Speech by the Rt Hon Gordon Brown MP, Chancellor of
the Exchequer at the National Gallery of Scotland
International Development in 2005: the challenge and the opportunity
6th January 2005 - edited version
2005 is a year of challenge but also a year of opportunity when - from the foundation of hope - we can, I believe, see real change.
A year which is also the year when the UK has special responsibilities as President of the G7 and European Union, a year in which we can tackle not just the terrible and tragic consequences of the tsunami - working together to forge a long term plan for the reconstruction of Asia - but also forge a new 'Marshall Plan' for the entire developing world.
And let me say the urgency and scale of the agenda I am going to propose for debt relief, for new funds for development and for fair trade is now even more pressing given the tragic events of recent days.
It is because I want a world that does not have to choose between emergency disaster relief and addressing the underlying causes of poverty and injustice - between advancing first aid and advancing fundamental change - that the proposals I am putting forward today to advance the interests of all the developing world will - the Government believes - find support in all parts of the world.
In just a few months time, just a few miles from here in Edinburgh, the G8 will meet in Gleneagles to discuss the most important issue of our generation - world poverty.
This year is the year when world leaders will first gather here in Scotland and then in September at the United Nation's Millennium Summit to examine just how much we have to do together if we are to seriously address the scale of poverty round the world today.
The first commitment to be met is that by next year the gap between the chances for girls and boys in primary and secondary education would be closed.
But we know already that not only are the vast majority - 60 per cent - of developing countries unlikely to meet the target but most of these are, on present trends, unlikely to achieve this gender equality for girls even by 2015.
And we know one stark fact that underlines this failure: not only are 70 million girls and 40 million boys of school age not going to school today but today and every day until we act 30,000 children will suffer and 30,000 children will die from avoidable diseases.
In 1948, with much of Europe still in a state of ruins, the American Secretary of State General Marshall proposed, for his generation, the most ambitious plan for social and economic reconstruction.
Marshall's starting point was a strategic and military threat but he quickly understood the underlying problems were social and economic.
Marshall's initial focus was the devastation wrought in one or two of the poorest countries but he rapidly realised his plan should be an offer to all poor countries in the neighbourhood.
Marshall started with a narrow view of aid needed for an emergency but quickly came to the conclusion that his plan had to tackle the underlying causes of poverty and deprivation.
Marshall's early thoughts were for small sums of money in emergency aid but very soon his searching analysis brought him to the conclusion that a historic offer of unprecedented sums of money was required.
He announced that America would contribute an unparalleled 1 per cent of its national income.
He said that his task was nothing less than to fight hunger, poverty, desperation and chaos.
His Treasury Secretary argued that prosperity like peace was indivisible, that it could not be achieved in one country at the expense of others but had to be spread throughout the world and that prosperity to be sustained had to be shared.
And Marshall's plan - and the unparalleled transfer of resources - not only made possible the reconstruction of Europe but the renewal of world trade and generation of prosperity for both these continents.
And I believe today's profound challenges call, even in a different world, for a similar shared response: comprehensive, inclusive, an assault on the underlying causes of poverty, with unprecedented support on offer from the richest countries.
I believe in 2005 we have a once in a generation opportunity to deliver for our times a modern Marshall Plan for the developing world -- a new deal between the richest countries and the poorest countries but one in which the developing countries are not supplicants but partners. And as we advance towards the G7 Finance Minister's meeting next month and the Heads of Government meeting chaired by Tony Blair in July, our Government calls on all countries to join with us in agreeing the three essential elements of a 2005 development plan for a new deal:
first, that we take the final historic step in delivering full debt relief for the debt burdened countries;
second, that we deliver the first world trade round in history that benefits the poorest countries and ensures they have the capacity to benefit from new trade; and
third - alongside declaring timetables on increasing development aid to 0.7 per cent of national income - that we implement a new international finance facility to offer immediate, predictable, long term aid for investment and development --- building on commitments by individual governments, leveraging in additional funds from the international capital markets, raising an additional $50 billions a year each year for the next ten years, effectively doubling aid to halve poverty.
I make this proposal for a new deal between developed and developing countries because as we meet here today - at the start of 2005 - I am aware not only of the pressures for emergency aid but that the promises we all made five years ago will forever remain unfulfilled unless we act together and act now.
So 2005 is a year of challenge. A testing time as to whether the world can not only provide the emergency aid that is needed now to help the millions affected by the Asian crisis but whether we can wake up to the tragedy of global poverty and all its implications. Whether we can finally live up to the scale of the promises made. Whether we can come together as never before to fashion a new relationship between rich and poor countries and peoples.
I believe this support is growing wider and deeper with already in 'Making Poverty History' more than a hundred aid, development, and trade organisations and anti poverty organisations coming together in demonstrations, campaigns, petitions - in challenging Government to make poverty the issue of the year.
Let me just summarise what I believe can be achieved by our Marshall Plan proposal…that as developing countries devise poverty reduction plans, expand their own development, investment and trade, tackle corruption and demonstrate transparency, we the richest countries ensure justice by taking this year, now, urgently, three vital steps.
First on debt relief, let us in 2005 make a historic offer that finally removes the burden of decades old debts that today prevent the poorest countries ever escaping poverty and leading their own economic development.
Whereas in 1997 just one country was going to receive debt relief, today 27 countries are benefiting with $70 billion of unpayable debt being written off, and 37 countries are now potentially eligible, up to $100 billions of debt relief now possible.
And it is because of debt relief in Uganda that 4 million more children now go to primary school.
Because of debt relief in Tanzania that 31,000 new classrooms have been built, 18,000 new teachers recruited and the goal of primary education for all will be achieved by the end of 2005.
Because of debt relief in Mozambique that half a million children are now being vaccinated against tetanus, whooping cough and diphtheria.
And it is partly because of debt relief that in the past decade in developing countries, primary school enrolments have increased at twice the rate of the 1980s; the proportion of those aged over 15 who can read has risen from 67 per cent to 74 per cent; life expectancy has increased by from 53 years to 59 years; and the number of people living in extreme poverty has fallen by 10 per cent.
We do not wipe out the debt of the poorest countries simply because these debts are not easily paid. We do so because people weighed down by the burden of debts imposed by the last generation on this cannot even begin to build for the next generation.
To insist on the payment of these debts is unjust - it offends human dignity.
What is morally wrong cannot be economically right.
And when many developing countries are still choosing between servicing their debts and making the investments in health, education and infrastructure that would allow them to achieve the Millennium Development Goals, we know we must do more.
That is why this year we must make rapid progress and today I want to set out both the principles to govern the next stage and the measures that can be delivered.
While we have achieved bilateral debt write off, the fact is that up to 80 per cent of the historic debt of some of the poorest countries is owed to international institutions and a solution to the debt tragedy now requires progress on debts owed not just to us but owed to the World Bank, the IMF and the development banks.
So we propose, first, that this year the richest countries match bilateral debt relief of 100 per cent with the bold act of offering 100 per cent multilateral debt relief --- relief from the $80 billion of debt owed to the IMF, the World Bank and the African Development Bank.
Second, that the cancellation of debts owed to the International Monetary Fund should be financed by a detailed plan and timetable we now agree to use IMF gold.
Third, we propose that countries make a unique declaration that they will repatriate their share of the World Bank and the African Development Bank's debts to their own country.
I can state that Britain will relieve those countries still under the burden of this debt to these banks by unilaterally paying our share - 10 per cent - of payments to the World Bank and African Development Bank. And we will both deepen and widen our debt relief as we will pay our share on behalf not just of Heavily Indebted Poor Countries but - because their need is just as great - of all low income countries, as long as they can ensure debt relief is used for poverty reduction.
In the G7 Finance Ministers meeting next month I will be asking other countries to contribute directly or to a World Bank trust fund.
And I also ask the European Union which deserves credit for more than 1.5 billion euros of debt relief so far to match that generosity with deeper multilateral debt relief.
Alongside more debt relief, 2005 is the opportunity that may not easily return if missed to agree a progressive approach to trade.
Economic development is the key to meeting the Millennium Development Goals and long term prosperity.
And no country has escaped poverty other than by participation in the international economy.
Our task is and remains helping developing countries build the capacity - the monetary and fiscal policies, the infrastructure, the support for private investment - essential for their development.
But we also know the damage that rich countries protectionism has done and that the developed world spends as much subsidising agriculture in our own countries as the whole income of all the 689 million people in sub Saharan Africa taken together.
Fair trade is not simply about the financial benefits, it is also about empowerment and dignity - enabling people to stand on their own two feet and using trade is a springboard out of poverty.
It is not enough to say 'you're on your own, simply compete'.
We have to say 'we will help you build the capacity you need to trade'.
Not just opening the door but helping you gain the strength to cross the threshold.
So in 2005 we need to make urgent progress.
First we the richest countries agree to end the hypocrisy of developed country protectionism by opening our markets, removing trade-distorting subsidies and in particular, doing more to urgently tackle the scandal and waste of the Common Agricultural Policy - showing we believe in free and fair trade.
Second, while recognising that while bringing down unjust tariffs and barriers is important, agree that developing countries receive the support necessary to carefully design and sequence trade reform into their own poverty reduction strategies.
And third, we have to recognise that developing countries will need additional resources to build their economic capacity and the infrastructure they need to take advantage of trading opportunities - and to prevent their most vulnerable people from falling further into poverty as they become integrated into the global economy.
We know that after macroeconomic stability, poor infrastructure, lack of transparency, legal problems, poor labour skills and low productivity are key risks and deterrents to both foreign and domestic investment.
Nor do many countries have the elasticity of supply to react to international market signals. The World Bank estimates that giving 24 of the poorest countries total access to western markets would have no impact on their economies as they would not have the capacity or infrastructure to make use of the opportunity.
So countries need investment in physical infrastructure, institutional capacity -from legal and financial systems to basic property rights and, at root, transparency that avoids corruption - physical infrastructure and, of course, investment in human capital to enable growth, investment, trade and therefore poverty reduction.
And to secure investment in development we need funds for development.
2005 can be the year when we free nations from the burden of crippling and unpayable debts and remove unacceptable barriers to trade and private investment but it is clear that we cannot solve the urgent problems of poverty and development around the world without a third step -- a substantial increase in resources for development, for investment in the future.
At the UN Monterrey Financing for Development Conference, donor countries pledged an additional $16 billion a year from 2006. For the UK's part, our level of Official Development Assistance will increase to £6.4 billion - 0.47 per cent of our national income - by 2008. Beyond that we wish to maintain those rates of growth which, on this timetable, would lift the ODA ratio beyond 0.5 per cent after 2008 and to 0.7 per cent by 2013 - and over the next year we plan to ask other countries to join us and nine others in becoming countries which have either already reached 0.7 or have set a timetable towards it.
But we know that even if one or two of the G7 could overcome fiscal constraints and go to 0.7 per cent tomorrow, we will still not reach the scale of the resources needed to achieve the Millennium Development Goals - at least $50 billion more a year - not in 2015 but now.
And the truth is that the scale of the resources needed immediately to tackle disease, illiteracy and global poverty is far beyond what traditional funding can offer today.
That is why the UK Government has put forward its proposal for stable, predictable, long-term funds frontloaded to tackle today's problems of poverty, disease and illiteracy through an International Finance Facility.
And let me just explain what the IFF could achieve for the world's poor. The IFF is founded upon long-term, binding donor commitments from the richest countries like ourselves. It builds upon the additional $16 billion already pledged at Monterrey. I believe the International Finance Facility has the following advantages.
First, the IFF would urgently create the scale of funding necessary to invest simultaneously across sectors - providing humanitarian assistance as well investment in education and health, trade capacity and economic development - so that instead of having to choose between first aid and tackling poverty, between health and education, between capacity building in trade and tackling aids, the impact of extra resources in one area reinforces what is being done in others and has a lasting effect.
Second, the IFF would provide a predictable flow of aid to developing countries so they no longer have to suffer from an up to 40 per cent variance in the amount of aid they receive from year to year which prevents them from investing efficiently in health and education systems for the long term and tackling the causes of poverty rather than just the symptoms.
Third, the IFF is designed to invest now to prevent problems later - to scale up development aid between now and 2015, enabling us to frontload aid so a critical mass can be deployed as investment now and over the next few years when it will have the most impact in achieving the Millennium Goals.
Indeed, the fact is that unless we adopt the IFF or a similar mechanism immediately there is simply no other way of meeting the Millennium Development Goals in time.
The IFF is not only complementary to existing commitments to the 0.7 per cent target - allowing participating countries to take faster steps towards 0.7 by increasing the resources available now - but can be implemented alongside continuing consideration of other proposals to provide financing in the longer term - including international taxes, special drawing rights and other forms of revenue raising on a world wide basis.
I believe that the advantage of the International Finance Facility I have described is not just that it is a means of providing the necessary resources immediately and thus far faster than other initiatives, but also that we can move quickly with a committed group of countries - not moving at the pace of the slowest but tackling the problem head-on now with those that are prepared to sign up
And so the practical benefits of the IFF are:
" we provide the support poor countries need straightaway - frontloading investment in infrastructure, education and health systems, and economic development so they can benefit from access to our markets; " we provide grants immediately to help ensure a sustainable exit from debt so poor countries do not need to choose between emergency relief and long term investment; " we make primary schooling for all not just a distant dream but a practical reality - meeting these needs and rights now and not deferring them to an uncertain future; and " we advance towards our global goals of cutting infant mortality and maternal mortality on schedule, eliminating malaria and TB and treating millions more people who are suffering from HIV/AIDS.
Let me give an illustration of what - because of the IFF model - could already be possible.
The Global Alliance for Vaccines and Immunisation (GAVI) - who have immunised over the last five years not a few children but a total of 50 million children round the world - is interested in applying the principles of the IFF to the immunisation sector ---- with donors making long term commitments that can be leveraged up via the international capital markets in order to frontload the funding available to tackle disease.
If, by these means, GAVI could increase the funding for its immunisation programme by an additional $4 billion over the next ten years, then it would be possible that their work could save the lives of an additional 5 million people between now and 2015 and a further 5 million lives after 2015. And I praise Bill Gates and Bono for their farsightedness - coming together to urge this week a financing proposal for making immunisation available to millions more.
So in one fund, with one initiative, we can glimpse the possibilities open to us if we act together. And there are other possibilities that could change the world.
Let me say that with proper funds the medical breakthroughs now being achieved in developing a preventive vaccine for malaria could be matched by the farsightedness of an advance purchase scheme that could prevent the loss of more than 1 million lives a year because of this dread disease.
Only £400 million pounds a year is spent on research for a preventative vaccine for HIV/AIDS, despite the fact that 75 million are affected and 25 million have died. And as we examine what can be done to prevent as well as treat HIV/AIDS it is obvious that with proper funds there could be a similar bold initiative on research and development - to internationalise and advance the research and then to provide support for the development of preventive vaccines…once again showing the possibilities for the Global Fund for health and for building health capacity that the International Finance Facility we propose opens up for the world.
And if what we achieve for health we could also achieve for schools, for debt relief, for the capacity to trade, for anti poverty programmes, for economic development, think of the better world we can achieve.
So the aim of the International Finance Facility is to bridge the gap between promises and reality. Between hopes raised and hopes dashed. Between an opportunity seized and an opportunity squandered.
And in the forthcoming G8 discussions we will ask all countries to join dozens of countries who have already given their backing to support and sign up to the IFF and we will be setting out a framework within which we can implement it.