Brown claims victory over Gulf financial plan

James Tapsfield,Pa
Sunday 02 November 2008 11:19

Gordon Brown claimed victory today in his bid to get Gulf states to pump more money into struggling economies.

After talks in Saudi Arabia, the Prime Minister said he believed the kingdom and other oil-rich countries would agree to up their contribution to the IMF.

Mr Brown has insisted that the fund's emergency reserves need to be expanded by hundreds of billions of dollars.

There are fears that its current level of 250bn dollars (£156bn) will not be enough to help states threatened by the global economic downturn. Iceland, Hungary and Ukraine have already been allocated some 30bn dollars (£18.6bn), with Pakistan expected to follow suit by requesting aid.

In a round of interviews this morning, Mr Brown was asked whether he thought the Gulf states would now hand over some of the one trillion dollar windfall they have reaped from soaring oil prices.

He replied: "Yes, I think people want to invest both in helping the world get through this very difficult period of time but also I think people want to work with us so we are less dependent on oil and have more stability in oil prices."

He went on: "The Saudis will, I think, contribute, so we can have a bigger fund worldwide."

The PM said countries such as Saudi Arabia and China should be given more say on international bodies, and welcomed news that Saudi ruler King Abdullah would be attending a summit in Washington later this month to discuss reform of the global financial system.

Mr Brown also struck a more upbeat tone than previously on the prospects for the UK economy, claiming the "building blocks" for recovery were in place.

He said borrowing could be allowed to rise because the Government had relatively low debt, and added: "Of course we have also got low interest rates compared to previous world downturns so the building blocks for a recovery are in place.

"The important thing is to get banks now lending to small businesses and families."

The premier again dodged questions over whether the Government's spending plans would be increased during the downturn, rather than borrowing merely rising to compensate for lower tax revenues and bigger unemployment benefit bills.

But he hit out at Tory concern over increased state debt, saying they were the "last vestige of that old right wing view that you should not borrow so that you can invest in the future".

Mr Brown also played down concerns over Britain's willingness to ignore poor democratic practices and human rights violations by oil-rich countries such as Saudi.

"I feel that it is important for us to work with countries that are making changes, that are showing progress and at the same time are very important to the stability of the world," he said.

"I think it's important that we recognise progress that is being made but also the importance of Saudi Arabia to the world."

Mr Brown, who is being accompanied on his four-day tour of the region by Business Secretary Peter Mandelson, Energy Secretary Ed Miliband and a high-powered delegation from British business, will stop in Qatar next.

Mr Mandelson indicated that there may not be any immediate cash commitment from the Saudis to the IMF.

He underlined the importance of Mr Brown's visit and getting the Gulf states involved, saying: "That's why the prime minister spending hours talking one on one with the King of Saudi Arabia is so important.

"But this is a process not an event."

Mr Brown sent a strong signal that he believed there was now scope for the Bank of England to cut interest rates again.

"We have seen two cuts in interest rates," he said.

"I can't speculate about what the Bank of England will do because they are independent but I believe that the trend around the world is to respond to falling oil prices and falling food prices. That is what we seeing at the moment."

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