HC Deb 12 February 1998 vol 306 c534
Mr. Lilley

Does the Chancellor of the Exchequer agree with his friends in the Trades Union Congress that unemployment will start to rise before the end of this year, and that that has little to do with the crisis in Asia but is primarily to do with his policies of high interest rates, an excessive exchange rate and over-tight fiscal policy? Will he give the House an assurance that he will not further tighten taxation policies in the Budget?

Mr. Brown

The right hon. Gentleman is stretching his question far beyond the issue of what the Government are doing on the IMF. However, I shall answer him directly. He is saying, first, that fiscal policy is too tight. A few months ago, he was saying that it was too lax. The Conservative party had better make up its mind where it stands on the issues. Is it in favour of lower interest rates, the same interest rates or higher interest rates? Is it in favour of higher public spending or lower public spending? The Conservative party really must make up its mind on those issues.

Dr. Palmer

Is the Chancellor aware of the widespread concern that the IMF, the World bank and, in future, the multilateral agreement on investment will be giving advice to developing countries that is more in the interests of the multilateral companies that might wish to invest in those countries than in the interests of the countries themselves? Will he use his influence to support the new direction, which we begin to see in the World bank, of considering not only openness to world financial markets but the social impact of changes?

Mr. Brown

Yes, on the last point, we shall follow the social reform policies that are being examined by the World bank. Three issues arise from what has been happening in the Asian countries. First, there is a desperate need for banking reform in those countries to avoid the exposures that caused so many problems in the past few months. Secondly, there is a desperate need for openness in monetary and fiscal policy so that people know exactly where they stand. Some of the recent events could have been avoided had the IMF adopted a code of monetary and fiscal policy, as we have suggested. Thirdly, the IMF will have to look at its own practices and the lessons to be learnt. The G7 and the meeting of the Association of South-East Asian Nations in London will provide a chance to examine all the issues. The lessons will have to be learnt.