HC Deb 28 February 2002 vol 380 cc819-21
4. Mr. John McFall (Dumbarton)

If he will make a statement on his recent initiative for relief of international debt. [35745]

The Chancellor of the Exchequer (Mr. Gordon Brown)

This week, Ghana reached decision point, qualifying for $3.7 billion of debt relief from the international community, including the United Kingdom, writing off 100 per cent. of the $200 million of debt owed by Ghana. That means that 25 countries—21 from Africa—will benefit from $60 billion in debt relief with potentially $100 billion of debt relief in prospect. Our plans support greater flexibility in debt reduction as part of a global new deal. In return for countries pursuing corruption-free policies that will encourage stability, trade and investment, we will raise development aid worldwide in cash terms and as a proportion of national income.

Mr. McFall

I commend the Chancellor on his speech in New York in November and on his Marshall plan for global poverty alleviation. In his New York speech, he mentioned the sheer lack of investment in poor countries. On my visits in the past few years to Zambia in Africa and Peru in Latin America, I have seen regression on the ground instead of progression. Will the Chancellor say what structural changes should take place with the International Monetary Fund and World Bank to ensure that countries that are grindingly poor at the moment have a better future?

Mr. Brown

Our proposal is for a trust fund of $50 billion a year. That would mean the effective doubling of international aid so that we can meet the 2015 development targets, whereby every child of primary school age should have free education, infant mortality is cut by two thirds, and, at the same time, poverty is halved. As for the changes that are necessary, first, we believe that countries must pursue stability-oriented polices and must therefore agree to new codes and rules for governing their financial, monetary and economic policies. Secondly, we must push forward on the Doha trade agenda. Thirdly, we must create a better environment for private as well as public investment. In return, we will make available additional resources. The next stage of that is the Monterrey conference in Mexico—the finance for development conference—at which I hope that other countries will also put up additional cash to support our proposals.

Mr. Andrew Robathan (Blaby)

I welcome the Chancellor's commitment to assisting developing countries. Will he say more about the corruption-free policies that go hand in hand with relief of international debt? He may not know that the International Development Committee is visiting Ghana next week. We have seen throughout Africa and elsewhere that corruption makes poor people poorer and harms the poor people in the world. Without corruption-free policies, international debt relief will have little effect on their lives.

Mr. Brown

I hope that we will have all-party support—and that that may be reflected in an intervention from the Opposition Front Bench—for what we are trying to achieve at Monterrey. The hon. Gentleman is absolutely right that one of the factors that has blighted the development of Africa and has made it difficult for people to justify additional aid, has been the amount of corruption that has taken place in a number of regimes throughout that continent. One of our proposals is designed to remove that possibility in the future as far as possible. Each country must agree to abide by the international rules of the game, and publish exactly what they are doing in their monetary, fiscal and general financial policy. Their accounts must be transparent and available for people to see. Additional expenditures or the siphoning off of money can therefore be investigated properly by the authorities. That demands a bigger role for the IMF and the World Bank in the surveyance of the financial activities of those countries and in insisting on structural reform.

I hope that the hon. Gentleman will also agree that our domestic legislation to prevent people from being able to claim bribes as part of tax relief is another measure that offers a way forward. I hope that there will be all-party support for what we are trying to do at Monterrey. That means that in return for pursuing those policies, we are prepared to put more money into solving intractable problems in Africa, which, with the international community working together, we can begin to address.

Ann McKechin (Glasgow, Maryhill)

My right hon. Friend will be aware that the heavily indebted poor countries debt relief conditions were based on an export growth rate of about 6 per cent. The World Bank's report stated that the growth rate was only about 4 per cent. Will my right hon. Friend assure the House that the Government will press for greater flexibility in the debt relief conditions to ensure that we do not end up with re-emerging problems of debt unsustainability?

Mr. Brown

That is why we insisted at the last meeting of the IMF committee that we include in our communique the commitment to be far more flexible on the terms under which debt reduction is available in future and to take account not just of the loss of exports by many countries, but of the general decline in world trade. The year before last, world trade grew by about 13 per cent.; last year, it barely grew at all, and the position of countries in Africa worsened as a result. That is one flexibility that we are including in future attitudes to debt relief.

The other flexibility relates to countries that are moving out of conflict. In Africa in particular many countries are denied debt relief because they are in conflict. Countries such as the Democratic Republic of Congo, Mozambique and Sudan which have the possibility of coming out of conflict could be more readily eligible for the debt relief that is necessary for restructuring. That is our second proposal for flexibility in debt relief.

Mr. David Lidington (Aylesbury)

I first welcome and support the Chancellor's efforts to develop policies on international debt relief. His work will command the support of hon. Members on both sides of the House. Can he confirm that the World Bank report published just last month forecasts that the 24 poorest countries will, after debt relief, still have to pay about $¼ billion more in debt service in 2005 than in 2002? Can he also confirm that the sustainability of the repayments depends, as the hon. Member for Glasgow, Maryhill (Ann McKechin) explained, on forecasts for growth and exports, which a number of expert observers think are over-optimistic? How certain is he that the present debt relief initiative programme will have the beneficial results that we all want?

Mr. Brown

I am grateful to the hon. Gentleman for his support for the debt relief initiatives. With the Monterrey conference next month, the IMF and World Bank meetings in April, the children's conference organised by the United Nations in May and the Johannesburg summit in September, this is the year in which we must make progress on meeting the millennium development targets. Whatever support comes from all parties in the House to back up the efforts of churches and non-governmental organisations throughout the world will be significant.

The hon. Gentleman rightly refers to the latest World Bank report. It is not necessarily the case that the figures, which he correctly says will be difficult for the poorest countries to meet, will be realised. The greater flexibility that we are offering in debt relief, the chance to create the new trust fund and the greater effort that the Prime Minister is putting into providing more funds for Africa could come together to reduce the burden that countries are under in meeting debt relief.

I acknowledge the efforts of the previous Chancellor to move the debt relief policy forward, but when we started on debt relief in 1997 only one country was likely to get it; now 25 receive debt relief. When we said $100 billion could be relieved, people said that that was impossible, but $60 billion has been agreed. If conflict countries such as Sudan and the DRC can come into the debt relief process the figure would be $100 billion. I am optimistic that if we work together we will make progress on an agenda that is vital for dealing not just with poverty and poor economic prospects in such countries, but with ill health and illiteracy among millions of children.