Mr. Andrew Dismore (Hendon) (Lab): I beg to move, That the House sit in private.
Question put forthwith (Standing Order No. 163).
Ms Sally Keeble (Northampton, North) (Lab): I beg to move, That the Bill be now read a Second time.
I am delighted to move the Second Reading of a Bill which, though small, is enormously significant for people living at the sharp end of some of the most acute poverty in the world. I do so on behalf of my hon. Friend the Member for Denton and Reddish (Andrew Gwynne), who has been a great champion of debt relief. Unfortunately, he is unable to be here today owing to serious illness. He has done the cause of fighting world poverty a great service by making debt relief the subject of his private Member's Bill, and I am sure the whole House wishes him a speedy recovery.
The Bill will hugely benefit some of the poorest people and countries in the world. It will prevent commercial creditors, some of them secretive private investment funds, from free-riding on the generosity of the British taxpayer. It will enable poor countries to concentrate funds on much needed new schools, hospitals and other direct services, instead of having to pay unsustainable levels of their Government revenues to service international debt.
The Bill strengthens the UK's commitment to debt relief. This country can take pride in the pioneering role that our Government have played in developing the international initiative to end developing country debt. The Bill takes the logic of public sector debt cancellation into the private sector, and it sets out for the financial services industry some limits to the dealings in which the industry can engage in developing country debt.
One of the results of the credit crunch is public anger about some of the activities of the financial services industry. Profiteering on the back of the debt of some of the poorest people in the world is perhaps the most objectionable activity of all. By passing the Bill, we as a Parliament and as a society will be setting boundaries and saying, "No further."
There has been much speculation about the number of financial institutions that will be affected by the provisions of the Bill, and about whether it will cut across the rights of a wide range of investors. That is not the case. The financial institutions that are likely to
be the most sharply affected are the so-called vulture funds-companies that buy up the sovereign debt of the poorest countries on the secondary markets, often at highly discounted prices, and then try to recover the full amount, plus costs and fees, through the courts-often, unfortunately, through the UK courts.
Many of those funds do not participate in debt relief, and by litigating for full repayment of their debt, they reduce the effectiveness of the international debt relief programmes of the UK, our international partners and responsible commercial creditors, and make less effective the very large amounts that the Government and other donors provide in aid for developing countries.
Peter Bottomley (Worthing, West) (Con): Will the hon. Lady join me in applauding the television coverage which has shown that some of those vulture fund people take their names off their doors when they are asked what they are doing? They ought to be as embarrassed about going to the High Court to try to enforce their claims as they are anxious to hide from the cameras and the media.
Ms Keeble: The hon. Gentleman is right about the operation of the funds. That is why my private Member's Bill dealt with issues of disclosure and transparency. I congratulate the media: television and some national newspapers have highlighted such activities and brought them much more into the public gaze. They have done us all a great service and presented us with a challenge by saying, "These are the facts. What are you as a Parliament and as a Government going to do about them?"
Mr. Andrew Dismore (Hendon) (Lab): I am a great supporter of the Bill, as I think all Members are, and my hon. Friend and our hon. Friend the Member for Denton and Reddish (Andrew Gwynne) are doing a great service to the developing world by bringing it forward. Does my hon. Friend the Member for Northampton, North (Ms Keeble) agree, however, that we need international action too? We, in just one country, cannot solve the problem. Does she agree also that if we pass the Bill today we will show that the UK again leads the world in dealing with developing world debt?
Ms Keeble: My hon. Friend is absolutely right-there is a need for international action. A Bill has been introduced in the United States, and I have met the Congresswoman who is taking it through. We also need to talk to other European jurisdictions to ensure that similar action is taken there. Importantly, however, action must start somewhere, and if it starts in this country that is fine, particularly given the global role of our financial services industry and the fact that our courts are often, unfortunately, the locus for action. In reality, we make a start and then look to the rest of the world to follow, as my hon. Friend said we have done on other issues.
The actions of the vulture funds are profoundly damaging, as hon. Members have said. Their world is opaque, and it has been hard to track their activities without the assistance of investigative journalists. To deal with my hon. Friend's point, I must note that a World Bank survey has reported a total of 54 actions by vulture funds since 2002, about one fifth of which have been brought in the UK. The problem is ongoing, and last year's World Bank survey reported 14 active or
unresolved law suits by commercial creditors worldwide. They include cases against Ethiopia, Sierra Leone and the Democratic Republic of the Congo.
Two well-documented court cases deserve particular mention: those brought against Zambia and Liberia. In the 1970s Zambia was provided with a loan to buy some tractors, but by the late 1990s it was unable to pay back all the money. The country was in the process of trying to find a settlement with the creditors when the Donegal International fund purchased the debt for a knockdown price of $3.3 million in 1999. The fund proceeded to pursue Zambia through the UK courts for the full amount of the debt, plus interest and fees, demanding an astonishing $55 million in total. The courts awarded $15.5 million, five times the amount that the fund paid for the debt.
In November last year, two commercial creditors took a case to the High Court against the Republic of Liberia for a debt that also dated back to the 1970s. In that instance, on an original loan worth $6 million, the funds were awarded $20 million. Not surprisingly, the President of Liberia has spoken out this week in support of action against the vulture funds.
Although those numbers may sound paltry when compared with the billions that have been won and lost each day during the credit crunch in this country, or, indeed, with the amounts that are at stake when a football club goes down, they are enormously significant to countries such as Zambia and Liberia. The $15.5 million awarded against Zambia would have been enough to pay for 30,000 primary school places. The $20 million awarded against Liberia represents an astonishing 5 per cent. of its Government's entire annual budget. In that country, the average income per person is less than half that of the "dollar a day" acute poverty target.
Mr. Justice Barton, who presided over the Liberia case, said:
"The only issue raised is plainly a sad one, that Liberia is a poor country, and cannot afford it."
Indeed, it is poor, because the average income per person in Liberia is $170, while roughly two thirds of Zambia's 12 million people live on less than $1 a day. That unscrupulous activity not only damages the economic growth of those developing countries, but undermines UK and international efforts to reduce the unsustainable nature of their debts. The Government have been at the forefront of driving through debt cancellation for some of the poorest countries, with the heavily indebted poor countries-HIPC-initiative. That is an international programme, but much of the original thinking and drive for it came from this country.
The scope of the programme has been extraordinary. Since 2000, $117 billion has been committed globally to debt relief for countries through the HIPC and multilateral debt relief initiatives. Some $9.7 billion has come from the UK. The lion's share of the debt cancellation- 94 per cent.-has come from the public sector, and it has been successful. Since 2001, the 35 post-decision-point HIPC countries have increased their spending on poverty reduction from $6.4 billion to $26.7 billion.
In Tanzania debt relief has helped to increase the number of children in primary school by more than 50 per cent., and helped to build almost 2,500 new
primary schools. Mozambique has more than tripled its poverty reduction spending from $792 million to more than $2 billion, contributing, for example, to a decrease in infant mortality from 147 deaths per 1,000 live births in 1997 to 100 per 1,000 live births in 2008. That is still far too high, and much higher than the rate in this country, but at least the trend is downward.
Debt cancellation has not been entirely a public sector programme, but concerns about the Bill have been raised because the idea has been put about that commercial debt is a new inclusion in the debt relief programme. However, commercial creditors have, notably and laudably, contributed to the debt cancellation, writing off debts because there was no realistic proposition of being able to collect them, out of concern for the impact of debt on the economic growth from which investors hope to benefit, or out of a genuine desire to be part of one of the most progressive movements in the world-the debt cancellation programme.
Some 6 per cent. of debt cancellation, about $4.5 billion, has come either in commitments or in reality from commercial creditors, so the principle of the cancellation of private or commercial sector debts as part of the HIPC programme is already well established. In fact it could be said that the Bill enshrines in legislation existing best practice in the commercial and private sector. It consistently applies to the private sector the principles that already apply to public debt cancellation.
I shall briefly set out the Bill's provisions, although we will consider them in more detail in Committee. The scope of the legislation, in terms of countries covered, is more modest than the provisions in the ten-minute Bill that I introduced last year on the same subject. It would be good to extend the Bill, but it is absolutely right to look at the HIPC countries and use the provisions that already operate in that area for the cancellation of some remaining commercial debts.
Clauses 1 and 2 define the debts to which the Bill applies. Basically, it confines the debts to those that are either included or expected to be included under the HIPC programmes. They are the debts of the 40 most heavily indebted poor countries in the world, including Afghanistan, fragile African states such as Somalia and the Democratic Republic of the Congo, and countries that have been torn apart by conflict, poor governance, and poverty. It also includes five countries that have yet to reach decision point under the HIPC programme: the Comoros islands, Eritrea, Somalia, Sudan and Kyrgyzstan.
My Bill sought to include a wider group of low-income countries, but there is a logic to restricting the legislation to the debts of HIPC countries and a fairness in treating all debt equally. Creditors will still be able to litigate for the recovery of their debts, so they will still retain their legal rights to debt recovery, but they will be able to do so only within the limits that the World Bank and IMF consider sustainable-the internationally agreed rules on the calculation of what is acceptable for debt recovery.
Clauses 3 and 4 reduce the proportion of those debts to be recovered to the level corresponding to the HIPC initiative. Those amounts are assessed internationally and there is a set assessment procedure, so the amount will not be at the discretion of one Government or another Government. A respected and established process for reaching the amount is already in train. Clause 5 applies those terms to judgment debts, and clause 6
creates an incentive for debtors to negotiate settlements to repay their debts on terms compatible with the HIPC initiative, by excluding from the scope of the legislation debts in respect of which the debtor has failed to do that.
Much of the discussion of the Bill in recent days has focused on the presumed restrictions that it introduces on the activities of private investors. However, as I have said, the Bill does not outlaw the proper pursuit of debt; it seeks to ensure that creditors cannot pursue payment beyond the level assessed as sustainable by the IMF and the World Bank. The overall goal, of course, is to reduce the relevant country's debt ratio to sustainable levels. The Bill provides safeguards for commercial creditors by promoting a negotiated settlement between them and the debtor countries, by excluding debts in respect of which the country concerned does not offer to settle on terms consistent with the initiative.
Finally, the Bill promotes fairness among creditors. The vulture funds that successfully take indebted countries to court can do so and make profits only by free-riding on the relief provided by British taxpayers, our international partners and other, more ethical, commercial creditors. As it stands today, the Bill is the result of solid consultation by the Government and a lot of hard work by the voluntary sector. It began with the work of the Jubilee Debt Campaign and included, in the Treasury, a consultation that reported recently.
What lies behind the Bill is economic realism as well as fairness to the British taxpayer, poor countries and other commercial creditors who already participate in debt relief. The reality for any country that reaches a HIPC process is that its debts are unsustainable and it has little or no prospect of ever repaying them in full. The initiative makes for the orderly management of the debt and reduces it to a level considered repayable. However, the process is fair and economically equitable only if all parties partake in the relief. The Bill would ensure that that happened and that the rogue vulture funds that are currently completely outside the law would be brought within the scope of internationally agreed procedures for managing developing country debt.
I pay particular tribute to my hon. Friend the Member for Denton and Reddish, for whom I am taking this Bill forward today; I am sure that he would have wanted very much to be here. I thank other colleagues in the House and the staff and supporters of the Jubilee Debt Campaign, who have been relentless in keeping this issue in the spotlight over the months and years. Their work and campaigning has provided the public space for the whole process of debt cancellation, which has been so important.
Mr. Speaker, you were one of the sponsors of the previous Bill, and I am sure that you would want to see this measure get on to the statute book before the election. I very much hope that we will get the time necessary for the Committee stage, and be able to complete Report and Third Reading in the little time left to this Parliament.
There is a strong body of support for the Bill right across the House; the Opposition have been extremely important in respect of the main thrust of the arguments behind the Bill. There is equally strong support outside
this building for ending the unsustainable levels of debt that have for so long paralysed the efforts to end world poverty.
Andrew Stunell (Hazel Grove) (LD): I am delighted to have this opportunity to speak in support of the Bill. I start by offering my sympathy to the hon. Member for Denton and Reddish (Andrew Gwynne), a geographical neighbour of mine who, like me, serves part of the borough of Stockport. I wish him well. I know from my conversations with him that he takes the Bill very seriously. He will be most disappointed not to be here as we, I hope, wave it forward on its way in the next hour or two.
I congratulate the hon. Member for Northampton, North (Ms Keeble), whose original ten-minute Bill first brought the issue to the attention of the House. I was happy to sponsor that Bill, and I am equally happy to sponsor this Bill today. Not having stepped back fast enough, I am also speaking on behalf of the Liberal Democrat party. I am happy to record my party's strong support for the Bill, which it sees as an important and practical, although small, way of assisting some of the poorest countries in the world-and, more importantly, the millions of poor people who will benefit when this legislation comes into force. As the hon. Member for Northampton, North said, this Bill is in some ways a little more refined than her ten-minute Bill, and it is none the worse for that. It is ready for implementation, subject to whatever is said in Committee.
I should make a disclaimer. As my constituents know, I am a stout defender of animal welfare. However, I should make it clear that international financial vultures are not included in my view of what should be protected by the House. I have served on the International Development Committee for the past year or so. Although I thought I already knew about some of the key issues, it has been an eye-opener to have seen the work done in many heavily indebted countries to tackle poverty and make a reality of the millennium development goals.
It is absurd that a great deal of work should be put in by non-governmental organisations, governmental organisations and multilateral donors to tackle the millennium development goals, to bring improvements to health and education and alleviate poverty in poor countries, while people operating from anonymous offices in financial centres around the world are exploiting the UK courts to take back some of the money that has been so hard won and negotiated so carefully for the purposes of poverty alleviation.
It is a particular cause of concern-anguish, even-for those of us who serve in the UK Parliament that the UK courts should have opened the door to all that and had a relaxed approach to such cases. That has made the UK one of the most-if not the most-favoured places for those anonymous financial experts to wreak their damage. As has already been mentioned in an intervention, those people do not seem to have too much shame, but they have enough to want to avoid the transparency that goes with full public disclosure. I welcome the fact that the Bill will tackle that issue as well.
My remarks will not be extensive. The Bill is a necessary measure to close a loophole that most people probably do not believe could ever have existed in the first place.
The Bill is well crafted and quite modest. I hope that it will get a very fair wind very quickly and that, not for the first time, what the House does on the issue of poverty reduction at an international level will be picked up in other parts of the world.
There are other centres of financial services and court regimes and, if the loophole is shut here, those anonymous financial experts will no doubt start to look elsewhere in greater numbers than before. We already know that the United States legislature is looking at parallel proposals. I hope that this morning will start a domino effect that will end up closing, at worldwide level, this ridiculous loophole and redirecting income streams that were always intended to alleviate poverty in poor countries back to those countries without further delay.
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