Low-income Countries: Debt Cancellation

Jim Shannon Excerpts

Thursday 6th February 2025 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

What a pleasure it is to serve under your chairmanship again, Ms McVey. I commend the hon. Member for Southgate and Wood Green (Bambos Charalambous) for leading the debate. I spoke to him beforehand, and he told me that he led a debate in this Chamber two weeks ago. I had the debate last Thursday, he has the debate this Thursday, and I have the debate next Thursday in the same time slot—I think he and I are competing for the graveyard shift on a Thursday afternoon. I think that is two each. Maybe it will be exceeded—I am not sure—but well done to him, because this is a subject that we are all interested in, and that is why we are all here.

It is a pleasure to see the Minister in her place. I wish her well in her new role, and we look forward to her response on a matter that I know is close to her heart. I am confident that she will do her best to encourage us all. I also give my well wishes to the shadow Minister, the hon. Member for Romford (Andrew Rosindell). I suspect he is newly appointed—I hope I am right about that—and I wish him well in the role.

The United Kingdom has been involved in various initiatives aimed at providing debt relief to low-income countries over the years, including in Africa, Asia and the Caribbean. We continue as a country to work alongside LICs to ease pressure, which is something we should be proud of. Many will know that we are known for our generosity to other countries. We will always do our best to support, and it is a real pleasure to discuss that. Indeed, Northern Ireland—you will probably know this, Ms McVey—is one of the most charitable regions. I am not saying we are better than anybody else, but we are generous when it comes to charitable giving, and I just wanted to put that on the record.

In December 2024, the World Bank warned that developing countries spent a record £1.4 trillion—my goodness, that slipped off my tongue quite easily, but it is an astronomical figure—to service their foreign debts in 2023, and that interest rates had risen to a 20-year high. It concluded that 38 low-income countries, most of them in Africa and Asia, are in debt distress.

Debt cancellation is a reserved UK-wide policy, but Northern Ireland, Scotland and Wales contribute to the UK’s foreign aid and international development budget, which largely includes the debt relief initiatives for the LICs. The Northern Ireland Anti-Poverty Network has long advocated for the UK’s involvement in providing debt relief to countries struggling with high financial burdens. Has the Minister had the opportunity to hold any discussions with the Northern Ireland Anti-Poverty Network? It is a good organisation that does great work, and it is always encouraging for such organisations to have engagement with Ministers.

It is interesting to look at the at the root cause of the debt. The sad reality is that for many countries, such as those in Africa, it is poverty. It is as simple as that, as graphic as that and as real as that. Poverty in Africa is a long-term and complex issue that impacts millions of lives every day. Political instability, uneven distribution of natural and Government resources, sometimes corruption, and climate change all contribute to this issue. Those who are most affected are often those in rural and remote areas.

There are incredible charities out there, and the hon. Member for Southgate and Wood Green mentioned some of those that contribute regularly. I want to talk about some of the church groups that contribute through their missions. I think first of Eden missions. Every year, I am fortunate to have engagement with those from Swaziland. A young people’s choir comes over and they do some fundraising when they are in our constituency. We do our best to help and support them in every way we can. Every one of the children in that choir has AIDS, because their parents passed it on to them. They are fortunate to have the drugs that help them. Even with those disabilities, their voices are something special.

I think of the Elim church missions. In the Strangford constituency, there are so many—the best thing might be just to name all the churches. There is the Church of Ireland, the Presbyterian Church, the Methodist Church, the Roman Catholic Church and Baptist churches as well. Then there are the independent churches, which contribute greatly. We see massive Christian faith-based volunteerism and energy to support projects in Africa.

I think in particular of Elim, because I engage with it every year whenever it comes to Northern Ireland. It provides schooling, health and work initiatives. That charity does so much. It prepares people for life and for jobs, whether on the farm, as a doctor or teacher, or whatever it may be. It gives people the opportunity to know how to sow the seeds and reap the crops, so that they can live. When they come to Northern Ireland, we see their smiles and we cannot help being lifted individually.

Those are just some of the people who do this work, along with all the other charities and more that the hon. Member for Southgate and Wood Green spoke about, and that others will speak of as well. I have no doubt that every one of us could name groups that work beyond belief to provide aid and support to these communities at a local level. In the conversation about debt relief, however, the policies come straight from the Government. These groups do their work outside of Government, but the Government and the policymakers in this House are of massive importance at international level.

The UK has worked incredibly hard to introduce schemes that ultimately write off or suspend large debt from certain countries. I will give four countries as examples— I think the hon. Member for Southgate and Wood Green mentioned them too. Zambia, Ghana, Chad and Ethiopia have applied to the common framework, which followed on from the debt service suspension initiative that was introduced in 2020. Thus far, an incredible $12.9 million in payments have been suspended, which will go a massive way to easing pressure and providing a little more financial security for those countries. They are struggling—and, as I said, more often than not the reason is poverty. When it comes to Governments repaying debt, where is the tax coming from if people are on the poverty line to such an extent that they cannot pay it?

From 2001 to 2010, at least 49 low-income countries owing debts to the UK had all or part of their debts forgiven. The total amount of debt owed to the UK is now $1.8 billion. There are calls for the UK to strengthen legislation on debt repayments. I know the Minister will give us some thoughts on how the Government can help when it comes to debt repayments. Compelling private creditors to be involved in debt relief schemes is one of the options.

The International Development Committee said that the United Kingdom of Great Britain and Northern Ireland is “uniquely placed”—that is the Committee’s opinion, and it is mine, too—to legislate, because 45% of sovereign debts, a large amount, are governed under English law. Is that the Minister’s intention? If we have the ability to legislate, as I understand we do, I suggest, very respectfully, humbly and kindly, that we should.

The scale of debt that is owed is huge. We have done our bit recently to ensure fairness to other countries. I thank the Minister and the Labour Government, and the Conservative Government beforehand, for all that they have done. Debt has a huge impact on the development of LICs. We must take that into consideration without forgetting that there are other means through which we can receive payments back. For example, would it be an option for countries to give us something back in kind? I look forward to hearing the Minister’s plan to ensure that we protect LICs without putting the development of our own country at risk.

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[Andrew Rosindell]

I respect the hon. Member’s point, but she did say that we should pay what we owe. All kinds of arguments can be put forward about what we owe, but it is a matter of opinion. Today we should bring unity and look for solutions, rather than making this a political issue. We can achieve more for developing countries if we work together, rather than looking at where things have gone wrong or right in history and at who may owe what, depending on what is going on in the world today. I do not think that will get us very far, so we should move on from that and focus on how we restructure the repayment of debt, and how we can develop a better system globally to deal with this issue, rather than looking too far back into history.

It has been clear to me, right from when I stood for Parliament for the first time, that this issue needs to be addressed. That has been confirmed by the passion that hon. Members have shown in today’s debate. Debt relief deserves serious consideration, and the Opposition recognise that. Unsustainable debt burdens can be huge and significant impediments to economic development and growth, trapping nations in a cycle of poverty. However, I believe that we must approach this matter in a responsible way, with both caution and pragmatism.

If pursued, debt relief must be conditional and tied to a strong policy of fiscal responsibility measures, so I hope the Minister will provide assurances that any recipient countries would be expected to implement sound economic policies, tackle corruption and take steps to prevent future over-borrowing. I do not think the Minister can disagree that without those safeguards, we risk creating a system in which there is financial mismanagement in perpetuity. We should focus on rewarding the expense of responsible governance. Making the hard-pressed British taxpayer foot the bill is not acceptable to most of our constituents, and we need solutions. We need to solve these problems and not see this as a one-way street.

If the United Kingdom taxpayer’s money is involved, I want the Government to tell us how they will ensure that such relief also serves the interests of the British people. During these difficult economic times, we must justify every single penny spent by the Government and always be mindful that it is our constituents’ money, not the Government’s. Debt relief must become not an open-ended commitment, but a strategic tool that strengthens bilateral ties and ensures geopolitical stability.

I hope the Minister can tell us how the Government intend to prioritise sustainable development, and what mechanisms are in place to monitor that. I also hope she will agree that the focus should be not on perpetual aid or blanket debt forgiveness, but on fostering economic self-sufficiency. That is the only sustainable way forward. We must also consider how the United Kingdom can play a meaningful part in helping low-income countries to develop their domestic industries, improve resource management and reduce their reliance on foreign debt. Without those structural changes, would debt relief simply serve as a temporary fix, or would she prefer to have a system that offers a sustainable solution? That is what the Opposition want.

[Jim Shannon]

I would never wish to be anything other than supportive of what the hon. Gentleman says, but everyone who has spoken so far has mentioned the charities and groups that contribute and sometimes fill the gap. May I ask, respectfully, if some recognition could be given to those groups?

[Andrew Rosindell]

The hon. Member touched on this in his speech earlier, as did the hon. Member for Melksham and Devizes. That is another new constituency name, and I think it includes Chippenham. Is that part of the hon. Gentleman’s constituency?

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[The Economic Secretary to the Treasury (Emma Reynolds)]

Thank you for calling me, Ms McVey. It is a pleasure to serve under your chairmanship for the first time, and I am sure not the last.

I thank the hon. Member for Southgate and Wood Green (Bambos Charalambous) for drawing attention to these issues and for bringing this debate on debt cancellation to Westminster Hall today. I also thank the other Members, whose speeches have made for a rich discussion on this issue. I will mention them briefly and then hope to come to everyone’s questions, should time allow. I thank the hon. Member for Strangford (Jim Shannon) for his kind words about my appointment—I am still early in my time in this role. I also thank him for underlining the importance of the role of charities in the development work that they do in low-income and vulnerable countries.

My hon. Friend the Member for Loughborough (Dr Sandher) spoke with great passion about his experience working in Somaliland. He brings great insights to the House after working in that capacity previously. I thank the hon. Members for Melksham and Devizes (Brian Mathew) and for Esher and Walton (Monica Harding) for stressing that the UK needs to restore our leadership on international development. I will come to some of their questions later in my contribution.

I also want to thank my hon. Friend the Member for Clapham and Brixton Hill (Bell Ribeiro-Addy) for raising crucial points about the situation that many low-income countries vulnerable to the impacts of climate change find themselves in. I will say a little more about that, too.

The Government are highly concerned by the debt challenges faced by many low and middle-income countries, with 3.3 billion people living in countries that spend more on servicing their debt than on health or education—a point made by many hon. Members. Among low-income countries, 10 are currently in debt distress and 25 are at high risk, and there is an urgent need to address the vulnerabilities. As a Government, we are fully committed to tackling unsustainable debt burdens in a way that supports development needs and helps countries address those vulnerabilities.

We are acting in three key ways. I will attempt to answer questions, particularly from my hon. Friend the Member for Southgate and Wood Green who secured the debate, when discussing the three key ways. The first is on addressing liquidity challenges; the second is on ensuring effective debt restructurings; and the third is on promoting debt resilience.

First, on addressing liquidity challenges, we are working with international partners to address immediate liquidity pressures facing many countries, which are crowding out vital spending on climate, health and education. We support the IMF and World Bank’s three-pillar approach, which is designed to support countries with high debt repayments. The first pillar is focused on action from vulnerable countries to improve revenue mobilisation and implement sound economic policies. The second focuses on ensuring that countries receive new flows of finance at concessional rates from international financial institutions and other development partners. The final pillar looks at providing case-by-case action to reduce the cost of existing debt burdens where needed.

Secondly, we are working to address debt vulnerabilities through improving the effectiveness of debt restructurings for countries in debt distress. The G20 common framework remains the best mechanism for co-ordinating debt restructurings to address unsustainable debt burdens, but further progress is needed.

The UK is working closely with the G20 and other international partners to ensure the framework delivers more timely, orderly and predictable debt restructurings. I know that is high on the priority list of the South African G20 presidency this year. The UK will be pressing for rapid implementation of the lessons learned from the common framework, which were agreed under the Brazilian presidency of the G20 last year.

The private sector, which has been mentioned by many hon. Members, must also play its part in debt restructuring efforts. We are actively engaging with private sector partners—for example, through the global sovereign debt roundtable—to ensure continued private sector support for addressing the debt challenges faced by countries, leveraging the City of London’s leading role in sovereign debt markets.

Several Members, including my hon. Friend the Member for Southgate and Wood Green, mentioned the issue of private creditors and whether we needed legislation to force them to participate. The Government are not currently seeing evidence that private creditors are refusing to participate in debt restructurings. Recently, private bondholders have agreed to debt treatments for common framework countries, including Zambia and Ghana. We are working closely with the private sector through bilateral meetings, engagement with representative institutions and Paris club discussions.

Hon. Members also raised the issue of comparable treatment by private creditors. I reiterate that both Zambia and Ghana have reached agreements on debt restructurings with their private bondholders. Official creditors have deemed these comparable with their own restructurings.

My hon. Friend the Member for Southgate and Wood Green raised the need for UK leadership on debt relief, and we heard that from others, too. I highlight that the UK has a strong track record of pushing for effective and holistic solutions to debt challenges, including supporting the IMF’s three-pillar approach for countries facing liquidity challenges and pushing for more effective co-operation and co-ordination under the G20’s common framework. The UK also co-ordinates debt treatment through our membership of the Paris club and our commitments to the G20 common framework in partnership with other creditors.

This is a key point: unilaterally writing off debt owed to the UK would not be in the interests of the UK taxpayer—the shadow Minister, the hon. Member for Romford (Andrew Rosindell), mentioned the UK taxpayer, of course—which would be subsidising ongoing payments to other creditors if done unilaterally. The Government are therefore working closely with borrowers, official and private creditors, and the IMF and World Bank to strengthen the wider debt architecture and provide timely and co-ordinated restructurings for countries, where needed to support holistic debt sustainability for low-income countries.

The third way that the Government are pursuing this issue is through tackling unsustainable debt by promoting greater resilience in debt markets. In response to the shadow Minister, I mention that the UK is committed to provide sovereign financing on sustainable terms and to act in an open and transparent manner to support global debt sustainability.

We are playing a leadership role internationally in several key ways. The hon. Members for Melksham and Devizes and for Esher and Walton asked what the UK was doing to provide leadership.

[Jim Shannon]

My contribution, not that it was better than anybody else’s, put forward the idea that the countries we are helping with debt might be able to supply us with some goods as a way of paying us back, rather than making a financial repayment. Is that something that the Minister and the Government would look at?