidity requirements behind those activities, which will have the impact of dampening down their scale. I, for one, will have no discomfort with that. The noble Lord also asked about credit rating agencies, and who will regulate them. I must be absolutely frank; I am limited to the G20 communiqué and while it is, as I have said, a wonderful document of considerable achievement it nevertheless asks a number of questions. That detail will, no doubt, be provided in due course, as will the matter of improving accounting practices. We can be perfectly frank, however; the failure to incorporate into banks their off balance sheet activities and the impact of market-to-market will, I imagine, be two issues that the accounting profession will be working to address.
Finally, the noble Lord asked about IMF quotas. I am sure that he is, in some ways, right to say that we could all make a simple review, agree it on the back of a menu and sign up for it at the end of the dinner. I suspect that people are more delicate about those issues and that it will take a little longer, but spring 2011 is a target date for completing the review. With good will, perhaps an earlier date can be achieved.