Amount of the limit on government assistance

Commonwealth Development Corporation Bill – in the House of Commons at 4:15 pm on 10th January 2017.

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Amendment proposed: 3, page 1, line 4, at end, insert—

“(1A) After subsection (1), insert—

(1A) The amount specified in this subsection is whichever is the lesser of the following amounts—

(a) £6,000 million,

(b) £1,500 million plus the amount determined in accordance with subsection (1B).

(1B) The Secretary of State shall determine the amount for the purposes of this subsection by estimating the amount which will constitute 4% of official development assistance in the relevant period determined in accordance with subsection (1C).

(1C) That period begins with the financial year in which the Secretary of State considers that the Crown’s assistance to the Corporation (determined in accordance with subsection (2)) will exceed £1,500 and ends at the end of the fourth subsequent financial year.

(1D) For the purposes of this section, ‘official development assistance’ has the same meaning as in the most recent annual report laid before each House of Parliament in accordance with the provisions of section 1 of the International Development (Reporting and Transparency) Act 2006.” —(Patrick Grady.)

This amendment would replace the proposed limit on government assistance under section 15 with a new amount, expressed as either £6 billion or the existing investment of £1.5 billion plus a sum not more than 4% of forecast official development assistance over a five year period, whichever is the lesser amount.

Question put, That the amendment be made.

The House divided:

Ayes 244, Noes 299.

Division number 118

See full list of votes (From The Public Whip)

Aye

No

Question accordingly negatived.

Third Reading

Photo of Rory Stewart Rory Stewart The Minister of State, Department for International Development 4:49 pm, 10th January 2017

I beg to move, That the Bill be now read a Third time.

I would like to begin by reiterating my thanks and the tribute we owe to right hon. and hon. Members on both sides of the House for their shared belief in the importance of international development. At the absolute core of the Bill is our moral obligation to some of the very poorest and most vulnerable people in the world. I pay tribute to right hon. and hon. Members for the important points raised, which will be reflected in the new strategy as it comes forward.

I will briefly lay out once more why believe that this is a good Bill. At its core is our understanding that there is extreme poverty and suffering in the world and that economic development will play an important part in addressing it. There is enormous demand in the poorest countries of the world for well-paid jobs. It is one of the first things that any of us discover when we go to Africa and other developing regions. As the Chairman of the International Development Committee, the hon. Member for Halton (Derek Twigg) said, 90% of the growth and employment in the poorest countries of the world is currently driven by the private sector. As he also said, Africa requires 15 million more jobs a year. Every one of those well-paid jobs is an opportunity for a family to deliver the stuff we all care about—for parents to provide education for their children and the healthcare their families need. Above all, it is through the revenue these jobs generate for Governments that a long-term sustainable future can be maintained. That is what allows a Government to pay for their education and healthcare systems and, if there is an earthquake or some other natural disaster, to access the resources to address it. In the end, the only long-term sustainable path is through the generation of that economic development and growth.

Why CDC? We have chosen CDC because it brings together two important things: on the one hand, the rigour of the private sector and its ability to work out whether investments make sense—are there genuine markets for these goods; can these jobs really be sustained? —and, on the other hand, the values of the public sector. The latter are what ensure we go into the hardest countries in the world—for example, that we do renewable energy in Burundi or the Central African Republic or get into Sierra Leone when Ebola happens—and, above all, ensure that investments are not about short-term commercial returns but are patient, long-term investments of the kind that the commercial sector will often not deliver.

Why CDC? Well, having been established in 1948, it is the longest-serving, as well as the best, development finance institution in the world. It proved it in the 1960s, through its investments in Kenya, and, much more recently, since 2012, with its fantastic reforms, which we have talked about at all stages of the Bill, on salaries, transparency, offshore financial centres, the geography of investments and the sectors in which we invest, all of which is summed up in the development impact grid. That is what answers a lot of the points made in the discussion today, and that is what allows us to make sure that every investment focuses on the areas that generate the most jobs and on the countries where investment is most difficult, where the least capital is available and where GDP per capita is lowest.

We can see this in the real world: in the 17 million indirect jobs created by CDC; in its investments in places such as Burundi and the Central African Republic; in the hydroelectric investment in eastern Democratic Republic of the Congo—not an easy place to invest in—which the Chairman of the International Development Committee referred to; and, actually, in the Globeleq investment, where CDC’s investment will help to generate 5,000 MW of power in Africa over the next decade. To put the latter in context, Africa managed only 6,000 MW over the previous decade, so that is almost the entire generation of Africa over the previous decade being driven by a single company supported by CDC. Moreover, there is value for money for the taxpayer because the money is recycled, and the need is absolutely there, as we can see from the fact that we need $2.5 trillion of investment by 2030.

In conclusion, our Department will do many other things besides CDC. Much of the money will continue to flow through NGOs such as Save the Children, CARE and Oxfam. Many of our investments will be with valued partners such as UNICEF. More than 90% of the money we will spend through overseas development assistance will continue to go to health, education and humanitarian assistance. Within that, not all the money in economic development will go through CDC. It will also go through our investments that will take place through support to Governments and technical assistance. However, that CDC investment, combining the rigour of the private sector, the focus on markets and the values of the public sector, reflects the values of the British public who care about poverty and show in their own philanthropic giving how much they care about some of the most vulnerable people in the world. We are showing our respect for the British people by pushing forward with a proven model that will provide the sustainable growth required to address some of the most vulnerable and poorest people in the world. This is our moral obligation.

Photo of Imran Hussain Imran Hussain Shadow Minister (International Development) 4:55 pm, 10th January 2017

I associate myself with the Minister’s comments in thanking right hon. and hon. Members of all parties who have participated in what I believe has been a very constructive debate—irrespective of whether the amendments and new clauses have been accepted. What they set out has been utilised in the best possible way, as hon. Members have used them to raise some very important points. I offer my thanks, too, to all the non-governmental organisations that supported us throughout the process, to those who came before us in Committee to present written and oral evidence and to staff in the Public Bill Office, whose assistance has been invaluable, as always.

I would like to thank my hon. Friends who have spoken with great concern and passion about the Bill, and I particularly mention my hon. Friend Stephen Doughty, whose experience in the Department for International Development is widely respected and was visibly expressed in today’s debate. I thank my hon. Friend Alison McGovern, who is no longer in her place, who also served outstandingly in Public Bill Committee. I do not want my hon. Friends’ valuable contributions to go unnoticed, and I include that of my hon. Friend Stephen Twigg, the Chair of the International Development Committee, who always makes a passionate case and has an informed stance on the matters in hand.

Let me be clear that in today’s constructive debate no Member has opposed the principle or spirit of the CDC itself, and no one has criticised its role and mission statement. All Members, particularly Opposition Members, have made the point time and again that we must not lose sight of the CDC’s sole or founding principle, which is poverty alleviation. We have all accepted that, and we have had constructive debates in Committee and on Report. The amendments and new clauses that were tabled have had some support from across the House. Some were tabled as probing amendments, but some were amendments intended to strengthen the Bill.

Throughout the Bill’s passage, we outlined a number of concerns that we held over its provisions, including on the accountability and scrutiny of the investments made by the CDC, on the need of the CDC to focus its investments on efforts to alleviate poverty and on the necessity of a business case from the CDC. These concerns have been fundamental to our position on the Bill, and they are concerns about which we have sought strong assurances from the Government.

On accountability and scrutiny, we had concerns, as illustrated in our amendments, over the fact that CDC investments are not independently assessed on a frequent and regular basis. The absence of such assessments undermines the credibility of the CDC and its investments, and it weakens public confidence that taxpayers’ money, through DFID, is being spent by the CDC on efforts to alleviate poverty and help the poorest in the world. It is vital for every pound, every penny, of development to be directed towards that goal, and strong, independent scrutiny of the development impact of the investments would assure us of that.

We have heard assurances from the Minister today and in Committee that he would welcome further independent assessment by the Independent Commission for Aid Impact. I feel that he has listened, and I am grateful to him for that. We have also been assured that the annual reports and accounts provided by the CDC contain ample information, and that the CDC will be held to account for any discrepancies by either the Public Accounts Committee or the International Development Committee. I am sure that they will make any such discrepancy the subject of inquiries, as they have in the past.

As I have said, it is vital for us to ensure that the CDC’s investments focus on the alleviation of poverty, which is DFID’s legal aim and purpose. Given past investments involving the construction of luxury hotels and shopping centres in well-developed areas, Labour Members were concerned about the possibility that the CDC would use its additional finance to return to such activity. However, the National Audit Office report, which was published just before the debate on Second Reading, makes it clear that that is no longer the case, following the important reforms set in motion by Mr Mitchell, who is not in the Chamber today.

The Minister has been kind enough to provide assurances in response to some of the concerns that have been expressed today, so we will not oppose the Bill’s Third Reading.

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford 5:02 pm, 10th January 2017

Whether people live in the United Kingdom, Tanzania or Colombia, the most important route out of poverty is a good job or a good livelihood, and that is why I fundamentally support the work of the CDC. It has done excellent work throughout the world for nearly 70 years, and in recent years it has concentrated on the most needy countries, where there is the highest level of unemployment or the highest level of poverty. I welcome the fact that the Government are to invest more through the CDC in the coming years.

However, I think that today’s debate, and our debates in Committee and on other occasions, have made clear that the CDC must be careful. It must invest in areas in which commercial investors would not normally invest; otherwise, it should be the commercial sector that invests in them. The CDC must invest in the areas that create the greatest number of jobs in return for the investment made. That will often involve agriculture, and it will often involve difficult investments, because it is not easy to invest in agriculture in remote areas. However, that is what the CDC is there for: it is not there for an easy life. I know that—given the management that it has had recently, and given the calibre of its staff—it is up to those challenges, and I welcome the Bill.

Photo of Patrick Grady Patrick Grady Shadow SNP Spokesperson (International Development) 5:03 pm, 10th January 2017

My I add my thanks to all the stakeholders and staff who have contributed to the Bill process? This is the first piece of legislation on which I have worked as an SNP spokesperson, so I am particularly grateful to the Clerk of Bills for his advice, to my staff and the SNP research team, and to the various non-governmental organisations that have provided input. I thank my hon. Friends the Members for Edinburgh East (Tommy Sheppard), for Coatbridge, Chryston and Bellshill (Philip Boswell) and for Kilmarnock and Loudoun (Alan Brown) for their contributions during the Bill’s various stages. I also recognise the commitment and hard work of the CDC’s staff, and their positive engagement with the Opposition parties.

This is the first piece of DFID legislation in the current Parliament, but I wonder whether it will be the last. The Minister might be aware that I tabled a question to the Secretary of State about the applicability of the International Development (Reporting and Transparency) Act 2006 now that the millennium development goals it requires DFID to report on have been replaced by the sustainable development goals. The International Development Committee proposed a consolidating international development Act to bring together all the various pieces of legislation passed over recent years. Perhaps that is not such a bad idea, especially as the debate about the purpose of aid and development seems to be getting louder.

As my hon. Friend the Member for Edinburgh East said on Report, throughout the Christmas recess there seemed to be a drip-feed of very negative stories about aid spending, particularly in the gutter press. It is absolutely right that examples of waste and inefficiency are exposed and questions asked about value for money, but the answer is to improve transparency and efficiency, and to measure impact—especially over the longer term—and not simply to cut off the supply or take heavy-handed, but ultimately counter-productive, action.

The debate on the CDC Bill has catalysed a broader debate about the use and purpose of aid, and the Government can be assured in the coming months that the SNP will be happy to support the cross-party and public consensus on our moral duty to help people most in need around the world, and the symbolism and very real impact of meeting the 0.7% aid target. However, as we have just heard on Report, if the highest standards of transparency and effectiveness are to be demanded from DFID’s external stakeholders, they must equally be applied across Government and to their arm’s-length agencies, starting with the CDC in this Bill.

The Government did not accept amendments, but I join the Opposition Front-Bench team in welcoming the commitments the Government have given. We will, through the procedures of this House, hold them to account for those commitments. There is a consensus behind the need for continual improvement of the CDC, and we want to maintain that consensus.

The Government will see this legislation passed today—their majority in the House assures them of that—and it is unlikely, due to the nature of the Bill, that the House of Lords will have any opportunity to amend or delay its progress on to the statute book. So the Government are being given a significant responsibility today; they are asking for the power to quadruple the budget of an agency which has a long but chequered history. The CDC has had significant successes in its history, but significant concerns have been raised and remain. If its resource base is to be massively scaled up, so must be its accountability and the standards it is held to. I hope the Secretary of State and her Ministers will confirm that they are prepared for the CDC, the Department, and themselves as Ministers, to be held to those standards.

Photo of Peter Bottomley Peter Bottomley Conservative, Worthing West 5:07 pm, 10th January 2017

I will say about three sentences.

It is both a moral and practical responsibility and an opportunity to aid other countries. Christian Aid was set up after the second world war to develop Europe, and its success over the next 20 years was fantastic. The same can apply to Africa and other parts of the world, and the CDC has the opportunity, through infrastructure and education, to achieve that.

We must reduce barriers and provide opportunities, and provide a welcome to other countries having the same aspirations and achievements we have had ourselves.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth 5:08 pm, 10th January 2017

I, too, want to place on record my thanks to the Clerk of Bills and all my colleagues on the Front and Back Benches who have taken part. We have heard excellent contributions from both sides of the House in what has been a very informative and useful process of scrutiny of this Bill through Second Reading, Committee and Report.

I was pleased to hear the Minister setting out a little more detail on the period over which we can expect the CDC to be drawing down monies. His suggestion that it will be a five and 10-year period in two tranches is much more reassuring than some of the earlier suggestions. There will, however, be a temptation to draw that down at a faster rate because of changes in reporting how our aid is calculated and what proportion the CDC counts towards that. So while I take what the Minister said with great sincerity, I urge him to caution against those who would suggest dumping money, as it were, into the CDC as a way of artificially meeting the 0.7% target. He should only go there with a clear plan and business case, and a clear understanding of how that is going to contribute towards poverty eradication.

I am concerned that we are still not going far enough on tax havens. I listened to what the Minister said and will look with interest at that strategy and what practical steps are taken to see us moving resources out of those jurisdictions, and the secondary effects we can have there.

I wholeheartedly agree with Jeremy Lefroy about the role that the CDC should play. It should not go for an easy life by going where commercial resources already go. There was some suggestion in the debate that we were almost the only source of funding for many of these investments, but that is patently not the case. In our development spending overall, and certainly in the case of the CDC, we ought to be acting as a catalyst for the very best in poverty eradication, for placing the very best focus on difficult sectors, areas and countries where others will not go, and for achieving the highest standards in sustainability and human rights. We ought to be acting as a catalyst in the world, not just going for an easy return and an easy life.

There is something that I still do not quite understand, and I hope that Ministers will reflect on this. The Secretary of State set out some good principles in her letter of 16 December on transparency, on open-book breakdowns of salaries, tenders and material costs, on due diligence in supply chains, on tax status and compliance, and on disclosures of conflicts of interest. I do not see why those principles cannot be applied equally to the CDC, just as they will be applied to other spenders of our aid spending. I urge Ministers to look carefully at this again. That is a reasonable set of requirements and it would be helpful if they could be applied to CDC.

On the question of the countries that CDC focuses on, there has been a shift. It is important to recognise that the CDC is investing more in the poorest countries, but it needs to go much further. I urge Ministers not to have any poverty of ambition in setting the framework and parameters for the CDC, particularly in relation to future disbursements, to ensure that the money goes to the poorest countries and not to middle-income countries that can often draw down other sources of funding and finance.

It was reassuring to hear many positive voices today making the case for our wider role in international development and for our 0.7% aid target. Indeed, it was good to hear the Prime Minister the other day rejecting the more shrill views from some on her own Benches and from the likes of the Daily Mail that we should scrap the aid target and that we should not be spending any international development money at all. She rejected that. This is not a zero sum game. It is not only morally wrong for us to ignore gross poverty, instability and insecurity, as the Minister said; it also fundamentally goes against our national interest and security and global security and stability. Those are good reasons why, with reasonable scrutiny and with reasonable questions being asked about all areas of our development spending, we must maintain our wider commitment to the poorest people and countries in the world.

Question put and agreed to.

Bill accordingly read the Third time and passed.