Debt Relief (Hansard, 31 July 1978)

§ 32. Mr. Forman
asked the Minister of Overseas Development whether her Department plans to take any new policy initiatives in the light of the recent Bonn summit meeting.

§ 37. Mr. Hooley
asked the Minister of Overseas Development what progress is being made with the cancellation of debt of the poorest developing countries.

§ 39. Mr. Spearing
asked the Minister of Overseas Development what proposals she has on debt relief for underdeveloped 25 countries; and whether she will make a statement.

§ 40. Mr. Brocklebank-Fowler
asked the Minister of Overseas Development what action she proposes to implement her decision to consider giving debt relief to the poorest countries on a country-by-country basis.

§ 41. Mr. MacFarquhar
asked the Minister of Overseas Development if she will make a statement on British policy on debt relief in the light of the Bonn summit.

§ Mrs. Hart
As part of their aid policy, the Government are taking steps with effect from today to remove the burden of past aid loans, known as RTA—retrospective terms adjustment—or to adopt equivalent measures, in respect of 17 of the poorest developing countries. These are Afghanistan, Bangladesh, Botswana, Egypt, the Gambia, India, Indonesia, Kenya, Lesotho, Malawi, Nepal, Pakistan, Sierra Leone, Sri Lanka, Sudan, Tanzania, and Western Samoa. All have aid repayments outstanding, but are now eligible to receive aid from us on grant terms.
The maximum cost will be some £60 million a year and the total amount of principal and interest involved to the end of the century is some £900 million. The cost will be entirely met from within the increasing aid programme. Detailed arrangements will be discussed with each of the 17 Governments. In the case of India, local cost aid will be offered instead of RTA.
RTA will not be extended to Governments which would otherwise qualify but which we regard as having seriously violated human rights. At the Bonn summit the Government promised, with other participants, to support a replenishment of the International Development Association to allow its annual lending to rise in real terms, and said that the World Bank's capital should be doubled. We shall be pursuing both issues vigorously in the coming months.

§ Mr. Forman
Is the Minister aware that many of us welcome her announcement of debt relief for the poorest countries, but is she further aware that it is disappointing that this agreement was not possible at the multilateral Bonn summit, as the Prime Minister had indicated? 26 Does this not suggest some failure of British policy? Will the Minister confirm that among the 17 countries which will benefit from this decision are some with a per capita income above the internationally agreed poverty datum line of 5280 a head?

§ Mrs. Hart
On the second point, no. Some of the data are in the process of being revised, and in fact the RTA will extend to countries which normally tit into the category of the poorest countries. On the hon. Member's first point, it is not a failure of British policy at the Bonn summit; it is just a pity that other countries have not reacted similarly.

§ Mr. Spearing
My right hon. Friend has mentioned that in future there will be grant aid instead of loans for such countries, but can she confirm that this will enable countries with the least resources to benefit in human terms in ways that might not have been possible under the former system of lending? Will she tell us how this will be effected in the coming years?

§ Mrs. Hart
In fact, the essence of this new step in aid policy is the logical inconsistency of clawing back debt repayment and interest from countries to which we have already been giving grants for some years. Of course, it follows that in future these countries will have grants, as in the past, and obviously that will assist their development policies considerably.

§ Mr. MacFarquhar
Can my right hon. Friend assure the House that the £60 million a year cost will not come out of already promised aid programmes to any of those 17 countries?

§ Mrs. Hart
Yes, I can assure my hon. Friend on that matter. I do not know whether the House has completely taken into account what we decided in the public expenditure White Paper of a few months ago—that the aid programme should increase by 6 per cent. a year over the next four years. This is the biggest increase in all public expenditure programmes and it means that we can use the aid programme to do certain very valuable things, such as giving this debt relief, and at the same time continue to increase the aid programmes to the poorest countries. There is no conflict at all.

§ Mr. Rifkind
Does not the Minister believe that it would have been far more sensible to give debt relief on a country-by-country basis to those countries that were having specific problems rather than giving it in toto to countries with an economic level below a certain figure?

§ Mrs. Hart
There are certain countries which are not included in this list to which we have been giving additional special measures of aid because of their difficulties. Jamaica and Zambia are two examples. The logic of the aid policy is that it is absurd to continue to claw back debt repayments and interest from countries to which we are giving grants. That is the basis of it, and the hon. Member must agree that we must have some logic.

§ Mr. Rhodes James
While personally welcoming the principle of the arrangements that the Minister has announced, may I ask her under what authority the Government can make such a commitment? Surely parliamentary approval is required, and when will that be sought?

§ Mrs. Hart
It would have been required had we met the cost of this scheme from outside the already agreed aid programme. But Parliament has already given its approval for that.

§ Mr. Luce
In view of the right hon. Lady's very important answer, may I express some regret that she has not made a statement on this matter so that we could probe it more effectively?
While I accept that there is mutual economic benefit to be derived from an effective writing off of debts in certain cases between Britain and the third world, may I ask what criteria she has applied for writing off the debts, particularly in view of the fact that the per capita assessment is a very crude method of judging a country's economic potential? Secondly, will she answer more specifically the point made by my hon. Friend the Member for Edinburgh, Pent-lands (Mr. Rifkind) about a country-by-country review of debt relief, based on a nation's ability to repay debts, which is far more sensible than the way in which we are tackling this problem?

§ Mrs. Hart
I shall certainly expand a shade on the answer that I gave to the hon. Member for Edinburgh, Pent- 28 lands (Mr. Rifkind). A country which comes into the poor category has terrible difficulty in its development problems, and therefore acute difficulty in repaying past debts and interest. That goes without saying.
As to the way in which we categorise countries, obviously we have used the category of the least developed countries. The per capita income, I agree, is not really satisfactory. I wish that some of our economists were further advanced in their work in trying to define some other index. But we do not have this yet, so we have to use the category of the World Bank. Work is being done on this at the Institute of Development Studies in Sussex, and I agree we should try to arrive at better categorisation. But at present we must use the World Bank standard, which is internationally applicable.

§ Mr. Rhodes James
On a point of order, Mr. Speaker. The right hon. Lady has made a statement which commits this country to an expenditure or loss of £60 million a year in the next 10 years to be taken off the existing aid budget. This involves a commitment by this country over a period to an expenditure of over £900 million. Her statement commits a future Parliament to certain expenditure. Should this not have been a statement by the Minister rather than an answer to a Question? Secondly, may we have a statement by you, Sir, tomorrow on the implications of decisions announced in this way by Ministers? Surely this involves the decision of the present Parliament and indeed of future Parliaments.

§ Mr. Speaker
First, it is a matter of judgment for the Minister herself as to how she answers Questions. Secondly, as the hon. Gentleman knows, every Parliament is the master of its own affairs. I have no doubt that the next Parliament will behave as it wishes to behave—properly, I hope.