Over 10,000 people have signed our petition for a Jubilee for Justice calling for:
- Cancellation of the unjust debts of the most indebted nations
- Promotion of just and progressive taxation
- The stopping of harmful lending which forces countries into debt
This follows over 400 faith leaders who at the start of 2013 signed a similar letter to the Prime Minister calling for the same three things to tackle the global debt crisis.
The Prime Minister’s response to the faith leaders said that “Freeing developing countries from their debt service payments frees up vital resources that can be used to support the achievement of the Millennium Development Goals” and that the UK had been doing this through the Heavily Indebted Poor Countries (HIPC) initiative.
However, this HIPC initiative, run by the IMF and World Bank, only applies to the poorest, most indebted countries, who have to follow extreme economic policies, such as privatising water supplies, to qualify for some debt relief. Whilst 35 countries have now qualified for $130 billion of debt cancellation, countries such as Jamaica, El Salvador, Egypt, Pakistan and the Philippines are excluded. All of these countries continue to fail to meet some of the Millennium Development Goals, such as halving the rate of hunger, because rich countries, including the UK, have reneged on their pledge in Millennium Development Goal 8 to “Deal comprehensively with the debt problems of developing countries”.
Moreover, unsustainable debts resulting from reckless bank lending, including by British banks, are now causing large increases in poverty in European countries such as Greece, Portugal and Ireland.
Furthermore, the Prime Minister made no response to our two calls to prevent debt crises happening again through the promotion of just and progressive taxation, and the stopping of harmful lending which forces countries into debt.
We have now written to the Prime Minister again, with six concrete proposals of how the UK government could cancel unjust debts, promote just taxation and control lending.
Cancel unjust debts
- International leadership is needed to create mechanisms to cancel unjust debts, such as a fair, independent and transparent arbitration mechanism for sovereign debt. We call on the UK government policy to change its policy and join countries such as Germany and Norway in supporting the creation of an independent arbitration mechanism for sovereign debt.
- Where debt cancellation is agreed internationally, vulture funds continue to ignore these agreements, and demand huge profits on debt they bought cheaply, most recently seen with Greece and the case brought by vulture funds against Argentina in New York. We call on the UK government to extend the UK Debt Relief (Developing Countries) Act to all internationally agreed debt write-downs, including Argentina and Greece, and share this experience with the US government.
- £2.3 billion of debt is still owed by developing countries to UK Export Finance. This includes: loans to now deposed Indonesian dictator General Suharto for military aircraft and tanks, which were used against Indonesian people; loans to now deposed Egyptian dictator Hosni Mubarak for military equipment; and loans to Saddam Hussain for weapons and a chemical weapons factory. We call on the UK government to hold a public audit into the debts owed to UK Export Finance, and cancel the unjust debts, such as loans for arms sales to now deposed dictators.
Just and progressive taxation
- Rhetorical statements on tackling tax avoidance by the Prime Minister are contradicted by UK government action such as: leading a global race to the bottom in consistently cutting the rate of corporation tax; changing Controlled Foreign Company rules which will enable global tax avoidance through companies borrowing funds in the UK and passing the debt on to foreign subsidiaries via tax havens; investing public money from the CDC through tax havens, enabling companies in developing countries to avoid tax. We call on the UK government to end the cuts to corporation tax in the UK, scrap the introduction of new Controlled Foreign Company rules, and stop UK public money being invested through tax havens.
The stopping of harmful lending which forces countries into debt
- In the 1950s and 1960s, regulations existed to control the amount of debt created by banks, and to monitor and smooth the flow of debts across the world. When such regulations existed, debts were far lower and there were hardly any debt crises. International leadership is needed to re-regulate the financial system; something which many countries are prevented from doing because of bans on regulation at the WTO and other ‘free trade’ agreements. Furthermore, the proposed EU-US free trade agreement and the ‘Really Good Friends of Services’ negotiations at the WTO threaten to further weaken the possibility of introducing regulations. We call on the UK government to remove financial services liberalisation from the EU-US free trade agreement and the Really Good Friends of Services negotiations.
- Many of the countries which have received debt cancellation are seeing their debts increase rapidly. The IMF and World Bank, over which the UK has a large say, are responsible for half of lending to low income countries. Foreign lending to sub-Saharan African governments has more than doubled between 2006 and 2011, and is due to increase even more in 2013. Vince Cable’s UK Export Finance is seeking to rapidly expand its lending, whilst it currently only conducts human rights, environmental and social impact assessments on 3 per cent of the loans it gives. And Justine Greening’s Department for International Development is considering giving more aid as loans. All these changes mean the UK is fuelling future debt crises through irresponsible lending. We call the UK government to reduce the amount of aid the UK gives through loans via the World Bank; to not introduce a new lending facility for UK bilateral aid; and make UK Export Finance conduct human rights, environmental and social impact assessments on all the loans it gives and guarantees.