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Howard's Way.... a weekly column from the Rt. Hon. Michael Howard QC. MP. 

9 April 2009

No political event in recent years has achieved half the publicity attracted by last week's G20 Summit in London. Gordon Brown went half way round the world to drum up support - and add to the coverage for the event. It was the occasion for President Obama's first visit in office to Europe. And to cap it all President Sarkozy threatened to walk out.

So it is hardly surprising that the outcome has variously been described as the saving of the world from the throes of Depression and the triumph of spin over substance. It is worth spending a little time examining what was in fact achieved.

First, Gordon Brown claimed that the Summit agreed a $5,000billion fiscal stimulus - the biggest in history. But in fact there were no new announcements. The figure is a rather technical calculation made by the IMF of the estimated rise in government deficits in the G20 countries as a share of national income between 2007 and 2010, divided by 2010 GDP.

Secondly, he claimed that $250 billion was to be provided to finance international trade. But the new trade finance on offer this year is less than $25 billion and most of this money is not new but re-allocations from other government budgets.

Another $500 billion is to be provided to the IMF- the International Monetary Fund. At least that was the claim. The reality is that no new commitments were made. The Fund already has $250 billion of resources. Japan offered $100 billion last November and the EU offered 75 billion Euros last month. The additional money is only provisional and has to be arranged in the months to come.

An extra $250 billion is to be provided as special drawing rights at the IMF. This is money which can be used by countries as foreign exchange reserves. It is welcome but as it is allocated in line with voting rights at the IMF 44% of it will go to the 7 largest economies in the world. Only about $80 billion will be going to all the middle income and poor countries combined.

Finally, the much vaunted claim that $100 billion will be provided as new aid for the poorest countries. Here again there is less than meets the eye. Some of this money is brought forward from future budgets and much of the rest will come from increased borrowing in financial markets.

None of this means that the Summit was a waste of time. Much was indeed achieved.

But it always pays to study the small print. And on this occasion, as on so