G20 summit: blow for Gordon Brown as £1.4 trillion spending blueprint is leaked

G20 summit: blow for Gordon Brown as £1.4 trillion spending blueprint is leaked
Gordon Brown's preparations for this week's G20 summit in London got off to a bad start last night when a British blueprint for a £1.4 trillion worldwide spending boost was leaked.

By Patrick Hennessy, Political Editor
Last Updated: 11:20PM GMT 28 Mar 2009


In an embarrassing disclosure, a draft of the final communiqué to be signed off by world leaders at the end of the one-day gathering on Thursday appeared in the German magazine Der Spiegel.

There were suspicions that the leak was a deliberate act of sabotage by sources within the German government, where Chancellor Angela Merkel is adopting a more cautious approach to fiscal moves to boost the national economy than Mr Brown, who will chair the summit.

A Downing Street spokesman said the leak was an "old document with out of date figures" and that the £1.4 trillion was an estimate by the International Monetary Fund (IMF) of stimulus measures already introduced by G20 countries. No new money was included, the spokesman added.

The comments, though, only served to increase speculation that Mr Brown was being forced to scale down ambitious plans because of international opposition, led by Germany and France.

Ahead of the summit, which will be held at the ExCel centre in London's Docklands, Mr Brown unveiled plans for a new crackdown on tax havens across the world.

Lord Owen, the former Labour foreign secretary, also warned that unless inflation was controlled, Britain's economy might have to be constrained by the IMF.

David Cameron's Conservative Party also widened its lead over Labour to 13 per cent in an ICM opinion poll for The Sunday Telegraph.

The leaked communiqué mentioned a figure of $2 trillion – £1.4 billion – in brackets, signifying it was a proposal for spending by G20 nations by Britain, as summit host, that still had to be formally agreed. According to the leak, this would boost growth by two per cent and employment by 19 million.

The draft also suggested that Britain wanted the G20 to come up with a target for global growth in 2010 – although no figure was mentioned.

The document stated: "We are determined to restore growth, resist protectionism and to reform our markets and institutions for the future.

"We believe that an open world economy, based on the principles of the market, effective regulation and strong global institutions, can ensure sustainable globalisation with rising wellbeing for all."

Insiders at Der Spiegel said the magazine had obtained the leak from German government sources.

British officials, however, declined to blame Mrs Merkel's inner circle directly, pointing the finger of blame instead at smaller political parties inside her ruling coalition.

A No 10 spokesman said the £1.4 trillion figure did not amount to "extra money" which Britain was calling for governments to spend to try to rescue economies which have been crippled by the credit crunch, but referred instead to estimates of expenditure which had already been made.

Mr Brown has faced claims that he wants to use the Budget, on 22 April, to unveil a big new fiscal stimulus for Britain while Alistair Darling, the Chancellor, and Mervyn King, the Bank of England Governor, are advocating caution.

The Prime Minister wants a main focus of the summit to be a clampdown on tax havens, with a three-point plan aimed at building on moves which have already seen Switzerland and Liechtenstein agree to abide by new transparency standards.

Britain will push for support on new moves to use tax incentives to stop companies and individuals trading with those who are resident in "non-compliant jurisdictions", Government sources said, while there will also be new measures requiring companies to disclose more details of dealings with tax havens.

The third part of the proposed clampdown involves a review of investment policies of institutions such as the IMF and retail development banks with a view to cutting the funds available to tax havens.

Amid the frantic preparations for the summit Lord Owen, foreign secretary under Jim Callaghan in the late 1970s, uses an article in today's Sunday Telegraph to warn that Britain's economy might have to be subject to "IMF disciplines" – which would require painful public spending cuts – to halt a "precipitate loss of confidence".

Lord Owen sounded the alert about the twin threats of a falling pound and inflation, which crippled Callaghan's government, being repeated under Mr Brown. "There is an air of breathtaking unreality in Westminster and Whitehall that reminds me of 1975," he wrote. "Hard choices need to be taken now, not postponed until after an election in 2010."

His comments are certain to infuriate ministers, Labour MPs and activists, many of whom still blame him for his role in splitting Labour by forming the Social Democratic Party (SDP) in the early 1980s.

In autumn 2007, two months after Mr Brown became Prime Minister, the two men held talks in Downing Street, leading to speculation that the peer was considering returning to the Labour fold.

Lord Owen's warning about the IMF echoed similar alerts sounded recently both by George Soros, the Hungarian financier, and Mr Cameron.

Meanwhile, George Osborne, the shadow chancellor, used a speech yesterday to Welsh Conservatives in Cardiff to taunt Mr Brown over his stewardship of the British economy.

Mr Osborne said: "When Gordon Brown sits down with the other G20 leaders in London next week, he will have to explain why he, of all the people sitting around the table, has the highest budget deficit – why the economy he presides over, of all the economies represented at the table, is forecast to still be in recession next year."

http://www.telegraph.co.uk/finance/financetopics/g20-summit/5067296/G20-summit-blow-for-Gordon-Brown-as-1.4-trillion-spending-blueprint-is-leaked.html

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