By Roger Helmer MEP.
Labour's attempts to promote debt relief for poor countries appear superficially admirable. In reality, the Private Member's Bill sponsored by Labour MP Andrew Gwynne, which has reached committee stage in the House of Commons (March 9) is one-sided and ill-informed, and will serve only to limit developing countries' access to secondary capital markets, isolating them from future prospects of public and private lending. It is beset with perverse incentives and unintended consequences.
Susceptible to the charms of celebrities like Jason Donovan, the British public is deceived about the probable outcomes of this legislation. The only way to alleviate poverty and spur growth in the developing world is (God forbid!) to let free markets flourish. Gwynne's Bill forces investors to comply with arbitrary levels of debt forgiveness and denies creditors access to due process to recover reasonable levels of debt from sovereigns with the ability to pay. More importantly, the Bill potentially encourages corruption in the developing world by allowing debt relief for kleptocrats who have continuously looted such loans from their citizens. Does Labour want the UK to become a safe haven for the attachable assets of corrupt governments? Or is it a jurisdiction where contracts are respected?
Unilateral and arbitrary debt relief rewards the profligate and punishes the prudent. It creates moral hazard. It cuts off the recipients from future access to funds -- and may thus increase the demand for foreign aid from the British tax-payer.
As Conservative MP Christopher Chope (Christchurch) observed in the Commons debate on the Bill:
“My heart goes out to the people of heavily indebted poor countries. They are heavily indebted because, for the most part, their leaders have been corrupt. We need only take a look at the leaders of Liberia and other countries. Many of them have substantial funds in, for instance, Swiss bank accounts. For such countries that are essentially corrupt, we seem, in effect, to be saying that we should indulge that corruption by writing off these debts, even when they have been incurred as a result of commercial transactions.”Private Members Bills are usually a flash in the pan – an opportunity to score points with constituents or against the opposition. However, the Gwynne Bill, backed by the government and an emotive public campaign by Jubilee Debt, has the potential to become British law, and British taxpayers will pick up the costs for the developing world’s continued reliance on aid.
