Labour calls on UK to show global leadership on Covid-19 crisis
Labour calls on UK to show global leadership on Covid-19 crisis
Labour’s Shadow Chancellor and Shadow Foreign Secretary have called on the UK government to step up and lead the international response to Covid-19 at this weekend’s G20 Finance Ministers’ meeting.
In a letter to their government counterparts warning of the serious threat of “international contagion” from financial problems caused by the Covid-19 crisis, Anneliese Dodds, Shadow Chancellor, and Lisa Nandy, Shadow Foreign Secretary, urged the UK to help fragile economies restructure existing debts.
Criticising the government’s record of global leadership during the Covid-19 crisis as “sorely lacking”, Dodds and Nandy said the UK was uniquely placed position within the international community to lead the global response.
They call on the UK government to use this weekend’s meeting to ensure private creditors cooperate with international efforts to facilitate government debt restructures, and to coordinate global action to allow countries with liquidity pressures make use of ‘Special Drawing Rights’ arrangements.
Anneliese Dodds, Labour’s Shadow Chancellor, said:
“The UK led the international response to the 2008 financial crisis and acted within days to prevent the global economy spiralling out of control.
“Our response to the Covid-19 crisis couldn’t be more different. We used to step up to the plate; now we’ve stepped off the stage.
“This weekend the government has a chance to put that right. Ministers must step up and coordinate action to support fragile economies so the whole world can pull together and beat this virus.
Lisa Nandy MP, Labour’s Shadow Foreign Secretary, said:
“At a moment when the world faces unprecedented economic and political challenges, the government is failing to step up and show the global leadership this crisis demands. This crisis has shown that we are only as strong as the most vulnerable – we can no longer afford to be absent from the world stage.
“The UK is uniquely positioned to bring together democratic countries from across the world to respond to the threats of Covid-19. The government must use those relationships to coordinate with our international partners and help lead the global response.”
Notes to Editors
- The third meeting of the G20 Finance Ministers and Central Bank Governors of the Saudi Arabia G20 Presidency will take place virtually on 18 July: https://g20.org/en/g20/Documents/Host%20Year%20Calendar%2007.13.20_EN.pdf
- Special Drawing Rights are units of account based on a basket of leading currencies, including pound sterling, issued by the International Monetary Fund. SDRs act as an international reserve asset to supplement the official reserves of IMF member countries. Countries have to meet certain conditions to access SDRs in proportion to their quotas (known as a general allocation). Following the 2008 financial crisis, a special one-time allocation in 2009 enabled countries that joined the IMF after 1981 to participate in the SDR system on an equitable basis: https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/14/51/Special-Drawing-Right-SDR
- Experts are calling for the issuing of additional special drawing rights and/or the transfer of existing, unused allocations to those countries that are most in need. The UK Government should be pushing for this too.
- Text of letter from Anneliese Dodds MP, Shadow Chancellor, and Lisa Nandy MP, Shadow Foreign Secretary, to the Chancellor of the Exchequer and Foreign Secretary, 17 July 2020:
Dear Rishi and Dominic,
We are writing to urge you to step up and show leadership at the forthcoming G20 Finance Ministers’ meeting this weekend.
The world now faces a serious threat of international contagion from financial problems caused by the Covid-19 crisis. Unless a number of fragile economies are able to restructure their existing debt, there is a risk they will be unable to contain the spread of Covid-19 and a second global wave becomes more likely. Given their links to other emerging economies – and indeed to our own – without concerted global action the impact on our economy and our health may be severe.
We are calling on you to show leadership on two critical issues.
Firstly, we need clear action to ensure that private creditors cooperate with internationally-coordinated debt restructuring by governments. The global community has been slow on this and it is right and proper that the UK leads the way now given that much of the legal activity concerning debt agreements with poorer nations is located in the City of London. We urge you to act to ensure that private lenders restructure debts where needed, including through making this part of IMF loan programmes and passing legislation to make it easier for countries to suspend and restructure debts governed by English law.
Secondly, we are calling on the UK government to co-ordinate global action to enable fragile economies to make use of ‘Special Drawing Rights’ to help them deal with liquidity pressures. Under the current arrangements, the countries that most need help now are the least likely to get it. We have raised this with you previously. At the beginning of May, the Chancellor assured us that he had ‘called on the IMF to keep a possible SDR allocation on the table’. This is insufficient. We need a global agreement that avoids the contagious effects of even more severe liquidity shocks for fragile economies, with all the knock-on impacts these would have. The UK must ensure this is on the agenda on Saturday and that an agreement is reached.
The world was slow to come together to tackle this pandemic and has been slow to take co-ordinated global action to deal with the economic crisis that followed. People across the world, including here in the UK, will suffer as a result. During the 2008 financial crash, the UK led the global response to protect us from economic haemorrhaging and action was taken within days. We need comparable leadership now.
The UK is uniquely placed within the international community to lead the global response to the Covid-19 pandemic. To date, however, that leadership has been sorely lacking, to the detriment of both UK and international efforts to tackle the spread of the virus. This crisis has shown that we are only as strong as the most vulnerable. The UK must now play its part, or we will all continue to suffer the consequences.
Anneliese Dodds MP
Shadow Chancellor of the Exchequer
Lisa Nandy MP
Shadow Secretary of State for Foreign and Commonwealth Affairs