Condition for exercise of power to increase limit: adherence to DFID partnership principles

Commonwealth Development Corporation Bill – in a Public Bill Committee at 4:30 pm on 6 December 2016.

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After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—

“15A Condition for exercise of power to increase limit: adherence to DFID partnership principles

(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he is satisfied that the condition in subsection (2) is met.

(2) That condition is that any new investment enabled by the proposed increase in the current limit at the time will be an entity which has agreed to adhere to the DFID partnership principles.

(3) In this section—

‘the current limit at the time’ means—

(a) prior to the making of any regulations under section 15(4), £6,000 million,

(b) thereafter, the limit set in regulations made under section 15(4) then in force;

‘the DFID partnership principles’ means—

(a) the principles set out in the DFID guidance note of March 2014 entitled ‘the Partnership Principles’, or

(b) any DFID guidance note of the same title issued with the approval of the Secretary of State.”—(Stephen Doughty.)

This new clause would require any new investment arising from any increase in the limit on government assistance under regulations under section 15(4) to go only to entities which agree to adhere to the DFID partnership principles.

Brought up, and read the First time.

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

I beg to move, That the clause be read a Second time.

I do not want to detain the Committee for too long on this new clause, because it refers to some of the issues that we discussed earlier, in terms of setting the overall framework for what CDC is doing and ensuring it is coherent with what the rest of Government—specifically DFID—are doing. Members may or may not be familiar with the partnership principles, which are an important set of principles that underpins DFID’s bilateral work, the types of relationships it has and the kinds of restrictions and caveats it places on that work.

For the benefit of the Committee, there are four partnership principles. The first is a commitment to reducing poverty and achieving what was then the millennium development goals—I am sure it is now the sustainable development goals. That is the commitment of a partner to address the constraints to poverty reduction and progress against those goals. The second is a commitment to respecting human rights and other international obligations. That is the commitment of a partner to respect human rights—particularly economic, social and cultural rights—as well as the civil and political rights of poor people. Third is a commitment to strengthen financial management and accountability and to reduce the risk of funds being misused through weak administration or corruption. The fourth is a commitment to domestic accountability, which is enabling people—a little bit to do with what I was just talking about with private healthcare and education—to hold their Government and public authorities to account for delivering on their commitments and responsibilities, and not undermining that either by supplanting those relationships or by diverting people’s attention.

Clearly, from some of the comments that the Minister made earlier about coherence with the sustainable development goals and the plans for the strategy, and from CDC’s progress since 2012 in financial management and accountability, I feel quite comfortable that we are probably heading in the direction of the DFID partnership principles in those two areas, albeit the proof will be in the pudding. On partnership principles 2 and 4, I want to hear from the Minister what restrictions and guidance are in place to ensure that the activities of CDC, its investment vehicles and, crucially, its partners in some investments do not undermine human rights and other standards we might expect to be maintained in a bilateral or other investment that the Department might make. On that last point in particular, does he accept that if we simply do development to people, whether through a bilateral programme or a fund investment in a particular area, we perhaps do not empower people to take advantage of their own destiny and opportunities and so develop that positive social contract with the state in their countries?

I am concerned about No. 2. The example of Feronia has been brought up a few times, but War on Want and other organisations have expressed concerns. I have not yet heard a full explanation or a response, but I hope that will be forthcoming. I also hope the Department and CDC will take seriously future concerns about investments, whether expressed by CDC partners or CDC itself. We should be adhering to the highest standards. It would be perfectly reasonable to expect CDC to adhere to the four principles, and I hope the Minister will consider accepting the new clause, or find some other way to put the principles into law. That is what we expect of our bilateral programmes and other partnership relationships, and we should expect no less from CDC.

Photo of Rory Stewart Rory Stewart The Minister of State, Department for International Development 4:45, 6 December 2016

Again, I shall endeavour to be short, before we move on to the final new clause, because Members need to go.

I am very pleased with the tone of the debate. As a result of the Opposition challenges, we will take their proposed measures seriously. The Opposition will hold us to account when they see the strategy and how we plan to address things. Unfortunately, however, there is a technical reason why we are reluctant to accept the new clause, which is that partnership principles are primarily addressed to Governments. At the core of our partnership principles is the intention to strengthen

“the management of public finances” and to enable

“people to hold the government and public authorities to account”,

so we would be reluctant to extend them for technical reasons.

The basic theme behind the new clause, however, is correct, and we shall deal with that through internal processes. We now have a team in CDC who focus on issues of ethics, and they look exactly at business integrity. Until about three weeks ago, in fact, we had a larger team looking at such issues than the International Finance Corporation itself has.

We touched on Feronia, and I am happy to talk about it in more detail—perhaps we can even visit it. The case is a difficult one. The company has been around in various forms for 100 years. It is trying to sustain jobs three weeks upriver in the Democratic Republic of the Congo. We are really serious about improving standards there and, since we increased our investment, we have been pushing up wage rates and improving safety standards, but there are huge challenges. We have inherited some 19th-century boilers and other challenges, and we have to work closely, but it is a classic example of the challenges of CDC going into a real frontier market, in a difficult and sometimes dangerous place, where 9,000 people depend on us directly and 30,000 indirectly for their jobs. We are trying to get the balance right as we gradually increase standards while maintaining that important part of the economy of the area.

With that, I ask politely for the amendment to be withdrawn.

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

Again, I appreciate the spirit in which the Minister took the new clause. I accept the technical reason. Obviously, the partnership principles apply to partner Governments, but it seems they could be transposed quite easily. It is quite clear that the headline standards CDC would be expected to adhere to would be the same as the Department’s bilateral programme as a whole.

I appreciate the Minister’s comments about Feronia. It would be good to have more information in writing about that and what steps are being taken. I accept his point that there are sometimes difficult examples and situations. Professor Collier made the point this morning that we should be taking more risk, and we do not expect everything to be perfect or right from day one, particularly when we are operating in difficult environments. However, when repeated concerns are raised about a particular case but there appears to not be the clearest response, we risk going back to the darker days of CDC’s past and some of the other investments. There were serious issues, which I do not want to dwell on, off the coast of west Africa and so on that enjoyed a great deal of scrutiny and criticism at the time.

A key point we have been debating is that if we expand CDC’s resources at a huge pace and by such a significant amount, without safeguards, particularly if we are increasing the appetite for risk, there is a risk that more will go wrong. Without a clear caveat, clear standards and clearer transparency, so that we here in Parliament and citizens of developing countries can scrutinise fully these investments and whether they hold to principles of human rights and ethics, we will potentially get ourselves into very serious difficulties. That is why I am so worried about the quantum of increase, despite the Minister’s welcome statement about his intentions. I hope he will look seriously at the possibility of ensuring CDC adheres in that way. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 9