Clause 6 - Financial assistance

International Development Bill [Lords] – in a Public Bill Committee at 11:15 am on 27 November 2001.

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Photo of Caroline Spelman Caroline Spelman Shadow Minister (Women), Shadow Secretary of State for International Development 11:15, 27 November 2001

I beg to move amendment No. 9, in page 3, line 6, at end insert—

`(2A) The value of loans made available to a country by way of financial assistance shall not, taking one year with another, amount to more than ten per cent. of development assistance to that country.'.

This is a probing amendment, and I am sure that the Minister will understand the spirit behind it. It seeks to prevent countries from running up substantial debts to our country by limiting the proportion of development assistance provided to them as loans. The amendment would seek to make it certain that development aid was mostly provided in grants. The relevant provisions in the Bill have been altered since its first appearance, but we want to reiterate our concern that the new drive to grant loans to developing countries could mean their getting into debt again. That is why I want to ensure that the Department is limiting the grant aid and loans that it can give to any one country. We are concerned that British taxpayers should get value for money from the loans. The Government must be sure that payment is guaranteed and forthcoming and they must undertake proper risk assessment.

We are also concerned about the countries that are eligible for DFID loans. Do the Government plan to lend to projects in countries that have failed to repay debts owed to this country in the past?

We have not debated debt relief to any great extent so far in considering the Bill, but it is an important aspect of the Department's work. Through the Jubilee 2000 initiative, with which many hon. Members were associated, we all learned a great deal about the vicious cycle in which developing countries borrow money that they are in no position to repay, and about the heavy burden of such unpayable debt.

We are pleased that the debt-relieving process has been successful in the majority of the countries for which it was envisaged, but I remain concerned about the capacity of some of the relevant countries to prevent the same thing from happening again, partly because debt relief can tackle the symptoms but not the cause of the accumulation of debt in the first place. I have already referred once this morning to what I fear is an impending problem for Afghanistan—the need to borrow a lot of money from the World Bank to fund reconstruction, which will result in its becoming yet another heavily indebted country.

The amendment enables us to press the Minister about the general question of unpayable debts accruing in developing countries, and about what thought he has given to that question in the context of the Bill. It is not immediately apparent that the Bill contains more safeguards against some of the fundamental problems that we learned about from Jubilee 2000.

Photo of Norman Lamb Norman Lamb Shadow Spokesperson (International Development), Liberal Democrat Spokesperson (International Development) 11:30, 27 November 2001

It seems to be a continuing theme of my remarks to say that, while I share the aspiration behind the amendment, it might have the unattractive consequence of constraining the Government in unintended ways. In some cases it might well be appropriate to exceed the 10 per cent. barrier, and I wonder why 10 per cent. should be fixed upon, rather than any other percentage.

Photo of Norman Lamb Norman Lamb Shadow Spokesperson (International Development), Liberal Democrat Spokesperson (International Development)

I appreciate that, and because it has potential unforeseen consequences, although we probably all support the spirit of it, we oppose the amendment.

Photo of Hilary Benn Hilary Benn The Parliamentary Under-Secretary of State for International Development

I am grateful to the hon. Member for Meriden for raising the question of debt relief by way of this probing amendment, and I acknowledge the spirit in which she spoke to it. The issue is important for developing countries, as hon. Members will know. It might help the Committee if I clarify the fact that the development aid given by the United Kingdom is almost always in the form of grant. Most of the debt that concerns the United Kingdom Government is in the form of Export Credits Guarantee Department loans. Clearly, however, the international financial institutions that we support, such as the International Monetary Fund and the World Bank, give support in part as loans.

As the hon. Member for North Norfolk (Norman Lamb) pointed out, the figure of 10 per cent. is arbitrary—and I understand that it was given for the purpose of stimulating debate. We mean to resist the amendment because it might place an artificial fetter on the Secretary of State in deciding the appropriate proportion of loan support.

On the principle of the matter, however, the hon. Member for Meriden is of course entirely right. This is a really big issue. Owing to the drive, effort and political will that my right hon. Friends the Chancellor of the Exchequer and the Secretary of State for International Development have brought to the question of debt relief, real progress has been made in the international community. That is also in part a result of the highly indebted poor countries initiative. I, too, pay tribute to the contribution that Jubilee 2000 and many other campaigning organisations made to the achievement of that progress on debt relief, because without that campaign the Governments of the world would not have taken the decisions that they have. As the hon. Lady will be aware, 24 countries are part of the process, which will deliver for them debt relief worth $53 billion. That is by any measure substantial. I accept the point that she made about needing to keep the matter under review as, under current economic circumstances, concern is inevitably being raised about the impact of the state of the world economy on the continuing ability of those and other developing countries to deal with their debt problems.

We need to keep up the pressure on other developed countries and continue to encourage them. In addition to the extent of debt relief that HIPC provides, the Government have announced the writing off of all the debts owed to the United Kingdom by 41 of the world's poorest countries. That is one area in which we are giving a clear lead, and I am sure that all hon. Members welcome it. We want to encourage other countries to follow that example, as that would add further force and strength to the argument for debt relief.

I believe that we are at one on the principle that we are trying to achieve. Government policy is clear, and has enabled us to make good progress, with the support of all the parties represented in the House. I hope that we can sustain and develop that progress long into the future.

Photo of Caroline Spelman Caroline Spelman Shadow Minister (Women), Shadow Secretary of State for International Development

The amendment was a probing amendment, and I am glad that the Minister took it in that spirit. It enabled us to flag up our concern about whether sufficient tools are in place to help countries to get off the treadmill of constantly re-accumulating debt. Again, we might be able to address our effectiveness as a country in reducing the cycle of debt accumulation by allowing the Department's work to be examined in its annual report. One may take a snapshot of a country at a particular time and believe from that picture that the debt has been relieved, but that country may be gradually accumulating more debt. The process tends to be an on-going one. Some instrument for analysing how well countries are tackling their underlying debt accumulation would enhance the Department's work.

As I have been assured of the Government's good intent on the point, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 6 ordered to stand part of the Bill.

Clause 7 ordered to stand part of the Bill.