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At their meeting in London yesterday before next month’s G8 summit in Gleneagles, Gordon Brown and his fellow finance ministers gave their backing to a proposal from France and Germany to impose a levy on air tickets.
The “air ticket contribution”, described as a tax by Germany, could raise up to $10 billion (£5.5 billion) a year on the basis of a tax of just $1 (55p) a ticket, France and Germany have claimed. But the proposal is likely to meet fierce resistance from the airlines.
“The air ticket tax; this is now on the working programme of the G8,” said Hans Eichel, Germany’s finance minister, after the meeting. “No one in the G8 has said anything against it. It’s now on the agenda.”
France and Germany will run a pilot project to test the feasibility of the scheme. It is not clear yet which airlines will be affected, and whether it will apply to domestic as well as international flights.
The backing for the proposal came as part of a deal that the chancellor described as “the most comprehensive statement finance ministers have ever made on debt and poverty”.
The agreement, which John Snow, the US treasury secretary, said was “historic”, will immediately write off $40 billion of debt owed to the World Bank, International Monetary Fund and African Development Bank (ADB) by 18 “heavily indebted poor countries”, 14 of them in Africa.
They include Ethiopia, Ghana, Mozambique, Rwanda, Tanzania and Uganda.
Brown, who acknowledged there were “moral hazard” concerns about cancelling debt that could affect the future creditworthiness of the countries concerned, said the world’s rich nations — America, Britain, Germany, France, Japan, Italy and Canada —- had agreed to put up extra money to meet the interest payments these countries and others would have made to the World Bank and the ADB over the next 10 years.
Another nine poor countries are close to a deal to cancel their debt, while 11 others could do so in the coming years, bringing the total helped to 38 and the amount of debt cancelled to a potential $55 billion.
Britain will pay up to £530m in interest over 10 years, with similar amounts from Germany and France. America will pay up to £960m. “This is not a time for timidity but a time for boldness,” Brown said. “This is not a time for second best.”
The IMF and World Bank would maintain “strict supervision” to ensure the cash freed went to health, education and alleviating poverty.
“We will take further steps to root out corruption,” the chancellor said.
Romilly Greenhill of ActionAid said: “The debt deal is very good news for the people in the 18 countries that will immediately benefit, and who will now see their debts written off. But it will do little to immediately help millions in at least 40 other countries that also need 100% debt relief.”
The Gleneagles summit is expected to back a limited version of Brown’s international finance facility, in which money is raised for poor countries on the security of their future aid flows. A £2.2 billion finance facility for immunisation is expected to be agreed.Yesterday’s meeting also opened the way for the oil producing countries, which have benefited from record prices this year, to give more to the world’s poor countries. A new trust fund is to be set up, aimed at helping countries affected by fluctuations in commodity prices.
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