Amount of the limit on government assistance

Commonwealth Development Corporation Bill – in a Public Bill Committee at 2:00 pm on 6 December 2016.

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Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth 2:00, 6 December 2016

I beg to move amendment 6, in clause 1, page 1, line 4, leave out “£6,000” and insert “£3,000”.

With this it will be convenient to discuss the following:

Amendment 1, in clause 1, page 1, line 4, leave out “£6,000” and insert “£5,999”.

Amendment 3, in clause 1, page 1, line 4, leave out “£6,000 million” and insert

“the amount specified in subsection (1A)”.

This amendment paves the way for amendment 4.

Amendment 4, in clause 1, 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—

(i) £6,000 million,

(ii) 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 5% 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 million 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.””.”.

This amendment, together with amendment 3, would replace the proposed limit on government assistance under section 15 with a new amount, expressed as either £6 billion or 5% of forecast official development assistance over a five year period, whichever is the lesser amount.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

It is a pleasure to serve under your chairmanship, Ms Ryan, and for the first time, I think. I know you take a keen interest in these matters, so it is particularly delightful to serve under you, as it was to serve under Mr Streeter this morning—I know he is equally interested in the Bill. We had a wide-ranging debate on Second Reading and a wide range of issues were also explored by all members of the Committee during some excellent scrutiny of the witnesses who were before us this morning.

Amendment 6 stands in my name and those of my hon. Friends the Members for Edmonton and for Bradford East. It regards the nub of the matter, which is the amount of money—aid money; taxpayers’ money—that the Bill intends to allow the CDC to receive. It is a very large sum: up to £6 billion, leading up to £12 billion, which I know we will come to discuss in due course.

As I said on Second Reading, I am not opposed to the existence of the CDC and I am not opposed to much of the important work that it does; I recognise that it does some excellent work. Indeed, the National Audit Office is clear that the CDC is largely meeting its own standards and the strategy that was set for it in 2012. However, that is not the issue before the House or, indeed, the Committee, rather it is whether we should grant such large sums of money to CDC as opposed to directing that important aid money to other uses.

Despite having listened carefully to the Minister and the CDC itself—I have met its representatives—and reading much of the documentation about the Bill, I am still at a loss as to where the £6 billion and £12 billion figures have come from; I do not believe that the case has been made for that expenditure. There may be a case for increasing capital for the CDC, and I am sure we will hear many of those arguments today, but I have certainly not seen the case to justify the expenditure of a potential extra £4.5 billion over this spending round, as implied by the Minister’s earlier comments and the contents of the explanatory notes to the Bill, nor do I see the rationale for potentially expanding that sum to £12 billion.

The information we have before us is very vague. Paragraph 10 of the explanatory notes to the Bill says:

“Increasing the limit on government assistance to £6,000 million will enable the Secretary of State to accelerate CDC’s growth over the current Spending Round in response to forecast market demand—” which is not actually explained anywhere, nor has it been explained in answers to questions I have put to Ministers—

“over CDC’s next strategy cycle and in order for CDC—” this, again, is very vague—

“to play a fuller role in the delivery of the UK’s international development objectives.”

Those are very short sentences and paragraphs to justify the potential spending of £6 billion, rising to £12 billion. Let us remember that the CDC only required capitalisation from the UK Government of £1.5 billion over the entire period between 1999 and 2016. We understand that the bulk of that has come at the CDC’s request, although I know that there are a variety of views out there on that. In recent years, we have seen the big recapitalisation of £735 million in two tranches, which I am glad to say was accompanied by a business case. Not all of that case was met, but at least there was some rationale for it—whether it should have gone through is not relevant now—whereas there is no rationale for the proposed increase.

I think it was the NAO that said that there is a cart-and-horse problem here. This is a huge potential uplift and we have not seen any kind of rationale for it, any clear statistics, analysis of markets or suggested project sectors, just a vague assurance that it will all be all right on the night and that Parliament should therefore go ahead and approve large sums of money on the nod. We have also heard doubts expressed by the NAO and others about whether the CDC even has the absorptive capacity to accept that sort of uplift in such a short space of time.

We had reassurances from the Minister that the uplift would only come in response to clear demand and with the clear ability to take it on, but the reality is that the NAO has criticised the CDC for risks in its staffing and for its organisation. Even regardless of that criticism, I question whether any organisation could take such an uplift in such a short space of time, whether it was a non-governmental organisation, the World Bank or a UN agency. We ought to treat our scrutiny of development finance institutions and multilateral agencies with the same brush, whether they are close to the Department for International Development or slightly further away; I will come back to that point in due course.

The other issue is that there is an opportunity cost here that I hope we will be able to explore in the debate. The Minister earlier seemed to suggest that if we do not give the money to the CDC, we will inevitably have to give it to a development finance institution that is performing less well or is perhaps even less focused than the CDC, but I do not think that he has made that case very clearly.

I have read in detail the multilateral aid review that the Minister published last week and that we scrutinised in an urgent question on Friday. It does a lot of good things; it gets into the meat of what some agencies are doing and it points out agencies that are not performing well. Has the CDC been put through that level of rigour? Is it subject to the same expectations of transparency, poverty focus, effectiveness and accountability to beneficiaries, taxpayers and the Government? I am not sure that it is. Where would it appear in the multilateral aid review’s graph of agencies? Undoubtedly it would do well in some areas but in others I suspect it would not, particularly given the NAO’s commentary.

Given what DFID expects not only of multilaterals but of its bilateral partnerships and its partnerships with civil society organisations, there seems to be a double standard. One example is that DFID now expects multilateral agencies to publish details of everything they spend over £500. That is a good thing, but we clearly do not have the same transparency from the CDC. Yet we are planning to give it extra billions of taxpayers’ money via the Bill—initially up to £6 billion and later up to £12 billion. At the very least, we ought to provide a level playing field for assessment and expectation, so that we are absolutely sure we are investing our money in the routes that will lead to the greatest reduction to poverty, that align with our wider development objectives, that are coherent and that meet the wider objectives of the Government and the Department.

Conversations with the CDC and comments from the Minister have revealed a crucial issue: the CDC has not requested this capital increase. The Minister told me that in a written answer last night and confirmed it in this morning’s Committee sitting, and the CDC itself has also confirmed it to me. That seems a very odd situation. I can understand a generic conversation—“Well, if x were y and y were z, we might be able to take a bit more money or do this or that”. But not even to have a request, never mind a clear rationale or expectation of what could be done with £6 billion of taxpayer funding—let alone £12 billion—is extremely concerning. Is the tail wagging the dog? Is this Ministers putting pressure on an organisation to accept significant increases in money, perhaps for some other purpose which I will come on to, rather than it being based on a real set of demands and a real set of expectations of what could be delivered? I am concerned when I hear that from the Minister or from the CDC, and I am concerned when it is confirmed in writing. It is in contrast to the situation in which it made a request for recapitalisation in the last year. It was perfectly reasonable for there to have been a request—I do not know about the value—but the CDC put forward a business plan which was discussed over a period and the Department agreed the £735 million.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

The Minister is shaking his head but the CDC did request £735 million; it told me so. Perhaps the Minister wants to intervene? The Minister’s own written answer to me last night, when I had asked him specifically what recapitalisations had been requested by the CDC in each of the past six years, told me that it had requested £735 million. So I am confused as to why he is shaking his head; perhaps he would like to intervene?

Photo of Rory Stewart Rory Stewart The Minister of State, Department for International Development

Thank you. It is a great pleasure, Ms Ryan, to serve under your chairmanship. I will try not to intervene too much, since this is not really my responsibility, but as a point of information, I think there are two separate issues here. The first is the question of the CDC calling on a promissory note, which is what would happen in the future. In terms of the £735 million request the hon. Gentleman is talking about, when the Government have funds available and have legislative authority to allow money to go into the CDC, the CDC will then make a request. That would be true in the future too, so if the Bill gets through Parliament and the money is available, so the option is available, and the promissory note and the business case from DFID are in place, at that point the request would come from the CDC. One would not anticipate the request coming from the CDC at this stage. That has not happened in the past and it would not happen in the future.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

I find that a very odd suggestion when we are talking about such large sums. One would expect there to be the architecture of a request, or the basic bare bones of a request, even if the specific details were not there. We are not talking here about £100 million or £200 million, large sums as those are, we are talking about £6 billion and £12 billion. These are huge sums as a proportion of the overall aid budget and in terms of our commitments to other multilateral development finance institutions. Now the Minister suggests that we just accept these back-of-a-fag-packet calculations— £6 billion, £12 billion—without any kind of rationale for what they are. He said earlier that the department had come up with those figures, that he had come up with those figures, and they had been presented to the CDC, rather than the other way around. One would expect the CDC, as the expert in the markets and sectors it is investing in, to be suggesting to Ministers, perhaps, where potential investments could be made, where returns could be achieved and where poverty eradication could be delivered.

Photo of Rory Stewart Rory Stewart The Minister of State, Department for International Development

I am contradicting myself by intervening again. There is an important distinction here. This is a piece of enabling legislation. The CDC is in a very unusual position. Unlike our normal relationship, where we can, for an NGO such as Oxfam, give money without coming to Parliament, or for a multilateral organisation such as the World Bank, go through secondary legislation, a statutory instrument, this is unusual. This is one of the only organisations we deal with where Parliament had imposed a cap. So what we are asking for is enabling legislation which would allow DFID, if it had a request from the CDC, to give it the money. This is not our giving it the money, it is creating an option and a ceiling against which, in the future, the CDC would be able to present a business case.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

The Minister suggests we should not be sceptical of the Government and their intents. It is the role of this House to be sceptical of the Government and their intents. To suggest that Ministers are going to take powers but might not use them is a slightly curious argument: I have not seen many cases of that in the past. The timing of this is very odd, given some of the other circumstances, which I will come on to.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

I will give way in a moment, but I just want to make one point. We have seen a very important change in the definition of the ODA, which occurred only last year. Previously, as I said on Second Reading, it was the issue of the CDC net disbursements that contributed to our ODA figures. Normally we looked at the money that the CDC was investing, returns from that investments, the function of the two and ended up, usually, with a positive number. Over the past five years it had been a £100 million or £200 million positive contribution to our aid effort. In fact, last year it would actually have been a negative contribution of minus £9 million. However, the Government changed the rules. They decided to count the capital inflow into the CDC—all of it, in its entirety—as ODA, as aid, rather than the function of what is actually, potentially, being achieved.

There is no perfect way to establish the benefits of our aid. Many different formulae could be used. However, this seems a very odd situation, and it is such a large increase in the budget for which parliamentary authority is being requested. The reality is that whereas before it would have been a function of whether there had been an impact, whether there had been a net disbursement to the poorest countries, regardless of where that went, whether it was effective and all the other questions that we should be asking, we are now looking instead at just the pure input of capital into the CDC. As a result, last year, instead of a minus £9 million contribution to the ODA budget, we saw plus £450 million, because of the disbursement that was made by the Secretary of State in capital to the CDC.

What is to prevent the Government in the future from putting pressure on the CDC, regardless of whether it wants the money, to spend, use or request, through the process that the Minister has described, large sums to bump up the figures to show that the Government are, for example, meeting the 0.7% aid target? Before the Minister jumps to his feet to say, “Oh no, that would never happen,” let me say that he knows full well that it has been the habit of all Governments, of all colours, to look at how figures are presented, move things around and reclassify things in an attempt to meet wider targets and wider agendas. Obviously, a certain amount of that goes on all the time, but it does look very odd that we are seeing this huge rise, this huge potential new power being given, at the same time as the definition of how that is counted is changed. That is where my scepticism and that of many others comes from.

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford 2:15, 6 December 2016

It is a pleasure to serve under your chairmanship, Ms Ryan. The hon. Gentleman raises a very important point about the capacity of DFID and, indeed, the capacity of the two continents—Africa and part of the continent of Asia, south Asia—to absorb this kind of money, but does he not agree that one major challenge facing the world at the moment is the need to create in the next 15 years 1 billion jobs, most of which will be in those countries, and that the amount of money that we are talking about is tiny in comparison with the amount that would be required to create those jobs and thereby to alleviate poverty?

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

I agree that the challenge of creating jobs is huge and one in which we and others should be playing a role, but it is not solely our role. Again, I hope that one question that we will get on to discussing is whether we should be providing what is in effect private capital in some of these locations or whether the capital should be coming from other sources: other Governments, institutions or DFIs. Indeed, should that be the responsibility of the Governments themselves? We will undoubtedly come on to that in discussion of some of the new clauses, but one of my fundamental questions is about the focus of this money: where is it going currently, and is it doing all that it could do? Professor Collier himself said this morning, in relation to the current bias of funding towards south Asia and India in particular, that he thought that there should be more focus on Africa. I agree.

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

I agree, too, on that point. Will the hon. Gentleman also accept this point about the other DFIs? The Dutch DFI has invested far more money than we have, and the Netherlands has a population one quarter the size of the UK’s. The French Proparco is in a similar position to the UK, but the Germans have invested three times as much. We are laggards in this respect.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

We are not here to discuss the Dutch DFI, but I do know a reasonable amount about it. It provides only marginally more than us. It does do interesting work; it does not do exactly the same work as us. I do not know its history of recapitalisations and how much additional ODA money it has received recently. It would be interesting to look at that. However, the question here is this. What is the best use of our money? Are we not investing or have we reduced investment in other sectors where we could be using our aid in order to do this, and is that the right choice? That is the question before us, and when we look at, for example, DFID’s closures of bilateral programmes in places such as Burundi, we do not have clarity from the bilateral aid review on whether there will be further closures or changes.

We have heard worrying things about cuts in bilateral funding for HIV/AIDS programmes, despite the good money that is going into the global fund. We have seen a shift away from certain sectors and from budget support. We have seen a shift away from investing in free healthcare and education, and in teacher salaries, and with removing user fees for healthcare, for example. When the CDC invests in private healthcare and private school systems, we might have a debate about the role that voluntary and private play in healthcare and schools, but again it is an opportunity cost—it is a choice about where we invest these things.

I accept the hon. Gentleman’s wider point about the importance of jobs, investing and crowding in capital into some of these sectors, but we have to question what we should be doing with our money and whether that is right versus other potential sources. I contend that the Government simply have not come forward with a case that justifies this level of cap. Some increase in the CDC’s budget might be justified, but certainly not at this level.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

I will give way in a moment, once I have made another point.

All that needs to be seen in line with some of the other issues. I mentioned the diversion of aid and the shifting of aid between priorities, but by 2019 26% of ODA will be spent by Departments other than DFID. That is a significant shift from where it was. As the hon. Member for Rochford and Southend East knows, I am not opposed to cross-Government working or other Departments spending ODA, but that level of it is concerning. With the CDC on top of that, as well as the prosperity fund, which we discover was given £1.3 billion of ODA in September this year—much of it spent through other Departments and yet ending up in India, China, Malaysia, Mexico and other locations—the picture of where our aid spending is shifting to gets worrying. Is it shifting away from the poorest countries and the poorest people, and from the core services that I believe we should be supporting?

Photo of Rory Stewart Rory Stewart The Minister of State, Department for International Development

Given that the hon. Gentleman seems to have such fundamental concerns about the CDC—its accounting practices, the role of Government, its strategy, its spending—will he clarify why he is proposing to give it £3 billion in his amendment?

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

As the Minister knows, in this House we have a thing called probing amendments and, like the Minister, I have drawn up a suggested figure—

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

Indeed. We can put any figure down and, without the rationale, we can have a debate—the Minister might criticise me for a £3 billion figure, I can criticise the Minister for a £6 billion figure. The fact, however, is that Minister has not provided a clear rationale or business case for £6 billion—nor has he for £12 billion—and there are some interesting suggestions from the SNP Members about proportions. Those are all issues that we ought to discuss. I made it clear earlier, I am not opposed to the CDC getting more money, but I am concerned about the period over which it gets it, the total amount and the caveats that we might then place on the CDC to receive it.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

I will happily give way, although the Minister said that he would not intervene all the time.

Photo of Rory Stewart Rory Stewart The Minister of State, Department for International Development

I am just trying to understand. The hon. Gentleman is seriously proposing an amendment to this House which we will vote on to give £3 billion to the CDC. Will he justify why he wishes to give it £3 billion? This is a real amendment, to a real piece of legislation before this Committee.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

It is not Question Time for me; it is Question Time for the Minister—[Interruption.] It is Question Time for the Minister proposing the legislation. He must explain the rationale—[Interruption.]

Order. May we keep this within the rules? If people want to make an intervention and the Member gives way, that is fine; shouting across the Floor is not fine. Everyone will get an opportunity to speak.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

The hon. Member for Rochford and Southend East is looking anxious to intervene. He has, for example, posted an amendment suggesting reducing the CDC funding to £1—I will happily give way to him to explain that.

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East

It is actually £1 million, but my amendment is probing, as the hon. Gentleman’s is. What the hon. Gentleman is getting wrong—I do not think wilfully—is that the Minister does not need to present a business case and, indeed, he should not present a business case now. This is a figure that might be reached on the basis of drawdown and a request of the CDC with a business case which he will then analyse.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

But the CDC has not made such a request and, as the NAO said this morning, it is the cart before horse. That is the problem. I do not expect the Minister to provide a detailed analysis of every single project that we will invest in over the next 10 years, but a paragraph in the explanatory notes and some vague assurances about market demand are simply not good enough. We are talking about spending, potentially, billions of pounds of taxpayers’ money. Would we suggest the same amount went to a non-governmental organisation such as Oxfam or indeed the World Bank?

Photo of Imran Hussain Imran Hussain Shadow Minister (International Development)

Does my hon. Friend agree that the central issue is not an increase in funding but the sheer level of funding? This is an organisation that in its whole life has had funding of £1.5 billion. On the Opposition Benches we want to probe why there is a such a significant increase, which is a reasonable view to take.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

Absolutely, and that gets to the nub of the issue. The Minister has been a veteran of many debates in this House and in Committee, so he knows full well the format in which debate takes place on amendments. Amendments are tabled to discuss the fundamental issues and the matters around them. Therefore, given the faux outrage at me for suggesting £3 billion versus £6 billion, he needs to explain—he has not done yet—his rationale for £6 billion and £12 billion, which I have yet to hear.

Photo of Richard Graham Richard Graham Conservative, Gloucester

I am curious, partly because the hon. Gentleman’s amendment proposes an absolute sum of money, but more because everything he has said so far suggests that he is almost as close to the lady from War on Want in disapproving strongly about the activities of the CDC and the ability of Government to allow it to access more capital if it makes the right case for doing so. Therefore, I suggest the emphasis is slightly on him to try to demonstrate to members of the Committee why he has decided that £3 billion is the appropriate figure. I imagine that he was influenced this morning by hearing Sir Paul say that we need to get on with investing more in business in order to provide the jobs that Africa in particular so badly needs. I leave it to him to point out that that is what he thinks.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

The hon. Gentleman clearly did not listen to what I said either on Second Reading or in Committee this morning. He knows full well that I do not support the views of War on Want on the role of business and private capital in supporting developments, jobs and job creation. I made it clear that I did not support that part of its views. What I did support was the suggestion that the CDC is being given a different set of rules to play by from other development finance institutions and indeed other routes on which we can put our valuable aid money, for which we should demand the highest levels of scrutiny, transparency and effectiveness, and coherence with the rest of our programme.

I do not want to stray too far from the terms of the amendment, but in the new clauses we will discuss some of those issues of coherence. Without additional safeguards and caveats on where that money is spent, the transparency arrangements, the business case that should be presented and so on, whatever number we put in, whether it is £1 million less that the hon. Member for Rochford and Southend East suggests, the £3 billion less that I suggest or indeed any other figure, or a proportion as suggested by SNP Members, we could see multiple distortive effects. For example, the value of investments currently going into middle-income countries is still significantly higher than into lower-income countries. The value of investments going into Africa has gone down and the value of investments going into south Asia—mostly to India, a country to which we were supposed to end giving aid—has in fact gone up. The reality is, if we boost the CDC’s budget further without any change in that overall strategy, we will see a multiplication of that effect.

Photo of Richard Fuller Richard Fuller Conservative, Bedford

On a point of clarity, when the hon. Gentleman talks about the value of investments, does he mean the valuation of investments made historically, and therefore revalued on the balance sheet, or is he talking about new disbursements?

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

I am talking about the issue before us today, which is about new investment and new disbursements. The figures I am referring to about those shifts relate to new disbursements by CDC—new investments made in recent years. We can have a lengthy debate about what went on in CDC before 2012 and the legacy investments that are still part of the portfolio—

Not here.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

We are not going to do that here. We are talking about the future. We are talking about where this money would go. I am concerned that in recent years, despite the progress, there has not been a big enough shift into the types of markets, sectors and places that would fit more coherently with DFID’s objectives. The CDC is operating in 65 countries and DFID in only 35. I accept that there might be some difference in that and some difference of focus, but that is a huge difference and yet potentially we will decide to give billions more.

I will draw my remarks to a close, but I simply do not see that the case has been set out or the rationale has been given. I do not think there is enough clarity on the absorptive capacity. I do not think there is enough justification of the opportunity costs of not investing by other routes. The crucial fact is that the CDC did not request this money. Did it even request the legislation, I wonder? Perhaps the Minister will be able to provide us with documents to that effect, asking for the legislation to be made available. The CDC has just been given £735 million extra. It seems slightly odd that it then requests a Bill for £6 billion or £12 billion more.

I am very interested to hear what the SNP has to say about its proposals to other Members.

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East 2:30, 6 December 2016

It is a pleasure to serve under your chairmanship, Ms Ryan. I have only two groups of points. The first is on process. I am a great fan of the “Daily Politics” show and was very disappointed when the hon. Member for Cardiff and Penarth resigned from the Front Bench. This is the first time I have sat on a Bill Committee where a Back Bencher has led the amendments in this way. The Labour Front Benchers, the hon. Members for Edmonton and for Bradford East, have added their names to the amendments, but have not tabled any in their own names. I will not do so in this debate, but I am thinking about leading a debate on the good use of Short money, because the Labour Front Bench is paid to do the job that is being done by the hon. Member for Cardiff South and Penarth on its behalf.

Order. Will the hon. Gentleman stick to the issues in front of us? A discussion of Short money is not relevant here.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

I am sure that my hon. Friends on the Front Bench will confirm that they are in full support. In fact, we have discussed the amendments at great length. It is simply a procedural point. I was not aware until I was informed by the Clerk earlier about the ordering of names, despite having been on many Bill Committees. I was informed by the Chair at the start that I would be called first because my name came first in the list. I assure the hon. Gentleman that the amendments have been fully discussed with the Front Benchers and have their full support. No doubt the Front Benchers will speak to the amendments in due course.

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East

Fantastic. My Front Bench also seems to be aware of that situation. I look forward to listening to the SNP’s contribution on amendments 3 and 4 and to seeing how its Front Bench is taking things forward.

Amendments 1 and 2, which I tabled, are probing amendments. I had taken myself off to table amendments that increased, not decreased, the amount and was told that while it would be permissible to table them, it would not be permissible for them to be selected, because of the money resolution. I therefore want to enter into a debate about whether it is the right amount. I have tabled an amendment that would make it lower, rather than higher, although I believe that there is capacity to invest more money in CDC, and faster. I do not share the scepticism of others around the table. I hope to see the £6 billion target reached earlier, rather than later.

This morning’s evidence session was incredibly useful and covered a lot of the points and queries that I would have wanted the Minister to address in his remarks. With that in mind, I will not detain the Committee any further.

Photo of Patrick Grady Patrick Grady Shadow SNP Spokesperson (International Development)

It is a pleasure to serve under your chairmanship, Ms Ryan. I will speak to amendments 3 and 4, which stand in my name and that of my hon. Friend the Member for Coatbridge, Chryston and Bellshill.

I agree with pretty much everything the hon. Member for Cardiff South and Penarth had to say. The Minister has been asked repeatedly how the figures of £6 billion and £12 billion were arrived at. It increasingly sounds as if they were arbitrary figures based on a best-guess discussion with the CDC about what it might manage to spend over a particular period in the coming years.

Amendments 3 and 4 try to relate the amount of investment in the CDC more clearly to the overall amount of official development assistance the Government are likely to have at their disposal over a spending review period of the lifetime of a Parliament. Of course, the amount of ODA can go up or down in any given year, because it is, by definition, a proportionate target: it is a percentage of gross national income. Indeed, in the autumn statement a couple of weeks ago, the ODA forecasts were revised down because the economy as a whole is contracting, not least because of the Brexit result.

Using those forecasts, the Library estimates that amendment 4 would mean that £3.77 billion of additional investment could be made on top of the £1.5 billion already invested, making a total investment of £5.02 billion. The effect of amendment 5, which I appreciate we are not discussing immediately, would be to bring the upper cap to £9.77 billion. As the hon. Member for Rochford and Southend East just said, the money resolution means that those numbers cannot go above £6 billion or £12 billion in any event. It is worth noting that introducing such a formula would mean that in the event of a significant decline in GNI—some sort of catastrophic economic collapse, which I am sure will not happen under this Government—the cap on investment could reduce, meaning that the Government would have to divest.

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East

The first time the hon. Gentleman mentioned a contraction in the economy I let it go, but I thought the economy was growing at about 2.2%. It is the fastest growing economy in either the G7 or the G8—forgive me for not knowing which. Does he have the wrong numbers, or is he drawing a distinction between GNI and GDP and being selective?

Photo of Patrick Grady Patrick Grady Shadow SNP Spokesperson (International Development)

As I said, the autumn statement demonstrated that GNI will go down and therefore the ODA forecasts are being revised down as well. The point I am trying to make is that if we are going to find a way of varying the cap on investment in the CDC, finding a way to make it proportionate to overall aid spending would seem to be the more sensible way of doing that.

Photo of Phil Boswell Phil Boswell Scottish National Party, Coatbridge, Chryston and Bellshill

In amendments 4 and 5, my hon. Friend and I have suggested a percentage adjustment mechanism. In this case, the figure of 5% is proffered. Does he agree that such a mechanism is altogether more equitable and appropriate? Will he elaborate on that for the Committee’s further consideration?

Photo of Patrick Grady Patrick Grady Shadow SNP Spokesperson (International Development)

I thank my hon. Friend for that point. The point of equity and proportionality is what I am trying to test. As I have said, under my formula, the figures would come out not that much lower than the caps proposed in the Bill. Let us accept, in good faith, that we will hear some rationale for those caps. My formula would take us not a million miles away from those numbers. The point is that under my formula, the caps would vary over time, depending on what the total ODA spend was likely to be.

Even if the Minister objects to the particular formula, I will be keen to hear why some kind of proportionate formula is not preferable to the hard numbers in the Bill. We have heard about other amendments that probe those numbers. A formula that linked the caps to the total ODA spend over a period of time surely would help to clarify the link with the overall amount of ODA and the balance of the Government’s development priorities, which we will discuss when we debate the new clauses.

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

I will make four brief points. First, there are several reasons for bringing forward the Bill, but one of the major reasons is that reducing the expected rate of return of the CDC’s investments, which I absolutely agree with, creates a need for more capital.

Under the last Labour Government, the CDC grew substantially, was well managed, invested in funds and made a lot of money out of significant investments, such as that in Celtel. All of that was good and I welcomed it, but it perhaps was not in accordance with the CDC’s original mission, although I would argue that it helped to reduce poverty. Capital was generated internally to quite a considerable extent. The required rate of return was relatively high, those returns came in and that money was reinvested.

Now that CDC is quite rightly supposed to focus on harder investments with lower rates of return and higher risk, there inevitably will not be as much free cash flow or free capital available for investment, so the shareholder —the UK Government, DFID and the taxpayer—needs to be prepared to put in more capital if we are to meet those objectives.

The second point is about middle-income countries. I fully accept the Minister’s point about the importance of targeting lower-income countries wherever possible, but let us not forget that the range for middle-income countries is, frankly, ridiculous. It goes from just over £1,000 to £13,000 per year. At the lower end are countries that are basically low-income countries and at the higher end are relatively wealthy countries. If we categorise all middle-income countries as somehow moderately wealthy, that is simply not the case. There was a point—not now, sadly, because of what is happening there—when South Sudan was briefly a middle-income country; look at where it is now. We have to be very careful when we talk about middle-income countries as though they are a homogenous group; they are not.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

The hon. Gentleman is making an important point and I have no doubt we will discuss this further. Is he not concerned, though, when he looks at the amount that is going into India, for example, and at individual states within India, where the majority of even the CDC’s new disbursements are still going to the richest states rather than the poorest? The top disbursement was to Maharashtra, where Mumbai is.

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

Absolutely, we should look at that. However, there are more of the poorest people in India than in the whole of sub-Saharan Africa. If you take the view that a company in India in which you invest is likely to have national ambitions and wants to work across India, you would hope that it would therefore target the poorest as well as those who are perhaps better off. I agree, though, that the CDC needs to look at this and ensure that it does not stray back into the realms of investing only in fairly soft, nice, high rate of return investments.

My third point is about employment. I have already mentioned the figure of 1 billion jobs. The World Bank says that 600 million jobs are required across the world in the next decade; others have put it as high as 1 billion. There will be more of those 1 billion jobs in the middle-income countries than in the low-income countries, so we need to invest across the two if we are to tackle this enormous threat.

I was in Tunisia last week at the launch of the Parliamentary Network’s middle east and north Africa chapter—I chair the global network. The problems that a country such as Tunisia faces, with a population of 10 million and unemployment among graduates of 60%, are enormous. We know the social consequences of that. Tunisia has a very high rate of young people who have gone to Syria and Iraq to fight for Daesh. That is one consequence of the very high rates of unemployment and the lack of hope in those countries.

Finally, this is about investment. We talk about money being spent, but it is actually investment. Once it goes in, provided it is well-managed, it is recycled. As I have said, the money that made about £500 million of profit from Celtel under the last Labour Government was recycled into investment and is still there. Some of it may have been invested twice since then. This is not a one-off hit where we make a grant to an organisation and it does excellent work, but is then gone. It is money that goes round and round, that is recycled and that creates jobs.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

The hon. Gentleman makes an interesting point and I agree that it is investment and it is recycled—the CDC has shown that. However, does he not agree that that applies to our whole aid budget? If we invest in the education of a girl through a bilateral programme, with the opportunities that provides in her life and the opportunity it gives her to contribute to the economy, that is, similarly, an investment.

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

Yes; I do not disagree with that.

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East

The hon. Member for Cardiff South and Penarth is wrong. It is not an investment in the same way, in that it is not so easily controlled. An investment in a girl’s education is, indeed, an investment, but we are discussing an investment that has an actual return, which we can reinvest and have some degree of control over, as the aid budget is targeted in different ways. It is a different type of investment. As I said on Second Reading, it is a gift that keeps giving.

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

I will conclude by saying that I feel a little like I am in the middle of a great argument, but I probably agree in some way with both Members.

Photo of Kate Osamor Kate Osamor Shadow Secretary of State for International Development

It is a pleasure to serve under your chairmanship, Ms Ryan. This is the first time for me, but I am sure there will be many more.

I want to speak about investment. That word has been used many times and in the absence of an investment strategy from the CDC, we feel very sceptical about why we should use taxpayers’ money in this way. It is only fair to ask the Minister to present that to us, so that we can have a debate in which we feel we have all the information. That is my brief contribution on this group of amendments.

Photo of Imran Hussain Imran Hussain Shadow Minister (International Development) 2:45, 6 December 2016

It is a pleasure to serve under your chairpersonship today, Ms Ryan.

I will sum up the points that we are making. My hon. Friend the Member for Cardiff South and Penarth has gone into some detail, as always, on where we stand. I want to place the Labour Front Bench firmly in line with his views, to answer the point made by the hon. Member for Rochford and Southend East.

The issue here is the Government’s intention. We are not in any way, shape or form anti-DFI or against the spirit of the corporation. It was brought in by a Labour Government many years ago and we accept, on the record, that the CDC has been improved since 2011, as I said on Second Reading. As my hon. Friend the Member for Cardiff South and Penarth set out, we want to be satisfied on the rationale behind the level of increase; the lack of strategies and investment policies—the phrase “cart before horse” has been mentioned on many occasions and I will not go into it further; the CDC’s capacity; and the fact that it has not requested this money. Those are all pertinent points. Finally, regarding the concern about where and how this money is currently being spent, I agree with Members on both sides of the Committee on the logical point of view that has been put forward. Nevertheless, that concern remains.

The Minister’s earlier intervention was most helpful, when he set out his reason for why the business case, the strategy and the investment policy were not forthcoming. He gave the guarantee, which I want to press him on, that no money would go to the CDC unless it was requested by the CDC. Even so, it has to be done in the light of a proper business case, a strategy and an investment policy. Secondly, I press him to give some indication as to when those important strategies and policies will come forward. They are central to these proposals and I hope he genuinely gives us dates and assurances in that regard.

Photo of Rory Stewart Rory Stewart The Minister of State, Department for International Development

It is a great pleasure to serve under your chairmanship, Ms Ryan.

I will begin by saying that I have a lot of sympathy with the points that the hon. Member for Cardiff South and Penarth is making; they are all incredibly important. He has an encyclopaedic knowledge of CDC and has identified a number of issues in relation to CDC that we take very seriously. They range across its accounting principles, its reporting framework, the scope of the countries in which it operates, its overall effectiveness, its absorptive capacity, the strategy and business case systems, theories of change and types of investment. I think these are all good concerns and there is nothing mentioned by the hon. Gentleman that I would disagree with in principle. These are the kinds of questions we would expect DFID and Parliament to ask, as well as CDC to ask of itself before it makes an investment.

The real question is what is appropriate to put in the Bill, what is appropriate to be done through Parliament, what is appropriate to be done through the Department and what is appropriate to be done through CDC. That is where I hope I can provide a bit of assurance to right hon. and hon. Members of all parties.

I think we can take it as read that there is an overall agreement that we should give some more money to CDC. There is some disagreement about how much more money—the different amendments suggest different views on how much money and how that money is calculated—but the basic principle is that CDC is a good thing, that economic development is a good thing, that DFIs are a good thing and that, particularly at this moment, as Sir Paul Collier pointed out strongly in this morning’s evidence session, we should be investing more in economic development and jobs in Africa. That is something we all agree. The question is how we do it and how we ensure that it is done in the right way.

The hon. Member for Glasgow North proposed a quite detailed amendment, but there is a small technical issue. He suggested that we aim at a 5% ODA amount, but there are two issues with that. We considered looking at that in the Bill, but the reasons we rejected it were twofold. There is an issue with confusing a stock with a flow. In other words, the measure is designed to create the capital that is invested and reinvested over time— that initial investment made by the Attlee Government continues to be recycled nearly 70 years later—whereas the ODA allocation is an annual allocation and an annual spend.

There is an issue around trying to compare a stock and a flow, and we can go on to that. In fact, rather good graphs have been produced, comparing stock and flow investments of Germany, France and the Netherlands, showing that, in proportional terms, Germany is spending nearly three times as much and France is spending nearly twice as much as we are. The reason I have not deployed those kinds of arguments is that I just do not think that that stock and flow comparison is good.

However, there is a more technical reason why we would reject the exact amendment. The way in which the amendment is written—at least on the basis of the analysis by our in-house lawyers—is that it would refer to the entire cap for the entire sum available to CDC. In other words, that 5% would not be 5% of future money. The way in which the amendment is drafted means that it would incorporate the £1.5 billion of its existing money. That would therefore limit us to only a further £1.5 billion over a five-year period. That would not be 5% of ODA. It would be about 2.5% of ODA, which we think would be considerably lower. The £3 billion number, which is what right hon. and hon. Members have been getting at, is a more plausible figure as an additional amount to the £1.5 billion. We can talk about that over time.

Very quickly, I will deal with the question of additional responsibilities, which is at the core of the questions asked by the shadow Secretary of State—the hon. Member for Edmonton—and the shadow Minister, the hon. Member for Bradford East. The basic questions are: are we are putting the cart before the horse, why are we using taxpayers’ money for this kind of investment, when will we present our strategy, what are our real intentions, and what kind of guarantees are taking place? The answer is that, in effect, we have a whole series of procedures. What we are asking Parliament to do is only the first stage of a whole series of checks and balances.

We are asking this Committee, and we are asking Parliament, to agree to the principle of lifting the existing cap on CDC—in other words, putting CDC more into the type of arrangement that we would have with any of our other donors. It is very unusual that CDC has a capped amount. That is not true for the amount of money we give to an NGO or to the World Bank. In fact, we are actually giving more to the World Bank than we would envisage giving to CDC. We are asking Parliament to lift the cap.

The next bit—the question of how the business strategy, the business case and individual investment decisions are written—would then be taken forward by the Department, in line with the UK aid strategy, and debated in Parliament. Directly to answer the question of the hon. Member for Bradford East, who wanted dates, in December 2016 we will complete our business strategy, which will lay out the strategy for the next five years for CDC. It is the strategy that the hon. Member for Cardiff South and Penarth was referring to as our last strategy. We will have a new strategy of that sort. That strategy will do a number of things that will address concerns raised in many of the amendments as the Bill passes through the House. It will, for example, tighten our impact assessments, put more focus on gender and set a cap on India. The next thing that will happen is that in summer 2017—this is quite a slow process—we will bring together a business case to draw down a promissory note of money; in other words, to say, “This is the amount of money we believe is the kind of money that CDC may need to call up.”

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

It is very helpful of the Minister to set out this process. Did I hear him correctly a moment ago when he said there would be a cap on India?

Photo of Rory Stewart Rory Stewart The Minister of State, Department for International Development

Indeed. I am happy to repeat that for the record. The intention is that, in our forthcoming business strategy, there will be a cap on the amount that CDC can spend on India.

As we move forward to the summer, we will produce the business case. The business case will define the amount of money, whatever that is. It could be, for example, £3 billion, which is roughly in line with some of the amendments that have come forward, but we would have the option to go up to £4.5 billion. I do not honestly believe that that business case will be going up to £4.5 billion, but we would have the option to do that.

The next stage is that CDCs needs to make very detailed investment decisions, which take a long time. A lot of these investment decisions take two to three years. Let us say that CDC was going into solar power in Burundi. It would have to get in on the ground. It would have to ensure that it had a viable business and then it would have to go through our development grid, which is the next stage of the process. That means ensuring that it had checked GDP per capita, it had checked the amount of capital available, it had checked the business environment and it had checked that this is a sector that creates jobs. That is just the first stage.

The next stage CDC needs to go through is to present a development impact theory. That individual investment needs to have a theory: exactly what contribution is this going to make to jobs, economic development and poverty alleviation? Within our strategy, at the end of this year, DFID will ask CDC to publish that development impact theory, so that the theory can be seen case by case with every investment and it will be possible to challenge that theory.

At that stage, CDC would then come back and call down on the promissory note to call down that money. Then other forms of monitoring come on. We are a 100% shareholder of CDC, which is why some of the analogies with giving money to NGOs or World Bank institutions are slightly different. This is us giving money to a wholly owned DFID institution. Every quarter, we as DFID shareholders meet the board and assess its performance. We have an annual review process. On top of that we have all the other processes: NAO, Public Accounts Committee and the International Development Committee. Independent Commission for Aid Impact reports would also be able to get into the business of CDC. It is that and, finally, it is our basic confidence in our institution that allows us to even begin the process. We would not come to the Committee asking for permission to make more money available unless we were confident that we had a good management team in place with a strong history and a strong track record of development; otherwise, we would be wasting hon. Members’ time.

We believe that this is a good institution that will be in a position for us to produce the business case, and that it will be in a position to find investments. I absolutely guarantee—

Photo of Imran Hussain Imran Hussain Shadow Minister (International Development)

Is the Minister giving an absolute assurance that no further investment will go to CDC before the full, thorough business case and investment policy comes before the House again?

Photo of Rory Stewart Rory Stewart The Minister of State, Department for International Development

I am giving an absolute assurance to the hon. Gentleman that no money will be given to CDC until a full strategy is developed and published, which can be debated in the House—that is a strategy coming in December—and no money will go to CDC until a full business case is written in huge detail, which will be prepared in the summer of 2017. Following on from that, there will be the individual investment decisions. I am happy to give that assurance. On that, I would ask the hon. Gentleman kindly to withdraw the amendment.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

This has been a helpful debate and we have covered some useful issues. I am still not convinced but I appreciate the steps the Minister has taken to explain some of the process and his assurances that issues that I and others have raised are being taken seriously. I welcome that; the Minister said nothing in principle that I would disagree with. I will record that and remember that as the Bill passes through its remaining stages.

I am intrigued by the Minister’s admission that there would be a cap on India. I would certainly like to know more about that. Is he able to give us a specific value or percentage? Given some of the wider points I have made, and no doubt will make with regard to other amendments, it would help if he would explain whether the Department has thinking on that on other countries. On the subject of middle-income countries versus lower-income countries, there are some odd situations where CDC seems to be putting money into places like Egypt. That country is not without its problems and not without poverty, but is not exactly a focus country for DFID. I would say there is a huge divergence between where DFID is operating bilaterally and where CDC is.

It would help if the Minister explained where CDC sits in relation to the transparency that is expected of other development finance institutions. It is all very well to go through the scrutiny and the checks and balances, because it is clear what those are, but it appears to me —I am not satisfied on this point—that CDC is being held to a different standard. We might not be a 100% shareholder in the World Bank, but we hold significant shareholdings as a major donor, and we take those very seriously. We use our influence there as a voting board member to take decisions, whether on individual loans or overall strategies.

It would also be very helpful if the Minister stated some clearer timelines. He says that he does not expect that we would use the full power to go to £4.5 billion in a short space of time, but the power would remain there, and were he not to be in his place, or were there another Minister who perhaps felt more mischievous, trying to move things around to fit the 0.7% aid target or whatever it might be, I am not sure that assurance would stand. Could we be much clearer—unlike the explanatory notes—about what sort of period we are looking at. If we are talking about spending £12 billion over a 20-year horizon, that is very, very different from what the explanatory notes seem to suggest, which is to spend up to £4.5 billion extra by the end of the comprehensive spending review period and then move on to another £12 billion—that is a much faster expansion. The timeline is not clear.

I welcome the Minister’s assurances—no doubt we will discuss this further—that there will be no further investment before a clear business case is produced. That will be debated by the House, and I think that is an important step forward. Indeed, I hope we will be able to vote on that. I will give the Minister a chance during this debate, and indeed during the weeks to come, to present further the case for expansion at this level. I am happy to withdraw my amendment at this stage, but we will undoubtedly return to the level and the exact amounts in due course. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 6, in clause 1, page 1, line 4, leave out “£6,000” and insert “£3,000”.—(Patrick Grady.)

Question put, That the amendment be made.

The Committee divided:

Ayes 2, Noes 9.

Division number 1 Christmas Tree Industry — Amount of the limit on government assistance

Aye: 2 MPs

No: 9 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Before I call the hon. Member for Cardiff South and Penarth, it may be helpful for the Committee to be aware that, if amendment 7 is agreed to, not only will all of the other amendments in the group fall, but all of the new clauses cannot be debated because they all refer to a provision that amendment 7 would remove. Nevertheless, I have decided that it would helpful for there to be separate debates afterwards on some of the new clauses—but I do not wish to hear repeated arguments about the principle of the delegated power.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

I beg to move amendment 7, in clause 1, page 1, line 5, leave out subsection (3).

This amendment removes the power of the Secretary of State to set a limit on government assistance above £6 billion up to £12 billion by means of secondary legislation.

With this it will be convenient to discuss the following:

Amendment 2, in clause 1, page 1, line 7, leave out “£12,000” and insert “£11,999”.

Amendment 5, in clause 1, page 1, line 7, leave out “£12,000 million” and insert

“the amount specified in subsection (4A).

(4A) The amount specified in this subsection is whichever is the lesser of the following amounts—

(i) £12,000 million,

(ii) the current limit at the time plus the amount determined in accordance with subsection (4B).

(4B) The Secretary of State shall determine the amount for the purposes of this subsection by estimating the amount which will constitute 5% of official development assistance in the relevant period determined in accordance with subsection (4C).

(4C) 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 the current limit at the time and ends at the end of the fourth subsequent financial year.

(4D) For the purposes of this section—

‘the current limit at the time’ means—

(a) prior to the making of any regulations under subsection (4), £6,000 million,

(b) thereafter, the limit set in regulations made under subsection (4) then in force;

‘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.”.

This amendment would set a new limit on the power to make regulations to increase the limit on government assistance under section 15, expressed as either £12 billion or the current limit at the time plus 5% of official development assistance over a five year period, whichever is the lesser amount.

Clause stand part.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

I am conscious of your admonishment not to repeat the arguments I made when I moved amendment 6, Chair. I will discuss a few other issues, specifically around the use of a statutory instrument in this way, the value of it and the way in which other replenishments and funding rounds are agreed for development finance institutions.

Many of the arguments that we have already discussed also apply to amendment 7, although I will come to one that we did not cover, but the fundamental issue is whether the Government should be given this level of power. There is a debate to be had about how much we give CDC, over what time period and with what caveats, but giving the Secretary of State the power to come back at the time of their choosing, which could be next week or in 10 years’ time, and not just increase the amount by another couple of billion but double it, is very significant. I am always extremely reluctant to grant Ministers such powers, whether they are financial powers or Executive powers.

We all know that despite the procedures of this House and the fact that many Members take an active interest in Delegated Legislation Committees and statutory instruments, secondary legislation often does not receive the same scrutiny as primary legislation. It often goes through on the nod or is scheduled on funny days when Members are not available. Obviously it is the responsibility of all Members to turn up and hold the Government to scrutiny, but given the debate we have had on the matter in this Committee and in the legislative process, it seems odd not to ask the Government to come back later with another Bill.

Let us not forget that a Bill was not required from 1999 to today, when only £1.5 billion was used. Even if there was an expansion, not to require another Bill for quite a significant period and just to put through another uptick, perhaps by a mischievous future Secretary of State or the current one, seems very odd.

I must come back to the Minister’s point about other development finance institutions and the processes they are subject to. Most development finance institutions, including the global health fund, the World Bank’s International Development Association, individual development banks and UN agencies, tend to go through replenishment rounds. They agree a set period, put out strategies and requests to donors for funding and come back on a three or four-year cycle. Those requests have to be justified so that we can scrutinise them and say whether we agree. Indeed, that is the very purpose of the multilateral aid review: to look into whether we are giving money in all the right areas and where we think some development finance institutions are underperforming.

I am concerned that, although CDC may be doing better in line with its 2012 plan, making improvements and shifting its focuses, as we have heard from the Minister, without any ability to come back and have a full, thorough debate about the nature of the organisation, the caveats that are placed on it and the overall cap of funding that it should receive, we are giving Ministers a completely open-ended power to increase that funding very significantly. Let us not forget that £12 billion is equivalent, roughly, to the annual aid budget—I know the Minister has made it clear that it will not be used in one year, but it is a very significant sum of money. We ought to be acting with real caution when giving Ministers such powers.

It would help if the Minister could be clear about the time periods he is looking at. If he is talking about 20 years, let us hear him say that. I would still be nervous even so, because a future Secretary of State or Minister might change their mind, but it would help to smooth the debate if we heard that statement from the Minister.

The other issue that the Committee did not discuss in our consideration of the previous amendment was the focus on sectors. I mentioned the problem of multiplying potential shifts into certain countries or regions, away from stated objectives; that argument applies equally to sectors. If we increased the limit to £12 billion, it would be magnified even further. I was concerned to receive an answer from the Minister today about certain sectors in which he stated that the CDC continues to disburse into some really questionable areas. One is private, fee-paying education—the CDC’s portfolio value in 2015 was £56.9 million. Another is private healthcare providers and services, in which the CDC had a total portfolio value in 2015 of £117.9 million. Its portfolio value in extractive industries—metals and mining—was £9.3 million; the portfolio value in palm oil, which we have discussed in relation to the Feronia case and other matters, was £20.4 million; the value of the investment in real estate is £147.7 million; and in fossil fuels, the current value of CDC’s portfolio is £250 million. That seems to me to be at complete odds with DFID’s wider development objectives for Government coherence.

To come back to the nature of the amendment—I can see Ms Ryan looking anxiously at me—those sorts of issue will be magnified even further by rapid increases in the budget without caveats being placed on it. Ms Ryan, you have rightly said that were we to vote on the amendment, and were it to pass, we would not get a chance to discuss some of those other matters, but the power being given here without assurances is simply not acceptable and I have great concerns about giving that power to Ministers.

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East

I shall raise only two points. I made all the comments I could possibly make on amendment 2 in the previous debate, so I will not detain the Committee further. I am sure it is terribly bad form, but I hope, Ms Ryan, that you will not mind, if we are still sitting when the business in the Chamber gets to the Adjournment debate, which is on rail services in my constituency, Southend, that I rush off before any possible vote.

Photo of Patrick Grady Patrick Grady Shadow SNP Spokesperson (International Development)

I share many of the concerns outlined by the hon. Member for Cardiff South and Penarth. Amendment 5, tabled in my name, would apply the same formula to the upper cap as my previous amendment and I have obviously heard the Committee’s view on that. I heard the Minister’s view as well and I appreciate the fact that he has given it some consideration. Even if that particular formula would not meet the standards that DFID would like it to meet, it would be interesting to see whether there was a way of coming up with a proportionate formula. That would answer a number of points that have been made today.

We have heard from a number of witnesses and in other evidence to the Bill, as well as from other hon. Members on Second Reading and since, that the £12 billion figure is particularly high, especially as it might theoretically be some years down the line before that maximum is reached or a need for it is felt. In that case, the points made by the hon. Member for Cardiff South and Penarth about the use of a statutory instrument are correct; it would perhaps be better if the Government were to come back with primary legislation in due course. We may come on to some of these issues in the debates on the new clauses, but the hon. Gentleman made a point earlier about the number of other arm’s length bodies that have the potential to receive an 800% increase in their funding from the Government with so little scrutiny. We should bear that in mind.

Photo of Richard Fuller Richard Fuller Conservative, Bedford

It is a great pleasure to serve under your chairmanship, Ms Ryan. I speak against amendment 7 —that will be no surprise—and in favour of clause 1(3). I would like to use the opportunity to probe the Minister a little, without straying too much into strategies, about the general thinking on direct versus indirect investing and how that relates to the figures, particularly the figure of £12 billion.

It is my view that the CDC has had unparalleled success in identifying and stimulating people in a variety of countries to set up first-time funds that then contribute to economic development in countries around the world. That role is, in itself, a tremendous aspect of British development policy—finding people in new countries who can then assist in the economic development of their countries.

We heard on Second Reading from the former Secretary of State about why getting the CDC to focus a bit more on direct investing had an advantage, in that people would then recognise that the CDC was there—it was good branding for us, developed a deeper understanding of countries and we were less stand-offish—but there is a value in indirect investing. As the Minister will know, the UK budget is only part of the money in that role. There is a multiplier effect from the CDC providing its money into first-time funds, because those funds then attract third-party funds as well. Does the Minister feel there is the right balance between direct and indirect investing? Can he reassure me that the CDC will continue to focus on the identification and creation of first-time funds in developing countries and that he shares the view of its role in the development agenda for the United Kingdom?

It goes to the point the Minister was kind enough to pick up on at Second Reading, when I mentioned the equivalence of respect. Part of this initiative from the Government is about rebalancing the way in which development budgets from the UK are spent. Rather than being a donor and donee model, we will work mutually together from the point of view of respect to understand how economic development in one country can be supported by a third country.

Those are my main points. Is the capacity there and does the Minister see indirect investment as having a significant role in the future? Does he share the view that identifying first-time funds in developing countries is an important part of our agenda and will he recommit himself to the issue of equivalence of respect through this amendment?

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford 3:15, 6 December 2016

I accept that the potential increase from £6 billion to £12 billion is very substantial. I note that subsection (3) talks about regulations. Does the Minister envisage gradual increases, perhaps of a billion at a time, through regulations under secondary legislation? I believe that secondary legislation is a very adequate way in which to do this and that hon. Members need to take it very seriously, as the hon. Member for Cardiff South and Penarth has mentioned. However, it might reassure Members if somewhere in the Bill or in an amendment it was stated that the increases would be no more than, say, £2 billion at a time. After all, we are now considering raising the amount by £4.5 billion in the Bill, yet, as I understand it, we are looking to put it up by £6 billion through secondary legislation. It might therefore be proportionate to indicate that we would expect the Government to come back to the House on more than one occasion if the sum were to go from £6 billion to £12 billion.

Photo of Imran Hussain Imran Hussain Shadow Minister (International Development)

For the sake of avoiding repetition, I will cite the case I previously outlined, because I think the arguments are exactly the same. The only additional point is that I agree with my hon. Friend the Member for Cardiff South and Penarth, who makes the point that using a statutory instrument to double the increase, if not more, is something that MPs will be uncomfortable with, for obvious reasons.

Photo of Rory Stewart Rory Stewart The Minister of State, Department for International Development

Ms Ryan, thank you very much for chairing this debate. I will deal with these issues very quickly, because I do not wish to detain people very long. A few issues of fact: first, this will not be an additional £12 billion on top of the £6 billion. We are talking about lifting the ceiling, so it will be an additional £6 billion. Essentially, the whole debate—we keep coming back to it in different ways—is about the fact that the CDC, through an accident in history, is governed by completely different rules from any other body to which we can give money. In the initial legislation, from 1948 onwards, a cap was put on the amount of money that the Government could put in. An additional cap was put in during the early 2000s when the Government were proposing to sell off CDC. The cap was put in there simply so that the Government did not pump more money into this organisation before it was sold off. That was a perfectly legitimate intention of primary legislation, but it puts us in an eccentric position in that it is possible for us to give, theoretically, unlimited money to an NGO, to a research council or any other body, to the World Bank and to other financial institutions, whereas the CDC is the only institution for which we have to return to primary legislation every time we wish to give it money.

The point about this ability to go up to £12 billion in the future would be that it would try to put the CDC into a similar position to the other recipients. In other words, on the basis of Parliament, the Minister and the Department, a decision would be made on the strategy on how the money was to be allocated. Money could be allocated to an NGO, it could be allocated to CDC, and we would do that through the normal departmental process.

The hon. Member for Cardiff South and Penarth asked about time. My strong belief, which I am happy to put on the record, is that the money we are asking for—that first ability to increase by £4.5 billion—would be the absolute maximum over the next five-year period up to 2021. We do not intend to come back for the next money until at least after 2021-22. At that point a new Government—it could be a Government, theoretically, of the Labour party—would have the option to come, through secondary legislation, and ask for the ability to increase the cap up to £12 billion. That, again, I would anticipate being for continuous, steady state investment. That £12 billion simply reflects, again, about £1 billion a year from the 2021 period going forward to 2026. That is the kind of money we are talking about and that is the kind of plan that is in place.

To conclude, we have heard very detailed, powerful and encyclopaedic speeches from the hon. Member for Cardiff South and Penarth. He has already made enormous arguments about the sectors and countries in which we should be investing. I request, if possible, that we do not return to those when the amendments are discussed, because they have already been made in enormous detail during the debate so far.

Photo of Stephen Doughty Stephen Doughty Labour/Co-operative, Cardiff South and Penarth

Ms Ryan, I am sure that you, rather than the Minister, will decide what is in order. I have no doubt that we will want to explore some of those issues in further detail. I am sure the Minister does not want to, but I hope we can prevail on you. The fundamental issue here concerns my outstanding question: why £12 billion? Where has this figure come from? What is it based on? It seems to have been arbitrarily picked out of the air. It is an 800% potential increase, as the hon. Member for Glasgow North pointed out along the way.

It is helpful that the Minister talked about the timescale. He says that it goes up to 2021 and that he does not intend to come back before 2022. My question is, why give this power now at all? Why not just require another simple, one-clause Bill to increase the cap if CDC is shown to be performing, to be reforming, to be diverting its focus more to poverty eradication, more to some of the countries we want to work in, or some of the sectors we would like to see it working in? Why not come back? This happens with other legislation. An armed forces Bill comes through regularly to maintain funding for our standing armed forces, and there are many other instances where simple pieces of legislation are proposed and receive the required level of scrutiny—indeed, this has happened with the CDC in its lifetime. My concern is why we would give such extensive powers at this stage. I take in good faith the assurance of the Minister, but obviously, as I have said before, that does not apply to future Ministers. The Minister mentioned the issue of selling off CDC; what if a Minister wanted to do that in the future? This would allow a Government to pump money into it before a sell-off. That is concerning and should concern all of us in this Committee.

I was interested in the point made by the hon. Member for Stafford about gradual increases. Will the Minister reflect on the possibility of considering an India cap of a certain amount beyond which CDC could not increase, whether it be £1 billion or less, at a time, whether that was a year or a two-year period, and coming back with secondary legislation to do that? That might give a lot more assurance as to the scale of the increase and it would not be prey to the sorts of pressures that I know exist within the Department in terms of overspending more generally. We have a 0.7% target that we need to meet. As the CDC contributes to that, it is incredibly tempting, if there has been underspending in one Department or another, to suddenly pump a load of new capital into it, record it as official development assistance for that year, as has happened, and have it contribute to the overall figure.

However, I think the Minister has said some important things. I want to hear more about the caveats and strategy for CDC going forward and while I wholly object to the suggestion of giving statutory instrument powers, secondary legislation powers, I am sure that this will be an issue that those at the other end of the building will look at in great detail in due course. At this stage I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 ordered to stand part of the Bill.

Clause 2