I beg to move, That the Bill be now read a Second time.

I am delighted to move the Second Reading of a Bill which, though small, is enormously significant for people living at the sharp end of some of the most acute poverty in the world. I do so on behalf of my hon. Friend the Member for Denton and Reddish (Andrew Gwynne), who has been a great champion of debt relief. Unfortunately, he is unable to be here today owing to serious illness. He has done the cause of fighting world poverty a great service by making debt relief the subject of his private Member’s Bill, and I am sure the whole House wishes him a speedy recovery.

The Bill will hugely benefit some of the poorest people and countries in the world. It will prevent commercial creditors, some of them secretive private investment funds, from free-riding on the generosity of the British taxpayer. It will enable poor countries to concentrate funds on much needed new schools, hospitals and other direct services, instead of having to pay unsustainable levels of their Government revenues to service international debt.

The Bill strengthens the UK’s commitment to debt relief. This country can take pride in the pioneering role that our Government have played in developing the international initiative to end developing country debt. The Bill takes the logic of public sector debt cancellation into the private sector, and it sets out for the financial services industry some limits to the dealings in which the industry can engage in developing country debt.

One of the results of the credit crunch is public anger about some of the activities of the financial services industry. Profiteering on the back of the debt of some of the poorest people in the world is perhaps the most objectionable activity of all. By passing the Bill, we as a Parliament and as a society will be setting boundaries and saying, “No further.”

There has been much speculation about the number of financial institutions that will be affected by the provisions of the Bill, and about whether it will cut across the rights of a wide range of investors. That is not the case. The financial institutions that are likely to be the most sharply affected are the so-called vulture funds—companies that buy up the sovereign debt of the poorest countries on the secondary markets, often at highly discounted prices, and then try to recover the full amount, plus costs and fees, through the courts—often, unfortunately, through the UK courts.

Many of those funds do not participate in debt relief, and by litigating for full repayment of their debt, they reduce the effectiveness of the international debt relief programmes of the UK, our international partners and responsible commercial creditors, and make less effective the very large amounts that the Government and other donors provide in aid for developing countries.

Will the hon. Lady join me in applauding the television coverage which has shown that some of those vulture fund people take their names off their doors when they are asked what they are doing? They ought to be as embarrassed about going to the High Court to try to enforce their claims as they are anxious to hide from the cameras and the media.

The hon. Gentleman is right about the operation of the funds. That is why my private Member’s Bill dealt with issues of disclosure and transparency. I congratulate the media: television and some national newspapers have highlighted such activities and brought them much more into the public gaze. They have done us all a great service and presented us with a challenge by saying, “These are the facts. What are you as a Parliament and as a Government going to do about them?”

I am a great supporter of the Bill, as I think all Members are, and my hon. Friend and our hon. Friend the Member for Denton and Reddish (Andrew Gwynne) are doing a great service to the developing world by bringing it forward. Does my hon. Friend the Member for Northampton, North (Ms Keeble) agree, however, that we need international action too? We, in just one country, cannot solve the problem. Does she agree also that if we pass the Bill today we will show that the UK again leads the world in dealing with developing world debt?

My hon. Friend is absolutely right—there is a need for international action. A Bill has been introduced in the United States, and I have met the Congresswoman who is taking it through. We also need to talk to other European jurisdictions to ensure that similar action is taken there. Importantly, however, action must start somewhere, and if it starts in this country that is fine, particularly given the global role of our financial services industry and the fact that our courts are often, unfortunately, the locus for action. In reality, we make a start and then look to the rest of the world to follow, as my hon. Friend said we have done on other issues.

The actions of the vulture funds are profoundly damaging, as hon. Members have said. Their world is opaque, and it has been hard to track their activities without the assistance of investigative journalists. To deal with my hon. Friend’s point, I must note that a World Bank survey has reported a total of 54 actions by vulture funds since 2002, about one fifth of which have been brought in the UK. The problem is ongoing, and last year’s World Bank survey reported 14 active or unresolved law suits by commercial creditors worldwide. They include cases against Ethiopia, Sierra Leone and the Democratic Republic of the Congo.

Two well-documented court cases deserve particular mention: those brought against Zambia and Liberia. In the 1970s Zambia was provided with a loan to buy some tractors, but by the late 1990s it was unable to pay back all the money. The country was in the process of trying to find a settlement with the creditors when the Donegal International fund purchased the debt for a knockdown price of $3.3 million in 1999. The fund proceeded to pursue Zambia through the UK courts for the full amount of the debt, plus interest and fees, demanding an astonishing $55 million in total. The courts awarded $15.5 million, five times the amount that the fund paid for the debt.

In November last year, two commercial creditors took a case to the High Court against the Republic of Liberia for a debt that also dated back to the 1970s. In that instance, on an original loan worth $6 million, the funds were awarded $20 million. Not surprisingly, the President of Liberia has spoken out this week in support of action against the vulture funds.

Although those numbers may sound paltry when compared with the billions that have been won and lost each day during the credit crunch in this country, or, indeed, with the amounts that are at stake when a football club goes down, they are enormously significant to countries such as Zambia and Liberia. The $15.5 million awarded against Zambia would have been enough to pay for 30,000 primary school places. The $20 million awarded against Liberia represents an astonishing 5 per cent. of its Government’s entire annual budget. In that country, the average income per person is less than half that of the “dollar a day” acute poverty target.

Mr. Justice Barton, who presided over the Liberia case, said:

“The only issue raised is plainly a sad one, that Liberia is a poor country, and cannot afford it.”

Indeed, it is poor, because the average income per person in Liberia is $170, while roughly two thirds of Zambia’s 12 million people live on less than $1 a day. That unscrupulous activity not only damages the economic growth of those developing countries, but undermines UK and international efforts to reduce the unsustainable nature of their debts. The Government have been at the forefront of driving through debt cancellation for some of the poorest countries, with the heavily indebted poor countries—HIPC—initiative. That is an international programme, but much of the original thinking and drive for it came from this country.

The scope of the programme has been extraordinary. Since 2000, $117 billion has been committed globally to debt relief for countries through the HIPC and multilateral debt relief initiatives. Some $9.7 billion has come from the UK. The lion’s share of the debt cancellation— 94 per cent.—has come from the public sector, and it has been successful. Since 2001, the 35 post-decision-point HIPC countries have increased their spending on poverty reduction from $6.4 billion to $26.7 billion.

In Tanzania debt relief has helped to increase the number of children in primary school by more than 50 per cent., and helped to build almost 2,500 new primary schools. Mozambique has more than tripled its poverty reduction spending from $792 million to more than $2 billion, contributing, for example, to a decrease in infant mortality from 147 deaths per 1,000 live births in 1997 to 100 per 1,000 live births in 2008. That is still far too high, and much higher than the rate in this country, but at least the trend is downward.

Debt cancellation has not been entirely a public sector programme, but concerns about the Bill have been raised because the idea has been put about that commercial debt is a new inclusion in the debt relief programme. However, commercial creditors have, notably and laudably, contributed to the debt cancellation, writing off debts because there was no realistic proposition of being able to collect them, out of concern for the impact of debt on the economic growth from which investors hope to benefit, or out of a genuine desire to be part of one of the most progressive movements in the world—the debt cancellation programme.

Some 6 per cent. of debt cancellation, about $4.5 billion, has come either in commitments or in reality from commercial creditors, so the principle of the cancellation of private or commercial sector debts as part of the HIPC programme is already well established. In fact it could be said that the Bill enshrines in legislation existing best practice in the commercial and private sector. It consistently applies to the private sector the principles that already apply to public debt cancellation.

I shall briefly set out the Bill’s provisions, although we will consider them in more detail in Committee. The scope of the legislation, in terms of countries covered, is more modest than the provisions in the ten-minute Bill that I introduced last year on the same subject. It would be good to extend the Bill, but it is absolutely right to look at the HIPC countries and use the provisions that already operate in that area for the cancellation of some remaining commercial debts.

Clauses 1 and 2 define the debts to which the Bill applies. Basically, it confines the debts to those that are either included or expected to be included under the HIPC programmes. They are the debts of the 40 most heavily indebted poor countries in the world, including Afghanistan, fragile African states such as Somalia and the Democratic Republic of the Congo, and countries that have been torn apart by conflict, poor governance, and poverty. It also includes five countries that have yet to reach decision point under the HIPC programme: the Comoros islands, Eritrea, Somalia, Sudan and Kyrgyzstan.

My Bill sought to include a wider group of low-income countries, but there is a logic to restricting the legislation to the debts of HIPC countries and a fairness in treating all debt equally. Creditors will still be able to litigate for the recovery of their debts, so they will still retain their legal rights to debt recovery, but they will be able to do so only within the limits that the World Bank and IMF consider sustainable—the internationally agreed rules on the calculation of what is acceptable for debt recovery.

Clauses 3 and 4 reduce the proportion of those debts to be recovered to the level corresponding to the HIPC initiative. Those amounts are assessed internationally and there is a set assessment procedure, so the amount will not be at the discretion of one Government or another Government. A respected and established process for reaching the amount is already in train. Clause 5 applies those terms to judgment debts, and clause 6 creates an incentive for debtors to negotiate settlements to repay their debts on terms compatible with the HIPC initiative, by excluding from the scope of the legislation debts in respect of which the debtor has failed to do that.

Much of the discussion of the Bill in recent days has focused on the presumed restrictions that it introduces on the activities of private investors. However, as I have said, the Bill does not outlaw the proper pursuit of debt; it seeks to ensure that creditors cannot pursue payment beyond the level assessed as sustainable by the IMF and the World Bank. The overall goal, of course, is to reduce the relevant country’s debt ratio to sustainable levels. The Bill provides safeguards for commercial creditors by promoting a negotiated settlement between them and the debtor countries, by excluding debts in respect of which the country concerned does not offer to settle on terms consistent with the initiative.

Finally, the Bill promotes fairness among creditors. The vulture funds that successfully take indebted countries to court can do so and make profits only by free-riding on the relief provided by British taxpayers, our international partners and other, more ethical, commercial creditors. As it stands today, the Bill is the result of solid consultation by the Government and a lot of hard work by the voluntary sector. It began with the work of the Jubilee Debt Campaign and included, in the Treasury, a consultation that reported recently.

What lies behind the Bill is economic realism as well as fairness to the British taxpayer, poor countries and other commercial creditors who already participate in debt relief. The reality for any country that reaches a HIPC process is that its debts are unsustainable and it has little or no prospect of ever repaying them in full. The initiative makes for the orderly management of the debt and reduces it to a level considered repayable. However, the process is fair and economically equitable only if all parties partake in the relief. The Bill would ensure that that happened and that the rogue vulture funds that are currently completely outside the law would be brought within the scope of internationally agreed procedures for managing developing country debt.

I pay particular tribute to my hon. Friend the Member for Denton and Reddish, for whom I am taking this Bill forward today; I am sure that he would have wanted very much to be here. I thank other colleagues in the House and the staff and supporters of the Jubilee Debt Campaign, who have been relentless in keeping this issue in the spotlight over the months and years. Their work and campaigning has provided the public space for the whole process of debt cancellation, which has been so important.

Mr. Speaker, you were one of the sponsors of the previous Bill, and I am sure that you would want to see this measure get on to the statute book before the election. I very much hope that we will get the time necessary for the Committee stage, and be able to complete Report and Third Reading in the little time left to this Parliament.

There is a strong body of support for the Bill right across the House; the Opposition have been extremely important in respect of the main thrust of the arguments behind the Bill. There is equally strong support outside this building for ending the unsustainable levels of debt that have for so long paralysed the efforts to end world poverty.

I am delighted to have this opportunity to speak in support of the Bill. I start by offering my sympathy to the hon. Member for Denton and Reddish (Andrew Gwynne), a geographical neighbour of mine who, like me, serves part of the borough of Stockport. I wish him well. I know from my conversations with him that he takes the Bill very seriously. He will be most disappointed not to be here as we, I hope, wave it forward on its way in the next hour or two.

I congratulate the hon. Member for Northampton, North (Ms Keeble), whose original ten-minute Bill first brought the issue to the attention of the House. I was happy to sponsor that Bill, and I am equally happy to sponsor this Bill today. Not having stepped back fast enough, I am also speaking on behalf of the Liberal Democrat party. I am happy to record my party’s strong support for the Bill, which it sees as an important and practical, although small, way of assisting some of the poorest countries in the world—and, more importantly, the millions of poor people who will benefit when this legislation comes into force. As the hon. Member for Northampton, North said, this Bill is in some ways a little more refined than her ten-minute Bill, and it is none the worse for that. It is ready for implementation, subject to whatever is said in Committee.

I should make a disclaimer. As my constituents know, I am a stout defender of animal welfare. However, I should make it clear that international financial vultures are not included in my view of what should be protected by the House. I have served on the International Development Committee for the past year or so. Although I thought I already knew about some of the key issues, it has been an eye-opener to have seen the work done in many heavily indebted countries to tackle poverty and make a reality of the millennium development goals.

It is absurd that a great deal of work should be put in by non-governmental organisations, governmental organisations and multilateral donors to tackle the millennium development goals, to bring improvements to health and education and alleviate poverty in poor countries, while people operating from anonymous offices in financial centres around the world are exploiting the UK courts to take back some of the money that has been so hard won and negotiated so carefully for the purposes of poverty alleviation.

It is a particular cause of concern—anguish, even—for those of us who serve in the UK Parliament that the UK courts should have opened the door to all that and had a relaxed approach to such cases. That has made the UK one of the most—if not the most—favoured places for those anonymous financial experts to wreak their damage. As has already been mentioned in an intervention, those people do not seem to have too much shame, but they have enough to want to avoid the transparency that goes with full public disclosure. I welcome the fact that the Bill will tackle that issue as well.

My remarks will not be extensive. The Bill is a necessary measure to close a loophole that most people probably do not believe could ever have existed in the first place. The Bill is well crafted and quite modest. I hope that it will get a very fair wind very quickly and that, not for the first time, what the House does on the issue of poverty reduction at an international level will be picked up in other parts of the world.

There are other centres of financial services and court regimes and, if the loophole is shut here, those anonymous financial experts will no doubt start to look elsewhere in greater numbers than before. We already know that the United States legislature is looking at parallel proposals. I hope that this morning will start a domino effect that will end up closing, at worldwide level, this ridiculous loophole and redirecting income streams that were always intended to alleviate poverty in poor countries back to those countries without further delay.

It is a pleasure to speak on Second Reading of the Bill. I add my words to those of the hon. Member for Hazel Grove (Andrew Stunell) in wishing the hon. Member for Denton and Reddish (Andrew Gwynne) well, and I congratulate the hon. Member for Northampton, North (Ms Keeble) on her long-standing interest in the matter and on presenting the Bill so effectively this morning. She is absolutely right that there is a cross-party consensus and real concern about debt. We believe that the Bill is extremely well intended and addresses an important issue, and we are grateful for the opportunity to examine it closely to see what we can do about the problem. In our view it should have an opportunity to go to Committee, and we hope that it will have a fair wind, to use the words of the hon. Member for Hazel Grove.

I should explain the Conservative party’s long-standing interest in debt relief. I know that there is consensus on the matter, but it is worth pointing out that our interest has long existed. In 1988, the Conservative Government negotiated the Toronto agreement to reduce debt payments by a third, and in 1990 they negotiated the Trinidad terms to reduce them by two thirds. In 1996, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), as Chancellor of the Exchequer, was much involved in the heavily indebted countries initiative to write down debts by 80 per cent. In the course of those initiatives, the Conservative Government unilaterally wrote off virtually all Britain’s aid loans— £1.2 billion-worth, which was the single biggest contribution to easing the debt crisis. I pay tribute to the current Government, too, for their work in building on that, and there is consensus on supporting debt relief.

It is perhaps worth my saying a word or two about why we believe that debt relief is so important. I make a comparison with what happens in market economies, in which individuals and companies can write off bad debts and start again. Countries cannot do that in the same way. Their debts cannot be written off automatically through bankruptcy or a voluntary liquidation regime, so they remain. They are incurred by impoverished countries, usually as a consequence of corrupt and incompetent rulers, but repaid by the population, who are both blameless and impoverished.

It would be interesting if the Economic Secretary could say something about the Government’s position on sovereign debt work-out mechanisms. I know that they were raised at the Doha financing for development conference in November and December 2008, at which there was an attempt to find a fair mechanism for developing countries that could not repay their debts. I would be interested to know what the Secretary of State for International Development has done to pursue that matter.

Individuals and companies in this country have a mechanism by which, subject to preferential treatment for particular entities, the pain can be shared among all their creditors, who each get a proportion of the debt repaid to them. Developing countries do not have that mechanism. Some creditors may voluntarily waive their rights, as certain countries have done. As the hon. Member for Northampton, North pointed out, a substantial number of commercial lenders have also done so. However, others continue to claim repayment of debt that cannot be afforded, and as I have said, there is no liquidation or administration procedure available. In many respects, one could describe the Bill as attempting to find such a mechanism, to prevent creditors that refuse to participate from benefiting from a free ride. I say that because countries could not repay any of their outstanding creditors without the steps taken by some of them to waive a substantial proportion of the debt. We need fairness for creditors, whether Governments or commercial lenders, who have taken a view that they will not pursue the full amount, which makes available funds that the more ruthless creditors can pursue.

A central point is the effect that the Bill would have on developing countries. The hon. Lady mentioned Liberia, which is topical given the judgment at the end of last year and given that it featured heavily in the “Newsnight” report on the matter last night. It is clearly grossly unfair on the people of such a country, who are deeply impoverished, to find a substantial part of their Government’s budget taken up in repaying aid over which they had no control and no say. That is at the heart of the Bill, and we share the concerns that drive it. We will support its Second Reading today.

Although there is cross-party consensus, that should not prevent the House from examining various points in the Bill closely. The responses to the Treasury’s consultation document raise a number of important points that we should consider with due care and attention. That is why it is proper that we have Committee stage, and I hope that the Government will be able to find time to ensure that that happens.

There are essentially two big issues to consider, and although the Bill is not contentious, it raises fundamental questions. The fact that there is a consensus is all the more reason to scrutinise it properly. I turn first, because it is perhaps the simplest and quickest argument to summarise, to the fact that the Bill clearly affects contractual rights—that is the intention behind it. By and large, we in this country take a view that contractual rights should be respected. Contracts provide certainty, are part of our tradition and are one of the reasons why English law is a favoured choice of system throughout the world. It has clearly been to the advantage of the UK that we have a system that provides such certainty. Alongside the tradition of respecting the sanctity of contracts, we have the terms of the European convention on human rights, which of course are now protected by the Human Rights Act 1998. They include the protection of the right to property under article 1 of protocol 1 to the convention.

The Government argue in their response to the consultation document that there are compelling policy reasons why contractual rights should be overridden, and to a large extent I have made the same argument in my remarks, as have other hon. Members. However, we should go into this matter with our eyes open. We should be aware that the Bill would disturb contractual rights, which has certain consequences. The Government say that the ECHR arguments can be overcome because there are compelling policy reasons. I do not dispute that, but it is right that we have an opportunity to debate such reasons in detail.

I am sure the whole House would agree with the hon. Gentleman on the importance of maintaining our historical commitment to the enforcement of honest and fair contracts. However, the honesty and fairness of the contracts is in question—the point put to the House is that the contracts are unfair and lopsided, because one party to them has no power whatever to mediate the process. In that situation, human rights legislation kicks in to protect the powerless.

My point is that the Bill would disturb contractual rights, but the argument is that there are compelling reasons why it is right to do so. The hon. Gentleman articulately sets out that case. I am not disagreeing with him in any way, but merely stating that it is right that we examine the argument closely. I will come back to the essence of what he is saying in a moment, but he has led me to my second point, which Members on both sides of the House and the Government, in their role of developing the legislation, are keen to address.

The central question is whether the measure will benefit developing countries. I am not arguing that it will not, but the argument that there would be certain spillover costs was put by a number of respondents to the Treasury consultation, and it is right to examine it. Essentially, the argument is that the Bill could create uncertainty. There may be a perception that further legislation will restrict creditors’ ability to reclaim their debts from heavily indebted poor countries and other developing countries more generally. That would have the consequence either of reducing the number of creditors that are prepared to lend to developing countries, or at the very least of making borrowing more expensive. The Treasury is very conscious of that argument and acknowledges throughout the documents it has produced—the response to the consultation and so on—that debt relief measures could increase risk premiums and make it harder for developing countries to borrow responsibly.

The counter-argument is that the Bill is carefully targeted and calibrated to prevent that in two ways. First, it focuses on historical debt, meaning debt contracted before commencement. No future debt will be affected, so when developing countries attempt to borrow in future, contracts will be unaffected, so there will be no risk premium. Secondly, the Bill is targeted at the public debts of the regimes of HIPCs, not those of all developing countries.

We first need to debate the question whether those qualifications are the right ones. One could approach that in two ways. First, one could argue that the measure is unduly restrictive. Why apply it only to HIPCs?

I will come back to that question later, but is there any evidence that the existing cancellation of commercial debt—the £4.5 billion to which I referred—has had any impact on risk premiums for developing countries?

I am not aware that there is. I stress that that argument was not mine, but that of a number of respondents to the consultation. It is not for me to speak for them, but I suspect they would say that there is a difference between a voluntary waiving of rights, and a compulsory waiving of rights brought about by legislation that means essentially that certain debts are unenforceable. There is a distinction, but the hon. Lady might be right to say that debt relief measures so far—she was right to acknowledge the considerable steps taken by commercial lenders in addition to those taken by Governments and international organisations—have substantially reduced the burden on impoverished countries. The Bill might well not affect premiums, but it is right that we explore the matter.

I was saying that the Bill could be criticised for being too prescriptive. Why is it targeted only at the public debts of HIPCs and not those of developing countries more widely? The alternative argument is that the Bill will not do the job because it will create uncertainty for creditors of developing countries, whether HIPCs or otherwise. To be fair, in paragraph 2.30 of its response to the consultation, the Treasury states:

“Predicting the scale of any negative spillovers from legislation is very difficult in advance of legislation.”

I am not claiming to know the answer, but given that the Treasury acknowledges uncertainty, we need to examine the arguments closely.

My hon. Friend will obviously have seen the evidence given to the Government consultation by the Alternative Investment Management Association. Does he accept that that association represents practitioners rather than theoreticians, and that we should take seriously its concerns about the provisions?

It is true that practitioners’ responses—across the board—to the Treasury consultation raise concerns, and it is right that the House hears and explores those arguments and takes a view on them. I am also conscious that some respondents—I am not saying that they are right—were of the view that they had not been properly engaged in the process and that there was insufficient consultation at an earlier stage. I would be grateful if the Minister responded to that argument. To what extent did the Treasury engage emerging markets creditors to assess spillover costs? I note that the impact assessment produced by the Treasury does not put a monetised cost on that. The essential argument why it does not make such an assessment, which is set out in paragraph 2.30, is that all arguments put forward for spillover costs are based on markets assuming—or at least contemplating the possibility of—a significantly increased risk that the Government will in future enact legislation different from that being introduced. It is worth acknowledging, as the hon. Member for Northampton, North rightly said, that this Bill will not cause an increased risk premium, but it could cause concern that a precedent has been set and further measures will be taken.

None of us would dissent from the idea that the legislation should be properly and thoroughly scrutinised in Committee, but can the hon. Gentleman tell us whether his party would support the enactment of legislation broadly along these lines to deal with this particular problem? That is something that the House needs to know, bearing in mind the very short time frame that we have to deal with matters in this Parliament.

We will support the Bill’s making progress to Committee today. It is for the Government to provide time for the Committee stage, but we hope that they will provide adequate time for scrutiny. We do not believe that it is right to circumvent the normal parliamentary process when dealing with these important matters because if we get this wrong, it will be the developing countries who suffer. It is not our fault that we are doing this only a few weeks before the end of this Parliament, and if we do not have time to give the Bill proper scrutiny, it is regrettable. However, it is important to do it properly.

I hope that the hon. Gentleman does not mind my pressing him a little. I accept the point that he makes, but he has expressed a wish to be sitting on the other side of the House in three or four months’ time, so it would be helpful to know whether, in that case, he would support a Bill in similar terms—subject to discussions in Committee on this Bill—to put it on the statute book without further delay.

We support measures to address this matter, for the reasons that I have been outlining. Questions still need to be answered to ensure that this Bill is the right approach, and I hope that we will be able to resolve those issues in Committee in the next few weeks.

The concern is that the Bill will set a precedent for future legislation, although the Government are clear that that is not the intention. As the hon. Member for Hazel Grove pointed out, we want to be on the other side of the House in a few months’ time, and we would want to ensure that any measures that we took were very carefully targeted.

We all have a responsibility to be careful about the language that we use in this debate. Most of us instinctively feel that it is wrong for rich western financial institutions to seek to enforce debts against poor African countries. But I would also make the tough-minded but pragmatic and realistic point that this Bill is rightly carefully targeted and the Government—we support them in this—do not believe that there is a broad principle that rich western financial institutions should never be able to enforce debts against poor African countries.

I hope that that position is supported across the House, because if we ever expressed our views in that way, it could easily be interpreted as suggesting that the Bill could be extended in future. We have to make the realistic point that if we were to accept that broad principle, financial institutions would not lend to developing countries, and that would be a huge disadvantage and place enormous restrictions on the potential for growth of developing countries. In some quarters, that point may be controversial, but it is right to express it explicitly to provide some reassurance that the Bill is carefully targeted and very restrictive in some respects, and should not undermine confidence in future. It is helpful to the success of the Bill to make that point explicitly and I hope that all parties will agree. I make that point partly in reference to an earlier intervention by the hon. Gentleman.

We recognise that this measure needs to be calibrated correctly, and that raises various questions. I have highlighted the two principal restrictions—it only applies to HIPC countries and to debts that have already been entered into, and it is entirely retrospective in that sense—but I have some other questions that I would like the Minister to address if he has an opportunity. The group that attracts most ire—as the hon. Gentleman and the hon. Member for Northampton, North said—is the vulture funds. They are the institutions that have bought up the debt in secondary markets at a low price and then sought to enforce it. This issue was covered on “Newsnight” last night, and I expect that many hon. Members will have seen that. It is worth noting that, according to the impact assessment published by the Treasury, of the £145 million that is identified as being of benefit to the HIPCs that will be affected by this legislation, some £78 million relates to original creditors, not the vulture funds. Assuming that every creditor that is not an original creditor is a vulture fund, that means that £67 million of debt has been bought on the secondary market.

Those who responded to the Treasury consultation unanimously believed that no distinction should be made between original creditors and those who bought the debt on the secondary market, but this issue is worth exploring given that public concern is focused on vulture funds. One can see, morally and ethically, why that is the case, but perhaps the Minister could explain why the Bill does not focus specifically on vulture funds.

The Treasury methodology used to produce the £145 million figure has been criticised. A previous consultation paper produced by the Treasury stated that the amount that the HIPC countries would benefit by was £254 million. There were arguments that that methodology was wrong, out of date and failed to address several points, and the Treasury acknowledges, in the response to the consultation paper, that it

“remains true that any estimate of the effect of this legislation attempts to quantify an intrinsically uncertain process.”

That flags up a degree of uncertainty, and I hope that we have an opportunity to explore that point.

I would also like to touch on a question that other hon. Members have mentioned: will other countries follow suit? Our principal concern is the impact on developing countries, but there could be a commercial knock-on effect for the UK, were contracts simply to use a different form of law—for example, New York law. Whether that happens partly depends on what happens in other jurisdictions, so can the Minister shed some light on progress in other countries? We have heard about what is happening in the US, but it would be interesting to know whether the Government can provide more detail on the likelihood of this legislation coming into effect in the US. That would help the House.

It is important that we get the Bill right. It is an attempt to address an important issue, and everybody wants to reduce the debt that these impoverished countries face. Equally, however, I am sure that nobody here wants to make it harder, or more expensive, for developing countries to raise funds. The legislation is designed to help. We want to ensure that it does, and we wish it well.

I would like to start by putting it on the record that the Government fully support the Debt Relief (Developing Countries) Bill, introduced by my hon. Friend the Member for Denton and Reddish (Andrew Gwynne). He has decided to introduce a serious and worthwhile measure, and I would like to join other hon. Members in expressing my sadness that he could not move the Second Reading in person. I wish him a speedy recovery. I am also grateful to my hon. Friend the Member for Northampton, North (Ms Keeble) for so ably opening the debate in his place. We are fortunate that someone with her expertise and commitment to this issue could do so, and I would like to pay tribute to her work over a considerable period on the issue of debt relief. I also pay tribute to the commitment of my hon. Friend the Member for Denton and Reddish.

Several private Members’ Bills this Session have been substantial and constructive pieces of legislation, but I am confident in saying that few, if any, have given the House the opportunity to progress a Bill as beneficial as this one. It was not a hard decision to support a Bill that will protect the debt relief that is vital to the development of the world’s poorest countries by preventing it from being exploited and diverted. It will do so efficiently and fairly, respecting legitimate commercial rights, and will ensure that the aid and debt relief funded by UK taxpayers will be used effectively to tackle global poverty. I also welcome the support for the Second Reading from both the Conservative and Liberal Democrat Front-Bench Members. Importantly, the provisions in the Bill are carefully targeted, and I think that both sides of the House recognise that.

I shall explain in more detail our reasons for supporting the Bill. As the House will be aware, several factors led many of the world’s poorest countries to build up debts that they had no realistic prospect of fully repaying, and by the 1990s this burden of debt was clearly a barrier to renewed development for those countries. Partial and piecemeal refinancing of their debts had proved insufficient, which is why, in 1996, the heavily indebted poor countries initiative for debt relief was established. HIPC provides a comprehensive framework for the debt relief that all creditors need to provide to reduce eligible countries’ debts to sustainable levels. Forty countries with a total population of more than 600 million, but an average income per person of just $530, qualify for the initiative, due to their high level of poverty and unsustainable debts.

The World Bank and the International Monetary Fund jointly administer the initiative and monitor each country’s progress. When a country meets the conditions for decision point on the initiative, those organisations assess the country’s total external debts and calculate the percentage reduction required from all creditors to reduce the debts to an economically sustainable level. The HIPC initiative expects that all creditors—bilateral, multilateral and commercial—will provide this percentage reduction fairly and equally, doing what is financially necessary.

At decision point, the World Bank and the IMF also agree with the country a set of reforms that it will undertake to direct the extra resources, from which it benefits through debt relief, towards tackling poverty and catalysing economic growth. Once the country achieves those triggers, it reaches completion point—the point at which all creditors are expected to have reduced their debts to the set level. With sustainable debt levels, a track record of macro-economic stability and a strategy being implemented to reduce poverty, countries completing the HIPC initiative are much better placed to continue their development.

The HIPC initiative is providing considerable success. Countries that have completed it have achieved higher rates of economic growth, maintained lower inflation and fiscal deficits and similarly improved their relative performance compared with other low-income countries. It is sustained economic growth that offers the surest underpinning for lifting people out of the poverty that continues to affect much of the countries’ populations. Of course, development is never a simple story, but the recent progress of, for example, Tanzania, Ghana and Rwanda shows the real contribution that debt relief can make.

Completing the HIPC initiative also triggers additional debt relief that goes beyond the aim of reducing debts to a sustainable level and further increases the resources freed up for the development. The UK is one of several countries that completely cancel all debts owed to the Government at completion point. At Gleneagles, in 2005, the UK won international agreement for the multilateral debt relief initiative that completely cancels debts owed to the IMF and the main multinational development banks. Together those initiatives are so far worth $117 billion in debt relief for the 40 heavily indebted poor countries. It is an achievement that the UK has led the world in bringing about, and all of us in the House should feel proud of it.

The benefits of debt relief, however, could, and should, be even greater. Most commercial creditors recognise that, aside from considerations of tackling poverty, the heavily indebted poor countries are unable to repay debts in excess of the percentage reduction expected under the HIPC initiative, and they agree voluntarily to reduce their debts accordingly. However, a small minority of creditors instead seize on the opportunity presented by the debt relief provided by others and sue the Government of the country for debts often contracted decades ago, and which have accumulated interest and arrears.

If a company cannot meet all its obligations to creditors, insolvency law brings about a fair and efficient resolution by requiring that all creditors receive repayment of an equal proportion of their debt. No analogous system exists for countries, as the hon. Member for South-West Hertfordshire (Mr. Gauke) noted when he said that there was no sovereign system of liquidation or insolvency. I do not think that we would want a system of liquidation for a country, but it is important that we have something comparable to an insolvency regime for countries that get into massive debt. That is what we are trying to do with the Bill.

It is currently legally possible for a creditor to free-ride on the debt relief that others provide, enforce its claim for full repayment and siphon off for commercial gain some of the resources that would have been used for poverty reduction. Hon. Members have spoken of how they see this practice as morally unjustifiable, and I agree with them, but I would also like to emphasise that allowing this free-riding to continue would perpetuate an economically unjustified and inefficient market failure. As the money that is diverted includes the development assistance funded by UK taxpayers, I have another strong reason, as a Treasury Minister, to support action in this area. That is an important point that I would want Members in all parts of the House to recognise.

For those reasons, the Government have already taken a range of steps to limit the problem. Many commercial creditors are happy to be repaid whatever proportion of their debt they remain entitled to, consistent with providing relief under the HIPC initiative. The World Bank’s debt reduction facility organises operations to buy back debts eligible for relief at the deep discount corresponding to HIPC initiative terms, and then to cancel them. The UK supports and, with other donors, funds such operations, which can be very effective. Last April the facility brought back and cancelled 97.5 per cent. of Liberia’s eligible commercial debt, for only 3 per cent. of its face value of $1.2 billion. I want to say something more about Liberia in a minute, because it was referred to by a number of hon. Members.

High-quality legal advice for heavily indebted poor countries is also important, to help them defend claims and avoid problematic terms in new borrowing. For that reason the Department for International Development has committed £5 million to fund the new African legal support facility. The value of good legal advice was illustrated by the case of Donegal International Ltd v. Zambia, where our funding for legal advice helped Zambia reduce its liability by around $40 million. Also, a number of claims brought by litigating creditors can be reduced if fewer responsible creditors sell on their claims. We have won support for commitments not to sell on claims, from 19 members of the Paris Club of creditor Governments, the European Union and signatories to the UN’s Doha declaration on financing for development.

Despite the success of all those measures, a problem remains. It is a problem of a small minority of commercial creditors that continue to litigate and recover sums greatly in excess of that which is compatible with the debt relief that heavily indebted poor countries can expect. The best information on the scale of the problem comes from the World Bank’s annual survey of heavily indebted poor country Governments. The most recent survey, in 2009, reported 14 active or unresolved law suits worldwide, with a total value of $1.2 billion. More new cases continue to be brought. Rates of litigation since 2002 indicate that around a fifth of such cases are heard here in the United Kingdom.

I cited Liberia as an example of the success of voluntary buy-backs, but as hon. Members have recognised, in November the High Court gave judgment for $20 million against Liberia, in a claim brought by two commercial creditors against the country, allowing them to seek to enforce full repayment in the United Kingdom. In Liberia, a country with an average income per person of just $170 and where 13 per cent. of children die before their fifth birthday, all the resources that its Government should expect are vital. I find the actions of commercial creditors morally repugnant. Only legislation, in the Bill before us today, can prevent such free-riding under UK laws and in UK courts by a small minority of unscrupulous commercial creditors. By passing the Bill, I believe that we can help to protect Liberia, Ethiopia, Sierra Leone, the Democratic Republic of the Congo and the other heavily indebted poor countries facing litigation.

I want to address some of the comments made by the hon. Member for South-West Hertfordshire about the Bill. He principally raised the issues of contractual rights and whether the Bill would actually benefit developing countries. There is certainly an interference with contractual rights, as he notes, but we believe that this is morally and economically justified. I shall say something about the compelling reasons for that in a moment. I strongly believe that the Bill will benefit developing countries. Indeed, if one asks developing countries, they, too, will say that the Bill will be helpful to them. The hon. Gentleman also raised what might be called the “thin end of the wedge” argument, which is that the Bill might set a precedent and that people might go further. I want to address that too, as well as commenting on the position of original creditors, to which he also referred.

Will the Minister also address the point raised by both the hon. Member for Hazel Grove (Andrew Stunell), the Front-Bench spokesman for the Liberal Democrats, and the Conservative party spokesman about the effect of other countries not following suit? That is an important issue if the money is being transferred elsewhere.

I will indeed address that point, as well as the sovereign debt work-out mechanism, which the hon. Member for South-West Hertfordshire also raised. On that issue first, as I think he is aware, the Government supported the IMF’s original proposal for a sovereign debt work-out mechanism in the early part of this decade. The proposal did not receive international consensus at that time. As a result, there has not been a renewed international proposal following the Doha declaration. That is why the Government have instead prioritised consulting on and supporting measures through legislation, which is why we are pleased to support the Bill before us today. We believe that it can build on the successful HIPC initiative and be implemented quickly.

The hon. Gentleman raised some specific points about contractual rights. I understand that some people take the view that the Bill is an unjustified interference with property rights. I recognise that that was not what the hon. Gentleman, who speaks for the Opposition, was saying, but he raised that point as an issue and a matter of principle. I hope that I have made clear the economic arguments for all creditors to provide the relief assessed as necessary in the HIPC initiative, and explained why free-riding is inefficient and inequitable. It is important to recognise that the vast majority of commercial creditors already voluntarily reduce debts in line with the initiative, so they will be completely unaffected by the legislation. As the hon. Gentleman said, the Bill is carefully targeted and calibrated. It includes a clause that specifically provides an incentive to debtors to negotiate settlements of their debts on terms compatible with the HIPC initiative, thereby helping the process. It is also worth noting that the typical market value of the debts that will be affected is around or below the level to which creditors will remain entitled under the Bill.

On contracts, as the House will be aware, the Government have already taken what steps we can, within the existing legal framework, to help developing countries with debt relief. What is proposed in the Bill is limited to a tightly defined stock of existing debts of the poorest countries in the world. It balances preventing creditors from extracting excessive repayment with an incentive to help them to recover the part of their debt that they can expect to be repaid. In this case, the need to stop the resources that the UK and others provide through debt relief being diverted from poor countries justifies reducing contractual rights. It is not the case that contracts would be torn up; rather, creditors will not be able to pursue payment beyond the level assessed as sustainable by the IMF and the World Bank.

Legislation not infrequently has some effect on the value of existing contracts. Although this is more unusual, there are precedents for legislation that changes existing contractual and other property rights. For example, I was responsible for leading on the Banking (Special Provisions) Act 2008 and the Banking Act 2009, both of which provide, in limited and defined circumstances, for powers to transfer the shares in, or property of, a bank to another person. Such a step should be taken only if there is a compelling public policy case for doing so, which we believe there to be in this instance. I hope that the Bill will receive its Second Reading today and that we can accelerate it through Committee, but I do not expect passing it into law to result in any significant impact on the UK’s competitiveness for financial services.

The commercial debt relief expected under the HIPC initiative is less than 0.1 per cent. of the total debts of developing countries. The proposal is limited to a fixed stock of debt that has already been contracted, and it is clear that it will have no impact on new lending.

So what does the Minister say about the comments of the Alternative Investment Management Association, which states:

“The proposed legislation would damage the reputation of English law and make the City of London less hospitable to investors”?

Does he discount that as irrelevant?

I do not discount it as irrelevant. The association is entitled to its view, but I do not happen to agree with it. I have a lot of time for investment management—more so than many people in this House or in the country generally. It performs a vital function in ensuring that economies can get the finance they need in order to grow. I always consider carefully the views of associations that represent such companies, but I do not believe that what they are saying in this instance reflects the true situation. We are talking about a very small number of transactions overall.

The Bill introduced by my hon. Friend the Member for Denton and Reddish has been carefully calibrated, and the Government want to ensure that English law retains its status as a preferred choice of law for finance, and that the City retains its status as a leading financial centre. There is nothing in the Bill to jeopardise those aims in any way. I believe that the concerns about it have been overstated. Those expressing them do not necessarily object to the targeted measures in the Bill, but they say that they would not want them to go further. This point was raised by the hon. Member for South-West Hertfordshire when he spoke of the danger of setting a precedent. I do not see it in that way. In giving our support to the Bill, we have been careful to say that it needs to be carefully targeted and that we need to be cognisant of the legal position.

The best analogy that I can provide is that of the debate on the hunting ban. At the time, many people argued that if we banned hunting, the next step would be to ban shooting and fishing. The legislation that we passed, however, has not been the thin end of the wedge, and we have seen no subsequent measures to ban shooting and fishing. Those who put forward those arguments were wrong to do so and, similarly, those who say that supporting this carefully calibrated Bill will open the door to a far more extreme Bill that would jeopardise Britain’s long-standing reputation as a leading financial centre have just got it wrong. It is not like that.

Is not the Minister’s argument about precedent completely undermined by the fact that has just cited his own very controversial Banking Act 2009 as the precedent for what he is proposing today?

I cited the Banking Act as an example of a situation in which exceptional circumstances and compelling reasons—in that case, the need to ensure financial stability—allow contract law to be interfered with. In general, however, the presumption has always been in favour of the sanctity of contractual law. We are not tearing up contract law by supporting this Bill; far from it. We are ensuring that there will be fair treatment for all creditors when some of the debts of a HIPC country are being pursued by a small minority of unscrupulous creditors.

Does my hon. Friend accept that the arrangements relating to the wind-down of banks that were required as a result of the credit crunch—which led to criticism from Opposition Members—were necessary because the public could not continue to underwrite the UK banks’ losses in an unsustainable way? There is a similar argument for initiating an orderly wind-down of the debts of developing countries. Again, this would protect the interests of British taxpayers, who are having to underwrite those losses as well.

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 this 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 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.

I shall not divide the House on Second Reading, but I would like to put on record some of my reservations and concerns about the Bill. I do not think that the Minister has adequately addressed the concerns expressed by investment managers about the Bill’s impact on the ability of countries suffering from substantial indebtedness to be able to obtain commercial support in the form of loans in future.

One example, which has already been cited, is what happened in Zambia. The Romanians supplied agricultural equipment to the Zambians and expected them to pay for it. I imagine that the Zambians would have had resources from grant moneys and overseas aid from other countries to enable them to purchase that agricultural equipment, but they defaulted on the debt. Ultimately, the entitlement to the debt was transferred to another organisation, which then sought to obtain a judgment against the Zambian Government. If the Zambian Government are to be allowed to get that equipment without paying anything for it, it surely defies common sense to suggest that, with no effective guarantee that the loans would ever be repaid, many people across the world would in future queue up to provide agricultural equipment backed by commercial loans to countries such as Zambia. That is one of the fundamental problems with this well-intentioned Bill.

I am also very concerned about the retrospective nature of the Bill. We are talking about organisations that have obtained judgments in our courts, only to find that Parliament, at the behest of the Government, is seeking to intervene to prevent those judgments from being enforced either in whole or in part against the judgment debtor. That can be justified only in the most extreme circumstances, and I do not think that the Government have set out those extreme circumstances.

Consequences flow from that. First, there must be a big question mark over whether the Bill’s provisions are compliant with the relevant articles of the European convention on human rights. We know from the background material that leading counsel’s opinion is that the existing provisions would be contrary to the ECHR. The Minister has not been able to assure us that the concerns of leading counsel in that respect have now been allayed as a result of anything the Government have done, so I regard that issue as still very much at large, and think that it is highly debatable whether the Bill is compliant with the ECHR, for the reasons I have set out.

If the Government’s argument is that there are compelling reasons justifying the unusual stance that has been taken, my argument would be that those reasons are less compelling in respect of retrospection, where judgment has already been obtained for the debts. If we take a look at the detail, we see that this legislation could be applied in various ways. The Government have chosen the most wide-ranging interpretation—and therefore, in my view, the most oppressive interpretation. It is also potentially the most inimical to the British system of justice, because the following is bound to happen: whereas at present many of these international contracts are drawn up in accordance with the provisions of English law and then are justiciable in the British courts, if we are unable in future to demonstrate some consistency in how we organise our legal affairs in this country, potential creditors will engage in forum shopping and make sure that the contracts are drawn up in law other than English law and that the forum where they are determined are courts other than the British courts. That would undermine our system of justice. As a result of history, we have, in London in particular, an international forum for resolving international disputes by both arbitration and litigation, and that provides employment to a lot of people. Anything that is done that, unwittingly or otherwise, has the consequence of undermining that very important part of the British economy can only be bad news.

I therefore have strong reservations about the Bill on the basis of human rights and because I think the law of unintended consequences could apply. At a time when our country is teetering on the brink of losing its triple A rating as a result of the extraordinarily reckless way in which the Government have managed our national finances over the past few years, it ill behoves us to start saying that we do not think people who have incurred debts as a result of commercial transactions should be liable for them. Government-to-Government lending is a completely different issue; that is a matter, ultimately, for the taxpayers of the Government who have been doing the lending and who decide not to pursue the repayments. However, in terms of commercial loans in the private sector, the consequences of the Bill’s measures will be dire in the extreme, and will ultimately prove to be to the detriment of third-world countries.

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.

I hope that this matter is looked at in much greater detail in Committee. There must not be a knee-jerk reaction, when people say, “Well, this sounds like a good idea; let’s go ahead with it.” Instead, we should take a careful look at the consequences that would flow from the Bill in its current form.

The hon. Member for Christchurch (Mr. Chope) has talked about some of his concerns about the Bill. They are shared by others, but they are not well founded or substantial, and I shall deal with them in the course of my remarks.

First, let me say a few words about the general point of the Bill. When the history of these times is written, I am sure that one of the great movements that will be noted is the great flood tide of international opinion in favour of ending global poverty. The response to the Ethiopian famine of the 1980s grabbed public attention in a way never seen before, and harnessed public opinion across the developed world. The formulation of the millennium development goals, with their targets for creating a better world, have been worked through national Government and international organisation mechanisms to produce real change. The Make Poverty History campaign motivated the public in the richest countries in the world to force our leaders to commit to ending the scandal that gives a child in Africa a fraction of the life expectancy of a UK child, not to mention the very much lower chances of getting an education, health care, a job or even—tragically, in this day and age—enough to eat each day. As well as the issues of increasing aid, of improving trade and of governance—about which the hon. Member for Christchurch is absolutely right—an important aspect of this world opinion has been the understanding that a poor country cannot develop if it is shackled by debt, and that is what this private Member’s Bill addresses.

Governments have already taken steps to write off debt—the hon. Gentleman referred to that—although some countries do not subscribe to the consensus view on that, so there is still work to do. Consideration must, for instance, be given to the situation for countries such as China; its investments in Africa and how those are working should be addressed. There has also been genuine progress on the cancellation of public debt, and I talked about that in my earlier speech.

This Bill deals with the rest of the commercial debts. It deals with the creditors who will not voluntarily, either out of normal commercial interest or for ethical reasons, engage with the debt cancellation process, and who remain outside the international consensus and the international mechanisms for dealing with developing country debt, instead aggressively pursuing the debts at the expense of the poorest people in the world. Therefore, the Bill addresses a small part of a very big picture.

That is an account of the broad idealism that has driven everyone who has been involved in the whole movement to address debt cancellation and world poverty, but the hon. Member for South-West Hertfordshire (Mr. Gauke) drew our attention to the Bill’s details, and he was right to do so because they need to be looked at. He identified three big issues, but I counted four. I hope his maths improve if he is to find himself on the Opposition Treasury Front Bench.

Or the Treasury Front Bench.

No, not the Treasury Front Bench. The Opposition need to be numerate as well as our own, very numerate, Minister.

Of course, contractual rights are an issue, but I think the Minister dealt with some of the key points. Remarks were made about the need for orderly wind-downs and orderly management of debts. There are arguments on that, and also on the trade-off between the contractual rights of people who hold debts and the public purse, which has to fund public services at the same time. That trade-off has been of acute concern here in the UK, and it also reads across to issues to do with debt management on the international stage.

However, this measure involves not just a whimsical ripping up of contracts, but the pulling of vulture funds—the outriders of capitalism, as it were—into a complex, internationally agreed process that calculates how much such countries can afford to pay and then makes arrangements for that amount be paid, while providing the necessary due legal process. So this is not an irrational, whimsical or illogical process but part of internationally agreed—and debated to death, probably—procedures and mechanisms.

The hon. Member for Christchurch said that the situation is different if the relationship is Government to Government, but one problem is that we cannot divide off the public and private sectors in this area—or, indeed, elsewhere. Government-to-Government relations for dealing with the debt cancellation that we have undertaken are underwritten by the British taxpayer, and I see no reason why such an arrangement, which is working in a constructive way at our constituents’ expense, should be ripped off by firms that decide they are not going to play ball and are going to do something different. Of course, the debts that are being pursued most aggressively—the hon. Member for South-West Hertfordshire raised this issue—are bought on the secondary market. I am not sure, but I think the Romanian debt was a Government debt that was then bought on the secondary market, so the divisions that the hon. Member for Christchurch referred to cannot be quite so neatly drawn.

The hon. Member for South-West Hertfordshire also dealt with human rights. Human rights compliance obviously has to be written off or dealt with in the legislation, and that issue will be looked at in Committee. He also raised the question of who this measure will benefit and whether it will benefit developing countries, which is a big issue. Various figures were mentioned, and the one that I have been working on is £1.2 billion, which is the amount currently in process. It can almost be argued that that figure is too small. I think it is about the size of the RBS bonus pot, so from that point of view it is not a vast amount of money to legislate for. However, as has been discussed throughout consideration of the Bill, it is money that is intended to tackle some of the worst poverty in the world, and what it can buy in the way of services in countries where services are needed is absolutely massive.

The figure of £145 million that I quoted comes from the Treasury’s own impact assessment and is the transfer from the creditors to the HIPC states. I quoted that figure because it is the Government’s own estimate, rather than the £1.2 billion that the hon. Lady quoted.

I think the £1.2 billion is the amount currently in the process of being sued for in all the actions that have been referred to. So the amount that the HIPC countries will be deprived of if the Bill is not enacted is about £1.2 billion—[Interruption.] Okay, but it would make a very significant difference in terms of what it could buy in the way of services for the countries concerned, so this legislation would be effective.

On the risk premium, one argument is that although the measure might provide this little bit of money to developing countries—£145 million, or whatever it is—because it will increase the cost of credit for those countries, in the long run it will be damaging. That view has also been put forward by some commentators in their submissions, but it is not well founded for several reasons. The measure will certainly increase the risks for the vulture funds—and a good thing, too. If it discourages them from taking actions that are unacceptable, or denies them the opportunity to make cheap money at British taxpayers’ and developing country populations’ expense, then we should recognise, as my hon. Friend the Minister said, that those are the morally repugnant activities that it is intended to prevent, while allowing for orderly wind-downs.

As is clear in the Bill and as my hon. Friend the Minister pointed out, future debts are specifically excluded, and rightly so, because the Bill deals with the HIPC process, which relates to historic debt. Therefore, the Bill will not increase the risks for the future. However, there is a much bigger issue. The hon. Member for Christchurch talked about the appalling track record of some developing countries, and about Government corruption, Swiss bank accounts and so on. The thing that will really encourage proper investment and the proper handling of debts and credit in developing countries is their having sound, growing economies, good governance, strong institutions and all the other things required for stable growth in the long-term. That is what will give investors the greatest confidence, and it is precisely what the HIPC process is designed to bring about, as my hon. Friend the Minister said. It is not just a question of saying, “Oh dear, these people can’t pay their debts. They are a basket-case—we are going to write the debts off.” It is about deciding how we handle the development process for these historic debts, which have shackled such countries in a terrible way and left them vulnerable to exploitation by the vulture funds, so that they can build more secure futures. That is precisely what responsible, ethical, sound investors would want to see happen in these countries, and this Bill is part of achieving just that.

It is really important that this Bill gets through all its stages and on to the statute book, and I am very grateful for the support of the hon. Member for Hazel Grove (Andrew Stunell). We obviously could not get through all the stages today because, rightly, it needs scrutiny and discussion and people need to see that happen so that they can be reassured. However, we do need to get it through before the election and time is limited, so I hope we can get Government time for Committee stage, and Opposition support for that. I urge my hon. Friends who are the business managers, and the hon. Member for South-West Hertfordshire, to ensure that that happens, because there is a further issue at stake: the credibility of this House and of our processes.

What the many people who have a burning passion for and interest in this subject will have heard this morning is that there is a real economic logic to the proposals in the Bill. There is also an ethical imperative; indeed, I think this is the first time I have heard a Minister describe something as morally repugnant—certainly a Treasury Minister talking about financial activities. The Bill is therefore receiving stronger ethical support and a stronger push from the Front Bench than many other things do. It would also probably be supported by some 90 per cent. of the financial services industry, which operates in a completely proper way and has been involved in the writing off of some of the debts of such countries.

If this is such a popular measure, why does the hon. Lady think that—apart from herself, and she is promoting the Bill today—I have been the only Back-Bench contributor to this debate?

I think that people want the Bill to get on to the statute book, and they have not turned up here to object to it. With the distinguished exception of the speech by the hon. Member for Christchurch, who has a track record of ensuring that he puts the awkward questions—and rightly so—people will have heard that there is huge support for this legislation from all the parties, and that is unusual. They will say, “Well that’s funny; everybody agrees with it, and everybody says that it is a good idea and that they want it to happen—so why hasn’t it happened?” That is why it is important that if there really is a political consensus on getting this measure on to the statute book—and sooner rather than later, because things take time to get up and running again after an election—we take the opportunity to do it. This is not a matter of the political arguments, because we have been through them all and they have pretty much been won; this is a matter of the political will to manage the process. I very much hope that in the remainder of this Parliament this will all be achieved. I commend the Bill to the House and I hope that people will support its Second Reading.

Question put and agreed to.

Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).