Brown condemns poverty 'vultures'

Mr Brown wants to end child poverty around the world

An extra $1bn is urgently needed to help the world's poorest countries cope with the global economic downturn, UK Chancellor Gordon Brown has said.

We must do everything we can to stop this shameful practice

Gordon Brown

Mr Brown has also attacked so-called Vulture Funds, which have been accused of preying on the world's most heavily indebted countries.

He branded the funds - which buy up countries' debt at a knockdown prices and then take them to court to recover the full amount - "morally outrageous".

At a speech to a United Nations summit on children in New York, Mr Brown set out an ambitious plan to "banish ignorance and poverty from Earth".

'Shameful'

Mr Brown discussed vulture funds with UN secretary general Kofi Annan, former South African president Nelson Mandela and his wife Graca Machel.

Aid experts fear the funds could undermine long-term debt relief efforts, enmeshing some of the world's poorest in costly court cases.

"Whenever a country has to defend a legal case it has to divert considerable time, attention and resources away from focusing on poverty reduction, health and education," Mr Brown said.

(Vulture funds) are literally the carrion-eaters of the international financial system

Henry Northover, of aid agency Cafod

"And we must do everything we can to stop this shameful practice."

He called on the international community to give free technical advice to countries facing legal action.

Developed countries should also offer "expert financial advice on debt restructuring to prevent future legal claims."

Doomed court battle

Vulture funds are not yet widespread.

But recent test cases have opened up the possibility of private financial institutions in rich countries making huge profits by suing poverty-stricken nations.

In one recent case, a company received $58m from Peru after successfully suing for full repayment - plus interest - of a $20m debt which it had acquired for just $11m in 1996.

Mr Brown fears that other poor countries will cave in to vulture funds rather than face a doomed court battle.

Measures already in place - under the Highly Indebted Poor Countries (HIPC) initiative - have cancelled $62bn in debt owed by 26 of the world's poorest states.

Powerful

But Mr Brown warned that a further $1bn would be needed to offset falls in commodity prices as a result of the global slowdown.

Gordon Brown: Wants more aid spending

He also called for the richest countries to back a World Bank initiative to ensure the commitment to providing primary education for all by 2015.

The world needed a "partnership for children so wide, so powerful and so determined that no obstacle should be allowed to impede its path or progress," Mr Brown said.

He repeated his pledge to "substantially" increase the share of the UK's national income on aid.

And called on other countries in Europe and America to follow suit.

'Punishing' debt

"If globalisation is to considered a success, the real test is that the world's children must become its beneficiaries not its victims."

Henry Northover, a public policy analyst at the CAFOD aid agency, welcomed Mr Brown's attack on vulture funds.

"Vulture funds are in clear breach of international debt cancellation agreements.

"By feeding off the debt burdens of poor countries with high rates of infant and maternal mortality, they are literally the carrion-eaters of the international financial system."

'Monopolistic control'

He went on: "Gordon Brown's support for debtor governments' legal fight in the US is welcome.

"But this issue also points to the need for an internationally binding debt arbitration mechanism.

Currently, creditors enjoy a monopolistic control over the pace, timing, eligibility and volume of debt write offs.

"A more neutral decision-making body is needed, where the interests of poorer governments and poverty reduction are put on a more equal footing with richer more powerful creditors."