I congratulate my hon. Friend the Economic Secretary on the assumption of his new and important responsibilities. I express my gratitude and, I am sure, that of the House for the way in which he introduced the Bill. I share some of the feelings expressed in the debate that it was an over-optimistic assessment of the situation. I apprehend, however, that the voice of Jacob and the hand of Esau are being represented on the Treasury Bench.
I entirely agree with the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) that this is one of the most important, if not the most important, issues that face the House and the free world. It is extraordinary that we should pay so much attention to the Chancellor of the Exchequer's statement last week, yet regard this as an unimportant debate that might end conveniently at 7 o'clock. The Chancellor's statement pales into insignificance besides the international debt crisis. Everything that he proposed, except possibly the useful reform of one of the more stupid Treasury budgetary procedures, was entirely at the margin of events.
It is rather strange that not one representative of the Social Democratic party or the Liberal party has been present at any stage of the debate. I suppose that they are busy in their constituencies, telling their supporters that they will clean the streets for them or get them a council house, and attending to their grass roots. Their proper place is here in a debate of this nature.
The crisis that we face today might be likened to a series of time bombs, ticking away under our hopes of economic recovery. We do not know exactly where the time bombs will go off—it may be in Argentina or Brazil or, as the right hon. Member for Cardiff, South and Penarth said, the crisis might affect first some of the smaller countries whose problems are desperate. All we know is that the Governments who are responsible simply send out the fire engines each time and react to each explosion as it takes place. They are experts in crisis management and so must always have some crisis or other to manage.
I welcome the Bill in so far as it increases from £350 million to £1,200 million the Treasury's power to lend to the IMF. Some hon. Members would regard that as quite a lot of public money to be dispensed, so the Government should be concerned about it. I agree with those who suggest that, far from it being too much, it is, as the right hon. Member for Bethnal Green and Stepney (Mr. Shore) suggested, too little. It is only a temporary palliative and we can be sure that, in the course of this Parliament, other measures to deal with the international debt crisis will be brought forward. It is a part, and only a small part, of what is proving to be a slowly developing international operation.
That international operation has become necessary in order to rescue hapless debtor nations from not only financial but economic disaster. In the process of rescuing them we are having to rescue ourselves. We have to rescue those who have lent so much and have lent it so unwisely and at such crippling interest rates. Lord Lever —although not so much when he was in Government—and many others have argued for a long time that one cannot sustain economic recovery or prosperity on the basis of high interest rates of the type that exist today.
Before the right hon. Member for Down, South (Mr. Powell) leaves the Chamber, I should like to pay him a warm tribute, as I have done on other occasions, for the notable speech that he made to the junior chamber of commerce in Bangor in the late 1960s when he said that no country could prosper or perhaps even survive with interest rates at 10 per cent. In the speech that the right hon. Gentleman intends to make, I hope that he will agree that high interest rates fuel inflation until the point when they bring about economic depression and disaster.
Like the right hon. Member for Bethnal Green and Stepney, I, too, read the newspapers. I read The Times rather than The Daily Telegraph this morning. I noticed the headline
Curbs sought on loan sharks".
My first impression was that the headline related to our debate this afternoon. It can be profitable to be a loan shark, but it is essential to have enforcers. Anyone at the lowest level of the Mafia could tell us that. We cannot go out and break the leg of the President of Brazil. We cannot put outside the presidential palace a van labelled "debt collector" so that he would be shamed into paying. We must tackle that problem in a different way.
I should like to ask the Government several questions. I will not attempt, as the right hon. Member for Bethnal Green and Stepney did, to ask questions and then to provide the answers. I want the Government to provide the answers. Will my hon. Friend make clear what similar action is now being taken by other Governments to increase their contributions to the IMF? Will he say a little more about how he envisages debtor nations such as Brazil ever being able to repay their IMF loans if they are still subject to existing interest rates? Perhaps he will clarify Brazil's position. The right hon. Member for Cardiff, South and Penarth said that Brazil must get its money—and I have no doubt that it will—but we have, in effect, to give Brazil the money to pay the interest on the debt and then to pay a tip so that Brazil will not embarrass us by defaulting altogether. What will Brazil receive? Will we be contributing and, if so, on what basis and to what extent? Do the Government feel that Brazil or any other country is likely to default, and, if so, what will we do in those circumstances?
My hon. Friend said that the basis of rescheduling was subject to conditions including austerity programmes. It makes more sense to have conditions such as compliance with human rights, which do not involve disastrous financial consequences. Countries that are on the floor and are using a high proportion of their national income to try to pay their debts—they are doing rather well and have done their best not to join the defaulters club — are being crippled by interest rates which mean that they can not buy from us. That leads to a downward spiral in international trade that must be halted.
My hon. Friend said that the world debt problems are slowly responding to treatment. That is not merely nonsense but nonsense on stilts and, if I may say so, on shaky stilts. I did not sense from my hon. Friend's speech that the Government are fully aware that not only the debtor nations but the whole of the world banking system is continuing to roam around the rim of chaos. I felt that there was no sense of urgency about the problem.
Clause 2 provides for the Treasury to indemnify the Bank of England in respect of its participation in international support operations—so far so good; I do not complain about that—but have the Government any further plans to extend such an indemnity to private banks and institutions? It has been said that the banks were pushed into lending, but some of them were willingly pushed and were a little greedy.
Over the past few years the Western world has had a licence to make money provided it made nothing else. After the 1979 budget I said that if I charge a man these rates of interest I do so partly because I never expect him to pay or that I expect the whole of the principal to be repaid in interest during the first few years. They were unwise loans and, when the time came for recycling, the Arabs, like a good many other sensible people, lent their money to safe countries and safe institutions in order that they should pass it on to unsafe ones. The difficulties have been compounded. The commercial banks will not be tempted to do it again. In that case, what will the Government do to insure them against loss? In the United States, the Hanover Manufacturers Trust has made proposals for official loan guarantees. Reference has been made to Lord Lever's admirable article in The Economist of this week, which again puts the case for which many of us have argued for so long for collective action to support the overstrained international banking system. What is interesting is that Lord Lever puts forward suggestions not only for a new look IMF system but for the development of export credit agencies. What is the Government's attitude to the proposal that we should extend the power of the export credit gruarantee agencies to ensure some exports of capital as well as of goods?
What action is being taken on the various pledges given at the Williamsburg summit at the end of May? I know that it is said that those are vague communiqués. I have always thought that if one took six communiqués and, with the aid of a word processor, shuffled the phrases around, one could produce another communiqué just about as useful. But we must not insult the intelligence and integrity of Heads of State and Government by believing that they are unable to read or do not understand what they have solemenly signed in our name.
However, we all know what the United States has been doing about steel imports in contradiction to all the fine talk about resisting protection. Last week, the Prime Minister said that she deplored that action and she rightly
accords importance to the Williamsburg declaration. She will recall that at Williamsburg, the Heads of State and Governments invited
ministers of finance, in consultation with the managing director of the IMF to define the conditions for improving the international monetary system and to consider the part which might, in due course, be played in this process by a high level international monetary conference.
That is a little lukewarm, but it is a recognition of the problem. What initiative are the Government taking in that regard? I am not suggesting calling a high-level conference without adequate preparation through official channels. Before there is a high-level conference there must be meetings of the relevant civil servants. I have always taken the view that, if it is expedient that one man should die for the people, it should be a civil servant, not a Minister. They are the people who must get down to the nitty gritty discussions. We hope that when they have prepared the ground sufficiently the Heads of State and Government will appear with golden pens, knowing for once what they will use them for.
I fear that, in spite of the limited rescue operation that the Bill represents, there is likely to be a continuing wave of international financial crises, perhaps culminating in considerable debt repudiation, if we do not take urgent action to deal with the problem. In that process, the developed and the developing countries suffer equally. The rich will not be able to sell and the poor will not be able to buy. That is the classic recipe for economic depression and disaster. I do not underestimate the difficulties associated with reaching international agreement, but we would all like some assurance that the Government are willing to take a lead to secure an effective overhaul of our international monetary system before it is too late.