Global Financial Crisis: Social Policy (Hansard, 4 November 1998)

§ Lord McIntosh of Haringey
My Lords, we are responding through the international financial institutions, together with United Nations organisations, to address the deep-seated social consequences of the crisis in Russia, Indonesia and many other countries. In particular, following interventions from the Chancellor of the Exchequer and the Secretary of State for International Development at the 1998 World Bank/IMF annual meetings in October, the World Bank is working on a code of practice for social policy.

§ Baroness Williams of Crosby
My Lords, while commending the Government on the efforts that the Chancellor and others are making with regard to the social consequences of the economic crisis, is the Minister aware that not only has the United Kingdom revised its projections for growth downwards from 2 per cent. to 1.25 per cent., but today the government of Japan have announced that the rate of growth expected for the current year has fallen from 1.9 per cent. plus to 1.8 per cent. minus, which suggests a continuing recession in East Asia? Given that the social consequences now include the exclusion from school of hundreds of thousands of young children in East Asia and the gradual breakdown of public health, and in Russia the payment of debt to commercial banks rather than the writing off of wage arrears, will the noble Lord be kind enough to ask Her Majesty's Government to reconsider the present policies of the International Monetary Fund, which appear to rely on the credit squeeze and very high interest rates? I ask him to look closely at that possibility.

§ Lord McIntosh of Haringey
My Lords, I acknowledge that the noble Baroness is right about the impact on the rest of East Asia of the reduction in the forecast for Japan. We do not underestimate in any way the seriousness of the problem there. In Indonesia, the proportion of the population in poverty, which had gone down to 11 per cent. this year from 57 per cent. in 1970, is starting to rise again. In Russia, GDP has decreased by 10 per cent. in one year and life expectancy is actually decreasing. Those are two very different problems. In Indonesia, the problem is one, fundamentally, of social assistance, which is the responsibility of the World Bank. In Russia, the problem 264 primarily relates to the financial system and needs the co-operation of the IMF. I do not believe that in either case the rigidity of the IMF, which the noble Baroness is alleging, is relevant.

§ Lord Judd
My Lords, does my noble friend agree that the situation is grave in human terms? In Indonesia alone, it is estimated that by the end of the year 100 million people will be living in poverty, which is four times the level in 1996, and 1.6 million children will have dropped out of primary and junior secondary education. Does the Minister agree that if that urgent problem is to be tackled, not only is it a matter of the World Bank and the IMF getting their act together so that one is not going for deflation and the other for the defeat of world poverty, but it is also a question of trade, and of ensuring more trade credits? Does my noble friend agree that talking about "level playing fields" is not sufficient, because we have to bring poor countries to the position where they have a chance of playing effectively on the playing field?

§ Lord McIntosh of Haringey
My Lords, my noble friend has confirmed the figures that I gave about poverty in Indonesia. I thank him for that. As to the role of the World Bank and other development bodies, he will know that the World Bank has allocated 17 billion dollars for dealing with social consequences in East Asia and that the Asian Development Bank has an 8.7 billion dollar social assistance and poverty reduction programme. That is in addition to the Community Recovery Programme which has been drawn up by the civil societies in Indonesia.
The problem with Indonesia is that many parts of it are returning to a subsistence economy. I am not sure that increases in trade, valuable though they may be in part of Indonesia, address the whole of the problem.

§ Baroness Gardner of Parkes
My Lords, is the Minister aware that many non-governmental organisations—I declare an interest as chairman of Plan International—are actively working in Indonesia? In the UK alone, we are raising £14 million, but world-wide the figure is £150 million, not all of which will be spent in Indonesia. I personally have seen the work in Indonesia. Is the Minister aware that DfID—formerly the ODA—is very good in terms of providing grant support to the NGOs and acts as an agent for moneys given by the British Government to help those people?

§ Lord McIntosh of Haringey
My Lords, I am grateful for the noble Baroness's comments. I think she is referring to the Community Recovery Programme which I mentioned, which is designed by the NGOs and which covers community based projects for food security, basic social services, income generation and so on. Indeed the DfID has given £850,000 to that programme.

§ Viscount Waverley
My Lords, are not all principal financial international institutions moribund on this subject? No mechanism exists whereby at judicial reviews of the WTO social consequences are factored in. What will the Government consider doing about that?

§ Lord McIntosh of Haringey
My Lords, I simply do not understand the noble Viscount's comment. The development committee of the World Bank and the IMF met on 4th October of this year and was given a statement by the Secretary of State for International Development and the Chancellor of the Exchequer—as the executive governors for those two bodies for the United Kingdom—which concentrated heavily on the social consequences of the problems in these countries. That is what I have been talking about in my responses.

§ Baroness Ludford
My Lords, can the Minister say a little more about what the British Government are doing to relieve debt in poor countries, bearing in mind that poverty and social distress, which lead to political instability, also threaten international security? Therefore it is very much in our self-interest to promote the cause of debt relief for poorer countries.

§ Lord McIntosh of Haringey
My Lords, as the noble Baroness knows, we have concentrated debt relief on the heavily indebted poorest countries, which does not include either Russia or Indonesia. However, she is right to say that debt relief is important for a wider range of countries. That will form part of the programmes which I have described.

§ Lord Hylton
My Lords, can the Minister say whether swap agreements are being considered, for example Russian nuclear weapons in exchange for Russian external debt, which I believe has reached 160 billion dollars?

§ Lord McIntosh of Haringey
My Lords, I am not familiar with the solution which the noble Lord has mentioned. If I can learn anything, I shall write to him about it.

Lord Lucas
My Lords, can the noble Lord confirm that the proportion of the DfID's budget which ends up in Russia is set to fall, and does he think that is sensible?

§ Lord McIntosh of Haringey
My Lords, the budget from year to year can change in a number of ways. What is required in Russia, as I made clear, was fiscal and financial stabilisation rather than direct financial relief. If that is reflected in the DfID's budget, that seems to me the right way to go about it.