Orders of the Day — International Monetary Arrangements Bill

Part of the debate – in the House of Commons at 4:04 pm on 11th July 1983.

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Photo of Mr Peter Shore Mr Peter Shore , Bethnal Green and Stepney 4:04 pm, 11th July 1983

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof: this House declines to give a Second Reading to the International Monetary Arrangements Bill which fails to impose conditions on United Kingdom financial assistance to the Argentine while the present state of hostilities continues. I want, at the start, to make our position plain. The Opposition are strong advocates and supporters of international co-operative measures designed to help deal with the great menace that the massive indebtedness of so many non-oil developing countries poses, not just for their own peoples, but for the world economy. That is why we shall not oppose the International Monetary Fund (Increase in Subscription) Order 1983 when it comes before the House a little later. That order authorises a basic 25 per cent. increase in the United Kingdom quota to the IMF. Our criticism, if we have any, is not that it is too much, but, on the contrary, that it is too little. Nor do we oppose, I must make this clear, the general intention behind the two clauses of this short Bill.

The increase in the sums that the Treasury will be able to make available to the IMF under the general arrangements to borrow from the present £350 million to £1,200 million is welcome, as is the arrangement in clause 2 for the Treasury to indemnify the Bank of England in respect of its participation with other central banks and the Bank of International Settlement, in supporting rescue operations aimed at avoiding financial collapse.

I must focus now upon our amendment. I congratulate the Economic Secretary on making his first speech from the Dispatch Box. Although he put forward a reasoned and plausible case, it is not one, I regret to say, that I found wholly convincing in two major respects. Like my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan), who intervened, I found the Economic Secretary altogether too optimistic in his general judgment that the debt problem was responding slowly to treatment.

I looked, unusually, at page 2 of The Daily Telegraph today. There was a report by Sir Gordon Borrie from the Office of Fair Trading highlighting an example of indebtedness upon which I am sure many hon. Members will wish to comment. It contained a story about a married couple who, 25 years ago, borrowed £50 and entered into an arrangement to repay it. Unfortunately, they fell short of the terminal date of repayment and, therefore, were driven into a rescheduling arrangement. That rescheduling arrangement again fell short of the terminal date of repayment. So it continued: 25 years later, they are in debt to the extent of £2,500 from the original £50 that they borrowed.

I have a horrible feeling that that is a minute example of what is happening on the world stage today as a result of the mammoth indebtedness that is afflicting so many countries.

My second criticism is of the Economic Secretary's attempt to persuade us that the Government's approach to Argentina and the refinancing of its economy is somehow in our national interest. It is a matter with which I shall have to deal at some length.

Our amendment appears to be well timed because today, if I am correctly informed, representatives of the leading commercial banks are meeting in New York to sign a five-year agreement with Argentina to provide that country with a medium-term loan of $1·5 billion of which approximately 10 per cent. — $150 million or £100 million—will be subscribed by British banks. Today's signing in New York marks the completion of a whole series of financial measures that began nearly a year ago designed to assist the Argentine economy.

The truth is that Argentina has an overseas debt of about $38 billion—a vast sum which it lacks the capacity to repay or even to service. The package of international assistance comprises three main linked elements. The first is IMF standby credit of $2·2 billion, formally agreed on 24 January. Secondly, there are two bridging loans—$500 million from the Bank of International Settlements and $1·1 billion from the commercial banks. The third element is the medium-term loan for $1·5 billion, which I assume replaces the bridging money. That is to be signed in New York today.