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I am clear that creditor rights are vital to smoothly functioning financial markets and they should be altered only in exceptional circumstances. That, however, is what I think this Bill does-these are exceptional circumstances because the international community has come together to agree to debt relief as a solution to what has been a decades-long debt crisis. It has commanded support from all the major creditor countries and from very many commercial creditors. Governments have taken the steps they can to reduce the problem without legislation, but although it has been reduced, the problem remains. A piece of legislation tightly targeted at a fixed
and limited stock of historical debt owed by the poorest countries provides an important means of tackling the problem.
As Members will be aware from reading the Bill, future lending is explicitly excluded from its scope, which is fundamentally right. To address directly the point raised by the hon. Member for South-West Hertfordshire, the main argument of those who say that the Bill will not benefit developing countries rests on the assumption that commercial lenders will be put off making them loans in future. It cannot be clearer in the Bill-it was also clear from what my hon. Friend the Member for Northampton, North said when she introduced it-that future lending is explicitly excluded from the Bill's scope. I thus see no reason why the Bill should affect future lending. In providing a solution to the problems of vulture funds and of creditors acting in what I believe is an unscrupulous way, it provides a real and tangible benefit to countries affected by having their debt pursued in the UK courts.
That brings me to the question raised about what other countries are doing. My hon. Friend the Member for Northampton, North has had meetings in the United States to discuss proposals for legislation, but it would not be right for me to speculate on the chances of such legislation passing through Congress. It remains the case that what we are doing in the UK is leading the way internationally, just as we have led the way in many aspects of the debt relief agenda over the past 10 or more years. We can be proud of that. It is nevertheless helpful if other countries produce similar legislation in their jurisdictions, and we want directly to encourage and support other countries to do that. The fact that the US is considering the issue at various levels is very welcome news, as it is obviously a major jurisdiction when it comes to the enforcement of debts. We would like other countries to follow the UK's lead, as I said.
Let me conclude by repeating that the UK can rightly be proud of its international leadership in this area. The debt relief initiatives that we have introduced have played a key role in helping to lift millions of people out of poverty and to lay the foundations for sustained development in 40 of the world's poorest countries. Part of the benefit that should result from the Government's support, however, is being diverted by a small minority of unscrupulous commercial creditors that seek to extract full repayment rather than participate in the HIPC debt relief initiative. The Bill will prevent that from happening under UK law enforceable in the UK courts, ensuring that all creditors participate in reducing debts to a sustainable level. That is the moral thing to do, but it is also economically logical and will make more effective the development aid that we all, as taxpayers, fund.
The reasons for supporting the Bill are compelling, and I am glad to be able to do so today. I hope that Members across the House will join me in helping to make the Bill law by agreeing to its Second Reading today.
11.7 am
Mr. Christopher Chope (Christchurch) (Con):
I shall not divide the House on Second Reading, but I would like to put on record some of my reservations and concerns about the Bill. I do not think that the Minister has adequately addressed the concerns expressed by
investment managers about the Bill's impact on the ability of countries suffering from substantial indebtedness to be able to obtain commercial support in the form of loans in future.
One example, which has already been cited, is what happened in Zambia. The Romanians supplied agricultural equipment to the Zambians and expected them to pay for it. I imagine that the Zambians would have had resources from grant moneys and overseas aid from other countries to enable them to purchase that agricultural equipment, but they defaulted on the debt. Ultimately, the entitlement to the debt was transferred to another organisation, which then sought to obtain a judgment against the Zambian Government. If the Zambian Government are to be allowed to get that equipment without paying anything for it, it surely defies common sense to suggest that, with no effective guarantee that the loans would ever be repaid, many people across the world would in future queue up to provide agricultural equipment backed by commercial loans to countries such as Zambia. That is one of the fundamental problems with this well-intentioned Bill.
I am also very concerned about the retrospective nature of the Bill. We are talking about organisations that have obtained judgments in our courts, only to find that Parliament, at the behest of the Government, is seeking to intervene to prevent those judgments from being enforced either in whole or in part against the judgment debtor. That can be justified only in the most extreme circumstances, and I do not think that the Government have set out those extreme circumstances.
Consequences flow from that. First, there must be a big question mark over whether the Bill's provisions are compliant with the relevant articles of the European convention on human rights. We know from the background material that leading counsel's opinion is that the existing provisions would be contrary to the ECHR. The Minister has not been able to assure us that the concerns of leading counsel in that respect have now been allayed as a result of anything the Government have done, so I regard that issue as still very much at large, and think that it is highly debatable whether the Bill is compliant with the ECHR, for the reasons I have set out.
If the Government's argument is that there are compelling reasons justifying the unusual stance that has been taken, my argument would be that those reasons are less compelling in respect of retrospection, where judgment has already been obtained for the debts. If we take a look at the detail, we see that this legislation could be applied in various ways. The Government have chosen the most wide-ranging interpretation-and therefore, in my view, the most oppressive interpretation. It is also potentially the most inimical to the British system of justice, because the following is bound to happen: whereas at present many of these international contracts are drawn up in accordance with the provisions of English law and then are justiciable in the British courts, if we are unable in future to demonstrate some consistency in how we organise our legal affairs in this country, potential creditors will engage in forum shopping and make sure that the contracts are drawn up in law other than English law and that the forum where they are determined are courts other than the British courts. That would undermine our system of justice. As a result of history, we have, in London in particular, an international forum for resolving international disputes by both arbitration
and litigation, and that provides employment to a lot of people. Anything that is done that, unwittingly or otherwise, has the consequence of undermining that very important part of the British economy can only be bad news.
I therefore have strong reservations about the Bill on the basis of human rights and because I think the law of unintended consequences could apply. At a time when our country is teetering on the brink of losing its triple A rating as a result of the extraordinarily reckless way in which the Government have managed our national finances over the past few years, it ill behoves us to start saying that we do not think people who have incurred debts as a result of commercial transactions should be liable for them. Government-to-Government lending is a completely different issue; that is a matter, ultimately, for the taxpayers of the Government who have been doing the lending and who decide not to pursue the repayments. However, in terms of commercial loans in the private sector, the consequences of the Bill's measures will be dire in the extreme, and will ultimately prove to be to the detriment of third-world countries.
My heart goes out to the people of heavily indebted poor countries. They are heavily indebted because, for the most part, their leaders have been corrupt. We need only take a look at the leaders of Liberia and other countries. Many of them have substantial funds in, for instance, Swiss bank accounts. For such countries that are essentially corrupt, we seem, in effect, to be saying that we should indulge that corruption by writing off these debts, even when they have been incurred as a result of commercial transactions.
I hope that this matter is looked at in much greater detail in Committee. There must not be a knee-jerk reaction, when people say, "Well, this sounds like a good idea; let's go ahead with it." Instead, we should take a careful look at the consequences that would flow from the Bill in its current form.
11.15 am
Ms Keeble: The hon. Member for Christchurch (Mr. Chope) has talked about some of his concerns about the Bill. They are shared by others, but they are not well founded or substantial, and I shall deal with them in the course of my remarks.
First, let me say a few words about the general point of the Bill. When the history of these times is written, I am sure that one of the great movements that will be noted is the great flood tide of international opinion in favour of ending global poverty. The response to the Ethiopian famine of the 1980s grabbed public attention in a way never seen before, and harnessed public opinion across the developed world. The formulation of the millennium development goals, with their targets for creating a better world, have been worked through national Government and international organisation mechanisms to produce real change. The Make Poverty History campaign motivated the public in the richest countries in the world to force our leaders to commit to ending the scandal that gives a child in Africa a fraction of the life expectancy of a UK child, not to mention the very much lower chances of getting an education, health care, a job or even-tragically, in this day and age-enough to eat each day. As well as the issues of increasing aid, of improving trade and of governance-about which the hon. Member for Christchurch is absolutely right-an
important aspect of this world opinion has been the understanding that a poor country cannot develop if it is shackled by debt, and that is what this private Member's Bill addresses.
Governments have already taken steps to write off debt-the hon. Gentleman referred to that-although some countries do not subscribe to the consensus view on that, so there is still work to do. Consideration must, for instance, be given to the situation for countries such as China; its investments in Africa and how those are working should be addressed. There has also been genuine progress on the cancellation of public debt, and I talked about that in my earlier speech.
This Bill deals with the rest of the commercial debts. It deals with the creditors who will not voluntarily, either out of normal commercial interest or for ethical reasons, engage with the debt cancellation process, and who remain outside the international consensus and the international mechanisms for dealing with developing country debt, instead aggressively pursuing the debts at the expense of the poorest people in the world. Therefore, the Bill addresses a small part of a very big picture.
That is an account of the broad idealism that has driven everyone who has been involved in the whole movement to address debt cancellation and world poverty, but the hon. Member for South-West Hertfordshire (Mr. Gauke) drew our attention to the Bill's details, and he was right to do so because they need to be looked at. He identified three big issues, but I counted four. I hope his maths improve if he is to find himself on the Opposition Treasury Front Bench.
Mr. Andrew Robathan (Blaby) (Con): Or the Treasury Front Bench.
Ms Keeble: No, not the Treasury Front Bench. The Opposition need to be numerate as well as our own, very numerate, Minister.
Of course, contractual rights are an issue, but I think the Minister dealt with some of the key points. Remarks were made about the need for orderly wind-downs and orderly management of debts. There are arguments on that, and also on the trade-off between the contractual rights of people who hold debts and the public purse, which has to fund public services at the same time. That trade-off has been of acute concern here in the UK, and it also reads across to issues to do with debt management on the international stage.
However, this measure involves not just a whimsical ripping up of contracts, but the pulling of vulture funds-the outriders of capitalism, as it were-into a complex, internationally agreed process that calculates how much such countries can afford to pay and then makes arrangements for that amount be paid, while providing the necessary due legal process. So this is not an irrational, whimsical or illogical process but part of internationally agreed-and debated to death, probably-procedures and mechanisms.
The hon. Member for Christchurch said that the situation is different if the relationship is Government to Government, but one problem is that we cannot divide off the public and private sectors in this area-or, indeed, elsewhere. Government-to-Government relations for dealing with the debt cancellation that we have undertaken are underwritten by the British taxpayer,
and I see no reason why such an arrangement, which is working in a constructive way at our constituents' expense, should be ripped off by firms that decide they are not going to play ball and are going to do something different. Of course, the debts that are being pursued most aggressively-the hon. Member for South-West Hertfordshire raised this issue-are bought on the secondary market. I am not sure, but I think the Romanian debt was a Government debt that was then bought on the secondary market, so the divisions that the hon. Member for Christchurch referred to cannot be quite so neatly drawn.
The hon. Member for South-West Hertfordshire also dealt with human rights. Human rights compliance obviously has to be written off or dealt with in the legislation, and that issue will be looked at in Committee. He also raised the question of who this measure will benefit and whether it will benefit developing countries, which is a big issue. Various figures were mentioned, and the one that I have been working on is £1.2 billion, which is the amount currently in process. It can almost be argued that that figure is too small. I think it is about the size of the RBS bonus pot, so from that point of view it is not a vast amount of money to legislate for. However, as has been discussed throughout consideration of the Bill, it is money that is intended to tackle some of the worst poverty in the world, and what it can buy in the way of services in countries where services are needed is absolutely massive.
Mr. Gauke: The figure of £145 million that I quoted comes from the Treasury's own impact assessment and is the transfer from the creditors to the HIPC states. I quoted that figure because it is the Government's own estimate, rather than the £1.2 billion that the hon. Lady quoted.
Ms Keeble: I think the £1.2 billion is the amount currently in the process of being sued for in all the actions that have been referred to. So the amount that the HIPC countries will be deprived of if the Bill is not enacted is about £1.2 billion- [ Interruption. ] Okay, but it would make a very significant difference in terms of what it could buy in the way of services for the countries concerned, so this legislation would be effective.
On the risk premium, one argument is that although the measure might provide this little bit of money to developing countries-£145 million, or whatever it is-because it will increase the cost of credit for those countries, in the long run it will be damaging. That view has also been put forward by some commentators in their submissions, but it is not well founded for several reasons. The measure will certainly increase the risks for the vulture funds-and a good thing, too. If it discourages them from taking actions that are unacceptable, or denies them the opportunity to make cheap money at British taxpayers' and developing country populations' expense, then we should recognise, as my hon. Friend the Minister said, that those are the morally repugnant activities that it is intended to prevent, while allowing for orderly wind-downs.
As is clear in the Bill and as my hon. Friend the Minister pointed out, future debts are specifically excluded, and rightly so, because the Bill deals with the HIPC process, which relates to historic debt. Therefore, the Bill will not increase the risks for the future. However,
there is a much bigger issue. The hon. Member for Christchurch talked about the appalling track record of some developing countries, and about Government corruption, Swiss bank accounts and so on. The thing that will really encourage proper investment and the proper handling of debts and credit in developing countries is their having sound, growing economies, good governance, strong institutions and all the other things required for stable growth in the long-term. That is what will give investors the greatest confidence, and it is precisely what the HIPC process is designed to bring about, as my hon. Friend the Minister said. It is not just a question of saying, "Oh dear, these people can't pay their debts. They are a basket-case-we are going to write the debts off." It is about deciding how we handle the development process for these historic debts, which have shackled such countries in a terrible way and left them vulnerable to exploitation by the vulture funds, so that they can build more secure futures. That is precisely what responsible, ethical, sound investors would want to see happen in these countries, and this Bill is part of achieving just that.
It is really important that this Bill gets through all its stages and on to the statute book, and I am very grateful for the support of the hon. Member for Hazel Grove (Andrew Stunell). We obviously could not get through all the stages today because, rightly, it needs scrutiny and discussion and people need to see that happen so that they can be reassured. However, we do need to get it through before the election and time is limited, so I hope we can get Government time for Committee stage, and Opposition support for that. I urge my hon. Friends who are the business managers, and the hon. Member for South-West Hertfordshire, to ensure that that happens, because there is a further issue at stake: the credibility of this House and of our processes.
What the many people who have a burning passion for and interest in this subject will have heard this morning is that there is a real economic logic to the proposals in the Bill. There is also an ethical imperative; indeed, I think this is the first time I have heard a
Minister describe something as morally repugnant-certainly a Treasury Minister talking about financial activities. The Bill is therefore receiving stronger ethical support and a stronger push from the Front Bench than many other things do. It would also probably be supported by some 90 per cent. of the financial services industry, which operates in a completely proper way and has been involved in the writing off of some of the debts of such countries.
Mr. Chope: If this is such a popular measure, why does the hon. Lady think that-apart from herself, and she is promoting the Bill today-I have been the only Back-Bench contributor to this debate?
Ms Keeble: I think that people want the Bill to get on to the statute book, and they have not turned up here to object to it. With the distinguished exception of the speech by the hon. Member for Christchurch, who has a track record of ensuring that he puts the awkward questions-and rightly so-people will have heard that there is huge support for this legislation from all the parties, and that is unusual. They will say, "Well that's funny; everybody agrees with it, and everybody says that it is a good idea and that they want it to happen-so why hasn't it happened?" That is why it is important that if there really is a political consensus on getting this measure on to the statute book-and sooner rather than later, because things take time to get up and running again after an election-we take the opportunity to do it. This is not a matter of the political arguments, because we have been through them all and they have pretty much been won; this is a matter of the political will to manage the process. I very much hope that in the remainder of this Parliament this will all be achieved. I commend the Bill to the House and I hope that people will support its Second Reading.
Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).
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