BEYOND THE LONDON SUMMIT
Assessing the UK Government’s response to the financial crisis and charting a way forward
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The G20 London Summit on 2 April 2009 issued “a global plan for recovery and reform”. G20 leaders have not yet gone far enough on the fundamental changes the world needs. The communiqué appears to have made progress on some critical issues but there were also missed opportunities, especially on building a green economy, and some areas where it moves in the wrong direction.
In this paper we assess the outcomes of the London Summit and the UK government’s progress towards the 12 recommendations set out by the Put People First platform in March 2009. Put People First has called for an overhaul of the global economy to deliver jobs, justice, and a safer climate. Put People First wanted explicit recognition that this is not just a banking or a regulation crisis, but a structural crisis of the entire economic model. However, the G20 leaders legitimised and strengthened the existing institutions which have been responsible for overseeing the failed policies. To bring about the overhaul of the global economy that is needed there must be an inclusive international process with the UN, which also needs reform, playing a key role. It is not only about process, the changes need to go to the heart of structural deficiencies in the international financial, economic and governance systems.
We appreciate that the UK government conducted extensive dialogue with UK civil society before the summit and look forward to further engagement. We renew our call for the UK government and other countries to seize this opportunity to start building an economy nationally as well as internationally that puts people and planet first.
Over the course of 2009, there are several key moments – the UN Conference on the Financial Crisis, the G8 summit, another G20 leaders summit, another G20 finance ministers summit, and the UN Framework Convention on Climate Change (UNFCCC) Copenhagen meeting – in which the UK should provide leadership for reform. We also call on the government to enhance the participation of key stakeholders including international civil society in these processes.
While small steps were taken towards some of our original 12 recommendations, not enough has been done. A holistic approach must be taken, not one that focuses on single issues in different venues, so that systemic and global governance issues are not lost in the process. The recommendations we make are an integrated package.
To deliver democratic governance we asked for the government to tackle tax havens, insist on fundamental reform of the World Bank and IMF, and increase accountability of financial institutions, financial markets and multinational companies. On tax havens small moves have been made, but without reform to the underlying rules of the system.
World Bank and IMF governance reform has been brought forward but without commitments on accountability and transparency. New financial regulation and supervision structures have been set up, but process have not been put in place to bring forward country-by-country accounting rules, proper regulation of all financial institutions, or global requirements on social, gender and environmental impact reporting. We have amended our recommendations in all of these areas accordingly, but feel a priority is that the government:
- Prepare, by the G20 finance ministers meeting in November, a proposal for a truly multilateral and automatic tax information exchange agreement that will benefit developing countries and assist those that need help in developing the capacity to make full use of the information that will be available.
- Reform regulation in the UK so that all financial firms, markets and products are not just registered, but properly regulated; and ensure that discussions on launching a fully-inclusive multilateral regulatory authority commence at the earliest possible time.
To deliver decent jobs and public services for all we called for a green new deal, a strengthening of public services including social housing, and sufficient emergency funding for developing countries with no economic policy conditionality.
The UK government has recognised that we must invest in low-carbon sustainable economies, but independent analysis shows that only 7% of the UK fiscal stimulus was committed to this rather than the 50% needed. While the government has committed to public services and put money towards more social housing, drastic public sector cuts are envisioned for the future and not enough has been set aside to build 100,000 new social homes within two years. The IMF has been given a large increase in resources in order to counteract the crisis in developing countries, but this will come with damaging conditionality for most countries and will not sufficiently fund social protection systems. We have amended our recommendations in all of these areas accordingly, but feel a priority is that the government:
- Create a green recovery by investing more in green jobs and green industries and ending investment to harmful projects that would lock in high carbon and other unsustainable infrastructure.
- Demand an end to the IMF’s practice of forcing damaging pro-cyclical economic policy conditions that will worsen recessions and constrain investment in public services in countries that go to it for loans.
To deliver justice and end global poverty and inequality, we asked the government to honour its commitments on aid while cancelling illegitimate and unpayable debts, ensure that developing countries could manage their economies, and stop pushing financial services liberalisation and deregulation. We welcome that the UK is still on target to meet its aid commitments while others are making cuts, but action needs to be taken on debt relief. The UK still needs to recognise the usefulness of capital controls for developing countries and a currency transaction tax which could both reduce volatility and raise new revenue. Ministers have expressed willingness to look at evidence of the problems with forced financial services liberalisation, but the official stance still calls for a quick conclusion to a problematic trade round. We have amended our recommendations in all of these areas accordingly, but feel a priority is that the government:
- Increase funding for nationally-developed comprehensive social protection schemes in developing countries ensuring that they reach the poorest and most vulnerable, including by revising the World Bank’s IDA allocation system and developing innovative sources of finance such as a currency transaction tax.
Finally, to deliver a safer climate and a green economy, we called for using regulation and financial incentives to this end, ensuring a fair global climate deal that keeps temperature increases well below 2°C, and providing sufficient climate financing additional to aid commitments. While the UK government has expressed interest in both regulatory reform and creating a low-carbon economy, it has not yet made the key link between these two goals. The UK has made welcome and substantial promises on cutting carbon emissions, but has not yet laid out plans for how that can be achieved given its underinvestment in green infrastructure projects. Ministers have committed verbally that climate change finance will be additional to existing aid, but the UK must now put that into practice in a framework that is governed under the UN Framework Convention on Climate Change. We have amended our recommendations in all of these areas accordingly, but feel a priority is that the government:
- Make sustainability criteria central to investment practice at both national and international level: Regulatory requirements should include reporting of risks incurred by financing carbon-intensive or ecologically damaging business activities. Pension funds and other investors should be incentivised to include environmental, gender and social impacts and governance risks in their business practices.
The policies in this paper offer the essential building blocks for undertaking a transformation of the global economic and financial system and should be viewed as an integrated package helping world leaders chart a path out of recession and towards a fairer global economy. We recognise that the UK can not act alone, and welcome the leadership the government has shown so far.
Now, we call on the UK government to step up its game, get serious about reform, seize the opportunities that this year presents, work closely and positively with the United Nations, and put its words into action.
