Briefing by the Prime Minister’s Spokesman on: meeting with global banks, Mervyn King and misc
Global Banks Meeting
Asked for a readout of the meeting with chief executives of global banks, the Prime Minister’s Spokesman (PMS) said that ahead of the G20 Summit and following on from the G20 Finance Ministers meeting there was clear agreement about the importance of supporting the global economy, restoring lending by dealing head on with troubled assets and rejecting protectionism. The main themes at the meeting were the importance of supporting the global economy through concerted stimulus both through fiscal and monetary policy, by reacting rapidly to restore lending, including by dealing with troubled bank assets and by urgently increasing the resources of the International Monetary Fund (IMF).
The second theme was rejecting protectionism and the third was reforming regulatory systems across the globe, including the development of macro prudential oversight for all systemically important financial institutions.
Finally, ensuring that financial firms’ governance structures risk management and compensation policies supported financial stability. As part of the discussion Lord Turner highlighted the recommendations from his recent report into the reform of banking regulation and supervision.
Asked if there had been a discussion about remuneration or bankers’ bonuses, the PMS said that that came under the final theme, which was financial firms’ governance structures, risk management and compensation policies. That was broadly in line with the emphasis that the Prime Minister had been putting on remuneration, which should support long-term growth rather than short-term risk taking.
Mervyn King
Asked for the Prime Minister’s response to Mervyn King’s comments today, the PMS said that Yvette Cooper had been giving interviews in the last few minutes on this. The Bank of England (BoE) and the Governor of the BoE supported the action that the Government had taken in the form of fiscal stimulus, which was outlined at the time of the Pre Budget Report (PBR). Any further announcements would be for the Chancellor to make in the Budget in April. We had been clear that we would do whatever it took to see us through the global downturn and a crucial part of that was to ensure that we coordinated action globally, and that was the purpose of the discussion of the G20 process on fiscal and monetary stimulus. The important point to make was that the action we had taken had also been mirrored in other countries around the world. For example, there was an article by President Obama in The Tribune newspaper today where he said that our efforts needed to begin with swift action to stimulate growth. Other members of the G20 had pursued fiscal stimulus as well as America and these efforts should be robust and sustained until demand was restored.
Asked if the Prime Minister thought that Mervyn King’s remarks were appropriate, the PMS said that the Governor of the BoE had a remit to look overall at the UK economy, specifically related to meeting the inflation target of 2 per cent and it was in that regard that he had been giving evidence this morning to the Select Committee.
Asked if the Prime Minister was going to take Mervyn King’s advice, the PMS said that any announcements on further action would be for the Chancellor and the Budget.
Asked if Mervyn King had been out of order in making his comments, the PMS said that the Governor of the BoE gave his views on a range of issues related to the UK economy.
Put that Mervyn King had clashed with Lord Mandelson last week and asked if No 10 felt exasperated that the Governor of the BoE kept embarrassing the Government, the PMS said that it was important to remember that the Governor of the BoE supported the action that we took forming the fiscal stimulus, as had numerous other organisations including the IMF.
Put that it wasn’t a matter of what had already been done but what needed to be done in the future, the PMS said that any further action or announcements were for the Chancellor and the Budget.
The Chancellor had already talked about the issue of public finances and fiscal stimulus at the Treasury Select Committee on 19 March when he said that, “there was no doubt that we, like other countries, faced a very turbulent period. Provided we maintained our support for the economy as I set out in the PBR, and provided that we made it clear that in the medium term all countries had to live within their means, then I believe we can get through this.”
Asked if Mervyn King’s words in any way constrained the Chancellor’s possible options for the Budget, the PMS said that the Chancellor would take the necessary decisions in the Budget for the overall benefit of the UK economy.
Asked if the Prime Minister was concerned that Mervyn King’s comments undermined his efforts to build an international consensus for further fiscal stimulus, the PMS said that he did not agree with the premise of the question. The Prime Minister had set out what we were attempting to achieve at the G20 Summit, which was the coordination of measures both monetary and fiscal, to ensure that the overall global effect was enhanced by coordination and cooperation. It was for national governments to take the decisions that were appropriate for their own economies. The important point to make on our fiscal stimulus was that we were part way through the programme that was announced in the PBR. If you took the VAT cut as an example, it was a 13 month-long policy and so it was too early to determine what the effect of it would be.
Put that the VAT cut might not work, the PMS said that was not what he had said; some people had been making an assessment on the VAT cut but it was too early to do that at this point. The overall benefit of the VAT cut would be to put £12.4 billion into the economy.
Asked if the Government had responded to the Retail Consortium’s request to extend the VAT cut, the PMS said that any further announcements on fiscal measures were for the Chancellor and the Budget.
Asked if the Prime Minister would be speaking to or had already spoken to Mervyn King today, the PMS said that the Prime Minister spoke to the Governor of the BoE, the Chancellor and others on a regular basis. As far as the PMS was aware they had not spoken today.
Misc
Asked if the Prime Minister was concerned about the fall in sterling, the PMS said that we never commented on the pound.
Asked about the Prime Minister’s response to the CBI figures today, the PMS said that the Governor of the BoE had given his assessment in his letter to the Chancellor, to which the Chancellor had replied.
Put that there was a suggestion that the Government would invite members of the public to lend them money in the form of bonds, the PMS said he was not aware of such a plan.
Asked if the Prime Minister had spoken to Tony McNulty today about his expenses, the PMS said that he had seen that report earlier today but did not recognise the account that was given. The Prime Minister spoke to his Ministers on a regular basis and we did not give read outs of those conversations.