Condition for exercise of power to increase limit: analysis of use of separate financial centres

Part of Commonwealth Development Corporation Bill – in the House of Commons at 3:30 pm on 10th January 2017.

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Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth 3:30 pm, 10th January 2017

I think it is, and that gets to the point. A lot of information is provided by CDC online, and it is important to acknowledge that much of it is helpful. We can get into individual projects and see the particular spending on those individual projects. However, it is not the same when it comes to the level of spending, which is what the NAO was looking at. It is important to be able to prove prospective development impact and show where it is going.

To take just one example, the NAO looked at the issue of funding going into the health sector in India, and tried to get clear information about where the money was being spent in a particular hospital group. It looked at whether it was going to the poorest or to middle-income patients. The NAO told us in its evidence that it was going to middle-income patients, which does not strike me as a correct use of the CDC’s money. That is not to say that the investment is not good in and of itself—I am sure that enabling access to hospital for people in general is a good thing. The question is whether we should be spending our aid money on that. Surely we should be focusing on the poorest.

When we examine the figures in depth—they can be found in a House of Commons Library research paper—we see that although the proportion of the CDC’s investments in the least developed countries has increased, it is still significantly lower than the proportion of its investments in middle-income countries. As for spending in individual countries, it is a fact that in India most of the CDC’s money is being spent in what are known to be the richest states. The highest proportion of its investments goes to Maharashtra, which is where Mumbai is located. I am not saying that the individual investments there are not good, effective or useful; I am saying that it is a question of priorities. In Committee, it was helpful to hear the Minister speak of the possibility of a cap or restriction on funds that go to India and elsewhere in south Asia rather than to Africa. Giving evidence to the Committee, Professor Paul Collier said that he shared the concern that had been expressed about whether the CDC was focusing enough resources on the poorest countries. New clause 9, for instance, relates to those issues.

The wider issue of spending routes that is raised in both the SNP’s amendment 3 and our new clause 10 is crucial. We are not suggesting that the CDC should not be given more money, or that it should not have a chance to expand its operations and the autonomy that it enjoys, but we believe that those elements should be in proportion to other forms of official development assistance. It is important that we introduce safeguards. By 2019-20, 6% of United Kingdom official development assistance will be spent by other Government Departments. Money goes into the prosperity fund and other Government funds, and there is often far less scrutiny and oversight than there is in DFID. That worries me, and I know that it worries other Members on both sides of the House.

We need to achieve a fair balance. The CDC has its role to play in the portfolio, but that must be proportionate to other ways in which we can spend the money. We must ensure that we are pulling all the levers of development, rather than just one at the expense of others. For that reason, I am inclined to support amendment 3 if it is pressed to a vote.

I want to say something about tax havens, although I shall not do so at length, because we discussed the issue a great deal in Committee and we have also discussed it today. I find it surprising—this relates to new clauses 1 and 8—that the CDC continues to use tax havens such as the Cayman islands and Mauritius. A fair point has been made about the importance of stable financial arrangements for investments. In some countries it is clearly not possible to set up arrangements within the legal structures of those countries to ensure that the right fiduciary controls are in place. However, I do not understand why we are not setting up such vehicles in England and Wales, or in other jurisdictions. Why are so many of them in the Cayman islands and Mauritius?

Moreover—I have asked parliamentary questions about this—we are paying management fees to financial services organisations, in the Cayman islands and elsewhere, that also support the far less transparent activities of other corporations and individuals. I find it deeply worrying that, whether or not there is anything untoward about an individual CDC investment, we may be indirectly supporting the flourishing of the tax avoidance and evasion that exists in overseas territories.