Page last updated at 09:52 GMT, Saturday, 5 September 2009 10:52 UK

Brown urges G20 to keep spending

Gordon Brown: "Too early a withdrawal of vital support could undermine the tentative signs of recovery we are now seeing"

It would be "a serious mistake" for rich nations to scale back plans to support the global economy, Prime Minister Gordon Brown has said.

Mr Brown told a meeting of G20 finance ministers that despite "tentative signs of recovery", cutting spending could cause another "downward lurch".

He called on ministers to fully implement the $5tn fiscal expansion plan agreed at last April's summit.

Mr Brown also said there must be new global "binding rules" on bankers' pay.

'Exit strategies'

Mr Brown told the meeting at the Treasury that the global economy was now at a "critical juncture".

Germany and France, which are both officially out of the recession, want the G20 to start discussing "exit strategies", but Mr Brown warned against any such move.

He said it could lead to a reduction in growth and employment and "worsen governments' debt positions over the longer term".

BBC business correspondent Joe Lynam
Joe Lynam, BBC business correspondent
Gordon Brown's aim was to inspire finance ministers and central bankers to forge ahead with their planned stimulus packages.

Instead, his comments on the enormous debt mountains which governments are accruing to rescue their economies struck a chord.

He spoke of the unavoidable "hard decisions" which would be required - reminding us (rather than his audience) that taxes would be going up next year.

Mr Brown did, though, highlight the need to plan a new economic world order after the current crisis has abated.

He spoke of the importance of IMF reform (China currently has the same rights as the Netherlands), and he called for the transition to a low carbon economy not to be delayed.

"It is clear in my view that too early a withdrawal of vital support could undermine the tentative signs of recovery we are now seeing and lead to a further downward lurch in business and consumer confidence," he said.

"The stakes are simply too high to get these judgements wrong, so to decide now that it is time to start withdrawing and reversing the exceptional measures we have taken would in my judgement be a serious mistake."

Mr Brown also raised the issue of bankers' pay.

The BBC understands Chancellor Alistair Darling will propose later that in future bonuses be paid out over five years and only in stock options.

France and Germany have suggested mandatory caps on bonuses, but the chancellor has described this as "unworkable".

He has argued that banks might get round the rules by raising basic salaries, or operating elsewhere.

The BBC's business correspondent Joe Lynam said Mr Darling would instead propose a longer-term system of bonuses, with the bulk of the money paid in the final two years of a five-year period.

Under his proposals, bonus agreements would also include claw-back clauses, allowing money to be recouped if necessary.

Pay and bonuses cannot reward failure or encourage unacceptable risk taking
Gordon Brown

Other reforms

Mr Brown said there could not be "a return to the past ways of governance" within the banking sector.

"Specifically, pay and bonuses cannot reward failure or encourage unacceptable risk taking," he told ministers.

"It is offensive to the general public, whose taxpayers' money in different ways has helped many banks from collapsing, and is now underpinning their recovery."

He also suggested a number of other reforms:

  • Greater power and independence for the International Monetary Fund (IMF) to monitor the global economy and identify risk
  • Better representation of new, emerging economies within the IMF and World Bank, and more help from these institutions for countries trying to prevent future financial crises
  • Tougher action against tax havens, and internationally agreed and enforced sanctions against countries who condone tax evasion


Protesters wearing masks of G20 leaders demonstrate in the City of London on Friday
Protesters called for more action to protect ordinary livelihoods

The BBC's chief economics correspondent, Hugh Pym, said government sources accepted tensions over how to reform bankers' pay and bonuses were likely to remain unresolved at Saturday's meeting.

The Conservatives, meanwhile, say the prime minister and his chancellor have sent mixed messages on bonuses, and "confusion" about their economic policies were threatening the economy.

The whole question of bonuses is now likely to be left for world leaders to deal with at another summit in Pittsburgh later this month, our correspondent said.

Protesters wearing masks of the G20 leaders gathered for a small demonstration in the City of London on Friday ahead of the meeting.

Waving placards saying "Stop letting money rule the world," they called for ministers to do more to protect ordinary people from the impact of the global downturn.

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