§ Mr. Steve Webb (Northavon)I am grateful for the opportunity to discuss the progress that has been made in writing off the debts of the world's poorest countries. The subject brought me into politics—I was concerned about national and global poverty and inequality.
For a long time, I have found it offensive that we generally enjoy such an affluent life style when there is so much unmet need in the world. I welcome the initiatives of groups such as Jubilee 2000, on whose briefing paper I shall draw heavily. A year or two ago, I helped to launch the parliamentary element of Jubilee 2000, and I spoke from a platform in this Chamber, although it then had a different layout.
I welcome the Government's efforts in this context. I am glad that they have reversed the long-standing fall in the percentage of national income that is spent on aid—the change is entirely laudable. I also welcome the lead that the Chancellor of the Exchequer has taken.
I want to discuss the disjunction between perception and reality, and to outline where we should go from here. I support much that has been done. My concern about the disjunction between perception and reality is that in the public's mind debt is virtually off the agenda in the United Kingdom. People have heard the announcement that we are writing off 100 per cent. of debt, and they might have heard President Clinton say a few months ago that the Americans will do the same. They might assume that the issue is largely solved, but the Economic Secretary well knows that that is not the case. Neither the public nor the Government should be complacent about debt.
We have rightly focused on debt during this millennium year, but that should not distract us from the broader problems. Someone said to me the other day that many of the world's poorest people live in countries that are not significantly indebted. We urgently need to tackle the debt issue, but when we have done so we should remember that that effort was part of a larger agenda.
I want to respond to criticisms of the progress that has been made. The phrase, "faster, deeper, broader" stems from the idea that debt relief should move faster, that there should be more of it and that it should be applied to more countries. I received an interesting letter from the Economic Secretary, which I imagine was prepared in response to Christian Aid's "one third, two thirds" postcard campaign. She used the phrase, "faster, wider, deeper", which suggests that she sympathises with the associated goals. I hope that she will expand on her comments.
Although we have heard announcements about the speed of change, the reality is a long way behind. I recognise that that is not wholly or even largely the fault of the UK Government. I urge the Economic Secretary to use her influence and that of the Government in international organisations to speed up the process. Last September, when the Chancellor of the Exchequer was wearing his hat as the chairman of the International Monetary Fund's monetary and financial committee, he said:
If we are successful, it will be a matter not of years or months but weeks before the first country will benefit from debt relief.97WH That upbeat and optimistic statement was qualified by another statement in March 2000. The Secretary-General of the United Nations said:The deeper, faster and broader relief promised last year has yet to materialise.There is a disjunction between people's perceptions and aspirations and reality.
§ Mr. Tony Colman (Putney)Does the hon. Gentleman agree that a good reason for the delay is the need to give heavily indebted poor countries a chance to comment on the poverty reduction programme that is connected with debt write-off? I should be concerned if such conditionality were lost—debt relief should be fast-tracked.
§ Mr. WebbI understand the hon. Gentleman's point. The Secretary of State for International Development spoke of the dangers of searching for a perfect poverty-reduction scheme. We need a balance. We must ensure that debt that is written off and that service payments saved are spent on poverty reduction. I am sure that the hon. Gentleman and I agree that we should not drag out that process.
Currently, only five countries appear to benefit from the enhanced HIPC initiative, which is even fewer than was thought likely at Christmas. I want to touch briefly on some reasons for the delays. The role of the International Monetary Fund is important. If Britain's influence is relatively powerful, I hope that pressure can be brought to bear on the IMF. Jubilee 2000 has suggested that the IMF's handling of the situation in Guyana has been neither consistent nor helpful, and I hope that Guyana will shortly receive assistance.
In the context of writing off debts, international organisations such as the World Bank are apparently worried about their triple-A credit ratings. That fear seems unnecessary, and I hope that pressure will be brought to bear in that regard. As the hon. Member for Putney (Mr. Colman) noted, there are delays associated with the preparation of poverty reduction strategy papers. One hopes that that process will not be too protracted.
The role of Japan, which is a major creditor nation, has been called into question, particularly in the context of Ghana, Malawi and Benin. In respect of Japan's role and the pressure that is being brought to bear, a rather different message is being given in private than in public. If the Japanese Government are trying to prevent countries from participating in the HIPC process, I hope that the Prime Minister will tell them that such behaviour is inappropriate when he travels to Japan later this year.
§ Mr. ColmanWill the hon. Gentleman give way?
§ Mr. WebbNo. The hon. Gentleman did not make clear his intention to intervene, and I cannot give way twice.
Japan has expressed concern about the moral hazard associated with writing off debts, yet it supported its banks to the tune of billions. I hope that the Government will make it clear to the Japanese Government that that is unacceptable. The United States Congress seems unwilling to back President 98WH Clinton's aspirations with hard cash. The European Union seems to be saying, "If the Americans won't play ball, perhaps we won't do our bit." At the bottom of the pile are the people of the world's poorest countries, who have to wait while this virtual merry-go-round continues. I hope that the Minister agrees that those delays are unacceptable, and will reassure us that the Government will do all that they can to break the logjam.
Speed is important, but so is the extent of debt write-off. The perception exists that 100 per cent. of debt has been written off, but, as the Minister well knows, that is far from the case. Indeed, in respect of the five countries that have reached decision point, the average stock of debt has been cut by only 40 per cent. Debt service costs have been cut by only 35 per cent. The 100 per cent. write-offs to which reference has been made are, typically, bilateral, aid-related debt. As far as I am aware, there are at present no pledges for 100 per cent. write-offs from the IMF, the World Bank or regional development banks. Given that one third of HIPCs' long-term debt is multilateral, it is clear that we are a long way from the Jubilee 2000 goal of full write-off during this year.
To give a feel for the inadequacy of the current situation, I shall quote from the Jubilee 2000 coalition briefing. It states:
After full implementation of the Cologne deal, its first five recipients will still be paying more than half a billion dollars every year to foreign creditors—almost as much as they spend on health care.I shall give a flavour of what that means for those five countries. HIV, which leaves 1 million children orphaned, is a big problem in Uganda, and we are not doing enough for that country. In Bolivia, basic sanitation is a fundamental problem. In Mauritania, nearly two thirds of the adult population are illiterate. The problems in Mozambique have been well documented in recent months. In Tanzania, one third of children are malnourished. On average, those countries continue to pay out substantial sums, even though they are participating in the scheme, and the call for deeper action has been noted.A slightly alarming development is the suggestion that Overseas Development Administration cancellations—aid write-offs—might be taken into account in considering HIPC initiatives. In other words, as in my field of social security, it will resemble a 100 per cent. taper: every pound that goes to one area is taken from another. Clearly, that was not what the United Kingdom Government intended when they said that they would write off bilateral debt. I hope that pressure will be put on the Paris Club creditors and the IMF to ensure that that does not happen and that there is genuine additionality.
We have discussed speed and depth. Which countries should be covered by debt write-off initiatives? Jubilee 2000 has cited some very needy and deserving countries that have a strong case but are not covered. I should like to refer to two of them. Nigeria has huge debts. Due to its political history, money that it has been given has sometimes ended up in the wrong pockets. One reason why Nigeria was not in the original HIPC initiative was that it had access to borrowing from the International Bank for Reconstruction and Development. I gather that under the agreement that Nigeria is reaching with 99WH the IMF, it will not have access to any further borrowing from the International Bank for Reconstruction and Development, and only $360 million will go towards poverty alleviation—10 times less than it is due to pay in debt service. That gives an idea of the scale of Nigeria's problem, and I hope that it can be brought into the HIPC scheme.
I should briefly mention Haiti, which has been described as one of the poorest countries in the western hemisphere and is in urgent of debt cancellation. Again, it has a troubled political history.
These are not simple issues. The countries involved clearly have a responsibility to channel the money that is used from debt write-offs into poverty alleviation. However, I get the impression that creditor nations and international organisations are not seized of the urgency of the matter. Some of them—the UK Government may be exempt from this criticism—are continuing at far too pedestrian a pace, not appreciating that as every day goes by another child is missing out on schooling or another mother is missing out on primary health care. The matter is therefore terribly urgent.
I urge the Economic Secretary, the Chancellor of the Exchequer and the Secretary of State for International Development to use all the influence that they can bring to bear on the multilateral organisations and creditor nations to follow the British lead and to ensure that Britain's promises are borne out by actions.
I often raise the concerns of South Gloucestershire, my local authority, in Adjournment debates, yet the matter that I have discussed today is as important to my constituents as their local traffic or schools. Many of them feel passionately about it. I hope that the Economic Secretary shares my, and their, concerns and will offer us some encouragement.
§ The Economic Secretary to the Treasury (Miss Melanie Johnson)As a girl raised in South Gloucestershire, I am sad that the hon. Member for Northavon (Mr. Webb) did not say anything further about it. However, he has raised a very important topic, and I shall endeavour to cover as quickly as I can the points that he made.
No one can doubt the Government's commitment to reducing the debts of the poorest countries. It is clear from the hon. Gentleman's remarks that he shares that view, and I am grateful for his recognition of the Government's achievements, especially the work of my right hon. Friend the Chancellor of the Exchequer. The Government called for, and secured, a review of the original heavily indebted poor countries initiative and pressured our G7 and international colleagues to adopt challenging standards on debt reduction and the number of countries that receive debt relief. We are committed to giving 100 per cent. debt relief to every country that qualifies under the HIPC initiative.
Many Members of Parliament, of all parties, recognise that our duties to the poorest countries are wider than debt relief for relief's sake. The Government start from a more fundamental principle—our dependence on each other and the fact that we are part of a wider community with mutual responsibilities and 100WH linked destinies. In today's global market, that interdependence is further accentuated and our fates and interests are bound together. We must look beyond our front doors and national boundaries, as the hon. Gentleman did, and accept that our responsibilities extend beyond traditional national boundaries.
If it is to be sustained, prosperity must be shared and the people of this country well understand that moral imperative. I have seen at first hand the British public's response to the call for debt relief in developing countries. I have seen the thousands of letters and postcards that have been written and I have responded to many of them.
Without doubt, last year's achievements and the agreement reached at Cologne to cancel ․100 billion of developing countries' debt would not have been possible without the actions of ordinary citizens throughout the world. They forced their Governments to listen to the call for faster, wider and deeper debt relief. The challenge now is to implement the enhanced HIPC initiative.
The United Kingdom has been at the forefront of efforts to persuade our international partners to meet the agreed targets under the HIPC initiative and to go beyond the agreed level of debt relief by providing 100 per cent. relief on the commercial debts of HIPCs.
At the beginning of this week, the Japanese Government announced that Japan will provide up to 100 per cent. relief on HIPC debt. The United Kingdom welcomes that announcement and acknowledges that it as an important step along the road to faster, wider and deeper debt relief. We shall continue to remind Japan and others of the importance of delivering on those commitments.
Following the announcement by Germany at the EU-Africa summit earlier this month, the G7 is now acting as one to relieve the debts that have, for too long, burdened those countries. The United Kingdom acknowledges the fact that other countries, such as Norway and Sweden, have made similar commitments and urges other creditors to join us in making 2000 the year in which we make a commitment to debt forgiveness on a global scale.
The challenge of debt reduction goes wider than that. The new HIPC framework acknowledges that we need debt relief not just for its own sake, but to break the vicious circle of debt, poverty and economic decline and to create a virtuous circle of debt relief, poverty reduction and economic development. Debt reduction and aid alone are not enough. That could lead to millions of pounds flowing into prestige projects that do nothing to relieve poverty, or to corrupt regimes and military excesses that destroy rather than build for the future. Only if debt relief is combined with the economic and social policies that are essential for economic development can it be the catalyst that releases countries from poverty. The Government place great emphasis on the implementation of countries' poverty reduction strategies, to which the hon. Member for Northavon referred.
Poverty reduction strategies are vital to the new approach that recognises the links that form the virtuous circle. First, we must deliver enhanced debt relief. Secondly, we must build a link between debt relief and poverty reduction strategies. Thirdly, we must 101WH create the new conditions for economic development that will allow all poor countries to participate in the global economy. Fourthly, we must recognise that education for all and the recognition of human capital is central to the whole project.
The hon. Gentleman asked whether we are making fast enough progress. The United Kingdom's main messages at the spring meetings will be that the process is important because it integrates macro-economics and structural and social policies in a new and powerful tool that will help developing countries in their efforts to reduce poverty and promote growth. It is important to expand participation in national policy making and the general building of a civic society that promotes openness and transparency. If Governments have sound poverty reduction strategies and an effective budgetary and institutional framework in place, donor focus should increasingly shift from projects to programme assistance. A good poverty reduction strategy will be based on a country-specific analysis of the processes that lead to and maintain poverty and of the impact that particular policies and spending will have on that.
The United Kingdom argues that a country need not have a full poverty reduction strategy paper in place when a decision is made. That addresses the question about how perfect we must be to make progress. We want poverty reduction strategy papers to be in place by completion and we want countries to take as long as they need to achieve a good PRSP that has broad support. However, we want countries to make decisions quickly and we have argued only for countries' IMF programmes to be broadly on track with a plausible road map for producing a PRSP. We are trying to meet the points made by the hon. Member for Northavon about the pace and the way in which the matter should be handled.
The Government's approach to developing countries' debt involves more than just cancelling the debt. Our strategy is to achieve sustainable development. We must be able to work with international organisations, other Governments and non-governmental organisations to develop a momentum towards development. The world's richest nations must accept their obligations 102WH towards the world's poorest people, so that those people can be empowered to play their full role in the global system.
The hon. Member for Northavon asked what other pressure we might bring to bear. Last week, the Chancellor and the Secretary of State for International Development wrote to the acting managing director of the IMF and the chairman of the World Bank about slippage in the timetable and suggested that the fund and the bank set up a HIPC initiative implementation unit to oversee the HIPC timetable. As a result of their letter, the bank and the fund have now told their respective boards that they will set up a joint committee to manage the HIPC process. The United Kingdom welcomes that development and will propose that the fund and the bank go further and mirror those changes at staff level by setting up a joint committee of the boards to be responsible for managing the HIPC timetable.
The contribution of the United States will be crucial in funding debt relief for the early Latin American cases. There was a setback when Congress failed to deliver last October, but we are reassured by the noises coming from the US Administration that they remain committed to securing the money to meet their pledge.
The hon. Gentleman asked about Guyana, which is off track with its economic reform programme, but we are confident that it is working closely with the IMF to resolve the remaining obstacles.
We have led international efforts to support the Nigerian Government but, with its history, it needs to demonstrate a track record to make progress.
As we embark on another wave of technological revolution, we must be sure that we include the people and places that the world has forgotten for too long. I applaud the hon. Member for Northavon for raising this important subject. We have made great progress and I am confident that we shall continue to make further progress. We are at the forefront of the international community in leading the pressure for effective strategies without losing sight of the fact they must be pursued vigorously at all times to achieve poverty reduction for so many of the world's population.
§ Question put and agreed to.
§ Adjourned accordingly at eight minutes to Two o'clock.