Debt Relief

HC Deb 01 November 2001 vol 373 cc319-60WH

[Relevant documents: Third Report from the International Development Committee, Session 1997–98, on Debt Relief HC 563, and the Government's response thereto, HC 1056; the Fourth Report from the International Development Committee, Session 1998–99, on Debt Relief and the Cologne G8 Summit, HC 470; and Fourth Report from the International Development Committee, Session 1999–2000, on Debt Relief—Further Developments, HC 251, and the Government's response thereto, HC 474.]

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Ainger.]

2.30 pm

The Financial Secretary to the Treasury (Mr. Paul Boateng):

Debt relief and poverty reduction must lie at the heart of our response to the challenges—as well as the opportunities—that globalisation presents to our world. This debate is timely, not least in its link to the debate that is taking place in the House. Undoubtedly, there is a link and we wish to recognise that; tackling poverty in the developing world is not a matter for Governments alone. We have had some success in tackling poverty and we should celebrate that as well as responding to the challenges and recognising the distance that we have to go. That success has often been due to grass-roots organisations in the developing world. That is particularly true of those organisations centred on the needs and contributions of women, who are playing their parts as agents of development in the developing world. Moreover, there has been a contribution from grass-roots organisations and non-governmental organisations with a broad base of membership in the developed world, especially in our country. We should rightly use an occasion such as this to pay tribute to the work of NGOs, which have ensured, day in and day out, that debt relief and poverty reduction do not slip off national and global agendas.

Progress towards debt reduction targets accelerated during the past year. We want to go faster but we are achieving a great deal. The issue is vital, as recent events have demonstrated. Those events have shown how closely interdependent all the nations of the world are, and how closely linked are our destinies. Poverty and crippling debt in one part of the world have implications for the whole world, and it is important to recognise that. We have a duty to spread the benefits of rising prosperity as widely as possible.

The United Kingdom has a good track record in tackling debt. We could do more and are determined to do so, but it should not be forgotten that this country called for and secured a review of the original heavily indebted poor countries initiative. We pressed our G7 and other international colleagues to adopt challenging targets on debt reduction and on the number of countries that receive debt relief, and we have made a commitment to grant 100 per cent. debt relief to every country that qualifies under the HIPC initiative.

Of course, freedom from debt is not an end in itself. The international community has, therefore, set challenging targets for reducing poverty, improving health and fostering education. We desperately need to see progress in those areas in particular. It is right that we should have set those targets, and it is right, if we are to call ourselves a community at all, that we should recognise that, in an effective community, nations share responsibility for the welfare of the whole community.

The subject excites interest on both sides of the House and should not be a matter for acrimonious party political debate. I doubt that we will have acrimonious debate in the Chamber today: indeed, I am sure that there will be much consensus. It would not be right to refer to this country's track record in tackling debt relief without mentioning the role that has been played over the years by successive Chancellors and Prime Ministers, and without recognising the rapid progress that has been made in the past four years. Even our political opponents would be obliged to concede that the rate of progress has been unprecedented, and I have no doubt that they will make such a generous concession in the debate in the light of my opening remarks.

It is important to recognise that if we are unable to work together on those issues, we are less likely to be able to break the vicious cycle of debt, poverty and economic decline that has more and more people in its maw. We must build consensus on the need to devote substantial resources to this issue and to make it the focus of all our nation's energies and commitment. If we do not do so, the scale of the human tragedy will be enormous. Every day this year, 30,000 children will lose their fight for life. It is, literally, a fight for life. Several hon. Members have seen such children in the grip of dysentery and respiratory disease, never mind in the last, fatal stages of starvation that bring with them apathy and lassitude. Many children die from curable diseases such as malaria, which is a major killer in the developing world, but which is by no means the only killer that could be prevented if appropriate action were taken. We could do so much more, and we must redouble our efforts to do so.

By the end of the debate, 3,000 more children will have given up that struggle and will no longer be alive. We know that if there were access to appropriate diagnostic tools and drugs—some of which cost little more than 12 cents—that number could be reduced. HIV-AIDS, malaria and tuberculosis kill 5 million people each year, again mostly in developing countries. Millions of cases of HIV could be prevented through well targeted, low cost prevention and care strategies. Countries such as Uganda, Thailand and Senegal have made the prevention of HIV and AIDS a priority, and have managed to stem the spread of the disease. Uganda took an early decision to confront the pandemic head-on and it has done so with great success.

Mr. Simon Thomas (Ceredigion)

The Financial Secretary has outlined the Government's actions on health issues and they have taken a lead with the global health fund, which was established to tackle the problems that he has described. Will money for that fund be additional to current international aid spending?

Mr. Boateng

I shall come to the global health fund in due course, and I shall also tackle additionality.

Health is not the only issue; education is key. Some 900 million people aged over 15—one sixth of the world's population—are illiterate. Public expenditure per pupil in the 19 least developed countries is less than $40 or £27, compared with $200 or £136 per pupil in developing countries. Some $5,300 more is spent per pupil in advanced economies. In the United Kingdom, spending per pupil aged 14 to 19 is equivalent to $5,316 or £3,625. That is the disparity; £27 is spent at one end of the scale and £3,625 is spent in our country. That is the background against which we must act to ensure that the talents of further generations are not wasted.

Under the historic agreement secured in Cologne, the HIPC initiative was enhanced to provide more debt relief to more countries. In autumn 2000, the International Monetary Fund and the World Bank committed themselves to ensuring that debt relief for 20 countries would be agreed by the end of the year. The target was met and then exceeded when agreements were reached for 22 countries. Some 23 countries have now reached that point, and will receive $54 billion of debt relief in total—$34 billion under the HIPC initiative and $20 billion from traditional methods of debt relief. Mozambique is among those countries: it reached the HIPC completion point on 25 September. Three other countries, including Ghana, are expected to reach a decision this year. President Kufuor of Ghana and his Government must be congratulated for deciding to proceed to the HIPC decision point so early in their Administration. That was brave and showed foresight, and they are to be commended.

Many countries that are engaged in armed conflict have yet to benefit from debt relief. As a result, they have exiled themselves from the support that HIPC and the international community can provide. Due to the HIPC initiative, countries' annual debt service payment will be reduced by a third. That represents an average stock of debt reduction of about 50 per cent. on top of debt relief mechanisms such as the Paris Club rescheduling, which reduces debt stock further to 67 per cent. Those are real gains.

The autumn IMF and World Bank meetings were cancelled in the wake of the terrible events of 11 September at the World Trade Centre. Ironically, as a result, some of the poorest people in the world will, or do, feel the aftershock of the appalling attack on the United States. Nevertheless, and importantly, the business of the fund and the bank continues. The G8 leaders' meeting in Genoa this year reaffirmed our commitment to making globalisation work for all citizens, especially the world's poor. The leaders called on countries engaged in conflict to turn away from violence. That remains the hope and focus of determined efforts by the international community and we do not intend to allow the events of 11 September to deflect us.

At the fund's spring meeting, it was agreed for the first time to offer emergency post-conflict assistance on concessionary terms. That will act as a powerful incentive to ease the discord that comes from conflict and to ensure that peace delivers its dividend to people who have been afflicted by armed internal or external conflict.

Significantly, we are working with our international partners, both governmental and non-governmental, to prevent conflict from occurring in the first place. That is particularly important for sub-Saharan Africa, where spending on conflict resolution has increased by 42 per cent. in real terms. The concerted effort to prevent conflict will be an important test of our capacity to ease a situation that all too many countries and people face.

I shall say a few words about the lead given by the United Kingdom. At the beginning of the new millennium, my right hon. Friend the Chancellor of the Exchequer said that the task of combating debt and delivering a real reduction in poverty should be seen as central to what we were doing. At a rally, he said "because poverty is so great and the need is so urgent, neither you nor I want the richest countries to benefit any more from the debts of…the poorest countries". The Chancellor made it clear to the audience and all 41 HIPC countries that we as a nation would renounce our right to receive any benefit from the historic debt owed by those countries.

Since that time, we have driven forward the international agenda, making it clear that we are all interdependent and have responsibilities. In recognition of that fact, we have imposed a unilateral ban on export credits for unproductive expenditure. That policy means that Britain's export credits will support only productive enterprise that assists social and economic development. We have worked to build capacity in poor countries and reduce the burdens placed on the recipients of aid. Importantly, we have begun writing off the £100 million owed by HIPCs to the Commonwealth Development Corporation and debts owed to the Export Credits Guarantee Department—100 per cent. of all HIPC bilateral debt. That was and remains an important step, but we must do more with our international partners to refocus the debt relief programme with the central object of reducing poverty and providing more debt relief to more countries more quickly.

At the same time as delivering on the reduction of poverty, the provision of education and the construction of a viable national infrastructure in countries afflicted by global poverty, it must be recognised that we cannot achieve our objectives by sentiment alone. We must move from sentiment to strategy. That is the importance of the poverty reduction strategies upon which debt relief is conditional. It is not a question of dropping money into a bottomless pit to be squandered by a ruling elite on their pet projects, wealth and self-glorification or on the pursuit of conflict. The strategies must be firmly rooted in an evidence base that ensures that they reduce poverty and improve the provision of education and the health of the people.

Country-owned, community-operated poverty reduction strategies are, of course, an innovation, but there must be a buy-in from the country receiving them. They have to feel that they own them. It is not about distant and unaccountable organisations prescribing conditions under which aid will be offered in a new form of neo-colonialism. This is about the countries themselves, working in partnership with the international community.

Mr. Andrew Love (Edmonton)

I thank my right hon. Friend for giving way. Would he agree that one of the difficulties is that there is a plethora of plans for each of the countries concerned—from the International Monetary Fund, the World Bank and others—and that we need a single plan that is accepted by the country concerned to help to lead it out of poverty?

Mr. Boateng

We certainly need to recognise the importance of international financial institutions working together to achieve a clear focus to the strategies that are put in place and we have advocated and promulgated a programme of reform of international financial institutions that is designed to achieve a greater and clearer focus.

The importance of the strategies is that they aim to put the countries concerned in a position in which they can reach the targets set internationally for poverty reduction. Those targets are aimed at reducing the proportion of people living in extreme poverty by half by 2015; enrolling all children in primary school by 2015; making progress towards gender equality and empowering women by eliminating gender disparities in primary and secondary education by 2005; reducing infant and child mortality rates by two thirds by 2015; reducing maternal mortality rates by three quarters by 2015; providing access for all who need them to reproductive health services by 2015; and implementing national strategies for sustainable development by 2005, so as to reverse the loss of environmental resources by 2015.

Those targets come from agreements and resolutions of a series of world conferences organised by the United Nations in the first half of the 1990s. Conferences are all very well but what makes a difference is what happens to the people who have to live, day in and day out, with the poverty demonstrated by the figures we have shared so far in the debate. We will be judged by that, rather than by our resolutions or our international or domestic debates.

Progress has been made on some of the targets in some parts of the world. For example, China reduced its number of people in poverty from 360 million to 210 million between 1990 and 1998. However, conflict and the spread of HIV-AIDS threatens the achievement of targets in many other areas. Sustained economic growth, which is vital for long-term reductions in poverty, is proving elusive for many countries, particularly in the current circumstances.

I should like to say a few words about the global health fund because, as hon. Members have already indicated, it is of enormous importance and we need to get it right. In some areas it is clear that we need to redouble our efforts. Health is one of them. Together with our international partners, we established the global health fund to assist. The UK's role was integral at its inception. We wanted to ensure that the fund's structure would allow it to address the major communicable diseases of HIV-AIDS, tuberculosis and malaria, which hit developing countries hard. The fund will support expanding coverage of critical interventions for prevention and treatment of those diseases by providing developing countries with the resources to purchase key commodities and strengthen systems to procure and deliver them effectively, safely and equitably.

The Department for International Development is working with other donors, developing countries and multilateral agencies to ensure that the fund is operational by 1 January 2002. The technical working group, chaired by Professor Chrispus Kiyonge from Uganda—a former Minister of Health who made a distinguished contribution to the development of health policy in that country—was established in Brussels on 27 August. It will meet three times between now and December to take key decisions on the establishment of the fund. It is intended that the fund be launched and become operational at the third meeting.

On resources, the latest tally for contributions stands at $1,831 million from the United States, and the United Kingdom has pledged $200 million over the next five years, to be disbursed when the appropriate structures are in place. That represents a significant contribution to dealing with the problem. I stress again, however, that it is only the beginning and that a great deal of work remains to be done, not least with pharmaceutical companies to get them to play a proper role and make an appropriate contribution.

Many years ago Kwame Nkrumah, speaking of the need for an independent Ghana at a time when the whole continent of Africa was looking forward to independence and freedom from colonial empires, said: The right of a people to decide their own destiny, to make their way in freedom, is not to be measured by the yardstick of colour or degree of social development. It is an inalienable right of people which they are powerless to exercise when forces, stronger than they themselves, by whatever means, for whatever reasons, take this right away from them. Subsequently the old empires that dominated Africa have ceased to exist. What has followed has not always benefited Africa. Sadly, some African countries are now in a worse position in terms of per capita income, infrastructure, health and education than they were at the time of the twilight of empire. That is part of Africa's great tragedy. It has also become clear in the interim period that the forces of oppression were not all imperial. Some were home grown and some have continued to hold too many people in their thrall. Greed, avarice and corruption, as well as a lack of accountability and transparency, have characterised far too many post-colonial Governments.

The good news is that that trend is now being challenged effectively. There is a real sense in Africa and elsewhere in the developing world that it is important to develop democratic institutions, to ensure transparency and accountability and to stop corrupt oligarchies preying on the people of those countries. In the light of that growing recognition, it would be an appalling shame and a dereliction of our responsibilities in the developed world if we did not ensure that the burden of crippling debt acquired over the years was lifted when at last there was a proper strategy in place to tackle the root causes of inequality and development failures. Our debate today is important because it marks the concern of hon. Members from all parties to ensure that combating poverty and providing debt relief remain high on our national agenda.

3 pm

Mr. David Lidington (Aylesbury)

I welcome the debate. It is a pleasure to face the Financial Secretary to the Treasury across the Chamber once again.

Debt relief and poverty reduction are crucial issues for the United Kingdom and more directly for the countries whose fate we are debating this afternoon. When considering the raw statistics published by organisations such as the World Bank, one must be careful not to become inured to the tragedy of what is taking place in the world. Tables of figures cannot do justice to the truth that there are still countries in Africa where more than 10 children out of every 100 die in infancy. They are not just statistics: most of those deaths are preventable, and every case reflects the most appalling human suffering and tragedy. The 113 million children of primary school age who do not attend any sort of school are more than mere statistics: the talent and energy of those children, our fellow human beings, are wasted because they lack the opportunities that we take for granted for our families.

On behalf of the Opposition, I am happy to tell the Minister that we shall seek a constructive debate on this subject with the Government and with outside organisations. The right hon. Gentleman was right to pay tribute to the work of non-governmental organisations in the field and in pricking the conscience of politicians and suggesting fresh thinking. My party has recently embarked on a major policy review, as part of which my hon. Friend the Member for Meriden (Mrs. Spelman) and I are looking forward to a sustained dialogue with NGOs and other bodies involved with debt and international development.

I was grateful for the Minister's acknowledgement of the work done when they were in office by John Major and other senior Conservative politicians to bring Britain's influence to bear in the multilateral institutions in an effort to reduce the burden of debt upon the poorest countries in the world. I return the compliment and give the present Administration credit for their energy and the priority that the Government, and the Chancellor of Exchequer personally, have given to the issue. I do not pledge to abstain always from criticising Government during the time that I am Opposition Front-Bench spokesman, and I certainly will not abstain from questioning them about the impact of their policies. However, it will always be our intention to seek constructive dialogue and debate.

It is important to recognise that neither debt relief in general, nor the HIPC scheme in particular, are panaceas. About 80 per cent. of the world's poor live in countries that are not eligible for the HIPC scheme, and all developing countries will depend for their future development upon several means of assistance, of which loans, although important, will be only one. Obviously, aid will continue to be important: the World Bank estimated that a 10 per cent. cut in overall net aid flows could, if implemented, wipe out overnight the entire benefit of the HIPC debt relief arrangements.

Even more important to the long-term sustainability of poorer nations are an increase in world trade and decisions by the industrialised powers to allow much freer access to markets for goods and services produced by developing countries. In that context, I welcome the commitment announced in February by the European Union to remove tariffs and quotas on all imports from less developed countries. If there is time, I hope that the Minister will bring the House up to date on the progress of that agenda and say whether the forthcoming meeting in Doha is likely to include discussions on how to increase access to the markets of developed countries.

As the Minister said, the leaders of poorer countries have responsibilities. Such countries are not helped if we always caricature their people as helpless victims who will inevitably be permanently dependent upon others. The Minister's comments about encouraging signs in Africa were pertinent. Many African countries have been misgoverned and, in some cases, plundered by their rulers. Stable political institutions and the rule of law, as well as sustainable economic policies, create the conditions that allow poor countries to attract investment and ensure that loans and aid are used to the advantage of the population to relieve poverty, not salted away to benefit only a corrupt elite.

Leaving the HIPC scheme and other issues until later, I will focus first on the impact of the current international crisis on the approach of international agencies and our Government to the countries of south and central Asia. I put on the record that I visited Pakistan just over a year ago; the details of the visit are in the appropriate place in the Register of Members' Interests.

To what extent is the British policy on debt cancellation and rescheduling affected by the international crisis and by the political and strategic need to keep some of the countries of central Asia within the alliance against terrorism? Pakistan and the central Asian republics that once formed part of the Soviet Union are poor countries: average annual income in Pakistan is about $500, which is about £730 on today's exchange rate. Central Asian countries are saddled with both the appalling economic and environmental legacy of communism and the consequences of a severe and lasting drought. In addition, Pakistan and other nations bordering Afghanistan have been affected by the flight of millions of Afghan refugees into their territories. There is a clear case for international help.

I hope that the Government are willing to state openly whether there is truth in media suggestions made in recent weeks that the normal rules that apply to poor countries seeking help with debt rescheduling are to be bypassed so as to cement the position of Pakistan and the central Asian republics in the international alliance. Let me give some examples of those reports. On 30 October, the Financial Times reported that Pakistan was seeking a debt rescheduling agreement with the Paris Club that would result in the maturity of its Government debt being extended to up to 40 years and its interest payments reduced. I understand—I believe that the Minister will agree—that those terms are usually reserved for much poorer countries.

Other press reports have suggested that the Spanish Government are asking the next European Council of Finance Ministers meeting to discuss an emergency package for the countries affected by war. Since ECOFIN is due to meet in a matter of days, it would be helpful if the Minister could advise us whether that topic will be on the agenda. The French newspaper Libération says that G8 and the international development banks will convene a meeting shortly to consider a package of emergency help for central Asia.

There is a powerful case for making exceptions for political reasons. It could be argued that the current overriding priority should be the campaign to defeat international terrorism. However, if that is the case, I hope that our Government will be candid about what is going on so that everyone clearly understands. I hope too that in any international discussions the Government will be alert to the risks of misuse of concessionary loans. The countries concerned already have high levels of military spending as a proportion of their gross domestic product, and it would be wrong if debt concessions intended to relieve poverty in those central Asian countries were used to subsidise further expenditure on their armed forces.

As the Minister made clear, there has been some progress to report on the HIPC scheme. By the end of June this year, 23 countries—most in Africa—had reached decision point and began to receive debt service relief. According to the World Bank, that relief will over time amount to about £34 billion and will reduce the indebtedness of recipient counties to below the average of all developing nations. The bank states that after HIPC relief those countries will spend about 2 per cent. of GDP on debt service, compared with 7 per cent. on social expenditure, including primary health care and education. I endorse the Minister's comments about the importance of giving priority to expenditure on education and health and to involving civil society, especially women, in a sense of ownership of the poverty reduction strategies that are part of the HIPC package.

I welcome the progress that has been made, but I have several concerns and questions to ask about the British contribution to debt relief and the HIPC scheme generally. Addressing British policy first, the Government should be given credit for their decision to go beyond the HIPC scheme. At the final event of Jubilee 2000, the Chancellor announced that the UK would renounce completely its right to debt repayment from the HIPC states. His announcement was in two parts. He said that immediate 100 per cent. debt relief would be given to those countries that had agreed at the decision point poverty reduction programmes under HIPC. I assume therefore that 100 per cent. relief is being given to the 23 states that have reached the decision point.

However, the Chancellor also said that other HIPC countries for which no poverty reduction programme had yet been agreed would still make debt repayments, but that Britain would hold them in trust, with the idea that moneys would be released to those countries once a poverty reduction strategy was in place. Will the Financial Secretary tell me, at the end of the debate or in writing, how many countries fall into that category, how much is held in trust, what happens to the interest on that money—I hope that it is added to the money, not channelled into the Exchequer bank account—and what happens if, for any reason, a country fails to reach its decision point? As the right hon. Gentleman pointed out, a number of the very poor countries we are discussing are plagued by civil war and desperate internecine conflicts. We understand that Britain, the IMF and the World Bank cannot easily bring about a resolution of such disputes, but are we to insist indefinitely that those countries continue making interest payments?

I wish the HIPC scheme well and hope that it works, but we need to explore some of the criticisms and concerns raised by NGOs and other organisations in recent months. There has been confusion over the total sums of money involved, but the Financial Secretary's remarks explained to a considerable extent how that disparity in figures has come about. The World Bank always talks about £34 billion of debt relief over time, whereas the G7 communiqué after the Genoa summit, and the Chancellor in the House on 19 July this year, referred to debt relief of £53 billion. I understood the Minister to say that the higher figure was made up of the £34 billion from the HIPC scheme, plus £20 billion from what he called "conventional debt relief". I would be grateful for further explanation of whether that £20 billion of conventional debt relief is targeted only on the 23 countries that have reached their decision point, or whether we are talking about the sum in the context of every eligible HIPC country. Is that £20 billion, like the HIPC £34 billion, dependent on the poverty reduction programme and the strategy of the World Bank and HIPC, or is it a concession that is being made in any case to the poorest countries under previously negotiated arrangements?

The fact that the scheme is not progressing as fast as its authors hoped or intended is also of concern. It started in September 1997 when the Mauritius mandate set a target for three quarters of eligible countries to reach decision points by the end of 2000. That target was endorsed by the G7 at the Cologne summit in June 1999, but it appears to have been revised downwards in January 2000. In his Gilbert Murray memorial lecture, the Chancellor said that he hoped that 25 countries would be signed up and at decision point by the end of that year—in other words, 10 months ago. Sadly, by the end of 2001, only 23 countries will have agreed their poverty reduction strategies, reached decision point and begun to receive debt relief under the HIPC scheme. That is just over half of the eligible countries, rather than three quarters as was originally hoped.

I acknowledge that in some cases a civil war or some other conflict has made progress impossible. However, I would have thought that the existence of conflicts in countries such as Congo or Sierra Leone was known when the target of three quarters of eligible countries was first set in 1997. Why has the target to which the international community agreed proved impossible to meet? I accept that Britain is only one of a number of countries involved and that it is not in the gift of the Financial Secretary or the Chancellor to command every creditor nation or the international organisations to jump when the British Government want them to, but some explanation of the failure to reach the target is required.

Doubts also exist about the long-term sustainability of the HIPC scheme. The Minister will have seen the Jubilee Plus report that was published in September. Although it contains some comments with which I disagree, it is an interesting report that asks searching questions about HIPC and provides statistics and other evidence that needs to be examined. It argues that the indicators of sustainability employed by the World Bank and the IMF are flawed. I would be interested to hear the Minister's views.

The report suggests, with evidence to support its conclusions, that even if one applies the criteria established by the World Bank and the IMF, the scheme will fail some of the very poorest countries. It predicts that the debts of Chad, Burkina Faso, Malawi, Rwanda, Tanzania and Niger will be unsustainable in terms of the World Bank's own criteria after they have received HIPC relief. The total debt of some countries is even projected to be higher after that relief than it would be if the scheme had never existed. The striking case cited in the report was of Gambia, whose debt is projected to fall dramatically at completion point in 2002, but to rise again afterwards. The reason given for that projected rise is that the scheme would not reduce the stock of debt so much as reschedule it over a longer period. The level of debt service would not be adequate to offset the buildup of interest on the existing stock of that country's debt. If the Jubilee Plus critique is correct—if as many as seven countries would still have unsustainable debts according to the World Bank's criteria, and if some countries would have higher debts with HIPC than they would without it—we should seek convincing answers about the flaws of the scheme in practice.

A further cause for concern which has been aggravated by recent international events is whether the assumptions on which the World Bank has made its forecasts are over-optimistic. International institutions that have made projections for the development of the poorest countries have assumed that there will be fairly vigorous economic growth during the next decade, which will ensure that debt service costs fall whether as a proportion of exports, GDP or Government revenues. They have assumed that exports from HIPC countries will grow much faster in the next decade than they did in the 1990s. I am not sure whether we would be wise to place great faith in such assumptions.

Commodity prices have been soft, and the prices of some of the key commodities on which the poorest countries depend, such as coffee, cocoa and tobacco, have fallen—quite sharply in some cases—since the events of 11 September. Oxfam says that the crisis that those terrorist outrages have sparked is creating an economic disaster in developing countries". It cites the problems caused in Uganda by the dramatic drop in coffee prices. Uganda is one of the countries with a good track record under the HIPC scheme, and it would be a tragedy if that progress went into reverse now. The IMF thinks that Niger will take 15 years to reach the International Development Association's $895 GNP per capita threshold, but the private sector is more sceptical: Standard and Poor's assessment is that Niger would take 366 years to reach that standard. Again, that raises questions about whether the HIPC scheme is a sustainable, long-term solution to debt problems.

The Minister will know that Jubilee Plus and others have argued for a different approach to some of the problems that the debt crisis has caused. Jubilee Plus has said that the international community must create an international bankruptcy procedure to allow for an emergency standstill and for international arbitration to re-order a poor country's debts and so enable it to continue to trade without having to damage its social infrastructure. This is my first parliamentary outing as the Opposition spokesman on this subject, and I shall not commit my party to endorsing that proposal, but it is an interesting idea that should be further examined. I certainly want to engage in a dialogue about its advantages and drawbacks with the relevant organisations. I was intrigued to find that Jubilee Plus—which one might assume is on the political left, especially given the authors of some of its publications—is not the sole voice backing the idea: it has also been endorsed by the United Nations Secretary-General and by Professor Jeffrey Sachs, who was regarded as one of the keenest apostles of free markets in Russia and eastern Europe.

The proposal would raise many complicated issues and would have to be enforceable in national courts. There would be implications for the IMF, as well as a risk that an international bankruptcy arrangement would result in the price of borrowing rising for all countries, including those that had acted responsibly, spent their loans well and produced a good return on them. The World Bank has noted that the public debt of low-income countries—not just the HIPC—amounts to $460 billion. Poorer countries will need to borrow to finance development well into the foreseeable future. Against that one must set the difficulties inherent in the current system. A question mark hangs over whether some of the debts of the very poorest countries, however frequently they are rescheduled, will ever be repaid. Are we merely deferring the day when we have to admit that for the world's poorest countries, talk of debt repayment is pretty much a fiction?

I hope that we shall have many opportunities to debate the detail of specific proposals and policies to tackle this important issue. I conclude by saying that my party will remain determined to seek cross-party agreement wherever that is possible. Our policy objective will be to enable our fellow human beings to have the material standard of life and the opportunities for health and education that we all take for granted and to which they are entitled simply by reason of their humanity.

3.31 pm

Ms Julia Drown (South Swindon)

Thank you for calling me so early in the debate, Mr. O'Hara. I apologise to my colleagues in advance—I may need to slip out of the debate later to attend some business in the House.

I congratulate the Government on what they have done and on scheduling this debate. It shows a willingness to highlight an issue that is of vital importance to millions throughout the world and of great interest to many individuals, Churches and other organisations in our constituencies. Although much has been done, if one examines the scale of what is needed it becomes clear that we have taken only the first steps to alleviating poverty. We need a sea change in thinking on the issue and, more importantly, a sea change in the lives of people in heavily indebted countries.

The Government led the calls for and signed up to the international objective to halve world poverty by 2015. That is a glorious objective. Kofi Annan, however, has said that without further debt cancellation the target is only a pipe dream—not just difficult or challenging, but a pipe dream. There are problems with the current HIPC process. Although I shall have time to touch on only two of them, I hope that other hon. Members will outline other problems and the available solutions.

I should like to focus on the potential changes in the light of the outrageous attacks in America on 11 September. Although I will not give the terrorists the satisfaction of hearing me say that the world has changed, I do not think that we can possibly ignore what happened. Thousands of innocent people were killed, and thousands of others were injured. It seems that we cannot express enough our sympathy with the families who were affected. However, equal grief and sympathy need to be shared with families in the poorest countries of the world, who have daily to come to terms with the same number of people dying. The fact that it happens every day does not make it more acceptable but less so. The ignorance of many people—who do not know that people's lives would be saved if Governments could afford to spend more on health and education instead of on debt repayments—should not make the situation any more acceptable.

There has been enormous international effort in response to 11 September. However, I cannot help feeling that that sends out the message that we value the lives of those who died in the World Trade Centre more than those of people who die unnecessarily in the poorest countries of the world. I accept that the Prime Minister has taken steps to recognise that difficulty. In his speech to the party conference, which the Minister mentioned, the Prime Minister spoke of building a world in which all individuals have the economic and social freedom to develop their potential to the full … The starving, the wretched, the dispossessed, the ignorant … they too are our cause. That cause requires significant debt relief, even more so due to the world economic slowdown that has been predicted since 11 September and will hit the poorest the hardest.

The events of 11 September have led to a huge increase in humanitarian aid to Afghanistan. Pakistan, a middle-income country in conflict that has so far been excluded from the HIPC process, is now being considered. The hon. Member for Aylesbury (Mr. Lidington) said that it seemed as though Pakistan would be given help and questioned whether it should because it is seen as a middle-income country, but the help is needed. Militarily, it is a high spending country, but that means that help needs to be tied conditionally. It should not take thousands of lives to be lost in America for Pakistan's need for help to be appreciated and for action to be taken on it. Other countries such as Nigeria, which is also excluded from the HIPC process, deserve support. They should not be ignored simply because they happen not to border a country where there is a crisis to which everyone's eyes are turned.

Whatever we think of the Government of Pakistan, we should consider how the debt originated. Most of it accumulated because foreign Governments made large loans to the previous military ruler, President Zia. Pakistan's debt service repayments make up 47 per cent. of the Government's budgetary expenditure, yet the country has great needs. Adult literacy is at 44 per cent., which is lower than the figures of many countries in the HIPC process. Bolivia's figure, for example, is 84 per cent., and Zambia's is 76 per cent.

The number of people in Pakistan who live without the basic minimum levels of nutrition is shooting up hugely, and was up to 44 million by 1999, more than in many western countries put together. The reality of the problems was conceded by the IMF, which said that the "long-term external outlook" was unsustainable, with most debt indicators worse than for many countries supported by the HIPC initiative". That shows that the HIPC process does not reach far enough to all the countries that need its help.

The Paris Club is now coming forward and it seems that Pakistan will be given help, although only bilateral help. The international institutions—the IMF and the World Bank—are not doing enough to help countries such as Pakistan. There are strong suggestions that the IMF will soon provide Pakistan with an additional $2 billion, but in loans. New loans cannot be the answer for a country that puts nearly half its money into debt service repayments. Pakistan is not the only case. Eleven HIPCs are denied debt relief because they are engaged in conflict. They all need help, albeit conditional help due to their military problems.

There is an undeniable link between poverty and conflict. Debt relief that ploughs money into poverty alleviation programmes would decrease the chances of conflicts breaking out and neuter the appeal of any fundamentalism of the sort behind the 11 September atrocities. People are vulnerable to extreme ideas when they are hungry, poor and desperate, but the conflicts help no one in the long run. As we saw on 11 September, no one is immune from the dangers of fundamentalism. Preventive measures such as conditional debt relief for countries in conflict must be a better way forward than for everyone to deal with the aftermath of conflicts. The 11 HIPCs in conflict must receive help, and so must countries outside the HIPC initiative such as Nigeria.

Nigeria's total debt is becoming worse rather than better; it is three and a half times its level in 1980. Since then, its bilateral debt has grown by a staggering 3,350 per cent., and debt and education spending have reversed their positions. Spending on servicing debt has risen from 2 per cent. to 8 per cent. of GNP, while spending on education has fallen from more than 6 per cent. to just over 1 per cent. Even so, Nigeria pays only about half its scheduled debt service, and for every £1 it receives in aid, £100 flow the other way in servicing debt.

Nigeria was originally classified as a HIPC country but in August 1998 the IMF and World Bank removed it from the list. Debt relief is vital if the new civilian Government are to survive. We should do more to support the new democracy there. Poverty has been at the root of ethnic and religious conflict that has torn the country apart many times. There is also real potential for problems of fundamentalism there. Debt relief is needed to get the people out of poverty, to allow the Government to spend meaningful amounts on public services, health and education, and to consolidate democracy.

We should also remember the ecological debt that the west owes to Nigeria. Companies such as Shell and Mobil have had a huge impact on the Niger delta—they have plundered it—with great ecological costs. Some of the long-term effects of oil pollution on that country are still to be seen. Nigeria is among the countries that need help.

In addition to the millions of people affected by debt, there are millions who say that the issue should be a Government priority. Twenty-four million people signed the Jubilee 2000 petition that called for more than the $100 billion of debt relief that was achieved. While $100 billion every 20 years is not a bad start—indeed, it is an achievement, amounting to $4,000 for every person who signed the petition, which is good going—much more still needs to be done. We need to improve the HIPC process to give conditional help to countries in conflict. We need to give more bilateral and, particularly, multinational institutional help, through the IMF and the World Bank, to countries that are outside HIPC but which are still desperate. We also have to use our influence to bring other countries that are not yet so firmly on board, such as Japan, into the process. We need to show that it is in Japan's interests to create a more stable and prosperous world.

The Minister said that 11 September must not deflect the work being done on debt. Events since that date show what can be done with political will. Not only should the Government not be deflected, but even more energy and commitment should be expended on stopping the unnecessary loss of thousands of lives every day.

3.42 pm

Dr. Vincent Cable (Twickenham)

I too congratulate the Government on selecting this subject for debate, and on choosing a senior Treasury Minister to deal with it. The two facts suggest that the issue is at the heart of Government thinking.

I apologise for the fact that I am to speak in this debate, rather than the Liberal Democrat spokesman on the issue, who is speaking on the Floor of the House. My credentials for speaking at all on this matter are a little dated. In the mid-1980s I worked with Harold Lever, who later became Lord Lever, on what became the Lever report. That eventually gave birth to a series of initiatives in the Commonwealth, notably the Kingston and Toronto initiatives, laying some of the foundations for the present HIPC initiative. Conservative and, later, Labour Ministers energetically followed up that work, to their credit.

The problem about having spent a long time working on a problem is that one tends to develop a certain world-weary cynicism at seeing the wheel being enthusiastically reinvented. The problem goes back a long way. I think that it was at the 1976 summit of the UN conference on trade and development that the issue of low income, debt and debt relief was first argued through. A quarter of a century later we are still trying to get to grips with it.

My second introductory point is that I have mixed feelings about the way in which the debt problem, or the loan conduct problem, has reached the heart of the debate on development. Although I am humbled by the enormous commitment shown by many British people, Churches and NGOs on the issue—their commitment is inspirational and Members of Parliament should do all that we can to encourage it—the danger is that we shall focus on a small corner of the jigsaw and ignore the rest. Trade and capital flows, which the hon. Member for Aylesbury (Mr. Lidington) mentioned, are still important and relevant.

I want to focus on the HIPC initiative and the current state of affairs. I do not want to go over the controversies about numbers, I believe that the value of debt relief for the 23 countries that have so far gone through the first stage of the process is about $20 billion, but that figure is largely meaningless because it relates to flows in the distant future. The current value is much smaller.

It is probably more useful to think about annual debt relief. My understanding is that that will be about $74 million—million, not billion—per year over the next five years, and about $65 million per year in the subsequent five years. We are not talking big bucks; these are relatively small sums, and even they are probably inflated because some of the countries were not paying the debt and probably never would. That is therefore a reduction from a hypothetical level. We are talking about modest but valuable assistance.

I should like to expand on some of the criticisms that have already been mentioned. First, the problem of sustainability has been made much worse by the events of the past few months. It now seems almost certain that there will be some form of global recession, affecting the United States, Germany and much of western Europe and east Asia. Recession will inevitably depress commodity prices—it always does—and the definition of sustainability, which I seem to recall entails a move from a 300 per cent. to a 150 per cent. debt to export ratio over the next three years, would be wildly optimistic in an environment in which export yields were decreasing substantially in a world of decreasing commodity prices.

Such a scenario would be much easier to deal with if international institutions existed that could handle fluctuating earnings from developing country exporters. The problem is that the structures are not satisfactory. The IMF has had a compensatory financing facility for many years, but it is highly conditional and very expensive and it is not something that the countries that we have been talking about can use. The European Union has a stabilisation of export earnings facility. That, too, goes back many years, but it is both limited in quantity and rigid in its application. Therefore, neither of those two schemes is likely to rescue such countries.

If there is a significant economic downturn and if it results in a significant depression of commodity prices, the framework within which HIPC concessionality has been devised will have to be rewritten. I hope that the Government are willing to acknowledge that.

My second point relates to the efficiency of the scheme. When I looked through the current progress report what struck me was that 23 countries have gone through the first stage of debt relief, but only three have completed the process. It is a complicated scheme. For a country to take full advantage of it, it has to satisfy such demanding processes as the poverty reduction programme, which entails three years, I think, of proven adjustment. Therefore it has to have stable, highly committed and highly competent government. That is a rather testing set of assumptions, and many countries are not going all the way through the pipeline.

Both the hon. Member for Aylesbury and the hon. Member for South Swindon (Ms Drown) have made the point about conflict-affected countries such as Sierra Leone, Congo and Ethiopia that do not simply have economic problems resulting from war, but have fallen into arrears to the IMF, and the IMF will not trigger release of debt relief unless those arrears are cleared. It is unrealistic to consider poverty reduction programmes for such countries, when they are still talking about basic reconstruction and putting simple administration in place. The HIPC framework, which assumes a country at peace, does not fit that model; some degree of flexibility must be introduced to cope with such countries.

There is also the problem of countries falling outside the number of those in the scheme; 23 are in the scheme, but 41 could be in it. Within the 41, Ghana should be the next of the big countries to begin the process. It has taken a lot of difficult decisions in the past two decades and it would be good for that to be recognised by its entrance being accelerated.

The difficult case, as the hon. Member for South Swindon has acknowledged, is Nigeria. I speak with feeling on the subject because, in my job before becoming an MP, I had the fruitless task of trying to persuade General Abacha and his cronies to adopt more sensible policies. However, they have gone. In those days, it would have been stupid to press debt relief on Nigeria because the money would have simply gone into bank accounts here instead of being used for Nigerian development. Fortunately they have gone, and Mr. Obasanjo and his Government are clearly committed to taking a more proactive approach to development. They are doing a lot of sensible and quite courageous things, but they need to be supported. Whether it is done under HIPC or a parallel programme does not matter, provided that they receive help. Nigeria is the biggest country in Africa, and the demonstrative effect of what it does is enormously important. I therefore hope to receive some encouraging signals that Nigeria is on the list and is being actively considered for something substantial.

As for Pakistan, I have rather mixed feelings. I understand that the British initiative so far—perhaps the Minister will confirm this—is to relieve £20 million of its £50 million official debt, which is about 0.01 per cent. of Pakistan's external debt. Pakistan clearly needs help with the cost of refugees, and I would totally support anything that helped it to cope with that problem, but we are in great danger of thinking only of economic sweeteners designed to help a military Government who are doing us political favours. Some dangerous things are happening with Pakistan, such as its textile export quotas being arbitrarily written off, which drive a coach and horses through a sensible trade policy. I hope that what happens with Pakistan is measured and takes account of further developments and the needs of other countries in the region such as Bangladesh and India, which as far as I know are not being given any extra assistance.

I shall say a little about the relationship between HIPC and poverty reduction, which was mentioned by the hon. Member for South Swindon. HIPC can play a useful role in poverty reduction only if that role is substantial. I believe that the debt relief already given amounts to about 2 per cent. to 3 per cent. of the GDP of the countries concerned. That is not a large sum. It is only a small lever, which will make it difficult to move such a large weight. I fully support the principle that debt relief should be linked to poverty reduction. Of course it should: we do not want the money going into corruption or into elite and ostentatious lifestyles. Although the agencies must ensure that that does not happen, we must be realistic about how much poverty reduction can be achieved with programmes that in aggregate offer rather small resources.

I wonder how much new money is contributed by the HIPC initiative and the wider debt reduction programme. What matters ultimately is whether that new money is bringing new flows to developing countries. Analytically there is no distinction between a new aid flow and debt relief except for the fact that debt relief is free foreign exchange. If increased debt relief is offset by reduced aid flows, because people think that the problem is being solved, those countries are no better off. My question to the Treasury is how much of those additional resources are genuinely additional? I know that it is difficult to prove the point, but some conviction on that score would be helpful.

The looming additionality debate is a big issue, because the debt relief that has been agreed under HIPC is about £30 billion, half of which is in the form of debt relief given by the International Monetary Fund, the World Bank and the regional development agencies—the multilaterals. It is right that they should be involved in debt relief; indeed, it would be meaningless to talk about debt relief unless they were involved. However, the funds of the World Bank, and particularly of the International Development Association, have to be replenished. Simply using their reserves or resources to write off debt will not advance long-term development unless those countries are genuinely replenished at a higher level. I hope that the Minister will give us a commitment that the wider context of additional flows is being properly considered, both in general and in relation to the multilaterals.

We are often pessimistic about development. I have been involved in the issue in varying degrees for a long time, and some positive things are happening. If one had listed the countries that would qualify for HIPC 25 years ago, Bangladesh would have headed the list and India would not have been far behind; but those countries are now producing real development and, although they still have vast numbers of very poor people, poverty is visibly and distinctly declining. If one were to ask Indians today if they wanted debt relief, they would be offended because it would affect their international borrowing capacity. Although China and many other countries in east Asia also have shown real progress in many respects, there is a hard core, especially in sub-Saharan Africa, where problems are getting worse and a concentrated effort from the international community is required. As the hon. Member for Aylesbury said, that is not a matter only of debt relief, but of aid and trade.

I fully support the European Union's everything but arms initiative and the efforts being made on multilateral trade negotiations that focus on the problems of developing countries and remove access barriers. If we can put all those ingredients in place, we shall have a genuinely comprehensive approach to the development problem of which we can be proud.

3.55 pm

Glenda Jackson (Hampstead and Highgate)

The hon. Member for Twickenham (Dr. Cable) is not the official spokesperson for the Liberal Democrats on this area of policy, but he could have fooled me—he made an extremely interesting and well-informed contribution to the debate. I congratulate the Government on affording the Chamber the opportunity to discuss these issues.

Not a single hon. Member could say that such issues do not feature regularly and at great volume in their constituency postbags. I am holding a letter from a constituent, Mr. Keiran Proffer, who was aware of this debate and urged me to ask several questions and to state on his behalf his views on the alleviation of the appalling poverty that leads to almost incomprehensible deaths among children, often from preventable diseases; a total lack of education; and, for many people, the belief that they and their families have no possibility of hope or advancement.

In his letter, Mr. Proffer says: The World Bank and International Monetary Fund must take swifter and deeper measures to cancel debt, with refinancing from the G7 nations as necessary. He is concerned about the limited number of countries that are on the HIPC list. He also argues that there are at least 50 countries that are both heavily indebted and poor", and thinks that the amount of debt relief due to be delivered is totally inadequate. However, he admits that there have been successes—debt cancellation works". I must be honest and say that I am not convinced that, on its own, debt cancellation does work. Although I was a strong supporter of Jubilee 2000, as were many of my constituents, I fear that—almost inevitably, given the size of the problem that we are attempting to deal with, with the best possible motives—we may be deluding ourselves if we believe that there is just one answer to the immensely complex problems that have arisen in the world as a result of aspects of human nature such as greed, violence and intransigence. The problems created by the deprivation of a vast portion of the world of what we, as a developed nation, regard almost as ours by right—although we know that in truth it is not—can seem insurmountable. I am worried that a sizeable proportion of the world may be coming to believe that the only simple solution is debt cancellation.

I agree with the hon. Member for Twickenham about additional aid. However, I disagree strongly with my hon. Friend the Member for South Swindon (Ms Drown), who said that poverty and deprivation cause people to fight. That is not true. People who are genuinely poor do not have the energy to fight, as is evident to those who have been to third-world countries, as I have been privileged to do. The obvious example that comes to mind is that of Ethiopia, which I visited in 1985 at the behest of Oxfam. The most remarkable aspect of that visit was the equality of poverty. A civil war was going on, but neither of the warring parties prevented aid from getting to the people who needed it. I should say, in the light of the current debate on the Floor of the House, that that is in marked contrast to what is happening in Afghanistan, if we are to believe what we read. The shared experience of poverty and of seeing children or elderly parents die did not provoke in any of the people whom I was privileged to meet the trigger for engaging in violence. During my time there—I questioned the aid agencies closely on this matter—not one sack of grain was stolen, but everybody was starving. Not one area in which the necessary food supplies were stored needed a lock. My point is that people who are truly deprived do not create conflict.

Ms Drown

The point that I wanted to get across, which I clearly failed to do, is that there is a potential link among poverty, lack of education and vulnerability to becoming involved in fundamentalism and conflict. There is a better route: by educating and supporting people we can show them that there is a better world and life for them and their families.

Glenda Jackson

I would not disagree with my hon. Friend's remarks, but when I hear the word "fundamentalism" the next word that comes to my mind is "Christian". Although Christian fundamentalists are, in my experience, extremely well educated and neither poor nor hungry, they will argue, for example, that they are entirely within their rights to blow up abortion clinics and publish on the internet the names of gynaecologists who are prepared to carry out abortions. Fundamentalism is not necessarily the trigger.

I shall return to my point, which I am reluctant to give up: in the main, conflict comes from basic human nature. We all have it, and it is reprehensible, but we shall get nowhere if we do not acknowledge that although human beings can do their best in the scale of things, it is equally possible for them to do their worst. That stems from greed, arrogance and a belief that one, whoever one may be, is superior or that others are inferior. A lack of education and integration, and an inability to tolerate an alternative argument, keep societies, individuals and nations in situations that we, in our privileged position, find unacceptable.

We have a moral duty—the world has this moral duty—to examine consistently what we find unacceptable in this area. We equally have an intellectual and moral duty to argue, not only within our own Chamber but in international chambers and across our country, that there is no simple solution to the problems with which we are attempting to deal. If we pretend that there is such a solution, we are deluding ourselves and cheating those whom we are most committed to helping. A great deal is being done, but more needs to happen. I should like to see greater trumpeting of the world's successes. The process of bringing to the world the benefits that it deserves is, in many instances, made more difficult by the problem seeming insuperable. Nevertheless, the problem can be and is being overcome.

I mentioned my experiences in Ethiopia. which, in 1985, was suffering its second great famine. When we saw the pictures we thought the problem insuperable, but it was dealt with. In Ethiopia, I met two little nurses who had never been out of England in their lives. They were faced by 150,000 starving people in a field. They could not save them all, but they achieved a great deal with the help of people in the area. We can achieve a lot, but we must not delude ourselves about how we can do so. Similarly, we must not delude the people whom we are trying to help about our methods.

I was interested to hear in the speech of the hon. Member for Aylesbury (Mr. Lidington) that the Opposition are re-examining their policy in consultation with agencies and non-governmental organisations, which is something that the Government also do. I hope that the Opposition will have discussions with the people in the countries that we want to help, and not necessarily with the Governments and the experts that have been there for a long time trying to solve particular problems. If we spoke more often to the people on the ground there could be enormous benefits. We know from experiences in our constituencies and areas of interest that the most interesting idea often comes from an unexpected quarter. Again, we delude ourselves if we believe that we can turn the world around by letting our anxiety result not in giving real help, but in an imposition of our ideas.

4.5 pm

Tony Baldry (Banbury)

I welcome debate, and the Government's commitment to take this issue forward. It carries on the work begun by John Major and continued my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) as Chancellor. The commitment of the present Chancellor and his team is evident.

I apologise to the Chamber for the fact that what I will say this afternoon may be a little technical, but this subject is technical in many ways. Today's debate has three reports from the Select Committee on International Development tagged. They were interesting reports, which commend to the Chamber, and they are an indication of the importance that the Select Committee attached to the subject in the previous Parliament. I am sure that the Select Committee will return to it during this Parliament.

First, the good news: the G8 summit at Cologne for the first time stated explicitly that the central purpose of debt relief was to free resources for investment and to tackle poverty. I agree with the hon. Member for Hampstead and Highgate (Glenda Jackson) that there is no total solution, but the issue remains of importance. The approach of ensuring that resources were freed for investment and to tackle poverty was strongly supported by the UK Government, as stated in their response to the last report on debt relief by the Select Committee. My first technical point derives from a quote from that response: The reduction in the export ratio from a range of 200–250 per cent. to a 150 per cent. greatly improves the prospect of countries achieving a sustainable exit from their debt problems. That should be a move forward that underscores the relationship between debt relief and poverty reduction. That relationship is crucial for half the population of heavily indebted poor countries, who live below the dollar-a-day poverty line in grinding persistent poverty; it is crucial for the one in six children who die before the age of five of poverty-related diseases, and for the 50 million children who are not in school today.

It is self-evident that heavily indebted poor countries urgently need every dollar of the $59 million collectively that, without this initiative, they would be obliged to transfer to their creditors each day. They now have that money to fight disease, recover from conflict and reduce poverty. That is good news for Uganda, Mozambique and Benin which are already benefiting from the HIPC programme.

The bad news begins when we look at the details of the debt relief and poverty link and the outcome in Cologne. It moves beyond relief given by developed countries—in all fairness, the UK is good in this respect, but Japan is poor. The HIPC definitions of sustainability reflect the dominance of G8 creditors, the inclination of those creditors to favour certain client countries and a reluctance to absorb losses that mirror mistakes of past initiatives.

That raises two questions. First, does the G8 approach help debt sustainability? The answer to that is, clearly not. Consider the following comment on the World Bank's criteria for HIPC debt sustainability as quite narrow from an overall development perspective. It does not deal with issues of domestic debt, which are important for fiscal sustainability, nor does it measure the adequacy of public resources to address priority development programmes after debt service has been paid. That is not a comment from Jubilee Plus or a non-governmental organisation; it is the World Bank's own assessment of its initiatives, which was included in a document entitled "The Challenge of Maintaining Long-term Debt Sustainability". Even the World Bank believes that its own criteria are quite narrow from an overall development perspective.

The decision on how much debt to cancel is based on a series of projections about the state of the economies of HIPCs in the next 15 to 20 years. The sustainability of the debt is therefore judged against expected levels of exports, revenues and GDP. If export growth proves lower than projected, it is clear that debt relief is likely to become unsustainable. That is a serious problem, which prompts my second question. Why has the World Bank set such optimistic economic projections for debt payments? In almost all cases, the World Bank has suggested significantly better economic performance by HIPCs in the next decade than they have managed in the previous one.

Moreover, the World Bank has assumed a relatively neutral external environment, and has not taken into account the vulnerability of HIPCs to external shocks. Obviously, the impact of 11 September looms large, but the problem existed even before then. If one compares previous GDP growth for the 23 HIPCs with current World Bank projections, there is a considerable and disconcerting difference. From 1990 to 1999, GDP growth for the 23 HIPCs was 3 per cent. Why, therefore, does the World Bank predict nearly double that average—5.5 per cent.—for the period 2000–10?

Furthermore, in the past decade, all 23 HIPCs undertook IMF reforms and in 1999, all experienced the IMF lending change from the enhanced structural adjustment facility to the poverty reduction and growth facility. However, none experienced any dramatic growth improvement at that time. As my hon. Friend the Member for Aylesbury (Mr. Lidington) pointed out, the forecasters Standard and Poor's predict an average growth of just 2.5 per cent. for those countries in the next 15 years, which is a long way short of 5.5 per cent. Nor are forecasters such as Eurodad particularly optimistic. It is clear that, even with debt relief, the low growth of HIPCs will not suddenly be reversed. The World Bank has set itself a tough and quite possibly elusive mythical gold standard of performance for the HIPCs.

That brings me back to the G8 announcement on the reduction of export ratio. I apologise for using such shorthand phrases—hopefully, those who take a close interest in these matters understand them. Given the World Bank's 150 per cent. criteria, some countries will not meet the sustainability threshold soon enough. Burkina Faso will have to wait until 2007. This autumn, I and several other hon. Members attended the Inter-Parliamentary Union conference in Burkina Faso. All of us took the opportunity to do exactly what the hon. Member for Hampstead and Highgate advocated: we talked, so far as was possible, to people on the ground, as she put it. Burkina Faso cannot wait until 2007—it, and countries like it, need help now.

Under the terms of the criteria, Rwanda will not receive help until 2008. This morning, the hon. Member for Putney (Mr. Colman)—I hope that he will catch your eye, Mr. O'Hara—and I were fortunate enough to meet the Rwandan Speaker, who made it clear that what is being achieved in Rwanda is very impressive. He also made it clear to us and other members of the Select Committee that for Rwanda the most important thing is poverty reduction. Every single person on the streets in Rwanda wants a reduction in their grinding poverty. He further pointed out the considerable efforts and tough decisions that the Rwandan Government and people had to make simply to get into the HIPC programme. He said that, as far as possible, everyone in the country will be involved in drawing up the poverty reduction strategy, so that there will be public ownership. Rwanda deserves to be rewarded for that effort sooner rather than later. Likewise, other countries such as Tanzania must wait until 2010.

The problem is more immediately compounded by the World Bank's use of debt to export ratio instead of debt to revenue ratio. It is clear that two countries, Chad and Zambia, have debt to revenue ratios above 250 per cent., but because their debt to export ratios are below 150 per cent., they are deemed sustainable. Is that not Mickey Mouse mathematics? There must be an alternative, more accurate measure. Some doubt should be cast on the World Bank's criteria when most of the 23 HIPCs have higher export than revenue levels.

Consider four such countries: Bolivia, Malawi, Rwanda and Burkina Faso. Each has a different economic pattern, because each has a higher debt to revenue ratio than debt to export ratio. Each therefore sees its chances of debt rescheduling decrease. Surely there should now be more tailored policies for specific countries. I will return to that important point.

What is the economic impact of the World Bank's criteria? Countries with higher debt to revenue ratios that are deemed sustainable—Chad and Zambia—are being made to sweat economically just to have a scintilla of sustainability. In those countries, debt servicing will have to come before health and education services. The World Bank will be seen, in principle, to be giving to the people of those countries but, in practice, will be taking. That cannot be right.

So perhaps the good news is not all that good. The difficulties are not confined to Chad and Zambia. They are compounded when we consider the economics of all HIPC countries since 11 September. A recent report by Jubilee Plus noted: the greater fragility and vulnerability of their economies has not been considered at all. There has never been a more relevant time to consider that fragility and vulnerability. As has already been mentioned, commodity prices are falling. Such countries' economies rely on coffee, cotton and tobacco. The prices of those have already fallen by 7.4 per cent. this year, and the World Bank now expects them to fall further.

That will clearly lead to fragility in those countries' debt sustainability. It will exacerbate further the debt payments of Zambia, Tanzania, Senegal, Mauritania and Cameroon, which already exceeded those countries' combined health and education budgets. According to Oxfam UK, the effect will be that a HIPC's debt payment of $2 billion per year will nearly equal the $2.7 billion cost of education and health in those countries. Less money will be spent on, for example, combating HIV/AIDS, although recent reports suggest that, on current trends, a quarter of Africa's population will be vulnerable to that by 2015.

My point, which I am sure that the Financial Secretary to the Treasury will take on board, is this: we should examine the mechanisms that are meant to be helping the HIPC countries to see whether they are really doing what we intended. What is happening is, perhaps, not what was intended. Earlier debt relief programmes such as the Baker plan and the Brady plan lacked development sustainability and a focus on developing countries economically and politically.

There is no question but that HIPC is a massive improvement. However, poverty reduction is essential. For example, it strikes me that with better education in HIPC countries, we will see generations with better health and opportunities and that are better placed to build economies, rather than being burdened with debt. In the Financial Times recently, Oxfam UK stressed to the G8 countries the importance of more debt relief, more aid and more trade access to the HIPCs after 11 September. The newspaper noted that disentangling the direct effects of September 11 from existing weaknesses in the world economy is not easy". Whatever the problems of disentanglement, 11 September tragically happened to the world—including its poor countries—and all will now have to live with the consequences.

In the week following the attacks, US trade figures showed a dramatic slump, which suggested an economic decline. There followed a collective operation to reduce interest rates in the United States, the United Kingdom and the euro zone. HIPCs and similar countries now need extra help.

Why under the International Monetary Fund and the World Bank are vulnerable food producers in HIPCs locked into unequal trade bargains when we remove trade barriers? Why has the EU not honoured its trade commitment to allow HIPCs proper access to northern markets? I could go on. Clearly, trade liberalisation must be considered carefully. In three days, at the World Trade Organisation summit in Doha, the world will have an opportunity to launch a new trade round and provide reassurance of an optimistic economic future. There is now a chance to tackle poverty through trade liberalisation.

A report from the Centre for Economic Policy Research on trade liberalisation and poverty convincingly asserts that trade liberalisation can have a direct impact on poverty … through its impact on the government's fiscal position. That is desperately needed and would directly assist HIPCs in dealing with their debt and developing not only sustainability but stability. The report stresses that the impact of trade liberalisation is very country-specific That means country-specific policies on trade, in a different manner to HIPC debt relief and could mean the plugging of another gap in sustainable debt.

The report further suggests that trade liberalisation would mean that some service reforms can aid the poor directly—for example, those in transport, health and education. That is simply not happening now. Surely, debt and development might be sustainable through the liberalisation of trade.

Is there another approach? Yes, although it would clearly involve the reform of G8 and HIPC status. Jubilee Plus has called for a new, independent and transparent process that would give poor countries the mandate to declare an emergency standstill on debt, when such payments became unsustainable. It calls for the right of such countries to have their debt sustainability determined by an independent and publicly accountable process. That strikes me as a firm and fair approach to debt relief. It is a call that would require broad interpretation of article VIII(2)(b) of the articles of agreement of the IMF and that has recently received the support of the UN Secretary-General.

Would that not be better than widening to HIPC 3? The proposal would mean that more than three countries—Uganda, Mozambique and Benin—would have the chance of sustainable debt in the near future. It is a reality that, under even the present HIPC scheme, seven countries of the 23 will still be living with unsustainable debt for the foreseeable future. The World Bank openly admits that debt relief has failed for those countries. The effect of that failure will be felt by the people of such countries for years to come.

The good news is that there has been some progress on debt relief, and the Governments of rich countries have evinced a willingness to help the people of poorer countries. The bad news is that the methodology of relief makes sustainable development difficult. We need to do much more for millions of poor people to give them the chance of leaving lives of grinding, unremitting poverty. I hope that the Financial Secretary and the Treasury team will continuously review the HIPC mechanisms, to ensure that they work as intended.

4.23 pm

Mr. Andy Reed (Loughborough)

I join in congratulating the Government on finding time for this extremely important debate. It is timely given the topic of debate in the main Chamber; the two subjects are inextricably linked.

I should like to review the issues that pull us together. The matter has total cross-party support: in the past Parliament, my hon. Friend the Member for South Swindon (Ms Drown) and I worked closely with the hon. Member for Stone (Mr. Cash) on debt issues. We are pleased that we are now building on that success and that many MPs—literally hundreds—are working together to ensure that the issue does not go away. Part of the problem with the Jubilee 2000 campaign was that it had an end date. Unfortunately, the issue has not gone away. In fact, even more may need to be done now than previously, because there is a feeling that we have achieved something whereas we have not.

I have only one rider: debt relief is not a panacea. I have seen some interesting figures, but the basic one is that if every country in the world met its UN debt-relief target of 0.7 per cent. of GDP, debt relief would look like a picnic. Such relief is extremely important for the countries that we are discussing, and we can talk about the countries that are just outside HIPC and others that should be included. However, it is important to remember that debt relief is only part of the overall solution.

I became involved in politics in the first place on the basis of debt relief and third-world debt. I belonged to a Church youth group that used to spend Sunday evenings discussing important issues. Someone from the Campaign Against the Arms Trade spoke to us one week, and someone talked about third-world debt the next. I wrote a letter to my MP, who is now the right hon. Member for Charnwood (Mr. Dorrell), and I am sure that I received a nice reply. However, doing that was not enough for me; I decided to get involved in politics.

At the time, that felt relatively naïve. People may recall the food mountains and wine lakes, yet every day we saw stark images of millions of people dying on our television screens. Those images have not gone away, although the food and butter mountains and wine lakes may have. There is a basic principle that the world has enough food to feed its people, but our system does not put those two things together, and that is what should drive us.

Part of the problem, which I realise as I become increasingly involved, is that we lose sight of the big picture. We have heard many statistics today—unfortunately, I have more to go through—but the most chilling was that 3,000 children will die during this debate. That is the figure on which we need to concentrate. We must remember that that is the basic reason why we are here today and put into the debate the passion and fire that I am sure brought many of us in this Chamber into politics in the first place.

I recognise the commitment of my right hon. Friends the Financial Secretary—even though he has briefly left while I am speaking—and the Chancellor of the Exchequer. My criticism of the HIPC initiative in no way indicates a lack of support from the Chancellor and Ministers in the Department for International Development and the Treasury during the years when I have worked on the issue.

It is, however, right to talk about HIPC's failings, as hon. Members have. I agree that we cannot just re-jig things and shuffle around the deck chairs. HIPC has reached the point at which its lack of credibility is recognised not only by NGOs and Jubilee Plus but by the World Bank. We have heard various quotes, which I shall not repeat, but World Bank reports show that there are fundamental flaws in what is being done.

Returning to the big picture, we need to ask what new structures are required and what a new HIPC should look like. I am not talking about a new enhanced HIPC or HIPC 3; we need to start again and perhaps base it on the informal workings of the Paris Club.

One difficulty, which I think my hon. Friend the Member for South Swindon mentioned, is that countries such as Japan, which has tremendous debts compared with those of the UK, are still not playing ball. I therefore call on the Government to act unilaterally wherever possible. I know that there are arguments against doing that, but when we consider the problems with HIPC, there comes a time when we have to go the extra step. I hope that the Minister returns to the Chamber so that I can repeat that point when he is here.

Other Members will know from their constituency postbags that debt relief is certainly not a minority issue. I have the honour of representing Loughborough, which includes the Quorn hunt. Foxhunting tends to produce a large postbag. I was pleased this year when the Jubilee 2000 campaign letters outnumbered those from foxhunters and anti-foxhunters. It was a good indication that at last people recognised the importance of the issue and were conversing about it, especially in view of the chilling fact that during this debate 3,000 children will die, as they do every day.

I shall not go over the facts and statistics of HIPC's achievements and the problems involved as other hon. Members have already done so and time is short. We should focus on HIPC's success stories. In Uganda, for example, HIPC's ability to deliver on the poverty reduction programme means that money earmarked from the savings on debt relief has gone directly into primary schools and primary education. The Uganda Government have been able to double the number of primary school places available within three to four years, which is a relatively short time, and by 2004 all children may have access to primary education.

As the Minister said, it is so important to get the basics right; shifting the emphasis of the money for debt relief to health and education will give the next generation's economy the sustainability that it lacks at present, as even the World Bank and the IMF recognise.

Mr. William Cash (Stone)

The hon. Gentleman and I have worked closely together on this matter for several years. Does he agree that it is also necessary to encourage enterprise in the economies, because if the money saved as a result of debt reduction goes back into the economies, roads and transport infrastructure can be built? It is not just a matter of health and education or even of human rights but of generating what President Museveni has constantly written about in his books: self-help in the country's economy, creating wealth from within the population, generating enterprise and encouraging small businesses.

Mr. Reed

I entirely agree with the hon. Gentleman, with whom I have worked closely on the issue for some time. That such co-operation is possible is a strange thing about the House that is difficult to explain to constituents and others. The hon. Gentleman's great knowledge on the subject is something that I have welcomed in the past few years, despite our differences on a range of other issues. It is nice to hear him talk about something other than Europe.

The hon. Gentleman is entirely right; health and education are important for the next generation, but economic sustainability is important for countries too, as they need to be self-sufficient. That touches on other, interlinked, issues raised in the debate that have been affected by commodity prices since 11 September. As I said earlier, debt relief on its own is not a panacea; it has to work in conjunction with aid and be taken into account in world trade talks if we are to ensure that these countries have a sustainable, long-term future. We do not want them to come back in 20 or 30 years' time with the same problems.

HIPC's failures have already been discussed, but there are a series of questions to which I should like the Government's reply. I am delighted at the lead taken by the Chancellor and the Prime Minister in the G7 and the G8 to push the matter on to the international agenda. I am far from impressed by HIPC's performance; however, we can use our influence on the IMF and the World Bank to make these poverty reduction programmes work for the poorest people.

As hon. Members have said, we need to take a bottom-up approach to the problem. I have been doing some research and I have pages of tables. Although I am not 100 per cent. certain one way or the other whether the programmes are working, the evidence shows that they have not made one jot of difference to many of the world's poorest people. That is how I measure whether the programmes are working; we need to look at the situation from the perspective of the people we are trying to help.

It is difficult to get something from the Dispatch Box to the doorstep; an announcement in the House does not necessarily translate well to our constituencies. It is difficult enough getting to Loughborough; trying to apply some of the policies to far-flung places around the world that desperately, and quickly, need our help adds to the complications.

There are serious concerns about HIPC. Let us find a way to move beyond just re-jigging the furniture and having a HIPC 3. We should consider new ideas, but we have to consider how those ideas should be implemented. The IMF and the World Bank clearly approach this from a banking perspective, yet, ultimately, the people we are trying to help are not banking customers. They are not even the Governments. They are the people on the ground, and the World Bank and the IMF having a veto over these issues makes the situation extremely difficult.

The example that I have heard is that of a president—I shall not name the country—who wanted to present his own poverty reduction programme to the board of the World Bank but was refused by the junior official who had attended the original meetings. Although the official might have been very intelligent and had a couple of PhDs from Harvard, it is only right in terms of world democracy for an elected president to have the opportunity to present his own poverty reduction programmes to the World Bank. I hope that we can use our influence on the World Bank and the IMF to ensure that the focus of what we are doing moves away from the technical and starts to look at the needs of the individual.

It has been a difficult debate and there are many who want to contribute to it. It is also a technical debate, and sometimes we can lose the big picture and get bogged down with HIPC, structural adjustment programmes, the IMF and all the technical arguments. I simply want to ensure that we focus on people. I have had my highs and lows in Parliament, but one of the highs was to hear the Chancellor announce the 100 per cent. debt relief at No. 11 Downing street. Eighteen years earlier, as a naïve teenager, I wrote my first letter to a Member of Parliament, but hearing that announcement was one of the humbling and unforgettable moments of my time in Parliament. Now I realise that there is so much more to do.

I have rejected all the technical arguments that I was going to put today. I have not read out anything that I wrote down and so my notes would be of no use to anybody. I feel this from the heart. This is about people and making sure that if we have this debate in 12 months' time another 3,000 children do not die during another three-hour period. Let us move away from the technical and try our hardest to move through this mire of figures, facts and tables and focus on delivering real poverty reduction, health, education and sustainable local economies in the countries that we are trying to support.

4.36 pm

Mr Mark Hoban (Fareham)

I welcome the opportunity to speak in this debate on a subject of particular interest to me. My father's cousin was a missionary in Kenya and as a child I constantly heard stories about the role that first missionaries and then NGOs such as CAFOD—the Catholic Agency for Overseas Development—played in looking after the health and education of many people in developing countries, as well as responding to their spiritual needs. It is entirely consistent with the compassion that they demonstrated to those of all faiths and none that Jubilee 2000 has raised the awareness of the issue of third world debt. It has played a major role in ensuring that third world debt is on the agenda not just of this Government but others in the international community.

In spite of Jubilee 2000's work, the alarming fact remains that, for all our aid and support to developing nations, through successive Governments of both major parties and successive generations, what we give has been nothing compared to what we ask in return. For every £1 in grant aid to developing countries, more than £13 comes back in debt repayments. On every day in 1999, $128 million was transferred from the poorest countries to the richest in debt repayments. Although hon. Members may differ on how they would tackle the effects of poverty, that balance sheet is unacceptable. The statistics on debt are shocking in aggregate. The total external debt of aid recipients was $2,534 billion at the end of 1999, with debt service payments of $300 billion. Those figures are quite dry and do not tell us about the impact of third world debt.

Let us look at the example of Zambia. Due to the HIV/AIDS crisis, life expectancy there is expected to fall from 43 to 33 years—a level last experienced in Europe in mediaeval times. More than 500,000 children are out of school, and those numbers are not declining. Yet debt service after enhanced relief under the HIPC scheme still remains more than combined spending on health and education in 1998.

To demonstrate the effect of debt relief, it has been estimated by the United Nations development programme that for each additional 1 per cent. of gross domestic product spent on health and education, child mortality is reduced by 24 per cent. In 1999, Zambia paid $438.5 million-13 per cent. of GDP—in total debt service. The same survey reveals that, if that money had been invested in Zambian health care, child mortality would have been reduced from 202 deaths per 1,000 live births to only eight per 1,000—the same rate as in the United States.

There are countless other examples of how the burden of debt can throttle what little life opportunities are on offer in many poorer nations. Other hon. Members have spoken about the initiatives that could be followed through to improve the effectiveness of the HPIC initiative. I shall not dwell on them, but I should like to raise one issue. We have said that debt relief is only part of the picture. I would like to deal with world trade, which offers developing nations the chance of a stable path out of poverty.

It is essential that the problems of the developing nations are not considered in a vacuum of debt relief policy, because those problems are intrinsically bound up with the real world economy. I found it strange when commentators complained about the Genoa summit prioritising concerns about the world economic situation—before 11 September—and argued that priority should have been given to the third world, as if the two were unrelated. We can more easily afford debt relief when the global economy is strong, while heavily indebted poor countries are more able to use debt relief to their long-term advantage when they are also able to increase trade and output.

As in Genoa, there is a problem in that many groups seeking to alleviate third-world debt are also sceptical about the benefits of free trade. The strongest charge against globalisation tends to involve accusations of increased inequality resulting from free trade and the global economy. However, let us consider the case of east Asia.

The World Bank states that the number of people living on less than $1 a day in east Asia fell from 418 million in 1987 to 278 million in 1998. The key reason for decreasing poverty in the poorest parts of Asia was the growth of China, which saw an average rise of 7.7 per cent. a year in private consumption per head between 1980 and 1997. The underlying reason was growing trade. The Chinese ratio of exported goods and services to GDP rose from 6 per cent. in 1980 to 22 per cent. in 1988.

An article in today's Financial Times quotes the World Bank report: Abolishing all trade barriers could reduce global income by $2,800 billion … and lift 320m people out of poverty by 2015, if co-ordinated actions were also taken to promote trade and reforms in developing countries". The article goes on: There is a strong concern in the bank that poverty reduction strategies that form the basis for IMF and World Bank lending to poor countries have too little trade strategy in them. That is an important message, so I hope that the World Trade Organisation meeting in Doha goes ahead.

Mr. Simon Thomas

The hon. Gentleman has argued that globalisation and increasing world trade can increase prosperity in certain parts of the world. Does he accept, however, that some parts of the world—Latin America and sub-Saharan Africa, for example—have seen their percentage share of world trade decrease? If globalisation is to work, institutions such as the WTO and the IMF must recognise the need for sustainable development throughout the world. The hot spots during the period to which he referred should not have been allowed to arise.

Mr Hoban

The hon. Gentleman makes a valid point. We must ensure that trade policies are sustainable and reasonable. I agree that that is not as simple as saying that free trade will solve the world's problems—far from it. Trade reform must take account of different factors, many of which diverge, including environmental considerations. Indeed, an article on www.ft.com today referred to the impact on the next world trade round of environmental concerns raised by the EU and the worry of many developing countries that those concerns were being used as a pretext for legitimising protectionism, particularly in agriculture. We must ensure that the next world trade round considers the concerns of developing countries and that environmental arguments are not used as a form of covert protectionism.

Notwithstanding the concerns of the hon. Member for Ceredigion (Mr. Thomas), growing free trade between prosperous nations and heavily indebted poor countries can be a source of sustainable poverty relief, but only if it goes hand in hand with sustainable debt relief.

4.15 pm

Ann McKechin (Glasgow, Maryhill)

I declare an interest as a member of the council of the World Development Movement.

The Government should be commended for calling for a new international effort to tackle poverty, especially after the events of the past few weeks. There is little prospect of meeting our target of halving the number of people in absolute poverty by 2015 unless we crack the problem of massive debt cancellation. Only 23 countries are at decision point in the HIPC scheme, but another 50 countries have been identified by the Jubilee Plus campaign as being heavily indebted and poor. That shows the extent of the problem that we still face.

Some Members mentioned the failures of the HIPC scheme, into which many of us who campaigned on debt put much reliance and effort. Its aim—to reduce debt to a level where it could be repaid—was fundamentally flawed and written to the criteria of the creditors not the debtors. It ignored the latter's problems of development and poverty and how they would tackle them. Northern aid donations are still being used to pay off debts, and the Department for International Development last year used aid funds for Sierra Leone's debt repayments to the World Bank and IMF. As has been said, some African countries are paying $1.4 billion per annum on debt repayment, rather than using those resources for health, education, preventing AIDS and economic development.

The Chair of the International Development Committee spoke about the difficulties of calculating sustainability. A recent internal World Bank report stated that it overestimated growth level in HIPCs. If their exports continue to grow at just over 4 per cent., as they did in the 1990s, rather than at the growth rate estimated by the World Bank of over 6 per cent.—which seems excessive in view of world events—they will never reach a sustainable level of debt servicing, and that is in the World Bank's narrow criteria. It is also true that the World Bank is giving relief only on debts incurred at the point when the debtors announced that they had a problem with their debts. Debts incurred after that date are not taken into account in the sustainability equation and the criteria take no account of the extent or depth of poverty in a country.

Many hon. Members have mentioned today that HIPCs are still paying more in debt servicing than they are in their combined health and education budgets. The debt relief that was announced at Cologne has resulted so far in only 6 per cent. of HIPC debt being relieved and, as has been stated, further payments will not make any substantial difference if the current scheme continues. Government revenue should be spent first on poverty reduction, with resources left over being used to repay debts. As early as 1988, the International Development Committee accepted that unstable debt was debt that cannot be repaid without damaging the prospects of economic and human development. Studies estimate that if we take a rights-based approach to debt relief, we are talking about having to write off more than $600 billion owed by 71 countries.

HIPC applies only to official creditors—the World Bank and the development banks—but much of the poorest countries' debt repayment is to private international financial institutions that have not undertaken any risk. If a country does not repay its debt, the World Bank suspends relief to it. Banks are not made to take the penalty of bad lending decisions, which runs counter to normal commercial practice. Where there is no risk, there is no penalty and so the penalty falls on innocent people in third-world countries. On the other hand, private international institutions actively promote free market policies that have driven the pace of globalisation on behalf of the richest stakeholders and that create injustice in the world economic system.

It is also disgraceful that some donor countries have put pressure on HIPC countries to withdraw from the scheme. Japan, for example, has put pressure on such countries as Ghana and Laos to withdraw, on the basis that instead of debt relief they will be given grants or aid tied to Japanese goods. Again, we have had the difficulty of a delay in payments from the US Congress, which has in turn slowed down the entire procedure.

I also have doubts about the poverty reduction strategy papers that were introduced as part of the Cologne settlement. They were supposedly designed by the recipient countries and endorsed by the World Bank and the IMF but they bear a close similarity to the structural adjustment programmes that attracted so much criticism in the past decade. A quarter of the developing countries' debt has been estimated to be odious—that is, debt that has unwisely been made to dictators, particularly those backed by the west during the cold war. My hon. Friend the Member for South Swindon (Ms Drown) made a telling reference to the case of Pakistan and the debts provided under the regime of President Zia.

G8 leaders increasingly point to the value of other resources to hide their inaction on debt. I have severe doubts about the global health fund, which is in no way adequate to tackle the problems faced by the developing world. It applies a top-down rather than bottom-up policy, which does not bode well for good international relations. The issue of how trade can assist the situation has been mentioned. I agree that we have to look carefully at the next round of trade negotiations to ensure that we allow better trade terms for the poorest countries. However, only about 1 per cent. of world trade comes from the very poorest countries. Africa receives only 1 per cent. of foreign direct investment flows. Even the proposed trade reforms are unlikely to benefit the very poorest countries in the short and medium term.

The UN Secretary-General, Kofi Annan, has called for radical debt relief and has said that if we are to meet the international development targets to which the Minister referred all donor countries and private international financial institutions should consider wiping off all their official debts. It is widely thought that there is a link between conflict and poverty. My hon. Friend the Member for Hampstead and Highgate (Glenda Jackson) made some telling points on the subject, but debt reduction would reduce the economic distress that leads to armed conflicts. Ultimately, the eradication of poverty comes down to political will. It is not just a question of pure finance. Leaders in the north who signed up to the international development targets will have to find sufficient funds if they are genuinely to support the poverty reduction process. We need immediately to stop taking payments from the poorest countries instead of waiting six, seven or eight years until they have reached some completion point that has been arbitrarily decided by the World Bank. All creditors need to commit to a 100 per cent. cancellation of debt for all the poorest countries.

We should reassess the basis of poverty reduction strategy papers so that they are the subject of valid discussion between the north and the south rather than an imposed solution. We need to consider a fundamental change to the multilateral trading system that permits a huge amount of northern protectionism, while liberalising southern markets without much protection to them. Trade should instead be focused on reducing world poverty. We need to begin new consultation and to engage in new dialogue between the north and the south, to establish a way of dealing with the money freed by debt cancellation. If we consider those aspects of the matter, we shall achieve the targets for which we have so long campaigned.

Several hon. Members

rose—

Mr. Edward O'Hara (in the Chair)

Order. I advise hon. Members that it is my intention to call the Minister not later than 5.20 pm.

4.55 pm

Mr. Simon Thomas (Ceredigion)

There is always a danger that debates in this Chamber will be overshadowed by those on the Floor of the House, and no doubt today there is an even greater chance of that. However, what we are discussing is important in the context of the debate on the coalition against international terrorism. I dare say that the ideas and views emerging from members of all parties in this Chamber will be of more use to the Government's long-term efforts to defeat international terrorism and to settle a new world order than those to be heard on the Floor of the House. Not having been present in the House, I cannot be sure of that, although a good deal more sense is being spoken in this Chamber—and there is more consensus too. It is only by such consensus that we shall progress.

I recently had the pleasure in the House of meeting Paul Robeson Jr, the son of the American singer and civil rights campaigner. He reminded hon. Members of the words of his father down the telephone line to the miners' eisteddfod in Porthcawl in 1955, when the House Committee on Un-American Activities had stopped him travelling to Wales. As well as singing with the miners—which has become part of folk history in Wales—he spoke of "abundance, dignity and peace". It is my view and my party's view that we will not get peace until we secure abundance and dignity for the developing world—and particularly, now, in the middle east and the countries around Afghanistan.

We need to discuss abundance. We have riches in abundance in this country and the question arises how we can share our development, progress, technology and wealth with developing countries so that they also receive political progress and dignity, which will in turn lead to peace.

I had many positive things to say about the Government's present policies, which are very proactive, but I shall not say them now—not as a criticism, but because those things have all been said. Instead, I shall straight away discuss the difficulties. The hon. Member for Aylesbury (Mr. Lidington) made some pertinent points about changes that may occur with respect to international development aid. I should like to hear from the Minister about ensuring that, in cementing the international coalition against terrorism and related activity, we do not try to provide aid or debt relief to countries in a way that undermines some of their long-term aims. We shall shortly consider the International Development Bill for the second time. That Bill does away with tied aid and it is important that in doing that we do not introduce a form of tied debt relief. Are we looking to the political nature of some countries that we want to help?

I shall comment on Pakistan shortly, but I ask the Minister, if he cannot respond on my point today, to think about an imminent decision that the Government will have to take on the Ilisu dam. He mentioned the Export Credits Guarantee Department in his opening remarks. It is understandable that there might be pressures on the Government to give the go-ahead for the Ilisu dam, despite a damning environmental assessment, because, of course, we want Turkey on board in our efforts with respect to Afghanistan and related areas. We must think not only of the economic benefits that the Ilisu dam might bring, but the huge destabilising effect with respect to water resources in the middle east. That question brings home the difficulty of some of the decisions that the Government must make.

It is unfortunate that this debate is taking place when not only this country but all the Development Assistance Committee countries—the richest countries in the Organisation for Economic Co-operation and Development—are contributing less as a proportion of GDP to development aid. Last year, that proportion dropped from 0.24 per cent. to 0.22 per cent. I accept that in the past year the Government have considerably increased the share of GDP given to international development. However, we are still well short of the DAC average of 0.39 per cent. Next year, we may reach 0.33 per cent., but that still falls well short of our international commitment to reach and maintain 0.7 per cent. Although the current rate of progress should be welcomed, it means that it will be 50 years before we reach that figure. Only four countries have reached 0.7 per cent., so we are in a majority, but it is not a majority to which we can be proud to belong. We should try instead to join the minority.

Many things have been said during the debate on the difficulties of the HIPC process, and many hon. Members have prayed in aid the important report by Jubilee Plus entitled "HIPC—flogging a dead process". From that report, hon. Members have understood that there are many questions to be asked about HIPC, but I will not reiterate those questions. I underline only what I take from that report: the HIPC process, however much it benefits countries such as Uganda, Mozambique and Benin, manages the long-term debts of those countries more than it allows them an exit from those debts. All hon. Members who have contributed to the debate want heavily indebted countries to come out of debt, not simply to manage their debt better. The Government are faced with the challenge of ensuring that a new or alternative HIPC initiative will enable them to do that.

Countries in conflict that lie outside the HIPC process form another important issue. It is frustrating that the countries most in need are in conflict and that we cannot deliver aid to them, as we cannot ensure that the aid gets to the people who need it. However, we should remember that the G8 statement after the Genoa summit said: Debt relief—particularly the Enhanced Heavily Indebted Poor Countries initiative—is a valuable contribution to the fight against poverty, but it is only one of the steps needed to stimulate faster growth in very poor countries…In particular we look to countries affected by conflict to turn away from violence. When they do, we confirm that we will strengthen our efforts to help them take the measures needed to receive debt relief. There is no more pressing example of violence in developing countries at the moment than what is happening in Afghanistan and surrounding countries. We know that Afghanistan was the poorest country in Asia before 11 September. It had already suffered 25 years of civil war and three years of drought, and one quarter of Afghan children were dying before their fifth birthday. The country was in dire need of aid before 11 September, but the reasons for that are complex and go back further than the Taliban. I am anxious to know how we can deliver aid to Afghanistan in the course of a conflict—if it is not a war, it is certainly a conflict. That measure is being discussed in the House at the moment, but we must bear in mind that we are trying to defeat an opposition, a Government and a terrorist network in one of the poorest countries of the world.

Associated with the problems of Afghanistan are the problems for world trade following 11 September. The hon. Member for Twickenham (Dr. Cable) made that point. The World Bank has already estimated that the poorest countries will suffer most as a result of the terrorist attacks, mainly due to commodity prices, as the hon. Gentleman said. The World Bank expects an extra 10 million people to fall below the poverty line of $1 a day, which will lead to an extra 20,000 to 40,000 child deaths. Although we all know about the scale of the attacks in Washington and New York, we should bear in mind the additional 20,000 to 40,000 deaths as a consequence of them. We must redouble our efforts to ensure that international aid reaches the places where it is most needed.

I conclude by referring to a couple of matters that have not so far come up in debate. First, the need for sustainable development should feature more strongly in international aid. I hope that we shall be able to amend the International Development Bill to put sustainable development on a far more secure footing in the legislation than it was when the Bill first came before the House. The Tyndall Centre for Climate Change Research carried out work about a year ago on the countries most likely to be affected by climate change. They were Tanzania, Sierra Leone, Ethiopia and Afghanistan. Sustainable development must be included in international aid programmes.

Secondly, the Tobin tax has not been mentioned so far; perhaps it should have been. I know that the hon. Member for Putney (Mr. Colman) chaired a meeting last night on the subject, and will no doubt expand on it in this debate. If the Government are not in favour of the Tobin tax or something similar, they have a responsibility to explain what other form of global tax there should be to help to fund international development. If we are moving towards a system in which we support global Governments and, through the HIPC initiative, to a global programme of relief for the poorest and most heavily indebted countries, we must consider how we can use taxation measures in the next few years to help those countries.

I look forward to the Minister's response to this interesting and varied debate.

5.5 pm

Mr. Tony Colman (Putney)

I associate myself with the remarks of the hon. Member for Ceredigion (Mr. Thomas), and with those of my right hon. Friend the Financial Secretary, who spoke about the link between this debate and that on the Floor of the House. The long-term way to deal with terrorism must be to tackle poverty worldwide. The world needs to make a fresh start in dealing with debt relief and poverty reduction. However, as the hon. Member for Aylesbury (Mr. Lidington) said, only 20 per cent. of developing countries are involved in the HIPC initiative; 80 per cent. are not. We need to expand the way in which we offer debt relief to the poorest countries of the world.

I noted the Financial Secretary's observation that conferences are all very well but what really matters is what happens on the ground. I agree. Nevertheless, there are some interesting conferences coming up—four in the next 11 months. The World Trade Organisation is meeting in Qatar next week and the following week there is the meeting of the IMF and World Bank. I hope that the United Nations conference on financing for development in Monterey, Mexico in March 2002 will bring together those two. That will lead to the world summit for sustainable development in Johannesburg in September 2002. Thus, there is a road map for updating HIPC and making progress with debt relief and poverty reduction—learning the lessons from what we have got wrong in the past five years and building on what we have got right.

To make progress, and to ensure that debt relates to Governments' capacities to collect revenues, we must ensure that there are sustainable debt procedures. All countries have to borrow against their tax base and their Governments should ensure that only debt able to be repaid is taken on. That is an important principle. Parliaments that represent democratic civil society should be required to approve all new borrowing arrangements worldwide. I should certainly like that requirement in any update of the HIPC initiative. Those Parliaments should receive regular reports on the performance and use of those loans to ensure that they are going to areas of which they approve, especially in terms of poverty reduction.

That idea is not a new one. It was agreed by the Inter-Parliamentary Union conference in Berlin in December 1999, at which a resolution was passed relating to a new global financial architecture. I was honoured to serve on the drafting committee of that conference. On my return, I discussed the matter with the Chancellor of the Exchequer who, after expressing doubts initially, said that it sounded like an excellent idea. Will the Financial Secretary—not necessarily today, as I have sprung it on him—pursue the issue and determine whether it can be taken forward? It is important that any new loans, especially if they relate to the way that the HIPC initiative progresses, must be approved by civil society which, so far as I am concerned as an elected Member of this House, is represented by parliamentarians.

Mr. Cash

Does the hon. Gentleman agree that there must be rigorous public accounting procedures in each of those countries and that those should be consistent with international accounting standards?

Mr. Colman

I certainly agree with that. The move towards international accounting standards should ensure that that is implemented throughout the world. My further point was that, to reassure the lower end of my postbag, it is crucial that the HIPC arrangements are accountable. The majority of letters that I receive are very much in favour of HIPC, but others write to tell me that they think that it is disgraceful that debt is being forgiven because the money saved is not being spent in the way in which I claim. It is important that Parliament has a role in each of the HIPC countries to review how the poverty reduction strategies are progressing. I am concerned that organisations such as Jubilee Plus has not sufficiently reviewed the situation. It needs to follow through to see what is happening.

As the hon. Member for Banbury (Tony Baldry) said, he and I and other hon. Members visited Ivory Coast and Burkina Faso, which are part of the HIPC initiative, in September. Both of those cases are interesting. Burkina Faso is just coming to its decision point. Ivory Coast has completed its passage through the HIPC process and there is a decision pending about whether there should be a further HIPC procedure there. There was great consternation among developed countries and multilateral institutions that there was still no anticorruption legislation in Ivory Coast. The delegation met all its political parties, but there was no consensus on how such legislation might proceed. There was rumour of a case in which 18 million euros had been embezzled by a member of the Government, which had not been followed up. I would hope that Jubilee Plus would examine that sort of thing.

Similarly, in the case of Burkina Faso, we heard allegations from non-governmental organisations based in the United Kingdom that civil society was not being allowed to review the poverty reduction strategy. The organisations were excluded. It is important for Jubilee Plus, which I strongly support and which is doing an excellent job, to ensure that the other half of the process—the review of how the HIPC initiative is working in the countries that have undergone the process—occurs. As the hon. Member for Banbury mentioned, we saw an excellent example of the other part of the process when we met the Speaker of the Parliament of Rwanda, where it is working very well indeed.

This debate is about poverty reduction, but hon. Members have extended it into other areas, so I seek the indulgence of the Chamber in doing so too. It was remarkable, in Ouagadougou, to be able to put one's bank card into a high street bank ATM and remove CFA francs. The CFA franc is the currency of Burkina Faso and it is linked to the French franc, which is linked to the euro. Extraordinarily, some 70 million Africans are in the eurozone—as it will be from 1 January 2002—and already have an exchange rate. That is a good example of the kind of alternative way of reducing poverty that should be examined. It is interesting that, in my experience, many Commonwealth countries have lost out significantly in currency depreciation since their currencies ceased to be linked to the pound sterling in the 1970s.

I have been talking about Lomé countries, and one of the themes of the debate has been the need to examine trade issues, which are also linked to poverty reduction. We need to ensure that access is tariff and quota-free. I am disappointed that the "Everything but Arms" initiative has been delayed for up to seven years and I hope that that can be brought forward. We need open access for developing countries to developed countries.

As the hon. Member for Fareham (Mr. Hoban) said, the Financial Times article explores the huge benefits for developing countries. The World Bank said: Expanding trade could well increase annual GDP growth by an additional 0.5 percent over the long run—and by 2015 lift 300 million people out of poverty in addition to the 600 million escaping desperate poverty with normal growth. Developing countries stand to gain an estimated $1.5 trillion of additional income in the 10 years after liberalization policies are begun; developed countries would see their incomes rise by some $1.3 trillion. The Government have not made a statement about what goals they believe are to be attained in Doha next week, but the World Bank has said that, for developing countries to benefit, developed countries must be willing to put the issues of agricultural products and textiles on the negotiating table because those are what the world's poor produce. A round that brings down barriers in agriculture, advances the timetable on textiles and agrees to curtail anti-dumping while taking up the concerns of industrialised countries has the potential to be a true development round. I hope that the Financial Secretary will have a word with my right hon. Friend the Secretary of State for Trade and Industry, who is the lead Minister on the issue, to see whether we can make progress on those matters.

The WTO meeting will be followed by the IMF-World Bank meeting. There, we shall have a great advantage because my right hon. Friend the Chancellor of the Exchequer has a chairing role at the IMF and my right hon. Friend the Secretary of State for International Development plays a strong role at the World Bank. I hope that they will take up the proposals of numerous colleagues in this debate for revising the HIPC scheme and for introducing emergency standstills and independent arbitrations—those ideas are well worth exploring.

I am also concerned that Ministers should pick up on the comments of the hon. Member for Twickenham (Dr. Cable) about countries such as Tanzania, Pakistan and many others, which receive large numbers of refugees and should get specific IMF help. Programmes are available in addition to the HIPC scheme for countries that are coming out of conflict, but it is important that we also consider countries that receive refugees.

I was pleased that the hon. Member for Ceredigion picked up on my wish yesterday to debate the Tobin tax, which I hope the Financial Secretary will consider. There is new evidence on how it might work and my right hon. Friend should read the technical note to the Zedillo commission, which John Langmore, the deputy Secretary-General of the United Nations, wrote on 21 August and which describes in detail how the proposals could be implemented.

The Continuing Linked Settlement system, which will come on stream at the beginning of 2002 and be based in London, will enable all currency transfers around the world to be put through a single system. The argument has been that the money will simply move offshore and into tax havens, but the post-11 September drive to stamp out tax havens and to deal with money laundering and hot money movements will make it possible for the world financial community to decide that it is best to put all currency transactions through one system, which will have sufficient capacity and ensure that the Tobin tax works. The small level of tax—0.001 per cent. of the currency transaction—would produce $53 billion, which would provide the basis that many people want for achieving overseas development assistance levels. As my hon. Friend the Member for Glasgow, Maryhill (Ann McKechin) said, the poorest countries would not benefit immediately from trade development. It is important to recognise the fact that overseas development assistance is needed and that a new source of it must be found.

Three or four conferences will soon take place and form an important map for dealing with debt relief and poverty reduction. After each conference, I look forward to further parliamentary debates so that we can hear how the Government have fared, hold them to account and move towards a world without poverty, which is what we all want.

5.19 pm

Mr. Boateng

The debate has been highly worth while and characterised by passion and conviction from all. It also showed experience and knowledge, not least in the considerable grasp of technical detail that one would expect from such distinguished members of the Select Committee on International Development as my hon. Friend the Member for Putney (Mr. Colman) and the hon. Member for Banbury (Tony Baldry). They certainly did not disappoint in that regard, and were right to be technical in such a way. We need to develop technically efficient and effective vehicles if we are to deliver a product that reflects the values and principles that we all espouse about the importance of reducing poverty, and the contribution of health, education and trade to that aim.

Some of the trenchant technical criticisms made in the past three hours, not least of the heavily indebted poor countries initiative—I intend to write to hon. Members to do justice to the nature of their arguments—draw attention to the need to ensure that we devise such mechanisms correctly. If we do not, there is a danger that they will be blown off course.

No technical mechanism could guarantee to guard against a crisis such as that sparked by the events of 11 September. Given that HIPCs are likely to be especially adversely affected by the recent economic slowdown, it will be important to ensure a trenchant analysis of its impact on them and their capacity to fulfil the process. At the G7 meeting of Finance Ministers, my right hon. Friend the Chancellor of the Exchequer went out of his way to emphasise the importance of the International Monetary Fund, in collaboration with the World Bank, making a thorough analysis of the impact of the events of 11 September on sustainability and economic growth in the countries concerned. Such analysis is being made and it will be important to bear in mind the possible need to make modifications in policy and the delivery of it as a result, if that is shown to be necessary.

I want to tackle several of the points made, in addition to writing to hon. Members about some of the more technical ones. It was asserted that the HIPC initiative had failed as it would not deliver sustainable debt levels for most of its countries. It is true that recent IMF and World Bank analyses show that 67 countries will have a debt-to-export ratio above the threshold and we heard of some examples. The Government have always acknowledged that as a problem, and we shall continue to work to help those countries to exit the HIPC process with sustainable levels of debt. The assistance and contribution of the Committees of the House, of all right hon. and hon. Members and of NGOs is important.

The Government are committed in the long term—it is not a short-term response, stimulated by recent events—to supporting Pakistan's economic reform programme. We recognise that the current crisis has had, and will continue to have, an impact on Pakistan's economy and we are working with other donors to ensure that the whole reform process, including the reform relating to the entrenchment of democratic institutions, will stay on track. In the meantime, as well as taking a number of other measures, we have provided £40 million to help deal with the Afghan refugees in Pakistan and £11 million of short-term assistance to host communities in Pakistan. It is important to recognise that, as we are not major creditors of Pakistan, our influence is inevitably limited.

For reasons that hon. Members understand, Nigeria does not qualify for HIPC status. We are working with the IMF to ensure that, as Nigeria achieves the IMF programme of reform of its economy, it gains some benefit as a result. Nigeria has not dropped out of our agenda. It is a major and important nation and we are working with others internationally to ensure that its reform process is supported.

It is important to remember—several hon. Members have touched on this—that since this Government came into office a major plank of our programme has been that our relations with international financial institutions should be subject to reform. We have pioneered and championed a reforming agenda for the IMF and the World Bank, not least in view of some of the experiences that hon. Members on both sides of the House have outlined today. Those institutions still have a long way to go in terms of transparency and accountability, and in how well equipped they are to put in place the sort of programmes that deliver the changes that we all seek. I shall be writing to hon. Members on a number of issues. The Tobin tax is one.

What we have heard today is not only a justification of why it is just as important to debate the matter in this place as it is in the Chamber but a reflection of the real concerns of those whom we represent. We have done our best—all those who contributed to the debate and all those who bothered to attend—to reflect those concerns and to do justice to that vital topic.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Five o'clock.