View from the House: G20 summit can never produce global salvation

Mar 18 2009 Philip Hammond, Conservative MP For For Runnymede & Weybridge, Surrey Herald

Much is being staked by Gordon Brown on the G20 summit of leaders of the world's biggest economies in London on April 2. He foresees a "global solution" to the problems of financial regulation and stimulation of economies to get us out of recession.

The realities of co-ordinating action by 20 different countries, all with their own agendas, points to a rather more prosaic outcome.

Take financial regulation for example: everybody agrees that banks need to be regulated differently and more effectively in the future. Gordon Brown wants a global approach. The European Union wants this to become a responsibility of [2026]the European Union, while the US is very clear that it alone will regulate its banks.

The harsh truth, as we have discovered over the last six months, is that when things go wrong with the British banks, there is only one person to whom they turn: the British taxpayer.

Not the American taxpayer. Not the European Union taxpayer. So it is essential that if British taxpayers have to clean up the mess, British Governments make the rules by which their banks play.

And so it is with "fiscal stimulus". President Obama wants the world to sign-up for borrowing more money and spending it. But f iscal stimulus is essentially making promises today that our children will have to pay for.

Some countries can afford to do this, because they managed their finances prudently during the good years; others cannot - and we are among them, since our Government put nothing aside during the good years.

On April 2, 20 heads of Government will gridlock London as they gather to endorse a pre-agreed communiqué. Expect the spin machines to be in overdrive as the result is proclaimed as the salvation of the world's financial system and the deliverer of our economy from ruin.

The reality is that a sensible degree of coordination between countries will be extremely helpful. A commitment by all not to revert to the protectionism that so damaged the world economy in the 1930s is essential.

But the desire for an all-embracing international Grand Scheme has little to do with saving the world's economy and everything to do with saving Gordon Brown's job. At its best, this Summit can be a useful step in co-ordinating the world's response to the crisis; at its worst, it could degenerate into a spin-fest which undermines the seriousness of the challenges we face.