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Lord Borrie: My Lords, does the Minister agree that, technically, an alliance can be a merger under the Fair Trading Act? Therefore, would it not be desirable for his own department, the Department of Transport, to make

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representations both to the Office of Fair Trading and, indeed, to DGIV in the European Community that it is likely to be, at the very least, antagonistic to the public interest of this country?

Viscount Goschen: My Lords, those are the very matters the Director-General of Fair Trading is considering. He is doing so under the mergers provisions. I have confirmed the basis upon which the proposed alliance is to be taken forward if that is the case. However, it is for the Director-General of Fair Trading to decide on the competitive benefits or disadvantages.

Lord Gisborough: My Lords, is it not a fact that almost all the airlines are creating alliances with other airlines? Indeed, it is nothing unusual; it is just what everyone else is doing.

Viscount Goschen: My Lords, it is certainly the case that there has been a global trend towards alliances between airlines. They believe that there are benefits to be achieved by way of code-sharing and in areas such as marketing.

Lord Clinton-Davis: My Lords, does the Minister agree that the overriding interest in the matter is that of the travelling public? Does he also agree that we are discussing a very complex issue: first, for the reason that my noble friend Lord Borrie mentioned; and, secondly, for a whole variety of other reasons? It is a very controversial issue. There is opposition to it from a number of smaller airlines in the United Kingdom.

In those circumstances--and, again, for the reasons just cited by my noble friend--is it not right that we should be satisfied that such alliances do not conflict with the competition rules of the European treaties? Surely it is appropriate that not only the Office of Fair Trading and the House of Commons Select Committee, but also the European Commission (operating under Article 89), should investigate such issues and ensure at all times that the public is made privy as far as possible to the evidence which is revealed and which must directly affect their interests above all.

Viscount Goschen: My Lords, on the variety of the noble Lord's points, I would certainly accept and agree that the interests of consumers are most important. When negotiating air service agreements with other countries, we take into account the interests of UK consumers, the interests of UK airlines and the interests of the regions, the economy as a whole and UK airports. That is rather different to what is being considered as a commercial arrangement between two companies. I agree that it is highly complex and that it is appropriate for the Office of Fair Trading to investigate the matter. I understand that the Commission has said that it will conduct an investigation into all alliances between Community and US carriers in recent

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years. However, I must stress that that is a wider investigation into all the recent alliances that have taken place.

Lord Clinton-Davis: My Lords, can the Minister confirm that the Commission proposes to investigate a number of such alliances and not exclusively this one?

Viscount Goschen: My Lords, I believe that that is exactly what I said in my response.

Lord Pearson of Rannoch: My Lords, as the noble Lord, Lord Clinton-Davis, has introduced the role of the European Commission, does my noble friend the Minister feel like suggesting to the Commission that it might be better employed preventing the massive subsidies which are paid by other countries to their state airlines to the detriment of our own?

Viscount Goschen: My Lords, I agree with my noble friend that the issue of state aid is incredibly important when considering the European market in aviation. The Government have made their position very clear indeed with regard to the Air France state aid of some £2.4 billion which was approved. We do not believe that that is appropriate and we are supporting and taking our own legal action in that respect. On the other hand, I understand that the Commission can use the restrictive powers contained in Article 89 of the Treaty.

Poor Countries: Debt Burden

3.26 p.m.

Lord Rea asked Her Majesty's Government:

    What decisions, if any, regarding the reduction of the international debt of low income developing countries were made at the recent meeting of the G7 in Lyons.

The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, I am pleased to report that the summit endorsed further steps to offer a number of highly indebted poor countries an exit from their unsustainable debt burdens. They are set out in the communique, copies of which have been placed in the Library of the House.

Lord Rea: My Lords, I thank the Minister for that Answer which was, perhaps, optimistic in tone but a little lacking in immediate substance. Is it not a pity that the Naples terms, which were agreed two years ago, for a reduction of bilateral debt of the most severely indebted countries by two-thirds was not increased to a four-fifths reduction, as was hoped, thus helping those nations to rejoin the world's economy both to our benefit and theirs? Can the Minister say what recommendations the G7 and the Government are making as regards the forthcoming meeting of the Bretton Woods financial institutions in September?

Baroness Chalker of Wallasey: My Lords, it would be very useful if the noble Lord were to read

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paragraphs 46 to 50 of the G7 summit communique because it states there quite clearly what is going on. I believe that I am right to be more optimistic than the noble Lord. I say that because the IMF's ESAF (the Enhanced Structure Adjustment Facility) will be on more concessional terms in the future. There is absolutely no doubt that the summit urged the Paris Club of government creditors to improve on the 67 per cent. debt reduction available under the Naples terms, from which 18 countries have already benefited. We shall encourage the Paris Club to offer up to 80 per cent. debt reduction in certain cases. Indeed, we are working on that for the meetings which will take place in the autumn.

Lord Clark of Kempston: My Lords, does my noble friend the Minister agree that this was a purely British initiative? Does she further agree that my right honourable friend the Chancellor of the Exchequer should be congratulated?

Baroness Chalker of Wallasey: My Lords, I am extremely pleased to agree with my noble friend. It was indeed a British initiative, taken forward by the Prime Minister and known, first, as the "Trinidad Terms" in 1990. In May of this year, creditors wrote off some 500 million US dollars, which is more than 50 per cent. of Guyana's official bilateral debt. My right honourable friend the Chancellor of the Exchequer, Mr. Kenneth Clarke, who took the matter forward, did not let a single opportunity go by to press the case for debt reduction so that those countries could stand on their own feet again. Britain has taken the lead every time, including action on multilateral debt. We shall continue to do so.

Lord Judd: My Lords, while I commend the Government on their efforts on debt, is it not disappointing that the Lyons meeting still failed to agree arrangements for the sale of IMF gold stocks to fund multilateral debt relief? Does the Minister agree that the proceeds of such gold sales should be invested directly in debt relief and not used simply to replenish the IMF's structural adjustment facility? Given that IMF lending in the past has been part of the cause of the present debt crisis, does the Minister agree that further lending--even on more concessionary terms--is not an adequate response?

Baroness Chalker of Wallasey: My Lords, the noble Lord, Lord Judd, needs to differentiate between what is really happening and the art of the possible in the reduction of multilateral debt. We expect multilateral creditors to maximise the use of their existing resources. As the noble Lord knows, bilateral creditors are already doing this through the Paris Club. This was very much the spirit of last year's G7 summit which encouraged the better use of all existing World Bank and IMF resources. The IMF has moved a long way on this. Not all countries, sadly, have supported the sale of gold as a means to fund reduction of multilateral debt, but we are in a better position now than we were even six months ago. We are continuing to work at it and we are

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gradually having more and more success. I am glad that the noble Lord recognised that in his remarks. We shall certainly make sure that we make yet further progress.

Lord Avebury: My Lords, is the Minister aware that the announcement she has made about the remission of debt for Guyana will be particularly welcome in view of the Herculean efforts made by President Jagan to put the economy back on a sound footing and his great successes hitherto which will be materially assisted by this remission? Can she also say something about another country which has been mentioned frequently in your Lordships' House; namely, Uganda? Was anything special done at the summit to remit the debt of that country?

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