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§ The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Raymond Whitney)
I beg to move,That the draft International Bank for Reconstruction and Development (1979 Additional Increase in Capital Stock) Order 1983, which was laid before this House on 3rd May, in the last Session of Parliament, be approved.
§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
With this it will be convenient for the House to consider the second motion:That the draft International Development Association (Special Contributions) Order 1983, which was laid before this House on 3rd May, in the last Session of Parliament, be approved.
§ Mr. Whitney
The purpose of the orders is to authorise an increase in our subscription to the capital stock of the World Bank for the take-up of shares allocated on the basis of 250 to each member and to make a United Kingdom contribution to help sustain the IDA's lending programme in its fiscal year 1984.
With your permission, Mr. Deputy Speaker, I want to say a word or two about both those institutions and our attitudes towards them before describing the orders in detail.
The International Bank for Reconstruction and Development, which we commonly know as the World Bank, is one of the twin institutional pillars proposed in the Bretton Woods conference in July 1944 to meet the immediate financial problems of those countries ravaged by the second world war. It was a bold and imaginative plan which was heavily backed by the United States and the British Government. The House responded by passing an Act in 1945 enabling the United Kingdom to become a founder member and the second largest shareholder.
Since then, the World Bank has changed its emphasis to meet the challenging needs of the world's developing countries. It has become the world's premier international institution for Third-world development. It now has a membership of over 140 countries, and has accumulated unrivalled intellectual and technical resources. Furthermore, it possesses knowledge gained first-hand of the whole range of developing countries' problems, and an operating experience that is second to none.
The bank finances its lending operations primarily from its borrowings in the international capital markets. A substantial contribution to the bank's resources also comes from its retained earnings and flows of repayments on its loans.
We strongly support the bank's adherence to the key and central aim of the alleviation of poverty, its concentration of resources in key sectors—agriculture, rural development and energy—and the restriction of its lending capacity to low income countries. We note also with satisfaction the importance that the bank attaches to maintaining its extremely high rating in the world's capital markets and the strict observance of its role in supporting only developmentally sound projects. Above all, we welcome the lead that the bank takes in conducting a dialogue with recipient countries with the aim of ensuring implementation of appropriate local development policies.
839 The bank's articles of agreement established the bank as an intergovernmental institution, corporate in form, with all its capital stock being owned by its member Governments. The original authorised capital stock was $10 billion, the paid-in element being 20 per cent. and the balance being on call. That was doubled in 1979, without any increase in the paid-in portion. Since then, special increases to allow new members to join and to adjust relative shareholdings in the bank, and a selective increase based on IMF quotas, which did not affect the United Kingdom subscription, brought the bank's authorised capital stock, immediately prior to the 1979 general capital increase, to $34 billion.
The 1979 general capital increase, when fully subscribed, will enable the bank to expand its capital base to around $80 billion. The draft order for the purchase of additional United Kingdom shares — the International Bank for Reconstruction and Development (1979 General Capital Increase) Order 1983 — was approved by the House last December, and the order now before the House should be viewed in conjunction with that.
This further order simply relates to an increase in the bank's capital stock for the purposes of avoiding dilution of voting resulting from the general capital increase. Shares have been allocated on the basis of 250 to each member, have no paid-in element and can be taken up at any time before July 1986. The order's purpose is to enable the Government to make a further subscription to the capital stock of the bank of sums not exceeding the equivalent of US $30,158,750, being the price set by the resolution of the board of governors in respect of 250 shares. This sum will be callable capital.
I now turn to the International Development Association, or IDA as it is generally and more popularly known. It is the World Bank's soft loan affiliate, and has been in existence since 1960. The Government have always been a strong supporter of IDA, which has a remit to help the poorest countries. Its resources are provided in the form of grants by the richer countries, and these are usually pledged every three years within the framework of internationally agreed replenishments.
IDA provides credits to its borrowers at no interest and with a maturity period of 50 years. Those credits attract modest service charges on disbursed and undisbursed balances. The majority of IDA flows go to Commonwealth countries and to Pakistan, totalling in all some 65 per cent. The main focus of attention is on agricultural and rural development projects. Basic infrastructure, resource development and non-project lending are other main sectors. The draft order before the House relates to a United Kingdom subscription for IDA's fiscal year 1 July 1983 to 30 June 1984—the gap between the current replenishment, IDA 6, and the next one, IDA 7.
I shall give some of the background to the operation of the current replenishment — IDA 6. The sixth replenishment of IDA, which totals US $12 billion provides the association with lending resources for a three-year period to 30 June 1983. Details of IDA 6 were published in Cmnd. 7900, and the United Kingdom's contribution is £555 million. The United States' contribution was approved in full by the United States Congress, but on the basis that it would be phased over four years instead of the three allowed under the sixth IDA replenishment. This has now caused a shortfall in IDA's 840 commitment authority in its fiscal year 1984—that is, between 1 July 1983 and 30 June 1984—by which time the majority of donors will have completed their IDA 6 contributions, and before arrangements for IDA 7 replenishment can be made.
On 26 October 1982 the executive directors of the World Bank approved a resolution authorising arrangements for special contributions to help sustain IDA's lending programme during its fiscal year 1984. The resolution has been published as Cmnd. 8867. Donors' contributions to these special funding arrangements can be through one of two mechanisms: first, a financial year 1984 account, which will be part of the general resources of IDA, and will carry voting rights which will be provided for at the time of the next general voting adjustment which will take place in IDA 7; or secondly, a special fund which will, for the time being, constitute a fund separate from IDA's general resources, carrying no voting rights and with procurement eligibility restricted to part II, that is to say developing country members of IDA, part I, or developed country, members contributing to the special fund, and part I members contributing to the financial year 1984 account who have deferred receipts of their voting rights in respect of their contributions on the same basis as contributors to the special fund.
It is the intention that the United Kingdom contribution will be made to the financial year 1984 account. The draft order, if approved, gives the Secretary of State authority to make the United Kingdom contribution of £105 million to these special arrangements. This will be done by a promissory note to be encashed over a period of years, with costs being met as they occur from sums voted for overseas aid.
§ Mr. Guy Barnett (Greenwich)
The House will be grateful to the Under-Secretary for explaining the technicalities of the two orders. On previous occasions Ministers have come to the House with equally technical speeches and the House frequently takes the opportunity to range widely over the operations of the International Development Association and the World Bank. For that reason I welcome the opportunity to debate the topic.
I agree that IDA is a vital aid agency because it seeks to meet the investment needs of the world's poorest countries. Such countries cannot satisfy their needs by commercial borrowing and IDA has a proven record of efficiency. An audit last year on 183 projects showed an annual return of about 18 per cent.
I have paid tribute before, and I do so again, to the last Conservative Government, because they recognised the importance of IDA, as did the Minister in his speech today. They recognised the importance of IDA when the Reagan Administration failed to meet their obligations to IDA. Britain played a leading role in pressing America to honour its obligations and by making up the shortfall by bringing forward our contribution.
In that area at least we can be thankful that Thatcherism and Reaganism were not the same. So far in Britain we have hardly seen any manifestation of the backwoods attitude towards aid that has been prevalent for some time in Washington. We have heard little about IDA funding Socialism in the Third world. Aid has not come under threat in Britain from the fudamentalist monetarists who see aid as a distortion of the international market.
841 I am grateful that in Britain political considerations have not entered into the financing of international institutions such as IDA and the World Bank, but we need assurances about the future, because the future is much more doubtful. That is why today's debate is important.
The Minister said that the Government have always been strong supporters of IDA. I agree with him. I understand that the Minister for Overseas Development is visiting a Third world country and cannot be in the House. He is a strong supporter of IDA. The former Foreign Secretary was also a supporter of IDA, but, alas, he is no longer on the Front Bench.
A rumour has emerged from the people who attended the UNCTAD conference in Belgrade that the gap between Thatcherism and Reaganism may be closing. It has been said specifically that the British Government have told the World Bank that they will not be prepared to repeat the bridging operation which allowed IDA to make up the shortfall in American contributions under IDA 6. If such reports are true, they are disturbing.
I hope that the Government are continuing to put pressure on the American Government about negotiations for IDA 7. I hope that the Under-Secretary can deny categorically that the Government have turned their backs on the possibility—which I believe to be a probability—that the American Government will not support IDA as they should to the fullest extent. I hope that the Government will be prepared under such circumstances to take action to ensure that IDA receives the support that it needs.
A regressive British-American alliance over IDA funding could cripple that agency and do untold damage to many of the poorest people in the Third world. As I have said before, the Government's attitude before the election was constructive. They gave an important lead to the world. I very much hope that, if necessary, they will be prepared to do so again.
The problems of IDA can be summed up simply. Under IDA 6 it received about $12 billion. The president of the World Bank, Mr. Clausen, has said that between $16 billion and $18 billion is needed under IDA 7 if it is to maintain the present level of spending. The increases are required, first, to compensate for inflation and, secondly, because China is now eligible to borrow. If the additional funding is not found, cuts will have to be made in the aid that IDA makes available to the developed countries.
In Belgrade last month, the leader of the United States delegation to UNCTAD, Mr. Kenneth Dam, was reported at a press conference as saying that Tom Clausen's hopes for IDA 7 were unrealistic. At UNCTAD the United States refused to make any commitment to the replenishment of IDA. Therefore we require some assurance about the Government's likely position.
As Mr. Clausen said when he addressed UNCTAD, the future of IDA is uncertain. He said:The need for IDA is great, the effectiveness of IDA is beyond question, but the political will to support IDA is in doubt … Most low-income countries cannot meet their needs for external capital by commercial borrowing; many low-income countries that borrowed significantly on commercial terms in the 1970s have encountered serious debt-servicing difficulties. Direct foreign investment in the low-income countries has been mainly confined to energy and mineral development, and official institutions are also constrained in their non-concessional lending to low-income countries by creditworthiness considerations. So for the low-income countries, there is no substitute for official development assistance.842 The problem of debt servicing arose last night in the debate on international monetary arrangements. My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) pointed out the extent to which export revenue of developing countries is absorbed by debt servicing—for example, Argentina 88 per cent., Brazil 88 per cent., Mexico 59 per cent., and in many other poorer countries between 20 and 50 per cent.
The international debt problem is grave. As my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) said, it will not be solved by the free market system. I know that there is an interest among Conservative Members in the possibilities that may arise as a consequence of private investment and in the contribution that private investment has already made in the Third world. But let no one suppose that such private investment can in any way be a substitute for Government and international action of the sort that has been described.
It is clear that action must be taken at Government and international level to tackle the whole problem of world development. Poor countries are facing the problems of debt charge, which I have described, and worsening teens of trade. The result of that in many countries is that their treasuries are empty. They have had to make cuts in their social services, education, infrastructural expenditure and so on. At the same time they have growing populations, growing unemployment and, as a consequence, social unrest. For those reasons our interests are very much served by strong support for the work of IDA.
The burden of debt in Third world countries must be eased and their terms of trade with the developed world improved. The World Bank receives immense and complementary support from the United Nations development programme. Some hon. Members have recently seen a pamphlet issued by the Centre for World Development Education in which it is made clear that between 1978 and 1982 the British Government's contribution to the UNDP has fallen by no less than 56 per cent. I regard that as a disastrous fall because in many respects the World Bank and the UNDP complement each other. The UNDP can provide management skills, technical skills and co-ordination because it recruits people with technical and professional qualifications. There are many projects in which it wants to become involved but cannot because of the fall in contributions from the rich world.
I believe that the effectiveness of the World Bank is likely to be adversely affected if UNDP is made short of money. The Prime Minister is fond of saying that one cannot solve problems by throwing money at them. I agree with the right hon. Lady. One has to throw money, technical skill and expertise at the problem and ensure that that money is properly and economically spent. That is why I hope that the Minister will be able to reply about the UNDP and the British contribution. I believe that that contribution is complementary to the effectiveness and the work of the World Bank. It is also very much in the interests of this country, the rich world and, indeed, the poor world.
I hope, therefore, that the Government will take to heart the words that I now utter. I utter them because there is a considerable mood of depression in the Third world following the apparent failure of the UNCTAD conference in Belgrade recently. The Third world countries approached UNCTAD with great seriousness and prepared their positions well in advance. They consulted widely, 843 they presented their proposals with a much more conciliatory tone than ever before and they were prepared also to negotiate. What was the result? "Near disaster" was the description in The Guardian of 5 July, which stated:The new Zeitgeist in the West, encapsulated in the bland assumption that recovery in the industrialised countries will automatically bolster Third world economies makes it doubtful that any future UNCTAD summits will take place.Put simply, the United States, West Germany and Britain blocked every Third world initiative at that conference in Belgrade. The main British initiative was to talk of the need to restructure UNCTAD, which is undoubtedly true, but the Third world is talking with increasing desperation of the need to restructure the whole world economy.
When we debated the second Brandt report last April, I mentioned an important document which will be published in September—a document based on the work of a group of experts set up by the Commonwealth, the so-called Helleiner committee. As I said, the report is due to be published in September and my information is that the draft is already prepared and that at the end of the month the committee will be meeting to approve that draft. I am told that it will be an important report which will be discussed at the finance Ministers' meeting in September. It will then presumably be on the agenda when the Heads of Government of the Commonwealth meet later in Delhi.
I hope very much that the Government will study that report with great care, that they will take it seriously and be prepared to take positive initiatives both at the finance Ministers' meeting and at the Heads of Government meeting. A constructive response is needed—the type of response that we saw from the Government over IDA. Now that we have, as it were, the second Thatcher Administration, I hope that we will have that constructive response to some of the desperate, growing problems that affect the Third world.
§ Mr. Bowen Wells (Hertford and Stortford)
At the outset I wish to welcome my hon. Friend the Under-Secretary of State to his position at the Department of Foreign and Commonwealth Affairs. When he was on the Back Benches he did not share some of my enthusiasm for the type of action that we are taking tonight to enable the Third world to buy goods from this country and, in so doing, develop this country and their economies. However, I am sure that he will be persuaded by the arguments that are put to him—I thought that the hon. Member for Greenwich (Mr. Barnett) put his case in a constructive way—including mine.
I regret that Mr. Speaker, in collusion with the two Front Benches, has agreed that this debate should be curtailed to 1½ hours. I do not believe that the two instruments should have been put together, but rather dealt with separately, so that there would have been adequate opportunity to deploy our arguments on both orders. However, I appreciate that Mr. Speaker is in the hands of the House, and I leave the matter there.
Adam Smith would have applauded many of the criteria deployed by the IBRD and IDA. The advice of both organisations to the countries to which they lend is, generally, along neo-classical economic lines. On the external side, the IBRD's report emphasises the need for open international trading systems, realistic exchange 844 rates and the use of world market prices to reflect real opportunity costs. On the internal side, there is an emphasis on appropriate resource allocation, realistic pricing policies, cost recovery and the maintenance of sensible fiscal and monetary policies. I am sure that the Prime Minister would welcome a definition of her economic policies, as outlined in the Gracious Speech, in exactly those terms.
Those are the types of institution and lending policies that we are discussing tonight, and I welcome the efforts being made by the Government to support those institutions. I say that because therein lies not only benefit for the economies to which we are proposing, through the IBRD and IDA, to lend money, but for our domestic economy and employment possibilities in Britain.
I was accused by Opposition Members last night of not knowing what I was talking about. I therefore took the precaution today of arming myself with quotations from people who, over the years, have been recognised as experts. One, for example, is Mr. Gordon Tether, who served as resident economic columnist on the Financial Times, The Observer and The Times. He wrote the introduction to the Centre for World Development Education's pamphlet "Action for Development", copies of which have been received by most hon. Members. He says in his introduction, and I agree wholeheartedly:Yet it is almost certainly not going too far to say that nothing is going to play a more crucial part in shaping the fortunes of the British people between now and the end of the century than the way in which this aspect of our affairs is dealt with during the lifetime of the new Parliament.I profoundly believe that economic recovery and a reduction in unemployment in Britain, which is the prime objective of the Government, cannot take place unless due regard is paid to institutions like the IBRD and IDA and support for them is forthcoming.
I say that because we must export to live; 30 per cent. of our gross domestic product is exported. To whom will we export if we cannot export to those who can pay for the goods? The answer is "No one", and if we cannot export, our unemployment will grow. Mr. Gordon Tether continued:Plainly, nothing would be more helpful in getting our own economies on the move than a sustained and substantial revival in export trade. And the sombre truth is that there can be little hope of that materialising when the countries that normally absorb anything from a fifth to a third of the industrial world's exports— some $300 billion in all —are in such a parlous balance of payments strait that they have no alternative but to cut their imports to the bone and concentrate all their efforts on disposing of what they themselves produce in other countries.There lies the nub of the argument that I am advancing. I have deployed the argument before in the House and I have brought Mr. Gordon Tether's article with me to support my contention. That is the background to the two orders.
I wish to persuade my right hon. and hon. Friends of the necessity to support the IBRD order and to explain why I support it and why I think that it should go further at a later stage in this Parliament. First, we should remember that we are not taking cash out of our economy for the IBRD quota. We are guaranteeing the borrowing of the World Bank on the money markets. That means that the money comes from world markets and has to be repaid. It does not come from the British taxpayers' pocket. The capital has to be repaid, and the interest, at a commercial rate of interest. That produces the financial discipline which lies behind all the IBRD's investments. It means 845 that it produces some real developmental projects that benefit the host countries and the countries that contribute to it.
I suggest that my hon. Friend the Under-Secretary of State asks the International Monetary Fund why it does not fund parts of its borrowings in exactly the same way. There seems to be no reason why the IMF should not learn from the experience of the IBRD. As the bank is such a sound lender and borrower it receives the lowest possible interest rates upon the world market. It is thereby enabled to lend on to fund projects in the Third world in a way that means that they are not crushed or overburdened by interest rates and are allowed to prosper.
It should be taken into account that the IBRD is entering increasingly into joint financing. This means that the World Bank is not the sole financier of many of the projects in which it engages. It joins Governments and multilateral and bilateral agencies. It also enters into arrangements with private banking organisations and international companies to provide the money and the technical abilities to provide a project that is meaningful and able to be developed in the country concerned. This is a developing part of the IBRD and it should be very much welcomed by the Government. Nearly 29 per cent. of its finances in the past year were arranged in that way.
If the private banks had wanted to make such great loans to developing countries, would it not have been much better if they had used the IBRD rather than their own judgment, which has proved on occasions to be gravely at fault, and developed joint projects with the IBRD, thus producing real economic development in the countries into which the money was directed?
Over the past year the IBRD distributed 24 per cent. of its funds to agriculture, 14 per cent. to transport, 13 per cent. to power and 12 per cent. to industry. This is a proper and sensible way in which to direct the finance into developing countries, because it is, after all, through the ability to feed themselves and to export crops which cannot be grown in the industrialised world that Third world or tropical countries can most benefit from the trading cycle.
The IBRD has gradually expanded its agricultural investment, on which it has a good record, and this investment should be increased. My continuing theme has been that the IBRD investment stimulates exports from this country. By enabling the Third world countries to buy from this country, the IBRD is providing jobs in this country and in the host country. This means that demand can be realised in the Third world countries for increased crops, products and other goods from Britain. We must continue to sustain this trading cycle through institutions such as the IBRD and the IDA.
Many people have said that the IDA is a grant-giving institution which gives money for which it expects no return. Nothing could be further from the truth. The rate of return required by IDA on its loans or grants must provide the borrowing Government with revenue to meet its obligations or the loan becomes a subsidy. IDA insists that that loan is repaid, albeit over 50 years, but some of these projects take that length of time to be realised.
We can see how successful IDA's criteria are. In "IDA in Retrospect" we find an analysis of the period through which IDA has existed. The average rate of return on capital investment is 17.9 per cent. Many companies in this country would be proud of such a return. The book emphasises that investment in the Third world not only 846 generates but expands the economies of those countries in a much faster way than any other investment, and stimulates exports from this country.
Some people say that IDA has not been successful. I was asked, after one of the debates in the House, how any country can be said to have been developed through the grants to IDA. We must point first to the prime example of India, which has been one of the largest recipients of IDA money. Through IDA technology, money and disciplines, India has been transformed from a net food importing and grain importing country into a grain exporting country in 30 years. It has been a much shorter period than that, because it took some time before India would and could accept the technology offered by the IDA. A contrast with India is its neighbour—Burma—from which it used to import rice. Burma is now a net food and grain importing country, so successful has IDA been.
There are graduates—India is one of them—from the IDA criteria, because it is only the poorest countries that benefit from IDA. Some of the graduates have become contributors to the IBRD in turn. What a success story. Chile, Columbia and Costa Rica have become contributors to the IBRD. Other graduates are Nigeria, the Dominican Republic, the Ivory Coast, the Republic of Korea, Turkey, Botswana, Equador, Syrian Arab Republic, Mauritius, Swaziland, El Salvador, Paraguay, Tunisia, Jordan, the Philippines, Thailand, Bolivia, Honduras, Indonesia, Cameroon, Egypt, Nicaragua and the People's Republic of Congo. That illustrates the success of these programmes in the host countries to which we have contributed through IDA.
What is the Minister going to do about the seventh replenishment of the IDA which will arise during the course of 1983–84? The negotiations must start now. The American Government have not yet contributed fully to the sixth replenishment. What will the Government and we as a Parliament do to persuade the United States Government and Congress that it is the right and proper course for us to follow? It is the responsibility of Members of the House to do that just as much as it is the Government's responsibility. I hope that hon. Members from both sides of the House will find their way to New York and Washington singing and persuading Congress to pass the IDA sixth and seventh replenishments because of the way it benefits the economies of the United States and this country, if for no other reason.
I want to deal with the United Nations development programme to which the hon. Member for Greenwich referred, which plays a pivotal role in all this. However, let us start with self-interest. For every pound that the British Government invest in the UNDP £2 worth of exports from this country are generated—yet, we have chosen to reduce the amount of money that we pay to the UNDP. I understand the reasons for that. It is a voluntary programme which is not ratcheted to this country's gross domestic product or gross national income. The programme can make out a prima facie case for support from the British Government, whatever economic difficulties the Government may find themselves in.
Will the Minister tell me how the £20 million cut, which I understand is to be expected from the ODA budget, will be reflected in the Government's contribution to the UNDP and to the multilateral institutions as a whole? The ODA must make out a proper case to the Economic Secretary and the Chancellor, which I could do, and which would result in the Chancellor coming, money 847 bags in hand, to invest in the ODA budget to support UNDP. I hope that those remarks will be borne in mind when the necessary economies are considered. However, do not let the cuts be made blindly and in ignorance. Let us think about what we have to do. Surely that is a programme that should not suffer. We must pursue straightforward remedies for the Third world through the IBRD and IDA. They must invest in the developing countries to make up the loss that those countries have experienced by the drop in commodity prices. In his article Mr. Gordon Tether said:The message is clear. One way or another, the pace-setting countries—and Britain is well-placed to give a suitable lead—must now attach the highest priority to measures aimed at channelling back to the developing countries the $100 billion per annum they have been deprived of—the equivalent of about a third of their normal export earnings — through lower commodity prices, reduced capital in-flows and record interest charges on their foreign debts. That calls for urgent steps to strengthen their international liquidity, step up economic aid to them, improve commodity markets and halt and roll back protectionist measures.Those are the remedies that we should pursue. Those are the remedies that will bring economic prosperity to this country as well as the host countries. That is the challenge that presents itself to the British Government on their reelection. That is the challenge that I am certain my hon. Friends will live up to. In welcoming the orders wholeheartedly, I hope that the Government will continue to direct intelligently the money that we use in this most productive enterprise.
§ Mr. Tom Clarke (Monklands, West)
It is appropriate that the hon. Member for Hertford and Stortford (Mr. Wells) should contribute to our debate and refer to the United Nations development programme, because today he assisted considerably in the arrangements for the publication of an interesting booklet on the development connection, which is relevant to the debate. I thank him for that assistance. The booklet is interesting not just because most of us welcome it but because yet again we have information that suggests that the Government do not sat the priority on Third world matters that we in the Opposition would like and that the British people would expect.
Mr. Arthur Brown, deputy administrator of the UNDP, was present today at the launching of the document. He referred to the introduction to the document, which states:Britain, for its part has cut its contribution to the UNDP more severely than almost any other major donor country.That statement is supported on page 9 of the document, on which we can compare Britain's contributions for different years. We contributed £25 million in 1978, £28.5 million in 1979, £15 million in 1980, £17.5 million in 1981 and £18.5 million in 1982. On page 10 we read that France, America and Japan substantially increased their contribution in dollars, yet Britain's contribution decreased from $47 million in 1978 to $28 million in 1983.
As Mr. Brown rightly said today, if one is consuming little to begin with, it is difficult to consume less. The figures quoted in the document show that when we are witnessing a world recession we seem to be expecting the Third world to cushion itself from that recession in an impossible way. That does not suggest great understanding on our part of the problems of the Third world.
848 Yesterday my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) eloquently reminded us that the rate of growth in the Third world countries is only 50 per cent. of what it was five years ago. As my hon. Friend the Member for Greenwich (Mr. Barnett) said in his excellent introductory remarks, the Third world countries are dealing with serious problems —the debt crisis, crippling interest rates, the oil price increase and the fall in commodity prices, which comes as a great blow to those countries and has led to greater problems of poverty, malnutrition and so on, which we in the House want to help to solve. However, that is not reflected in the orders.
The need to restructure the programme of Third world borrowing has been made clear today. To that extent, the debate goes beyond the orders. As my hon. Friend the Member for Greenwich properly said, a certain despair arises from various recent conferences about whether the Western world is seriously worried about offering a solution to these problems. Unfortunately, these matters were given almost no attention during the general election campaign. They were given almost as little attention at what should have been a vital Williamsburg conference.
Bearing in mind our fears about the collapse of the world banking system, we have heard remarkably little from Belgrade. With regard to UNCTAD, the same uninspiring story has applied from Geneva in 1964 to Manila in 1979. Time is not on our side. If we cannot arrange these matters in a way that is relevant to the real monetary problems that the world faces, we have no right to speak our minds as we are normally entitled to do on such issues as the cost of the arms programme when the Third world and the West have so many other problems with which to deal.
The problem of the arms programme demands a great deal of attention. It is of great concern to us all that, when resources are so scarce, there is a tremendous build-up of arms, not least in the Third world. We should say as a nation that we believe that the matter should be considered, as it is an enormous problem for us and the rest of mankind.
We also have a right to speak of human rights. The hon. Member for Hertford and Stortford referred to the Philippines. The Minister should be aware that there is great anxiety, especially on this side of the House, about recent events there. People are deeply worried about the denial of human rights. We are still not satisfied that we have heard the type of explanation that we want of the Commonwealth Development Corporation project at Mindanao. As a supporter of the CDC, I do not believe that it helps to allow disquiet to continue. There is growing evidence day after day of the denial of human rights in the Philippines and the abuse of what amounts to British investment as long as the Lost Command, which we were promised would be banished from the scene, is strongly in evidence. I hope that the Minister will take that point as seriously as the House would expect.
There is an interesting link between the orders and the need for a programme for disarmament and dialogue. We have not yet paid sufficient attention to the battle of ideas. In Belgrade, Mrs. Gandhi said:No sustained revival of the North is possible without development of the South. The world is too integrated to permit segmentation. Some countries cannot continue to prosper, ignoring stagnation in others.849 If we cannot respond as a nation to the cries of humanity, perhaps enlightened self-interest will have its appeal.
§ 10.4 pm
§ Mr. Tam Dalyell (Linlithgow)
It gives many hon. Members great satisfaction that a man who, on 3 April 1982, made an auspiciously brave speech should now be Under-Secretary of State for Foreign and Commonwealth Affairs. At some length yesterday evening, as leader of the parliamentary delegation to Brazil in the mid-1970s, and with a continuing interest in that country, I asked about the Government's philosophy in helping the major debtors. The Economic Secretary to the Treasury could not answer that question yesterday evening because of lack of time, so I repeat it now.
The second question, which is probably expected of me, is this: do not all the billions that are now being spent on the Falkland Islands mean that we give much less aid to India and the poorest countries? Often a short point is effective, so I shall leave my remarks there because I wish to hear the Minister's reply.
§ 10.5 pm
§ Mr. Paddy Ashdown (Yeovil)
I join other hon. Members in congratulating the Under-Secretary of State on his recent appointment. I welcome most of the speeches that have been made so far, and this is clearly one of the rare occasions in the House when opinions on both sides of the House are roughly similar. I do not wish to introduce an unnecessary note of contention, but some of the comments of the hon. Members for Monklands, West (Mr. Clarke) and for Greenwich (Mr. Barnett) sounded rather strange in the mouths of the representatives of a party one of whose policies is an increase in protectionism, which will do more than anything else to harm the genuine long-term needs of the Third world. The hon. Member for Monklands, West said that he hoped that we would give priority to Third world matters, but nothing could be more important than a free system of world trade for the development of the Third world.
I do not wish to go into detail about the genesis of our present position, except to say, as has been said before, and as is clearly understood by all hon. Members, that American action has brought us to this position. Many people believe, as do I, that we have reached such a position because the United States has broken its legal commitments to the funding of the International Development Agency. The sum of $245 million over which we are still haggling is relatively small, and would amount to no more than 10 hours of defence expenditure in the United States. Britain is the second largest contributor to the International Development Agency, so we must ensure that the agency achieves the bridging that is necessary to carry us across to the start of IDA 7 on 1 July 1984. I join other hon. Members in welcoming and supporting the Government's generous commitment to do that. As the hon. Member for Greenwich said, it is an important commitment that the Opposition welcome.
Before we discuss the details of that decision, it is worthwhile asking a few questions about the future, which must be answered soon. First of all, will IDA 7, the new replenishment agreement, start this year? We are concerned about whether that will come about. Those decisions must be made soon and they need to be made at least by September of this year. If that does not happen, the House should realise that some further bridging 850 agreements will have to be set up. We hope that the Government will put the maximum pressure on the United States to ensure that it makes a commitment towards IDA 7 as early as possible.
Secondly, if we commit ourselves and IDA 7 gets off the ground, will it have the resources to cope with the scale of the problem? The hon. Member for Greenwich has already said that this will mean a substantial increase over the funds that have been available to IDA 6 — an increase from about $12 billion to about $17 billion or $18 billion. That is a result of the fact that the Chinese may now draw on IDA funds, of the considerable problems facing the African economies, and of the rate of inflation. We need to be assured that, if IDA 7 is not to be hamstrung from the start, it will have an appropriate level of funding to cope with the problems that it will have to assist in funding.
My third question concerns the level of British contributions to IDA 7. Over the past two to three years the level of the British contribution to IDA 6, or the International Development Agency in general, has fallen. That is not unreasonable, given the change in the world situation and the British economy. However, unless the IDA is not to be hamstrung by loss of resources, it is important that the British contribution should remain at a reasonable level. We hope that the Government take this opportunity to give a commitment that the British level of contributions will be reasonable in terms both of what we can afford and of what is needed for IDA 7. This is an important point, to which the hon. Member for Greenwich also referred.
My fourth question has also been touched on by other hon. Members. Are we right to parachute loans and funds into countries that do not have the infrastructure to cope with them properly? I do not want to add much to what has already been said, but in this, the role of the UNDP is crucial. The UNDP acts as a vehicle to ensure that the infrastructure of human capacity of the countries to which those loans will be made is appropriate to ensure that the loans achieve the maximum benefit.
We echo the comments made today to the effect that the Government's withdrawal of funding from the UNDP at this stage seems to run counter to their commitment to IDA 6, and we hope in the future to IDA 7. We should wish to see that substantially reversed, because the money that IDA 6 and 7 will have available will not be appropriately used unless the infrastructure of the nations are appropriate, and the UNDP has a key role.
There are many reasons for supporting the IDA. For example, it is an organ that distributes multilateral rather than unilateral aid. I join the hon. Member for Greenwich in expressing concern at the evidence, which I have also received, about the Government's desire to move away from multilateral to unilateral aid. That is bad for the aid and development programmes of the Third world. It is also bad in raw economic terms. The ghost that somehow or other we benefit more from disbursing unilateral aid than we do from disbursing multilateral aids need to be laid. It is rather the contrary. For every £1 dispensed in unilateral aid, about 60p to 70p comes back in terms of procurement. For every £1 spent on multilateral aid £1 comes back in procurement.
Leaving aside the moral question of what we seek to do for the Third world, it is more economically beneficial for Britain to disburse its aid through multilateral rather than unilateral channels. The IDA is an appropriate mechanism 851 for doing so. The IDA has a good record for the quality of its aid. I join the hon. Member for Greenwich in referring to the assistance that the IDA has given to transforming the agriculture and the agricultural infrastructure of the Indian subcontinent. That is a remarkable achievement and very much to the IDA's credit.
IDA aid is aimed at the poorest segment of the developing nations. It is one of the few soft loan lifelines still available to the poorest nations of the Third world. Net transfers from IDA funds last year amounted to no less than 10 per cent. of current account deficit for the poorest nations, and about 80 per cent. of IDA's lending has been to the poorest nations of the world.
Criticisms can be levelled at the IDA, as at any organ, especially in the international field arena. In our judgment, the agency has been somewhat ineffective in generating urgent action which reflects the scale and nature of the problems of the Third world. Unfavourable comparisons can be drawn between the way in which the nations of the world have got together to deal with the debt problems of Poland, Brazil and Mexico and the way in which they have got together on a rather meaner scale and failed to deal with the extreme problems of Third world nations.
The Opposition also express concern about the way in which the IDA has exported the dogma of monetarists control. In our view, that is an inappropriate way to generate sound economies, although some Conservative Members might find it a reason for supporting the IDA.
On balance, we regard the IDA as an effective organ which dispenses aid to the right areas, mostly by appropriate methods. It has a good record. We therefore welcome the order, but, we hope that the Government will give a longer-term commitment especially to IDA 7. We hope that they will use this occasion to put pressure on the United States to reach an early decision about its commitment to IDA 7, so that it can continue without the need for a further bridging operation this time next year.
§ Mr. Whitney
As the hon. Member for Greenwich (Mr. Barnett) said, narrow technical orders of the kind that I was privileged to introduce today lead to wide-ranging debates on the general philosophy of our aid policy. This debate has been no exception. It is not within my capability, nor have I the time available, to respond to all the interesting points that have been made, but I assure the House that all the points will be carefully studied, especially by my right hon. Friend the Minister for Overseas Development, no doubt to his benefit and, I hope, to the further refinement of the very positive aid policy for which he is responsible.
On a personal note, I am grateful for the generous remarks made by hon. Members on both sides of the House about my appearance at the Dispatch Box. I am sorry that the hon. Member for Linlithgow (Mr. Dalyell) cannot be with us, as he is indisposed.
The wide consensus mentioned by the hon. Member for Yeovil (Mr. Ashdown) and many others is encouraging. I hope that we shall be judged on deeds rather than words. The orders demonstrate our participation in the increase in World Bank funding and the Government's commitment to the objectives so forcefully put by hon. Members in all parts of the House. I hope that there is no 852 misunderstanding or wrong perceptions on the matter. I hope, too, that the hon. Member for Greenwich will not be led too far astray by rumours and whispers in the corridors of UNCTAD or any other forum. By our actions let us be judged.
I hope that the concern expressed about the IDA 7 replenishment will prove to be exaggerated. Of course, we have some way to go yet. Certainly, I would not presume to forecast what other sovereign states may or may not do. The policies of the United States Government and what might happen in one contingency or another takes us into the realms of speculation and hypothesis, which I shall not enter. So I hope that we can take some comfort for what we have achieved and the determination that we have shown over these years and during the period of the last Conservative Administration, which again the hon. Member for Greenwich was good enough to recognise.
Considerable concern has been expressed about the United Nations development programme. Decisions about that have to be taken as part of the process of the overall allocation of our aid programme resources. Again, we are totally committed to the great work, to which I personally can testify, having had 10 years of experience in various connections with aid programmes thoughout the world and the effectiveness of UNDP programmes, but as always it is a question of striking a balance between the variety of commitments and pressures which there are on a necessarily limited aid budget. Those include the growing and important European aid programmes. I assure the House that the recent cuts will not affect our current year payments of £18½ million to the UN development programme.
The recent UNCTAD conference was mentioned by a number of hon. Members. It is my view that somewhat too depressing a view was taken of UNCTAD 6. Perhaps there were exaggerated expectations of what that conference might produce, but there were valuable exchanges on a number of agenda items, in particular on commodities, trade, money and finance. Certainly, the negotiations were at times slow and far from easy. But consensus was reached on more than 20 resolutions, including one on the World Bank and other multilateral development institutions.
§ Mr. Bowen Wells
Is it possible for my hon. Friend to publish those 20 resolutions, and in particular those that the United Kingdom delegations agreed with and supported for the benefit of the House?
§ Mr. Whitney
I shall certainly bring the matter to the attention of my right hon. Friend the Minister for Overseas Development, and I am sure that he will be happy to consider that possibility.
As my right hon. Friend the Minister for Trade told the House on 7 July:UNCTAD provides a forum for deliberation over a wide field, but decisions are often taken elsewhere, by national Governments and in other international organisations". —[Official Report, 7 July 1983; Vol. 45, c.151.]We believe that the results of the conference should be judged not only in terms of its resolutions but in terms of action taken, for example, in the IMF, the World Bank and the General Agreement on Tariffs and Trade, and on agreements reached at the OECD ministerial meeting and, I might add, at the Williamsburg summit. We should not be too dismissive or pessimistic about the results of UNCTAD.
853 I want to take up some of the points made by my hon. Friend the Member for Hertford and Stortford (Mr. Wells), who, as the House knows, is a great expert in these matters and constantly makes valuable contributions to these debates. As he said, we may not share his enthusiasm for some of those points but I share his enthusiasm for Adam Smith although I am perhaps rather less enthusiastic about Mr. Gordon Tether. However, variety is the spice of life.
His points were somewhat technica1, but we strongly support his advocacy of co-financing with commercial banks. The bank's executive board recently agreed a two-year trial period to test new financial instruments whereby the bank invests its funds in the commercial loan through jointly financed bank projects. We share my hon. Friend's enthusiasm for that.
I hope that I have covered the points that were made about the United Nations development programme. I recognise the problems of the IDA 7 replenishment—[Interruption.] I am sorry that the hon. Member for Warrington, North (Mr. Hoyle) did not join us for the whole debate, because we would have benefited from his contributions.
I conclude by reinforcing the point that the needs of the Third world, the valuable balance between the contribution which official aid assistance has to give private investment flows, and indeed, above all, the importance of trade are recognised. The importance of avoiding the pressures of protectionism is recognised by Conservative Members, and, I hope, by wiser Labour Members.
Our dedication to the official development aid, to the agencies of the IBRD and the IDA, is demonstrated by our contribution to expanding the funding of those two organisations on the lines that we have described.
§ Question put and agreed to.
That the draft International Bank for Reconstruction and Development (1979 Additional Increase in Capital Stock) Order 1983, which was laid before this House on 3rd May, in the last Session of Parliament, be approved.
That the draft International Development Association (Special Contributions) Order 1983, which was laid before this House on 3rd May, in the last Session of Parliament, be approved.—[Mr. Whitney.]