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Clause 6 - Financial assistance

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

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Photo of Caroline Spelman Caroline Spelman Shadow Minister (Women), Shadow Secretary of State for International Development 11:15 am, 27th 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.