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House of Commons

Friday 17 March 1989

The House met at half-past Nine o'clock


[Mr. Speaker-- in the Chair ]

Overseas Development

9.36 am

Miss Joan Lestor (Eccles) : I beg to move,

That this House deplores the widespread poverty, malnutrition and infant mortality, that afflict so many nations in the developing world ; calls on the Government substantially to extend measures of debt reduction for both the poorest and middle-income heavily indebted nations ; requests that the Overseas Development Administration establish a timetable to achieve the UN target for overseas aid of 0.7 per cent. of gross national product ; and urges the Government to work to achieve international agreement to ensure that the negative transfer of resources from the developing to the developed world is reversed.

I was in some doubt as to where I should stand when moving this motion. As Opposition Front Bench spokesperson on aid and development I became frustrated by the fact that we were never given a Supply day because the Government did not consider the subject important enough to grant us a day's debate. Therefore, I decided to chance my luck and put in for a Back Bench motion, and I considered moving the motion from the Back Benches and coming down to the Front Bench to intervene during the debate. I thought that might cause confusion and, therefore, decided to do both from the Front Bench and thus, perhaps, enhance the status of the debate. After 19 years in the House--including a short break when resting-- [Hon. Members :-- "Disgraceful."] It was disgraceful, I agree, but the electorate can be fickle. This is the first time that I have had the good luck to come first in the ballot for private Member's motions.

I decided to put down the motion in this form because I wanted to make it as wide as possible to allow hon. Members to raise their particular interests during the debate. I shall concentrate on one or two particular matters--obviously, I shall have to leave out others. At 1 o'clock on Tuesday morning, we managed to have a debate--when the Minister for Overseas Development was travelling back from a visit abroad involving these very matters. We are indebted to my hon. Friend the Member for Linlithgow (Mr. Dalyell) for raising the subject of rain forests--and doing so in a graphic and startling fashion. Although I cannot pursue that subject today, I know that yesterday he asked several questions about it during the Budget debate. I hope that the Chancellor, or whoever is responsible for such matters, will deal with my hon. Friend's questions urgently, because they are extremely important. If we had time this would bring us to the Bruntland report and to what is happening to the environment in many developing countries. I hope that other hon. Members will deal with the EEC and 1992 and Lome , and the problem of where we go from here.

In recent years the people of this country and many other parts of the industrialised world--there was evidence

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of it again only last week--have responded generously and with great feeling and commitment to the horrors of famine, war, disease, malnutrition, drought and debt that have confronted them in the media. UNICEF estimates that in the past 12 months 500,000 children have died as a result of the slowing down or reversal of development. That has been enough to make people respond generously, as they did for Comic Relief--and to ask why it is happening. For these children are dying not from the causes I mentioned a moment ago--famine, disease, war or drought-- but from the failure of efforts to increase their chances of survival. The figures show that their chances are often reduced in spite of our efforts and the efforts of the Government, voluntary organisations and the British public, who have responded so generously to the various appeals.

UNICEF's recent disclosure that throughout Africa and Latin America average family incomes have fallen by between 10 and 25 per cent. since 1980 has shown that the availability of the bare necessities of life has been restricted for the poorest people. Child malnutrition is now on the increase in many countries. I remind the House--although many hon. Members are aware of it--that a third of all child deaths occur in just three countries--Bangladesh, India and Pakistan. It is tragic to witness that and to have to acknowledge it almost 30 years after the United Nations proclaimed the first development decade. Governments in debt to the richer nations have been forced to cut expenditure on social services ; 40 of the least developed countries have slashed spending on health by 50 per cent. a head and on education by 25 per cent. a head in the past few years. The proportion of six to 11-year olds who are at school in Third world countries is now falling.

There is, too, the problem of the southern African front-line states. In a spirit of agreement or fellow feeling, I want to point out that my union, the General, Municipal, Boilermakers and Allied Trades Union, launched an appeal for Mozambique and, on behalf of UNICEF, I went to see what was happening there and to witness the devastation that has been caused by the bandits Renamo. When I returned and reported the plight of a particular hospital in the Gaza province to the Minister he contributed £60,000 to the appeal to equip the hospital. When I saw it it had no blankets, medicines, mattresses, or bandages--it had nothing. It had been starved and robbed by the bandits, who are destabilising the whole country. In the context of the south African development co-ordination conference countries, it is unfortunate that our bilateral aid in 1987 was only 64 per cent. of its 1979 level in real terms. That represents a cumulative loss up to 1987 of about $480 million in real terms. The Commonwealth committee of Foreign Ministers on southern Africa reported in February this year that the cost of south Africa's destabilisation has been well over one million people killed and several million disabled and estimated damage of about $35 billion since 1980. So whatever we do to help Mozambique--the Government have done much more for it than for some other front-line states --these countries are being destabilised and are losing out rapidly. Whether we are discussing the front-line states or other parts of the developing world, those of us who have seen the results of poverty, malnutrition, drought, disease, famine and war, as many hon. Members and the Minister have frequently done, know that for these millions of people the name of the game is survival, and that many are

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losing that game. The children of Third world countries are paying those countries' debts with their lives. That is one of the most appalling things that we must recognise.

I pay tribute to all the Government and voluntary agencies and the people who are working in Third world countries and doing their best, often in appallingly difficult circumstances, to meet some of the challenges of directing programmes to the poor and of doing as UNICEF and other bodies have done--carrying out programmes of immunisation to try to save children and taking part in a variety of projects. They know the long-lasting effects that such work will have. Our Government are responsible for ensuring that they make a far greater contribution than in recent years.

In the 1960s the United Nations proclaimed the first development decade in a spirit of optimism and progress that has been short-lived. The 1980s have been a decade of debt, not development. Economic growth and social progress have been stalled. There has been little or no development. In its place, debt has grown, accompanied by rising malnutrition, poverty and infant mortality throughout Africa and Latin America.

When I first took up these responsibilities I went to see the IMF and the World Bank, institutions that were not well known to me at that time, and like my hon. Friend the Member for Vauxhall (Mr. Holland)--for many years he has done a great deal of work in this area--I became convinced that the one overwhelming problem that we now faced was is debt.

The most graphic illustration of the debt decade is the negative transfer of funds from north to south ; the positive investment and development of the 1960s and 1970s have been reversed. Since the early 1980s, the heavily indebted countries of the Third world have been forced to make massive annual repayments. A positive transfer in favour of the Third world of more than $30 billion has turned into a negative flow that amounted to $29 billion in 1987. The major debtor countries, most of which are to be found in Latin America, have thereby had their long-term growth prospects undermined, and domestic investment has collapsed. Per capita income has fallen by 30 per cent. in real terms. To sustain their debt service these countries have been forced to boost exports and to cut imports. Their volume of imports has declined by 40 per cent. since 1980. Import compression on this scale has caused a similar massive decline in domestic investment, which diminishes prospects for further growth. Despite these efforts, the burden of debt is increasing. According to an analysis by the United Nations conference on trade and development, the aggregate debt profile of the most heavily indebted countries is worse today than when the crisis first emerged in 1982. Their debt as a ratio of GDP rose last year to 50 per cent. from 42 per cent. in 1982. The debtors' plight in Latin America and elsewhere remains a drag on world economic growth and harms the trading interests of the creditor nations.

The leaders of the industrialised nations have yet to understand the lessons of interdependence that were so powerfully expressed in the original and subsequent reports of the Brandt commission--a best seller in its day, which proves the point that I made about the interest of large numbers of people in these matters.

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The debt problems of the developing countries caused by monetarist policies of deflation and high interest rates have damaged north-south trade. Overseas sales and domestic growth in the industrialised countries have been lost. According to UNCTAD, by 1984 total OECD exports to developing countries were about $46 billion a year below their average for 1980-81--a trade loss that has cost as many as three million jobs in industry in this country and diminished tax revenues from companies and employees throughout the industrialised world.

Despite the 1985 plan proposed by former United States Treasury Secretary Jim Baker, negative transfers persist. While the debt crisis may have been contained, it has not been solved. The major debtors are making unparalleled repayments at huge economic and social cost while the creditors lose both export markets and jobs. Meanwhile, the commercial banks have led a private sector stampede away from the business of overseas development. The banks have offered virtually no new loans to the debtors since 1982. According to the IMF, there has been a precipitous drop in private financial flows to the Third world. The banks have unambiguously declared their refusal to consider a new wave of lending to refinance even the most successful adjustment programmes and efforts of the debtor nations. As a result, as the House is aware, the public sector is forced to fill that financial gap. The share of total finance to the major debtors accounted for by the public sector has risen from 10 per cent. between 1979 and 1982 to more than 60 per cent. between 1983 and 1987. It is high time that policy makers in the leading industrialised countries accepted the market's hidden realism about the debts crisis. I hope that the new plan proposed by the United States Treasury Screetary Mr. Brady will mark a significant shift in policy. I know that it is too early to know what the scheme offers, but I hope that the forthcoming spring meetings of the World Bank and the IMF in Washington will break new ground.

A co-operative and explicitly political solution to the debt crisis is undoubtedly needed. The scope exists for a bargain to be struck between debtors and creditors, both public and private. We need to achieve debt reduction that will enhance growth in trade. A number of proposals already exist for the creation of an institution, perhaps an affiliate to the World Bank, capitalised by the creditor nation Governments which can offer funds or guarantee to facilitate debt reduction. Such schemes might involve the provision of fixed interest bonds against which commercial banks can exchange, at a discount, some of the developing country loans in their portfolios. As a result of that, the burden of the debtor nation would be reduced, stimulating development and trade while the bank's balance sheet would also improve. All those proposals are worth considering. Critics of debt relief argue that taxpayers' money would be offered to bail out the banks. However, the taxpayer is already giving relief to the banks for debt improvisation and more widely suffering the lost revenues resulting from diminished trade and employment caused by the debt crisis. To be credible and fair, any scheme of debt reduction must ensure that the banks shoulder a significant proportion of any loss.

Inevitably, the public sector must play a key role in debt reduction. The World Bank and the IMF are already providing publicly funded resources to assist the adjustment processes of the Third world. Those agencies

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are obviously central to a programme of debt reduction and they will need greater resources in future. The surplus nations of the group of 7, especially Japan, could make a substantial major contribution.

Debt reduction does not imply a generalised write-off of the liabilities of countries like those in Latin America. The magnitude of capital flight from that region clearly illustrates the moral hazard of unconditional debt relief. Any new mechanism for debt reduction, probably managed by the World Bank, would of necessity adopt a case by case approach offering phased rather than one-off debt reduction. I am glad to see that the Minister thinks that that is a good idea. Those are the broad parameters of a politically feasible scheme of debt reduction. Such a co-operative approach would offer the prospect for shared benefits by debtor and creditor nations alike while promoting international trade and world economic growth. In the absence of agreement on debt relief, there is a real threat that the present strategy of containment of the debt crisis will break down. The debts of Latin America and elsewhere are highly sensitive, as we all know, to rising dollar interest rates and the prospects of improvement in the trade deficit of the United States. Therefore, action now to achieve debt reduction would sharply reduce the risks of a recession caused by economic adjustment in America. The lesson of the debt crisis is that international financial flows need public sector guidance. The bank lending spree of the 1970s produced the classic market failure of boom and bust. Today all forms of private finance, including direct investment and bank lending, have made an ungainly retreat from the Third world.

Mr. Matthew Carrington (Fulham) : This is very important. I understand entirely what the hon. Lady has said about debt reduction. I was heavily involved in making many of those loans when the lending boom was going on. I recognise that many of the loans that were made then were unwise on the part of the banks and probably unwise from the point of view of development in those countries. However, it is important to remember that those loans were borrowed at the instigation of the countries that borrowed them. Very few of the loans made to Latin America were made other than to the Governments of the countries concerned. The proposals put up for those loans were backed by development information which clearly showed that that country not only believed that it could repay the loan, but that the loan would be beneficial to the country's development. Our problem in the future, as I understand it, is that if we are to do what the hon. Lady has suggested, we must somehow control how those countries use the money that they borrow.

Miss Lestor : I do not disagree entirely with the hon. Gentleman. However, I find it incredibly easy to borrow money. I receive invitations daily telling me how simple it is to borrow. I need only take this mock cheque or whatever and I can have as much as I like. Of course the loans were made at the request of the Governments concerned, but, my God, it was made extremely easy for many of them to borrow and the fact that things might go wrong was left out of the account. I do not want to pursue that because I want to achieve agreement in the House on these issues. I do not want people to look back. However,

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if we consider the history of some of the loans, it is obvious that they were made extremely attractive. The posibility of the economies going wrong was left out of the account. Similarly, if the interest rates and mortgage rates rise in this country and if commodity prices fall, what happens then? I am sure that the hon. Member for Fulham (Mr. Carrington) will make his contribution later.

In future we must ensure that there is a positive and more sustainable balance of public and private sector finance for development. Measures for debt reduction are essential to reduce today's negative flows of funds from the south to the north. Fortunately, sub-Saharan Africa has already gained some measure of debt relief. Africa's financial quagmire is forcing the conservative advocates of sound money and balanced budgets to think again. Nevertheless, the continent is today suffering from an acute financial famine.

According to the recent report to the United Nations

secretary-general prepared by an expert group under the chairmanship of Sir Douglas Wass, Africa needs a minimum of $5 billion a year to overcome its chronic debt and development crisis. The report warns that almost all of sub-Saharan Africa is suffering from import strangulation. Machinery is breaking down for want of spare parts, development programmes are under threat and per capita GDP has fallen by 2.9 per cent. each year during the 1980s.

I acknowledge that some progress on African debt has been made. For example, we have the much trumpeted plan from the Chancellor of the Exchequer. As the House will be aware, at the recent annual meeting of the World Bank and the IMF in Berlin, agreement was reached on a plan, which was jointly promoted by Britain and France, to assist the poorest African debtors. The plan offers debt forgiveness, reduced interest rates and longer-term loan rescheduling. The Labour party fully supports that plan as far as it goes. It would be churlish of us not to do so. I welcome it and hope that other industrialised countries will act on the urgent need for debt relief in Africa. It is not hard for us to offer bipartisan support for the initiative, because the scale of Africa's plight warrants a united approach and because the plan was of course inherited from the Labour party. As long ago as 1978, Judith Hart, the then Minister of State for Overseas Development, negotiated an agreement at UNCTAD to turn former official aid loans to the poorest countries into grants. That scheme freed the debtor from many outstanding repayments and covered public as distinct from private debts for many low income countries. The Conservative Government elected in 1979 continued that policy. Subsequently, about £1 billion has been written off, of which £260 million was owed by African debtors. Reduced interest rates and longer-term rescheduling figured prominently in our policy statement on overseas development that was published at the time of the last general election. It is gratifying that the Chancellor has borrowed from that policy and is carrying forward the achievements of the last Labour Government.

However, it remains distressing that there has been a massive real decline in Britain's aid programme and in the assistance that we give to Africa. The Tory Government have allowed aid as a percentage of our gross national product to fall to a record low of 0.28 per cent. As a result, our level of aid to sub-Saharan Africa in 1987 was 26 per cent. lower than that achieved in 1979. The accumulative loss in real terms over that period was a massive £600 million.

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At a recent sports event to raise money in the Minister's constituency, he and I took part in the presentation of a mock cheque for that amount, to show what the aid budget would have been had the achievements of 1979 been carried forward. However, I am aiming for unity today and I do not wish to score points.

The Chancellor's credibility in championing debt relief for Africa collapses in the wake of such an appallingly low level of development aid. Of course we welcome moves towards debt relief, as I have already said, but when one compares it with the declining level of aid given, the comparison is not flattering. As long ago as 1983, the Prime Minister accepted that the Government should move towards the United Nations' target for overseas aid "when economic circumstances permit". I cannot imagine that there is any excuse today for not substantially increasing our aid programme. On Tuesday, the Chancellor revealed to the House that he had a surplus of more than £14 billion, so he certainly has the resources available. The Chancellor says that he cannot spend those funds, because he is worried about domestic inflation and our balance of payments, but those constraints do not apply to overseas aid. Such expenditure would not be inflationary since the money would go abroad and, by assisting British industry, would also help our export performance. The case for a substantial increase in aid has never been stronger, as the words of the Prime Minister herself demonstrate.

Britain must improve her performance in respect of overseas aid. It is shameful that the OECD's recent review of the British aid programme is sharply critical of our record, as was the report of the Select Committee. The OECD states unequivocally that the time has come for Britain to reverse the decline in her aid to GNP ratio. It refers also to burden-sharing among the major donor nations, with a straightforward and deeply humiliating expression of concern that Britain is not pulling her weight or honouring her commitment to reach the United Nations' target--a target that has been accepted even by the Prime Minister.

The motion before the House urges the Government to re-establish a timetable of expenditure increases to reach the United Nations' target. That proposal was also made in the last Session, in a Bill introduced by my hon. Friend the Member for Cunninghame, North (Mr. Wilson). I hope that the Minister will reconsider his opposition to the expenditure timetable, because without such a measure of progress the Government will never restore the ratio--at least, not to the level they inherited from the last Labour Government.

More aid must be combined with more debt relief. The debt crisis emphatically demonstrates the inadequacy of the existing Bretton Woods institutions--the International Monetary Fund, the World Bank and the General Agreement on Tariffs and Trade. Those institutions were established in 1945 to promote the financial and economic reconstruction of post-war industrial Europe, and not the development of low-income countries in Africa, Asia and Latin America. Their management structure and economic assumptions have not adapted to the new diversity of problems.

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Changes to the Bretton Woods institutions have been resisted by conservative governments in the West, but new opportunities for modernising them are on the horizon. The increased self- confidence of the EEC as it moves towards 1992, and the new interest of the Soviet Union and of China in possible membership of those institutions suggest that there is a serious prospect of modernisation in the 1990s. My hon. Friend the Member for Vauxhall has done a great deal of work in respect of all those matters.

Africa has accumulated a heavy burden of debt to multilateral agencies, especially the World Bank. Much of that debt cannot be rescheduled for fear of damaging the bank's own credit rating, but without relief, many countries risk falling into arrears with the World Bank, as some have already done with the IMF. The bank may soon become part of Africa's debt problem rather than be a contributor to its solution.

Debt service to the World Bank in 1986 amounted to 67 per cent. of Tanzania's public debt service, 46 per cent. of that of Zambia, and 30 per cent. of that of Kenya. The Nordic countries have, in response, proposed the creation of a facility to refinance a substantial proportion of those debts. The World Bank responded to that idea by creating a special fund through which donors can offer additional aid. The fund will pay for the ending of some outstanding loans, thus alleviating the burden of repayment for the debtors. The British Government should be prepared to contribute to the Nordic scheme. I have made that point before, and I look forward to the Minister's comments.

The World Bank should also offer to convert outstanding soft loans offered by the International Development Association to grants. IDA credits now amount to 29 billion dollars. The next IDA replenishment, which will be negotiated early next year, should be wholly in the form of grants, not loans. I understand that former IDA recipients such as South Korea might benefit from that scheme. The Minister made that point to me when we last debated these matters in Committee, and I accept the truth of it. However, special arrangements could be negotiated so that countries no longer eligible for IDA funds could make special repayments equivalent to their outstanding loans. There does not have to be one overall policy for all countries. Such payments could be made into the Nordic facility that I mentioned. A package of additional measures of debt relief combined with increased aid, which is urgently needed, would help to break Africa's downward spiral of poverty and debt. Today, as in the past, we are trying to play a constructive role in tackling the debt crisis and promoting growth in and trade with the Third world.

Our strategy is to meet the challenge of development. If we do not meet that challenge, we shall find that there are serious repercussions. Monetarist dogma has made the 1980s the decade of debt. As we reach the 1990s, we must ensure that we move out of debt and into development. If we fail, more children will die. I began my speech by referring to the increase in child deaths. Without aid, more services will be cut and the gap between the developed world and the developing world will widen. The consequences are too terrifying to contemplate.

10.8 am

The Minister for Overseas Development (Mr. Chris Patten) : I congratulate the hon. Member for Eccles (Miss Lestor) on her luck. I am extremely glad that, having won

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the ballot, she chose to debate this subject. I suppose, to follow the hon. Lady's remarks, that it is rather like winning first prize in a raffle and choosing to have dinner with one's self.

Mr. Frank Dobson (Holborn and St. Pancras) : One could not make a better choice.

Mr. Patten : I much agree with the hon. Gentleman's comment, but do not want to be accused of making a sexist remark. We all thank the hon. Lady for choosing the subject of overseas development. As she said, the House does not often have an opportunity to debate aid and development. That is not because of any lack of public interest, because we saw from the response to Comic Relief how much public interest does exist. There is certainly public interest, but I do not think that there is much public controversy about our aid programme, with one exception. That general agreement is reflected in the main reports of the Select Committee on Foreign Affairs and in what the Public Accounts Committee had to say the other day, namely : "We consider that the Overseas Development Administration have adopted a generally sound approach to monitoring and controlling the Multilateral Aid programme."

I am delighted with that endorsement, and only sorry that it was not reflected in all the press reports on the PAC's findings. We have a sensible and effective aid programme, the quality of which is generally reckoned to be as high as anyone's. Of course it is not perfect ; we go on trying to improve it and to sharpen our performance in helping poor people and countries, and in helping to promote sustainable development. The controversy, such as it is, concentrates not on what we do but on how much we do. I intend to deal with that at the close of my remarks, but first I want to present a general review of how our aid strategy touches on some of the main points raised by the hon. Member for Eccles.

I think--at least, I hope--that the hon. Lady will accept that the story of aid and development is not one of unmitigated disaster. We tend to concentrate on the problems that confront developing countries. That is not surprising as those problems are so formidable, but we should remember some of the successes, too, and learn from them. Aid in the past couple of decades has helped developing countries to secure a fall in child mortality rates far sharper, and over a shorter period, than we have ever managed in most developed countries, although the rates are still far too high. It has helped developing countries to increase life expectancy rather more rapidly than we have managed in developed countries. It has also helped to improve literacy rates and enrolment in primary schools more rapidly, and to increase access to potable water. Those are all successes, and I think that they justify the use of aid for sensible, effective and well targeted programmes.

We can also point to individual sectoral and national success stories. We can point, for example, to the green revolution in Asia, the extraordinary agricultural successes in a number of Asian countries--as a result partly of farmers being offered a decent price, partly of the application of appropriate science and technology to agricultural techniques and partly of the development of good and effective agricultural extension services. We have also seen the spectacular take-off of individual Asian

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economies--particularly those in east Asia, although they are now being followed rapidly by a number of economies in south-east Asia. How have those countries achieved so much? First, they have had a good deal of support from outside, both official development assistance and private investment, and they have used that support well. Secondly, they have attracted private investment because of the sensible way in which they have run their economies. Thirdly, they have usually enjoyed political stability. Fourthly, they have followed a market-oriented economic policy and prudent financial policies, and have believed in the price mechanism. Fifthly, they have placed equal emphasis on a few simple social goals, above all, basic education and training and basic health care. They have invested in their people, and the rest of the world has therefore invested in them.

It is interesting to note that 25 years ago everyone thought that Africa would be the success story in development and that Asia would be where all the tragedies were played out. It has, alas, turned out to be the other way round. We certainly should not under-estimate the scale of the problems that Africa has had to face in the past few years--war and civil conflict, ecological degradation, appalling health problems and now the terrible scourge of AIDS. It has had to face a fall in the price of many of the basic commodities that it exports ; it has often had to face an unfavourable international economic environment. At the same time, too many African countries have been implementing policies that have been at best inappropriate and at worst disastrous.

As a result, in the 1980s much of Africa has suffered a slump in living standards rather greater than the one that we suffered in the north of the globe in the 1920s and 1930s, and it has done so albeit from a far lower standard of living. I think that it is fair to argue, however, that we have now reached a turning point. Let me quote from the recently published report by the World Bank and the United Nations development programme on Africa's adjustment and growth in the 1980s :

"The evidence of the past three years leaves room for optimism. These encouraging signs, though still preliminary, augur well for the future."

The vice-president of the World Bank responsible for the Africa region, and the assistant administrator of the UNDP responsible for the regional bureau for Africa, say in their foreword to the report, "Recovery has begun."

As the report says, the evidence of the past three years gives us some grounds for hope. The report refers to the growing economic reform movement in Africa, which is gathering strength throughout the region. More than half its countries have now undertaken significant reforms. They are cutting back unnecessary bureaucracy, setting more realistic exchange rates, curbing inflation, improving incentives for farmers, liberalising their economies and encouraging the private sector. We know that that reform process can be uncomfortable and even painful ; we also know that it requires considerable political courage to implement many of the reforms.

Mr. Tam Dalyell (Linlithgow) : The Minister will be aware of the argument that the instructions given by the Government to the British director of the World Bank--at present Mr. Cassell--are less publicised than those given by the Americans to their director. Would it not be proper to tell the House exactly what we are saying to our director, and how we operate?

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Mr. Patten : I note that the hon. Gentleman made that point in his recent speech. I am delighted to deal with it now, although it interrupts the flow of my argument. If the hon. Gentleman does not mind my saying so, he makes something of a false point. It is of course inconceivable that I could avoid explaining in terms to the House what the Government proposed to do about a matter as controversial as the one that I think gave rise to his question--the World Bank loan to the power sector in Brazil. Beyond that, I have given an assurance to environmental NGOs and other interested parties that we will consult them before making up our mind what to do on the board of the World Bank about that proposed loan, and about other equally controversial matters affecting the environment. I do not think that it is reasonable or possible to be much more open than that, while at the same time taking account of the need for commercial sensitivity from time to time in view of some of the operations that we are discussing on the board.

I agree, however, that the point that the hon. Gentleman has raised has caused concern to many people over the years. My strong feeling is that it is always better to say more rather than less on these issues and that, as we have to do that anyway at the end of the day, we might as well start off by doing it. I hope that I have answered the hon. Gentleman's question.

Mr. Dalyell : I thank the Minister.

Mr. Patten : Two things stand out reasonably clearly so far from the success of the reform movement in Africa. First, to carry on with misguided policies has only one result. It impoverishes those who are already poor. Secondly, the reform programmes are starting to show results. The results are set out in terms in the report to which I referred. The most obvious consequence is a revival of growth, especially in the agricultural sector. For many countries that have abandoned the failed policies of the 1970s, not only is growth higher but their exports are higher. Farmers' real incomes have also increased. The policies have attracted donor support, by means of both conventional aid programmes and debt initiatives. We have been, and we shall remain, prominent on both counts.

The House knows that we are providing a growing share of our aid programme to support economic policy reform, especially in Africa but also elsewhere. Just over a year ago, we pledged up to £250 million of bilateral programme aid--balance of payments support--over three years to the World Bank's co-ordinated special programme of action for the poorest and most heavily indebted countries of sub-Saharan Africa. In 1988, we made new programme aid commitments to sub-Saharan Africa of over £100 million. The House also knows about the central role that we have played recently in support of the Nigerian economic reform programme. We played the leading role--I think one can say that without vanity--in co-ordinating the international community's assistance to the Nigerian economic reform programme. We decided to contribute $100 million to that reform programme. Over two thirds of it was new money. It was a genuine addition to our published aid programme. I am delighted that we have made such good progress in bringing together support for that crucial reform programme in west Africa.

Last month I was in Uganda. While I was there I was able to commit a further £21 million of grant aid to

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Uganda, including £10 million of programme aid to that country's economic reform programme. That brings to about £110 million the money that we have either committed to or spent in Uganda since President Museveni came to power. It is clear that President Museveni and his Government face problems of Herculean size in the next few years, after the horrors of the last 10 to 15 years. I was extremely impressed by the progress that Uganda has already made in starting to tackle some of those horrific problems. The country deserves and, for my part, it will continue to receive as much support as possible. I am sure that the House is also aware that one of the most successful stories of adjustment is that of Ghana. I am pleased to be able to tell the House that we propose to pledge a further £20 million to support Ghana's economic recovery programme and that we also intend to spend an additional £10 million to support Kenya's programme. The House may recollect that we have agreed to make the largest single contribution to the interest subsidy account of the International Monetary Fund's enhanced structural adjustment facility. Britain's contribution will be sufficient to subsidise up to £750 million of new lending.

I should like to deal with two additional points that are also relevant. First, I believe that there is a remarkable convergence of thinking within and between OECD countries and developing countries about the need for policy reform if growth prospects are to be restored and poverty is to be overcome. There is wide consensus that aid for bad policies is wasted aid. However, our critics suggest that there is a severe social impact as a result of the reform programmes and that there is still a shortage of funds to support reform and economic development.

It should be recognised that there is a calamitous social impact if countries do not reform. However, it is a fair point that in the early stages of the reform movement not enough account was taken by all donors of the social or environmental impact of structural adjustment programmes. That position is changing--partly, no doubt, thanks to the advocacy of organisations such as UNICEF. When programmes are designed, we are now taking far greater account of the social dimension. We are playing our part --I refer to what we are doing in Tanzania and Ghana--and we shall also play our part in paying for the consequences.

Although it is true that reform has attracted greater finance from donors, more funds will be needed as more aid recipients embark--as we all hope they will--on restructuring programmes. It is wrong to misuse figures. The last part of the motion tabled by the hon. Member for Eccles is seriously misleading and she developed the point during her speech. She referred to a large net transfer from developing to developed countries and used a World Bank figure. Given the statistical parameters within which she was working, she could have used the large figure of $43 billion that has been reported in the press during the last few days.

The way in which figures have been used is misleading on a number of counts. That figure covers all developing countries. There is no reason why the newly-prosperous developing countries, such as Korea, should not pay back the money that they have borrowed to develop their industries. It does not make sense to behave as though Korea and Mozambique are in precisely the same category. We should be concerned about the position of the poorest countries. It is even more significant that the

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figure that the hon. Lady used takes no account of other flows, such as grant aid. The figure measures only the difference between the repayment of loans and known and new lending.

If we include grants--which seems to me, as we are talking about overseas development, to be not unreasonable--and look at net capital flows to sub- Saharan Africa, a very different picture emerges from that which was suggested by the hon. Lady. According to the OECD figures, the flows of funds to this extremely poor region--probably the poorest region in the world--have been strongly positive throughout the 1980s. In 1987 they amounted to $20 billion--or, to be strictly accurate, to $15 billion after deducting interest payments. That is, to repeat myself, a different picture from that which was painted by the hon. Lady and by her motion.

Mr. Tom Clarke (Monklands, West) : As the Minister is dealing with statistics, can he tell the House when the Government expect to achieve the United Nations target of 0.7 per cent. GNP?

Mr. Patten : As I said at the outset of my remarks, I intend to deal with volume and the percentage of GNP at the end of my speech. I can assure the hon. Gentleman that I shall not disappoint him. I shall turn to the issue with considerable relish.

Debt naturally affects capital flows. The hon. Lady was right to make that point. She made a number of interesting observations about it. Third world debt is over $1,000 billion.

Mr. Bowen Wells (Hertford and Stortford) : Before my hon. Friend moves on to his next subject of debt, will he give the House the details of the amount of money that he has transferred from the Indian and Asian programmes to Africa in the past two or three years, as there has been a major change of thrust and in the amount of money from ODA into Africa?

Mr. Patten : It would be fairer to say that we have used the welcome increase in our aid programme to support our programmes in Africa. We have spent less in India in the past two years mainly because we did not have sufficient projects in the pipeline, but I am about to announce new projects in the pipeline which may adjust that balance in future. Nevertheless, it is true, as my hon. Friend suggests, that the bulk of our new enhanced expenditure will be used to support economic reforms in sub- Saharan Africa.

As I said, half of Third world debt--about $500 billion--is in sub-Saharan Africa and Latin America. As the hon. Lady made clear, that sum has been the focus of particular attention. The poorest indebted countries are those in Africa and they owe about $100 billion in debt, mainly to the multilateral institutions and to Governments. We have put a great deal of effort into trying to help solve their problems. The House will be aware of our successes. Last year we finally achieved international agreement on the Chancellor's debt initiative at the Toronto summit. It provides a menu of different ways for providing concessional rescheduling of bilateral official debts from the poorest and most heavily indebted countries that are trying to pursue sensible policies. We shall agree to long-term rescheduling of bilateral official debt at concessional interest rates. Already seven African countries have negotiated concessional Toronto terms in the Paris club, and more will follow. As regards aid debts

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we have led the way in converting past aid loans to grants and the policy of retrospective terms adjustment has relieved the poorest countries of aid debts totalling more than £1 billion. As the hon. Lady said, that includes 13 of the poorest countries in Africa at a cost of £260 million. I am delighted to learn that one of my predecessors, Baroness Hart, had the same idea. Fortunately, after the 1979 general election we were in a position to do something about it.

Mr. Stuart Holland (Vauxhall) : Oh, that is very clever--really clever.

Mr. Patten : I am sure that the hon. Member for Vauxhall (Mr. Holland) made a major contribution to the fact that we have been able to discharge those obligations.

Latin America has debts of some $400 million, mainly owed to commercial banks. We have been seeking a country-by-country solution combining economic reform, substantial support from the IMF and World Bank and voluntary agreements between the debtors and the banks on how to deal with the outstanding debts. That strategy has made a valuable contribution to dealing with the problem of middle income debtors. We shall be looking carefully at the latest United States proposals for debt reduction in the run up to the IMF-World Bank interim committee meeting next month to which the hon. Lady referred, when we expect they will be further discussed. We have yet to see detailed proposals.

The existing debt strategy provides for voluntary debt reduction, and to that extent the United States proposals may be seen as an extension of present strategy. Our wish is that we should not transfer the responsibility for commercial debts from the banks to the taxpayers, nor should we deter commercial banks from future lending to those countries and, of course, the hon. Lady referred to the problems of moral hazard.

The aid programme is primarily about sustainable development and the alleviation of poverty. Sustainable development requires sound policies including an enhanced role for the private sector, care for the environment, both local and global, and the strengthening of local institutions to sustain what is created by donors' help. Alleviating poverty requires economic growth, and for economic growth to be politically and environmentally sustainable it requires an attack on poverty.

What do I conclude should be the key elements in our aid programme? I have already said much about our support for economic policy reform. Let me assure the House that environmental issues will be given equal prominence. I have absolutely no doubt about the importance of helping developing countries to tackle their environmental problems and to participate in the initiative to counter global and environmental damage.

Mr. Dalyell : The Department's foresters under Ron Kemp have a good international reputation and are people of the highest quality, but with all their work with the International Tropical Timber Organisation and the tropical forest action plan, and answering public inquiries and inquisitive Members of Parliament, they are really overworked. Is the Minister satisfied that he has the number of people in his Department necessary to carry out that environmental work?

Mr. Patten : It is perhaps a mild comfort that we have rather more expertise available than some other donor

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agencies, but of course the hon. Gentleman raises an important point. As we attempt to do more in the forestry sector there are bound to be consequences for the expertise and manpower that we have available and we shall have to keep the issue under careful scrutiny and attention. I have no doubt about the validity of what the hon. Gentleman says but we can draw on other expertise, for example, the work of the Oxford forestry institution and other academic institutions.

We intend to use our influence in the multilateral agencies to ensure that they put greater emphasis on environmental needs in allocating their resources. We shall set an example in the way that we manage our own bilateral aid programme. Today we have published a manual for our aid programme managers on assessing environmental impact. We already do that through our forestry initiative, which was described in detail in my hon. Friend's reply to the debate on tropical rain forests earlier this week. I join others in congratulating the hon. Member for Linlithgow (Mr. Dalyell) on initiating that useful debate in the middle of the night. I learnt first hand about the Amer-Indian perspective when I met Chief Paiakan of the Kayapo tribe before Christmas. Naturally, it is extremely important that we raise issues of forestry destruction with other states constructively in a way which makes clear our respect for their national sovereignty. Forests are not global property, even if their preservation has global significance. Undoubtedly, Brazilian Government policies have contributed to the destruction of the rain forests but there have been recent and hopeful policy reforms. We must welcome them and encourage their effective implementation while continuing to monitor the situation carefully.

The Brazilian Government regards our research project on Maraca Island as a shining example of the positive international co-operation that Brazil would welcome for saving the rain forests. To date Brazil has been wary of foreign assistance, but in recent discussions the Brazilian Government asked for further technical co-operation, possibly to assist in understanding the genetic potential of the Amazon. We are considering that request urgently. Of course our technical assistance would be only one small part of an international effort. No one has the resources to take on the Amazon single-handed.

The other dimension of any aid programme must be a concern with poverty. I have recently approved new project commitments totalling £50 million as a poverty alleviation programme in India--the Andhra Pradesh primary education project, the Orissa family welfare project and a number of agricultural projects across several states directed at the poorest groups. We are also financing a number of urban projects to deal with slum improvements in Hyderabad, Indor and Visag at a cost of some £65 million. They combine physical infrastructure improvements with work in community development, health and education. Our experience of those projects so far is encouraging and we are planning to do more.

As part of our concern with poverty we have been increasing our support for the voluntary agencies working overseas through the joint funding scheme. The voluntary agencies are particularly effective in working at the grass roots and helping local communities to help themselves. In the next financial year I am proposing to allocate £16

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million for the joint funding scheme--an increase of 43 per cent. on the allocation for this year. In 1986-87 we spent less than £6 million under the joint funding scheme on non- governmental organisations. Next year we will spend at least £16 million. Those figures speak for themselves.

Mr. Anthony Steen (South Hams) : When the all-party parliamentary group on population and development went to India we heard that the Indian Government were grateful, as was the Family Planning Association, for all that the Government and my hon. Friend the Minister are doing. However, one of the points raised was that the money given went to the Indian Government and not all of it--in fact not much at all--was seen by the voluntary bodies, particularly the Family Planning Association, which does such important work with population control. Has the Minister thought of giving money direct to organisations such as that so that it misses out the Government conduit?

Mr. Patten : In a number of cases we give funds directly to family planning associations such as the International Planned Parenthood Federation. We also give money directly to United Nations family planning projects and to other organisations involved in family planning such as Marie Stopes International. Circumstances vary from one country to another but I shall look into that important point. I should like to pay tribute to the work done by not only our non-governmental organisations but by our volunteer organisations. They do a superb job which justifies the increasing financial support that we have provided for them. Last year we increased our grants to the volunteer organisations by over 16 per cent. This year we have increased our grants to those organisations by over 20 per cent. and, next year, we intend once again to increase our grants to them by over 20 per cent., bringing the grants to £13 million. That is money well spent. All attempts to use the non-governmental organisations more and to put more through the volunteer organisations help to enhance the quality of our total aid programme.

Finally--not because there is not plenty more I could say but because I want to allow other hon. Members to participate in the debate--I want to deal with volume. I shall deal initially with the facts. We inherited from the previous Labour Administration--a distant and not especially sweet memory--an economy that was somewhat less than robust. Anyone who disbelieves that should consult the memoirs of those Labour politicians who have subsequently spilled the beans in order to add a little well-deserved comfort to their retirements. From 1979 to 1982, in order to help restore our economic health, we cut public expenditure, including our spending on aid. The aid programme was held at that level until last year. During that period we saw the economy steadily expand again. The percentage of our GNP spent on aid therefore fell. In the autumn of 1987 we secured, for the first time since 1979, an increase in the aid programme.

Mr. Tom Clarke : Tell us the percentage.

Mr. Patten : I will do so in a moment.

We secured an increase in the aid programme in real terms for the following expenditure period. We turned a corner and we went on motoring in the last public spending round. The aid programme will increase by 5 per cent. in real terms in the coming year over the figure

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originally planned for this year. The aid programme is starting to reflect the increased strength of the British economy and I hope that it will continue to do so.

Sir John Stanley (Tonbridge and Malling) : Will my hon. Friend say whether the 5 per cent. figure is based on the inflation forecast in the Autumn Statement or on the new inflation figures given by my right hon. Friend the Chancellor in his Budget Statement?

Mr. Patten : We have attempted to make the figure as up to date as possible. It is based on the latest GDP inflator.

In the autumn of 1987 we secured an increase and that has continued. As I have said, we look forward, after the Budget, to a 5 per cent. increase in real terms next year.

I appreciate that that is not sufficient for the Labour party--a party which when in office took us cap in hand to the IMF. It now grumbles at us- -a Government who have been able to make the major contribution to the interest subsidy account of the IMF's enhanced structural adjustment facility to help today's debtors. That list of debtors, naturally, does not include the United Kingdom. It does not take a financial genius to work out that we are of more long-term assistance to developing countries as a growing economy, a major private investor in developing countries and one of the largest contributors to international debt initiatives, than as a Carey street layabout--all mouth and no pocket.

The House may be interested to learn that in the period 1984-87 total United Kingdom direct investment in developing countries exceeded that from the rest of the European Community put together. That is the mark of a strong and open economy. I shall be fair--as fair as I always am to the Labour party. The Labour party has a clear policy on aid. The Leader of the Opposition tells us that a Labour Government would increase the aid programme. In fact I should not be so reticent he said that they would double the aid programme. That is extremely generous. The rabbit comes out of the hat and £1.5 billion appears just like that.

Far be it from me to inject a note of mild partisanship into otherwise amiable proceedings. However, we are obliged by the recent spectacular political progress of the Labour party, manifested for example so explicitly in the by-election results in Glasgow, Govan, Epping Forest and Richmond, Yorks, to address its arguments with due seriousness. I shall establish three appropriately serious facts. First, not only have the Opposition promised at least £1.5 billion more on aid, they have promised, as Harry Enfield would say, "loadsamoney" on everything else. As I recall, in their previous manifesto the cost worked out at something in excess of £30 billion. I am sure that it is more than that now. I suspect that deep in the dank cellars of the Treasury under-secretaries are still counting. That promised openhandedness will come as no surprise to Lord Barnett who had to try to deal with the spectacular consequences last time round.

The second fact is that the Labour party has to answer a question that is as old as time. Where will all the money come from? The answer to that remains one of the great secrets of modern history, more unfathomable than the cracking of Enigma or the unlocking of Linear B.

The third fact is that we are pressed to give a timetable--I am delighted to satisfy the hon. Member for Monklands, West (Mr. Clarke)--for achieving the 0.7 per

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