Tories side with Europe over stimulus plan

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Indy Politics

The Conservative Party backed Germany and France yesterday in their row with the British Government over how long the global economic bailout should continue.

George Osborne, the shadow Chancellor, accused Gordon Brown of being in "complete denial" over the cost of the measures to stimulate the world economy and said it was time to look for an exit strategy.

Britain has been frustrated by calls from Germany and France to cut support after their economies showed signs of moving out of recession.

Leaders of the three countries put on a united front yesterday ahead of a meeting of finance ministers from the G20 group of nations in London today and tomorrow. They will seek to narrow differences before the G20 leaders meet in Pittsburgh in three weeks. In a letter to their EU partners, Gordon Brown, Angela Merkel and Nicolas Sarkozy said: "The crisis is not over and the labour markets will suffer... over the months to come. Together we must send a message from Pittsburgh that we are fully and firmly resolved to implement our stimulus plans."

The leaders reached outline agreement on curbs to banker bonuses and accused bankers of returning to the "reprehensible practices" blamed for causing the financial crisis.

They proposed binding rules linking bonuses to profits; said bankers should not be guaranteed them every year; and that for "significant" payments there should be a clawback mechanism so bankers would not receive them if deals later went wrong.

Differences remain because France wants to cap the bonuses for individual bankers. Britain believes that is unworkable and wants financial watchdogs to intervene only when banks are paying large bonuses. Mr Brown is prepared to look at linking bonuses to "revenues and/or profits".

Mr Sarkozy said yesterday: "Even the English understand that we have to regulate, we have to limit, and that there are unacceptable scandals."

Privately, there is tension over how and when to start tightening fiscal and monetary policies as countries return to growth at different rates.

The Tories turned their fire on Alistair Darling over his interview in The Independent yesterday in which he called on other countries not to scale back their fiscal stimulus plans yet. Mr Osborne said: "There's a fundamental contradiction at the heart of Alistair Darling's argument. He says that he expects, as we do, that Britain will come out of recession this year and yet he wants to go on with large increases in public spending next year, when he knows the country cannot afford it.

"His position has everything to do with the politics of a looming election and nothing to do with the economic interests of the British people."

But Timothy Geithner, the US Treasury Secretary, backed Mr Darling's stance: "We've come a very long way but I think we have to be realistic, we've got a long way to go still."

Mr Darling stuck to his guns in a speech to the Scottish CBI last night. "I believe we can be confident about our prospects for 2010," he said. "But there are still uncertainties and risks that we have to confront. And the biggest risk is to think that the job's done – that recovery is guaranteed. No country can be complacent. We've got to see this through."

That meant supporting the economy now through targeted public spending, rather than cutting back at this crucial time, and fighting protectionism by kickstarting the stalled world trade talks, he said.

The Chancellor called on the G20 to set a March 2010 deadline for tax havens to meet their international obligations or face tough sanctions.

He said HM Revenue & Customs had requested details of at least 100,000 offshore accounts held at more than 300 institutions. That would mean recouping billions of unpaid tax, with an expected £1bn from a deal with Lichtenstein alone.

*Mr Brown said he would be prepared to take a cut in his £192,250-a-year salary during the recession. He told BBC Radio One: "I'm not in this job for the money. If there was an agreement that we could all do that I would be very much part of that."