Low-income Countries: Debt Cancellation

Chi Onwurah Excerpts

Thursday 6th February 2025 Westminster Hall

[Chi Onwurah (Newcastle upon Tyne Central and West) (Lab)]

I thank my hon. Friend for the work he has done in this incredibly important area over a long time. He talks about the impact of rising interest rates on low-income countries, to which could be added the impact of covid and dealing with climate change, and the private sector operators. Does he agree that when countries such as the UK choose to forgive sovereign debt, speculators and private sector operators should not profit from that but should follow this country’s lead?

[Bambos Charalambous]

My hon. Friend makes an excellent point. I will come to that later in my speech, but she is absolutely right. We need to treat private creditors in the same way we treat bilateral and multilateral creditors.

Private credit schemes are proving to be very lucrative deals for private creditors. In 2023 alone, private creditors received $68 billion more in interest and repayments from low-income countries than they had actually lent to them. That in itself is bad enough; what is worse is that when a defaulting country seeks debt relief there is nothing to compel private creditors to agree to be bound by any agreement reached by multilateral and bilateral creditors. In fact, there is no obligation to compel them to act in good faith or at all.

One stark example is the case of Sri Lanka. In 2022, Sri Lanka defaulted on its sovereign debt, which led to the most serious economic crisis in the country’s history. Sri Lanka sought debt relief from its creditors, with 47% of it owned by private creditors. Despite reaching an agreement with its bilateral creditors, the private creditors refused to accept any debt relief and sued Sri Lanka in the US courts to prioritise their debts. As a result, the private creditors will receive 30% more in debt repayments than the bilateral creditors, while Sri Lanka had to seek a bailout from the IMF. Sri Lanka will have to slash its public sector spending and spend 30% of its Government revenue on debt repayments, which the IMF regards as unsustainable. It is morally repugnant that private creditors behave in such a way, deliberately hampering the ability of a low-income country to get back on its feet at a time of crisis.

Sri Lanka is not alone in its experience at the hands of private lenders. Following the covid pandemic the G20, realising that international debt needed to be urgently dealt with, set up its common framework for debt treatments as the main global framework for dealing with resolving debt crises. The expectation was that all creditors would co-operate in collectively agreeing debt relief for countries that sought relief under the framework. Despite progress being made with bilateral and multilateral creditors, Chad and Zambia, which both sought debt relief under the framework, found that their private creditors would either drag negotiations out or offer debt relief that was significantly less than what was agreed with the bilateral or multilateral creditors.

Chad failed to get any debt relief from its main private creditor, the UK-based company Glencore, and Glencore will be repaid 50% more than Government creditors. Zambia had been negotiating a debt relief agreement for more than four years when it finally reached agreement with bondholders. One of the private companies was paid 13% more than Governments, including the UK, while other private lenders, including UK-based Standard Chartered and Investec, are still to agree debt relief with Zambia. Ethiopia and Ghana have experienced similar behaviour from private creditors.

The behaviour of private creditors is contrary to the spirit of the framework and has resulted in a loss of confidence in the framework’s efficacy among other debtor countries. To date, only four countries have sought relief under the framework. The truth is that private creditors have no incentive to agree to debt relief, because if they hold out, they get the interest payments and principal repayments as agreed. If there is a default, they can sue in the UK or US courts for enforcement action against the defaulting country, which will also be lucrative for them.

For private creditors, it is a win-win situation; for low-income countries, it is lose-lose. Expecting private creditors to voluntarily enter into debt relief arrangements is like telling an alcoholic not to have a drink. Urgent legislation is required to compel private creditors to enter into and be bound by debt relief agreements.

I have talked a lot so far about sums of money, but we must remember the human cost of investment not going to low-income countries as a result of debt re-servicing—for example, the rise in infant mortality due to cuts in health spending. UNICEF has stated that if a country has defaulted on debt repayments that remain unresolved for more than three years, the infant mortality level rises by 11.4% over that same period. Chronic under-investment in education leads to a less skilled, less healthy and less productive workforce, resulting in a lost generation, making it harder for them to escape poverty.

So what needs to be done to resolve the debt crisis? In its excellent 2023 report entitled “Debt relief in low-income countries”, the International Development Committee came up with some recommendations. The first such measure would be the reform of the governance of financial institutions that control international debt, such as the IMF. The conditions imposed by the IMF on debt bail-outs often have dire effects and make things worse for the debtor country by placing more emphasis on the short-term repayment of debt, rather than on the long-term infrastructure development of a country that could provide it with lasting security and protection from indebtedness.

Secondly, there is a need to create a level playing field by passing legislation to compel private creditors to actively participate in the debt relief process by preventing them from suing for more money than they would get if they accepted debt relief on the same terms as other lenders. In 2010, the Labour Government passed the Debt Relief (Developing Countries) Act, which did exactly that for debt that was owed prior to 2004. My ten-minute rule Bill is an updated version of the 2010 Act. As more than 90% of bonds owed by countries eligible for debt relief are issued in the UK, it would have a significant impact on low-income countries and could be transformative in allowing money spent on servicing debt to go into health and education systems and to be spent on the environment. It would cost the Treasury nothing and, at a time when aid spending is seeing little if any increase, it would be a sure way of getting money to the most vulnerable countries. There is no justification for treating private creditors differently from other lenders.

Thirdly, there needs to be a public global debt register to record the details of all global sovereign debt. The need for transparency is urgent, and it would help populations in debtor countries to hold their Governments to account over entering agreements with predatory private creditors.

Fourthly, there should be a framework for the automatic cancellation of debt servicing when highly indebted countries are hit by catastrophic events such as climate-related disasters like Storm Beryl. It cannot be right that while a climate-vulnerable country is struggling to get back on its feet, it is forced to make debt-servicing payments. Instead of making these countries apply to international institutions for debt cancellation, debt cancellation should be automatic. Given that in 2024 the total external debt serviced by all African countries was $104 billion, of which $47 billion was owed to private creditors, and the entire UK aid budget to Africa was £993 million, something needs to change; otherwise we are just servicing the debt owed to private creditors.

[Chi Onwurah]

I thank my hon. Friend for his generosity in giving way, as well as the excellent points he is making. As the chair of the all-party parliamentary group for Africa, I have noted with concern the language around the increased migration that we have seen over the last few years, and we are all concerned to see the way in which criminal gangs exploit vulnerable migrants. Does my hon. Friend agree with me that by allowing the extraction of so much value from countries in Africa, we are not aiding and supporting economic opportunities for Africans in their own countries and are therefore contributing towards increased migration?

[Bambos Charalambous]

Again, my hon. Friend makes an excellent point. The lack of investment as a result of debt servicing leads to people seeking opportunities that are not available in their own country, so I totally agree with my hon. Friend on that point.

Before I conclude, I thank CAFOD, Christian Aid, Debt Justice, UNICEF and Save the Children for their excellent briefings ahead of this debate, and for their support in relation to debt cancellation. I conclude with these questions for the Minister. Will the Government support my ten-minute rule Bill to prevent private creditors from being able to sue for enforcement in the UK courts for more than has been agreed in relation to debt relief with bilateral and multilateral lenders? Does the Minister agree that there should be comparable treatment for all creditors? Also, do the Government support a public global debt register for transparency? Does the Minister support the reform of the governance of the institutions, such as the IMF, that set the terms and conditions of bail-outs?

The UK has a unique position in being able to use its global reputation to bring about change on the international stage in relation to debt cancellation, as it did 25 years ago. We led the way then, and it is time to do so again. We cannot afford not to. The global south is looking to us for action, and it is time for us to act.

Growing the UK Economy

Chi Onwurah Excerpts

Wednesday 29th January 2025 Commons Chamber

[Darren Jones]

Thank you. I thought it was “EU” again—I could not read my own handwriting.

The whole premise of the growth corridor is that we will have a transport spine through that corridor that allows for all the developments—housing, lab space or communities—around it. That is a crucial part of our plans, and we will make sure that it is delivered.

[Chi Onwurah (Newcastle upon Tyne Central and West) (Lab)]

I congratulate the Chief Secretary to the Treasury and the Chancellor of the Exchequer on a plan for growth that is both concrete—shovels in the ground now—and forward-looking, building on our scientific and skills base to drive long-term jobs and higher living standards. Heathrow expansion will help businesses in the north-east, but for the sake of those of us who are not Manchester United fans, will the Chief Secretary to the Treasury make it clear that much of the investment in the Man U development will be private sector-based? Will he also set out how that will help the rest of the north, particularly Newcastle United fans such as myself?

[Darren Jones]

I thank the Chair of the Science, Innovation and Technology Committee for her question. She and her Committee know the huge advantage we have in the UK with our brilliant universities and research and development ecosystem, which is why we are supporting them and putting rocket boosters underneath their activity to develop world-leading and frontier research and innovation, and stimulate economic growth across the country.

My hon. Friend is right that the development in Manchester is a broad set of privately financed housing and commercial opportunities, as well as the work that Manchester United wants to do with its football stadium. I should inform the House that I cannot give a running commentary on the stadium applications for all football clubs across the country, and she will have to forgive me for not knowing the latest plans for Newcastle.

Agricultural and Business Property Reliefs: OBR Costing

Chi Onwurah Excerpts

Thursday 23rd January 2025 Commons Chamber

[James Murray]

I think there may be some confusion on the Conservative Benches about what the OBR data shows. The data published by the OBR yesterday refers to exactly the same costing as was published at Budget. It sets out the approach to modelling and the costing, which is typical and in line with other tax policies. Indeed, the OBR’s statement makes it clear that:

“The OBR’s role is to provide independent scrutiny and certification of whether the Government’s policy costings are reasonable and central.”

That is exactly what the OBR has done in publishing the extra information, which shows the modelling behind the data that was published at the time of the Budget.

The shadow Secretary of State asked about the data. The data on the number of affected estates claiming APR and, indeed, APR/BPR—some 530 is the upper estimate—is in table 1.1 of the OBR document published yesterday. That is consistent with what we have been saying for many months since the Budget. I think Opposition Members are confusing the value of farms with the value of claims under inheritance tax. The only way to truly understand the impact of changes to inheritance tax policy on inheritance tax claims is to look at the claims data itself.

We are working in partnership with the large supermarket chains to make sure they are driving economic growth. We are very clear that some of the decisions we had to take in the Budget were difficult decisions that will have consequences, but we are determined to work with businesses across the country to drive economic growth, which is the No. 1 mission of this Government.

[Chi Onwurah (Newcastle upon Tyne Central and West) (Lab)]

The people of Newcastle upon Tyne Central and West love the local produce provided by local farmers in our fantastic markets, such as Grainger market, and they enjoy the beautiful countryside of Northumberland, which has been shaped by generations of sustainable farming. However, we cannot help but be aware that most of that land is owned by, for example, the Duke of Northumberland, big landowners and those seeking to minimise their tax exposure, so does the Minister agree that, by keeping this loophole open for so long, the country has pushed up land prices and pushed out the next generation of young farmers?

[James Murray]

There certainly is evidence that the current inheritance tax system has caused people to use these reliefs for tax planning and to avoid inheritance tax bills. My hon. Friend alludes to the broader question of the fairness and sustainability of this measure. As I mentioned earlier, 40% of agricultural property relief benefits the top 7% of estates, and 50% of business property relief benefits the top 4% of estates. The Leader of the Opposition has said that she thinks this is a good way to prioritise public money, but we think it is neither fair nor sustainable.

Public Finances: Borrowing Costs

Chi Onwurah Excerpts

Thursday 9th January 2025 Commons Chamber

[Darren Jones]

I have been clear to the House, as has the Chancellor, that the fiscal rules are non-negotiable. Public services will have to live within their means. We set the Budget in the autumn last year, and we have the OBR forecasts coming in March. Those are the numbers that Departments are working to in the spending review, and those are the numbers that we will hold public services to when we conclude the spending review in June.

[Chi Onwurah (Newcastle upon Tyne Central and West) (Lab)]

We thought we knew the dire economic situation when the general election was called, but on entering government, we found the real consequences of the previous Tory Government’s addiction to unfunded spending announcements. The people of Newcastle upon Tyne Central and West are paying the consequences for the Truss-Kwarteng economic crash. With the imminent entry into the White House of a President also committed to significant unfunded tax cuts, the economic stability of the UK becomes even more important. Will my right hon. Friend confirm that this Government are absolutely committed to fiscal responsibility and rising living standards, and that the plan for growth will deliver both?

[Darren Jones]

I thank the Chair of the Science, Innovation and Technology Committee for her question. She will know that our first commitment in the Labour party manifesto at the last election was to fiscal responsibility. It is the bedrock of this Government and the bedrock of every decision we take. As the Prime Minister set out in his plan for change, the reason people will know the difference that a Labour Government make is that they will have more money in their pockets by the end of this Parliament than when it started.

Oral Answers to Questions

Chi Onwurah Excerpts

Tuesday 3rd September 2024 Commons Chamber

[Darren Jones]

The issue of so-called hope value was referenced in the Labour party’s manifesto, and the Government will set out further detail in due course.

[Chi Onwurah (Newcastle upon Tyne Central and West) (Lab)]

3. What fiscal steps she is taking with Cabinet colleagues to encourage inward investment.

[Alan Gemmell (Central Ayrshire) (Lab)]

8. What fiscal steps she is taking with Cabinet colleagues to encourage inward investment.

--- Later in debate ---

[The Chancellor of the Exchequer (Rachel Reeves)]

Investment is at the heart of this Government’s growth mission, alongside stability and reform. With robust fiscal rules and respect for economic institutions, the Government are building the confidence needed to deliver private sector investment. It is vital that the tax system also supports growth, and today I can confirm that the Government will outline a tax road map for business at the Budget to offer the certainty that encourages investment and gives business the confidence to grow, including our commitment to cap corporation tax at 25% for the duration of this Parliament and to retain full expensing.

[Chi Onwurah]

I thank the Chancellor for her response. Last year, the north-east attracted 67 foreign direct investment projects, creating over 4,000 jobs. In the key growth sectors, from advanced manufacturing to health and tech, those who know the north-east know our huge potential, and I know that the Chancellor recognises that too. What is she doing with the Mayor of the North East, Kim McGuinness, to ensure that more global investors are aware of the north-east’s strengths and that we can attract more inward investment, creating more jobs?

[Rachel Reeves]

My hon. Friend makes an important contribution on behalf of her constituents, based on her background of working in science and technology before entering this House. My hon. Friend is absolutely right to say that the north-east has huge potential to grow the economy through sectors including advanced manufacturing, health, technology and our creative industries, and this Government will work with our local mayors, including Kim McGuiness, to develop ambitious, long-term local growth plans that reflect the north-east’s strengths. We will look to address some of the barriers to growth and support delivery of our national industrial strategy, as well as narrowing some of the inequalities that have persisted for far too long.

Economy, Welfare and Public Services

Chi Onwurah Excerpts

Monday 22nd July 2024 Commons Chamber

[Chi Onwurah (Newcastle upon Tyne Central and West) (Lab)]

I congratulate all the hon. Members who have made their maiden speeches on their passion and their commitment to their constituency, which has come across so well. Age does not wither, nor custom stale the privilege of being in this place, and I too want to thank my constituents, who have returned me to Parliament to represent them all and the wonderful city we call home.

I spent 14 years on the Opposition Benches, standing up for my constituents against a Government who were bearing down on them. It is absolutely fantastic to speak from the Government Benches in support of a Government who will help and empower them. Some Conservative Members have been painting a rosy picture of our economic inheritance, but the message of working people in Newcastle upon Tyne Central and West was clear and consistent: “We need change.” It is not hard to see why. People are worse off; over a third of children in Newcastle upon Tyne Central and West live in poverty; and over 2,000 households in Newcastle are homeless. Those are just a few of the issues that my constituents face, so please, let us not pretend that we should be grateful to the last Government.

But everything changed on 4 July. Indeed, as I was buying my fish supper last Friday at one of the excellent fishmongers in Grainger market—locally smoked cod, since you ask—they told me that on 5 July, sales of halibut soared. That is an expensive fish, so they took that as a sign of celebration, but also of optimism, hope, and confidence in a better future. There is nothing fishy there, because the Bills set out in the King’s Speech will give Newcastle our future back. Our destiny will be in our own hands, with the English devolution Bill and the better buses Bill giving local leaders such as our fantastic Mayor Kim McGuinness the powers needed to drive growth and prosperity locally. Our region’s immense potential in the green industries of the future will finally be unlocked through the national wealth fund and Great British Energy; planning reform will take the handbrake off building new homes and spaces for business, making us an even greater city with an economy that provides great jobs and good homes for all Geordies; and by expanding the rights of workers, tenants and minoritised groups, the Government will make sure that work pays and everyone in Newcastle enjoys their fair share of our national prosperity.

Having worked around the world as an engineer, I have been proud to champion science and innovation in Newcastle and across the UK. I am now privileged to have both of Newcastle’s fantastic universities in our constituency, and our city is looking forward to building a proper industrial strategy once again—one that can boost our universities as drivers of inclusive economic growth. Unlocking private investment through measures such as the national wealth fund and the recently announced pensions review will super-charge spin-outs and start-ups in the north-east, and I believe that sites such as Helix—home to innovative businesses and entrepreneurs in cutting-edge industries—are a tantalising glimpse of the future of Newcastle.

Technology has the power to make our constituents’ lives so much better, and measures such as planning reform will make that a reality. As an ex-shadow science Minister, I have spoken to Lord Vallance, as he begins his ministerial role, to offer my support, and to make the case for investment in regional research and development. I know that the Department for Science, Innovation and Technology team are already committed to opening up careers in science to everyone, getting money outside the golden triangle and connecting science to industrial strategy, healthcare and economic growth.

As I have said, this Government inspire hope that has been lacking in Newcastle— that is, apart from on match days. That is why, as the MP for St James’ Park, I welcome the football governance Bill. From Mike Ashley to the Saudi Public Investment Fund takeover, football governance has been a thorn in our side, and Geordies around the world will welcome the safeguarding of our precious football club.

My constituents sent me to this place because our party promised change. With this King’s Speech, with this Government back at the service—

[Mr Deputy Speaker (Sir Christopher Chope)]

Order. I call Olly Glover to make his maiden speech.