May I say what a pleasure it is to serve under your chairmanship, Mr. Chope? Without wanting to reopen the issues that have been amply rehearsed on clause 1, I too wish to echo my overall support for what is being achieved here. We have a balance not only in terms of the equity of the existing loans but the needs of the developing world, which are real. Even though we do not want to express it, we all probably feel a certain degree of distaste at having to go through the nitty-gritty of working out the balance of assets and liabilities, and I do not intend to add to that process. It occurred to me that my remarks might be interpreted as an attempt to qualify as the authentic Treasury nerd or, as I would prefer to call it, the anorak on the matter, but I have to admit that this particular anorak has not done his homework as well as he might have. If he had, he would have tabled an amendment, but as we are now on clause 2, looking at further definitions, I just want to probe the interaction of a couple of points relating to subsections (9) and (10). That is as near as one gets to scheduling it.
I want to pause on two words. The first is external. In subsection (10) it is clear enough to me that there is a presumption that a debt is an external one, unless someone proves the contrary, which is an interesting way of looking at it. I appreciate that UK rather than international jurisdiction is involved, but I particularly want to rehearse the case of a country listed in the table in the explanatory notes having a currency other than its own, or using another countrys currency. That might define whether the debt is external. For example, although I have not visited the country, I think that Liberia uses the US dollar. I do not know whether that creates confusionif it is the domestic currency it is also the external currency.
My second point is on creditors. I may have misunderstood this, as I claim to be no expert and certainly no advocate of vulture funds, but regarding the interaction of subsections (9) and (10), subsection (9) talks about the creditor as if there were only one within a particular line of debt. Presumably some of the debt is factored around, and may be owned by a number of creditors who may or may not be resident in the particular country, quite apart from the fact that the currency may or may not be a currency that goes from outside that country to another country. I am concerned to probe whether, if there are different categories of creditor, some of whom are clearly resident in the country and others of whom may not be, that affects the treatment of the overall debt, or means that individual debts would be treated differently, depending on whether the holder of the tranche of the debt was in one country or another.
I am sure that there are answers to those questions. Equally, I am sure that there need to be answers, because the trouble with all this, in trying to do something that is a real-world improvement, is that, when we get down to the difficult words in the small print, we might end up with unintended consequences or inequities that we would not wish to defend. I hope that the hon. Lady can satisfactorily explain that, or reflect on it. The last thing I want to do is distract the Committee from the important and substantial task of taking the Bill forward.
May I ask the Committee to pay attention to subsection (10)? Are the words on line 16treat the debtthe best ones? Might it be considered at some stage whether they might change? They are admirably clear in English and that is good, but I wonder whether it is better to say the debt is to be treated as external unless after qualifying debt, on line 15. I leave that as a reflection. Perhaps the current wording is fine, but it can perhaps be improved.
The other issue here is in line 16. It says:
If in any proceedings there is an issue as to whether a debt is a qualifying debt, and goes on to talk about how the debt is to be treated as external. Might it be worth adding something on the question of externality? There may be other reasons for questioning whether a debt is a qualifying debt other than just that it is external, as we see from earlier in the clause.
It is fair to say that clause 2, which defines the debts to which the HIPC initiative will apply, is based on the World Bank and International Monetary Fund definitions. Clause 2(3)(a) states that the definition of debt excludes
a liability to pay for goods or services that arose on the delivery of the goods or the provision of services.
That is a significant carve-out. I can see why it has been made, but does the hon. Lady have any evidenceit might be unfair to spring this question on herrelating to the scale of the carve-out? A substantial amount of debt that would otherwise fall within the regime might not do so because of that exclusion. Why has that carve-out been made? As I have said, it is probably based on the World Bank and IMF definitions, but it would be helpful if the hon. Lady could shed further light on the issue.
Clause 2 deals with some of the details of what is, and is not, a debt. As the hon. Gentleman rightly says, a great deal of discussion has taken place, and much experience has been built up, with both the World Bank and the IMF. On the point made by the hon. Member for Daventry, the definition of residence is not based on currency, but on the residency of the creditor. It is quite common for debts to be incurred in different currencies from that of the country concerned. I do not, therefore, think that that is an issue. To offer complete clarification, however, the definition mirrors the IMF definitions and is not based on currency.
On subsection (10), I understand that the Government have consulted the IMF and that they have been able to apply the residence test without difficulty. They are clear about what is, and is not, an external debt. The subsection clearly sets out what should happen if there is any doubt. On the final point about the exclusion of revenue spending, the carve-out of the liability to pay for goods and services in subsection (3) mirrors the IMF initiative, which also makes those exclusions. They seem eminently practical, because if we included liability to pay for goods and services, almost all Government spending would apply to the kind of relief involved, and that would clearly be unworkable. The approach in the legislation is not about inventing new procedures, but about using tried and tested mechanisms that have been subject to scrutiny and international negotiation to deal with the issues connected to the remainder of the private sector debt.
I hope that the hon. Lady will consider the point that I made on subsection (10). As for the issues raised about debts and subsection (3), under subsection (4)(a), a short-term debt is included in this subsection if it ought to have been discharged
more than a year before commencement.
Does that mean commencement when the Bill becomes an Act or is it some other commencement? It cannot be the commencement of the loan because that would mean repaying it before it was made, so presumably it is the commencement of the Act.
I am being told that that is the case. That is correct. I am sorry for not responding earlier; I thought that I had dealt with the points made by the hon. Gentleman.