HL Deb 24 March 1977 vol 381 cc696-715

6.7 p.m.

The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey)

My Lords, I beg to move that this Bill be now read a second time. This is a fairly, or perhaps very, technical Bill with a number of detailed provisions. The bulk of the changes proposed relate to increases in financial limits—changes which need to be made from time to time, given economic growth, growth in trade and in the size of payments in balances, and high rates of inflation. The institutions concerned are the International Monetary Fund, the Export Credits Guarantee Department, the Commonwealth Development Corporation and international and regional development institutions. But the measures proposed in this Bill are, in detail, technical and the House will wish me to give the Government view of the important problems and principles which can easily be hidden under the technicalities.

The theme which underlies this Bill is the promotion of international trade and international economic growth together with a more stable and balanced international economic order. Noble Lords will be aware, particularly, of the central role which the International Monetary Fund plays in this area. The IMF provisions of the Bill contain the legislative requirements in the United Kingdom of a number of changes which have been proposed to the IMF in order to enable the Fund to maintain its position at the centre of the international monetary system.

There are two main strands: first, the increase in IMF quotas; and, secondly, the amendments to the Articles of Agreement which have been the consequence of the intense discussions of international monetary reform that have taken place in recent years. The increase in our quota is the result of a general review of, and decision to increase, the Fund's resources. This review will increase the total of all member's quotas by one-third, taking the total to the staggering figure of 45 billion dollars. The background to the proposed increase was set out in Cmnd. 6704, which was published in January of this year. At the general level, the increase in quotas will enable the Fund to pursue more effectively its objective of promoting stable growth. Among the objectives of the Fund set out in the Articles is included the following: To give confidence to Members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity". The years since the oil crisis have seen a greater risk of resort to just such measures than in any other period since the war. The huge increase in oil revenues, together with the low capacity of many oil producing countries to I increase their imports at a sufficiently rapid rate, has meant that most developed and developing countries have been compelled to run exceptional deficits in their balance of payments. During the past three years, this Government and the Governments of other countries have been concerned to avoid the worst consequences of this new situation; namely, deliberate excessive deflation and restrictions on trade.

The IMF, too, has played an effective part in pursuit of the objective I quoted. It has contributed partly by acting as an effective forum for international discussions and partly also in more tangible ways. In saying that, I refer particularly to the institution of the oil facility, which operated during 1974 and 1975. During this time a total of very nearly 8 billion dollars was borrowed under the facility, of which getting on for 3 billion dollars was drawn by the non-oil developing countries. I would remind the House that the United Kingdom also benefited to the extent of 1,100 million dollars.

But the central facility of the Fund is, and should continue to be, the finance which is offered through drawings in the credit tranches which are related to members' quotas. Use of the credit tranches requires Fund surveillance of a member's policies, and there is no doubt that in present circumstances Fund involvement is generally beneficial. For the problem of oil producers' surpluses is likely to be a continuing one, and the counterpart deficits must be accepted by countries able to bear them. The increase in quotas will make a worthwhile contribution towards the financing of deficits. Noble Lords will need no reminding of the contribution which the IMF has made towards our own adjustment problems in recent years.

The opportunity of this increase in quotas has also been taken to adjust the relative size of quotas to take account of members' ability to contribute to the Fund, as well as to reflect increased needs. For quotas, as noble Lords will understand, also determine potential contribution as well as drawings. While the average increase in quotas is some 34 per cent., the share of the industrial countries has fallen to allow a doubling in the share of the major oil exporters as a group in the enlarged Fund. The collective share of all other developing countries has been maintained at its present level.

Now, my Lords, the other strand of the IMF provisions, and I refer to Clause 2 of the Bill, is the revision to the Fund's Articles of agreement. The importance of the amendments is more difficult to grasp in some ways than the increase in quotas, but it is probably more important for the longer term. Noble Lords will forgive me if I do not go over these in detail—the main changes are discussed in a second White Paper published in January of this year, Cmnd. 6705. Briefly, there are two main changes. The first is the removal of gold from its central position in the Fund Articles, and the adoption of the objective of gradually reducing its role in the international monetary system.

This change is the rational and logical consequence of the break in the link between the U.S. dollar and gold and the move to flexible exchange rates. With a price determined in the free market, gold could not be a stable denominator for exchange rates, and it has little relevance where most currencies are floating against each other. The continued use of gold as a principal reserve asset is, moreover, highly expensive in terms of resources. Noble Lords will be aware that the IMF has begun a programme to reduce its holdings of gold by one-third, in part by restoring gold to members, and in part by auctions in aid of a trust fund which will provide concessional resources to the developing countries. The second major area of reform is on exchange rate arrangements. Members will no longer be required to declare par values under the amended articles, but the Fund is given an enhanced role in overseeing the operation of exchange systems. Having described these arrangements, I should say that the amendments are perhaps not the complete overhaul of the international monetary system which was foreseen by some when the Committee of Twenty was set up in 1972. None the less, they are a worthwhile and significant step forward.

Progress continues to be made. For example, the Basle agreement on sterling balances earlier this year, by reducing the reserve currency role of sterling, will contribute to a more rational system. But other problems remain to be tackled. In particular, there is the question of the unequal and asymmetrical way in which the adjustment process works, and which results in more pressure being put on deficit than on surplus countries. This is a problem which much concerned Maynard Keynes and Harry White, who are properly described as the parents of the IMF, but it is particularly urgent in the present economic situation. We greatly hope that the IMF will tackle this problem and the problem of better co-ordination of floating exchange rates as it developes its new role of surveillance over exchange rate arrangements.

I have emphasised in what I have said the role of the IMF in promoting the growth of international trade. That leads me into a look at another aspect of the Bill. Not all countries are able to compete on equal terms for the advantages of trade, and here of course I refer to the developing countries. The present Bill provides for an increase in the borrowing limits of the Commonwealth Development Corporation, an organisation which makes a significant contribution—and has done for many years—to the needs of the developing countries. There is an increasing recognition of the interdependence between the developed and developing countries, and a general desire to avoid mutually damaging confrontation. Noble Lords are aware of the United Kingdom's general aid policy—in fact, it was debated here in February of last year—for increasing emphasis on the poorest countries and on rural development which improves the lot of the poorest people within those countries.

The Commonwealth Development Corporation follows a policy which accords with this, and increasingly places emphasis on projects in poorer countries and for natural resources development. It contributes in a wide variety of ways, by finance, and by management for economically worthwhile projects. It is able, by drawing on its experience, to put together package schemes for rural development. The Bill shows this, although there were failures in the early years; but the record since then has been good. Just one example of their activities is their recent contribution to the Kenya Tea Development Authority where the project is estimated to achieve a rate of return of 38 per cent. and gives employment to some 100,000 smallholders, supporting about 500,000 people.

My Lords, the Bill also provides for changes in the legislation relating to international and regional development institutions, and the range of contribution we might make to them. These are a major source of capital for developing countries. The World Bank group is perhaps the best known, but a very useful part is played in the regional development banks. The United Kingdom is well aware of the vital role which these institutions have had in helping the developing countries over the past few difficult years, and we shall do all we can to see that they can continue to play a full part. I should like to mention some of the steps that have recently been taken to ensure this, and then to look briefly to the future.

First, the World Bank itself, as your Lordships will know, the Bank lends at semi-commercial rates, recycling funds borrowed in the market. The scale of its lending has increased enormously over the past ten years, commitments rising from some 777 million dollars in 1967 to over 5 billion dollars in 1976. Along with this massive increase in scale has gone an increasing concentration on projects in the agricultural sector, reflecting the general recognition that this is indeed the crucial area. In order to back this rapid expansion, the Governments who stand behind the Bank have recently agreed in principle a Selective Capital Increase of 6.9 billion dollars. That has not involved the United Kingdom, because it was based on IMF quotas, and the United Kingdom's IMF quota has not been increased relative to the overall increase in quotas.

Secondly, I would refer to the International Development Association, which can be described as "the soft lending arm" of the World Bank. Your Lordships will have been pleased to see a recent report that negotiations were successfully concluded for the fifth replenishment of IDA, for a total of 7.6 billion dollars. This will more than maintain the real value of IDA's lending over the next three years; and we are pleased that some of the oil-rich countries have been able to contribute, although the vast bulk of the resources will come from the traditional donors. The United Kingdom's share, at 10.7 per cent. of the total, will be some 814 million dollars. We give IDA high priority in our limited aid resources because of its concentration on the poorest countries.

Thirdly, I would mention that an increase has been proposed in the capital of the international Finance Corporation —that is the part of the World Bank group which assists private sector projects in the developing countries—and we are considering the question of a contribution to that. So, looking into the future, we hope that agreement will soon be reached on a capital increase for the Asian Development Bank, more than doubling its capital and allowing a considerable increase in its lending. Apart from those particular matters, there is the question of a general capital increase for the World Bank. Discussions here are at a very early stage, but we shall play a full part in them.

Finally, I turn again within the context of the Bill to the subject of export credit. This Bill increases ECGD's sterling limit and sets up a separate limit against which ECGD's foreign currency liabilities will be counted. On export credit matters generally, it remains Government policy that the United Kingdom should play a full and active part in negotiations to rationalise and restrain competition over terms for export credit. We are continuing our efforts to avoid such competition escalating into any kind of mutually damaging and self-defeating export credit war. However, at the same time, we are determined that the whole package of facilities and support available from the ECGD should stand fair comparison with that available to exporters in our competitor countries. Any attempt by us unilaterally to restrict credit terms in one country or for our exports as a whole could only put our exporters at a competitive disadvantage and it is for this reason that we place so much importance on international discussion and agreement. This bore some fruit last week with the Government's decision to endorse international guidelines on export credit terms.

In the United Kingdom, Government support for export credit is provided through the Export Credit Guarantee Department. The Department will soon celebrate its sixtieth birthday and most exporters would agree that it plays and has played a vital role in our export effort. The figures speak for themselves, since ECGD now insures over 35 per cent. of British exports, and in the last financial year it covered exports valued at almost £8,500 million. Of this, about three-quarters was in the vital area of exports for cash and exports sold on short-credit terms which, of course, bring the greatest benefit to the balance-of-payments. Some of our exports, however, are sold on medium and long-term credit at fixed rates of interest. The Government re-finance a substantial amount of the credit advanced by the clearing banks on these terms.

Noble Lords will be aware that a number of changes to ECGD arrangements have been in preparation for some time. It was announced on 15th December last that it would be necessary to reduce expenditure on refinancing of export credit and that this will be partly achieved by the agreement by the clearing banks to provide more finance from their own resources. The Government would acknowledge that and say that we are most grateful to the clearing banks in this respect.

Savings on refinancing export credit will also be partly achieved by a switch to foreign currency financing for business, and that will be encouraged by a range of measures to be taken by ECGD, including the provision of improved support for contracts in foreign currency. Details of measures have been published both by Press Notice and by a Written Answer to a Parliamentary Question in the other place on 21st February 1977. For this reason, the Bill provides for a separate limit on foreign currency business undertaken by ECGD. Banks and exporters are already joining in active efforts to bring about the switch to foreign currency financing of long-term credit business. The Bill thus provides the Export Credit Guarantee Department with the means of providing a flexible and positive response to the changing needs of our exporters. I believe all noble Lords will welcome that.

In conclusion, may I say that the wide-ranging provisions of this Bill touch on principles and institutions which are important to the stable and equitable growth of the world economy as well as to more parochial interests and I commend it, on that basis to your Lordships.

Moved, That the Bill be now read 2ª.—(Lord McCluskey.)

6.27 p.m.

Lord BELSTEAD

My Lords, as the noble and learned Lord, Lord McCluskey, has said, this Bill is really divided into three parts—the Export Credit Guarantee Department, the IMF and the Commonwealth Development Corporation. I should like to say at once that I support the provisions in the Bill for increasing the ECGD's limit for fresh facilities for export contracts in foreign currencies.

It is remarkable how rapidly the Department has increased the volume of its business. I remember that two years ago there was a debate in this House on the Export Guarantees Bill 1975, which then increased the Department's limit. I remember that on that occasion the Government forecast that the ceiling which was fixed in that Bill would probably last for a minimum of five years. The Department's limit is to be raised again.

I see from the Explanatory and Financial Memorandum to the Bill that the introduction of foreign currency commitments is expected to lead to an increase of about 40 in the staff of the ECGD. Then the Memorandum goes on to say: The expected increase in the volume of other commitments is also likely to lead to some increase in staff. I cannot help wondering whether the really enormous increase in the volume of ECGD's business alone will not lead to fairly substantial increases in staff. If that is necessary, I make no complaint whatsoever about it, because I think the Department has every reason to be proud of the growth of its operations in recent years.

However, rather more generally, I must confess to some uneasiness about the terms on which we offer credit abroad. The Russian deal offered by the former Prime Minister has been a worrying example, I think, just over two years ago, because on that occasion massive credit was offered to the Soviet Union at an undisclosed rate of interest which the Soviet Union would have been able to use while at the same time consistently arming itself to threaten our own existence. I have seen quoted—I believe it was in the Sunday Telegraph some six weeks ago—a figure of £18 billion of net indebtedness owed by the Soviet Union alone to countries of the West. Perhaps the noble and learned Lord could confirm whether that figure is in any way accurate. But for us to be offering credit on very favourable terms to the Soviet Union, and indeed to the Iron Curtain countries as a whole, cannot be desirable. I was very glad to hear the noble and learned Lord state in his speech the Government's determination to lend their weight to preventing a continuation of an international credit war or race. I was also glad to hear his reference to the EEC's international guidelines agreement, which was concluded only last week.

The Bill, as it relates to the IMF, is complicated and I should like to concentrate on the simple issue of our drawing rights from the Fund. We have, in recent months, seen a temporary increase in the percentage of our quota which we can borrow. As I understand it, this stood at 125 per cent., and we have now, in fact, borrowed 145 per cent. of our quota with the IMF. I shall not go into the rights and wrongs of this. From the Government Front Bench, the noble and learned Lord had every right to say that it has been a very important drawing right in keeping the finances of this country going, except that I am bound to observe that, apart from Italy, we are the only developed nation to have been incapable of dealing with the problems presented by the oil crisis of the last three years. I bear in mind that the noble and learned Lord made the point that countries have had to run very large deficits, but we are alone in our scale of borrowing.

What I find difficult to understand, and I should like the assistance of the noble and learned Lord, are two points. First, as I understand it, the new quota for us in 1978 will be raised. I suppose, therefore, that in the interim—and it is a very short interim, of course—as we begin to repay our loans (if indeed that is what we are going to do) we shall have 125 per cent. as our quota borrowing target, until this is adjusted a year from now. But I must confess that I do not understand how this will work. I gave the noble and earned Lord notice of the question which I have asked, and if he could give me a little illustration on this point I should be grateful.

It appears to me that the matter is further complicated by the fact that, although under the Bill the Government may by order increase the limit of our quota to the IMF—in other words, the Government must come to Parliament in order to do this—there is no corresponding duty laid on the Government to obtain Parliamentary approval to further massive borrowings from the International Monetary Fund. I am not making a political point about this, because this has been the case in the past. But it seems to me that these massive borrowings which we are making are a clear example of control of the Legislature by the Executive, and I must say that on that aspect I do not find the Bill as desirable as it otherwise might be.

Also, it is salutary to reflect that, side by side with these misgivings about the country borrowing from the IMF in order to support a way of life which, perhaps, we should not he supporting, there is the wholly admirable intention of Clause 5, which raises the limits for borrowing by, and advances to, the Commonwealth Development Corporation. The policy of the CDC has always seemed to me to be as soundly based as anyone could wish for. It is CDC policy not only that its operations should be economically beneficial to the countries in which it is operating, but also that CDC projects should bring a reasonable financial rate of return.

When Cmnd. 6544, entitled The British Aid Programme in 1975 was published, the Government at that time expressed their support for projects in poorer countries covering renewable natural resources; in other words, agriculture, forestry and fisheries. The noble and learned Lord referred in his speech to the Kenya Tea Development Authority and, indeed, only 18 months ago I had the good fortune to be able to see on the ground a little of the work which is going on under that Authority. These projects can, of course, be hazardous. Not only do they depend upon accurate assessments of geographical and weather conditions, but they also have to be acceptable to people living in countries where, very often, agricultural land is the prime source of wealth and therefore in great demand, and not always easily let out to people who like to start splendid projects which, perhaps, local people do not think are quite as splendid as other people might believe.

I have always taken the view—and I listened very carefully to what the noble and learned Lord said about the World Bank—that CDC supported projects are very much preferable to World Bank supported projects, because I think I am right in saying that the CDC usually acts as a principal in its projects. It has therefore built up over the years, and is continuing to build up, a tremendous measure of expertise and practical administrative ability. I may or may not be right in making that comparison, but, none the less, I think that the way in which the CDC operates is very desirable from that point of view.

I should be very interested to hear from the Government whether the new policy for the aid programme, which I understand is to be reviewed in 1977, is, so far as can be seen at the moment, a success. The noble and learned Lord gave us a wealth of detail, but what I am not quite certain about is whether this new emphasis on agricultural, forestry and fishery projects in the poorer countries is, so far as can be seen at the moment, a social, commercial and financial success. I support the main purpose of this Bill, and agree that it should now be read a second time.

6.36 p.m.

Lord THURLOW

My Lords, I do not propose to get involved in some of the more technical aspects of this Bill, but should like to make two points which I hope will be regarded by the noble and learned Lord as constructive. There seems to me, in the light of my own experience in relation to smaller dependent territories, to be a gap in the mechanisms by which we seek to help the development of the smallest of our dependent territories. As has been said, the CDC has not just a good, but an excellent record. It has built up a sensitive and effective administration to apply prudent and highly beneficial principles, and it has experienced and able staff who work very closely with the many foreign and Commonwealth Governments in different parts of the world. Similarly, the Department of Overseas Development has built up a remarkably effective apparatus to work with other Governments all over the world, on a very much wider spectrum of functions than the CDC.

But in spite of the quality of our agencies, there have for many years been great difficulties about helping to provide capital for some of the small-scale commercial development projects that some very small island territories require for their development. The sums of capital required are often tiny in relation to the general aid picture, but they do not meet the criterion of a reasonable commercial return, which the CDC has very properly drawn up, and as commercial ventures it is difficult to fit them into the framework of direct overseas aid.

Perhaps I may use the Turks and Caicos Islands as an illustration. I believe that the Minister herself has visited these lovely islands, and I strongly recommend your Lordships to take every possible opportunity to do the same. When I went there on one of my earliest visits as Governor, from the neighbouring territory for which I was responsible, I was able to say, to the surprise of the inhabitants, that I was probably the only Governor of those islands who could, according to reports, claim that his grandmother had been born on one of their beaches.

For 10 years and more, these territories have struggled with us to find ways of assisting their very modest development programmes. Together we have been able to make very little progress. They need, for instance, improved communications as a key to tourism and their own various construction industries in the different Islands. These industries cannot be expected, however, to yield an ordinary commercial profit, so the CDC has been unable to take up this kind of project. It is difficult to fit such projects into the normal rules of direct capital aid. As it is, we grant-aid this territory for their ordinary budget; but it is, I suggest, unacceptable to leave matters at that.

Can we not modify the framework to enable some capital aid for commercial ventures in very small territories to be made available on special terms? As I have suggested, the sums involved are too small to affect the general aid picture. The inability of the British people to help is quite incomprehensible to the inhabitants of these territories when they see the actual sums involved. Luckily, the Minister has available, I understand, a ready-made instrument to tackle such problems, in the form of a very effective joint working party of the CDC and the Department of Overseas Development.

May I therefore ask the noble and learned Lord to bring the issue to the attention of the Minister and suggest that the joint Working Party should be asked to work out proposals to enable help to be given as a special case to the commercial development projects in these smaller Island territories. For instance, a line could perhaps be drawn between territories on the basis of size of population, so that steps taken in this kind of context would not create embarrassing territory precedents in larger territories. Perhaps the Department of Overseas Development could establish a special fund for smaller territories and make grants from it to the CDC so that the latter could assume responsibility for the administration of the projects without prejudicing their own valid rules for a normal, reasonable, commercial return.

My second point relates to the education of public opinion on aid programmes and strategy. The noble and learned Lord has referred to the very great increase in general international aid. It is a truism that in the next five to 10 years the developed countries must do far more to help the less developed countries to help themselves, or else the scale of human suffering by famine, plague and otherwise is inevitably going to increase far beyond the scope of our present imagining. After all, the amount of food production in the world—as the noble and learned Lord said, this is the most crucial of all the areas—must more than double in the next 15 to 20 years. Apart from finance, this is an appalling challenge to all technical and administrative resources.

It is quite obvious that, as a matter of practical politics, Her Majesty's Government cannot be expected in the immediate future to increase the aid Vote by any spectacular amount, though I hope that some increase may be possible before too long. However, it is possible—indeed, in terms of the current price of North Sea oil and the world price of oil it is quite probable—that in the next three to five years this country will swing over to a very large balance of payments surplus. Some of the optimists have predicted a swing round, first to a balance in three to four years and then to a positive surplus as large, within 10 years, as our negative balance is now. There is going to be, in any case, a complete revolution in terms of our foreign exchange problems. Obviously there are many uncertainties and preconditions, including, as a first step, the need for us to improve our own productivity. However, we are undoubtedly going to have a very large external balance.

At present, all the emphasis in Government education of public opinion must be on the need to cut back. We are in a dark phase, but the sun is beginning to rise over the horizon. We can at least look forward to an era when we not only can but must find new means of dealing with a large external surplus. At this point we can, and should, greatly increase our own overseas aid and give a lead in the EEC, and internationally, to more ambitious aid strategies. However, the Government's hands will be tied unless public opinion has been educated to accept the change, and this will not be easy. It has taken years to get the public to realise that we are poor and must cut back, and in the process overseas aid is looked at rather grudgingly. After all, we have to borrow the money that we give away. How are we to expect the man in the street to respond quickly to proposals to allocate vastly greater sums to overseas aid?

Therefore I ask the noble and learned Lord to suggest to the Minister that as soon as possible she should embark on a long-term, carefully drawn up informaton campaign designed to induce the public to realise that in the not too distant future we shall be able to adopt an entirely new appoach to the scale of our contributions to international aid. I hope that the full resources of the Government's information machinery will be involved so that when the time comes, which will not be all that far off in terms of trends of public opinion, the Government of the day may not find themselves confronted by an inward-looking reluctance to support a possible big increase. I think that we could find ourselves in real difficulty in effecting this kind of change in public understanding. Therefore I hope that the Government will bring their mind to bear on the problem so that when the time comes we are not caught with our pants down.

6.49 p.m.

Lord RITCHIE-CALDER

My Lords, I did not intend to intervene and I apologise for not having put down my name. However, I want to follow the noble Lord, Lord Thurlow, and emphasise the last point which he made. The whole story of the last 25 to 30 years of so-called aid has been completely misunderstood. I am sorry to be arrogant, but I speak with a great deal of authority on this subject. The fact is that we have treated aid as though it were alms-giving. It is not alms-giving. It is not a question of just giving and helping out of charity. The point is that this is a real and a meaningful investment and that what we have failed to do over the last 30 years we must redress now.

We must make people in this country understand that what we are doing is not putting a penny in the blind man's tin, but actually and in definite reality investing in the future of this country. I am not speaking about tied aid, or anything like that, but we have no future as a country unless we realise the meaningfulness of the developing world in which we have to invest. We can call it anything we like—grants in aid, private investment; whatever we call it, it is something which is creating a meaningful and significant development for this country and also something which the world cannot do without.

6.51 p.m.

Lord McCLUSKEY

My Lords, I should like to respond first to the matters which have been raised by the noble Lord, Lord Thurlow, and supported by my noble friend Lord Ritchie-Calder. First, I am sure that the approach which they both supported is right; that we should not be going as alms givers, and indeed I am happy to see in one of the documents which was published in 1975—the report of the Development Assistance Committee—that the official reports are beginning to use language which recognises that one is not handing out alms but in fact engaging in technical co-operation with Governments and bodies in the developing countries.

As to educating public opinion, the Department of Overseas Development has quite recently set aside a substantial fund, £150,000, to assist voluntary organisations to engage in development education—that is to say, education of public opinion in this country—and that was done with the very purpose that was so eloquently supported by the noble Lord, Lord Thurlow. So that when the time comes—and one prays that it may be soon—that resources are more readily available, then public opinion can indeed the more readily accept a Government move towards making these resources available in larger measure to the developing countries.

I will certainly bring to the attention of my right honourable friend the specific matters mentioned by the noble Lord, Lord Thurlow. Turning to the point with which he began, we are aware of his close concern for the little islands; he was formerly a Governor of the Bahamas, as your Lordships will no doubt know. The Government are wholly in sympathy with his approach. However, the Commonwealth Development Corporation has worked very successfully after a somewhat hesitant beginning some years ago and is expert in identifying projects which are viable, and these are the projects which the Commonwealth Development Corporation seeks out and then supports. Indeed, the Corporation in fact sent teams out to the area of which the noble Lord spoke. The problem there has been that the projects which are viable are extremely difficult to find and, unless there is a change in the framework within which CDC operates, it will not be easy to provide the kind of support of which the noble Lord spoke. However, what he has said will be taken into account in considering the whole matter.

I turn now to the points made by the noble Lord, Lord Belstead. As to staffing, it is thought that the Department in fact has sufficient staff, with relatively modest increases, to handle the increase in business. There have in fact been some increases, and there are currently increases in staff, but partly because the techniques which will be employed, for example, in relation to foreign currency financing are similar to the techniques which have been developed over the years by the Department, it is thought that not too many extra staff will be required, although this is a new departure. Also it is thought that other measures which are taking place, for example the installation and use of a computer at Cardiff, will tend to reduce the requirement for increases in staff, and that will help to keep down the numbers. So while we welcome the noble Lord's tributes to the efficiency of the Department we hope that the increase in numbers will he kept within quite modest limits.

The noble Lord did not surprise me when he spoke of the particular matter of the credit deal with the Soviet Union. As he said, it is now something over two years old. He asked me specifically about the figure which appeared in the Sunday Telegraph, saying that at the present time the net indebtedness of the Soviet Union was some 18 billion dollars. I do not know the exact basis for that figure but in a reply which the Financial Secretary gave to a Question in another place on 10th March, it was then said that it was believed that the total convertible currency indebtedness of the USSR at the end of 1976 was estimated to be in the region of 15 to 16 billion US dollars. So, given the passage of time, it is not too far away from the mark.

On the general matter of his concern about the arrangements with the Soviet Union and with the Eastern countries, further commitments with all Eastern countries are taken on after an assessment has been made of that country's ability to service its debts. In the case of the Eastern countries it is not considered that their present levels of borrowing from Western countries are likely to present insupportable repayment problems, and the Euro-currency market seems to share this view. Indeed, their past repayment record has been impeccable, so on strict commercial and underwriting grounds the extension of further credit is justified. But I should like to reiterate something I said when I made my first speech, that a careful watch has been kept, and will continue to be kept, on the developing situation, and that will include close consultation and co-operation with our Western colleagues in order to avoid any kind of cut-throat credit war. So the Government are well aware of the problem and consultations will proceed. There is also some evidence that the Eastern European countries themselves are taking steps to reduce the level of indebtedness in their plans for the next five years.

I was then asked—and indeed the noble Lord, Lord Belstead, gave me notice of—a question in relation to the IMF. I think he did that in the belief that it would help me to answer it. I hope that is correct and I hope the answer I give him will help him to understand the matter because it is indeed difficult. The position as I understand it is this: the first 25 per cent. —the first credit tranche on top of 100 per cent.—is granted without undue difficulty. A letter of application has to be signed. Extra tranches are granted on a letter of intent. We had examples of such letters in 1967, 1969 and December of 1976. In December 1975 we obtained agreement to draw the first 25 per cent. and we drew it in May of 1976. At about the same time we drew 1,000 million special drawing rights under the oil facility. In Jamaica in January 1976 it was agreed that all quotas would be increased by an average of 34 per cent., and ad interim all credit tranches were increased by 45 per cent.

In December we arranged that the three remaining credit tranches could be drawn, plus the allowed additional 45 per cent., plus the temporary 45 per cent. increase in the first credit tranche. That meant that the total which we could draw, leaving aside the oil facility, was 145 per cent. of our quota. Although in 1978 the new arrangements about which we spoke are to come into effect, in practice our rights in relation to that 145 per cent. are determined by the old quotas, by the arrangements I have referred to and by the Jamaica interim agreement. In other words, our rights are not going to be diminished by the implementation of the agreement.

The other point in relation to that which the noble Lord mentioned was that there was no duty to obtain Parliamentary approval. Of course, one agrees that that is so, but I think in substance there is very little in that point, because he would surely acknowledge that no Government could go to the International Monetary Fund or any other body to obtain any substantial loan without that matter falling under the scrutiny of Parliament. As we have seen quite recently, even if the matter does not come before Parliament on a formal Motion, ways and means can be found—for example, by refusing to adjourn the House—to put the matter to a vote.

The noble Lord mentioned that the Commonwealth Development Corporation is soundly based, and referred to it looking for a reasonable return. I think that is not quite accurate. The aim of the body is to break even, taking one year with another. He asked me specifically whether the new emphasis about which I spoke and which had been referred to before was a success. I think I can answer that. It is really too early to say whether new projects will be successful, but the CDC has considerable experience in assessing such projects and it applies the the same criteria to these projects as it has applied to others. The CDC is, therefore, confident of their success.

The noble Lord also mentioned the role of the World Bank and compared and contrasted that with the CDC. I will not follow him in that endeavour, because they are doing different things, and I think it would perhaps be unfortunate if I, on behalf of the Government, sought to draw invidious comparisons between the two. I would say that they are both doing an excellent service within the field that they have undertaken, and I would not want to detract from the success of either. My Lords, I think I have replied to the points, and I can conclude my speech on that note.

On Question, Bill read 2ª; Committee negatived.