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Debt Relief (Developing Countries) Bill

I will indeed address that point, as well as the sovereign debt work-out mechanism, which the hon. Member for South-West Hertfordshire also raised. On that issue first, as I think he is aware, the Government supported the IMF's original proposal for a sovereign debt work-out mechanism in the early part of this decade. The proposal did not receive international consensus at that time. As a result, there has not been a renewed international proposal following the Doha declaration. That is why the Government have instead prioritised consulting on and supporting measures through legislation, which is why we are pleased to support the Bill before us today. We believe that it can build on the successful HIPC initiative and be implemented quickly. The hon. Gentleman raised some specific points about contractual rights. I understand that some people take the view that the Bill is an unjustified interference with property rights. I recognise that that was not what the hon. Gentleman, who speaks for the Opposition, was saying, but he raised that point as an issue and a matter of principle. I hope that I have made clear the economic arguments for all creditors to provide the relief assessed as necessary in the HIPC initiative, and explained why free riding is inefficient and inequitable. It is important to recognise that the vast majority of commercial creditors already voluntarily reduce their debts in line with the initiative, and that they will be completely unaffected by the legislation. As the hon. Gentleman said, the Bill is carefully targeted and calibrated. It includes a clause that specifically provides an incentive to debtors to negotiate settlements of their debts on terms compatible with the HIPC initiative, thereby helping the process. It is also worth noting that the typical market value of the debts that will be affected is around or below the level to which creditors will remain entitled under the Bill. On contracts, as the House will be aware, the Government have already taken what steps we can, within the existing legal framework, to help developing countries with debt relief. What is proposed in the Bill is limited to a tightly defined stock of existing debts of the poorest countries in the world. It balances preventing creditors from extracting excessive repayment with an incentive to help them to recover the part of their debt that they can expect to be repaid. In this case, the need to stop the resources that the UK and others provide through debt relief being diverted from poor countries justifies reducing contractual rights. It is not the case that contracts would be torn up; rather, creditors will not be able to pursue payment beyond the level assessed as sustainable by the IMF and the World Bank. Legislation not infrequently has some effect on the value of existing contracts. Although this is more unusual, there are precedents for legislation that changes existing contractual and other property rights. For example, I was responsible for leading on the Banking (Special Provisions) Act 2008 and the Banking Act 2009, both of which provide, in limited and defined circumstances, for powers to transfer the shares in, or property of, a bank to another person. Such a step should be taken only if there is a compelling public policy case for doing so, which we believe there to be in this instance. I hope that the Bill will receive its Second Reading today and that we can accelerate it through Committee, but I do not expect passing it into law to result in any significant impact on the UK's competitiveness for financial services. The commercial debt relief expected under the HIPC initiative is less than 0.1 per cent. of the total debts of developing countries. The proposal is limited to a fixed stock of debt that has already been contracted, and it is clear that it will have no impact on new lending.