HC Deb 27 October 1988 vol 139 cc441-3
4. Mr. Gwilym Jones

To ask the Chancellor of the Exchequer if he will make a statement on the outcome of the joint annual meeting of the International Monetary Fund and the World Bank.

8. Mr. William Powell

To ask the Chancellor of the Exchequer if he will make a statement on the outcome of the joint annual meeting of the International Monetary Fund and the World Bank.

Mr. Lawson

At the meetings of the International Monetary Fund, the World Bank and G7 in Berlin last month the major industrialised countries agreed to continue to work closely together and to pursue the policies of sound finance and exchange rate stability which have led to improved growth in the world economy. All countries accepted the need for vigilance against any build-up of inflationary pressures.

On the debt of the poorest, we secured final agreement on the necessary arrangements to implement a scheme to ease the official debt burden of the poorest and most heavily indebted countries in sub-Saharan Africa, following the initiative which I launched in April 1987.

On middle income debt, support for the current strategy was reaffirmed, with emphasis on the central role of the IMF and on the importance of encouraging new market-based schemes, without transferring risk from the private to the public sector.

Mr. Jones

I warmly welcome my right hon. Friend's personal contribution to the progress that has been made. Does he agree that there are still many barriers to free trade which ought to come down—especially barriers in advanced countries to exports from developing countries?

Mr. Lawson

I very strongly agree with my hon. Friend. Of course, it is desirable that trade barriers should come down all round. That is the purpose of the Uruguay round of the GATT, which is going on to negotiate that, and I very much hope that it is successful, but it is particularly important to the developing countries that they have markets open to their goods. I deplore the protectionist tendencies of many in the Labour party, who would like to try to frustrate the opportunities that those countries have, and so badly need, to sell their produce in the developed countries.

Mr. Powell

Was my right hon. Friend able to discuss with his colleagues the growing confidence, which so many outside Britain feel, in the resurgence of the British economy? Was he able to highlight the fact that half the inward investment into EEC countries at the moment is being made in Britain and that, as a result, there is likely to be a substantial improvement in our balance of manufacturing trade? In particular, exports from Nissan, Peugeot and Ford will redress the imbalance in the motor car industry. Is my right hon. Friend aware that much of the investment is taking place in Corby?

Mr. Lawson

My hon. Friend has an enclyclopaedic knowledge of his own constituency and other important matters, and indeed he is aware of far more things than I am. Therefore, I always find his questions extremely informative, and I am most grateful to him. He is right that I did notice in the International Monetary Fund and World Bank meeting in Berlin last month that there was a very strong respect and admiration for the strength and success of the British economy, and I have to say that, if we had not been speaking from that position of strength, I do not think that over the 18 months—or whatever it took—I would have been able to persuade the other countries to come along with the debt initiative which I had earlier launched to help the very poorest countries in sub-Saharan Africa.

Mr. Skinner

Will the Chancellor confirm that during the past six years there has been an increase in the number of Third world and semi-developed countries that are unable to pay their way? Does he accept that there are now more than 50 countries out of about 160 in the world that are in that category? Will he confirm that the United States cannot do as much as it has done before because of its massive deficit on trade and on its Budget? Will he also confirm that Japan and West Germany have a massive surplus of $120 billion on their trade? What can Britain do about it when it is currently running a balance of payments deficit approaching £15 billion?

Mr. Lawson

What we can do about the difficult situation—indeed, the hon. Gentleman is right that there are a great many countries in the world today having difficulties with their foreign indebtedness. We are in a particularly strong position. Our net overseas assets are second in the world only to those of Japan, and we are playing a very large part, in the way that I indicated in my answer to an earlier question, through our membership of the IMF, in the debt strategy generally and in another area which is particularly important. Our private investment in the developing countries, which is so important for the success of those countries' economies, is greater than that of the whole of the rest of the European Community put together.

Mr. Holland

Putting on one side the fine print of the authorship of the debt relief proposals, which come from the Swedish Ministry of Foreign Affairs rather than from the Chancellor, and putting on one side the fact that the recent impetus of debt write-off comes from the Government of France rather than from the Government of this country, does the Chancellor recognise that there is no secondary market solution to the debt, and that we really need a public intervention of funding for the developing countries on the lines of the Baker plan, but on a much larger scale?

Secondly, does he admit that one of the key issues before the recent Bank-Fund meeting in Berlin was that of cross-conditionality, whereby the independent roles of the Bank and the Fund have been merged so that countries have to apply to both rather than to one for funding? What did he do—[Interruption.]

Mr. Speaker

Order. Long questions lead to long answers.

Mr. Holland

What did the right hon. Gentleman do to make a contribution to more positive conditionality for developing countries to help them with programmes for housing, health, education and social services?

Mr. Lawson

If I can remember the various points which the hon. Gentleman made, on his first point, I am sorry that he has such a distaste—even hatred—for this country that when this country takes a successful international initiative he cannot bear it.

As for his middle question, I think it was, I certainly do not accept that there should be, as he suggests, a transfer of risks from the private sector to the public sector and a great injection of public funds. Indeed, to say that that was what lay behind the Baker initiative is plain and arrant nonsense. There is no one who alongside myself has maintained the line harder than Jim Baker that the risk that the commercial banks have and that the private sector has should not be transferred to the backs of the taxpayers.

As for his final point, it is highly damaging if there is any merging of the roles of the World Bank and the International Monetary Fund. They have to work together; they have to co-operate together. That is sensible in the debt strategy. But they have different roles, and I have been concerned in the recent episode with Argentina that those roles have been merged. I hope that that will not happen and that it will be clearly understood that it is the IMF which is in the lead and it is the IMF's seal of good housekeeping which is all-important.

Mr. Gow

Did the managing director of the IMF remind my right hon. Friend of the series of begging letters sent to his predecessor by the right hon. Member for Leeds, East (Mr. Healey)? Did the managing director mark the contrast between the strength of the United Kingdom economy under my right hon. Friend's stewardship compared with its weakness under the stewardship of the Labour party?

Mr. Lawson

Mr. Camdessus, the present and highly expert managing director of the International Monetary Fund, is fully appreciative both of the strength of the British economy and of the role that we play in the world economy. Whether he keeps on him, as I know, my hon. Friend does, a copy of Dr. Witteveen's celebrated correspondence with the right hon. Member for Leeds, East, (Mr. Healey) I do not know, but I certainly think that it would be helpful if my hon. Friend were to remind him, because it was a very important episode even if a humiliating one, in our country's history.