New CAFOD analysis shows the impact UK debt action could make in the face of the damaging British aid cuts

New research from CAFOD reveals that decisive action on the debt crisis could vastly improve the lives of people living in poverty who have been impacted by the damage caused by Britain’s aid cuts, which were announced by the Prime Minister one year ago today, without costing UK taxpayers a penny.

Reducing debt payments for low-income countries at 10% of revenue would unlock new funds – delivering major gains in water and sanitation, restoring and growing school enrolment, and protecting health systems.

As 90% of low-income country debt is governed by English law, the UK has unique power to force private creditors to cooperate and deliver transformative global relief.

The analysis, compiled by CAFOD’s Lead Economist, Maria Finnerty, compared figures from Save the Children, Debt Justice UK and the University of St Andrews, finding that gains from action on the debt crisis could more than counteract the projected lives lost and services scrapped as due to UK ODA cuts.

The modelling is based on a scenario in which debt servicing costs for low-income countries are reduced to a more sustainable level of around 10% of government revenue.

Maria Finnerty said:

“UK action is not only a moral necessity that would save lives in the wake of sweeping aid cuts – it’s also economic common sense. Reversing aid cuts and action on debt must go hand in hand. Our laws allow lenders to charge extortionate interest rates on the grounds that they may not get paid back in full – and then sue in full amount in English courts. This is a clear contradiction.

“We can only limp on without a functional debt relief process for so long while the number of countries in debt distress go up and up. Sooner or later, something will have to change. If the UK government doesn’t act to make private lenders face the consequences of their actions, it will be UK taxpayers who end up having to bail them out.

“It’s simple. Pass a private creditors participation law, like the UK has done before. Ground it in the extensive research done by dozens of world-leading economists, including Nobel laureates. And watch as countries newly freed from punitive debt payments provide clean water and sanitation for tens of millions, classrooms full of children, properly staffed medical clinics, and budgets for growth rather than servicing yesterday’s loans. The cost to the UK Treasury is zero. The benefits are immeasurable. The only scarce resource is political will.”