HC Deb 24 June 1999 vol 333 cc1274-7
4. Ms Julia Drown (South Swindon)

What agreement was reached at the recent G8 Finance Ministers' meeting with regard to reducing the debt burden of the poorest countries; and if he will make a statement. [87059]

10. Ann Clwyd (Cynon Valley)

What progress was made on debt relief at the Cologne G8 summit. [87066]

The Chancellor of the Exchequer (Mr. Gordon Brown)

Two weeks ago, at the G7 Finance Ministers meeting in Frankfurt, we took forward proposals for faster, deeper and wider debt relief. Agreement was then reached a week ago at the G8 Summit in Cologne on an initiative that will reduce the debt owed by the poorest countries by up to $100 billion. Under the proposals, two thirds of official debt of the poorest countries can be written off.

I want to applaud the work of the Churches and non-governmental organisations in helping ensure that outcome.

Ms Drown

I thank my right hon. Friend for that answer. The Government deserve much congratulation for their work in securing further and faster debt relief. I was also pleased that the Prime Minister told the House on Monday that he wanted further progress on debt relief to be made. That is needed because, even after Cologne, Tanzania will still be expected to pay $5 per person per year. That is much more than the health budget in that country, which still needs to spend much more money on basic health care to save lives.

Will my right hon. Friend say what further steps can be taken to make further progress on debt relief, and will he assure the House and the public that the relief achieved at Cologne will not be funded out of our already overstretched aid budget?

Mr. Brown

I can reassure my hon. Friend on her final point. What was agreed at Cologne was that 38 countries will be able to benefit from the debt relief—many more than were in the scheme beforehand—and that debt relief can be made possible by the end of 2000. There are three things that we must do between now and October, which is when the International Monetary Fund and the World Bank meetings will finally confirm many of the proposals.

First—my hon. Friend's point about Tanzania applies to other countries as well—we want to ensure the front-loading of debt relief. That means that debt relief will be available immediately, and debt interest payments can be reduced. Secondly, we want the World Bank's millennium trust fund, which has received $100 million from the British Government and $171 million in total, to gain funds from other countries. We want to encourage other countries to contribute to the fund, and also private companies that are involved throughout the world.

Finally, and most important for the long term, we want debt relief to be linked to poverty relief in the most immediate way. We want to create a virtuous circle of debt reduction, poverty reduction and economic development. That is the hope for the countries about which we are talking.

Ann Clwyd

My right hon. Friend has always described debt relief as a great moral issue, and has pursued it with great vigour. He has been among the leaders on the matter in the G7 countries. The package brings important relief to eligible countries, but they must still pay more in debt servicing than they can spend on health and education. What progress is my right hon. Friend likely to make with the IMF and the World Bank? In conversations with representatives of those international institutions, the International Development Committee has found continued rigidity and lack of flexibility in their attitudes to some of the poorest countries, such as Rwanda, which, in addition to recovering from genocide, is trying to service its debt.

Mr. Brown

I thank the International Development Committee for all its work on debt relief. Post-conflict proposals exist to help countries such as Rwanda to come more quickly into the debt reduction process, just as there are policies for post-catastrophe countries, such as Honduras and Nicaragua. My hon. Friend should not underestimate what is being done. Subject to the terms of the agreement, two thirds of the official debt of the poorest countries will be written off. That includes £20 billion in Overseas Development Administration loans, $30 billion from the previous package—for which my predecessor as Chancellor should be congratulated on leading the way several years ago—and £50 billion, or $70 billion, as a result of the negotiations.

The package makes a major change because we want debt relief in 2000, the millennium year. The work of the Churches and the 120,000 people who sent cards to the Treasury over the past few weeks have succeeded in keeping debt relief alive in many countries around the world. From talking to fellow Finance Ministers, I know that that has had a substantial impact on public opinion. At the World Bank meetings in October and in IMF meetings, we will be determined that the link between debt relief and poverty relief should be recognised. My hon. Friend should recall that IMF gold sales will be approved for the first time, and the millennium trust fund will be set up.

Sir Peter Tapsell (Louth and Horncastle)

May I ask the Chancellor why the Government's proposals for reducing the debt burden on the poorest countries include having the IMF sell about 310 tonnes of its gold holdings? Is the Chancellor aware that, in Washington on Monday, Mr. James Motlatsi, president of the National Union of Mineworkers of South Africa—which has more than 200,000 members—told many leading United States Congressmen that, if the downward pressure on the gold price were maintained, at least 80,000 of his members would become unemployed? That would be the effect on South Africa alone, but 30 of the 41 poorest countries that we are trying to help are gold exporters, and, on average, each gold miner supports 10 people.

Mr. Brown

The sale of gold is only one among the issues surrounding debt relief. I should have thought that the hon. Gentleman would wish to welcome the general package of debt reduction.

Sir Peter Tapsell

Answer the question.

Mr. Brown

I am coming to it, but I should have thought that someone on the Conservative Benches would wish to welcome the debt reduction proposals.

Every country in the G7 is supporting the IMF gold sales. They are now agreed as an international policy and other countries on the IMF interim committee will endorse it. The income from gold sales enables the IMF to do far more than it would otherwise be able to do to secure debt reduction. It is obvious that the hon. Gentleman is not concerned about the question at all: it is about debt reduction.

Mr. Edward Davey (Kingston and Surbiton)

Unlike the Conservatives, the Liberal Democrats wholeheartedly congratulate the Chancellor on the work that he has done to achieve the debt relief package. I wish him well in the work that he has pledged to undertake to make further progress. We all hope that he succeeds. Will he take this opportunity to confirm to the House that the United Kingdom contribution to debt relief will be additional to the Department for International Development budget in the period of both this comprehensive spending review and future ones? When will the G7 countries become more specific about their precise contributions to debt relief?

Mr. Brown

On the first point, yes. On the second point, we expect announcements from the countries that are members of the G7 soon about the contributions that they will make to the millennium trust fund. There is also a proposal for the European development fund, which is made up of contributions from member states, but outside the EU budget, and which has substantial surpluses, to make a one-off contribution to the World Bank to enable it to reduce debt or make a one-off contribution to the countries with debts. I hope that that proposal will command support throughout the House.