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Lord McIntosh of Haringey: My Lords, before I respond to my noble friend's interesting and worthwhile points, perhaps I may take up a point made by the noble Lord, Lord Higgins, to which I failed to respond earlier. He asked me what lending into arrears meant. It is the practice of providing credit to countries which have enacted a temporary standstill in debt repayment in consultation with their creditors. I hope that that helps.
My noble friend Lord Peston pays, I think, proper tribute to the importance of the Statement. He reminds us of the extent to which we are all members of the international economy. He asks about the extent to which we can make progress without new institutions. I suspect that the phrase "international financial architecture", the cant phrase now in use--I resisted its use on an earlier occasion but I have failed to do so now--is a way to describe something which falls short of a new institution but is a revitalisation and extension of the responsibilities of existing institutions. I suspect that we should do better to concentrate on what international financial architecture is for, rather than the form it takes.
As to how changes will be implemented, many of them are implemented already in the sense that the new reserves for the new agreement on borrowing and the quota increases will be available within the next few months as they are needed. The logjam has been broken, in particular by the United States' agreement to the new agreement on borrowing. It is the availability of finance which brings with it the other changes which are necessary because it provides the cement which holds together the rules which must be imposed. Those rules will be imposed by continued negotiation between the members of G7, both the finance Ministers and governors, in the same way that the agreement itself was achieved, over the next few months. There will be a formal reporting at the next G7 summit in Cologne but in the meantime it has been shown that work can
Lord Barnett: My Lords, I should tell my noble friend that I welcome the commitment of the UK and others to go for high rates of growth and employment. I do not care terribly whether that is considered Keynesian or Milton Friedmanism or whatever. I just welcome it. My noble friend has not yet responded to points made by the noble Lord, Lord Higgins, about reconciling the Bank of England Act with that requirement. Despite the fact that my noble friend Lord Peston and I tried to amend that Act to ensure that the Government's growth and employment policies should be at least on a par with policies in relation to inflation, that was not done. The Act as it stands seeks to advise, indeed insist, that the Bank of England and the Monetary Policy Committee must put inflation above the Government's own economic policy on growth and employment, to which they are now even more firmly committed.
Perhaps the Government have in mind, under the terms of this agreement, to amend the Act along the lines which my noble friend and I recommended previously. That would at least meet the commitment which my noble friend the Minister has made so clearly to the House today.
Lord McIntosh of Haringey: My Lords, no, an amendment to the Act is neither desirable nor necessary. I made clear in answer to the noble Lord, Lord Higgins, that the inflation target which has been set is both a maximum and minimum target. In other words, it can be used for the purposes of stimulating growth if that, as appears to be the case in the global economy, is the higher priority rather than keeping down inflation. It is because we have, in addition to the inflation target, the phrase "government policies on growth and employment" that the terms of reference for the Bank of England Monetary Policy Committee are still entirely appropriate.
Lord Shore of Stepney: My Lords, I too welcome the Statement, not least because at last we have recognised that there is a global problem which needs global solutions; and secondly, because at long last there is some recognition that we face a problem of deflation and not inflation with which the present Government have been obsessed during the past 12 months. That relates immediately to the terms of reference to the Bank of England which should and could be changed by operating Section 19 of the Bank of England Act. That allows for new actions, changed terms of reference, in the light of major changes of circumstance.
My short question is this. Is the 90 billion dollar facility a new one or simply the facility for which, for two years--long before the present crisis hit us--the IMF has been asking and which was held up because the United States had not paid its contribution?
In any normal use of the term, this is a new facility available for the purposes of the IMF. I can only refer my noble friend to previous answers I have given. There is no need for any change in the instructions to the Bank of England. What has proved to be the case is that the formulation in the Bank of England Act is appropriate whether or not the balance of risks has changed. My noble friend complains that we have been obsessed by inflation. We come back to Keynes: "If situations change, we change with them. What do you do, sir?"
Lord Clinton-Davis: My Lords, I wish to refer to one aspect of the worthwhile Statement in relation to corporate governance. I do not subscribe to the view that all multinational operations are malign. It is extremely difficult, from past experience, to imagine that provisions for corporate governance will be overwhelmingly supported. Does my noble friend agree that in terms of environment and activities within developing countries, too many multinational operations have not observed the already existing provisions for corporate governance? Why, therefore, does my noble friend imagine that this provision, when refined, will have a more stimulating and progressive effect than has been the experience in the past?
Also, does my noble friend agree that, in relation to multinational companies, there is a pronounced emphasis upon the measure of voluntarism that has to be applied in this case for the new regime to be successful?
Lord McIntosh of Haringey: My Lords, my noble friend, who knows far more about these matters than I ever shall, is right in saying that multinationals are not necessarily malign. But of course they are multinationals; that is the essence of them. That is why it is essential for us to have consistent policies throughout the developed world--not just the G7 countries but on a wider scale--for corporate governance.
The Statement made by the Chancellor makes clear that the imposition of proper rules for corporate governance is an international responsibility. All multinational corporations must be based somewhere. Unless we have comparable rules, wherever they may be based, then we shall not have the control over their activities which is necessary to achieve the objectives of global governance of the economy. My noble friend therefore is right in moving from government policies to corporate governance issues. I am grateful to him for making that point.
Lord Bruce of Donington: My Lords, I congratulate my noble friend on injecting a note of caution into these proceedings. He correctly pointed out that the agreement among the G7 countries was more in terms of aspiration than the practical steps that have to be taken if those aspirations are to be realised. Clearly, before we approve the rules we need to know what they are. Before we
One principle upon which I should like to go on record is that it is not the formation of institutions that is important. On another occasion I might be tempted to outline a few institutions I could usefully abolish with great benefit to the European and world economy. But that does not arise in this instance and I therefore repeat my congratulations. I do not believe institutions matter. We have to get the policy right and then determine which institutions should carry them out.
Lord McIntosh of Haringey: My Lords, I hesitate to disagree to some extent with my noble friend when he is being so supportive. However, I did not describe this programme in terms of being "aspirations". I agreed with the noble Lord, Lord Higgins, that it was as much an agenda as a description of completed action. But it is a firmly based agenda which addresses both the immediate problems and the longer-term issues.
The agenda consists of a firm commitment by the G7 countries to implement specific reforms with the resources to implement those reforms. It enables them to deal with any potential crisis from new countries facing financial difficulties and, without saying that this will happen to Brazil noble Lords referred to Brazil as a possible example of it. It commits the G7 countries to reform to increase the transparency and openness of the international financial system; to identify and disseminate codes of good practice in policy making; to strengthen incentives for countries to meet those standards of behaviour; and to improve surveillance of the international financial system. That amounts to a great deal more than just aspirations.
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