Clause 1

Part of Debt Relief (Developing Countries) Bill – in a Public Bill Committee at 9:45 am on 9th March 2010.

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Photo of David Gauke David Gauke Shadow Minister (Treasury) 9:45 am, 9th March 2010

I am grateful for my hon. Friend’s comments.

Clause 1 is at the heart of the Bill because it concerns the definition of a qualifying debt. Getting the definition right is vital, a point that we touched on in the last  debate. The hon. Member for Northampton, North was absolutely right to make that point. Criticisms about the definition of qualifying debt come from two directions. Some argue that the clause is too narrow and that the focus is on HIPCs. Why should we not apply the Bill to developing countries as a whole? Why should we not apply it to other regimes in which debt reduction has been negotiated? Does the Bill go far enough? No doubt at some point in the course of the morning we shall debate the impacts of the Bill, including the benefits arising for developing countries, which some will argue are unduly modest.

The counter-argument, which was put in a number of responses to the Treasury consultation and some of which was quoted on Second Reading, is that if we interfere in contractual rights we run a risk of undermining confidence in the sanctity of contracts. Lenders will become wary of lending to developing countries—perhaps HIPCs specifically—because of the risk of being caught up not so much in the Bill as in future legislation using the Bill as a precedent.

We ought to debate such matters intelligently, to ensure that we calibrate the proposals correctly. I thank the hon. Member for Northampton, North for how she has consistently conducted the debate, ensuring that we do not fall into oversimplifying the matter and dismiss such concerns but that we address them. I am sure that no one in Committee would in any way want to jeopardise the long-term ability of developing countries to borrow at affordable, sustainable and sensible levels. Consequently, I shall ask the hon. Lady a number of questions and, in responding, she can set out why those who are concerned about the Bill should be reassured.

First, why should the Bill be focused on heavily indebted poor countries and on them alone? Why not include all creditors to developing countries? Why is the focus on loans entered into before the commencement of the Bill? Why is the Bill essentially retrospective legislation, applying to contracts entered into in the past, but does not apply going forward? We understand why, but it would be helpful to the Committee if the hon. Lady could set that out. We have already touched on why potentially eligible countries are included. If she is in a position to provide some breakdown of the benefits, and whether they will apply to countries falling within the existing HIPC initiative or those potentially eligible for the initiative, that might be helpful. She has already touched on the issue, to be fair, but perhaps she could add a word or two about why subsections (11) and (12) mean that any amendments to the initiative will not change the nature of the Bill—additional debt will not be liable to be treated as falling under the Bill as a consequence of any changes.

Essentially, I seek as much reassurance as possible from the hon. Lady that the Bill is a one-off. I do not say that because of the concern about the position of developing countries going away—far from it—but the Treasury consultation response recognised that if we focus on narrowly defined areas, if we look backwards at debt already entered into and if we restrict the effect of the Bill to specific countries, the more we provide reassurance that we shall not come back in the future and produce another Bill, although well intentioned and undoubtedly with support from some organisations outside this place, that could have an impact on the attractiveness of lending to developing countries. We all  seek to achieve that balance, which is finely calibrated. We should use the opportunity of the stand part debate to ensure that all sides recognise that we must be careful.

Comment from the Minister, setting out his views, will also be welcome, so that all sides recognise that we need to focus narrowly, to ensure that we are serving the best interests of developing countries and not engaging in gesture politics, which could do harm. The Bill is not about that, but we need to put on record that we are thinking the issues through and that we recognise the dangers that exist.