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Friday Volume 506 26 February 2010 No. 46 HOUSE OF COMMONS OFFICIAL REPORT PARLIAMENTARY DEBATES (HANSARD) Friday 26 February 2010 £5·00 © Parliamentary Copyright House of Commons 2010 This publication may be reproduced under the terms of the Parliamentary Click-Use Licence, available online through the Office of Public Sector Information website at www.opsi.gov.uk/click-use/ Enquiries to the Office of Public Sector Information, Kew, Richmond, Surrey TW9 4DU; e-mail: [email protected] 559 26 FEBRUARY 2010 Debt Relief (Developing 560 Countries) Bill be the most sharply affected are the so-called vulture House of Commons funds—companies that buy up the sovereign debt of the poorest countries on the secondary markets, often Friday 26 February 2010 at highly discounted prices, and then try to recover the full amount, plus costs and fees, through the courts—often, unfortunately, through the UK courts. The House met at half-past Nine o’clock Many of those funds do not participate in debt relief, and by litigating for full repayment of their debt, they PRAYERS reduce the effectiveness of the international debt relief programmes of the UK, our international partners and responsible commercial creditors, and make less effective [MR.SPEAKER in the Chair] the very large amounts that the Government and other donors provide in aid for developing countries. Mr. Andrew Dismore (Hendon) (Lab): I beg to move, That the House sit in private. Peter Bottomley (Worthing, West) (Con): Will the hon. Lady join me in applauding the television coverage Question put forthwith (Standing Order No. 163). which has shown that some of those vulture fund Question negatived. people take their names off their doors when they are asked what they are doing? They ought to be as embarrassed Debt Relief (Developing Countries) Bill about going to the High Court to try to enforce their claims as they are anxious to hide from the cameras and Second Reading the media. 9.35 am Ms Keeble: The hon. Gentleman is right about the Ms Sally Keeble (Northampton, North) (Lab): I beg operation of the funds. That is why my private Member’s to move, That the Bill be now read a Second time. Bill dealt with issues of disclosure and transparency. I congratulate the media: television and some national I am delighted to move the Second Reading of a Bill newspapers have highlighted such activities and brought which, though small, is enormously significant for people them much more into the public gaze. They have done living at the sharp end of some of the most acute us all a great service and presented us with a challenge poverty in the world. I do so on behalf of my hon. by saying, “These are the facts. What are you as a Friend the Member for Denton and Reddish (Andrew Parliament and as a Government going to do about Gwynne), who has been a great champion of debt relief. them?” Unfortunately, he is unable to be here today owing to serious illness. He has done the cause of fighting world Mr. Andrew Dismore (Hendon) (Lab): I am a great poverty a great service by making debt relief the subject supporter of the Bill, as I think all Members are, and of his private Member’s Bill, and I am sure the whole my hon. Friend and our hon. Friend the Member for House wishes him a speedy recovery. Denton and Reddish (Andrew Gwynne) are doing a The Bill will hugely benefit some of the poorest great service to the developing world by bringing it people and countries in the world. It will prevent forward. Does my hon. Friend the Member for commercial creditors, some of them secretive private Northampton, North (Ms Keeble) agree, however, that investment funds, from free-riding on the generosity we need international action too? We, in just one country, of the British taxpayer. It will enable poor countries cannot solve the problem. Does she agree also that if we to concentrate funds on much needed new schools, pass the Bill today we will show that the UK again leads hospitals and other direct services, instead of having to the world in dealing with developing world debt? pay unsustainable levels of their Government revenues to service international debt. Ms Keeble: My hon. Friend is absolutely right—there is a need for international action. A Bill has been The Bill strengthens the UK’s commitment to debt introduced in the United States, and I have met the relief. This country can take pride in the pioneering role Congresswoman who is taking it through. We also need that our Government have played in developing the to talk to look to other European jurisdictions to ensure international initiative to end developing country debt. that similar action is taken. Importantly, however, action The Bill takes the logic of public sector debt cancellation must start somewhere, and if it starts in this country into the private sector, and it sets out for the financial that is fine, particularly given the global role of our services industry some limits to the dealings in which financial services industry and the fact that our courts the industry can engage in developing country debt. are often, unfortunately, the locus for action. In reality, One of the results of the credit crunch is public anger we make a start and then look to the rest of the world to about some of the activities of the financial services follow, as my hon. Friend said we have done on other industry. Profiteering on the back of the debt of some issues. of the poorest people in the world is perhaps the most The actions of the vulture funds are profoundly objectionable activity of all. By passing the Bill, we as a damaging, as hon. Members have said. Their world is Parliament and as a society will be setting boundaries opaque, and it has been hard to track their activities and saying, “No further.” without the assistance of investigative journalists. To There has been much speculation about the number deal with my hon. Friend’s point, I must note that a of financial institutions that will be affected by the World Bank survey has reported a total of 54 actions by provisions of the Bill, and about whether it will cut vulture funds since 2002, about one fifth of which have across the rights of a wide range of investors. That is been brought in the UK. The problem is ongoing, and not the case. The financial institutions that are likely to last year’s World Bank survey reported 14 active or 561 Debt Relief (Developing 26 FEBRUARY 2010 Debt Relief (Developing 562 Countries) Bill Countries) Bill [Ms Keeble] primary schools. Mozambique has more than tripled its poverty reduction spending from $792 million to more unresolved law suits by commercial creditors worldwide. than $2 billion, contributing, for example, to a decrease They include cases against Ethiopia, Sierra Leone and in infant mortality from 147 deaths per 1,000 live births the Democratic Republic of the Congo. in 1997 to 100 per 1,000 live births in 2008. That is still Two well documented court cases deserve particular far too high, and much higher than the rate in this mention: those brought against Zambia and Liberia. In country, but at least the trend is downward. the 1970s Zambia was provided with a loan to buy some Debt cancellation has not been entirely a public tractors, but by the late 1990s it was unable to pay back sector programme, but concerns about the Bill have all the money. The country was in the process of trying been raised because the idea has been put about that to find a settlement with the creditors when the Donegal commercial debt is a new inclusion in the debt relief International fund purchased the debt for a knockdown programme. However, commercial creditors have, notably price of $3.3 million in 1999. The fund proceeded to and laudably, contributed to the debt cancellation, writing pursue Zambia through the UK courts for the full off debts because there was no realistic proposition of amount of the debt, plus interest and fees, demanding being able to collect them, out of concern for the impact an astonishing $55 million in total. The courts awarded of debt on the economic growth from which investors $15.5 million, five times the amount that the fund paid hope to benefit, or out of a genuine desire to be part of for the debt. one of the most progressive movements in the world—the In November last year, two commercial creditors debt cancellation programme. took a case to the High Court against the Republic of Some 6 per cent. of debt cancellation, about $4.5 billion, Liberia for a debt that also dated back to the 1970s. In has come either in commitments or in reality from that instance, on an original loan worth $6 million, the commercial creditors, so the principle of the cancellation funds were awarded $20 million. Not surprisingly, the of private or commercial sector debts as part of the President of Liberia has spoken out this week in support HIPC programme is already well established. In fact it of action against the vulture funds. could be said that the Bill enshrines in legislation existing Although those numbers may sound paltry when best practice in the commercial and private sector. It compared with the billions that have been won and lost consistently applies to the private sector the principles each day during the credit crunch in this country, or, that already apply to public debt cancellation.