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"at the end of the period of one year"
or that the Act would, by order, have permanent effect. I am not quibbling about the content of the Bill.
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Ms Keeble: I am going to be quite honest about this. Opposition Members have to make up their minds about which side they are on. On Second Reading, another Member said:
"My heart goes out to the people of heavily indebted poor countries."-[ Official Report, 26 February 2010; Vol. 506, c. 580.]
He then proceeded to block the entire Bill from going through, to the outrage of many members of the public. There is no point in saying that one is really upset about the position of third-world and developing countries and then raising all kinds of objections.
Mr. Cash: Will the hon. Lady give way?
Ms Keeble: No, I will not. The hon. Gentleman's colleagues on the Front Bench, who have behaved entirely properly throughout this process, have described the measure as a sunset clause, and so it is. It was their measure, and they also got in the measure for making the Bill permanent. If the clause were taken out, the effect would be that the Bill would continue for more than one year. There has to be an annual vote on it, because there is no provision for anything else. I asked in the Library and, in the short time available, the only Acts that we could think of that are so demanding of parliamentary time and attention that they have to be renewed annually are terrorism legislation and the Finance Acts. I am sure that the hon. Member for Gainsborough, who is the Chairman of the Public Accounts Committee and is therefore very concerned about efficiency and proper functioning, would think that, important though the Bill is, it is not on the same level as terrorism legislation or the Finance Acts, but that would be one effect of his amendment.
Mr. David Drew (Stroud) (Lab/Co-op): If we were to pass the Bill into statute and then, a year later, effectively let it wither on the vine, what message would we be sending to the developing countries that are looking for our support in this area? Surely that is the point.
Ms Keeble: My hon. Friend is exactly right. The other side of the argument is that it was important to ensure that we had cross-party consensus, given that the legislation was complex and that we were coming to the end of the Parliament. It was also thought important to ensure that there was a proper way forward and that there was provision for a new Parliament to take a further look at the matter. My hon. Friend is right and I am sure that these issues will be debated again.
Amendment 2 would remove subsection (3), which means that the Bill would require annual renewal. It would be damaging and unsatisfactory for heavily indebted poor countries to have unresolved commercial debt claims hanging over them, particularly when there remains a possibility of those being aggressively enforced for their full value in spite of the debt relief provided by others. HIPC Governments have made clear the real economic costs resulting from the deterrent to trade and investment that such unresolved claims could create. If the Act remained temporary, with the possibility of expiring within a year, a commercial creditor who might consider seeking full repayment would have a disincentive to settle their claim, because if they held on to it and the Act expired, they would be able to pursue 100 per cent. repayment. The Bill, as introduced, did not create that incentive for creditors to hold on to their debts in the hope that the Act would expire, as it would have taken permanent effect immediately.
Mr. Leigh: That is fine, but then why did the hon. Lady put subsection (1) in her Bill?
Ms Keeble: I shall come to that. First, I am going to go through the hon. Gentleman's comments on his amendments, because there were some contradictions in relation to amendment 3.
Originally, the Bill did not create an incentive for creditors to hold on to their debts in the hope that the Act would expire, as it would have taken permanent
effect immediately. That risk was one reason for the caution about including the sunset clause. However, the problem would be considerably worse if the Bill provided no option, short of new primary legislation, for the Act to take permanent effect.
If Parliament is satisfied at some future point that the Act has caused, and is causing, no significant damage to the operation of financial markets, then it should be able to approve, by affirmative resolution, its taking permanent effect. That is a proper way to provide for the orderly management of these very difficult debts in heavily indebted poor countries. There has been extensive discussion of this Bill, but part of the purpose throughout has been to make sure that we use the existing procedures of the HIPC programme to provide stability and security to the countries involved.
I turn now to amendment 3. The hon. Member for Gainsborough has said that he cannot understand clause 9(6), but it makes arrangements for handling the debt if the Bill is not confirmed. The result of that would be two classes of creditors: the first would be made up people who had taken action after the Bill fell and who would therefore be able to sue for the full amount, and the second would consist of people who took action for the one year that the legislation was in force. The second group would find that the value of their claims would be knocked back, because the legislation would allow them to pursue only that certain percentage of their debts that was approved by the HIPC procedure. The purpose of clause 9(6) is therefore to restore equity between the different classes of creditors.
As I have said, although the Bill looks quite complex, the principles behind it are simple. One of those principles is that there should be equity between different classes of creditors. If the amendment were accepted, a mechanism for restoring that equity would disappear, with the result that creditors would have no incentive to pursue their debts in the interim period when the legislation is in force. They will think, "Perhaps it won't be renewed, so we'd better not go to the courts now and just hang on instead." That would mean that the HIPC countries would still have their debts hanging over them, and also that creditors would receive less justice in the end. That would be the impact of amendment 3, and I do not think that that is what the hon. Gentleman intends. If the legislation were to fall for some reason in the next Parliament, I think that he would probably prefer to see justice restored for those creditors who had taken action while it was in force.
Amendment 2 would give the Act that this Bill will become equal status, in terms of parliamentary time, attention and renewal, with much more substantial pieces of legislation. It would have to keep being renewed every year, and there would be no provision to make it permanent. However, I think that the Opposition's intention was to ensure that a new Parliament could scrutinise the legislation and decide whether it was what was needed. If it was, and if it was working properly, that new Parliament could make it permanent.
The impact of amendment 6 would also not be what the hon. Member for Gainsborough intends, as it would delete the mechanism for providing justice and equity to all classes of creditors, if a new Parliament decided not renew the legislation.
Mr. Leigh:
May I ask one other question? Can the hon. Lady assure me that there will not be very expensive
lawsuits as a result of this Bill? Will it be sufficiently clear, so that we can avoid this becoming a matter of just lawyers, lawyers, lawyers?
Ms Keeble: The hon. Gentleman is absolutely right. One problem has been the cost of lawsuits, which is in part why the Government and other donors have set up a fund to enable developing countries to deal with some of the lawsuits that have arisen as a result of the vulture funds. I am sure that my hon. Friend the Economic Secretary will want to say more about that.
Furthermore, there is a real perception that there is no system-that it is all down to the courts and that there is no mechanism-whereas in fact although the measure is a Treasury Bill, it draws on existing international development procedures for the management of developing country debt. In previous discussions, we described the amount of public sector debt and noted that much of it has been written off. A total of about £4.5 billion was private sector debt. A lot of the debt has already been managed. The legislation would deal with the completely unreasonable creditors-the vulture funds, which involve people who operate outside the rules.
There are already internationally recognised mechanisms to determine the value of debt. If the hon. Gentleman had been in the Chamber on Second Reading, he would have heard the hon. Member for South-West Hertfordshire (Mr. Gauke) claim from the Front Bench credit for his party for taking the lead on the management of developing country debt. On the Government Benches, we tried not to heckle or intervene when the hon. Gentleman took the credit, but there is no dispute about the fact that there are proper mechanisms. The only issue is to make sure that they apply to vulture funds, whose activities rightly outrage so many people not only in the UK but across the world.
The hon. Member for Gainsborough asked about the provision on the duration of the Act. The amendment was included at the behest of Conservative Front Benchers. It was a sunset clause for a year to give a new Parliament an opportunity to look again at the legislation, to make sure that we were not in Dangerous Dogs Act territory, where legislation was passed without scrutiny. There will be a chance to look at the detail and the working of the measure, so that it can pass into legislation.
I hope that I have answered the hon. Gentleman's concerns.
Mr. David Gauke (South-West Hertfordshire) (Con): We are pleased that the Government have found time to bring the Bill back to the House on Report and that we have an opportunity to complete its remaining stages. I thank the hon. Member for Northampton, North (Ms Keeble) for her remarks about the cross-party co-operation on the Bill. I hope we can maintain that spirit for the rest of the afternoon.
In addressing the amendments, it may help my hon. Friends if I explain the thinking behind clause 9, which, as the hon. Lady pointed out, was an amendment we proposed in Committee. It was drawn up in conjunction with the parliamentary draftsman and there was cross-party co-operation. The thinking behind the provision is as follows. We all want to help developing countries. We are all concerned about the activities of vulture funds, but it is recognised by the hon. Lady-the Bill's sponsor-the Government and the Opposition that we need to get
the measure right. It is important that its provisions are carefully calibrated, because if we prevent creditors from enforcing debts against developing countries, there is a risk that they will not lend to developing countries in future. The law of unintended consequences could apply and we could make things worse for developing countries. Nobody wants to do that, which is why the Bill is carefully calibrated to apply only to heavily indebted poor countries. It relates only to past debt and not to future contracts. Future lending agreements can be enforced unaffected by the Bill.
Concern was frequently expressed by industry bodies during the Treasury consultation that the Bill might send the message that creditors in the UK could not enforce debts against developing countries and that that could be applied more broadly. As part of the consultation, it was pointed out that those possible spill-over costs would be difficult to assess. For example, would a risk premium be applied to developing countries that would make it harder for them to obtain credit?
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The solution to the problem that we proposed, which the Government and the hon. Member for Northampton, North accepted in Committee, was clause 9, which is essentially a sunset clause. The thinking behind the clause is that we should accept the Bill. However, although it has been given sufficient time to proceed in this House, it will not get the full scrutiny in the other place that such a Bill might otherwise receive. Even if it did receive such scrutiny, however, some things would not become clear until it came into force, so we proposed a mechanism that would make it possible in the 12 months following enactment to assess the Act's effect on the risk premium paid by developing countries and the number of debts-again, there is uncertainty and disagreement on this point-that could not be enforced at their full amount.
Mr. Cash: My question is really only about the accuracy of language. When we use the expression "sunset clause", we usually mean that as a result of various procedures, and after a period of time, a provision will cease to have effect. However, there is some confusion, as exactly the opposite seems to be provided for by clause 9 because it can give the Bill permanent effect, rather than causing it to cease. To make things clearer, may we use an expression other than "sunset clause"-perhaps by referring to a "sunlight clause"?
Mr. Speaker: Order. Interventions should be brief at the best of times-they should not be mini-speeches-but there is a premium on such brevity now because we have a very real time constraint and other hon. and right hon. Members might wish to speak.
Mr. Gauke:
I would always take guidance on terminology from my hon. Friend the Member for Stone (Mr. Cash), but clause 9 does contain a sunset provision because subsection (1) provides that the legislation shall expire after 12 months. However, the clause includes additional provisions that allow the Treasury, by order, to renew the Act for a further 12 months or to give it permanent effect. The advantage of including both approaches-this deals specifically with amendment 2-is that it gives the Treasury the flexibility to assess the effect of the Bill. It
is quite possible that a Select Committee will want to investigate the effect of the legislation in the early months of the next Parliament. We could then be in a position to make an informed judgment about the Act. We might be unsure about some concerns, in which case we could give the Act another 12 months and look again, but if the concerns can be dismissed after we have seen the way in which the Act has worked for 12 months, we can accept that it should have permanent effect.
Mr. Leigh: I am pleased that I tabled amendment 2 because we have had a debate about the law of unintended consequences. That is a serious point because the Bill could militate against developing countries. My hon. Friend might be fortunate enough to become the Treasury Minister with responsibility for the legislation, but does he think that 12 months is sufficient time in which to assess this complex area? What sort of plans does he have? I assume that he will not give a commitment either way now, but he might say later that we should have a further year of consideration.
Mr. Gauke: That is possible under the clause as it stands: it gives Ministers in the next Government, whoever they are, an opportunity to assess what is happening to the risk premium, the levels of debt affected, and the implications of the legislation. If it turns out that 12 months is insufficient, there is the possibility of extension for a further 12 months. I think that the provision adds to the Bill.
Let me say why I think this debate is helpful. Parliament is dealing with the matter sensibly, recognising the potential dangers and treading carefully. That is a good message to send out. The concern about the risk premium centres not on the Bill itself, but on the possibility that it will become a precedent for a future Bill that prevents the enforcement of future debts. No doubt some in this House would argue that that would be a great thing to do, but it would pose significant dangers for developing countries. The element of caution provided by the sunset clause is sensible, and subsection (3) is an important part of that.
The hon. Member for Northampton, North spoke about subsection (6) and how it would be wrong to allow a situation to arise in which those debts enforced during the period in which the measure is in force were treated differently from those that were pursued subsequently. That would have an impact on which debts were enforced and, in some respects, damage the credibility of the legislation. Subsection (6) is therefore helpful.
I shall bear in mind your strictures, Mr. Speaker, as I realise that many hon. Members wish to speak, whether on the amendments or Third Reading. I am grateful to my hon. Friend the Member for Gainsborough (Mr. Leigh) for raising his queries, but I believe that clause 9 as it stands is beneficial. It strengthens both the Bill and the next Parliament's ability to deal with these matters in greater detail, when the opportunity arises.
The Economic Secretary to the Treasury (Ian Pearson):
I appreciate the probing spirit in which the hon. Member for Gainsborough (Mr. Leigh) tabled the amendments. I do not feel the need to add to the comments made by my hon. Friend the Member for Northampton, North
(Ms Keeble) and the hon. Member for South-West Hertfordshire (Mr. Gauke). Given your strictures, Mr. Speaker, it would not be right to explain for the third time why the clause is structured as it is and why the amendments are unnecessary-
Mr. Leigh: Will the Minister give way?
Ian Pearson: I will give way to the hon. Gentleman, but I assume that he listened to the arguments made by my hon. Friend and his.
Mr. Leigh: I have listened to the whole debate, but I want to know what the nature of the assessment will be. We are dealing with a highly complex matter relating to developing countries. What assessment will be made and how will the Treasury conduct that assessment over the next 12 months?
Ian Pearson: I assure the hon. Gentleman that the Treasury will look at all the available evidence on the potential market impact of the measure before seeking an affirmative resolution to give it permanent effect, or to extend it for a further year. Clearly, our aim during the Committee stage was to respond to the concerns expressed by those who argued that the legislation could have an impact on future lending decisions that would be to the disadvantage of developing countries. No one wants that to happen.
We think that the Bill introduced by my hon. Friend the Member for Denton and Reddish (Andrew Gwynne), who sadly cannot be with us today-we wish him a speedy recovery-is carefully calibrated, as the hon. Member for South-West Hertfordshire says. We are confident that, when the assessment is conducted, there will be no evidence of any significant market impact. None the less, it is right that we take a belt-and-braces approach, which is why we were happy to accede as we have to the arguments of those who expressed doubt. With that in mind, I urge the hon. Member for Gainsborough to withdraw the amendment.
Mr. Leigh: I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
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Ian Pearson: I beg to move, That the Bill be now read the Third time.
I congratulate my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) on his Bill, which is likely to be very effective in providing relief to developing countries and in ensuring that they are not exposed in future to what is frequently called vulture fund activity.
I pay great tribute to my hon. Friend the Member for Northampton, North (Ms Keeble), who is a long-standing champion of the world's poorest countries. She is a strong and very effective campaigning voice when it comes to helping the world's poorest, and indeed standing up for the rights of her constituents. I am glad that she has been able to take the measure forward.
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