After I came third in Parliaments Private Members Ballot I gave a great deal of time and consideration to which issue I should take forward.
When I was elected to parliament one of my personal pledges was to ensure I would always do all I could to tackle the excessive burden of third world debt and help those who are less fortunate than ourselves in this world. I do this not just as a Labour MP, but as a member of the Christian Socialist Movement.
I have been fully supportive of what this Labour Government has already done to relieve third world debt, and the real steps we have taken to help the very poorest in the world.
One of the things I have personally been concerned about has been the operation of so called “vulture funds” whereby a small number of investment companies buy up the defaulted debts of the world’s poorest countries at very low prices and then take them to court to aggressively recoup the debts at full value. So after long consideration this is the issue I have decided to deal with through my Private Members Bill.
There have been a number of cases that particularly spurred me to take on this issue. Very recently in the UK High Court two investment funds won the right to recover over $20m from Liberia, one of the poorest countries in the world. This was for an initial loan in the 1970s of only $6m.
In government finance terms this may not seem like a fortune, but in Liberia this accounts for over 5% of government revenues, in one of the poorest countries in the world where almost half the population lives on under a dollar a day.
Surely this is money that could be better spent on things such as health and education.
This practice is simply unacceptable to anyone who believes in reducing third world debt and helping the very poorest in our world. And I aim to put a stop to it. So the aim of my Bill will be to prevent creditors of the poorest countries from reclaiming excessive amounts on these debts.
Latest estimates say that worldwide claims worth $1.2bn against Heavily Indebted Poor Countries (HIPCs) are being litigated on by commercial creditors or have an outstanding judgment awarded but the case remains unresolved. It is an issue with a strong international dimension and through my Bill the UK can take a lead on world debt, much as the Labour Government has done before. If we managed to pass this Bill it may prompt the rest of the international community to take similar action.
I have carefully considered the best way to make my Private Members Bill most effective to those who need the protection most. My Bill was published last week and has a number of provisions. I will take the Bill forward with my co sponsor Sally Keeble MP.
It will cover the debts of the 40 Highly indebted Poor Countries (HIPC), the poorest in the world, that qualify for international debt relief initiatives, but it will specifically exclude new lending. This will ensure that all creditors play their part in providing the necessary relief on historical debts, without cutting off these countries from the possible benefits of supporting their development with new commercial borrowing.
I will seek to make sure that creditors cannot pursue payment beyond the level assessed as sustainable by the IMF and World Bank. In short they will get back the proportion of the money owed to them that the country can afford to repay and which offers a fair reduction comparable to that being provided by other creditors.
I am determined to ensure that these activities of this small number of investment companies do not prevent resources being freed up to finance development and tackle poverty in the poorest countries. I do think it is important that we still have the smooth running of financial markets, which can in the right conditions support development by enabling countries to finance projects that will accelerate their growth. And I recognise and welcome that the majority of commercial creditors already do negotiate in good faith with the governments of HIPCs to provide the expected level of debt relief. My legislation aims not to undermine or replace that, but to deal with the minority of creditors that refuse to participate.
But let’s be honest, commercial companies do have role to play in helping to provide debt relief and I want to see all commercial creditors provide their share of debt relief for the poorest countries. Under the HIPC Initiative, $4.3bn of relief, some 6% of the total, is expected from commercial creditors, so they form an important part of the jigsaw for debt relief.
If my Bill passes into law it would represent a major step forward in tackling these so called vulture funds. It cannot be right that companies are allowed, in British courts, to make profits unfairly out of the world's poorest people.
For too long, some companies have been allowed to get away with exploiting the debt relief received by developing countries for their own profit; taking vital resources away from those that need it most. Through my Private Members Bill I aim to put a stop to it.
