Overseas Government Debts

Part of the debate – in the House of Commons at 10:50 pm on 4th December 1990.

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Photo of John McFall John McFall , Dumbarton 10:50 pm, 4th December 1990

I am pleased to be speaking in the debate.

Two relevant events have occurred in the past two months. The first was when I visited Sussex university with some of my hon. Friends. We attended a week-long seminar at the institute of development studies and considered third-world problems. The overriding message from the academics and experts was that the third world's position is decreasing year by year.

Secondly, my interest was stimulated by correspondence from Christian Aid setting out its campaign on banking on the poor against third-world debt. It is worthy to bring that message to the attention of all parliamentarians, despite the words of the hon. Member for Eltham (Mr. Bottomley). This is too important a subject to start putting one side against the other. Let us consider Third-world debt and our own responsibility, and fashion a policy that will help the third world. The debate should be taken forward on that basis.

A quotation that aroused my concern was uttered by one of the Catholic bishops in south America, the general secretary of the Latin American Council of Churches, Bishop Federico Pagura. He said: The debt is killing and it is killing in earnest, literally thousands and thousands of people in Latin America. The link between that statement and tonight's debate is that when we are aware that our high street banks and tax relief system involve some of the creditors who show no mercy, we simply cannot ignore the challenge. We must look at the systems of tax and tax relief if we are to help third-world countries. Another phrase used by a Churchman from Latin America was that we are all on the Titanic, but some of us are travelling first class. We are travelling first class, but to the same end as the other travellers if we do not heed the position of the Third-world countries.

As a result of the Christian Aid campaign appeal, I wrote to every church in my constituency, contacted the local Christian Aid branch through its secretary, Tim Rhead and received responses from the third world. My message to the Churches is to write letters to me so that I can seek meetings with the relevant chairmen of banks in Scotland and England, put the constituents' case to them and send the Minister the letters from the concerned Christians and constituents so that action occurs as a result of Parliament.

The hon. Member for Eltham spoke of 600 responses, which is a problem. But we should try to obtain 6,000 or 60,000 responses. We can do that tonight by highlighting our concerns about the third world and starting a campaign to arouse the interests of the commercially minded in the banks and the Government.

Third-world countries have suffered greatly since 1975. We all know about the quadrupling of the price of oil. Mexico is repaying £1 billion in interest every month, and it still owes more than it borrowed in the first place. The effect in Mexico, Brazil and other Third-world countries has been that, since the mid-1970s, their income has dropped by 20 per cent. Fewer children in those countries go to school, and UNICEF estimates that the debt crisis is costing about 500,000 young lives a year.

That catastrophe can be reversed only if something is done about the burden of debt. I echo what the hon. Member for Eltham said about Governments of the past, of whatever hue, having been responsible for the catastrophe. I beg the Government, because they are in power now, to do something positive.

Pastor Reginald Knowles of the Alexandria Christian Fellowship in my constituency lived in Guyana until a few years ago. He writes to me that it was a British colony until 1970. During his stay there he saw many sights that touched him deeply: A child sleeping on the pavement next to its mother. Another child whose arm had been chewed through by a rat while he had been a patient in the Georgetown hospital child surgical ward. He says that he spoke to some nurses who were so demoralised with their pay—98 Guyanese dollars a week compared to the cost of an 8 oz jar of coffee, at 175 Guyanese dollars. Given the increased lending by banks since the 1970s, and the drop in the price of commodities produced by third-world countries in the early 1980s, those nurses cannot even afford a jar of coffee.

That good pastor and his congregation have decided to send a full-time voluntary worker from my constituency, Ruth McEndoe from Dumbarton, to set up a charity.

I have not given the Minister notice of my next point, so it would be unfair to expect an immediate answer from him. Pastor Knowles says that the IMF and the World bank are engaged in an economic recovery programme that is due to provide $1 million in the form of grants, with the promise of another $2 million to come. Pastor Knowles says that there has been no mention of support for Guyana from Britain, and considering our past colonial links with that country, we should be ashamed of ourselves. What does the Minister think of that?

We should help countries such as Guyana in south America. We could invest large sums if only the banks could be persuaded to release the money. Banks are extremely important in all this. I do not want to score party political points, but it is a pity that the right hon. Member for Ayr (Mr. Younger) is not here, since he is chairman of the Royal Bank of Scotland. I shall write to him in the next few weeks, mentioning that British taxpayers are bailing out the banks.

Britain's four major high street banks, Lloyds, National Westminster, Midland and Barclays last year claimed relief for provision against Third-world debt that may eventually cost the average taxpayer £62·80. The Inland Revenue allows banks to claim relief at a rate of up to 35 per cent. on money set aside from their profits as insurance against bad debts in the third world. In 1989, the big four set aside £4·5 billion for that purpose, generating almost £1·7 billion in tax relief. That relief allows the banks to have their cake and eat it, providing them with public money to shore up their financial position but allowing them to continue to demand that countries such as Mexico pay their debts in full.

A tiny minority of debts have been reduced, but Third-world debt continues to grow and is spiralling. The banks are being subsidised by taxpayers, not for cancelling debts, but merely for assuming in the accounts that debts will not be repaid. Sad to say, the level of that public subsidy is higher than the amount that the Government spend on overseas aid. My hon. Friend the Member for Cynon Valley (Mrs. Clwyd) spoke about that. Official development assistance in 1989 was £1·5 billion, costing each taxpayer £62·54. The tax relief to the big four banks was equal to £62·80 from each taxpayer.

In 1989, Lloyds set aside £1,763 million of debt provision. At 35 per cent. that represents tax relief of £617 million, equal to £24·49 for every taxpayer in the United Kingdom. National Westminster set aside £990 million, and tax relief on that is equal to £13·75 per taxpayer. Barclays bank set aside £983 million, and tax relief on that amounts to £13·65 for every taxpayer. Midland bank made a provision of £846 million, equal to £10·91 for every taxpayer. Those four high street banks set aside a total of £4·5 billion and received tax relief of more than £1·5 billion, resulting in £62·80 from each taxpayer. In the name of decency and morality, the Government should look at that and change the tax relief system.

I mentioned Brazil and Mexico. Brazil's foreign debt stands at US $120 billion, the biggest such debt in Latin America. No interest payments have been made since July 1989 and the Brazilian Government have said that none will be made for the remainder of this year. The Brazilian economy relies on huge imports of oil and is certain to be hit hard by the Gulf crisis. The Economy Ministry has calculated that this year's oil bill will be at least US $1 billion higher than forecast.

All concerned parliamentarians plead with the Government to do something about those problems. I leave the Minister with a Christian sentiment from Christian Aid. The bishop of a small industrial area near Rio de Janiero, Mauro Morelli, said: In the gospel the bread was blessed, and divided for 5,000. In Brazil 5,000 people produce the bread and one person takes it. We are party to that shameful state of affairs. On behalf of Christian Aid and the concerned Churches in my constituency, I plead with the Minister to look at the issue and say that that is no longer acceptable. He should then do something to help Third-world countries and show that Britain has some morality.