Third World Debt (Hansard, 14 July 1988)

§ 1. Mr. Franks
To ask the Chancellor of the Exchequer what discussions took place at the Toronto economic summit relating to Third world debt; if there will be an increase in aid to less developed nations; and if he will make a statement.

§ The Chancellor of the Exchequer (Mr. Nigel Lawson)
An agreement was reached at the economic summit in Toronto last month, along the lines of the initiative that I launched in April last year, to reduce the debt burden of the poorest, most heavily indebted countries, mainly in sub-Saharan Africa, which are following approved economic policies.

§ Mr. Franks
Does my right hon. Friend accept that Britain's role in securing that agreement was decisive? Will he continue his efforts to ensure that the agreement is implemented as soon as possible?

§ Mr. Lawson
Yes. I am grateful to my hon. Friend for what he has said. It has been our persistence, since I launched the initiative in Washington at the interim committee meeting in April last year, which I believe allowed us to get the agreement in Toronto, which is of the first importance for the heavily indebted poorest countries of sub-Saharan Africa. Earlier this week there was a meeting of senior officials, under the aegis of the Paris Club, at which a substantial amount of agreement was reached on the nuts and bolts. I hope that, as my hon. Friend has said, it will not be too long before the agreement can be implemented.

§ Mr. Tony Lloyd
Does the Chancellor recognise that the cost of debt, particularly in Latin America, can be measured directly in jobs lost in this country through lost exports? What steps will he now take to ensure positive action by the richer nations of the world to ease the debt problems of Latin America?

§ Mr. Lawson
The middle-income debtors of Latin America indeed have substantial debts. It is a great problem, which has been there since 1982. During that time we have had a well-developed debt strategy for dealing with the problems, but it is not just a matter of the International Monetary Fund taking a lead, as it does very valuably, or of the commercial banks rescheduling debts, which they are doing. It is also vitally important for those countries to put their own economic houses in order.

§ Mr. Lester
I welcome the additional information that my right hon. Friend has been able to give about recent action in the Paris Club. Can he tell how long it will be before its members will be in a position to implement the scheme that his energies have helped to create, and what scale of benefit we may expect to see for those poorest countries?

§ Mr. Lawson
I pay tribute to the part that my hon. Friend has played in the House in consistently drawing attention to these matters. I cannot tell him how long it 540 will take, but we are going ahead as quickly as possible; and the fact that the special meeting was held at the Paris Club earlier this week is an indication of that.
As for the benefit for the poorest countries, it is difficult to say. It will build up over a period. It could, however, eventually add up to as much as $500 million a year if the countries concerned participate fully in their proper economic adjustment programmes.

§ Mr. Holland
The Chancellor's debt strategy may well develop, but it is not very athletic. Surely he realises that, as was pointed out by my hon. Friend the Member for Stretford (Mr. Lloyd), up to a quarter of a million jobs have been lost in the export sector in the United Kingdom since 1981 alone because of the Latin American debt crisis.
As for sub-Saharan Africa, why did the Chancellor not respond to the challenge and invitation issued by the new French Government and President Mitterrand to write off one third of the debt of the 20 least developed African countries? Surely he recognises that it is time to act on debt rather than talk. Otherwise, we shall neither resolve the crisis for the countries concerned nor restore British export trade.

§ Mr. Lawson
I am astonished at the ill-informed nature of the hon. Gentleman's comments. We have done far more in connection with writing-off old aid loans than France. However, I do not want to enter into competition, because the United Kingdom and France have been working very closely together on the initiative on which agreement was reached in Toronto and which was further discussed at the Paris Club this week.
As for unemployment, I am astonished that the hon. Gentleman should mention it without welcoming today's figures, which show that unemployment in this country has fallen by well over half a million since the general election alone.

§ Sir William Clark
I congratulate my right hon. Friend on his welcome initiative. Does he agree, however, that it is the height of irresponsibility to promise a massive increase in aid when, if the Labour party ever regained office, our economy would be in such a parlous state that we would not be able to afford an increase in aid, and might not even be able to afford the aid that we now provide?

§ Mr. Lawson
My hon. Friend is right. It is very easy for the Opposition to say, as they do, that they will increase aid. The Leader of the Opposition—who at present is safely away from these shores—has said that they will increase it by two and a half times, and raise the basic rate of income tax by 2p to pay for it. But, of course, if there were ever another Labour Government the economy would be in such dire straits that I doubt whether even a 2p increase in income tax would be sufficient to pay for it.