Debt Relief

Part of the debate – in Westminster Hall at 10:43 am on 21st May 2002.

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Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury 10:43 am, 21st May 2002

This has been a good debate on an important subject. We owe a debt of gratitude to my hon. Friend James Purnell for enabling us to address an issue that is of real concern to many of our constituents, and of grave concern to the millions affected by the decisions made throughout the developed world on aid and debt relief that might allow developing countries better to respond to the crisis that has so many of them in its grip.

The debate has been characterised by an almost total absence of party political rancour and partisanship, and characterises the House's approach to the issue. There was one entirely characteristic fall from grace on the part of Mr. Chope, but I shall gloss over it as far as I can, and look instead to the early preferment of Mrs. Spelman. She demonstrated a clear grasp of the subject, and has a distinguished track record. Indeed, that is true of all those who participated, and that enriched the tone and content of the debate.

It would be a mistake to present HIPC and the important initiative before us as the answer to the problems that hon. Members mentioned. The HIPC scheme makes an important contribution, but it is not the answer to poverty in a world in which so many live on so little and in such conditions. It is an important starting point on which we can build, but it was never designed to release enough resources to meet the human development needs of low-income countries. Rather, it was intended to allow heavily indebted poor countries to achieve a sustainable level of debt, and the question for us in the developed world is how we meet that objective and what more we can do in terms of development aid and trade to tackle global poverty.

The hon. Member for Meriden, referring to the Jubilee 2000 research documents, asked whether HIPC was dead, and the only fair answer is, "No, it isn't." We must, however, take steps to ensure that it delivers on its objectives. The latest IMF and World Bank analysis shows that more than half of HIPC countries will reach completion point with unsustainable debt levels. The Government acknowledge that problem, and will continue to argue that countries should exit the HIPC process with sustainable debt levels.

We must build on the approach taken in the Monterrey consensus, which agreed that

"future reviews of debt sustainability should also bear in mind the impact of debt relief on progress towards the achievement of the development goals contained in the Millennium Declaration".

Those important words recognise the fact that more needs to be done, and give us some hope of developing an international response to the debt crisis.

We should not, however, overlook the fact that, in 2001–02, the scheme increased social expenditures by $1.7 billion in countries that received HIPC debt relief. That is equivalent to 1.2 per cent. of GDP. On average, health and education spending accounted for 65 per cent. of the funds made available under HIPC debt relief. Those are substantial benefits, but we know that they will not be enough of themselves.

Poor countries have a role to play in achieving macro-economic stability, improving their policy environment, prioritising poverty reduction and investments in education and health, and improving governance and accountability. To judge from what hon. Members have said, there are no illusions about what the developing nations need to do if the issue is to be addressed. Anyone who has lived in Africa, as my hon. Friend Valerie Davey and I have, knows that good governance has to be fought for. It needs to be developed, and that can be done only when civil society is given the opportunity to contribute.

The history of the HIPC initiative shows that one of the most important developments was the way in which civil society was freed up in the countries, so that it could contribute to the development of poverty reduction strategy plans. Plans that emanate simply from us in Whitehall or the capital cities of the heavily indebted poor countries themselves are unlikely to deliver on the ground. There must be a sense of ownership and involvement from local people who live with the consequences of poverty and struggle to combat it.

Women are vital to that work. All the evidence suggests that they are the best agents of development. When women are empowered through organisations—faith groups, local community development organisations and trade unions—to contribute to the development of local poverty reduction strategy plans, those plans are more likely to deliver their aims.

The hon. Member for Christchurch mentioned Malawi. I travelled there a few months ago to participate in a Commonwealth Finance Ministers conference on HIPC. There I met representatives of civil society who had been engaged with the Government of Malawi in developing a poverty reduction plan. I was enormously heartened by their approach. Trade unionists, church people, women's and youth organisations and rural village community development associations come together to monitor what their Government are supposed to deliver with the moneys coming on-stream as a result of HIPC.

Those people took a direct and practical approach to the monitoring of the impact of poverty reduction plans. Their Government had told them that a certain sum had been spent on education, so they visited schools and villages to ask what had been received recently from the Ministry responsible for education. They would then take an inventory of what had been received. They would ask how many teachers worked in the school, and how many had been appointed recently; they would follow the flow of money to the point where it was supposed to make a difference. Then they would compile a report and share it with donor agencies and countries.

That was practical monitoring of plans. It was a hands-on engagement with the development of anti-poverty strategies, and, therefore, that much more likely to make a difference by changing the conditions under which people live in Malawi. I am heartened by that but, at the same time, deeply disappointed by the circumstances in which the current food crisis in that country has been allowed to develop. To pretend that that crisis is the result of any action taken by the IMF, the World Bank, the UK or other donor nations is beyond belief; that is simply not the case. That food crisis, I fear, has its origins in corruption and abuse of power.

Our concern about that corruption and abuse of power made it necessary to suspend direct budgetary support to Malawi. I was obliged to make clear to the Malawi Government our concerns about the way in which the crisis had developed. That has not stopped us continuing to deliver effective programmes of support to the people of Malawi where we are satisfied that that support will go directly to reduce poverty. It has not stopped us from providing the necessary support to the people of Malawi in addressing the food crisis, but there are important lessons to be learned from the experience of Malawi about how effective poverty reduction plans are formulated and put into effect, how they are monitored and how good governance should be developed and grown.

Other aspects of the situation in Malawi, including visible demonstrations of a commitment to democracy and civil society, give cause for hope for the future. It is dangerous to allow ourselves to be sucked into a vortex of defeatism and cynicism when tackling this problem.

The scale of the crisis in Africa and elsewhere in the developing world is made that much worse by HIV/AIDS, and Dr. Tonge is right to draw attention to the scale of that crisis. In Malawi, I visited schools where the teaching population had been decimated by AIDS. I visited a village where one in three families was in the process of losing or had lost someone through AIDS. The response of NGOs and local people to that crisis in those countries is heartening and worthy of our support.