HL Deb 27 April 1983 vol 441 cc924-32

2.56 p.m.

Lord Oram rose to call attention to the second report of the Brandt Commission, Common Crisis; and to move for Papers.

The noble Lord said: My Lords, this second report of the Brandt Commission, to which I wish to call your Lordships' attention, does not repeat the first report of three years ago, which, as your Lordships will recall, was a challenging and comprehensive review of the relationships between developed and developing countries. Instead the commission briefly recalls and endorses what it said three years ago, but then moves to the present situation and warns us of the impending crisis in the world economy. It summarises that warning, if I may quote, on page 12 of its report in these terms: This is already a crisis of contraction: contraction of production, of employment, of trade, of credit, of aid, of economic growth … If each country retreats inwards out of an impulse to self-preservation we shall end up hurting each other and worsening both our collective and individual condition … There is not much more time to take the policy measures necessary to avert a major world depression".

Having summarised the threat of depression and crisis, the report then puts forward an emergency programme calling urgently for interim action to ward off the economic and social collapse that threatens the world. This debate comes, I think, appropriately midway between the debate on international finance which was initiated by the noble Lord, Lord Soames, on 23rd March—and which carried much the same message from the noble Lord as the Brandt Commission conveys—and the debate which I am glad to see the noble Lord, Lord Seebohm, proposes to initiate on world hunger on 18th May. This debate is timely also because it follows a full-scale debate on the Brandt Report in another place just 10 days ago, so that we have had the advantage of reading the Government's attitude as expressed by the Foreign Secretary, and also, of course, the views of Mr. Edward Heath, who was a member of the Brandt Commission.

When the first Brandt Report was published, the Government issued this White Paper in response to it. I must say that this document was one of the most negative, depressing, cold and heartless documents that it has been my misfortune to read. Your Lordships may recall that that White Paper and the Government's attitude provoked a mass lobby of historic proportions. I say "historic proportions" because that lobby, led by churchmen and churchwomen from all over the country, brought to Parliament many more protesters against Government policy than I have ever seen in these buildings in my 35 years at Westminster in one capacity or another. That was the degree of interest and the degree of protest that was provoked on that occasion.

But there is a contrast this time. Perhaps it is the impending general election which has induced the Government this time to try not to alienate that section of public opinion, because on this occasion we read of welcoming phrases from the Foreign Office. In the other place we had a friendly speech from the Foreign Secretary, Mr. Pym. He promised us another White Paper and it will indeed be interesting to compare this new White Paper with the one of three years ago. If I may make a forecast, it is that the White Paper will be like Mr. Pym's speech—it will be bland, it will be complacent and it will be completely inadequate. The keynote of this document, called Common Crisis, is its sense of immediacy and urgency; but the Government's response is one of self-satisfaction and complacency.

I cannot of course in a few minutes take up the Government's attitude to all the 59 Brandt proposals. I therefore propose to deal with a number of them under five headings. The first is the question of economic expansion. The second is the need to increase the resources of the IMF and of the World Bank. The third is the volume of bilateral aid to developing countries; and the fourth of my headings concerns commodities and the fluctuations in their prices. Lastly, I should like to deal with the machinery of consultation and negotiation which is necessary if the Brandt proposals are to be properly implemented.

First, then, on the general economic policy. The Brandt Commission is openly expansionist in its economic philosophy. But the British Government, as we know only too well, still takes the opposite view, despite their protestations that they welcome Brandt. I believe that one day the Government will have to face the fact that if they genuinely embrace Brandt, the inevitable consequence of that attitude is a radical change in their economic policies. They cannot have it both ways.

Secondly, I refer to the international resources of the IMF and other institutions. What the Foreign Secretary complacently said 10 days ago was: In fact, much progress has already been achieved … The Government will certainly approach the subject with an open mind … On the whole, we think that the system has worked well and the judgments made have been broadly correct".—[Official Report, Commons, 18/4/83; cols. 34–35.] He was followed by the Minister for Overseas Development, Mr. Raison, who also said that his mind was wide open on the question of IMF quotas.

But the Brandt Commission recommended a 100 per cent. increase in IMF quotas. Britain has gone along with a mere 50 per cent. increase. Therefore, I suggest that in this respect the British Government so far has been literally half-hearted or, as they say, open-minded. In a critical situation—and that is what we are in—we do not want Ministers with persistently open minds. We want Ministers who can make up their minds. To use a phrase that I think I have seen elsewhere, what we need in this situation is "the resolute approach".

My third heading is on the question of the volume of bilateral aid. We are forever being told that the Government are providing £1,000 million, and that sounds a great sum. But if one examines the record, as we have from time to time during Question Time, one finds that in real terms the Labour Government increased aid in every year, bar one, whereas the Conservative Government have so far decreased aid in every year, bar none. Only two days ago, in a Written Answer in another place, the Minister for Overseas Development had to admit that 1982 was still worse and that the figure was down to .38 per cent. of GNP compared with .44 per cent. in the previous year. So much for the comparative record on the provision of bilateral aid.

Fourthly, what about commodities? Depressed commodity prices are one of the third world's most serious problems. But on this crucial subject all that Mr. Pym could say by way of self-justification was that we have joined the Common Fund and that the Government hope that the EEC will join the Sugar Agreement. Surely we in the United Kingdom, with London as one of the most powerful world centres of commodity markets and with all our experience and authority in commodity trade, are in a position and are due to take initiatives and to take a lead in this matter. We should now be advocating schemes which improve upon and greatly extend the STABEX scheme under the Lomé Convention. I know that that scheme is open to some criticism but at least it compensates signatory members who suffer from depressed commodity prices. My point is that I see no signs of drive or leadership in this area, and I only wish that I could see them.

Fifthly and lastly, we come to what I have referred to as the negotiating mechanism for implementing the Brandt proposals. The first Brandt Report suggested a summit conference. As we know, that summit conference was staged at Cancun, and what a disaster it was! We had just two days of well-publicised discussion with set speeches. There was no real negotiation and no real results. There was, as I say, publicity, but no agreement for action. From the point of view of this country, unfortunately, our representative, the Prime Minister, was seen to be in a close partnership with President Reagan as the hard-line minority resisting even the modest action that was proposed at that conference.

The Brandt Commission this time, in this second report, seems to have recognised the weakness of its proposed summitry proposals which led nowhere. It now suggests—and I welcome the suggestion—that if another such conference is called there should be much more detailed preparation and that there should beforehand and at the conference be much more down-to-earth negotation. But, in my view, it is not the nature of the machinery which counts in the long run. It is the will for action: the determination to achieve results. It was that which was lacking at Cancun. Our Government must take a major part of the blame for that failure, because I suggest that from what I have already said it is clear that in these matters the Government obviously lack the will.

In conclusion, I remind your Lordships that the Brandt Commission comprised people of many and varied political views. There were Socialists like Herr Brandt of Germany, Mr. Amir Jamal of Tanzania and Mr. Olaf Palme, the Prime Minister of Sweden. On the Commission there were also Conservatives like our own Mr. Heath. But, despite their differences of political attitude, they reached agreed conclusions both in the first report and in this second report. I suggest that what the world desperately needs is that kind of agreement on world affairs between people of different political persuasions. What we need is a progressive approach to world problems. We need to be outward and forward-looking and not as we are at the moment, inward-looking, monetarist and narrow.

I am conscious, as I hope your Lordships are, that an opportunity will soon be presenting itself on the world stage for some world leader to give a lead. I refer to Williamsburg. At the Williamsburg summit it will be again the Prime Minister who will be representing the United Kingdom. I suggest that there at Williamsburg is for her a supreme opportunity to grasp this nettle of the common crisis. I would echo Mr. Heath's proposal that Britain should put on the table at Williamsburg this emergency programme proposed by the Brandt Commission. I could only wish that my country, the United Kingdom, were to be represented at that vital conference by a statesman big enough to meet that enormous challenge. My Lords, I beg to move for Papers.

3.14 p.m.

Lord Banks

My Lords, I should like to thank the noble Lord, Lord Oram, for raising this important matter this afternoon and for doing so in such a comprehensive manner. We on these Benches warmly welcome the second report of the Brandt Commission and give general support to its principal recommendations. We see that report as a warning cry which cannot be ignored and as an emergency programme which ought to be considered with urgency.

There are, broadly speaking, two schools of thought which tend to dominate discussion of North-South relations. One I would call the school of global Keynesianism, and it is that which has to a large extent inspired the two Brandt Reports. Supporters of that particular point of view—and we on these Benches would be among them—see the need for a transfer of resources from North to South. We see the need to increase liquidity in the world financial system, to increase Government aid to third world countries, to stabilise commodity prices, to make some reform of the international financial institutions and also in many cases to ease the conditions of loans to the third world.

Supporters of the other school of thought—for simplicity I would call that the monetarist school—consider that the transfer of resources and an increase in liquidity would simply cause inflation and ought to be avoided. They believe that world recovery will be spontaneous and does not require any governmental stimulus. They rely almost entirely on market forces. They think that low commodity prices are advantageous since they will help the developing countries to sell their exports. They do not want to make any alteration to the conditions which are made as far as loans to third world countries are concerned. The more extreme supporters of this point of view would think that governmental aid was of no use at all.

The monetarist school accuse the global Keynesians of pursuing Socialist and inflationary policies. What Socialism means today is difficult to define. It can mean anything from Communism to social reform. Of course there is a sense in which we are all Socialists now—as a Liberal Chancellor of the Exchequer said some 90 years ago. But if Socialism is taken to mean outright hostility to market forces, hostility to the mixed economy and a preference on every occassion for state action, then it is extraordinary that the leading exponent of Brandt policies in the United Kingdom, as the noble Lord, Lord Oram, made clear, is Mr. Edward Heath, a Member of the Commission, a former Conservative Prime Minister, and one who, as a Conservative Cabinet Minister, abolished retail price maintenance. The fact that he was able to distinguish the unacceptable face of capitalism from the acceptable did not make him a Socialist.

As to whether Brandt II, the report, Common Crisis, which we are discussing, is inflationary, Mr. Heath himself has argued with some force that when world reserves have fallen in a short period of time by 200 billion dollars, and those of the developing countries by 85 billion dollars, then the 50 billion dollar special drawing rights which are proposed by Brandt can scarcely be considered to be inflationary.

There are these two schools of thought. I have made it clear where we on these Benches stand in relation to them. But the question I want to ask is: where do the British Government stand in this clash of arguments? To some extent this question has already been raised in the comments of the noble Lord, Lord Oram. After the publication of the first Brandt Report and the reaction of the British Government at that time, I should have said that they stood firmly with the monetarists. After all, the Government have followed a deflationary policy at home. They have certainly resisted moves to reflate the European or world economies. The report, Common Crisis, emphasises the ill-effects on developing countries of deflationary policies, including high interest rates and states how these policies pursued in the developed countries have adversely affected the developing countries.

However, the Government's welcome for the second Brandt Report has been much warmer. As the noble Lord, Lord Oram, said, one Common Crisis recommendation is for an increase of 100 per cent. in IMF quotas. As the noble Lord made clear, the Government have not gone as far as that, but the Chancellor of the Exchequer presided over the meeting at which it was decided to increase the quotas by nearly 50 per cent., and that has led the Chancellor to be criticised by some for being a monetarist at home and a Keynesian abroad.

Another Brandt recommendation is that there should be a major new allocation of special drawing rights, distributed on a basis which takes into account the particular needs of developing countries in deficit. The Foreign Secretary has indicated that the Government have an open mind on that. From our point of view on these Benches, it would have been better had he made up his mind on it and in favour of it; but at any rate he has an open mind and is agreeable that these matters should be discussed in the autumn. However, the delay is alarming. Surely it is possible to bring forward the discussions and consider the matter now as one of urgency.

The Common Crisis speaks of the need for temporary arrangements to overcome funding problems for the sixth replenishment of the International Development Association—the soft loan arm of the World Bank—and the need also to proceed to consider the seventh replenishment. As Mr. Pym has made clear, the Government have urged the United States to complete its contribution to the sixth replenishment.

The report Common Crisis calls for the ratification of the Common Fund for Commodities. The Government have ratified, and have urged others to do so. But what a lengthy, drawn-out process is the establishment of the Common Fund! The Common Crisis calls for Government aid to be raised to 0.7 per cent. of gross national product in five years. The Government accept the target, but not the timetable. They have no commitment as to when they will achieve it, or hope to achieve it.Common Crisis urges a relaxation of the conditions of loans to the third world, but if what we read in the papers this morning is correct, the Government are clearly opposed to that and still believe that policies of considerable austerity must be imposed on borrowers.

So looking overall at the Government's record, it is clear that they are not opposing the Brandt II Report root and branch. They are agreeing to some of the proposals. There is at least a partial acceptance of Brandt. The Government are betwixt and between. But my fears are two-fold, and to a considerable extent they correspond with fears expressed by the noble Lord, Lord Oram. My first fear is that the reaction of the Government, and indeed of the Governments of the countries of the North (if I may call them that) will be a case of too little, too late. The 50 per cent., instead of 100 per cent., increase in IMF quotas, the delay over dealing with an increase in special drawing rights, and the rigidity over conditionality, suggest that what I fear may well be the case.

My second fear is that which was expressed by the noble Lord, Lord Oram: that there will not be the political will to get things done. There will be an acceptance, in part, of the second Brandt Report, but there will not be sufficient enthusiasm for it in order to take a crusading position at Williamsburg, or in UNCTAD VI, when it is held in June.

Common Crisis says that there are far greater dangers today than there were three years ago. I wonder whether the Government would agree that although some indications of a slight recovery in some Western countries are encouraging, nevertheless the problems that we are discussing today remain a serious threat. Do the Government agree that there is a crisis of the magnitude described in Common Crisis? If so, does their response, and that of the North generally, match up to the challenge and to the emergency? That, I believe, is the central issue that is before the House today.

3.25 p.m.

The Lord Bishop of Hereford

My Lords, the Churches are grateful to the noble Lord, Lord Oram, for this debate because it will underline the crisis which exists and to which the publication Common Crisis draws attention. Some of your Lordships may remember that on 15th January a front page headline in The Times read: Parliament urged to act on jungle of commodities market". That referred not to a quotation from the Brandt Commission's memorandum, but to a statement made by a judge at the Central Criminal Court when acquitting a man of fraud. The judge said that there was no Government body or code of ethics to protect clients; nor was there any restriction on premiums charged to clients. He continued: The trouble is that the world of commodity dealing is a jungle. It seems to me to be a most perilous state of affairs, which merits attention by Parliament. Whether legislation is required, it is not for me to say, but I hope my words may reach beyond the walls of this court". The first point that the Churches would wish to make in today's debate is that there should be such a code of ethics to establish control of the London markets in commodities. This is one of the major pleas of the Brandt Commission, and it appears on page 105 of its second publication, where it is stated: Solutions have to be found urgently to the severe problems caused by the continuing slump in primary prices if the deprivation and hardship already experienced by poor countries is not to be exacerbated further.". On the previous page we are told that the price of raw sugar fell by 78 per cent. in a two-year period ending in June last year; rubber fell by 37 per cent., and copper by 35 per cent.

On Easter Day consideration was given in the "Food Programme" on Radio 4 to the production, marketing and selling of cocoa for Easter eggs. Dealers from 30 countries operate in the London cocoa markets. Ghana, Nigeria, and the Ivory Coast have a combined international debt of over 20 billion dollars. These countries depend substantially upon their export earnings from cocoa for their balance of payments. Yet as the judge to whom I have already referred pointed out in the Central Criminal Court in London, Small investors had been charged enormous hidden premiums on their investments in cocoa and other commodities.". He said further that: there is no code to sell at the best price, to reveal commissions charged, or to reveal true market prices". The same is true of the coffee market. In his book, Human Rights Begin with Breakfast, John Madeley, the journalist, describes how one speculator on the coffee market is thought to have made a profit of £18 million. The people who produce the coffee to make possible such speculation are lucky if they earn £200 a year. John Madeley concludes: An improvement in the way that commodities are traded in international markets could probably do more to promote economic rights in developing countries than any other single measure". The Churches would urge, as a first step, the setting up of just such a code of conduct for the London commodity markets.

The director of Christian Aid has estimated that in the last five years, 500 billion dollars has actually been transferred from the countries producing primary products—which include Canada—to the developed industrial countries, through the deterioration in the terms of trade. No wonder there is acute and growing poverty in all parts of the world. It is trade and reform of its structures, not aid, that remains the primary focus of the concern of the Brandt Commission and of its second publication.

But, of course, the theme of the Brandt Commission's message is that the world is facing a financial crisis, and to alleviate that immediate crisis, aid is vital. The visit of the President of the World Bank to see the Prime Minister in London this month drew attention to the crisis facing the funds of International Development Assistance—IDA as it is commonly known—which is the arm of the World Bank that provides long-term loans at concessional rates of interest to the poorest countries. In its publication we read that, IDA projects have a weighted average rate of return of 21 per cent., excellent by any standards". Yet our partner across the Atlantic is failing to meet its commitment to the existing replenishment of its funds and the prospects for the seventh replenishment next summer are somewhat grim.

In addition to the plea that there should be a code of ethics to establish control of the London markets in commodities, the Churches would want to make three observations. First, as Common Crisis points out, concessional funding from multilateral aid agencies like IDA is essential for programme aid to rural agricultural development schemes. Malawi, Kenya and Zambia have drawn up national food strategies. It is crucial that they have access to funds to finance them if the face of famine is not to threaten the whole of sub-Saharan Africa.

Secondly, as the Berg Report on that region made clear last summer, development is chiefly related to the exploding rates of population growth. In sub-Saharan Africa, six children are at present being born to every fertile woman. As a result of this population growth and other factors, every person now living in the region is eating at least 10 per cent. less food than was available to them in 1970. Aid is crucial if the population explosion is to be restrained by the end of this century.

Thirdly, aid, and particularly low interest, long-term, official multilateral aid, is related to the problem of debt. According to page 45 of the commission's report, total foreign indebtedness of developing countries reached 630 billion dollars in 1981 which stretches the resources of the whole credit system. Surely, this astronomical figure must be related to the 500 billion dollars mentioned earlier as an estimate of wealth transferred through deteriorating terms of trade to the industrialised economies and to the 650 billion dollars that is spent by the world annually on the arms trade.

Here, clearly, there are symptoms of enormous strain in the financial system and of great insecurity felt by nations intent on arming themselves beyond their means. Both conclusions suggest that the Brandt Commission, in Programme for Survival and Common Crisis, is right in identifying a critical point having been reached in the world situation. It calls rightly for new start to be made in the North-South dialogue.

The Churches would therefore call upon Her Majesty's Government at the Williamsburg Summit in May and at the United Nations Conference on Trade and Development in Belgrade in June to go determined to negotiate a new start. We have the important initiative of the Commonwealth Secretariat in producing its report The North-South Dialogue: Making it Work that will guide us. We have the important Plan of Action to Combat World Hunger, proposed by the European Community and supported by Canada, to direct us. Above all, I believe that we have a growing political will in this country, fostered by the Churches and other non-governmental organisations to which the Brandt Report pays tribute, that will back us.

I end with a quotation from page 10 of the report where it states: A new century nears, and with it the prospect of a new civilisation. Could we not begin to lay the basis for that new community with reasonable relations among all peoples and nations, and to build a world in which sharing, justice, freedom and peace might prevail?