§ Mr. Tony Worthington (Clydebank and Milngavie)I hope that this debate will be welcomed in the context of the G7 summit, which will take place this weekend when the world leaders will meet. I am pleased that towards the top of their agenda will be a subject that should concern them greatly—the financial relationship between the richest and the poorest nations.
In previous years, that has been characterised in terms of aid—the rich giving to the poor. However, that is an inadequate picture of the interrelationship, because debt repayments or terms of trade have frequently been heavily skewed against the poorer countries. In the period from 1980 to 1994, the rich north paid Africa $278 billion less for its coffee, copper and other commodities than it would have paid had prices remained stable. In the same period, Africa's debt increased from $84 billion to $217 billion. Thus the rich north paid the poor south less and then lent it money to pay for those losses.
Also during that period, we saw a pattern of falling aid contributions—that certainly applied to this country—so that the United Nations target of 0.7 per cent. of gross domestic product became increasingly distant. We need to aim at what the Chancellor calls "the virtuous circle"—not just the reduction of debt, but increased aid flows and fairer trade policies.
It is gratifying to see that the British Government are now leading the way. Over the years, charities such as Oxfam have been critical of the British Government, and it gave me great joy recently to read in one of its publications that the best proposal on the table for relief of debt was from Britain. That is a change from the past.
The creation of the Department for International Development and the concerted action by the development and finance arms of the Government are making a real impact. Two Cabinet Ministers now work together on the issue and it is really making a difference. The work of the Select Committee on International Development in providing a focus on development issues in the House is also important. Our latest report is on the issue of debt. I commend it to the House and hope that it will influence the decisions that come out of the Cologne summit. I also hope that in future there will be a much greater concerted action between the Treasury, DFID and the Department of Trade and Industry to ensure that the debt, aid and trade aspects of government are linked.
I approve of much that has occurred. I applaud the proposal to sell off International Monetary Fund gold to finance debt cancellation. I applaud the proposals to review and improve the extremely inadequate HIPC—heavily indebted poor countries—scheme, which I shall discuss in more detail later. I applaud the Chancellor's drive to create $50 billion in debt relief and, as part of that commitment, to use unspent parts of the European development fund to finance debt relief. The Chancellor's proposal for a new millennium trust fund to finance additional aspects of HIPC are welcome. His drive to set up a millennium giving scheme so that the whole nation can be involved in debt relief is another good measure.
The growing movement by countries such as Canada and Norway to cancel debt bilaterally is welcome. Third-world debt as a political issue has grown in 357 importance. I pay tribute to the Jubilee 2000 campaign, which is helping politicians throughout the developed world to raise the issue of third-world debt.
A few years ago, it would have been unthinkable to see an article such as that which appeared in The Guardian on Monday, written jointly by the President of the World Bank, James Wolfensohn, and the Archbishop of Canterbury—the world of mammon and God joining together in an unprecedented way.
§ Mr. Brian Cotter (Weston-super-Mare)The thought occurred to me that, as politicians, it is important that we get the message over that many of us are concerned about this issue on humanitarian rather than political grounds. Other groups with whom we try to work on this matter sometimes feel that politicians are there only for political gain. I simply wanted to mark that card. Many of us are genuinely concerned about the issue and feel that we should link with Churches and take the same approach.
§ Mr. WorthingtonI agree with the hon. Gentleman. We are human beings and this issue has captured our imagination. Several weeks ago, I went to St. Albans cathedral, which is not where I normally strut my stuff. Some 600 people had turned out to say that this issue brings together the political world and the world of the Churches in a way that allows them to play a shared role.
All those moves are welcome, but we are still in the foothills. A large number of poor countries are still being crippled by debt that they cannot possibly afford to pay back. The HIPC initiative, which was much heralded a few years ago, has been sadly inadequate. Only three countries have received help and even they were only marginally assisted. For example, Uganda's gains were wiped out by a collapse in coffee prices, which again rendered its debt unsustainable because the calculation of sustainable debt is based on the value of exports. I hope that that formula will at least be modified; calculating sustainable debt on the basis of export prices is a deeply flawed procedure and I hope that the G7 will look at that again.
It takes six years for debt relief to come through, which is hardly urgent action in the face of mass poverty, health services that do not exist and widespread illiteracy. Above all, the countries that have been through the HIPC process have gained little, because debt that was not being paid, and which could not have been paid anyway, has been cancelled. The people of those countries have received no tangible benefit from the relief of a purely notional debt.
The situation has been much worse since debt relief has had to be linked to IMF structural adjustment programmes. If one follows IMF programmes, one may receive debt relief; however, those programmes are geared not to immediate poverty relief, but to financial rectitude by bankers' standards. IMF programmes have been linked with mass unemployment as, for example, inefficient parastatals have been privatised.
The requirement for cuts in state spending on health and education has been particularly damaging, so IMF programmes have caused cuts in literacy programmes. According to the World Development Movement, the introduction of school-user fees in Ghana led to primary school drop-out rates of up to 40 per cent. How on earth 358 does one increase prosperity by increasing illiteracy? In Mozambique, health charges introduced under structural adjustment have meant that patients visiting hospital have to pay user charges, which simply means that people do not go to hospital. That is scorched-earth economics, which creates the stability of the desert.
One of the aims of the IMF is to increase per capita earning in those poor countries, but how does one achieve that by withdrawing reproductive health facilities? How on earth can a country whose population is doubling every 25 years increase its per capita earnings when family planning services are being withdrawn? That is doomed to failure. Mercifully, there seems to be a realisation that debt relief does not help poor countries unless it is linked with joined-up policies to lessen poverty. James Wolfensohn of the World Bank is recognising the importance of investment in health and education, good governance, social institutions and a worldwide drive against corruption.
If we want those countries to thrive economically, human rights issues have to come first. We have set targets, as has the world community, such as the reduction by half by 2015 of the proportion of people living in extreme poverty. Other targets, such as universal primary education by 2015, the elimination of gender difference in education, access to reproductive health services and reductions in maternal mortality, have also been set. Those targets must be at the centre of our debt relief and aid programmes.
The way to achieve prosperity and reduction of poverty is through ensuring that health and education services are expanded. In particular, we cannot have debt relief policies that do not leave countries and Governments the freedom to spend at least 20 per cent. of their revenue on health and education.
The African countries that have grown quickest are those, such as Botswana, with a good record on democracy and a relative lack of corruption. The ones that have sunk like a stone are those such as Nigeria, which have corrupt military rule and where corruption is the byword. If hon. Members want to see total privatisation, market rule and capitalism unrestricted by regulation and taken to their ultimate, they should go to Nigeria and see misery and the ultimate failure of trickle-down economics.
By separating debt relief from our aid and economic policies that support the poor we have made our debt relief policies ineffective—they have been countermanded by IMF structural adjustment programmes—so let me ask my hon. Friend the Financial Secretary what the Government are hoping for as they go into the Cologne summit. Will there be, alongside debt relief measures, proposals that will ensure that investment in human capital is increased? We cannot have structural adjustment programmes that increase poverty in the name of financial rectitude. How can we justify a country such as Mozambique having to pay 25 per cent. of its budget on debt servicing?
What action will the Government and their partners be taking to shorten the period in which countries qualify for debt relief? Six years is a ludicrously long time for a country to wait when it is drowning. Will the G7 change the definition of debt sustainability, as the principle of basing it on export sales seems to be seriously flawed?
359 I should be most grateful if my hon. Friend would tell me what action the Government are taking in respect of the cancellation of bilateral debt. I applaud my right hon. Friend the Chancellor for seeking to achieve movement among the whole G7 towards concerted action. We can tackle this problem only on a worldwide basis, but some countries, for the best of reasons, are going their own way. Canada and Norway are saying that they will cancel all their bilateral debt. We have a policy of cancelling debt that has been accrued on concessionary terms, but it would be interesting to know whether the Government intend to make any change in that and whether we will follow the path taken by Norway and Canada. I suspect that other countries will do so.
What will happen to increase the number of countries that will qualify for debt relief? There are many countries which we would all recognise as poor that do not qualify for debt relief. It would be interesting to know some of the detail of what is happening to my right hon. Friend the Chancellor's proposals for selling off IMF gold. Have they been generally accepted in the IMF? There have been positive moves recently; the change in the position of the German Government, for example, is very welcome. Is there still an ambition to sell off IMF gold, and how much will be sold?
What response are we receiving to the proposal that unused European Development Fund money, which has not been spent and is clogged up in the morass that is development in Europe, could be used to achieve debt relief? What has happened in respect of the imaginative proposal of my right hon. Friend the Chancellor for a millennium fund to aid debt relief?
The world is looking for boldness from Cologne. The biggest issue facing the world has to be the abject poverty of many of its citizens. The cost of many of those proposals is nil in effective terms. Many debts will not be paid because they cannot credibly be paid. The EDF money is budgeted anyway and the sale of IMF gold would inconvenience no one. Many of the other costs would be spread over many years. The benefits that we would gain through the increased prosperity of the developing world would far outweigh any cost.
I know that Treasury Ministers met last weekend to work out their response on third-world debt. I applaud the lead taken by the Chancellor, but he may be dragged back by other G7 participants. I hope that this weekend the Prime Minister will exercise real leadership, and will make our G7 partners see that they can make history by taking this issue forward and by building on the momentum in the world for the relief of third-world debt.
I look forward to hearing what my hon. Friend the Minister has to say about our intentions and about what we have achieved as we are poised for the meeting of the Finance Ministers of the G7 countries and the leaders of the world in Cologne this weekend.
§ The Financial Secretary to the Treasury (Mrs. Barbara Roche)I congratulate my hon. Friend the Member for Clydebank and Milngavie (Mr. Worthington) on securing this Adjournment debate, especially given the context in which he has made his remarks. It is well known that he has been interested in these matters for many years, and he has considerable expertise. I am delighted to respond to him.
It is particularly pertinent to discuss this issue in the lead up to the Cologne summit. My hon. Friend rightly mentioned the work of Jubilee 2000, which has involved 360 many people, including the Churches and voluntary groups in our constituencies. Its campaigning work has highlighted this problem. I was pleased to be in Edinburgh on Saturday to participate in the well attended proceedings there.
The debate is timely because last Friday the Select Committee on International Development published a welcome and useful report on international debt. It strongly endorses the Government's action and proposals, and acknowledges that the United Kingdom is at the forefront of debt relief. As is normal practice, the Government will respond to the report in due course.
As I said, the debate is timely because of the discussions in Cologne. I shall address that issue in more detail, but first I want to dwell on the question of why debt is an issue. We all know why it is important to move forward on debt and poverty relief for the poorest countries of the world. We all know of countries that are weighed down by the burdens of being forced to spend more on their debt interest payments than they are able to invest in the young, the sick, the undernourished and the poor.
Debt relief is an economic issue, because a mountain of inherited and immovable debt stands in the way of economic development in Africa and elsewhere. That is why it is entirely appropriate for the Treasury and the Chancellor of Exchequer to be heavily involved in this issue, as they have been. Debt relief is also a moral issue, and I make no bones about it. The debt is a burden imposed from the past on the present. A third of the world's children go to bed hungry: 30,000 children die every day from preventable diseases and 1.3 billion people live in poverty.
What does the debt burden do? It deprives millions of people of their chance of a future. It prevents them from breaking out of the vicious circle of poverty, and it prevents investment in what really counts—health, education, and the advancement of economic opportunity. My hon. Friend was right to dwell on that.
I shall outline how the Government are constructively engaging and leading our international partners in the efforts to tackle this most important issue. I agree with my hon. Friend that the 1996 HIPC—heavily indebted poor countries—initiative is delivering too little, too late for the poorest countries. It is not helping the poorest countries to tackle their chronic poverty, and it is not helping them to invest in a foundation for sustainable long-term growth—in particular, investment in primary education and health care. That is why we have been campaigning for faster, deeper and wider debt relief.
In September 1997, we launched the Mauritius mandate, which is aimed at speeding up the process, so that three quarters of those countries should have reached firm decisions on the amounts and terms of debt relief by 2000.
At the annual meetings of the International Monetary Fund and the World Bank last October, we secured a fundamental review of the HIPC initiative. Equally important, we secured the recognition of the developed countries—in particular our G7 partners—that the current scheme required major changes to deliver its key objectives of debt sustainability and, more importantly, alleviation of poverty.
361 Last weekend, the Chancellor secured the agreement of his G7 Finance Minister colleagues to a package that will lead to the cancellation of $50 billion of debt by 2000. Subject to minor details, final agreement is expected at the summit this Cologne weekend.
We are committed to the agreed international target of halving the proportion of people living in abject poverty. On 3 March, my right hon. Friends the Chancellor of the Exchequer and the Secretary of State for International Development set out a comprehensive four-point plan to deliver a new contract with the poorest countries.
The plan proposed, first, that by the end of 2000 we move from only a couple of billions of debt relief, achieved in the last few years, to a cut in the debt of $50 billion. Secondly, it proposed that we increase aid—in the form of grants, not loans—flowing from the developed world to the developing world to a total of $60 billion.
Thirdly, our plan proposed that we sell the gold—$1 billion to $2 billion of IMF gold—and establish a new millennium trust fund to pay for this enhanced initiative. Fourthly, we challenged the British public to join us and to double their charitable giving to $1 billion through millennium gift aid. We know how generous people in this country are, and that they are conscious of the problem. I am sure that all hon. Members will have received representations on this matter. There is a willingness among the British public to move forward on this issue.
Last week, my right hon. Friends the Chancellor and the Secretary of State for International Development set out our proposals to translate debt relief quickly into real financial improvements for the countries concerned, and to make debt relief an essential part of poverty alleviation. We also proposed last week to shorten the timetable to ensure that the countries that have been involved in the HIPC initiative feel the benefits of debt relief after three years rather than the current maximum of six years. My hon. Friend made that point well in his speech.
We need to make real headway in regard to the large amount of aid debt that is outstanding to HIPCs. We also need to increase the amount of aid given by developed countries to poor countries and to refocus future aid, providing it in the form of grants rather than loans.
We have taken the lead on the international stage in trying to unshackle the poorest countries from their unsustainable debt burdens. We have written off, unilaterally, $5 billion of Overseas Development Agency debt; we have increased the aid budget by 28 per cent. in real terms, which means £1.6 billion over the next three years; and we have guaranteed that all future aid will take the form of grants rather than loans.
It is clear that, over time, an enhanced HIPC initiative will cost more. It is impossible to estimate the size and timing of the costs precisely, but if an enhanced initiative is to become a reality, we need a credible and robust approach to tackling them. I have already mentioned our call for the sale of gold to meet the extra costs that fall to the fund.
Last month, my right hon. Friends the Chancellor of the Exchequer and the Secretary of State for International Development proposed the establishment of a millennium 362 trust fund, which will finance the setting up of a more ambitious framework for faster, wider and deeper debt relief. The new fund will consist of the resources of the existing HIPC trust fund, to which Britain has already pledged $71 million. We have called on the world's richest countries to increase their contribution. It is within their power to provide a better deal for poor countries, and for the world's poorest people.
Last week, in a further demonstration of our commitment, my right hon. Friends pledged another $100 million to the millennium trust fund. That took our total pledge to $171 million, which is more than any other country has committed. We now encourage our international colleagues, and possibly the private sector here, to make their donations. We have called on the European Commission to contribute resources from the European Development Fund to the millennium trust fund, and we have called for the EDF to contribute 1 billion euro, over time, to the costs of debt relief. In the coming weeks, we will press our partners in Europe to support that call.
We are convinced that such resources could make a major contribution to debt relief, and therefore to the alleviation of poverty in the poorest countries, enabling them to tackle the greatest problem of our generation: the lack of primary education and health care for the poorest and most deprived to which my hon. Friend referred. Those resources can provide the key that will unlock the door to escape from chronic poverty.
§ Ms Julia Drown (South Swindon)The Government have a very good record on both debt reduction and the alleviation of poverty, but will my hon. Friend assure us that their determination to tackle those problems will not cease until millions of children no longer die unnecessarily every year because their countries have no basic health or education services?
Yesterday I hosted a very successful meeting with Christian Aid. There was a huge response from Members of Parliament, all of whom were very concerned about the Cologne summit. They were keen to back the Government—to urge them to go to Cologne and ensure that achievements were made, and the determination maintained, until real improvements were brought about for the benefit of the millions of people throughout the world who depend on the attaining of the goals outlined by my hon. Friend.
§ Mrs. RocheI thank my hon. Friend for making that point; I know that she takes a great interest in these matters.
We want to establish a new dialogue between debtors and institutions. Our commitment is essential. The IMF programmes clearly protect spending on health and education, and my hon. Friend need not doubt that we shall use our best endeavours in this regard.
Our actions have had a galvanising effect. Over the past few months, many developed countries—and all the G7 countries—have set their own proposals for reform of the HIPC arrangements. Although the emphases are different, the initiatives have a common theme: the need for a more ambitious framework that will provide faster, wider, deeper debt relief, remove unsustainable debt burdens and allow resources to be reallocated to programmes that reduce poverty.
363 In achieving those aims, we must work together. The days of unilateral action are gone. The best way forward is now through collective international effort, which means new co-operation and partnerships between donors and recipient countries. Working together, we can achieve much more than we can when working alone.
We also want debtor countries themselves to be involved in the debate on debt relief. That brings me back to a point that I made to my hon. Friend the Member for Clydebank and Milngavie. The HIPC capacity building programme that we are helping to finance is working with 21 countries to improve their debt management, so that they can understand their debt position, take control of it, and adopt the right policies on new borrowing. It is important for poor countries to take the opportunities open to them to press their own agendas.
Although debt relief is important, it is not an end in itself. The United Kingdom's bilateral aid programme for HIPCs is eight times as large as the receipts of interest payments. Debt reduction must be accompanied by appropriate aid programmes and economic management. The billions saved in debt-servicing payments must not be wasted on weapons or lost to corruption; they must be invested in health, education and economic development.
The international community is placing more emphasis on the assessment of the impact of policies and programmes on the poor. Greater efforts are being made to attend to their priorities, and to build consensus by means of consultation with civil society. However, much remains to be done. That applies to all development programmes, not just those that are funded through debt relief.
§ Mr. CotterMay I take up a point made by the hon. Member for Clydebank and Milngavie 364 (Mr. Worthington)? Is it not important to ensure that, after the provision of debt relief, democracy is delivered and Governments use the money wisely?
§ Mrs. RocheThat is a good point. We are certainly committed to achieving that end.
§ Mrs. Cheryl Gillan (Chesham and Amersham)Will the Minister give way?
§ Mrs. RocheYes, very briefly. I have only a couple of minutes.
§ Mrs. Gillanrose—
§ Mr. Deputy Speaker (Mr. Michael Lord)Order. This is a half-hour Adjournment debate, and Opposition Front Benchers do not normally participate in such debates.
§ Mrs. RocheWith your permission, Mr. Deputy Speaker, I will give way briefly.
§ Mrs. GillanI thank the Minister. I merely wish to express the Opposition's support, to congratulate the hon. Member for Clydebank and Milngavie (Mr. Worthington) on raising such an important matter, and to ask the Minister to undertake to place in the Library, immediately after the summit, a report relating specifically to this part of the negotiations at Cologne.
§ Mrs. RocheWe make sure that all our reports are disseminated in the normal way after a summit.
I am very pleased to have been able to reply to the debate. We must ensure that this item is placed at the top of our agenda, and that is what the Government are doing.