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Debt Relief (Developing Countries) Bill

My hon. Friend is right. She is not only an expert in debt relief but a distinguished member of the Treasury Committee, and she has followed these matters closely. I used the Banking Act as an example in my argument about contractual law. It was exactly because there were compelling policy reasons that we enacted that legislation. That is why we acted in that instance, and I strongly believe that there is an equally compelling public policy reason to support the measures in my hon. Friend the Member for Denton and Reddish's Bill, to which my hon. Friend the Member for Northampton, North has spoken so eloquently today. The hon. Member for South-West Hertfordshire raised a point about creditors. Some people argue that they should be able to choose whether to participate in the arrangements, rather than being forced to do so. That would not happen in the case of a company insolvency, as we have discussed, and I hope that I have made the case that it would be unfair if one or two creditors were able to operate as free riders when everyone else had decided to participate in the initiative. I believe in providing debt relief, on development and moral grounds. There is also a strong economic argument for full participation. HIPC debts cannot be substantially repaid without debt relief, and the HIPC initiative aims for all creditors to provide the level of debt relief that will return those debts to sustainability. The example of insolvency law is directly relevant here. Because there is no equivalent to insolvency for countries, they are vulnerable to the small number of unscrupulous creditors who refuse to participate in the necessary reduction of debt that has been agreed by sovereign member states, as well as by all the other international lending institutions and most other commercial companies that have made loans to the country in question. This is a classic free rider problem in economic terms, and the situation is being exploited by vulture funds. The Bill is designed to stop that happening. Debt relief is funded by the UK taxpayer, and I am enormously proud of what we have done in the United Kingdom in that regard. Without action, however, our efforts risk being undermined by the small minority of unscrupulous commercial creditors, with that money being diverted to investors. The hon. Member for South-West Hertfordshire is right to mention that this is not just about vulture funds, given that the legislation as drafted also refers to the original creditors. He is also right to say that roughly half the debts in question stand in the name of the original creditors. The key aim of the Bill, as I understand it, is that all creditors provide debt relief as expected under the HIPC initiative; it does not discriminate between so-called vulture funds and more typical commercial creditors. The purpose of the legislation is to tackle unacceptable behaviour rather than certain types of fund. Once there has been wide agreement on debt relief and the necessary reductions, I think it just wrong for any creditor to be able to turn around and say, "Well, we are not having that; we do not agree to that" when everybody else has, and then to seek to pursue the full commercial debt. I am clear that creditor rights are vital to smoothly functioning financial markets and they should be altered only in exceptional circumstances. That, however, is what I think this Bill does—these are exceptional circumstances because the international community has come together to agree to debt relief as a solution to what has been a decades-long debt crisis. It has commanded support from all the major creditor countries and from very many commercial creditors. Governments have taken the steps they can to reduce the problem without legislation, but although it has been reduced, the problem remains. A piece of legislation tightly targeted at a fixed and limited stock of historical debt owed by the poorest countries provides an important means of tackling the problem. As Members will be aware from reading the Bill, future lending is explicitly excluded from its scope, which is fundamentally right. To address directly the point raised by the hon. Member for South-West Hertfordshire, the main argument of those who say that the Bill will not benefit developing countries rests on the assumption that commercial lenders will be put off from making them loans in future. It cannot be clearer in the Bill—it was also clear from what my hon. Friend the Member for Northampton, North said when she introduced it—that future lending is explicitly excluded from the Bill's scope. I thus see no reason why the Bill should affect future lending. In providing a solution to the problems of vulture funds and of creditors acting in what I believe is an unscrupulous way, it provides a real and tangible benefit to countries affected by having their debt pursued in the UK courts. That brings me to the question raised about what other countries are doing. My hon. Friend the Member for Northampton, North has had meetings in the United States to discuss proposals for legislation, but it would not be right for me to speculate on the chances of such legislation passing through Congress. It remains the case that what we are doing in the UK is leading the way internationally, just as we have led the way in many aspects of the debt relief agenda over the past 10 or more years. We can be proud of that. It is nevertheless helpful if other countries produce similar legislation in their jurisdictions, and we want directly to encourage and support other countries to do that. The fact that the US is considering the issue at various levels is very welcome news, as it is obviously a major jurisdiction when it comes to the enforcement of debts. We would like other countries to follow the UK's lead, as I said. Let me conclude by repeating that the UK can rightly be proud of its international leadership in this area. The debt relief initiatives that we have introduced have played a key role in helping to lift millions of people out of poverty and to lay the foundations for sustained development in 40 of the world's poorest countries. Part of the benefit that should result from the Government's support, however, is being diverted by a small minority of unscrupulous commercial creditors that seek to extract full repayment rather than participate in the HIPC debt relief initiative. The Bill will prevent that from happening under UK law enforceable in the UK courts, ensuring that all creditors participate in reducing debts to a sustainable level. That is the moral thing to do, but it is also economically logical and will make more effective the development aid that we all, as taxpayers, fund. The reasons for supporting the Bill are compelling, and I am glad to be able to do so today. I hope that Members across the House will join me in helping to make the Bill law by agreeing to its Second Reading today.