Third World Debt (Hansard, 19 October 1989)

§ 5. Mrs. Ann Taylor
To ask the Chancellor of the Exchequer when he last met ministerial colleagues in the G7 to discuss Third world debt.

§ 10. Mr. Win Griffiths
To ask the Chancellor of the Exchequer when he last met the managing director of the International Monetary Fund and the president of the World Bank to discuss Third world debt.

§ Mr. Lawson
During my visit to Washington last month for the annual meetings of the IMF and World Bank.

§ Mrs. Taylor
Does the Chancellor accept that high interest rates impose bigger burdens not only on home owners and others in this country but on Third world debtor nations, because of the high levels of repayment? In view of that, will the right hon. Gentleman stop lecturing those countries about putting their economies in order? Will he acknowledge that he has not been able to put his own house in order, and that his policies are making it much more difficult for them to do the same?

§ Mr. Lawson
I have to say first that it is necessary for those countries to put their own houses in order, and they know that very well; that is agreed, I think, by all those who have considered the matter seriously.
As for the effect of interest rates, for the vast majority of these countries it is of course the dollar interest rate which is far more important to them than the sterling or any other interest rate. As for the question of helping these countries, as the hon. Lady will no doubt know, we have all agreed on a strengthened debt strategy involving a significant element of debt reduction for the middle and low-income development countries. That is of course over and above the help for the very poorest of the sub-Saharan indebted countries, which was secured in the way that my hon. Friend the Economic Secretary to the Treasury recently said.

§ Mr. Griffiths
Did the Chancellor find that the president of the World Bank and the manager of the International Monetary Fund expressed any surprise at the fact that Japan is now offering money out of its Third world budget to Britain to save a major food research institute, which the Government want to close to save £1 million? Is that part of the economic miracle of 10 years of Tory rule?

§ Mr. Lawson
Without accepting the terms in which the hon. Member put the question to me, I have to tell him —even though it is not connected with this question—that this country is receiving Japanese inward investment on a very large scale, far larger than any other European country. This is because they recognise this country as a country with excellent prospects, and that is why they want to come here.

§ Mr. Page
Is not my right hon. Friend to be congratulated on giving the lead in transmitting debt to write-offs for countries stricken by disease and plague? Is he not absolutely right in giving the lead to the rest of the world? Is he not also right to say that Third world countries have been correctly forced into the reconstruction of their debts so that they can succeed economically and take on commitments from the rest of the world, so that in future they do not rely upon handouts but stand up as fully independent members of society?

§ Mr. Lawson
I am grateful for what my hon. Friend says about the initiative that I took over two and a half years ago now which eventually led to the international agreement on the so-called Toronto terms to help with the indebtedness of the very poorest countries of sub-Saharan Africa. As for what countries are doing with their economies and what economic policies they are pursuing around the world, I found it very striking at the annual meeting of the Bank and fund this year to see more than ever before, all round the table, country after country was determined to turn its economy from a Socialist economy into a market economy because it saw that as the way forward. Incidentally, no one put this more clearly than the new Polish finance Minister Mr. Balcerowicz who wants a fully capitalist market economy organised in Poland. It will be very difficult, but I think we should give them all the help we can.

§ Mr. Conway
Is my right hon. Friend aware that while there will be support from all sides of the House for easing the debt burden of Third world countries, there is concern in some of those countries that have made attempts to honour their debts that they should not be penalised by those who follow a Socialist spendthrift economy?

§ Mr. Lawson
My hon. Friend has a very good point. Certainly that is something which we need to take into account as the debt strategy evolves. That is a further reason why I believe that it is better to leave that, so far as possible, to the commercial banks—when it is commercial debt bank debts we are talking about, which it largely is —to negotiate with the individual debtor nations without the Government seeking to twist their arms.

§ Mr. Chris Smith
Does the Chancellor of the Exchequer accept that contrary to the impression that he attempted to give my hon. Friend the Member for Dewsbury (Mrs. Taylor), the sterling interest rate is relevant to Third world debt and affects very large amounts of debt held by the United Kingdom financial institutions and banks? Does not a high interest rate policy in the developed world intensify the flow of funds from poor to rich countries? Does it not increase the crippling debt burden that the Third world faces, or is the Chancellor ignoring the need of the poor around the world as he is the needs of home owners in Britain?

§ Mr. Lawson
I take it that what the hon. Gentleman means by the flow of resources from the poor to the rich is the debtor countries paying interest on the debts they have incurred.

§ Mr. Smith
Exactly.

§ Mr. Lawson
The hon. Gentleman says, "Exactly" from a sedentary position. I hope that he is not suggesting that those countries should not pay interest on debts that they have incurred.

§ Mr. John Greenway
When my right hon. Friend next meets Finance Ministers in the G7 group, will he take time to consider with them the world development movement's current resolution on world poverty? Does he agree that it would be far better if help given to the Third world, whether in debt reduction, debt alleviation or generous assistance, were measured in its effect on relieving poverty and not in promoting political propaganda?

§ Mr. Lawson
It certainly should not be directed to enabling Governments of those countries to make political propaganda. I agree with my hon. Friend. Of course it is aid that we use to relieve poverty and that is very important. Development assistance is designed to help those countries to have more successful economies and to develop their economic policies, but of course at the end of the day the measures that they take to put their own houses in order—and this goes back to the question that the hon. Member for Dewsbury (Mrs. Taylor) originally put—are all important.