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Financial Institutions

It is always a challenge to follow the noble Lord, Lord Desai, but when he came to abolishing institutions, it seemed to me that the house is on fire and that we should not pour petrol on the flames. The philosopher Nietzsche wrote that there are no such things as truths, only interpretations. Nietzsche was quite a problem to himself, but he has left us with this valuable insight. Interpretations vary from yet another valuable insight to frankly partisan spin. How do we tease out the Government’s interpretation of their assessment of the IMF? I shall refer to two short sentences in the Prime Minister’s Statement on the European Council meetings. On the rebuilding of confidence, given the Prime Minister’s view that as the crisis started in America, America is responsible, any interpretation of Northern Rock is left high and dry. The first sentence refers to, "““a new international architecture for the global financial sector””." The second sentence refers to, "““reform of the International Monetary Fund and Financial Stability Forum, including the creation of an early warning system for the global economy””.—[Official Report, Commons, 20/10/08; col. 22.]" How does the noble Lord interpret ““a new international architecture””? Is the whole of Bretton Woods to be felled? As we follow once again in the revolutionary footsteps of Tom Paine, what will be built and when? We have no time for this fantasy when what we need, and encouragingly are seeing, is daily IMF action—for example, Iceland, Hungary, Ukraine and Poland. Where next? This architecture sentence is firmly in the category of ““spin””. What is the Government’s interpretation? The second sentence is more interesting. Three points need consideration. First, we need to consider reform of the IMF, which is 64 years-old with 185 members, 10 of whom have 55 per cent of the votes. With 11 years’ experience, the Prime Minister will be sitting on many a memorandum entitled something like ““Proposals for the reform of the IMF””. Have any been published? I could not find one on the Treasury website. Now I part company with the noble Lord, Lord Bilimoria, to whom we are all grateful this afternoon. The IMF has understandably long found it risky to give hard advice to the 10—55 per cent—members. Indeed, everyone finds it risky to give the Prime Minister hard advice. The fund has frequently been reminded that many identify the onset of irrelevance. When and if it has run scared, that has not been surprising. That is not so now when such critics are repenting or at least spinning their willingness to claim that they have always been determined supporters given unspecified reforms. However, the most recent IMF financial stability assessment of the UK was in 2003 and the United States will not have one. The reform of the Financial Stability Forum is an entirely different matter, although it appears in the same sentence. The FSF is nine years-old. It is housed in the Bank for International Settlements with a seconded secretariat of seven. There is no structure, no professional staff or any legal status. As no threat to G7 leaders, or to their bureaucracies, it is a comfortable partner. How is it to be reformed? It is not an international institution as it is. Finally, the early warning system is already the delegated responsibility of the IMF, but who paid due attention to the April 2007 global financial stability report—perhaps punches were pulled, as the noble Lord, Lord Bilimoria, suggested, but they were running scared of the bullies—or to the April 2008 report, which was closer to the mark than any rich-country Government? How do the Government assess the IMF—as an interesting institution but not much use until reformed, or as an important and professional contributor to the solution of today’s crisis? What is the answer?