International Debt

Part of the debate – in the House of Commons am 2:05 pm ar 12 Mai 1989.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Tom Clarke Tom Clarke Shadow Minister (Disability) 2:05, 12 Mai 1989

I beg to move, That this House recognises the crucial role played by the World Bank, and, in particular, the International Development Association, in promoting development and alleviating the debt problems of the Third World; therefore urges Her Majesty's Government to support a generous real increase in the resources of the International Development Association in the forthcoming negotiations for its ninth replenishment; recommends that in future assistance provided by the International Development Association should be on grant terms, and that all outstanding International Development Association credits should be adjusted retrospectively into grants; and believes that measures of debt relief, such as the Brady plan, and new funds for the International Development Association would be a major contribution to restoring economic and social development in the Third World. This will be an all-too-brief debate. I must say first that there are times when I think that I am not exactly the Minister's favourite Member of Parliament. On this occasion, so little do I feature in his thoughts that he does not appear to be listening to the point I am making. However, by way of compensation for keeping him late on a Friday, I assure him that if he finds it possible to accept my rather modest motion, I shall do my best to arrange the kind of reception for him in Glasgow that Daniel Ortega experienced last week.

We have had an interesting debate on the role of voluntary organisations and I feel confident that organisations such as Oxfam, the Catholic Fund for Overseas Development, Christian Aid, the World Development Movement, the Scottish Catholic International Aid Fund and War on Want would feel that the week before an extremely important meeting in London dealing with world debt is an important time for us to have this debate and to give the Minister an opportunity—alas, an all-too-brief one—to respond to what we have to say.

This debate takes place against a background of a cut in aid to Africa of 26 per cent., or £600 million, which does not balance the excellent efforts of organisations such as Band Aid and Sport Aid, which feel that, on top of their efforts, there is a great need for us to address ourselves to the problem of debt. The debate gives us an opportunity to talk about the influence of the World Bank, the International Development Association, and, of course, the Brady plan. We do so in the knowledge that the ninth replenishment meeting of the International Development Association will take place in London next week.

The Minister knows that IDA provides generous loans on generous terms to the poorest countries and that every three years, the replenishment comes up for debate. We hope that the Government will approach the meeting positively. We want to see a generous replenishment next week as we realise that the present figure of $12 billion is somewhat inadequate. We should—and I hope that the Minister will have the opportunity to tell us this—attempt to exceed that figure next week, especially as the United Kingdom share has declined noticeably.

All this takes place at a time when we know that the British people are generous in their approach to these matters, but also at a time when the Chancellor of the Exchequer had a surplus of £15 billion in the last Budget. It is not as though the resources are not available if the will is there. We must not have a world in which the poorest countries are subsidising the rest of us and in which we do not appear to be taking steps to remove the dreadful problem of debt.

I want to quote the words of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) from the important speech he made on 29 March to the Overseas Development Institute and the Royal Institute for International Affairs. He said: Either way both lenders and borrowers in the 1970s made some awful financial decisions. But the real tragedy is that the resulting debt crisis, far from encouraging forgiveness, has relentlessly ensured that the sins of the fathers have been visited on children in the third world. I am delighted that my right hon. and learned Friend pursues these matters with vigour.

Our contribution and approach should be those of the last Labour Government. They did not have the resources in oil that this Government have experienced, yet under Judith Hart, we had a far better record. The Minister will recall that under IDA 4, the Labour Government's contribution was 11·1 per cent. Under IDA 5, it was 10·6 per cent. and under IDA 6, it was 10·1 per cent. Under the Tories, our share under IDA 7 was 6·7 per cent. and the same under IDA 8, so I look forward to a huge increase to make up for those lost opportunities when the Government tell us about their approach to next week 's meeting, which is important because the replenishment of the agreement will apply until 1993.

The views contained in the motion are widely shared. On the future, the motion makes it clear that grants should be offered in some cases, if only because we have seen in the past that loans do not always make economic sense. I am delighted to say that, on that point, I speak not only for my hon. Friends but for a clear majority in the House. That was made clear in a letter addressed to Mr. Barber Conable, the president of the World Bank in spring 1988, signed by 400 hon. Members including 169 Conservative Members. It said: When IDA started lending to the Third World's poorest countries in the early 1960s, its terms were amongst the most concessional of any aid donor. However, since then the governments of many donors such as the United States, the United Kingdom and the Federal Republic of Germany, have switched to providing nearly all of their bilateral aid to the poorest countries on grant terms. The letter continued: In the discussions beginning this year on the ninth replenishment of IDA, we urge that you put proposals to donor governments that the funds they supply for IDA should then be provided to the poorest countries on grant terms. That letter was signed by Lord Oram, the hon. Member for Broxtowe (Mr. Lester), my hon. Friend the Member for Oxford, East (Mr. Smith), and the hon. Member for Hertford and Stortford (Mr. Wells) and was supported by more than 400 hon. Members altogether.

Having endorsed that aim, as I hope we shall, should we not do something else? Should we not consider that 0024;32 billion of credit are outstanding which the poorest countries owe to the World Bank? Should we not accept that that is a major problem inviting a response? The countries concerned are flat on their backs. Over the years, some of them have grown out of their difficulties. We accept that South Korea, for example, would not qualify for any arrangements; indeed, it might be invited, in its new role and with its new status as a developing country, to contribute to countries whose need is so great.

There is a case for multilateral aid being grant-supported rather than being based on loans. There is also a case —many have supported this view—for writing off much of the debt retrospectively. There is nothing new about that proposal. I shall try to be fair to the Minister, even though he does not always make life easy for me, by saying that even this Government have accepted in their bilateral aid policy that there is a case for grants instead of loans. They have carried on Judith Hart's policy, and I am delighted to see her successor, the hon. Member for Clydesdale (Mr. Hood) here. I give the Government credit for doing that, but why do they not apply that important concept to multilateral debt and introduce it into the meeting next week. The World Bank has a major influence on these matters. It is the largest source of multilateral aid to Africa at the moment, accounting for 25 per cent. of the total.

An article in The Times of 5 April, referring to the recent meeting of the Group of Seven said: The meetings of the Group of Seven, International Monetary Fund and World Bank which ended yesterday were characterized, as usual, by surface harmony. All the participants claimed to support the letter of the communiqués while going on to interpret them in ways which were blatantly at odds with each other. There is a need for some form of leadership, but not of the sort that we have seen so far in the Government's representations.

In a previous debate I asked the Minister to comment on the Brady proposals. We have had little debate so far on these matters in the House and, especially, on the Brady proposals. I refer the Minister to a comment in the Financial Times on 19 April: By emphasising voluntary debt reduction, accelerated with financial support from the International Monetary Fund and World Bank, the US has implicitly recognised that—at least for countries taking the right kind of economic measures —ability to pay should be a factor in deciding what countries should pay. It added: One could not expect banks to support the moral argument. However, there are strong financial arguments to suggest that they should try to embrace the Brady proposals as convincingly as possible. For reasons out of my control, time is not on our side, but we sincerely ask the Minister and the Government at least to consider the contents of the motion. We recognise the awful problem that debt represents to the developing countries—to the poorest of the poor. We see no good in the Chancellor seemingly giving with the one hand and then very definitely taking away with the other. Debt represents an enormous problem. It leads to hunger and to poverty, which strike a major blow to the quality of life of millions of men and women in the Third world.

I believe that Great Britain has a contribution to make towards the economic and social development of the developing world. Next week we have a responsibility to make such a contribution to solving those problems. I urge the Minister to consider these matters seriously, because poverty in the Third world represents perhaps the biggest threat to peace apart from nuclear weapons. The problem invites a major response from the Government and from the Minister.