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House of Commons
Session 2009 - 10
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Debt Relief (Developing Countries) Bill

The Committee consisted of the following Members:

Chairman: Mr. Christopher Chope
Baldry, Tony (Banbury) (Con)
Binley, Mr. Brian (Northampton, South) (Con)
Boswell, Mr. Tim (Daventry) (Con)
Bottomley, Peter (Worthing, West) (Con)
Clarke, Mr. Tom (Coatbridge, Chryston and Bellshill) (Lab)
Connarty, Michael (Linlithgow and East Falkirk) (Lab)
Cook, Frank (Stockton, North) (Lab)
Gauke, Mr. David (South-West Hertfordshire) (Con)
Hemming, John (Birmingham, Yardley) (LD)
Kaufman, Sir Gerald (Manchester, Gorton) (Lab)
Keeble, Ms Sally (Northampton, North) (Lab)
Love, Mr. Andrew (Edmonton) (Lab/Co-op)
Mallaber, Judy (Amber Valley) (Lab)
Pound, Stephen (Ealing, North) (Lab)
Timms, Mr. Stephen (Financial Secretary to the Treasury)
Williams, Mr. Roger (Brecon and Radnorshire) (LD)
Eliot Wilson, Committee Clerk
† attended the Committee

Public Bill Committee

Tuesday 9 March 2010

[Mr. Christopher Chope in the Chair]

Debt Relief (Developing Countries) Bill
9.30 am
The Chair: Good morning everybody. I am delighted to see an army of volunteers here today to participate in consideration of the Bill. This is the first time I have had the privilege of chairing a Committee on a private Member’s Bill, so it is a novel experience for me. Before we start, I wish to make a couple of announcements. If people wish, they can remove their jackets, and if they have mobile phones or pagers, I should be grateful if they ensured that they do not disturb our proceedings.

Clause 1

Meaning of “qualifying debt” etc
Mr. David Gauke (South-West Hertfordshire) (Con): I beg to move amendment 1, in clause 1, page 1, line 20, leave out “identify” and insert
“have identified by the date that this Act comes into force”.
It is a great pleasure to serve under your chairmanship, Mr. Chope. This is the first time I have served on a Committee considering a private Member’s Bill, but—notwithstanding that it is a new experience for you—I am sure you will guide me as necessary.
The amendment relates to a specific aspect of the meaning of “qualifying debt” under the clause. I shall make broader remarks about the definition in our stand part debate and set out briefly what I hope to achieve during this morning’s proceedings. The amendment is narrow. It relates to which countries fall within the definition of qualifying debt. Essentially, the regime focuses on heavily indebted poor countries falling within the HIPC initiative, but it is also extended to include potentially eligible initiative countries. I tabled the amendment to obtain clarification of the provision. Under subsection (6),
“Potentially eligible Initiative country” means a country —
(a) “that the International Monetary Fund and World Bank identify as potentially eligible for debt relief under the Initiative, and
(b) in respect of which decision point has not been reached.”
I was not entirely clear when reading the provision whether it included simply those potentially eligible initiative countries identified at that point, or subsequently.
Sir Gerald Kaufman (Manchester, Gorton) (Lab): I am sure the hon. Gentleman is speaking to the amendment with the most constructive of intentions. If it were accepted, would enactment of the Bill be a cut-off point for such identification?
Mr. Gauke: I am seeking to clarify whether the Bill already does what the right hon. Gentleman suggests. If I develop my point, perhaps I can also deal with his intervention more fully. The words
“potentially eligible for debt relief under the initiative”
suggests that it is not a cut-off point, although I note that the explanatory notes to the Bill refer to
“countries that have been identified”,
which suggests that it is a cut-off point. They go on to state:
“Five countries currently fall into this country.”
The word “currently” suggests that the position could change, and that it is not a cut-off point. It is fair to raise such an issue because the general thinking behind the Bill and the clause is to ensure that it is retrospective. There are good reasons for that, which we shall debate in a moment or so. The intention is to say, “Here are particular debts that will, at the date of commencement, fall within the regime set out in the Bill and to which the debt reduction mechanisms will apply.”
Subsection (11) states:
“If the terms of the Initiative are amended after commencement in such a way as to change a relevant eligibility condition, this Act has effect as if they had not been so amended.”
The intention is largely to say, “This is where we are now; this has happened in the past; these particular loans are effectors”.
There is a considerable attempt to provide certainty regarding where the Bill actually applies. It could be understood to mean that—in the case of subsequent changes of facts in a given area, such as a country becoming potentially eligible—debts not currently affected by the Bill would become so affected. That may be an incorrect way of interpreting it, but my intention in tabling the amendment is to seek clarity on that point.
Michael Connarty (Linlithgow and East Falkirk) (Lab): I agree with my right hon. Friend the Member for Manchester, Gorton, in that I am sure the amendment is well intentioned, but in fact the subsection refers to a “potentially eligible Initiative country”, not debt. I have just read a book about someone who followed in the footsteps of David Livingstone across the Democratic Republic of the Congo. At one time it had 11,000 kilometres of motorway, and now it has 1,100 kilometres of passable roads. So a country that at the moment seems quite secure after the ravages of war could end up, like the DRC, unable to pay back the debts it currently has. Given that the provision focuses on the “country”, to say that nothing could be considered for the country in question in future would be entirely wrong.
Mr. Gauke: I take that point and I am grateful to the hon. Gentleman for acknowledging that the amendment is well intentioned, as was his intervention. I do not want to get into one of the broader debates just yet. However, one of the issues that the Treasury’s consultation paper has tried to wrestle with—and which the Government and the hon. Member for Northampton, North acknowledged in her thoughtful speeches on Second Reading—is that we do not want to pursue a policy that means that the costs and interest rates that developing countries will have to pay will go up because of a risk premium. There is a carefully calibrated argument to address that issue. The Government’s consultation paper and the Bill have addressed it by providing some certainty, essentially looking backwards and saying, “These particular debts are covered.” I do not want to labour this point—I want to let the hon. Lady proceed—my purpose is simply to provide some certainty on what the thinking is and what the wording means.
Peter Bottomley (Worthing, West) (Con): On a point of order, Mr. Chope. Is the word “nerd” an acceptable parliamentary expression?
The Chair: It is an acceptable parliamentary expression. As far as this intervention is concerned, may I remind the Committee that we are considering a very narrow amendment? During the intermission, perhaps the hon. Member for Banbury might like to look at the Hansard report of Second Reading to bring himself up to date.
Mr. Gauke: I am grateful to my hon. Friend the Member for Banbury for that intervention. I will not try your patience, Mr. Chope. As I said earlier, I wanted to deal with the questions that arise from this provision, but perhaps it would be more appropriate to do so in the stand part debate.
Mr. Tim Boswell (Daventry) (Con): Is not the issue simply that one sets aside contracts at one’s peril, and that it is important that, although there is the real-world issue of the burden of debt, which needs to be relieved—everyone in the Committee wants to address that; indeed, it is why we are here—it needs to be done in a precisely defined way that is not likely to give rise to trouble or to compensating commercial premiums in the future?
Mr. Gauke: I am grateful to my hon. Friend, who sets out the issue very well. There is no casus belli. I hope we will be able to work constructively, as we did on Second Reading, and proceed with the Bill in that spirit.
The intention, as my hon. Friend points out, is to ensure that the Bill is appropriately calibrated so that it will address the legitimate concerns of developing countries and assist them. There is no sympathy in the Committee for vulture funds—the intention is to help developing countries. However, in doing so, we must be careful and not make developing countries pay a risk premium on borrowing in the future, which will have a detrimental effect. That is a concern that we all recognise, which is why we want to calibrate the measures appropriately, and hence my entering now into some of the arguments I was going to raise in the stand part debate.
Amendment 1 is a probing amendment. The general approach in the Bill is to look back and enable us to identify a narrowly defined set of debts to which the Bill will apply, but there appears to be an exception. One reading of the Bill suggests that a country could become eligible and at that point, debts that were entered into before the legislation’s commencement, but which could not currently be identified because we do not necessarily know which countries will become eligible, would suddenly fall within that jurisdiction. I am not sure that, in the great scheme of things, the consequences of that would be particularly terrible, because we would be talking about debts incurred in the past. However, the clause’s wording is not entirely clear, and if the hon. Lady could provide some clarity, that would be of service to the Committee.
John Hemming (Birmingham, Yardley) (LD): I am sorry, but I cannot agree with the amendment if it is pushed to a vote. The clause is about identifying countries to which the Bill, which is effectively a form of creditors’ voluntary arrangement whereby everyone will get the same poundage, will apply. More complex issues that relate to how enforceable the Bill will be—the issue is an international one, and the Bill will only affect the UK’s jurisdiction—are for later. Logically, if we are to have a creditors’ voluntary arrangement whereby everyone gets a poundage, all creditors should get the same poundage. That should apply to all countries where that process occurs.
Ms Sally Keeble (Northampton, North) (Lab): It is a great pleasure to serve under your chairmanship, Mr. Chope. I know that, given your interest in the Bill, all the issues will be aired and debated. I welcome the amendment, which is important. This is an historic Bill—it is the first to deal with this issue, which is a concern in a number of countries. We have an opportunity to get the Bill through by the end of this Parliament. Given the time constraints, it is important that the issues are aired and that people are clear about the Bill’s purpose.
The Bill has to provide for the orderly management of debt. There is a need for consistency and certainty, which is important for developing countries’ economic management and the risk premium they might face in the future. Therefore, having clarity on which countries are in and which are out is important.
9.45 am
The principle here is that the scheme as it was agreed by the World Bank is what should apply. If the scheme varies at some date, this legislation will not. The legislation is based on the 2004 ring-fencing of the HIPC initiative, so there is no question of revisiting the matter and including new countries, to a point—I will explain that more fully. Repeated assurances have been given, and the hon. Member for South-West Hertfordshire knows, that the measure applies not to future, but to historic, debt. That is because the HIPC process manages the debts of heavily indebted poor countries, so that they can start with a clean sheet and manage their economies in the future. If they take on further debt, they can do so on reasonable terms, and not be subject to the vagaries of misfortune to which they have been in the past.
There are two issues on the potentially eligible countries about which I think the hon. Gentleman is concerned, and which need some clarification. The HIPC initiative was ring-fenced in 2004, and if circumstances change after that it is a whole different ball game. There are some countries that might have been completely closed but might have been eligible for the HIPC initiative at the 2004 point, based on information that has come to light. The example that springs most to mind is Afghanistan, which, on the 2004 figures, qualified for the initiative. I imagine that Zimbabwe is the only country anyone can think of that is currently a closed society in which information is not known, that might be included on 2004 data. I suspect that if there was a big debate here about finding a proper way to manage Zimbabwe’s historic debts, people would accept that if we looked at the 2004 data and it applied, the country would go into a set process.
The only other possible circumstance would be a country that currently does not exist but for which there is data, and it is clear that on the 2004 data it would have qualified. Perhaps the only such country that one can think of is southern Sudan, and people would accept that, given the circumstances—depending on what happens, as there will be a referendum there—that might also be appropriate. It is not a matter of saying, however, that we will have a 2008 or 2009 cut-off point. The data that are used to determine whether a country is a HIPC were ring-fenced in 2004 and are therefore not open to variation. That provides a consistent and coherent way of dealing with the debts of a closed list of 45 countries, as set out in the explanatory notes.
The pre-decision point countries are well known: Comoros Islands, Eritrea, Kyrgyz Republic, Somalia and Sudan. We have a defined list of countries, historic debts and an agreed process, which has been scrutinised nationally and internationally. All that therefore provides the certainly that the hon. Gentleman seeks and the assurance that the measure will not spread to any list of countries drawn up on any criteria. The process is clearly defined, and that certainty will help to ensure that the money markets see that it is consistent and not whimsical. I hope that that also deals with the concerns about the risk premiums, and that the hon. Gentleman will withdraw his amendment.
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Prepared 10 March 2010