Second Standing Committee on Statutory Instruments, &c.


Wednesday 16 December 1987



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The Committee consisted of the following Members:


Benyon, Mr. W. (Milton Keynes)

Bottomley, Mrs. Virginia (Surrey, South West)

Foulkes, Mr. George (Carrick, Cumnock and Doon Valley)

McFall, Mr. John (Dumbarton)

Meale, Mr. Alan (Mansfield)

Neubert, Mr. Michael (Romford)

Patchett, Mr. Terry (Barnsley, East)

Patten, Mr. Chris, Minister for Overseas Development

Porter, Mr.Barry (Wirral, South)

Rhys Williams, Sir Brandon (Kensington)

Spearing, Mr. Nigel (Newham, South)

Spicer, Mr. Jim (Dorset, West)

Steen, Mr. Anthony (South Hams)

Thomas, Dr. Dafydd Elis (Meirionnydd Nant Conwy)

Thornton, Mr. Malcolm (Crosby)

Townsend, Mr. Cyril D. (Bexleyheath)

Wells, Mr.Bowen (Hertford and Stortford)

Winnick, Mr. David (Walsall North)

Helme, Miss P. A., Committee Clerk

3 Second Standing Committee on Statutory Instruments, &c. Wednesday 16 December 1987


Draft International Trust Fund for Tuvalu (Immunities and Privileges) Order 1987

10.30 am

The Minister for Overseas Development (Mr. Chris Patten): I beg to move, That the Committee has considered the draft International Trust Fund for Tuvalu (Immunities and Privileges) Order 1987. Before I deal with the precise purpose of the draft order, I should say a word about the economy of Tuvala, our aid programme to that country and how the trust fund will meet its present and future needs. As the Committee may know, Tuvalu, which was formerly a British dependent territory, achieved full independence in 1978. It is one of the world's smallest independent countries, with a population of around 8,700 and a total land area of only 24 sq km, divided between nine islands. It is a remote country, connected to the surrounding world by air nights from Fiji. The scope for economic development is necessarily limited. It is therefore not surprising that, since independence, Tuvalu has received substantial aid from us. The aid has been given in three ways. First, we have provided project aid. Our largest project is the replacement, at a cost of £3.8 million, of the only vessel which carries passengers and goods between the islands of Tuvalu. The new vessel will be launched next March. Second, we have given much-needed technical co-operation, both by financing British personnel working in Tuvalu and by paying for the training of Tuvaluans in the region and in this country. Technical co-operation is running at about £400,000 a year. We shall continue to provide technical co-operation. Thirdly, we have provided budgetary aid. Budgetary aid is the direct funding by Official Development Assistance of a government budget deficit. We have provided it very sparingly, always to dependent or recently independent countries, all of them small island economies. St. Helena and the Turks and Caicos islands are the dependencies which have recently received budgetary aid from us. The independent countries are all in the Pacific. Apart from Tuvalu, only two other budgetary aid agreements are still in operation, for Kiribati and Vanuatu. The Kiribati agreement will end in 1989, and the country has not called on us for any budgetary aid since 1985. The Vanuatu agreement ends in 1988 and a final instalment of £114,000 budgetary aid is likely to be paid early next year. 4 Budgetary aid given by the United Kingdom to Tuvalu has been substantial in the context of the country's small economy. For some years, it has run at around £400,000 to £500,000. We have argued that budgetary aid, because of the tight conditions which have to be attached to its spending, is not an appropriate form of aid from one independent country to another. It was against this background that we strongly supported the initiative to set up an international trust fund for Truvalu, which would provide an income to supply the budgetary deficit of the Government of Tuvalu but would replace the budgetary aid which the United Kingdom had up to then provided. An international trust fund, on which the Government of Tuvalu was fully represented both as a contributor and on the board of directors, would avoid the disadvantages of government-to-government budgetary aid which I have mentioned. The Select Committee Foreign Affairs, in its Second Report for the session 1986–87, recognised that a trust fund would be an imaginative solution to the problem of budgetary aid to Tuvalu. The three main initial contributors were ourselves, Australia and New Zealand. Their contributions were paid in various currencies, but expressed in sterling at the present rate of exchange. The United Kingdom provided £3,325,118, Australia £3,129,523 and New Zealand £3,525,595. I learnt only this week that Japan has decided to provide £272,331. This money will be invested and the income used to supply the recurrent needs of Tuvalu. As I have already explained, we shall continue to provide technical co-operation and project aid to the Government of Tuvalu, over and above our initial contribution to the trust fund, which was a once-for-all contribution. Budgetary aid has finally ceased. The purpose of the present order is not to establish the participation of the United Kingdom in the fund. The agreement concerning an international trust fund for Tuvalu was ratified by the United Kingdom on 24 July after it had been laid before Parliament in the normal way. Its purpose is a much narrower one: it is to provide the fund with the legal capacity to hold and invest money, to buy and sell property and to institute legal proceedings in this country. The fund would therefore be given the legal capacity of a body corporate to make contracts. In addition, and in order to ensure the maximum benefit for Tuvalu, the order would give exemption from all United Kingdom income tax and tax on capital gains to the interest earned and the profits made on the sums held and invested by the fund. Both these provisions are in accordance with the requirement of article 5 of the agreement, which requires each party to the fund to accord it these legal privileges, status and immunities. Australia and New Zealand have completed the necessary procedures and Tuvalu is taking similar action. I should like to make it clear that all these financial immunities will be restricted to the fund's transactions. No privileges or immunities are to be provided for members of the board of directors of the fund or of its advisory committee. The order is the final legal step to ensure that we contribute in every possible way to the successful 5 operation of the fund. I am delighted that we have been able to respond so positively and quickly to the endorsement of the Select Committee on Foreign Affairs to the establishment of the fund. Above all, we shall be responding in the best practical way to the needs of Tuvalu and showing once again that we have a continuing and strong commitment to the countries of the south Pacific.

10.37 am

Mr. George Foulkes (Carrick, Cumnock and Doon Valley): I welcome the order. I am grateful to the Minister for widening the scope of the discussion beyond immunities and privileges and for giving us the authentic pronunciation of Tuvalu, with the accent on the second syllable and not the third. From now on we shall use the correct pronunciation, which sounds more poetic if not exact. The Opposition welcome the order unreservedly. I had intended to ask the Minister several questions, but, with his usual perspicacity, he has anticipated a number of them. That will save me taking up the Committee's time in seeking answers. However, I should like to ask those that remain unanswered in relation to our contribution. It would be helpful if the Minister could confirm that additional resources will be available to his Department to enable the sum to be contributed. Or will the moneys come out of the ODA's existing resources? As the Minister knows from other discussions that we have had, we should like to see those resources supplemented and increased. Secondly, is the Department contemplating offering expertise in fund management? Such expertise exists in the ODA and in organisations such as the Highlands and Islands Development Board and the Scottish Development Agency. My hon. Friend the Member for Dumbarton (Mr. McFall) and I have some experience of both Scottish organisations. I was about to suggest the Falklands Islands Development Corporation too, but it has had one or two changes in personnel recently and that might not be an appropriate body. Thirdly, it would be helpful if the Minister could tell us whether further contributions from the United Kingdom are envisaged or whether this is a once-and-for-all final payment. It is a question of the interest from the total fund that will be applied if there are to be no further contributions from the United Kingdom. I welcome the Minister's announcement of the contribution from Japan. It would be helpful to know whether any other contributions might be expected. Perhaps some of our partners in the European Community would be interested in contributing. The Minister helpfully outlined his suggestion for Kiribati and Vanuatu. Would this be seen as a model by them or any of the other dependent territories, the vestiges of empire strung around the world, either now independent or still dependent territories? It is an interesting and useful model. I know that the Minister shares my concern and that of some Conservative Members—I see some familiar faces—about the problem of micro states and the viability of some island states. This is a concern that is based on economic, defence and other considerations. It would 6 be helpful if the Minister could tell us briefly whether this idea is likely to be picked up and used in another context. As I said, the Minister has anticipated my other questions and has answered them effectively. I hope that he will be able to answer my additional questions, because with those answers the Opposition will want to join the Government in giving the order a fair wind and wishing Tuvalu and the fund all success in future. 10.41 am

Mr. Chris Patten: I shall try as rapidly but as fully as I can to respond to the points made by the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes). I hope that I shall do so satisfactorily enough to allow us all to adjourn for an early lunch or bath. The hon. Gentleman asked first whether the contribution to the fund would come out of the existing ODA budget or would represent a net addition. I am happy to say that, as the ODA budget is now set on a growth path, the contribution to the fund comes out of a budget which is growing in real terms. I hope that that will satisfy the hon. Gentleman, although I realise that he would like the ODA budget to increase by even more, a point which he has made eloquently on a number of occasions. Secondly, the hon. Gentleman asked about expertise in fund management. A number of experts, including British experts, bid for the post of management of the fund. The eventual winner was an Australian bank, an investment firm called Westpac Investment Management, which will provide the expertise for which the hon. Gentleman properly called. The hon. Gentleman asked whether we would envisage making further payments into the fund. That is not our intention. We see the establishment of this fund as a once-and-for-all substitute for budgetary aid, but, as I mentioned, there are other forms of assistance, not least technical co-operation, which is particularly important in the south Pacific, which we shall go on making available. The hon. Gentleman asked whether other countries in addition to Japan were envisaging contributing to the fund. I do not have any information about others at the moment. We should, of course, welcome further contributions by other countries to reflect the concern that we, the Australians, the New Zealanders and the Japanese have in the stability and economic growth of the south Pacific region. Finally, the hon. Gentleman asked about budgetary aid elsewhere, in particular in the dependencies. As I tried to suggest, it is important to make a distinction between budgetary aid to dependent territories and budgetary aid to independent territories. The Select Committee on Foreign Affairs made a particularly cogent argument about the difficulties of providing budgetary aid to an independent country, given the restrictions which necessarily have to be put on it. The dependencies where we are primarily providing budgetary aid at present are St. Helena and the Turks and Caicos islands. We do not have any plans to change that arrangement at the moment, and by "at the moment" I do not mean that we shall have plans the year after next. I admit that budgetary aid is much 7 more difficult to manage satisfactorily than most other forms of development assistance. As the primary purpose of development assistance is to help other countries to stand on their own feet and to become more independent of donors rather than more dependent on them, there is always a difficulty about justifying and arguing the case for budgetary aid. But I repeat that at present there are no plans to make any change in the existing arrangements. On that note I hope that I can secure the agreement of the Committee to the order. I hope also that we 8 shall be able to make clear to the people of Tuvalu our interest in and concern about their future prosperity and the prosperity of their region.

Question put and agreed to.

Resolved, That the Committee has considered the draft International Trust Fund for Tuvalu (Immunities and Privileges) Order 1987.

Committee rose at fourteen minutes to Eleven o'clock.


Lofthouse, Mr. Geoffrey (Chairman)

Bottomley, Mrs. Virginia

Foulkes, Mr.

McFall, Mr.

Meale, Mr.

Neubert, Mr.

Patten, Mr. Chris

Rhys Williams, Sir Brandon,

Steen, Mr.

Thornton, Mr.

Townsend, Mr. Cyril D.