Tackling Unsustainable Debt

Lord Oates Excerpts

Thursday 17th July 2025 Lords Chamber

[Lord Livermore (Lab)]

I am very grateful to my noble friend for her question and I pay tribute to her considerable expertise on these issues; I know she served as shadow Minister for Africa for several years. The Government fully agree that private creditors must play their part in debt restructurings. The Paris Club and now the G20, as part of its commitment to co-ordinate on debt treatments under the common framework, are clear on our collective expectation that private creditors must participate in restructurings on terms at least as favourable as those provided by official creditors. Overall, we have seen evidence of private creditors’ willingness to engage and provide debt treatments where needed.

While the Government appreciate the intentions of those proposing legislation in this area, we are concerned about the potential negative impacts that such legislation could have, specifically on the cost of finance for developing countries. As such, the UK is not currently pursuing legislation, given the existing lack of evidence to justify such an approach and the potentially adverse wider consequences. We will, of course, continue to keep the evidence and our position under review.

My noble friend specifically mentioned South Sudan. As I understand the complex situation with Afreximbank—an African financial institution based in Cairo—South Sudan is not undergoing a multilateral restructuring with official creditors, so it is not clear that legislation would improve that situation.

[Lord Oates (LD)]

My Lords, does the Minister recognise that the concerns he just expressed about the legislation referred to by the noble Baroness, Lady Brown, are exactly the sorts of concerns that were issued in advance of Andrew Gwynne’s Act in 2010 and that were found, on review, to be without merit? Does he recognise that, for over 3 billion people living in countries that spend more on debt servicing than on public services such as health and education, the risk of action is far less than the devastating impact of inaction?

[Lord Livermore (Lab)]

I absolutely recognise what the noble Lord says. It is important to recognise that the debt relief Act was different in scope and scale. It targeted a small, ring-fenced amount of historical debt. Current proposals for legislation would impact all future debt contracts written under English law. We have significant concerns about the impacts of that on the cost of capital at a time when global liquidity is constrained.

That is not to say—as the noble Lord rightly advises—that we are not taking action. We are absolutely taking action and we believe that multilateral action is the right way forward, predominantly through the common framework established by the G20. The Chancellor has also established the London coalition, which was launched on 23 June and provides exactly what is needed: a formal avenue to engage with private creditors to ensure long-term stable flows of capital to emerging markets.