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House of Commons

Thursday 3 February 2005

The House met at half-past Eleven o'clock

PRAYERS

[Mr. Speaker in the Chair]

Oral Answers to Questions

TREASURY

The Chancellor of the Exchequer was asked—

Debt Relief

1. Ms Christine Russell (City of Chester) (Lab): If he will press G7 Finance Ministers, at their meeting in February, to take further action on debt relief. [213415]

3. Mr. Clive Betts (Sheffield, Attercliffe) (Lab): If he will make a statement on the initiatives that the Government will bring forward during the UK's presidency of the G7 on cancellation of debt in the poorest countries. [213417]

10. Tony Lloyd (Manchester, Central) (Lab): What plans he has to extend debt cancellation to heavily indebted poor countries; and if he will make a statement. [213424]

The Chancellor of the Exchequer (Mr. Gordon Brown): For the G7 Finance Ministers' meeting, which takes place in London tomorrow and Saturday, the UK has put forward detailed proposals for 100 per cent. multilateral debt relief for poor countries. We will discuss using International Monetary Fund gold and financing World Bank debt service payments. The aim is to bring to an end once and for all the tragedy of poor countries' unpayable debt.

Ms Russell: I thank my right hon. Friend for that answer. Today, many of my constituents have travelled down from Chester to attend the "Make Poverty History" rally, which I believe will be addressed in an hour's time by the former President of South Africa, Nelson Mandela. I am sure that all Labour Members welcome him to London. [Hon. Members: "Hear, hear."] He is on record as calling for the world's richer countries to make a bigger contribution to helping the poorer ones achieve their millennium goals. What more does my right hon. Friend think that Britain can do to galvanise global action to eradicate poverty and debt throughout the world?

Mr. Brown: I am grateful to my hon. Friend, who has taken a huge interest in these matters. All Members of
 
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the House will want to welcome former President Mandela to London and to welcome his wife, Graca Machel, who is joining him. I gather that he is speaking in Trafalgar square in only a few minutes' time, which perhaps explains why so few Conservatives are here today. I had the privilege of meeting him yesterday, and he urged us to move forward with our proposals on debt relief and on the international finance facility. He speaks not just for the developing world and the emerging markets countries, but for a very large proportion of industrialised countries, which want a solution once and for all to the tragedy of promised debt relief not being given to the poorest countries.

Mr. Betts: I congratulate my right hon. Friend on the tremendous lead that he has given on this issue on the international stage, but will he clarify two points? First, how can we guarantee that the money saved through debt relief will be spent on health and education, and not on more arms and luxurious lifestyles for some of the leaders concerned? Secondly, how would he provide the money for debt relief if, at the same time, he had to cut £35 billion from public expenditure?

Mr. Brown: I am grateful to my hon. Friend. When I had the good fortune to be in Tanzania and to meet President Mkapa only a few days ago, he agreed that the additional debt relief that we are providing unilaterally to Tanzania will go directly towards financing secondary education, free of charge, to pupils in his country. When we signed a similar agreement with the Prime Minister of Mozambique the next day, she said that the money would be used for health, education and infrastructure development. If our proposals for Mozambique come off, debt as a share of its national income will fall from 6 per cent. to 2 per cent., and then to just 0.5 per cent. That would be a major advance, because Mozambique is spending more on debt interest today than on education or health.

On the proposals of all parties in this House for dealing with the debt tragedy, I hope that the shadow Chancellor can say today that he supports us in providing the resources for debt relief, and that he would not cut his party's overseas development budget.

Tony Lloyd : May I also congratulate my right hon. Friend on his personal commitment to this initiative, which will make an enormous difference to the quality of life—and, indeed, the lives—of millions of people? I know that he is keen to promote poorer countries' access to trading systems, so that they can trade with markets such as ours. Does he accept, however, that although freeing up trade for such countries is very important, it is also important that they do not face unfair competition from rapacious producers in countries such as ours, who   would simply destroy their developing trading structures?

Mr. Brown: My hon. Friend, who has also taken a huge interest in these matters, speaks for the millions of people in this country who are concerned about not just debt relief but trade justice. One proposal that we will advance at the G7 Finance Ministers' meeting is that, as we seek a solution during December's world trade talks in Hong Kong, we will make resources available to build up the capacity of such countries, particularly those in
 
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Africa, to engage in trade in the international community on equal terms. By capacity we mean help with infrastructure—road, rail and communication—and with training and education. That would be an important advance.

My hon. Friend also rightly points to the key element of debt relief, and I am pleased to tell him that yesterday, Canada supported our proposals. Its Finance Minister stated that Canada wants 100 per cent. debt relief, and I praise him for doing so. Every day, additional countries are saying that they are now prepared to support a final settlement to the issue of providing 100 per cent. debt relief for multilateral debts owed to the IMF and to the World Bank.

Dr. Vincent Cable (Twickenham) (LD): May I add my appreciation for the Chancellor's work on overseas development and debt, which may stand him in good stead when he is promoted to become the Secretary of State with responsibility for foreign affairs and overseas development?

Specifically on tsunami relief, will he clarify the position? The Government have offered debt relief and debt cancellation, but the two countries that have applied are apparently being told that payments will be postponed and that interest will be fully capitalised and has to be paid in full. It has even been suggested that there will be interest on the interest. That is certainly not debt relief, let alone debt cancellation. If there is genuine debt relief, where in the public accounts is provision made for extra funding over and above the pre-existing Overseas Development Administration-Department for International Development budget?

Mr. Brown: The hon. Gentleman makes the issue of debt relief complex, but he is simply wrong. He is wrong because we told Indonesia that there would be a moratorium on debt interest payments until such time as the International Monetary Fund and the World Bank complete the needs assessment. That assessment will be available this weekend, and we will then look again at the position of Indonesia, which already has a moratorium. We have to look into what more we can do. Indonesia has also been offered a very substantial loan from the IMF for emergency assistance.

For the second country, Sri Lanka, we have offered not only a moratorium on debt relief, but cancellation of the debts that the country owes to the World Bank and other international institutions. We have agreed that Sri Lanka, as a low-income country, should now join the list of 70 countries eligible for debt relief. I hope that the hon. Gentleman would support that.

We have put money into the tsunami disaster appeal from the reserve and also provided extra money through tax relief on gift-aid donations. We have also provided tax relief on VAT requirements in respect of the national concert record and the CD that has been issued. No VAT will be charged as a result and we will give a similar payment to the appeal. Through public expenditure, debt relief and forgone tax revenue, we are providing substantial resources and we look forward to discussing with the World Bank president and the managing director of the IMF on Saturday what more we can do
 
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for what I hope we all agree should be a united effort among all the rich countries to help these two countries in difficulty.

Sir Peter Tapsell (Louth and Horncastle) (Con): Did the Chancellor learn, perhaps on the bush telegraph while he was relieving debt in Africa, that the Prime Minister was planning to relieve him of his burdens at the Treasury here in Britain?

Mr. Brown: I might listen to the hon. Gentleman if he had ever got anything right. He was completely wrong when he opposed the independence of the Bank of England and he is completely wrong again.

Mr. Alistair Carmichael (Orkney and Shetland) (LD): Can the Chancellor give the House an absolute assurance that essential services such as education in heavily indebted poor countries will not be damaged while the countries themselves are in the process of qualifying for debt relief? Surely we do not want to find ourselves facing the situation that we saw in Uganda where the Government introduced fees for primary education as a justification during the qualifying process.

Mr. Brown: The hon. Gentleman must look at the facts. In Uganda, the number of children in primary education has risen from 2 million to 6 million and primary education there is free. If the hon. Gentleman considered Tanzania, Mozambique and South Africa, as well as Uganda, he would find that attempts have been made to remove charges for primary education and health. What worried me most when I visited African countries was that fewer than 10 per cent. of pupils were able to get secondary education and those who did had to pay fees. It is with respect to secondary education that the issue of fees arises. That is why we signed an agreement with Tanzania—so that secondary education could be provided free of charge—and why the World Bank has changed its position and is now opposed to user fees for primary and secondary education. I believe that our duty to those countries is to make it possible, through our proposals for the international finance facility, to finance both universal and free education and health care.

Mr. Tom Clarke (Coatbridge and Chryston) (Lab): My right hon. Friend pointed out very tellingly that something like 80 per cent. of the poorest countries' historical debt is owed to the international institutions. Does he agree that it is absolutely right of him to press the IMF to consider the use of its existing assets, including gold, as stability and growth in the developing countries is useful to those institutions as well?

Mr. Brown: My right hon. Friend has an honourable record in pushing this issue, and especially debt relief. The poorest countries in the world owe the IMF $12 billion. If the IMF were prepared to revalue or sell its gold, that would be the best way of removing those countries' liability. I believe that there is an understanding in most of the industrial countries that that is the best way to deal with the problem. I hope that, in the next few weeks, we will secure agreement among the G7 member countries that that proposal can be
 
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made to the IMF meeting to be held in Washington in April. It is to the credit of all parties in this House that time has been devoted to these issues today, but the important thing—especially as we listen to people making their case in Trafalgar square and elsewhere—is to get an agreement among the major countries.

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