I share my hon. Friend's sentiments on that. We should like to hear more from the Prime Minister, rather than from some of the Government's more obscure Ministers, about the likelihood of a peace dividend. We need that information quickly because when we are talking about additional aid for eastern Europe this year, we need assurances about aid in subsequent years. We want some of the savings resulting from the peace dividend to go to developing countries and eastern Europe.

The leaders of the European Community, at their summit in Dublin recently, asked the Commission to see how the EC could help provide aid and credit to the Soviet Union to buy time for perestroika. At their summit in Houston, the leaders of the western world called on the IMF and the World bank to see how they could help. The leader of the Labour party outlined his plan at a meeting with President Bush to help the Soviet Union. We expect BERD to co-ordinate its efforts with the various institutions and, where possible, to provide expertise.

Numerous agencies and banks are now setting up work in eastern Europe, and co-ordination is essential. The World bank is lending between $5 billion and $7 billion over the next few years. The bank's international financial corporation is already promoting private sector investment along the lines planned for BERD. The IMF has set up stand-by agreements with Poland and Yugoslavia.

All this makes it essential that there is close co-ordination between the banks. It also shows that BERD needs to be quite clear about its own role. Clearly, it will not be a massive new source of funds to overshadow all the others. Nevertheless, it could make a distinctive contribution by becoming the focal point for co-ordination among agencies and banks supporting eastern Europe and for providing expertise in the region. That will require strong leadership and commitment from BERD members.

For the Soviet Union, which is not a member of the IMF or the World bank, BERD provides an important stepping stone into the international financial community. It was thanks to the insistence of the United States that the amount that the USSR can borrow is strictly limited and that a minimum of 60 per cent. must be lent to the private sector. What attempts did the Prime Minister make to oppose those limitations that were imposed by the United States? How can she tell Mr. Gorbachev that we all support his attempts at reform and that we are delighted that the Soviet Union is a founding member of BERD but that, because we do not trust him to use the money well, the Soviet Union cannot be a net borrower?

Indeed, BERD must take care not to burden the east with eager loans. With a debt of $40 billion, Poland alone cannot afford to take out that new loan. Poland's ratio of debt to exports is overwhelming at over 500 per cent. Annual interest payments amount to nearly half a year's exports. Poland's biggest creditors are official—that means that it is Governments who now could and should give considerable debt relief.

In evidence to the Select Committee on the Treasury and Civil Service, the report of which is published today, Mr. Crockett of the Bank of England said: I think there is no question, however, but that normal services, that is to say, regular amortisation and interest payments on debt, is not possible given the size of Poland's debts. However, we have heard nothing from the Government about promoting debt relief. We all know that the Paris Club has rescheduled Poland's debt, but why not reduce it? Surely now is the time for a bit of imagination and initiative, if ever there was one.

Do the Government accept the recommendation of the Select Committee on the Treasury and Civil Service, paragraph 74 of which states: A sizeable chunk of Poland's debt should be written off"? As the east European countries still have a severe shortage of hard currency and their own currencies are not yet convertible, making loans in those conditions could present many problems.

I support the call in a recent European Parliament resolution that it is extremely important in allocating funds that specific attention should be paid to effective monitoring of the projects funded and the capacity of the economies of central and eastern European countries to absorb the investment.

I am sure that all hon. Members recognise that the development of market economies will take quite a long time. After all, it took 13 years for western Europe's major currencies to become convertible after the second world war. We cannot expect more of eastern Europe in the 1990s than we achieved in the 1940s and 1950s. As hon.

Members know, after the war, western Europe received a great deal of concessional assistance for our reconstruction. We must now give eastern Europe the same chance that we had.

Of course, BERD is only a small part of the massive west-east effort that is necessary. We must not allow it to divert attention from the need for grant aid, technical aid, debt relief, a re-examination of EC trade policies and other vital assistance.

There is obviously some confusion about BERD's terms of lending, and that is evidenced in the report of the Treasury and Civil Service Select Committee. Mr. Crockett of the Bank of England stated: A good project would probably finance itself from the BERD with a lower spread than a merchant bank in England would be able to offer. Can the Minister confirm that it is intended that BERD will be profit-making, but that, thanks to Government backing and AAA-rating, it will offer slightly lower interest rates than commercial banks? Can she explain why the issue has not been fully resolved when it is obviously of great importance? Can she say what the Government are doing to ensure that sufficient concessional aid is provided? The Select Committee's report questions the lack of clarity in the lending criteria of BERD.

Another grey area is the funding of Britain's contribution to BERD. On 15 June, the then Economic Secretary to the Treasury said in reply to a written question that the United Kingdom's contribution would be additional to the overseas aid budget until 1993–94, and that future contributions would be discussed in public expenditure surveys. Will the Government guarantee that not only will the initial cash instalment come from an additional line in the aid vote, but so will the encashment of promissory notes that the ODA's memorandum says will be met as they are incurred from sums voted for overseas aid?

Will the Minister also guarantee that contributions will continue to come from additional money after 1993? In particular, do the Government accept the recommendation of the Foreign Affairs Committee that BERD contributions should come out of the eastern Europe line, and not from funds for multilateral institutions?

In conclusion, I wish to say how much the Opposition welcome the setting up of the bank. I am pleased that it is to be in the United Kingdom, although I would have wished cities other than London to be considered. I hope that it means that the United Kingdom will play an important role in European Community development. That is what the public want. Alas, I fear that it is not what the Government intend—but it is certainly the role which the next Labour Government will adopt.