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Poor Countries (Debt)

4. Ms Christine Russell (City of Chester) (Lab): If he will make a statement on progress towards multilateral debt cancellation for poor countries. [205213]

The Chancellor of the Exchequer (Mr. Gordon Brown): Our objective is to match bilateral debt relief by up to 100 per cent., with relief on the debt owed by poor countries to the World Bank and African Development Bank of up to 100 per cent. also to be funded through new commitment from all donors.

Ms Russell: May I thank my right hon. Friend for that encouraging reply? He will be aware that, in common with many other Labour Members, I have hundreds of constituents who communicate with me regularly on matters such as debt relief, and they tell me that they very much welcome and acknowledge the commitment to debt relief that our Government have shown. They have asked me to pass on to my right hon. Friend their earnest wish that Britain, when it assumes the presidency of the G8 and the EU next year, will encourage our colleagues to follow his lead and commit to debt relief.

Mr. Brown: I am grateful to my hon. Friend who, like many hon. Members, is working with the Churches and faith groups to push for debt relief for the poorest countries in the world. In the 1999–2000 period, we persuaded countries to write off 100 per cent. of bilateral debt relief, but we still have to complete the process. That involves writing off the debt owed to the World Bank, the IMF and the African Development Bank. Until now, I had hoped for all-party support in this. Unfortunately, I find that the Conservative party's proposals to cut £35 billion from public expenditure would mean a massive cut in overseas development aid. Again, what sort of Christmas present is that for the third world? The Opposition would cut the Sure Start children's centres, and now we know that they would also cut the overseas development aid.

Tony Baldry (Banbury) (Con): The Chancellor has made it clear that he will pay the UK's share of the remaining concessionary lending debt to the World Bank and the African Development Bank of those countries reaching the heavily indebted poor countries completion point. How much money does he think that that will involve? What indication has he had so far that other donors will be willing to follow the UK's lead? Will this matter be a priority for our G8 presidency?

Mr. Brown: I pay tribute to the hon. Gentleman's work as chairman of the all-party committee. That will be a priority for our presidency. I will talk to the American Administration about it this weekend, and I will meet the IMF and the World Bank to look at practical proposals to allow us to move forward. In the
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case of debts owed to the IMF, that would be done by use of IMF gold, which would be a bold decision but the right one. I believe that there is increasing support for that from the international community and from the managing director of the IMF. On debts owed to the World Bank, when we tried to act previously we raised a trust fund of something in the order of $3 billion. We have offered to pay off our share—10 per cent.—of the debts owed to the World Bank. I would like other countries to follow. I believe that the different members of the G7 recognise that that has to be done. I am glad that the hon. Gentleman supports our policy, but I ask him please to advise those on the Conservative Front Bench that if they continue to cut overseas development aid in their Budget proposals, they will not be able to finance the debt relief that we are providing. The Conservative party should think again.

Mr. Tom Clarke (Coatbridge and Chryston) (Lab): Does my right hon. Friend agree that the remarkable bilateral and multilateral progress that he has made in respect of debt puts him in a very strong position to encourage developing countries to introduce a strategy where they have mineral resources, such as in the great lakes or even in Angola, so that they can indeed reach the millennium goals and achieve the objectives that he has nobly set?

Mr. Brown: My right hon. Friend has played a prominent part in pushing to ensure that resources are there for the economic development of countries in Africa that have been denied opportunities for too long. That demands a good solution to the trade talks. It also demands that resources be available for education, health and economic development. In the example of Ethiopia, which was the starting country for the Live Aid action 20 years ago, one reason why it has not been able to move forward, and why it has, for example, only 2,000 doctors for 70 million people—a pathetic situation for a country with so many people—is that much of its debt is still owed to the World Bank and the IMF. It is therefore necessary for us to complete the process of debt relief to enable some countries to make the decisions that are right for them. I hope to be able to report progress in the first few months of next year.

Rev. Martin Smyth (Belfast, South) (UUP): We welcome what the Chancellor has been saying. He is offering to pay off 10 per cent. Will that be over a period of years, or is it intended to give a lead to others? Can he give any guidance on who might be the loiterers in coming forward?

Mr. Brown: I am grateful to the hon. Gentleman. We are beginning to persuade people, so I do not think naming and shaming is the right way to move forward in the first few months of our presidency. I believe that we can persuade the countries that need to contribute. The hon. Gentleman asked how the debt relief would be paid. Our 10 per cent. contribution is that we will pay all the interest payments due from the poorest countries to the World Bank for as long as they fall due. We are taking on the burden of the debt, and I hope that other countries can follow that course. The money is set
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against the overseas aid budget, so all parties would have to make a commitment that they would finance that budget to be able to do it.

Mr. John MacDougall (Central Fife) (Lab): I congratulate my right hon. Friend on his contribution to tackling third world debt. Would he care to comment on the work of the Commission for Africa, which faces significant challenges, particularly in terms of the HIV/AIDS epidemic that is sweeping the country and of the number of orphans left in distressful and unfortunate situations? I believe that the commission is doing an excellent job. Would the Chancellor care to comment on its work?

Mr. Brown: My hon. Friend has taken a big interest in these matters, and he is absolutely right to refer to the 11 million children in Africa who are orphans of mothers and fathers who have died from AIDS. That figure will rise dramatically in the next few years unless something is done. In some countries of Africa, a quarter of the adult population suffer from HIV/AIDS. That is why the measures that we are looking at, including giving £500 million a year from the Department for International Development to finance action on AIDS, are desperately necessary.

We have a meeting in Johannesburg at the beginning of January with the Commission for Africa and we will try to get agreement on a package of measures that could finance action on HIV/AIDS, malaria, tuberculosis and all the killer diseases in Africa. I hope that when we publish the Commission for Africa report we will have all-party agreement that we need to spend the money necessary so that illiteracy can be tackled—110 million children are not going to school today—and so that the 6 million avoidable deaths from killer diseases can be dealt with through prevention and cure.

Growth and Stability Pact

5. Mr. James Plaskitt (Warwick and Leamington) (Lab): What objectives he intends to pursue during the UK's EU presidency in respect of the growth and stability pact. [205214]

The Chancellor of the Exchequer (Mr. Gordon Brown): The Government will continue to pursue our objective of a stability and growth pact that takes into account the economic cycle, debt sustainability and the role of public investment. I intend to publish later today the UK's 2004 convergence programme. The Government are also publishing today their autumn report on euro preparations.

Mr. Plaskitt: Continental Europe seems to be stuck with rates of unemployment far higher than ours. Is it possible to argue that the growth and stability pact has delivered stability, but of the sort one tends to notice in a corpse? Under my right hon. Friend's stewardship, by contrast, the United Kingdom has announced outstanding records on both growth and job creation. What advice on the future of the pact will he give his European colleagues over the next few months?
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Mr. Brown: It is true that the euro area has higher inflation and higher unemployment with lower growth than we do. The issue arising is whether the stability and growth pact gives a degree of co-ordination that is necessary with the monetary authority of the European Central Bank to enable Europe to continue to grow at a rate that would bring down unemployment. We have three specific proposals. First, just like our fiscal rules, Europe should take into account the economic cycle. Secondly, those countries with low levels of debt should be allowed to borrow. That would be positive for growth. Thirdly, they should recognise the important role of public investment, as we do in setting our fiscal rules, to enable countries with low debt to be able to borrow to make the necessary public investment to build up their infrastructure and to secure economic growth for the future. I believe that the main economies of Europe are moving towards the views that we have expressed for seven years on the stability and growth pact. I hope that during the Luxemburg presidency many of the rules that underlie the implementation of the stability and growth pact will be rewritten.

Mr. Richard Spring (West Suffolk) (Con): Given that UK net borrowing has breached the 3 per cent. level, does the Chancellor agree that a key objective of the UK presidency would be to avoid the excessive gloating, tellingly referred to by the Chancellor's comrade-in-arms Lord—oh, I am sorry—Mr. Peter Mandelson?

Mr. Brown: It is not usual to refer to Members in another place. I must correct the hon. Gentleman—the deficit this year is 2.9 per cent., not 3 per cent. That compares with other countries, including America and Japan, where the deficit is over 4 per cent., in both cases around 5 per cent. In Japan's case it is nearer 6 per cent. now. So our record is a good one and he should congratulate us on our management of public finances. Unfortunately, the only contribution that the Conservatives could make to public finances would be to cut £35 billion of public spending. Even if they sacked every civil servant in the country, they could raise only £15 billion, so they would have to find a further £20 billion from massive cuts in our public services. It is about time that they explained how many nurses, teachers and carers would lose their jobs.

Mr. Nigel Beard (Bexleyheath and Crayford) (Lab): What are the likely consequences of the European Union continuing effectively without any fiscal rules if the stability and growth pact is not reformed?

Mr. Brown: It is clear that the pact will be reformed and that all countries now recognise that the existing implementation rules cannot be sustained. Because France and Germany are not going to be disciplined as a result of the breach of the rules, it is clear that the rules will have to be changed; otherwise, the pact cannot survive. I believe that in the next few months we shall see proposals that will make the pact more understanding of the needs of the economic cycle and of public investment and more sympathetic to countries with low debt.
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