At Jubilee Scotland we have been part of many campaigns calling for debt relief and the cancellation of unjust debt in the global south. Adding to the unjust sovereign debt that many nations need relief for financially, there is another type of debt that needs to be addressed by it’s systemic nature, debt incurred by climate change.  Climate change does not affect people equally. Those individuals, communities and countries affected the most by climate change are also those who have contributed the least to it. Everyday in the global south, there are droughts, natural disasters, food shortages and loss of habitat, as a result of the climate crisis. Many of the affected countries go into debt, because they lack additional finances to respond to these climate disasters.

At the same time, climate change is primarily caused by rich, high-emission countries, including the UK and Scotland. We therefore owe a moral debt to those countries and communities that suffer the most from climate change.  

The 26th Conference of the Parties (COP26) which takes place in Glasgow in November 2021 is set to be the most important UN climate conference for years. COP26 will focus on the immediate need for dramatic climate mitigation targets to be set by Scotland and other world leaders. Additionally, global south countries will be looking for finance initiatives, as more funding is necessary to adapt to the devastating impact of the climate crisis.

In partnership with Oxfam Scotland, Stop Climate Chaos Scotland and SCIAF, we have been researching the ways that the Scottish government can make a meaningful impact at COP26. The Scottish Government has previously committed to putting the voices of people affected by climate change at the heart of the conference. By increasing the Climate Justice Fund and developing a position on loss and damage and championing this issue at COP26, Scotland can show it is serious about its commitment to climate justice and set an example for other global north countries. 

Anne Funnemark, campaign director at Jubilee Scotland and lead author of the report has said: “The climate emergency is, quite literally, costing the earth for developing countries. Ahead of COP26 in Glasgow, rich countries must demonstrate that they will stand shoulder to shoulder with the world’s poorest people by offering more financial support to countries on the frontline of the climate emergency to adapt to climate change while also compensating them for their losses.”

We’re calling on the Scottish Government to :

• Significantly increase the Climate Justice Fund with new and additional finance, such as from a high-emitter tax

• Proactively call for other rich countries, including the UK, to increase their own climate finance informed by a Fair Shares analysis, while championing additionality before and at COP26

• Undertake a review of the Climate Justice Fund to build on its success, ensuring that it is fully aligned with best practice in climate adaptation globally

• Develop a position on loss and damage and use this to champion progress on it at COP26. Namely, a financial mechanism for the WIM and meaningful development of the Santiago Network

Read the report here, or through our viewer below.

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As household debt in the UK has become the highest it’s ever been on record,  many lower income households finds themselves unable to save money at all, increasing these households’ vulnerability in times of financial insecurity.  Households unable to make ends meet have been said by the Office of National Statistics  “to be living beyond their means”. 

Blaming of borrowers often occurs whenever the topic of household debt comes up. The notion that debtedness is the fault of the individual, is often fuelled by soundbites and stories in the media. Society promotes the idea that it is a self-inflicted punishment for something one person has done, because they’re the ones signing up to credit cards, taking out loans, repaying the mortgage. But most household debt isn’t because people are frivolous like many presume. Rather, it is caused by reductions of wages and benefits, redundancy, and illness. According to Stepchange’s Scotland in the Red Report, before COVID-19 the main cause of household debt was  ‘life events’, Life events are classified as unexpected shocks that put a burden on a person’s finances. In many cases, such events are costly burdens that complicate a person’s life, with no room for flexibility. 

With a third of people being affected financially by COVID-19, a wide range of people have experienced a ‘life event’ that has affected them financially.  An estimated 4 million people have been added to the number with substantial household debt since the crisis began. This begs the question of whether or not this will pave the way for people to talk about their debts and how it affects them.

At the same time, The Bank of England stated that £7.4bn of consumer credit was repaid during the first month of lockdown, the biggest net repayment in a month since 1993. A huge reduction in retail spending led to this, with the outstanding debts on credit cards remaining at £64bn. This positive sounding news demonstrates how the lockdown has added to the wealth divide in the UK. People who were able to keep working can see their debts cleared from a lack of incentive to spend, while many workers being hit by job losses and cut wages take on more debt while on furlough. If this trend continues we are unlikely to see a decrease in stigma associated with debt. It’s possible that these figures could be used by creditors to present a distorted version of events when payment holidays end, adding to the guilt of people who are unable to repay when so many others could.

A poll conducted by Citizens Advice Scotland this summer found that 1 in 4 Scottish people were concerned about their debt repayments. In response to these findings a spokesperson for the Scottish Government said that “We recognise the stress and strain debt can create and we would encourage anyone with concerns to contact organisations such as CAS to get advice and support.” While this statement acknowledges the fact that it’s a stressful time for people in debt, it passes the buck of having a conversation about debt back onto the charities that have already done so much to bring the issue to the foreground. Along with voting down the recent plans for rent controls, the Scottish Government hasn’t done much to address people’s heightened debt concerns. 

A reduction of the stigma around household debt is necessary to widen the conversation on the topic and increase the pressure on government and public lenders to make systematic changes to our flawed financial system. To make this happen  we have to harness the shared experience of COVID-19’s impact on household debt. People should not be treated like criminals for the chaotic circumstances that life throws at them. The conversation needs to be facilitated in a way where the Scottish government talks about personal debt, in a transparent way that makes people feel heard instead of at risk for speaking out.  If we don’t talk about the devastating impact of household debt openly and address the scale of the problem, we won’t build back as a better society. 

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The outbreak of COVID-19 has reminded us what is really important – looking after each other and our communities, our health and well-being, our public services. Now, as Scotland moves past a peak of infections, our attention turns to what comes next The choices made by the government now will affect our communities and our climate for generations to come. 

The recovery plan must lay the foundations of a greener, fairer Scotland for everyone. Where we reduce inequalities, strengthen public services and provide an adequate income for everyone. Where we do our fair share of climate action and restore nature. Where we all have a say in decisions that affect us.

We are proud to stand with over 80 organisations in Scotland calling for a Just and Green Recovery in Scotland. Together, we wrote to the First Minister outlining five steps for the recovery which you can read here.

This is just the beginning, we need to grow and show public support for a recovery that helps us transform our society for the better

Will you join Scotland’s movement to Build Back Better?

Sign the petition here!

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Oxfam International’s Head of Washington DC Office, Nadia Daar, said:

“We commend Congresswoman Maxine Waters, Chairwoman of the HFSC, for advancing this crucial reform agenda at the IFC where the US remains the largest shareholder, and applaud IFC CEO Philippe Le Houérou for his leadership in making these reforms possible. This is a huge step forward not just for the IFC, but for how we understand the role of the private sector in development.”

“This historic decision from the IFC will ensure its investments support improvements in education without excluding children or impoverishing families. Public aid money should not be used to fund corporate-backed private school chains that fuel inequality. Other donor agencies and governments now need to follow suit.”

This freeze is in response to concerns raised by 170 organizations, including Jubilee Scotland who called on the World Bank to end support for these forms of private education that profit on the exploitation of poor children, creating wider inequality. We called for expansions of public education that everyone can access- instead of ‘low-fee private schools’ which exclude girls, impoverished children and paid extremely low wages to under qualified teachers. In Uganda and Kenya, these schools have been accused of refusing to comply with minimum government education standards.

In addition to the freeze the IFC announced an evaluation of its investments in private schools by the World Bank’s independent evaluation group. Oxfam have stated that the COVID-19 Pandemic cannot be used by any donor as an excuse to invest in for-profit education, with the need for these organisations to financing to help countries meet educational needs of millions of children out of school with no access to online classes, tutors or computers.

This move by the bank has been a good start for ending private financing that negatively impacts communities while letting private companies profit. It is time for the UK to take out their investment in these schools that are part of this problem, especially when this investment is supposed to be providing aid.

The Guardian published an article this weekend that focuses on the UK’s current position on this issue.

“The Department for International Development (DfID) has given millions of pounds to low-fee private schools (LFPS) in countries around the world, including Nigeria, Kenya, Uganda, Ghana and Pakistan. It believes the money can help improve the educational prospects of children in places where public-sector schools are poor or lacking.

But the funding, some of it channelled through DfID’s private investment arm, CDC, has proved controversial. Among those that have received UK taxpayer cash are the private school chain Bridge International Academies (BIA) which has also been the recipient of money from Bill Gates and Mark Zuckerberg.”

Bridge International Academies runs low-cost schools with the UK investing £12.3 in the company. Last year a World Bank watchdog, the Compliance Adviser Ombudsman (CAO) investigated BIA’s operations in Kenya and found allegations of human rights abuses, poor working conditions, discrimination, lack of transparency and intimidation, as well as concerns about pay, health and safety and sanitation.

At the time the DFID said they would investigate the situation, something which they are continuing to work on with the WBG. But this should be a sign that the policy of DFID investing aid money in Public Private Partnerships can can lead to situations like this. PPPs and their lack of accountability and transparency have led to fee-paying schools with questionable quality popping up in countries which need to fight for free and universal education.

Linda Oduor-Noah, project manager at East African Campaign for Human Rights commented “We have heard first-hand from other investors that they are keenly awaiting the outcome of the investigation,”she said. “I would like Bridge to respect human rights and I think that no for-profit entity should masquerade as having social agenda, when at the end of the day profit drives all decision making. People involved in the provision of public goods should never endeavour to make profit off the poor.” Bridge Schools have had a researcher arrested and have lobbied the investigation of the issues of their schools. The reseracher they arrested, Curtis Riep made the recommendation to not fund Bridge Schools as they neglect legal standards while driving profit, a clear case of a PPP that starts with an altrustic goal that become consumed by profit margins as time goes on.

As a private company they have produced research and press releases justifying the existence of PPPs that come off as strange and potentially misleading PR moves. In one report produced by BIA about the British public’s support and approval of Privately provided education in foreign countries, they say that over half of people are in support of these type of schools. They’ve done the same for the public opinon of USA citizens, but the reports use leading questions that doesn’t show any transparency of what these private schools actually are like.

These reports don’t talk about the actual work they do, but just dress up some market research, that makes it look like people are in favor of this, but It’s hard to say that the every-man on the street in any English speaking country has enough information to make a valid assessment of the issues surrounding privatization of education in Africa. With statistics that look good, they can claim that people approve of what they do without shedding much light on it at all or twisting figures and claims. They asked people if a social enterprise company like them should run schools that cost parents about $7 US dollars a month, in countries where there is a lack of other schools. Of course this sounds like a great idea when you think about what that amount of money means to you, but this is without mentioning that $7 can be a huge amount of a persons income in these countries. The teachers at these Schools work up to 65 hours per week and only take away $100 per month. In Kenya, sending three children to a Bridge school is estimated to represent almost a third of the monthly income of families living on $1.25 (94p) a day, according to a joint study by Kenya National Union of Teachers and Education International, a federation representing 32 million teachers and support staff. Instead of spending time

The European investment bank financed Bridge International Academies Ltd (BIA) through an equity fund, who became involved in a controversial PPP educational project in Liberia. Indeed, the Liberian government outsourced the lion share of its public pre-primary and primary schools to BIA, but the process was not competitive, local communities were not properly consulted, and there was not full transparency.

This is just one of many providing this form of private-for-profit education, PPPs in Africa that provide public services in a way that makes it harder to make people accountable when they can’t meet standards that they promised. The issues is that many countries can’t offer a full education system alone without some reform of the corruption within their society, in places like Liberia the education system has been broken for years. Private alternatives are marginally better for learning outcomes, but still fail students on basic human rights and protections from abuse.

The steps that the World Bank group have taken are great and hopefully open up a conversation about how to ensure the education in the global south can thrive and not be used as a tool to drive profit. But this is an issue that should be closely watched. While our government uses PPPs to provide part of our education infrastructure with mixed results, handing a contract over to private companies to overhaul a whole system in places like the Global South edges out what the ultimate aim should be in these places – quality universal free education for all children.

This article was initially posted on our Medium.com blog.

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Presentation by Dexter Whitfield, European Services Strategy Unit, to meeting ‘Rethinking Private Financing of Scottish Public Projects’ at the Scottish Parliament on 29 January 2020, organised by Jubilee Scotland and chaired by Neil Findlay, MSP.

I welcome the refreshing straight-talking report on NDP and hub PPP contracts from Audit Scotland this week. I strongly recommend that the Scottish Parliament, local authorities and public bodies immediately adopt six strategies for public infrastructure projects in Scotland.

1 – Increase direct public investment in public infrastructure and stop all planned Mutual Investment Model projects

The Government should take the opportunity to increase direct public investment in infrastructure in the current period of low interest rates.

Planned MIM projects and those that have been approved with options appraisal and business cases, but yet not commenced the start of the contractual procurement process, should be stopped. The Scottish Government should support the local authorities and public bodies in arranging direct public investment for these projects.

The Mutual Investment Model (MIM) allows the public sector to invest up to 20% of the risk capital in project companies and to meet the private investment classification (off public sector balance sheet). However, the public sector, in effect, becomes a commercial partner with the private sector in sharing all the risks and rewards. This significantly deepens the degree of privatisation, extends the scope of secondary market trading in PPP equity and the takeover or merger of infrastructure funds (Whitfield 2016 and 2017b).

2 – Scotland should adopt a new public design/finance and operate model

This would have three objectives, to integrate the design and construction process, to reduce the cost of construction and to minimise the risk of delays. Two examples illustrate how these objectives can be achieved.

The UK’s Integrated Project Insurance (IPI) offers a guaranteed maximum price and protection against defects underwritten by insurance. A project alliance is formed with a Gain/Pain Share agreement under IPI in which all members of the project Alliance share in risk and reward. It was recently successfully piloted at Dudley College. The target outturn construction cost of £9.83m was agreed and exceeded by only 1.8%. The client share of the additional cost was only 0.34% of the target cost. The building was ready for occupation as planned at the start of the 2017/18 academic year.

Construction Management At Risk (CMAR) has been widely used in many US states for public building, transportation and utility projects. The client selects an architect who commences the design and later selects the construction manager/contractor, based on qualifications and track record, before the design stage is completed. The architect and construction manager work together in the final stage of the design process. The construction manager/contractor gives the client a guaranteed maximum price and coordinates all the subcontracted work. This process strengthens coordination, enhances transparency, delivers efficiencies and minimises delays (Whitfield, 2020).

3 – Local authorities and public bodies should intensify the monitoring of PPPs to identify defaults and poor performance.

Monitoring of PPP projects has often been inadequate due to inadequate monitoring staffing levels being included in business cases and contracts and over-reliance on self-monitoring by the private sector. Local authorities should now intensify contract monitoring focusing on all aspects of the quality of performance and other contractual requirements. This information should be reported to relevant committees and publicly disclosed.

Local authorities should also establish contract reviews where defaults and poor performance have been significant or systemic. They should draw on evidence from service users, community and tenants organisations and trade unions. There remains considerable scope for local authorities and public bodies to consider terminating operational PPP service contracts and return provision in-house. Where defaults and poor performance are evidenced and remain after the issue of contractual warnings by the authority, termination without compensation is a viable and legal option. In some cases a contractor has withdrawn from a contract on technical or operational grounds. There have been 27 PPP contract terminations and 12 buyouts in the UK to date (Whitfield, 2020).

4 – Establish a comprehensive and rigorous Economic, Social, Equality and Environmental Cost Benefit Analysis methodology

This should be mandatory for all infrastructure projects in Scotland. The Scottish Government should also require comprehensive and rigorous impact assessments to identify the positive and negative economic, employment, equality and environmental consequences of projects and to identify where and what form of mitigation action is required.

The quality of impact assessment is reliant on assessment of the impact on inputs, processes, outputs, equity and outcomes to establish cause and effect and the use of a counterfactual (the situation that would exist if the project did not proceed). Furthermore, employment impacts must include a full analysis of current jobs, terms and conditions, health and safety and equality practices and planned changes.

5 – The Scottish Parliament and local authorities should oppose the sale of equity in PPPs

The average annual rate of return on the sale of equity in PPP projects was 28.7% (based on a significant data sample) at the end of 2016 with acquisition mainly by offshore infrastructure funds in tax havens (Whitfield, 2017b). This evidence is in sharp contrast with the expected 12%-15% rate of return contained in PPP business cases or contract documentation.

The scale of equity transactions and offshoring to tax havens is very significant. “A total of 87.5% of Scotland’s PFI/PPP education projects (280 out of 320 schools) are currently partly or wholly owned by offshore tax haven funds. Nearly half the schools had 100% of their equity owned offshore” (Table 11, Whitfield, 2016). The NDP and MIM models in effect lock-in and legitimate public sector investment in PPP projects and the secondary market.

Whilst the sale of equity is legally permissible, there is a very strong case that it should be opposed on political economy and ethical grounds.

6 – Challenge the trend of Scottish pension fund investment in PPPs

There are direct links between Scottish public sector pension fund investments, offshore tax havens and shares in NPD and hub companies. At least four Scottish pension funds have investments in offshore infrastructure funds with stakes in NPD and hub projects. Glasgow City Council, on behalf of Strathclyde Pension Fund, has had a £30m investment in the Equitix Fund IV LP since 2016 which was extended by further £50m investment in the Equitix Fund V LP, managed by Equitix GP 5 Limited (Guernsey).

Edinburgh City Council, on behalf of Lothian Pension Fund and Lothian Buses Pension Fund and the Falkirk Council Pension Fund have investments in the Equitix Fund II LP. Equitix Ltd is one of the largest UK PPP companies and although a registered UK company it is owned by Tetragon Financial Group Limited and registered offshore in Guernsey (Whitfield, 2018).

The targeted 10% annual rate of return of these investments is not in the public interest because it ramps up the cost of public infrastructure. Likewise, public sector investments in NDP and MIM projects feed potential gains in the secondary market which may only cover the cost of risky investment in other PPP projects.

I believe these policies are essential in developing a genuine public alternative to PPPs in Scotland.

References

Whitfield, D. (2016) The financial commodification of public infrastructure: The growth of offshore PFI/PPP

secondary market infrastructure funds, ESSU Research Report No. 8,

https://www.european-services-strategy.org.uk/wp-content/uploads/2017/01/financial-commodification-public-infrastructure.pdf

Whitfield, D. (2017a) PFI/PPP Buyouts, Bailouts, Terminations and Major Problem Contracts, ESSU Research

Report No. 9,

https://www.european-services-strategy.org.uk/wp-content/uploads/2017/02/pfi-ppp-buyouts-bailouts-and-terminations.pdf

Whitfield, D. (2017b) PPP profiteering and Offshoring: New Evidence, PPP Equity Database 1998-2016 (UK), ESSU Research Report No.10,

https://www.european-services-strategy.org.uk/wp-content/uploads/2017/10/PPP-profiteering-Offshoring-New-Evidence.pdf

Whitfield, D. (2018) Ownership and Offshoring of NPD and Hub Projects: Scottish Futures Trust, May,
https://www.european-services-strategy.org.uk/wp-content/uploads/2018/06/SFT-Offshoring-report.pdf

Whitfield, D, (2020) Public Alternative to the Privatisation of Life, Spokesman Books, Nottingham.

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At the book launch Dexter will discuss key points of the book and share his views on what policies and strategies are needed to deliver fundamental change. The event will be chaired by the Director of Commonweal, Robin McAlpine.

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The problem with PPP

At Jubilee Scotland we campaign for the cancellation of unjust debt worldwide. This year we have been focusing at one of the main causes of rising debt here at home and abroad, one that has long been criticised yet little has been done about. Public Private Partnerships (PPPs) are long-term contracts where the private sector designs, builds, finances and operates an infrastructure project.  This scheme in its various forms over the years has left local authorities across Scotland paying much more than needed for public projects and in some cases putting people at risk. Long contracts with high interest rates and poor building standards have left Scotland with flawed or unfinished buildings, the taxpayers sometimes paying double what they’re actually worth. It has created unjust debt problems and added unnecessary financial pressure on local services across the public sector.

The Oxgangs School catastrophe put PPPs on the map for a lot of people in Scotland. After the wall collapse 17 schools across Edinburgh that were built under the same PPP, ‘Edinburgh Schools Partnership’ were forced to close and undergo inspection and repairs. 2 years later, after the partnership told the council that all problems had been fixed, it was found that there was still issues with many of the buildings, forcing the council to undertake emergency repairs of their own. Because of the nature of these PPPs, the parties responsible are usually protected through corporate confidentiality contracts, but it’s the council that take all the blame for schools they were promised were built properly.

Private Profit over public safety

Recently two of the countries biggest hospitals have been in dispute with their own faulty PPPs. NHS Lothian is paying out £1.4m every month for the new unfinished Sick Kids Hospital with little oversight of how much of that money is going back into the public purse. The hospital hasn’t opened because of design flaws that make it uninhabitable, yet there’s nobody to take to task, nobody to answer questions why these mistakes have happened. NHS Greater Glasgow and Clyde have decided to take legal action against the contractor of both hospitals. Brookfield Multiplex were responsible for the construction of Queen Elizabeth University Hospital which opened in 2015 with many severe issues, leading to deaths in the children’s ward due to contaminated water. 

PPPs like these have led to a loss of accountability in our public services, because local councils and the government are rarely given any power to renegotiate when things take a turn. The country has a ballooning amount of debt that we have no control over as the contracts in a PPP are not usually transparent, last for decades and almost always favour the private contractor. Scotland has had issues with them, but has still has been involved in exporting PPPs to countries abroad through the UK’s Department For International Development. On an international level these Partnerships have led to corruption, environmental issues and inequality. It’s an unacceptable move for a country that committed to the Sustainable Development Goals to export schemes that undermine progress on them.

Finding a way forward

We need an alternative solution for Scotland’s problems with funding. On the 29th of January 2020, the fourth anniversary of the Oxgangs School collapse, we will debut our report at the Scottish Government. It examines Scotland’s relationship with PPPs, highlighting all the issues with the current system of private financing while presenting solutions to how we can fund infrastructure here in Scotland that the public have control of. By taking on an approach that serves the needs of local communities, we will be able to make their projects work for us instead of being being held ransom by private companies to access of our own public services.

Click here to download our report, Rethinking Private Financing of Scottish Public Projects

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1. The Scottish Government launched its White Paper ‘Scotland’s Future’ on the 26th November. In this, debt relief is highlighted as a priority for international development, with the statement: “The Scottish Government will give careful consideration to the question of ‘unjust’ debts; will work to ensure that Scottish export politics do not create new unjust debts; and support moves to establish Scotland as an international centre for debt arbitration.” While remaining neutral on the issue of Scottish independence, Jubilee Scotland is welcoming the Government’s recognition of sovereign debt as a key issue for Scotland’s international development policy. This is a great campaign success. It is recognised however that in either scenario following the referendum Jubilee Scotland’s work must continue to ensure unjust debts are given full consideration through an audit of Scottish and UK debts and a commitment made to cancel all those deemed to be unjust. Jubilee Scotland’s paper outlining their asks for debt justice in both a yes and no vote, and responses by the Yes Scotland and Better Together campaigns can be found here. The Scottish Government’s commitment appears in chapter 6 of the white paper.
2. Egypt has been revealed to be the most indebted country in the Middle East and Africa, seventh in the World. (Argentina remains in first place globally as the country least likely to be able to pay its debts.) Egypt’s debts now make up 79.8 percent of its GDP, totalling $234.4 billion which is the equivalent of $2600 for every Egyptian citizen. The likelihood of Egypt being unable to pay its debts has now risen to 37.9 percent. Egypt is a key case for Scotland and the UK with many debts owed by the country being to UK Export Finance for loans made during the Mubarak regime and for arms. Meanwhile, Kuwait plans to buy $2 billion of Egyptian bonds as part of a second aid package having already pledged $15 billion in aid alongside Saudi Arabia and the United Arab Emirates earlier this year. Read more on Egypt’s debts here.
3. Grenada is making plans to lower its income tax threshold on the recommendations of the International Monetary Fund (IMF) and as part of its debt restructuring programme. Grenada is currently seeking to hold a conference with all of its creditors to come to a mutual agreement about how to meet its debt obligations.
4. The IMF Fiscal Monitor Report estimates that Pakistan requires $76.9 billion, the equivalent of 30 percent of its yearly GDP to pay off its existing debts. This places it at the top of the of the list of indebted emerging countries and suggests it is going to find itself borrowing more in order to meet its repayments.
5. Several developing countries, including Jamaica, El Salvador and Pakistan, are failing to meet international development goals after rich countries reneged on a pledge to deal with their debts. Moreover, unjust debts in countries such as Greece, Portugal and Latvia are now increasing poverty at an alarming rate. These findings are part of Jubilee Debt Campaign’s ‘Life and debt: Global studies of debt and resistance’, published in October 2013. The report compares debt crises in nine countries: Egypt, El Salvador, Greece, Jamaica, Latvia, Pakistan, the Philippines, Portugal and Tunisia. Key findings include:
   • Jamaica pays more on its foreign debt repayments than Greece at a staggering 33 percent of its revenue.
   • Greece is spending 29 percent on its revenue on debt repayments.
   • El Salvador continues to spend 25% of government revenue on foreign debt payments, the debt originating from lending by the western world to the vicious military junta in the 1980s, whilst hunger and extreme poverty are increasing.
   • Pakistan is unlikely to be able to meet many of the Millennium Development Goals because of its debts, including those aiming to halve the proportion of people going hungry, eliminating gender disparity at all levels of education, and reducing by two-thirds the child mortality rate.

   The report also gives inspiring examples of the campaigns in countries for debt justice, for example calls in Tunisia for a debt audit.

6. At the Commonwealth Heads of Government Meeting in Colombo, Sri Lanka, 15-17th November 2013, on the issue of debt it was minuted that: ‘Heads welcomed the report of the Commonwealth High Level Mission on the debt and financing challenges of Small States. Heads emphasised the need to continue advancing global awareness of unsustainable Small States’ debt and the accompanying financial challenges they confront, building on the Mission’s recent work. They endorsed the recommendations of the Mission’s Report, underlining the importance of continued collaboration within the international community to address these debt and financing challenges and to build small states’ resilience as well as continued engagement on innovative solutions such as the Mission’s proposals for debt reduction and the inclusion of a vulnerability criterion in debt alleviation interventions and allocation procedures of international financial institutions. Heads reaffirmed their support for the Commonwealth Secretariat’s current debt management and recording work.’ It is reassuring to see sovereign debt maintaining a place on the agenda of the Commonwealth Heads of Government. The report to which they refer includes recommendations on the need for integration of resilience building of small states, provision of grace periods for debt repayment during times of natural disasters or other external shocks and provision of countercyclical loans. Whilst these are valuable contributions to the pursuit of debt justice, Jubilee Scotland believes these efforts must go further if they are to tackle the unjust economic systems which support existing lending and borrowing principles. Equally, more attention must be paid to the concept of ‘unjust debt’ and its necessary cancellation.
7. The IMF wants Sri Lanka to boost its tax revenues to cut both its budget deficit and public debts, a further demonstration of the IMF seeking to impose its economic policies on developing countries. Read the full story here.
8. Qatar has agreed to provide $150 million in debt relief to Palestine. This was announced by US Secretary of State John Kerry during Israeli-Palestinian peace talks in October although no further details were provided.
9. A new Eurodad report, ‘The new debt vulnerabilities. 10 reasons why the debt crisis is not over’ was published in November 2013. It finds that debt vulnerabilities have changed, but overall have not been substantially reduced. The number of bank failures has dropped since the height of the financial crisis which is good news. However, the downside is that governments have paid a high price to stabilise the financial sector, and sovereign debt levels have surged. It states that: Debt has not been canceled or paid off, it has simply been shifted from one balance sheet to another, and primarily from the private purse to public or government coffers. The opportunity to use the financial crisis for fundamental reforms in nation and international debt management and debt crises prevention and resolution has largely been wasted. To read a summary of the report and its recommendations as well as download a copy you can visit the Eurodad website.
10. A Bank of England report has criticised existing methods of dealing with sovereign debt crisis. Referring to bailouts in Greece, Ireland, Portugal and Cyprus, the authors say using public money to bail out nations leaves taxpayers shouldering an “inequitable” burden. They suggest that private creditors, those who lent indebted nations the cash in the first place, should instead foot the bill for any rescue. Whilst acknowledging that current trends in ad hoc bailouts in response to debt crises are poor, the report pays no attention to considering alternative longer-term solutions to debt workout upon which Jubilee Scotland campaigns. It maintains a commitment to bailouts and simply shifts emphasis from public to private rescue plans. Note: in a disclaimer the report states that the views are not necessarily the official view of the Bank of England, rather the authors of the paper.
11. US American Brooking Institution recently published a new paper on sovereign debt restructuring entitled ‘Revisiting Sovereign Bankruptcy’. It highlights creditors’ role in irresponsible lending, a positive statement in shifting focus away from placing blame on debtor countries for their debt burden. It also promotes the contribution of stakeholders, including NGOs and civil society, in discussions of debt restructuring. Jubilee Scotland welcomes these commitments. On the downside, however, there are only very weak proposals for a reformed scheme. Whilst understanding the need a statutory insolvency framework for sovereign states – a system through which debts can be restructured – rather than presenting alternative ways in which this can be done they point largely only to a wide range of challenges which are presented. Read a full account written by Jürgen Kaiser of Erlassjahr, a Eurodad member and a partner organisation of Jubilee Scotland.

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By Charlotte Snelling.

For much of the post-war period, Guatemala’s past has been a story of dictatorships, terror, and genocidal regimes. It is estimated that 200,000 people have died as a result of murder, torture, and extreme poverty whilst the country continues to be affected by a legacy of successive odious governments. It remains one of the most impoverished countries in Latin America and ranks at just 131 on the United Nations Human Development Index, out of a total of 187 countries. In the Americas, only Haiti ranks lower.[1]

A recent report by Jubilee Debt Campaign has been launched to investigate the build up of sovereign debt in Guatemala and the role this has played, and continues to play, in reproducing poverty across the country, particularly in its rural areas. It looks at how debt has been accumulated, the impact on the country’s economy, society, and population, as well as the steps needed to ensure the people of Guatemala are not left paying for the illegitimate actions and unfair treatment endured at the hands of their former leaders.

Guatemala has a long history of debt and exploitation by foreign powers. In the late 1970s and early 1980s, when the wave of terror was at its highest level, foreign lending to the country increased substantially. Successive loans of between $100 million and $300 million every year were granted from 1978 to 1982 and by 1985 Guatemala’s debt had reached $2.2 billion, an increase of over $2 billion in just 10 years. The majority of this debt was owed to multilateral institutions, in particular the World Bank, and today the country is still paying these institutions back over $400 million every year. This undoubtedly has important implications for Guatemala’s ability to rebuild and develop its economy alongside providing essential services to its citizens. Money which could otherwise be spent on moving people out of poverty and developing essential infrastructure is being shipped out of the country and into the pockets of Western lenders.

Guatemala, March 2009. Dozens gather to commemorate the 27th anniversary of the Rio Negro Massacre at Pak’oxom Peak in 1982. Photo: James Rodríguez / MiMundo.org

Significantly however, the loans granted to Guatemala were crucial in supporting the decades of terror its population endured, funding ill-conceived, unsustainable projects which impoverished families and led to displacement and destruction of rural communities. The Chixoy Dam is just one example but one which highlights some of the worst effects of the World Bank’s irresponsible lending. [2]In the late 1970s and early 1980s the Chixoy Dam project, $400 million of its budget financed by the World Bank and Inter-American Development Bank, acted only to exacerbate levels of violence and persecution against Guatemala’s indigenous people. In seeking to create a new reservoir as part of the project, the population of the Rio Negro region were threatened with eviction. When the local population resisted this pressure to move, their opposition was then exploited by the government as justification for counter-insurgency and increased violence against the Rio Negro community. It is estimated the project forcibly displaced more than 3,500 Mayan community members and led to 6,000 families suffering loss of land and livelihoods, with more than 400 people were massacred because of their opposition to the project. For the survivors the impact continues to be felt. A Probe International Report from 2001 states: “members of the Rio Negro community live in extreme poverty in comparison to neighbouring communities. However, before dam construction, the community enjoyed, relatively speaking, a high standard of living.”[3] Furthermore, World Bank loans for this project (and a second Chixoy Dam project in 1986) have cost Guatemalan governments $100 million in interest. The Chixoy Dam is a single example within a large back catalogue of odious debts originating from multilateral lending to Guatemala’s past dictatorial regimes. Worryingly the World Bank appears content to continue lending money to the country for new projects which threaten to exploit and impoverish even more communities.

A mural in Pacux, home of the Rio Negro survivors. http://upsidedownworld.org/main/guatemala-archives-33/1442-guatemala-the-forgotten-spirits-of-rabinal

As Barbara Rose Johnston at the Center for Political Ecology states, “the World Bank and Inter-American Development Bank… loans were the primary source of foreign aid to a nation ruled by a military dictatorship engaged in systematic state-sponsored destruction of Mayan peoples”[4]. Debt accrued in the period was loaned to illegitimate and unaccountable governments of which the lenders were well aware whilst only minimal, if any, token investigations into possible impacts of projects were conducted. It is unjust for new governments to be saddled with these debts and responsibility must be shared by the countries and multilateral organisations which funded and supported projects at the expense of the Guatemalan people.

The experience of Guatemala and this new report show that something needs to change. Not only should these illegitimate and destructive debts be cancelled, the accumulation of new odious debt has to be prevented. Lobbying for an audit of the debt in Guatemala and campaigning to force the World Bank to overhaul its current policy and apply ethical principles of justice, fairness, and sustainability to its future lending will be vital in this process.

Importantly though, we should also be looking closer to home. In the UK, UK Export Finance (previously the Export Credit Guarantee Department), a semi-autonomous government body existing to support UK exporters to enter in to international markets considered risky and where the likelihood of failure is high, has been responsible for numerous dodgy deals similar to that seen in Guatemala. Deals where UKEF is involved are typically made in the arms trade, aerospace or fossil fuel related industry (over 75 percent of UKEF’s observable transactions) and are often based in countries with unstable governments, despotic regimes, and areas of conflict, which further compounds their negative effects. Egypt, for example, owes the UK approximately £100mn which includes loans for arms made to the regimes of both Mubarak and his predecessor Sadat. Between 1985 and 1986 UKEF supported £250mn of arms sale loans to finance a tank factory near Cairo and a military city west of Alexandria.[5] As in Guatemala, the Egyptian people are now left paying for the actions of the governments which previously oppressed them.

Scotland has an opportunity to take a stand against unethical lending. It seems possible that, whatever the result of the referendum, Scotland will be given the powers to create export credits. We must campaign here to ensure that this agency will not follow the route of corrupt deals, human rights abuses and disregard for environmental considerations that has characterised UKEF, but instead lead the way in being a positive and socially responsible export agency, setting an example internationally of how exporters can be supported in a way that is ethical and fair[6].

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The post Guatemala: a study in human rights abuses appeared first on Jubilee Scotland.

Economics on the one hand, and justice and human rights issues on the other hand, are often discussed as separate phenomena; as ways of looking at the world that don’t connect or intersect. But I believe that it’s of fundamental importance that we consider them alongside each other. In this blog I would like to use the example of Egypt’s arms debt to the UK to argue this point, touching on the gaps in international law and the importance of lending in the often violent shaping of the political map.

Jubilee Scotland is campaigning at the moment alongside its sister organisation – Jubilee Debt Campaign – for the cancellation of $100 million is owed by the Egyptian people to the UK government.

We are asking for it to be cancelled because we believe it to be an odious debt. An odious debt is one taken on by an unelected dictator – in this case Hosni Mubarak – the repayment for which is then demanded from the people of the country. This is the moral equivalent of someone breaking into your house and taking out a huge second mortgage against it, which you then have to repay when you get back into the house.

This would be enough to make the debt odious, but in the case of Egypt there is another layer to consider. The debt was used to pay for Rapier and Swingfire missiles, Lynx helicopters and a tank factory, weaponry which would actually have been used to shore up the illegitimate Mubarak regime. So to use our previous analogy, the house owner is also having to pay for the weapons that kept them out of their own house

Unfortunately, international law doesn’t recognise the concept of odious debt. This ties into the wider fact that it only recognises sovereign states and leaders; individuals, or whole peoples even, have no personality in its eyes. To go back to the house example, national law would seek to protect the interest of the party whose house had been stolen, but international law, if it operated the same way, would recognise the existence of the house, but assume that whoever was in charge of the house was the rightful owner – a kind of ‘finders-keepers’ approach to ownership. It is not a Code of Law in the true sense, as first formulated in ancient Babylon, because it does not protect the weak against the strong. It’s a system in which individuals – and whole peoples – are totally exposed to the Great Predators of the global economy: dictators, arms manufacturers, and lenders.

Mubarak’s arms debts are owed to a branch of the UK government called the Export Credit Guarantee Department (now renamed as UK Export finance), who use British tax-payers’ money to underwrite ‘high risk’ exports such as arms deals, meaning that both the arms exporter and the dictator remove themselves from the equation, leaving a debt owed by the people who suffered from the deal to us, the UK taxpayers.

The Export Credit Guarantee Department are the UK’s Export Credit Agency. Every major world power has one of these bodies, whose job it is to promote and support risky investments overseas. By using tax-payers’ money to underwrite deals they totally transform the risk profile of these risky deals, in effect creating a market where otherwise there wouldn’t be one.

For decades, Export Credit Agencies such as the ECGD have been used to set up trading relations with dictators in all parts of the world, including President Suharto in Indonesia and President Marcos in the Philippines. Their activities have provided domestic weapons manufacturers with stable overseas markets, have shored up regimes sympathetic to the West and have ensured a steady flow of debt repayments.

Export Credit Agency lending forms part of a wider portfolio of lending and aid – and it’s worth knowing that to qualify as ‘Overseas Development Assistance’ (the most widely used concept of aid) capital flows only have to have a 25% component of grant finances. This lending has been used for many decades to shape the map of the world, and to ensure that governments sympathetic to lending powers remained in charge of the house.

By sympathetic, we mean sympathetic to the supporting superpower, rather than sympathetic to the people of the country. As Franklin Roosevelt famously said of Nicaragua’s dictator Somoza, ‘he may be a son of a bitch, but he’s our son of a bitch.’

Because the bloody origins of many of these debts are not widely discussed, all debt campaigners are frequently asked whether we should in fact cancel debts to poor countries without being very vigilant on how the money is spent. To my mind this would be shutting the stable door after the horse has bolted. In the case of an Egypt or Indonesia the money for these debts has already been spent by a dictator on arms – often under the lender’s very vigilant eye.

Cancelling the debts is morally essential because it’s wrong to keep collecting money from the people whose oppression we have unwittingly colluded in. But if we are serious about stopping oppression we need to put a stop to bad lending, not just cancelling pre-existing bad debt.

In 1997, when Robin Cook became Foreign Secretary, he spoke of an ‘ethical foreign policy’. This statement was widely derided at the time as being a joke. In 1998, the scoffers were to some extent proved to be right, when the UK’s Export Credit Guarantee Department underwrote a huge sale of jet-fighters to the Indonesian dictator Suharto. The phrase ‘ethical foreign policy’ – even the idea of having an ethical foreign policy – became at this point even more bankrupt.

This trend needs I believe to be reversed. We may view ourselves as individuals, or as citizens of the world, we may campaign or give as individuals, and strive as campaigners to change the international system but we should not ignore the large proportion of our individual global impact which is mediated through UK foreign policy. It’s for this reason that, as well as building individual links with debt campaigners around the world, and while campaigning for an international system through which odious debts can be recognised and cancelled as as such, Jubilee Scotland also campaigns – alongside Campaign Against the Arms Trade and Amnesty International – for the radical reform of the Export Credit Guarantee Department.

Find our more about the campaign to end unfair lending at www.cleanupexports.org.uk and Jubilee Scotland at www.jubileescotland.org.uk

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