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Liberal Democrat inaction over dictator debts contradicts commitments to democracy

Liberal democrats support moves to democracy after “Arab Awakening”
But the party fails to implement its policy on invalidating debts which were run up by reckless lending to dictators; in the region and beyond.

Yesterday the Liberal Democrats passed a policy which recognises the progress towards democracy made by popular movements in the so called “Arab Spring”.

The policy sets out that “Democracy, justice, free expression, free association and self-determination are universal human rights… Such human rights can discourage conflict, enhance prosperity and economic development…Countries which embrace freedom and pluralism should feel its full economic, social and political benefits”

But campaigners argue that one way democracy could be supported would be the Liberal Democrats implementing their existing policy to audit overseas debts to the UK and to invalidate any debts which were run up by reckless lending to dictators.

Maddy Evans, Campaigner for Jubilee Debt Campaign said, “The UK’s Export Credit Guarantee Department (ECGD) is expecting payment of hundreds of millions for deals done with dictators like Mubarak. The ECGD is controlled by Vince Cable; it’s high time he fulfilled LibDem policy on dictator debts by auditing the debts and cancelling those which resulted from irresponsible lending. This would show a real commitment to supporting democracy”.

“Expecting people struggling for democracy in Egypt to pay off debts that were run up by their dictator is completely unfair, and undermines the government’s claims around supporting transition to democracy.”

Thus far there has been no progress on Liberal Democrat policy to audit these debts since they entered government. And when Malcolm Bruce, Liberal Democrat Chair of the International Development Select Committee, asked a parliamentary question on Egypt’s debts in June 2011, Ed Davey, Liberal Democrat minister, responded that “no audit of debts owed by Egypt …is contemplated”

Despite Mubarak’s fall his debts continue to burden the country. The UK government has not explained the origin of these debts, but it is clear that in the past other debts to the ECGD have been run up through arms exports, fossil fuel projects, and projects which have harmed the human rights or environment of people in the country concerned. Other countries which owe dictator debts to the ECGD include Indonesia, Iraq and Kenya.

— ENDS

For more information please contact Maddy, Campaigns Officer at Jubilee Debt campaign on 020 7324 4728

Notes:

1. Jubilee Debt Campaign is the UK coalition campaigning for cancellation of unjust and unpayable poor country debts. For more information see: http://www.jubileedebtcampaign.org.uk.

2. The Export Credits Guarantee Department (ECGD) is the UK’s export credit agency, reporting to the Department for Business, Innovation and Skills. It provides insurance and guarantees to UK exporters entering ‘risky’ markets. Traditionally 75% of ECGD support has been given to arms, aerospace and carbon-intensive industries. In the event of an ECGD financed company not being paid by the relevant importing party, it is able to recover its project costs from the ECGD. The ECGD may then try to recover the total sum paid from the government of the recipient country – in effect it will become debt which that government owes to the UK Government. In this way developing countries have accumulated significant quantities of bi-lateral debt.

3. Developing countries owe over £2 billion of debt to the ECGD, but almost nothing is known about how these debts were created – despite many of them arising from deals with some of the world’s most notorious dictators. This is more than 90 per cent of the debt owed directly by developing countries to the UK government. Most recently Egypt has joined the list of countries whose dictators have left power, but whose debts to the UK still remain. The ECGD cannot or will not say what the vast majority of this debt is owed for. We know that part of the £450 million ECGD claims from Indonesia relates to the controversial sale of Hawk jets to General Suharto in the 1990s, because it provoked a storm of protest at the time.

4. In 2010 the Liberal Democrats took the important step of adopting party policy to conduct an audit of UK government debts: “We will conduct our own audit of all existing UK government and commercial debts, ruling invalid any past lending that was recklessly given to dictators known not to be committed to spend the loans on development.” The party also adopted policy to end “export credit support for military goods”.

5. On 8 June 2011 Malcolm Bruce asked: To ask the Secretary of State for Business, Innovation and Skills what consideration he has given to the merits of auditing debts owed by Egypt to the Export Credits Guarantee Department; and if he will consider the merits of cancelling any debt owed by Egypt which was the result of loans made to governments which are considered undemocratic.

Ed Davey replied: No audit of debts owed by Egypt to the Export Credits Guarantee Department is contemplated. To date Egypt has not sought cancellation of debts owed to ECGD or any other export credit agency. Such matters would be decided multilaterally through the auspices of the Paris Club of official creditors.


Jubilee Debt Campaign is a company limited by guarantee, number 3201959
Jubilee Debt Campaign's registered charity number is 1055675