The International Debt Problem (Hansard, 9 April 1986)

§ Lord Williams of Elvel
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ The Secretary of State for Employment (Lord Young of Graffham)
My Lords, the Government recognise the debt problems of developing countries and remain committed to the case-by-case approach followed successfully since 1982. We support the Baker initiative, which builds on this, and we welcome its emphasis on economic adjustment and growth.

§ Lord Williams of Elvel
My Lords, I am grateful to the noble Lord for his response. Is he aware that Vice-President Bush of the United States has recently gone on record to the effect that if the oil price stabilised at 12 dollars a barrel or less, the United States Government would be forced to intervene to rescue certain financial institutions in the United States which, in his words, would be badly hurt? Do the Government feel the same responsibility toward UK financial institutions which would be similarly badly hurt, and will the Government not join with Vice-President Bush in seeking ways of stabilising oil prices so as to protect the world financial system from the danger of collapse?

§ Lord Young of Graffham
No, my Lords, it would be better, I believe, for oil prices to adjust and to fall to their correct level. I notice that during the last few days they have come back very closely to 14 dollars a barrel. We shall have to see how the position develops.

§ Lord Barnett
My Lords, does not the Minister share the concern of the United States Government about the dangers to the international debt problem and particularly to the whole of the banking system, including UK banks, from the collapse of the price of oil? Is it not rather silly of this Government to sit back and do nothing at all while that danger exists? Would it not be better at least to join in talks to try to do something about it?

§ Lord Young of Graffham
My Lords, this country does not sit back; it does join in. It supported the Baker initiative. It appreciates that the best way to go about this is through a country by country, case by case, approach and that it ill serves anyone, debtor or creditor nation, to speculate about the future level of oil prices. We have to adjust to circumstances as they arise and dampen down unnecessary speculation.

§ Lord Barnett
My Lords, how does the noble Lord propose to do that?

§ Lord Young of Graffham
My Lords, by following the policy that the Government are following at the present time.

§ Lord Ezra
My Lords, the noble Lord said that the prices of oil had improved recently. Would he not agree, however, that this is entirely due to the fortuitous circumstance of a strike in the Norwegian oil fields? Is the Government's policy therefore to live from hand to mouth?

§ Lord Young of Graffham
No, my Lords, but this Government recognise that the price of oil, like the price of other commodities, is a market matter. The Government recognise the limit of the ability of themselves or any other collection of governments to 196 control these prices. What we must do therefore is not to speculate too much but to plan in advance and to react when the time comes.

§ Lord Boardman
My Lords, does my noble friend not agree that the drop in the price of oil can bring to the world and to world trade many industrial advantages that should improve the position of many of the indebted countries while the world oil price remains at a reasonable low level?

§ Lord Young of Graffham
My Lords, I have no doubt that within the scenario of any change in the oil price there are as many winners as losers. What we are seeing is that this country was not dependent on a particular level of price of oil. We see that there is a remarkable opportunity now for our manufacturing industries, for exports and for the growth of the economy as a whole. However, my right honourable friend the Chancellor took an assumption of 15 dollars a barrel as the price of oil for the forthcoming year. We shall just have to see what level the price of oil actually achieves.

§ Lord Hatch of Lusby
My Lords, may we return to the debt crisis? I agree with the sentiments expressed by the noble Lord, Lord Boardman—that there are opportunities for increased manufacturing activities in some parts of the world. However, does not the noble Lord the Minister recognise that in other parts of the developing world—I would mention, in particular, Venezuela, Mexico and Nigeria—the fall in the oil price has greatly increased the danger that these countries will not be able to pay even the interest on their debts? Is it sufficient to undertake what the noble Lord the Minister calls a case by case consideration of this problem rather than, as other people are hoping to do at Tokyo, look at the whole international debt problem? Is it not necessary to look ahead as well as take an off-the-cuff approach to what happens to prices from week to week?

§ Lord Young of Graffham
My Lords, I wish that I shared the noble Lord's belief that governments could get together and look ahead with great precision at such a volatile subject as the price of oil. For every loser, when there is a change in the price of oil, there is a winner. For every Venezuela, there is a Poland. A case by case study is the only way that we can react.

§ Lord Williams of Elvel
My Lords, the noble Lord referred to the Baker plan. Do the Government really, genuinely believe that the Baker plan is still alive and that it will still work?

§ Lord Young of Graffham
Yes, my Lords, because this situation can best be dealt with by a case by case study. What we have seen in helping the Baker plan proceed, and looking at what has been done through the Paris club and in other ways, is that the problem is gradually, slowly and painfully being reduced.