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I beg to move,
That leave be given to bring in a Bill to require certain companies engaged in oil or gas extraction, and other mining activities, to disclose the type and total amount of payments made to any national government, or any company wholly or partly owned by a national government;
and for connected purposes.
This Bill is designed to make it a legally binding requirement for companies involved in natural resource extraction that are listed on the London stock exchange to provide in their annual report details of the payments they have made to national Governments on a project-by-project and country-by-country basis.
I am a passionate believer in international development because I deeply believe in the principles of equality and social justice, both at home and abroad. That is why, on entering the House, I immediately put myself forward for election to the International Development Committee.
I hope you will indulge me for a moment, Mr Deputy Speaker, if I ask you to picture a country filled with vast areas of natural beauty and heritage—a country in which there is an abundance of natural resources. You will be surprised at my next request when I ask you to picture that very same country as being home to some of the most impoverished and poorest people in the world. Sadly, there are many countries around the world where this is precisely the case—countries that have significant natural resource wealth in terms of oil, gas and precious metal reserves but for which this natural wealth has not translated into the economic prosperity that it should have.
Right hon. and hon. Members may have heard this situation described as “the resource curse”. In the absence of strong democratic institutions and strong governance, the people of these countries are unable to hold corrupt officials to account, as those officials siphon off public money for their own benefit instead of using it for the public good.
The figures from Equatorial Guinea display just one example. Equatorial Guinea had the 12th highest gross domestic product in the world in 2008, with more than $30,000 per capita. However, it also ranked 121st out of 177 countries on the United Nations human development index. Africa as a whole exported over £400 billion-worth of oil and minerals in 2008—nearly nine times the value of international aid to the continent, yet millions still struggle to survive.
One major problem is a lack of transparency. As Paul Collier, the director of Oxford university’s centre for the study of African economics points out, the sale of natural resource extraction rights in the developing world has so far
“been spectacularly deficient in respect of transparency”.
In recent years, the UK has been a leader in the promotion of corporate transparency. My right hon. Friend Mr Brown put tax transparency on the agenda for the G20 in 2009. The international extractive industries transparency initiative, EITI, launched by the former Member for Sedgefield when he was Prime Minister, has also played a fantastic role in improving voluntary transparency in the extractive industries.
This time, however, America is blazing the trail for improvements in tax transparency. The bipartisan Cardin-Lugar amendment to the Dodd-Frank Bill, passed in the United States last year, has given the voluntary rules of the EITI the force of law in the US. Backing that amendment, President Obama said:
“We know that countries are more likely to prosper when governments are accountable to their people…That’s why we now require oil, gas and mining companies that raise capital in the United States to disclose all payments they make to foreign governments”.
It represents a long-awaited regulatory change, championed globally by a 600-strong group of non-governmental organisations and charities known as Publish What You Pay, and could ultimately improve the lives of millions of people in developing countries that are consistently resource-rich but cash-poor.
In effect, the Bill would replicate the measures in the Cardin-Lugar amendment for UK listed extractive companies, supporting the move towards a global standard on the issue and a first step towards full tax justice for developing countries. The changes would enable civil society and NGOs to hold Governments to account. Albert Oduman, Uganda’s shadow Minister for Finance, in a recent video interview for the ONE campaign, expressed incredibly powerfully his support and appreciation for the new global transparency efforts, which will empower him with the information to challenge corruption in his own country.
In one of my first speeches in the House, I emphasised the importance of aid in the developing world. At the same time, however, I stressed the need to promote stronger governance through an accountable state-citizen relationship. The Bill seeks to do precisely that, and the potential benefits are huge. Transparent, effective tax systems and the reduction of corruption could allow money otherwise lost to be spent on schools, doctors, clean water and infrastructure—exactly the kind of projects on which British aid money is spent now. Improving access to their own wealth could lead many developing countries out of poverty, away from aid dependency, and into self-sufficiency and sustainable growth—the ultimate development goal.
With more than 80 extractive companies listed on the London stock exchange, representing more than £1 trillion of capital, the UK has a responsibility to take action on the issue, for the benefit not only of the developing world but of UK business. Many of the British companies that would be caught by a UK rule are already listed on the New York stock exchange, and therefore will already be providing the information in the near future. Bringing the London stock exchange in line with the New York stock exchange would level the playing field for those organisations already reporting, by requiring the remaining companies in the UK extractive sector to do exactly the same.
Transparent disclosure of payments will also help responsible companies reduce the reputational risk in operating in unstable nations and states where false accusations of supporting corruption are only too easily made. Transparency would also help UK investors to value companies and evaluate regulatory, taxation and geopolitical risks, while enhancing company accountability and governance. The improved stability that we hope would develop in resource-rich nations would also provide a better environment for investment, both for British business ventures and UK-sponsored aid projects.
Although I have been working on the Bill for several months, its introduction could not have come at a much better time. During the recess, we had the welcome news that the Chancellor and the Business Secretary are backing President Sarkozy’s plans for Europe-wide rules on the issue. I believe that EU legislation is crucial if the global drive for increased transparency in the extractive industries is to be truly successful. That is why I anxiously await a statement in the House from the Chancellor, clarifying what active steps the Government will take to ensure swift progress at EU level.
However, potential EU regulation should not be seen as a reason for us to withhold from legislating independently. Natural resources are finite, and obtaining EU approval and implementation of such rules could take a considerable time. The amount of money disappearing every day could translate into lifting millions of people out of poverty in developing countries. Independent action by the UK would not jeopardise EU progress, but would strengthen the campaign by setting an important example. It would represent a big contribution to international development at little or no cost, while at the same time promoting the kind of corporate social responsibility of which we can all be proud.
I am delighted to say that the Bill enjoys strong support from all three main political parties. As with many development issues, it can be said genuinely to transcend party politics. I thank all the Members who have shown their support by being present today, and I especially thank those who have agreed to sponsor the Bill.
This Bill has the support of non-governmental organisations, independent economists, and leaders of the developing world and developing countries. It has cross-party support in the House, and above all it has the support of the British people. In the last 10 days alone, nearly 9,000 people have signed a ONE campaign petition on the issue with which it deals. The Financial Times has said that the United States has shone a light into an area that is widely considered to be shrouded in mystery, and has applauded the brave leadership that it has demonstrated on the issue. It is now up to us to show similar leadership here in Europe.
International development is not just about cash and “percentage of GDP” commitments; it is also about leading by example and setting global standards. The developing world does not have time to wait for Europe to catch up. A genuinely sustainable and cost-effective approach to international development demands that the UK Government act now.
Question put and agreed to.
That Anas Sarwar, Tony Baldry, Fiona Bruce, Malcolm Bruce, Richard Burden, Mr Tom Clarke, Mr Tobias Ellwood, John Glen, Eric Joyce, Jeremy Lefroy, Catherine McKinnell and John Thurso present the Bill.
Anas Sarwar accordingly presented the Bill.
Bill read the First time; to be read a Second time on