The Chancellor did have one new gift, of pounds 300m, to draw from his capacious bag, which now contains over pounds 5bn of debt relief. This latest announcement covers money owed to the Government's Export Credit Guarantee Department which has been incurred since the cut-off date in the G7's scheme, adopted at the Cologne summit last June, for 41 of the world's most heavily indebted nations.
The share of debt owed to Britain is but a small fraction of the pounds 70bn covered by the Cologne agreement. The United States has previously announced that it will write off all the money it is owed by the poorest countries, and just yesterday Italy joined the ranks of charitable nations by writing off pounds 1bn of Third World debt. Nonetheless, Gordon Brown should be praised for having taken a leading role in starting this particular ball rolling.
As welcome as these initiatives are, however, we must not lull ourselves into thinking that they provide a panacea for ridding the world of poverty. Nations are not poor because they are in debt; they are in debt because they are poor. The sources of their poor economic performances lie in wrong economic and social policies, pursued by kleptocratic dictatorships and misguided interventionist bureaucracies. These essentially political problems will be made all the worse if the rulers of the poorest countries come to believe that their economic failures will invariably be forgiven.
It must also be recognised that there are more than 41 poor countries in the world, and it is only the indebted ones which will be gaining from the forgiveness of debts. The money spent on helping these countries will reduce what is available for assisting other needy nations, such as Bangladesh, that have managed to pay back what they have borrowed.
In the spirit of the season, however, let us put these reservations to the back of our minds, and drink a glass of grog to our charitable Chancellor. His generosity, after all, is but a welcome use of our money.Reuse content