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4.55 p.m.

Lord Bishop of Worcester: My Lords, I have great sympathy with the noble Lord, Lord Cledwyn of Penrhos, in seeing the dark side of the picture as we look at the world at the present time. Nevertheless, there must be enormous gratitude that since the last gracious Speech from the Throne better news has come out of South Africa and the Middle East--though, as the noble Lord, Lord Mayhew, wisely pointed out, it is but fragile--and also (though it be not foreign affairs) better news from Northern Ireland. The discovery of massive fraud in the European Union must, however, dim the European ideal.

It is sad that we so often see Europe solely in terms of a market for over 300 million people. It is something far more than a market. I wish that people would see it as an ideal which enables us to rally behind the assets that are humanitarian, cultural and spiritual in Europe. I hope and pray that the Churches, if they would only repent of their own divisions, could help Europe to find its soul. To that end I hope that we shall look for co-operation in the fields that I have mentioned.

We need very much to recover the statement that was well known in the 19th century that what is morally wrong can never be politically right. I hope that we as a nation shall play our part in the shaping of Europe, and in shaping it not just as a market. Markets are important; and mercantile countries have always done much for culture and indeed for religion. But we must see beyond mere economic and financial prosperity.

I want to introduce into this debate the question of overseas aid to the poorest people in the world--the issue has already been spoken of, and I want to speak of it again --and the ramifications of the policies of the World Bank and the International Monetary Fund. From this country and from Europe we desperately need to send signals of hope to the poor people and poor nations of the world. After all, the European Union is the world's largest trading bloc. It accounts for 19 per cent. of world trade. In that Union, the United Kingdom should use its influence and leadership to see that we address the poverty of the developing countries, and in the best possible way. The worst thing that can happen is the death of hope. And the worst thing that can happen to young people is for them to be cut off from their future.

It is not in the interests of any of us for the world to be destabilised by poverty and for political extremists, whether in eastern Europe or in the countries of the Southern Hemisphere, to climb to power on the back of despair. At this moment I ought to apologise if I am not here for the summing up. It depends on the length of noble Lords' speeches. Tomorrow morning at 8 a.m. I have a commitment in Worcester, so I shall have to catch the last train from Paddington. But I shall read the summing up in Hansard to see what volume of aid is going to the former Soviet empire. I shall want to know

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how far we have got in reaching the 0.7 per cent. of gross national product which was the recommendation of the Pearson Commission so many years ago.

The World Bank and the International Monetary Fund celebrate their 50th anniversary this year. They were founded at Bretton Woods, and Lewis Preston, the president of the World Bank, has rightly expressed certain pride in their achievements. He speaks of 50 years of achievement in helping to reduce poverty and improve living standards through sustainable growth and investment in people. But I must say that 11 of the main aid charities are of a different opinion. While acknowledging the heritage of Bretton Woods, they believe that, 50 years on, we should re-examine the policies and impact of the World Bank and the International Monetary Fund.

The "structural adjustment programmes", which are required of developing nations when seeking funds, have shown themselves to be detrimental to the poor and to make them poorer. Concern over the detrimental effect of structural adaptation was expressed in the World Bank's internal report. The Secretary-General of the United Nations has warned about the effects of structural adjustment programmes. In Zimbabwe, Nicaragua, Sri Lanka and other countries the required adjustments have led to cutbacks in education, hospital and health care and food, making those countries poorer now than they were 20 years ago.

Obviously, economic adjustments and deflationary measures are necessary. But they have been too stringent for weak economies. A Zimbabwean farmer, Betty Mozira, said: "People who had cattle do not have them any more; bread and maize are very expensive; structural adjustments are killing us". Indeed, in Africa as a whole, where more than 30 countries have embraced structural adjustments, average incomes fell by 20 per cent. during the 1980s, and they were very low to begin with. Unemployment has quadrupled to 100 million. In short, the medicine given by the World Bank and the International Monetary Fund has been too strong. The prescription needs changing.

There is a further criticism. The World Bank is unaccountable to citizens and governments in the developing world. They do not participate in the formulation of policies. Moreover, there has been a call for parliamentary scrutiny of the International Monetary Fund and the World Bank. The average Briton contributes £10 a year to the World Bank. It takes 10 per cent. of our bilateral aid. Cannot there be an annual report to Parliament, giving information to MPs in as transparent a way as possible? Cannot there be an annual debate on that report? Should not there also be Select Committee hearings on the operations of the World Bank and the International Monetary Fund and the work of the United Kingdom executive director, in which the Overseas Development Administration should be involved?

With regard to democratisation of the World Bank, it should be remembered that so far back as 1979 in the Brandt Report, there was a call for bargaining between countries of the southern and northern hemispheres to

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be done on a more equal basis and for the sharing of power between the givers and receivers of aid. I should like to know how far that has gone.

In the light of the Pergau judgment, it would seem hardly necessary to make the plea that aid be kept strictly separate from arms deals. I should be grateful if it could be confirmed or denied that that particular deal ended in a 400 per cent. payback in defence contracts. I know that a Foreign Office spokesman was reported as saying that we give aid and sell arms but there is no connection between the two. But can we be told whether it is true or false that aid to Indonesia has increased in the past 18 months? Does that have anything to do with the fact that there is the possibility of a very large deal in the offing?

I return to my first plea. The world desperately needs to be seen as a single interlocking whole. There cannot be peace unless there is justice for all. I know that that is accepted by Her Majesty's Government. There is no one to whom I should want to pay greater tribute than the noble Baroness, Lady Chalker, for all that she has done. Indeed, in adopting this theme for my speech I know that I am on fairly difficult ground as she is one of the greatest experts on the whole subject of overseas aid.

As your Lordships' House will wholly agree, we cannot be content that one billion of our fellow human beings are constantly struggling below the poverty line, their children --as I said--cut off from their future. Nor is it in anyone's self-interest for that to continue. So often our own self-interest dictates that which justice demands.

I hope that this speech has been chiefly about what the gracious Speech from the Throne called "a substantial aid programme"--so be it--

    "to promote sustainable development and good government".

5.6 p.m.

Lord Blaker: My Lords, having been born in Hong Kong, where members of my family lived and worked for some 60 years, and having received my letters patent on 10th October, a date which has great resonance in the history of China, I hope that the House will allow me to speak for a few minutes about Hong Kong. I read the Official Report of your Lordships' debate on 18th May this year. It is clear that your Lordships already have much information and many statistics about the territory. I hope that I can give some new statistics, or some which may be familiar at least to some noble Lords.

Six million people living in a territory only twice the size of the Isle of Wight have created a society which is a miracle of success. Forty-nine years ago Hong Kong emerged stricken from Japanese occupation, its economy in a state of collapse. Now it is the world's seventh largest trading community and accounts for nearly one quarter of China's GDP. The 1994 World Competitiveness Report shows that it is fourth among the world's major economies, ahead of every European country. It has the world's biggest container port. At present employed in Hong Kong is 40 per cent. of the world's dredger fleet, engaged in preparatory work for the airport and related projects. It has a smaller public sector than any other advanced economy and public

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spending is consistently below 20 per cent. Unemployment is 1.5 per cent. It has a stable and free political system and a free press. It has enjoyed great achievements in housing, education and health. This year crime has fallen for the third year running. It is relatively free from corruption.

We must ask whether that success and way of life can continue beyond 1997. I believe that it can and will do so. First, it is very much in China's interests that it should do so. Hong Kong is China's largest trading partner. It is the biggest investor in China and China is the biggest investor in Hong Kong. Mr. Lu Ping, head of the Hong Kong and Macau office in Peking, said, in a speech which was quoted in your Lordships' House in the debate to which I referred, that China needs:

    "a bridge to carry us to the western world and for the western world to come to the China market. Hong Kong has been playing this role all along, and China wants it to continue to do so by retaining its capitalistic characteristic".
I believe that Hong Kong will continue to be as important to China in that context as it has been in the past.

The second main reason why I believe Hong Kong will continue to thrive, as representatives of the Government of China are very clearly aware, is that Hong Kong is an example to Taiwan. There have been changes in Taiwan but this factor has not lost its force in the minds of the rulers in Peking. If Hong Kong is successful after 1997, the prospects for reunification between Taiwan and the mainland are improved.

I believe that there are probably only two situations which could destroy Hong Kong's way of life. The first would be chaos in China comparable to the chaos which existed between the two world wars. That would be to nobody's advantage and I believe it is unlikely. The other situation would be if the Government of China concluded that Hong Kong was being used as a base for the subversion of China. The Chinese, not surprisingly, value stability. They do not want to see Hong Kong used to introduce Western democracy into China. They have a strong sense of history and they must be conscious of the fact that Sun Yat Sen, who was the main author of the successful revolution of 1911 which overthrew the Manchu dynasty, spent a significant part of his early years in Hong Kong. As Mr. Lu Ping said in the same speech from which I have quoted:

    "There are some who believe that only when China turns capitalist, that Hong Kong's capitalism can be guaranteed. This is an entirely wrong concept ... Chinese leaders are determined to build a strong socialist China. Any movement or action to change this direction may cause chaos and disruption to the Chinese economy. Hence, any foreign government or Hong Kong people trying to exert pressure on the Chinese Government will not succeed. China would not want itself to be rampant with chaos".

I am not saying anything about the case for a gradual move towards democracy in Hong Kong, though I note--this is not often remarked on--that the Basic Law says that the ultimate aim is the election of all the members of the Legislative Council by universal suffrage. What I am suggesting is that the people of Hong Kong, for whom I have a great admiration, would be wise to draw a distinction between democracy in Hong Kong and democracy in China. The Joint Declaration and the principle of "one country, two

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systems" involve Hong Kong people running Hong Kong except in foreign affairs and defence. But I believe that there is an implied bargain. The bargain must be that if China is not to interfere in Hong Kong, Hong Kong should not interfere in the running of China. I am not calling for legislation to restrict free speech in Hong Kong, but I am suggesting that it is wise for the people of Hong Kong to exercise sensible self-restraint by leaving the way China is run to the people who live in China. It is not necessary for China to be democratic for Hong Kong to flourish.

Much is to be done in co-operation with China. I welcome the remarks about Hong Kong in the gracious Speech and the emphasis put there on co-operation with China. Much has been done by the Joint Liaison Group but it is urgent to speed up its work. Both the British and the Hong Kong Government have made clear their wish to see that achieved. Progress has recently been made in relation to the financing of the airport. But even there, two further financial agreements are required before the package is sewn up. There are many other areas for the Joint Liaison Group: air services, the right of abode and the localisation and adaptation of laws. It will be hard going to resolve all those matters before July 1997. A formidable programme of work exists.

In a recent policy statement the Governor emphasised that he and his government would do everything they can to prepare the way for a smooth transfer of government in 1997; they would help the preparatory committee when it is established in 1996; they would give every possible support to the future Chief Executive, when chosen, in preparing to take up his or her responsibilities; they would help the people designated as future members of the Executive Council and principal officers of the future SAR. I welcome this wise attitude and I hope that it will help to dispel suspicion on the part of the Government of China. It is also helpful that the Governor has recently repeated that the fiscal reserves to be handed over in 1997 are still forecast to be 120 billion dollars.

I know from my time as a Minister responsible for Hong Kong in the Foreign and Commonwealth Office, and more recently as chairman of the All Party British-Hong Kong Parliamentary Group, that the United Kingdom and Hong Kong Governments over the years have had three things in mind: first, a determination to observe the Joint Declaration; secondly, a desire to maintain good working relations with the Government of China, which itself is very much in the interests of Hong Kong; thirdly, a firm resolve to do our best for the people of Hong Kong, to whom we have what the Governor has described as "a debt of honour" which we are determined to fulfil. We face a task without precedent. I believe it is possible to carry it through to success.

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