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Mr. Gauke: I am grateful to the hon. Lady for her remarks. She has clarified the intention behind the wording of subsection (6). I accept that other countries, not currently on the list of eligibility for the HIPC initiative, may be added, and she set out the very limited circumstances in which that might happen. As I may have mentioned in my earlier remarks, amendment 1 was probing, to seek clarity on that point. Having achieved that clarity, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Peter Bottomley: May I suggest to the hon. Member for Northampton, North, who is promoting the Bill, that she might want to consider adding 2004 to the Bill at a later stage? The year appears once, by chance, in clause 7. The issue raised by my hon. Friend the Member for South-West Hertfordshire might not be immediately obvious to many people but, given that those involved in providing future loans might have their attention drawn to the Bill, if and when it is enacted, we ought to make it clear that there is a time limit to which it can go back. That would be a little mark of safety, and it would be helpful if it is possible to do that with a bit of imagination later in the parliamentary procedure.
Secondly, 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 impact of that on everyone is not immediately clear. Explanation or modification later on might be useful.
Mr. Gauke: I am grateful for my hon. Friend’s comments.
The counter-argument, which was put in a number of responses to the Treasury consultation and some of which was quoted on Second Reading, is that if we interfere in contractual rights we run a risk of undermining confidence in the sanctity of contracts. Lenders will become wary of lending to developing countries—perhaps HIPCs specifically—because of the risk of being caught up not so much in the Bill as in future legislation using the Bill as a precedent.
We ought to debate such matters intelligently, to ensure that we calibrate the proposals correctly. I thank the hon. Member for Northampton, North for how she has consistently conducted the debate, ensuring that we do not fall into oversimplifying the matter and dismiss such concerns but that we address them. I am sure that no one in Committee would in any way want to jeopardise the long-term ability of developing countries to borrow at affordable, sustainable and sensible levels. Consequently, I shall ask the hon. Lady a number of questions and, in responding, she can set out why those who are concerned about the Bill should be reassured.
First, why should the Bill be focused on heavily indebted poor countries and on them alone? Why not include all creditors to developing countries? Why is the focus on loans entered into before the commencement of the Bill? Why is the Bill essentially retrospective legislation, applying to contracts entered into in the past, but does not apply going forward? We understand why, but it would be helpful to the Committee if the hon. Lady could set that out. We have already touched on why potentially eligible countries are included. If she is in a position to provide some breakdown of the benefits, and whether they will apply to countries falling within the existing HIPC initiative or those potentially eligible for the initiative, that might be helpful. She has already touched on the issue, to be fair, but perhaps she could add a word or two about why subsections (11) and (12) mean that any amendments to the initiative will not change the nature of the Bill—additional debt will not be liable to be treated as falling under the Bill as a consequence of any changes.
Essentially, I seek as much reassurance as possible from the hon. Lady that the Bill is a one-off. I do not say that because of the concern about the position of developing countries going away—far from it—but the Treasury consultation response recognised that if we focus on narrowly defined areas, if we look backwards at debt already entered into and if we restrict the effect of the Bill to specific countries, the more we provide reassurance that we shall not come back in the future and produce another Bill, although well intentioned and undoubtedly with support from some organisations outside this place, that could have an impact on the attractiveness of lending to developing countries. We all seek to achieve that balance, which is finely calibrated. We should use the opportunity of the stand part debate to ensure that all sides recognise that we must be careful.
Comment from the Minister, setting out his views, will also be welcome, so that all sides recognise that we need to focus narrowly, to ensure that we are serving the best interests of developing countries and not engaging in gesture politics, which could do harm. The Bill is not about that, but we need to put on record that we are thinking the issues through and that we recognise the dangers that exist.
10 am
John Hemming: The essence of the Bill, as discussed earlier, concerns a country being unable to pay its debts because its income is too low. An individual would have some form of bankruptcy arrangement and, effectively, we are dealing with countries in such a position—their exports are so low that they cannot pay.
We cannot get away from the fact that in future, lenders will take into account countries’ ability to repay debt when loaning funds to them. I think that that is a healthy situation. Having a situation where lenders hold out massive quantities of money to developing countries, some of which find their way into Swiss bank accounts and do not do the country any good whatsoever, is not helpful for developing countries. Within all that, there are factors—for example, the Bill will only affect UK jurisdiction, so debts enforceable in other jurisdictions remain enforceable there anyway. It is an issue that requires international rather than UK resolution.
There is also a question about whether it is appropriate to have corporate entities controlled by the Government included within the Bill, as opposed to sovereign debt. The nature of sovereign debt is particularly different. If one looks at the history of Haiti and how sovereign debt has caused problems there over centuries, and the fact that most debt disappears into people’s estates when they die, one can see that that particular type of debt hangs on. Again, we are interfering with contracts—there is no question about that. However, bankruptcy arrangements interfere with contracts, so it is with precedent.
Mr. Gauke: The hon. Gentleman is making a good point, and I say that not only because I also made that point on Second Reading. There is no equivalent of insolvency procedures for a country. Interfering with contractual rights is something that, by and large, we do not believe in doing in this country. However, we recognise that there are times when we have to do so in a case of bankrupt individuals and insolvent companies. He is making a helpful point; those are the narrow circumstances in which interfering with contractual rights can be accepted.
John Hemming: I thank the hon. Gentleman for that intervention. We are in agreement—we are effectively dealing with the insolvency of countries, which do not have the revenue. If there is insolvency of countries, we are asking whether the poundage applies to everyone. That is a fair process to resolve a situation. If a country in that situation decides, in the interest of its long-term credit rating, to put particular effort into paying someone, that will be a different issue. However, that is an issue for the countries themselves. The responsibility is always with lenders to consider the ability of the people to whom they are lending funds to pay them back. There have been many problems with people doling out money without considering whether people can pay it back. We see that in the banking crisis that we have had ourselves. To that extent, I am supportive of the Bill, and I should congratulate the hon. Member for Northampton, North on promoting it.
The Financial Secretary to the Treasury (Mr. Stephen Timms): I, too, am delighted to serve under your chairmanship this morning, Mr. Chope. I welcome and applaud the pioneering work of my hon. Friend the Member for Northampton, North over an extended period, recently supported by my hon. Friend the Member for Denton and Reddish (Andrew Gwynne).
I also agree with much of what the hon. Member for South-West Hertfordshire said in his remarks. The Government agree that the Bill should mirror the internationally agreed HIPC initiative, as the clause specifies. The aim is to ensure that all creditors provide debt relief in line with the initiative, as the vast majority of creditors are already doing. I welcome the clarification of the scope and the illumination that has come from the debate on the amendment, which we had a few minutes ago.
I also agree that the Bill should not apply to debts taken on after its commencement, as we do not want to deter new lending to countries. Therefore, it is right to exclude new lending. However, I very much support the clause and hope that we can agree to it.
Ms Keeble: I will pick up the points that the hon. Member for South-West Hertfordshire made and give some assurances to the hon. Member for Worthing, West. There is a criticism that the Bill is too narrow. Indeed, my original Bill went wider, but that was a different Bill for different purposes. To be honest, if we start to cast the net more widely, we will have problems of definition, and then we will get into issues of uncertainty for countries that might be looking to raise loans, and potential sources of finance might say, “Is it going down or up? Might it bump into or bump out of the provisions?” In addition, there has not been international discussion about how countries might be treated, and therefore the uncertainty that the hon. Gentleman wants to avoid would be created if we cast the net more widely. As I said, in my previous Bill, we considered different definitions and there were problems with them.
Another important matter is that the Bill has two logics to it. One is about justice for developing countries; the other is about justice for British taxpayers, which gets overlooked a bit. One of the big arguments about this, and why I was interested in including HIPC countries in my original legislation, is that there is a logic that says, “Why should British taxpayers pay money to write off debts for developing countries when private, completely uncontrolled vulture funds can swoop in and cream off some of the money?” Therefore, it is about different types of debt being treated equitably but also about protecting British taxpayers’ interest. The HIPC countries have benefited from UK taxpayers’ funds, so there is a need to ensure that different types of debts are treated equally. That second logic is often overlooked in some of the discussions.
There is also the issue of moral hazard, about which the hon. Member for South-West Hertfordshire is right. It has come more to the fore because of the credit crunch and the banking crisis. The moral hazard of letting people off their debts is why it is so important that the legislation is carefully defined with safeguards so that we cannot suddenly extend the list of countries and extend the debt to others. My right hon. Friend the Financial Secretary has set out why new debts are not included. If we look at the other part of the HIPC initiative, the debt write-offs and the protection against profiteering by vulture funds and others have a quid pro quo, which is that developing countries have to engage in the programmes that are required as part of the HIPC process. That also gives some protection against what otherwise might be seen as the moral hazard of the excuse of private debt.
The Bill is properly targeted, because it deals with the worst cases of indebted countries, it deals with the protection of British taxpayers’ interests, and it has safeguards against the moral hazard of excuse from debt, which the hon. Member for South-West Hertfordshire identified. I hate to say it, but it is a much better way forward than my original Bill was. It will provide consistency and stability, ensuring that those countries can demonstrate sound governance and that the international process has been fair, sound and consistent. As my right hon. Friend said, if those countries need to take on debts, the international markets will be well disposed towards them.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Qualifying debts: further definitions
Question proposed, That the clause stand part of the Bill.
Mr. Boswell: May I say what a pleasure it is to serve under your chairmanship, Mr. Chope? Without wanting to reopen the issues that have been amply rehearsed on clause 1, I too wish to echo my overall support for what is being achieved here. We have a balance not only in terms of the equity of the existing loans but the needs of the developing world, which are real. Even though we do not want to express it, we all probably feel a certain degree of distaste at having to go through the nitty-gritty of working out the balance of assets and liabilities, and I do not intend to add to that process. It occurred to me that my remarks might be interpreted as an attempt to qualify as the authentic Treasury nerd or, as I would prefer to call it, the anorak on the matter, but I have to admit that this particular anorak has not done his homework as well as he might have. If he had, he would have tabled an amendment, but as we are now on clause 2, looking at further definitions, I just want to probe the interaction of a couple of points relating to subsections (9) and (10). That is as near as one gets to scheduling it.
My second point is on creditors. I may have misunderstood this, as I claim to be no expert and certainly no advocate of vulture funds, but regarding the interaction of subsections (9) and (10), subsection (9) talks about “the creditor” as if there were only one within a particular line of debt. Presumably some of the debt is factored around, and may be owned by a number of creditors who may or may not be resident in the particular country, quite apart from the fact that the currency may or may not be a currency that goes from outside that country to another country. I am concerned to probe whether, if there are different categories of creditor, some of whom are clearly resident in the country and others of whom may not be, that affects the treatment of the overall debt, or means that individual debts would be treated differently, depending on whether the holder of the tranche of the debt was in one country or another.
I am sure that there are answers to those questions. Equally, I am sure that there need to be answers, because the trouble with all this, in trying to do something that is a real-world improvement, is that, when we get down to the difficult words in the small print, we might end up with unintended consequences or inequities that we would not wish to defend. I hope that the hon. Lady can satisfactorily explain that, or reflect on it. The last thing I want to do is distract the Committee from the important and substantial task of taking the Bill forward.
 
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