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Iraq (Debt)

: I congratulate my hon. Friend the Member for Leyton and Wanstead (Harry Cohen) on securing the debate and on taking us through his objections to the arrangements that have recently been put in place or that are in prospect to help Iraq to rebuild its economy and improve its economic position. He did so in the way that we have come to recognise and expect from him: he was very direct, forceful and clear in his criticisms of the approach taken by the international community and—by direct and indirect implication—of the role played by the United Kingdom Government. I shall try to respond to some of his specific points, not least because some of his assertions are not entirely correct. Then, I shall respond in more general terms and fill him in on the details of the present position and the prospects as I see them. The Government accept that we have a special responsibility to Iraq, as my hon. Friend argued from the start. In part, that is a product of our historical relationship with that country; in part, it is in recognition of the special circumstances of Iraq's economy at present. My hon. Friend completely dismisses the value of the Paris club agreement, with the 80 per cent. debt write-off at its heart, but that view is not shared by elected representatives in Iraq. That is particularly true of the new Minister of Finance, who has been to the Treasury in the past month to meet my right hon. Friend the Chief Secretary to the Treasury. In that discussion, Mr. Ali Alawi made it clear that he and the Iraqi Government appreciate the UK's help in putting the Iraqi economy on a sensible footing and the work that we have done on the Paris club agreement. They also recognise that the aid that the UK is putting directly into Iraq is being put to good use. On our part, we welcome our close, continuing dialogue with the Iraqi Government. As my right hon. Friend made clear, we are ready to consider further requests from the Iraqi Government as part of our contribution to their country's reconstruction and economic rehabilitation. I promised to pick up several of my hon. Friend's points that I felt were not strictly correct. First, no UK export credit guarantees were granted for weapons—there were no credit guarantees for the sale of guns, as he put it. Some guarantees were related to defence expenditure, but not to the purpose that he suggested. Secondly, as a result of the Paris club deal, debt is set to be restructured over 23 years, not 50, and no payments at all will fall due until 2008. Thirdly, as I am sure my hon. Friend appreciates although it did not come through clearly in his remarks, the International Monetary Fund programme to which he referred critically was negotiated with Iraq, not imposed on it. The stand-by agreement, to which he also referred, is in the process of being negotiated. Like other Governments, we must await the outcome of the IMF's negotiations with Iraq to see the SBA's precise content. My hon. Friend raised a couple of points about that, but, in all honesty, I would expect certain conditions and a reduction in fuel subsidies to be part of the stand-by agreement once it is settled with Iraq, for the simple reason that a system of subsidies such as the one for fuel in Iraq creates strong economic incentives for smuggling and corruption. I think that he, like me, would want that to be stamped out.