DfID Economic Development Strategy

Monday 27th November 2017 Lords Chamber

Motion to Take Note

15:08

Moved by

[Baroness Nicholson of Winterbourne]

That this House takes note of the Department for International Development’s Economic Development Strategy, and Her Majesty’s Government’s plans to implement that strategy.

[Baroness Nicholson of Winterbourne (Con)]

My Lords, it is an honour to initiate this important debate because it marks a significant change in the Department for International Development’s thinking that has perhaps not yet been fully explored in your Lordships’ House. The change is highly important and there is already a new departmental strategy in place with some very senior staff already in post. As I read it, this has been triggered by Brexit, when we can no longer afford to run alone as different departments but must come together and work together for the wider British goals. The implementation the Government are offering will be largely, but I imagine not wholly, by CDC; the focus of the new policy—but I expect it will soon be beyond this—is on Africa and Asia; the collaboration, long sought, will be a close partnership between DfID, the Foreign and Commonwealth Office, the Department for International Trade and the MoD.

The new policy continues DfID’s soft power. I had the honour of speaking for DfID at the UN’s first ever global sustainable transport conference in Turkmenistan recently—something that could not have happened if DfID had not financed it through the World Bank—but soft power has limitations. It is not visible in expenditure; it is, if you like, at second or third hand, and it is not possible to find the British imprint on that expenditure. Adding to that widespread portfolio with the new policy is, as I see it, a very good thing to do.

Already, the Commonwealth Development Corporation had an ancient track record of excellence in this field, and under its new guise since 2007 it is joining the stable of eminent institutions whose view is that the value of aid per se in conquering poverty has perhaps peaked and is dropping and that we must focus much more on the free market and the rule of law and on making stability through jobs and futures.

The common characteristics of those countries which rank high on DfID’s action list create most obvious barriers to investment. The first and clearest is our old friend corruption. All the countries that DfID is interested in assisting where poverty is rife are riddled with corruption. Alongside that goes weak, evasive or invisible justice, inadequate laws to protect the population and untrustworthy police. All these things open the door for international criminals, including globally active gangs of human traffickers. There will be a lack of international banks and a failure to honour UN conventions, which results in monstrous human rights breaches without apparent objections. There will be state ownership of national resources, concomitant with a lack of a private sector investment. All these unpleasant matters will add up to acute poverty—indeed, I would say that they cause poverty, particularly corruption. It is those characteristics which make aid the obvious answer to put forward, but I believe that aid should now diminish in its value because it does not help with employment or futures and we know that other things can do so.

Since my interests will inevitably flow through my remarks, as will be the case for all noble Lords, I declare immediately that I have the honour of being a trade envoy for Her Majesty’s Government in four nations: Azerbaijan; the federal Republic of Iraq; Kazakhstan; and Turkmenistan. I have a commitment to the creative industries: I chair the Booker Prize for Russian fiction; I am vice-president of the Man Booker Prize for English fiction; and I am a patron of the Caine Prize for African Writing. Perhaps most relevantly, I chair the AMAR International Charitable Foundation, which is in its 25th year. It has 1 million patients in Iraq and 500,000 pupils of all ages, all well below any poverty line that can be identified. However, I say immediately that no funding for that comes from DfID, and therefore I have no conflicts of interest in this debate. I am also a non-executive president of the Iraq Britain Business Council.

I have no conflict, but I have a deep and lifelong commitment in aid and trade. I see the United Kingdom today as offering a different approach. For example, what are the needs? The needs of the poverty-stricken populations in the countries that DfID goes to are food aid and nutrition. What have we got to offer from the United Kingdom? We have magnificent agriculture—some of the very best on the globe—with one of the smallest populations working on the land and some of the highest and best-value output. We have so much to offer, yet when I tour these countries I do not actually see the National Farmers Union, which is the body that should be there. I do not see the big industrial agricultural sector that is here in the United Kingdom; we should export that eagerly and willingly.

I see a tremendous need for public health. However many jobs may be available, you simply cannot work if you have dysentery or worse. Here in the United Kingdom we have something that is the envy of the globe, although we tend to mock it, and that is the National Health Service. We should be exporting that infinitely more than we do. We have tremendous public health capabilities here, and I hope and believe that DfID should work on that in its new guise.

As for education, our universities, as we know, are also the envy of the globe and among the topmost universities anywhere. We have the British Council, the BBC Trust and the BBC World Service, but without the language of English, without the capacity for students to put themselves forward speaking English, no university here will accept them. One of the key issues that should be looked at at the moment is the teaching of English and, with that, the teaching of information technology. With those two things, any young person these days can go anywhere and succeed in anything. I urge the Minister to think of that.

Regarding conflict diminution—I will come in a minute to the hearts and minds campaign—justice and the rule of law is another tremendously important factor. Here in the United Kingdom we do not seem to invest in our associations. For example, the American Bar Association has tremendous investment from the State Department, but I have yet to find a similar investment for the British Bar Council or the solicitors, yet we have so much to offer in terms of justice and it just needs a push from government. If the State Department can do it, why not DfID?

I can hardly mention enough the excellence of the City of London—it is so enormous that it takes speech after speech to praise it. Given the transfer of knowledge that we did so eagerly and well when eastern Europe came into the land of the living again following the ending of the Cold War, surely we should do that again.

Again, I refer to the State Department, which funds a tremendous amount of teaching. I joined them myself in Jordan and in Morocco, teaching women to be, perhaps, barristers, solicitors, attorneys. There is enormous potential there which enables countries to offer justice and the rule of law more strongly. We have professional standards here which are unique and wonderful. Such high standards of engineering, accountancy and auditing are rare indeed. We should be teaching those things; everybody wants to learn them.

Regarding the creative arts, when the Globe Theatre toured the world a couple of years ago for Shakespeare’s birthday, it won us more friends than anything else I have yet met on a single issue. Another thing we excel at is tourism. That is quite an easy thing to explain and to experience. We have wonderful tourist industries here in the United Kingdom.

For fighting corruption, we need transfer of technical knowledge—economist language, which is not at all easy for any of us to understand, even for economists. We have United Kingdom Export Finance, for example, with a tremendous offer these days of loan guarantees; yet the countries I know well do not understand that a loan guarantee is there to encourage western banks, British banks, to back a company, and that it is not, in fact, a grant or loan to government itself. I believe that the language, vocabulary and thinking of modern-day economics should be explained far more clearly. That is something else that can be done by government.

I have worked hard recently on corporate social responsibility, and I pay great tribute to those companies, big and small, which offer corporate social responsibility to local people. The classic, pioneering companies, such as the oil and gas majors, do magnificent work, but it is also possible to do this with a much smaller company. However, as the Secretary of State for International Trade commented recently, it is hard to stimulate interest in the small to medium-sized businesses in the United Kingdom at the moment. It is difficult because they have been so cosy in the club of the EU that they do not see that the wider world is infinitely more exciting and has far greater possibilities. Might I suggest perhaps that DfID might consider financing roadshows—per country, it would have to be—inside the EU, using the magnificent chambers of commerce system that we have in Britain, to explain how it is perfectly possible to invest in a country where you may be a little nervous at the moment?

This does not divert at all from the absolute commitment of DfID to conquer poverty, but my argument, which I think is impregnable, is that conquering poverty in the long term means jobs and futures, training, standards, opportunities, languages and international exploration—at least on the web if nothing else. The classic pioneering companies can find a way of looking longer term because they have the deepest pockets and the longest life cycles, particularly in sectors such as oil and gas, but it is perfectly possible to interest the smaller companies, the ones with the shorter life cycles, which are absolutely crucial for different types and styles of jobs. I would suggest that, in its new guise with its new policies, DfID should invest in success. Britain has plenty of it, all of which is the envy of others and all of which is relevant to the areas of the world in which DfID chooses to focus.

Last week the noble Lord, Lord McConnell, commented on how crucial it is to bring together diplomacy, defence and DfID. I would indeed say that DfID should look seriously at major support of the Ministry of Defence. Indeed, it is hard not to think that in that sense DfID is the,

“Quinquireme of Nineveh from distant Ophir”,

and the Ministry of Defence is the,

“Dirty British coaster with a salt-caked smoke-stack”,

but the MoD is absolutely crucial. Fighting is only one phase in bringing peace; you have to have the hearts and minds following that.

Working in Basra with the British military in April 2003, I was dismayed when the funding was withdrawn and it could not continue with the wonderful things it was putting in and installing democracy. I moved up to Baghdad and worked for a number of years for the US Department of Defense, which I saw had the funding from Washington and was close to the people—no closer than the British in Basra but simply because it had the financial backing it was able to do much more of the job. I really commend that example to your Lordships. Safety and security are crucial for training, teaching and access to further education, which people need so badly.

I invite the Minister to consider, in the context of his new policy and of my own remarks, that the change from aid to trade is no great sharp leap from one side of a river to another. While it is a major shift of emphasis, which I believe our nation will highly welcome, aligning DfID with the Brexit horizon of a nation that is not just at ease with itself but with creating higher productivity and more prosperity for all is something that DfID is uniquely capable of doing, bringing together, as must be the case, the FCO, DfID and the DIT in—to use the phrase more properly—ever closer union. Who knows? Even that beacon of ethics, the Daily Mail, might feel happier. I beg to move.

15:23

[Lord Desai (Lab)]

My Lords, we are very grateful to the noble Baroness, Lady Nicholson, for introducing this topic. She has done excellent work in this area and she has now very boldly invited us to think about the new policy on development. I say immediately that I entirely agree with her suggestion that there should be much more liaison—if not almost a formal coming together—between the Foreign Office, the Ministry of Defence and DfID.

Over the years that I have been studying or writing about development, we have come to a very different understanding of it now compared to before. Once upon a time, in the days of the Cold War, we got into development aid just to make sure that our voice was being heard, as against the opposite voice. We put faith in Governments, and government-to-government aid seemed to be the centre of the way development aid was distributed. We then realised that development is not actually about Governments but the people who live in those countries. The noble Baroness pointed out the problem of corruption; Governments often stopped development happening because they concentrated all the money in their own hands.

We need to look at two things. First, as the noble Baroness asked, how does UK development aid—I say parenthetically that I very much welcome our commitment to spending 0.7% of GDP on development —further the UK’s soft power? That is one way of looking at it. Secondly, how does UK money actually further development? That is a separate problem and we should worry about that in a different way from how we worry about the departmental correlation.

On departmental correlation, the current problem of development is not only that it does not take place within national boundaries but that it often occurs in ways which are difficult to deal with. Take the problem of refugees, for example, who have streamed out of Syria because of the war. There are also people who are not refugees but economic migrants coming from Africa into Europe. That is a development problem, and the Syrian refugee issue is another such problem that belongs to no particular country but lots of lots of countries. We have to do something with our resources about the refugee problem, which will go on occurring. There will be no finite end to it; nor will there ever be an end to the problem of economic migration, no matter how many boats we ply in the Mediterranean. People will cross oceans and seas, taking enormous risks to move from what are now poor countries to what they consider to be rich countries offering them opportunities.

While we will do everything we can to stem the flow of people, there will be cases—especially those involving women, children and other vulnerable people—where we will have to face up to the fact that helping them is a problem for the Ministry of Defence and the Foreign Office, or for DfID. But it is a problem we cannot neglect: if we are to advance our soft power and help development, we will have to have a philosophy within DfID, or within government itself, that takes a robust view of what we should do about these recurring problems.

Let me also point out the recent problem of hurricanes, floods and typhoons. It was reported—I say that only because I do not know whether it was true—that under OECD rules, DfID could not help certain Caribbean countries because they were classified as too prosperous to come under DfID rules. When people are affected by hurricanes, floods or climate change, do we not have a responsibility to think about how we can help them, especially if they are within the UK’s overseas territories? All the problems of climate change, hurricanes and floods, post-war refugees and economic migration are the new problems of development, rather than the old ones associated with trying to help the people of a country by giving money to their Government, in the hope that they will trickle the money down to the people.

Going further along that line of thought, I will say just one more thing. Over the many years that I have worked in this area, I have always thought that aid should not be from government to government, but from charities and NGOs in the donor country to charities and NGOs in the recipient country. We have to get the money on the ground with as few intermediaries as possible; often, governments are not good intermediaries in the developing countries where the need is greatest. The more that we can fund our aid through UK charities, which have done very good development work over the years, the better. We ought to use their expertise and on-the-ground knowledge of where the money is needed, what it is needed for and how to use it most effectively.

I welcome what the noble Baroness said about the Daily Mail. Let us have the Daily Mail as a critic, because it keeps us on edge. There is no point in wasting money. We have to be able to demonstrate time and again that we are using the money we have properly. Remember, there is a development problem at home as well. We have to maintain balance, and every time we give money outside the country, we have to think of the people who are not getting that money at home. We should not pretend that we somehow have no problems and that all the problems are abroad. People resent that. When we spend DfID money, we have to make quite sure that we are getting good value in terms of both UK soft power and tackling the problem of development.

15:32

[Viscount Eccles (Con)]

My Lords, I am also very grateful to my noble friend for introducing this debate about economic development. Because the CDC is mentioned quite frequently in the development strategy, I thought it appropriate that I should say a few words and concentrate on it.

The CDC was founded 70 years ago, and I was fortunate enough to work for it at the beginning of its second half, so I am already history. My noble friend is very closely connected with the CDC. Her father-in-law was the man who developed the idea, within the Colonial Office, for the beginnings of what was then the Colonial Development Corporation. Its purpose was to look for economic opportunities in the colonies, develop them and do so in a way that meant that, taking one year with another, the institution broke even. There was also a subline, which was that the United Kingdom was pretty short of food, so if it concentrated on agriculture, everybody would be very happy. Sir Michael Caine of Booker—justifiably famous for the Booker prize—was the vice-chairman of the CDC during my time. Apart from being very good at many things, he knew a great deal about the growing of sugar cane.

It seems to me that no institution can ever escape from its beginnings, and I am not sure that any institution should try. The CDC was founded in the context of economic development, and that is where it still is today. It is classified as a development finance institution, and as the noble Lord, Lord Desai, said, every now and again, you run into an awkward OECD rule, even if you are a publicly owned development finance institution.

As such, the CDC is 100% publicly owned; it works only in the private sector and primarily by the provision of equity finance. It derives some great advantages from its public ownership. One is that it has no need to distribute, as its shareholder does not call for dividends. Another is that it is not a profit maximiser since it does not have shareholders looking for the maximum return. This enables it to work in places and sectors where the fully private sector either does not want to work or is not yet ready to. So a development finance institution is a very useful gap-filler. Perhaps it enters into partnership with people who are already interested in an economic opportunity, or perhaps it starts one entirely of its own volition—the CDC has a long record of doing both. It is also able, with a proportion of its portfolio, to be innovative and take greater risks than the private sector might be willing to. In doing this, it has one huge advantage of being publicly owned: it has the backing of Her Majesty’s Government’s posts all round the world. That can be extremely useful if you are in a country where, as my noble friend says, there is rather a lot of corruption. It is a pretty good help to have someone who knows who is who and tells you with whom you should and should not work.

I say in parenthesis that in the 10 years that I was involved with the CDC I was never offered a bribe, nor was it once suggested to me that I should provide one. The CDC was known as incorruptible, and I assure noble Lords that when people on the other side of the fence know there is no game that they can play, they do not play it. That is an important lesson that might be more widely learned.

In searching for economic opportunities we hope to find something that will give both a financial and an economic rate of return. I apologise for my language being slightly out of date; the DfID strategy describes these matters in much more depth and detail than there was ever any need for in my time. If you find such economic opportunities and you succeed, that is a great help. I will give three examples. First, long ago my predecessor invested in a £700,000 convertible loan to complete a project in Hong Kong. It is strange to think of Hong Kong being eligible for OECD aid, but it was at the time. Some 25 years later, that £700,000 turned into £48 million. When we accepted the £48 million cheque, we said to the Chinese who had bought the property, “You may be surprised to learn that we’re going to invest this money in Africa”. I merely make the point that if you succeed, it gives you opportunities in places where things are more difficult and where you are more badly needed.

Secondly, I would cite mobile telephones. The CDC was one of the very first investors in mobile telephones south of the Sahara. That has been a huge benefit to the continent of Africa, which in fact will never need hard-wiring in the same way as we have been hard-wired. Indeed, some of my children and grandchildren do not have a fixed-line telephone any more, and they live in this country.

Thirdly, I would cite the property, which had belonged to the Japanese, that was given to the CDC in its earliest days by the enemy alien property division of the Colonial Office. There we worked, and at the beginning we had 24 people from this country working on the project but by the end only one remained. We sold the property to a Singaporean firm for £100 million —again, a huge opportunity to redeploy the money in other, more needful places.

From time to time, a development finance institution investing and making a return has been questioned: is it aid? The most famous debates about the subject were in your Lordships’ House many years ago between two economists, both Hungarian: Lord Bauer and Lord Balogh. Lord Bauer was a man who believed entirely in private-sector economic development. He said, “We got development in the United Kingdom that way; why are we different from everybody else?”. He also made the point made this afternoon about Governments not necessarily being the best people to decide what should be done next. He was up against Lord Balogh, who was an adviser to Harold Wilson and very socialist. He believed that everything should be done through Governments. That debate has gone on, one way and another, ever since. My view is that it is time we stopped it, because obviously there is a critical place for aid in all sorts of humanitarian circumstances— refugee camps have been mentioned. There cannot be any argument that there should not be aid, but there also cannot be any argument that there should not be economic development.

I illustrate that with a little story. I was at lunch in Accra with 12 businessmen, half of them Ghanaian and half from various parts of Europe—a Conrad-type mixture of people. They asked me about Malaya: “John, tell us: why is it? We have about the same population, economic opportunities, level of mineral wealth—although ours is gold, in Malaya it is tin. We had the same colonial administration, education policy, approach to the human rights of the people in the country, and rule of law, although that did not always make us very happy. How does it come about that they are several times as rich per head as we are?”. That has continued. Today, the per capita income in Ghana, which is a wonderful country with huge opportunities and a charming people, is $4,000 per capita, but in Malaysia, it is $27,000. That takes some explaining by anyone involved in economic development and trying to do the best they can around the world for the per capita income of the people.

Finally, I pick up a point made by the noble Lord, Lord Desai, about the Crown colonies and dependencies. It is a great pity that the CDC is no longer empowered to work in those countries. There was a time when the Foreign Office came to us and said, “Will you do something in Anguilla?”. It wanted the restoration of good behaviour in the power-generating company there. It seemed interesting, and we knew a lot about power generation and distribution, so we went and restored the Anguillan’s power company.

That was not done with any focus on poverty. If you are in economic development, that is not the right place to start. We started by saying, “We need a general manager”. We found a mixed-race Caribbean man who lived in Toronto—a lot of very able people from the Caribbean live in Toronto. He became the general manager and—surprise surprise—one day someone came into the office in London and said that he would like to see me. He turned out to be a maintenance engineer working on a British power station, but came originally from Anguilla. He had heard of the CDC and said, “If you are going to this company there, I will go home and become one of your maintenance engineers”. He did so, and that was a great success. We were not there for very long because, once we had put it right, we let it move on.

I quite understand and fully agree that we are trying to alleviate and remove, if possible, poverty from as many people in the world as possible. But if you have a finance development institution which invests successfully, it could do a lot more if it was allowed to work in places that are not so poor. There may be more economic opportunities, and if it makes a return it will go on to the balance sheet.

There is some concern in this House and elsewhere about the potential increase in the CDC’s capital. If it succeeds in making a reasonable return, it will be many years before it draws down all that capital. Indeed, in my time at the CDC, we did not draw any money net out of the aid programme at all. One of its objectives should be that it minimises its call on 0.7%.

15:46

[Lord Judd (Lab)]

My Lords, it is a great joy to follow the noble Viscount, Lord Eccles. During my ministerial days, I had the joy at one stage of being the Minister responsible for CDC, which has a powerful record that we should all recognise. Indeed, I put on record now my appreciation of the very helpful brief CDC sent in preparation for this debate.

As the noble Viscount said, it is not either/or; we have to get better at understanding the pluses and minuses in all situations with what different people have to offer. I will make just two gentle observations about CDC: it is a matter not just about growth but about focusing on poverty reduction as well. We need to know more about what is being achieved by CDC on poverty reduction. It is also very important to encourage CDC in its new commitment to the emancipation of women and their part in economic development. We should hear all we possibly can about how that work is going. Another, more general point worth mentioning about CDC is that perhaps its patchy record of development impact could be a little fuller and more detailed. That would help its case tremendously.

I simply must declare an interest as much of my life has been spent working in this sphere, as a Minister in overseas development, in the Ministry of Defence and, indeed, in the Foreign Office. I have also been involved in the NGO world professionally—as noted in the register—and as a trustee and volunteer.

I am concerned that voices are now being heard by us all, calling in quite strident terms for a cut in the aid programme. This is a misunderstanding of the situation and is often very naive and ill-informed. I suggest that the challenges for the aid programme are still immense. In the aid programme, we still have the issue of world poverty. The World Bank itself has said that there are 770 million people living on less than $1.90 dollars a day. Getting it down to that level has been an incredible achievement by all concerned. Since 1990, 1.1 billion people have lifted themselves out of extreme poverty, but we have to face the reality that the growth that has helped to deliver this has been vastly unequal in most countries. The World Bank’s own figures show that, had growth been pro-poor between 1990 and 2010, 700 million more people, most of them women, would not be living in poverty today.

It is also important to point out that living on $1.90 a day is far from a job well done, when you think about all the difficulties and hardships involved. It is an incredibly basic amount of income. It is also worth noting that, despite the downward trajectory of poverty, the number of hungry people in the world has increased for the first time since the turn of the century. In 2016, the number of chronically undernourished people reached 118 million, up 38 million from the previous year. That is a huge challenge—and it is no time to start talking about cutting the aid programme.

There are other aspects to this. I never forget the alarming statistics that the number of displaced people in the world is 65.6 million, and the number of refugees in the world is 22.5 million people. The number of stateless people in the world is 10 million—and just think of the proportion of those who come from South Sudan, Afghanistan and Syria. If we are concerned with peace and security, we should see how indispensable the aid programme is in meeting challenges of this scale, which military activity alone cannot possibly solve. They are all breeding grounds for alienation, polarisation, extremism and worse.

I have been looking at another set of statistics, and I put on record the help that I have received from our excellent Library, which I greatly appreciate. The World Health Organization is carrying a huge responsibility on behalf of the world, with the Ebola epidemic and other similar episodes that could follow. It is a vital international organisation in the cause of the service of humanity. The shortfall in its programme budget is recognised by it and by others to be $1,119 million. Others, very well informed, have said that it is closer to £2.2 billion dollars.

UNRWA is an organisation on the front line dealing with Palestinian refugees. That is central to stability and peace in the world. Its general fund has a deficit of $101.2 million. Its project shortfall is $191.5 million. The shortfall on its emergency appeal is $995.6 million. Where on earth are the people who talk about cutting the aid programme at this juncture coming from, when we have challenges on this scale to meet? The deficit in the current budget of the UN High Commissioner for Refugees is 46%. UNICEF, an organisation which is well known and greatly respected across the world, needs $932 million for its vital education programmes in emergency countries. So far, the voluntary contributions towards that have been less than $115 million. So the humanitarian challenges are irresistible.

I will talk for a moment about growth. Of course it matters and the noble Baroness made that point powerfully in her very good opening speech—which was not surprising in view of her almost unrivalled experience of what we are talking about. However, it is not just about growth as such: it is about the quality of growth, too. Where is that growth taking place; what are its knock-on consequences in, for example, fragile states; can it actually be risky in terms of conflict sensitivity; and are some vulnerable people in society being made more vulnerable as growth takes place? It is a constant preoccupation of mine that this matters tremendously, not just in humanitarian terms but for an intelligent approach to peace and security. We need to be more cognisant all the time about the nature of growth.

I will conclude with some specific points that the strategy requires us to look at. DfID surely needs to ensure that the objectives of its economic development strategy are framed around the sustainable development goals, ensuring that no one is left behind. In its economic development programmes, consideration needs to be given to the growth diagnostics in measuring economic development. It is not sufficient to have markers that measure only the quantity of job creation: quality has to be examined as well. I suggest, unashamedly, that these should be in line with the standards set by the International Labour Organization. There are questions around what indicators are being used and how DfID plans to monitor and report on the implementation of the strategy.

There are concerns that the strategy does not have sufficient focus on youth. There is a lot of work to be done with the private sector on the sustainability of industries as young people move to cities. Look at the huge drift of young people to the Channel and the immediate problems that confront us there. That happens because they find themselves without jobs, without work and without a purpose in life. There is a terrific challenge to be tackled at the grass roots in the countries concerned, not least in west Africa. What job opportunities are being created for the young on the ground?

We also need to be certain that there is a truly inclusive approach, ensuring that policies within DfID and between it and other government departments are coherent and do not undermine development outcomes. One of the things that worries me about the strategy is its insufficient emphasis on climate change. This is fundamental and needs to be strengthened. There will be immeasurable consequences not only for people in the poorest countries, particularly low-lying countries, but for ourselves. That needs to receive more attention.

I am glad that there is a strategy; it probably was time to examine what our direction and underlying objectives should be and whether they meet the real demands of the society in which we live. However, as the noble Viscount kept saying, it is not a case of either/or. In our preoccupation with the efficiency and contribution of industry, commerce and the rest, we must not lose sight of the humanitarian challenge, which cannot be separated from creating an environment in which industry can survive and flourish in the long term. It is vital not to lose sight of the need for a stable and peaceful world. Therefore, I plead with some of those who spoke in last week’s defence debate to go away and do their homework, to face the realities and to see that it is not a matter of just cutting the aid programme to put into defence. Of course there ought to be appropriate co-operation and a recognised interrelationship between development and defence—I would be the first to emphasise that and see its value—but that is very different from a naive perception that you simply cut money out of the aid programme and put it into defence.

16:02

[Baroness Jenkin of Kennington (Con)]

My Lords, I welcome both the noble Baroness’s introduction to her excellent debate and the discussion about DfID’s economic development strategy. I admit to having had something of an essay crisis this morning when preparing for this debate but I am grateful for the words and works of Professor Paul Collier, the CDC, the noble Lord, Lord Griffiths, and his co-author Dr Kim Tan for making the case for social venture capital through their pamphlet, Fighting Poverty Through Enterprise, as inspiration and background reading for this debate.

What is clear is that the economic development strategy is good but that certain elements need expanding—namely, the opportunity for DfID to catalyse private sector skills and organisations and mobilise the best of Britain and British to assist, through advice, in supporting the sustainable building of poorer economies. I know, for example, British businesspeople who have helped to develop Nigeria’s venture capital system to the benefit of both the UK and Nigeria. Using experienced people on a voluntary basis costs the UK nothing. They ask for no return or benefit for themselves, just the satisfaction of seeing the UK and Nigeria prosper. These are programmes on which to build. As a founder of the Conservative Friends of International Development, I meet successful businesspeople on a regular basis who are keen to share their expertise and experience by helping the UK and DfID develop programmes of this kind. May I ask my noble friend what is being done to harness the energy and enthusiasm of experienced entrepreneurs of this kind? Are there programmes within DfID to which they could be signposted?

The decision by DfID to allow more of the UK’s aid budget to flow via the CDC to support private investment met with predictable criticisms from some quarters. There are still some who want aid to be uncontaminated by business and, on the other side of the coin, there are those who believe that aid allows Governments to avoid facing reality while crowding out private finance. When such different arguments agree, we should be careful. Shifting aid to support for business will be essential for the small low-income countries that are the core of the development challenge. What is more, other advanced countries are also building up public agencies like the CDC. The ascent out of poverty depends on transforming the productivity of the vast workforce engaged in private economic activity. This transformation is not mysterious. It is achieved by reaping the gains from scale and specialisation. Modern countries perform this miracle of productivity as a matter of course but in poor countries proper companies have not yet developed. Informal microenterprises, while important, are not a substitute. Any of us who have travelled to poor countries will have seen intense activity by one-man bands working their socks off to make a living but unable to scale their businesses to soak up the workforce in any meaningful way.

In Africa in particular, few companies have scaled up, so their workers are condemned to poverty. The reason is that the economies of many African countries are tiny, environments are risky and the markets are undeveloped. Groups making investments will often be pioneers. Being a pioneer is even more important in poor countries than in rich ones. While in advanced economies, most investment simply deepens existing forms of capital, in the poorest countries this is not the case, so a much higher proportion of investment is likely to be pioneering, not technologically but because it is market-creating. A mechanism that supports the public benefit is therefore especially important. Aid is needed to pay for the substantial public benefit of bringing reputable companies into difficult countries. Without such groups the poorest countries will struggle to develop, and without public support there will be too few of them. This view should not be contentious, and, happily, development agencies are belatedly recognising its merits.

To channel aid to companies, aid agencies need specialist vehicles with private sector expertise. The African Development Bank has created the Africa50 Infrastructure Fund for this purpose. In December last year, donors signed off the £65 billion, 18th three-year replenishment of the International Development Association—the World Bank’s aid programme. For the first time, this includes a private sector window, whereby about $2.5 billion can be channelled to the International Finance Corporation—the bank’s specialist vehicle for the private sector. The CDC is the British equivalent of the IFC. For a period it lost its way, and policy mistakes made a decade or more ago have left a scar. In 2011, a policy rethink brought in excellent new management and a new mandate. I pay particular credit to the recently departed chief executive, Diana Noble, who did so much to turn things around. I wish her successor, Nick O’Donohoe, continuing success as he builds on her legacy and continues to scale the work of the CDC to help build businesses and create jobs in Africa and south Asia. It is a crucial tool in the part that business and enterprise can play in reducing poverty.

I turn to microfinance and social impact investing, most particularly used in Africa as another tool. Micro- credit has been a crucial first step in directly helping the poor escape poverty. The development of microfinance institutions providing small uncollateralised loans to poor entrepreneurs to start up micro-businesses has been successful. The loan repayment rate amongst these MFIs is exceptionally high, especially if the loans are made to women rather than men. Social venture capital has the potential to be a successful asset class and an important second step to support the growth of small and medium-sized enterprises in developing countries and thereby create crucial jobs. So what is social venture capital? These are for-profit social venture funds investing in SMEs in developing countries. They take an enterprise approach to poverty alleviation by building commercially sustainable companies that create jobs and empower the poor to improve their livelihoods. They adopt the principles, discipline and accountability of venture capital investing, but with a sub-venture capital rate of financial returns. Henry Ford once said, “A business that only makes money is a poor kind of business”. This is an attitude and business model which increasingly resonates amongst a new generation of social entrepreneurs. The old business model of existing solely to make a profit for their shareholders looks increasingly dated.

Social enterprise businesses look beyond just financial returns to social and environmental returns as well. Of course, they do not lose money—to be sustainable, a business has to be profitable—but a social VC does not require the same high rate of financial return, and this is a sector that is growing rapidly. Furthermore, some 10 years ago there were very few players in this market —for example, the Shell Foundation and Google.org— but it is growing rapidly and mainstream investment funds are allocating capital to this area. I would like to hear from the Minister what the Government are doing to encourage growth in this sector.

I would like to share with noble Lords an example of a successful social enterprise in a developing country. The Agape call centre operates in the largest men’s prison in Singapore. It employs convicts to try to rehabilitate them. It has helped inmates with remaining sentences of 12 to 24 months to rebuild their self-esteem and confidence. It helps offenders on their release to integrate back into society and the marketplace, and often reduces reoffending. The prison is now releasing inmates six months earlier on parole if they demonstrate good behaviour and if they work in the Agape call centre. It also leads to other things.

Anil calls himself an “unbankable” person—someone who is not reliable to bankroll or invest money in because he served time in that prison. He worked in that same call centre and worked his way up to the centre’s manager position. As he puts it, “To be in a call centre for a prisoner is the most effective work there is. In the prison environment, there are no distractions. They are completely focused and hungry for more. And we tell them that if you make 100 calls, you get 80% to 90% reject calls, but you know that you have actually learned perseverance. At times when customers call them and berate them, you know that they will not react because they value their jobs and they have developed the skill of patience”.

When he completed his jail term, armed with his industrial know-how, Anil decided that he wanted to give back and start a call centre business for inmates and fellow ex-convicts. However, because of his ex- convict status, he could not get a bank loan to start the business, so two methods were devised to impose corporate governance systems to ensure that Anil managed the provided capital effectively and wisely. His investor and mentor said, “Here’s a guy who has transformed himself, having been through what he’s been through, and now he has a vision to go and build a business that can help others along the same journey and give them a second, third or fourth chance. So for us as investors, at the end of the day, we are wholeheartedly behind the vision. The key question for us was: is this the right person? Anil is willing to learn, teachable and transparent about his background, and he is treasuring his existing chance ... So we see that as something we are willing to take a bet on”.

And Anil has delivered. In all, he has given employment to 85 prison inmates, including six senior citizens, three people with disabilities, three single mothers and one stroke patient, and his call centre manager is a fellow ex-convict. He has won the social entrepreneur of the year award at the Singapore Venture Capital and Private Equity Association.

DfID should support this agenda where possible. Here is the opportunity but here too is the challenge. Looking back to 1960, per capita income in Africa and east Asia was roughly the same. By 2004, GDP per capita in east Asian countries was five times higher than in Africa. My noble friend Lord Eccles used more up-to-date figures to illustrate the same point. Such a divergence in income between poor and wealthier countries has been a contributory factor to greater illegal migration out of Africa, but if we in the UK could play our part in developing and investing in businesses such as these, just imagine what the future of Africa and other tragically poor countries across the developing world might look like.

16:13

[Lord McInnes of Kilwinning (Con)]

My Lords, I begin by thanking my noble friend Lady Nicholson for her excellent introduction to this debate and for bringing this strategy before your Lordships’ House. She proved very well her own impregnable argument as to why this strategy is right for Britain at this point.

It is helpful that this debate follows a recent one introduced by the noble Earl, Lord Sandwich, on the implications of Brexit for aid. Personally, I am very pleased that DfID is now putting a proper focus on how the UK can ensure that sustainable economic development is supported by the UK in less developed countries.

I take great pride in this country’s commitment to our 0.7% of GDP being spent on international aid. We have witnessed time and time again how the UK, working with NGOs, makes such a humanitarian difference to so many parts of the world. This humanitarian and reactive responsibility must, however, always lie at the heart of what the department does. With the greatest migration levels since the Second World War—and, outside the context of war, since late antiquity—coupled with natural disasters that we see worsened by climate change, that basic utility and purpose of DfID must not be forgotten.

However, it is clear that the UK’s commitment, financially and in human resource, to international aid and scrutiny of the department mean that expectations of DfID and the difference it is making in the world can only increase. The department is therefore required to create economic sustainability and growth through this new strategy. The huge growth and urbanisation of the population in sub-Saharan Africa, for example, can be sustained only through full economic growth. Clearly these new supercities that we are seeing across the world will not be self-sustainable in food and utilities without a strong market economy based on development, supported by this country. By 2030, 70% of the world’s population will live in an urban environment. That requires major infrastructural support for these countries.

I would like to cover a few fundamental themes on how the economic strategy is enacted. First, it is essential that the current ethical nature and humanitarian ethos of DfID underpins this strategy and is closely monitored to ensure that we do not lose our way. This strategy must not be a means for the UK to create an aid-for-trade basis with the less developed countries of the world. I am pleased to see in the strategy the commitment to continue placing a special focus on women and girls. That is exactly the kind of ethical basis this strategy needs.

It would be easy for us to slip to the lowest common denominator and to an easier economic strategy in many of these less developed countries. That would undermine the work of DfID and lead to even more critical analysis from our friends in the press and those in this country who do not always get too excited about our 0.7% commitment. As we have seen recently with the criticism of the CDC—as my noble friend Lady Jenkin said, it has found its way in again—it is important that this strategy is transparent as we move forward, and that there is not an opportunity for criticism of equity or investment strategies.

Secondly, we cannot doubt that this is an opportunity for our country, post Brexit, to negotiate new trade deals and to ensure that we put in place ethical trade deals that encourage economic development across the world. The most obvious example is coffee from Ethiopia. The EU does not currently allow that coffee to be properly processed in its country of origin, leading to the devaluing of what should be an economically strong export for Ethiopia.

We also need to make sure that this economic strategy is flexible and subject to regular review. The noble Lord, Lord Desai, mentioned refugees. There will be times when refugees enter countries that would not normally be included under OECD rules as countries that could benefit from international aid from us; we must ensure that there is economic stability for those refugees when they arrive. There are more than 1 million refugees in Lebanon and Jordan at the moment, so unless we provide proper support for economic development and employment opportunities for them, we will create a situation of political instability that will lead only to further resource needing to be invested in the future.

That leads me to my next concern. We cannot see immediate humanitarian aid, economic development and support through the Foreign Office for political stabilisation as three separate things in three different silos. As my noble friend Lady Nicholson said, Iraq is a good example of where, despite enormous investment after 2003, a lack of investment in political reconciliation after that year has led to a point where the Iraqi people have not been able properly to benefit from the enormous pump-priming after 2003. I have absolute confidence in my noble friend and his colleagues, but it will be incumbent on them to ensure that this excellent economic strategy is not allowed to become a department within a department, or indeed be cut off from co-operation with the department’s more traditional programme of humanitarian aid or from co-operation with the Foreign Office.

Finally, I emphasise that as long as we avoid the dangerous pitfalls I have outlined, I see this economic strategy as an opportunity to benefit not only the United Kingdom but also those less developed nations.

16:21

[Baroness Hodgson of Abinger (Con)]

My Lords, I thank noble Lords for allowing me to contribute and in particular I thank my noble friend Lady Nicholson for introducing this important debate. Encouraging economic development is the way to help countries lift themselves out of poverty, and ultimately the goal of development strategy has to be to make countries sustainable and able to stand on their own feet.

Many of the poorest countries have the ability to generate economic growth but too often they are hampered by lack of knowledge, political instability, conflict and corruption. Today’s world is complex and those of us lucky enough to live in a developed country need to help. That is why we should be proud that we in the UK not only give 0.7% of GNI in aid, we have enshrined it into legislation to ensure that it continues. While this still appears to be somewhat controversial, we need to stand firm. Not only is it the right thing to do, but by helping those countries to gain stability it will help to cut migration flows and stem potential conflicts. Conflict creates poverty, but poverty can also create conflict.

Investing in the poorest countries is one tool we can use. I congratulate our Government on having increased the budget to the CDC by £3.5 million. Investing in private sector businesses has the benefit not only of generating income but of creating direct and indirect employment and thus having a real impact on individuals, families and communities. The general public here in the UK is quite rightly demanding that aid is well spent but supporting businesses in the most fragile countries does have risks and sometimes there will be failures. I would like to ask my noble friend the Minister about DfID’s appetite for risk, and for transparency and accountability of the long-term investments that the CDC makes. How are the CDC’s successful investments accounted for in the ODA budget—are they put against the spending as they create income? Is there more that we can do to encourage UK private sector investment in businesses in developing countries?

Besides investing in existing businesses, stimulating business creation is also important. As my noble friend Lady Jenkin has already said, microfinance is an important grass-roots tool to encourage people to set up businesses. I have seen examples in Africa where a tiny bit of seed capital has helped women to set up stalls in the marketplace and create an income. Can the Minister say what the Government can do to encourage more microfinance opportunities?

Besides encouraging capital investment, there are other ways that we can help. The Hammamet conference last year, organised by the British Council, brought together youth from across the MENA region, where there is much unemployment but no culture of entrepreneurship. So perhaps through our trade envoys and attachés, ways could be found to link entrepreneurs in the UK with aspiring entrepreneurs in developing countries to encourage and assist. For example, getting produce into an international market can often be a problem. This is an area where the UK has speciality skills. Perhaps we can look to specifically link expertise and mentoring to help increase access to markets as well as to help with marketing. Too often, products are sold and then packaged and marketed elsewhere, losing the added value to the producer.

However, we should not overlook that, all too often, the barriers to economic prosperity are poverty, conflict and corruption. All the work done by DfID through its programming and the UK embassies on the ground to help with stability and to encourage law and order, border controls and anti-corruption laws is to be applauded. Of course, too often it is women who are the poorest of the poor, so I particularly welcome all the work that the UK is engaged in to counter violence against women and to promote equality.

I thank noble Lords for letting me intercede today. I congratulate DfID, under a Conservative Government, on leading the way in creating this important strategy and all it is doing to encourage economic development in the poorest countries.

16:25

[Lord Bruce of Bennachie (LD)]

My Lords, I join in thanking the noble Baroness, Lady Nicholson, for giving us the opportunity to have this debate. I agree with her call for engagement in development not only across government but across UK plc. That is something that struck a chord in the House and which we could do a lot more of. Many of us would wish to respond to that and encourage private businesses, professional organisations and others to do more on participation with DfID.

The noble Baroness went through a list of professions and sectors, many of which are engaged but clearly could do more. In particular she mentioned the NHS, which I suggest is effectively engaged. It was perhaps the best cross-party response we saw during the Ebola crisis—which engaged pretty much every government department, including the NHS. It is interesting to see that the budget in Sierra Leone has now been cut. That raises the issue of the need to secure long-term capacity.

The contributions we have heard have ranged much more widely than just the CDC; indeed, the noble Baroness was more concerned about the wider interest than just about the CDC itself. The only thing I wish to say is that the Government have increased the funding for the CDC by a substantial amount, and the CDC has been radically restructured to enable it to do more and to focus on poverty reduction in the poorest countries. Many of us agree it is in a much better shape to do so now than it was three or four years ago. When the International Development Committee reported on the CDC, when Andrew Mitchell indicated he was looking at restructuring it, we suggested it should concentrate on more high-risk, poorer areas using frontier investment, but it did not have the capacity to do so. It now does, but there is still a question mark over whether it will be able to absorb the scale of finance available to it. Although the CDC feels that it can definitely increase funding, I think it is absolutely clear, having met with it in recent weeks, that it has to invest where others would not to make things happen that would not otherwise happen; otherwise, it will perfectly legitimately earn criticism for stepping in where the private sector could perfectly well have done so without state involvement at all. That is quite an important qualification.

The noble Lord, Lord Judd, made a strong case for some of the traditional values of aid and development not being lost sight of. I echo quite a lot of what he said. There is no doubt whatever that no country that has lifted people out of poverty in significant numbers has done so other than by a very significant expansion of its private sector. That is incontrovertibly the case. To the extent that aid can and does help that happen, that clearly has to be an objective if we are to end absolute poverty and leave no one behind. The question is what the role of aid is in that and how we should do it. I would divide it into three components.

The first component is much discussed: the humanitarian response. That generally gets wide support and no criticism from almost every sector and point of view because it is obvious, apparent and immediate—people are in distress, first aid is required and we need to respond. We nearly doubled our response in UK funding; the British public added to that by their own generous response to appeals. That is completely understandable, but I suggest we can do better in bringing more private finance into humanitarian responses by use of, for example, more insurance-based and bond-based funding.

Many of these crises and disasters are predictable, if not the exact time and scale. Many countries are prone to flooding, drought or earthquakes. They know they will happen but they just do not know when, and the people are too poor to make adequate provision. By working together we can do two things. We can effectively pay insurance premiums on their behalf and get the benefit of risk assessment by the insurance industry to ensure: first, that people are better prepared if there is a disaster and they are adequately compensated to make the quickest possible recovery; and secondly, that when rebuilding or rehabilitation goes on, it is done in a way that will make the next disaster less severe because resilience has been built in. That is a way of bringing public and private money together and unlocking a great deal more funding than would otherwise be the case.

The noble Lord, Lord Desai, mentioned the recent hurricanes in the Caribbean. I think that most of us completely understand the OECD criteria but also accept that the scale of the devastation was such that, regardless of whether it is ODA, we should respond. We have responded, as is right and proper. I am a member of the APPG on the Caribbean. We had evidence last week that some of the smaller islands have effectively had their economic wealth wiped out, so it is possibly arguable that one or two of them have dropped below the threshold that would qualify them for ODA. If that is the case, I hope the OECD will take that into account. However, we should be very careful that we do not try to drive a coach and horses through the correct safeguards that the OECD has put in to ensure that aid money is targeted at the most vulnerable and poorest people in the poorest countries and is not diverted for other purposes. Indeed, the noble Lord, Lord McInnes, gave ample warning that it should not be used as a cover for trade deals that are in our interests rather than related to the real needs of poor countries, and he is absolutely right.

Development spending is not widely understood. Indeed, many times in debates in this House I have heard noble Lords say, “Well of course we should do the humanitarian stuff, but I am really not sure about this other aid. We can surely spend it in other ways”. By definition, aid is long term. We are trying to build the capacity of some of the weakest, most fragile countries so that they have, in the long run, the ability to develop themselves and to graduate from aid. As a country, successive Governments, including the present one, have made a policy decision that we should prioritise those countries emerging from conflict that are particularly vulnerable, particularly crisis-prone, particularly dysfunctional and particularly corrupt. If we have taken that policy decision, we have to accept that we are going to have to give aid in a variety of ways which are difficult and long term. What are we trying to do? We are trying to lay down the foundations of a functioning education system, a functioning health service, a decent infrastructure and ultimately a civil service and parliamentary capacity that will give governance that might ultimately create the platform that will enable both domestic and inward investment to take off in those countries. That is not going to happen in a year or two. It will take, if we are lucky, a generation.

One can look at the really bad countries, such as South Sudan, which is going solidly backwards. One of the tragedies of recent years is that a country that fought for its independence for 50 years and secured its independence by a democratic vote immediately went to war with the country it had just got its independence from and then decided to have a civil war at the same time. A country that was quite capable of building a future for itself has effectively destroyed it. Do we just walk away? Unfortunately, the UK has a legacy in many of these countries. We have a responsibility, but we have to work with partners, and partners do not always have the capacity we wish they had, but development is about helping that to happen.

There are countries that are further up the ladder where development can and does work, and we can see the quality of healthcare, vaccination and diet improving. People say that aid does not work, but the noble Lord, Lord Judd, quoted statistics on the reduction in poverty that has taken place over the years. I do not think anybody should tell Members of this House that that has happened by happenstance. It happened because the international community had a development policy to tackle unemployment and it has actually delivered. But there are still too many people hungry and poor and we still need to ensure that we can reach them.

Many of us who have the advantage of travelling and seeing what is going on can see the practical benefits of partnership in countries which are beginning to show signs of positive development. I cite the example that I saw some time ago in Tanzania, where a combination of philanthropic private organisations, namely Gatsby and the Wood Foundation, working with DfID and Unilever, were providing agricultural support to tea planters to raise the yield and the quality of the tea they produced, with Unilever providing a guarantee that it would buy the tea at a price that would give an improved return. That was a really good example of philanthropy, state aid and commercial interests coming together in ways that were really beneficial. There are hundreds if not thousands of such examples. Indeed, as the noble Viscount pointed out, it is something that the CDC has traditionally done, and does, in significant and potentially growing operations now. Many of us look forward to seeing the CDC report back with some end results, but with the caution that we cannot expect the CDC to carry the full burden of aid and development.

As a number of contributors have made clear, what is fundamentally needed is a holistic approach that says, “We will fund humanitarian aid as necessary, innovatively and creatively, to meet a need. We will make sure that we encourage private sector development to try to build skills and capacity, and work with the private sector to create investment and jobs that will help countries lift themselves out of poverty. But we will continue to invest in public goods and the building of capacity, whether it is functioning parliaments, bureaucracies, health services, education—institutions across these countries that will ultimately enable them to take their place as successful economic countries that will not require aid”. I think that none of us who have been involved in this sector for a significant time believes that now is a moment when we could or should be cutting aid.

I would say to those who dismiss the idea that aid is not wasted and is getting to where it needs to go that one of the most striking things is how little evidence there is of misspent aid, given the risks that we associate with where we are spending it. The experience of DfID and its partners—whether they are NGOs, private contractors, commercial partners, specialist agencies or international agencies such as the World Bank—is that they know what they are doing. They make mistakes because they are operating in difficult environments but they learn from those mistakes and have become expert and professional.

I have just one question for the Minister. I have asked him this before and I suspect he will not want to answer. We have, on the verge of Brexit, a very substantial commitment to the World Development Fund. It has been rated a very effective way of delivering UK aid. Can we expect a constructive conversation between ourselves and the EU to ensure that the best of the co-operation between the UK and the EU on development can continue in a constructive, ongoing way? The poor people of the world would really appreciate it if we did.

16:38

[Lord Collins of Highbury (Lab)]

My Lords, I too thank the noble Baroness, Lady Nicholson, for securing today’s debate. I also place on record my appreciation of the efforts of the Minister, who also helped secure this debate. It has been important for the Government to recognise the need for parliamentary debate and scrutiny of this issue and I welcome his efforts.

I am totally with the noble Lord, Lord Bruce, in his analysis of the debate that we face. Language is quite important. We say, “development assistance” and “the Department for International Development” and then we suddenly switch to “aid”, which fuels some of the negative comments from the likes of the Daily Mail. It is “development”. We have a responsibility. Like the noble Lord, Lord McInnes, I welcome the fact that we have a party-political consensus on the 0.7% for ODA. But we have to recognise that despite that consensus, we have not necessarily gone far enough to persuade many of the public. We should and must make the case every day we can. When a budget as important as this is ring-fenced, there is a fiscal responsibility and a moral duty to ensure that the money we invest makes as much change as possible.

We also need to make the argument that development is also in Britain’s interests—better off, growing and trading within a strong global economy, with a sustainable climate, supported governance and secure borders. All those things that we have heard in the debate are potential risks to the United Kingdom can be addressed through our commitment to the 0.7%.

I agree with the noble Lord, Lord Bruce, that we need to encourage the private sector to do more. We need the private sector to be engaged. When Priti Patel was Secretary of State, she argued that the private sector needed to play an even greater role by integrating the aims of the SDGs into its business practices—absolutely right; I could not agree more. Of course, developing countries currently face an annual investment gap of $2.5 trillion to achieve the SDGs by 2030. Current investment levels are less than half that. Over the next decade, 1 billion more young people will enter the job market, mainly in Asia and sub-Saharan Africa. Africa’s population is set to double by 2050 and its urban population is set to triple. As many as 18 million extra jobs a year will be needed. This challenge can be addressed only by working with the private sector, including organisations such as the CDC. The SDGs and the Addis Ababa Action Agenda produced an international consensus that the private sector must play a vital role in achieving sustainable development.

Again, I very much welcome DfID’s strategy, which sets out how the UK will invest to support inclusive economic growth in the poorest regions by building the potential for developing countries to trade more, as well as entering into technical partnerships with partner Governments to tackle the constraints—policy, legal and regulatory—that have been identified in today’s debate, which deter investors and prevent business growth. CDC, wholly owned by DfID, has a central part to play in delivering that strategy, particularly in developing local financial sectors, deepening links with the City of London and pioneering investments in businesses to create jobs and catalyse private sector investment—to pump-prime and get things started in those difficult areas.

As we have heard in the debate, poverty and bad governance are still holding too many countries and their people back. Many women and disabled people and too many minorities are discriminated against and denied access to their fair share of goods, services and opportunity. Economic growth has the potential to be the engine to drive change. But growth without jobs, inclusion, healthcare, education or human rights—growth without power—will not deliver for the many. DfID’s strategy assumes that growth means poverty reduction. As my noble friend Lord Judd said, that is not necessarily the case. Rising inequality in high-growth countries has been a manifest problem. If we are serious about leaving no one behind, we need to address that. Perhaps the Minister can tell us how the strategy will deliver on inclusion and identify the most marginalised.

Decent jobs are a vital part of goal 8 of the SDGs. I know I have said this before but it really bugs me that the SDGs can be described in a review, yet no mention is made of trade unions and how people are to be empowered. Trade unions are vital to making change. By supporting trade unions, women’s groups and other civil society groups, we can give them a voice in mounting their own advocacy in defence of human rights, including workers’ rights. That is how we make change happen on the ground.

DfID and the CDC need to consider the growth diagnostics when measuring economic development. It is not sufficient to have markers that measure only the quantity of jobs created; job quality also needs to be measured. These measurements should of course be in line with the standards set by the ILO. I hope the Minister can tell us just how trade unions will be involved in the dialogue on the quality of jobs created as part of the strategy.

I want to turn to one other aspect of inclusion. I declare an interest as an officer of the APPG for Global Lesbian, Gay, Bisexual, and Transgender Rights. There are still 13 countries where being gay is punishable by death and 75 where same-sex contact remains a criminal offence. That covers 2.9 billion people—some 40% of the world’s population. LGBT rights, like women’s rights, are workers’ rights, too. That is what we need to address. The trade unions have long argued the benefits that flow when equality flourishes. On LGBT rights there is a business case to make, too, and this is where DfID’s strategy and the CDC have a role to play. I recently raised this issue with the officers of the CDC and I hope that the Minister will also take this up.

The positive case for equality has recently been made in the five standards of conduct, published by the office of the United Nations High Commissioner for Human Rights, to support the business community in tackling discrimination against LGBT people. I have met with the United Nations officials who were responsible. We can often say that investment is leverage but I am not one of those people who think that we should stop support or development assistance because a country makes same-sex contact illegal or criminalises homosexuals. I believe there is a case for engagement: engagement by making the case that inclusion, equality and empowerment deliver better growth, better jobs and better workers. We need to make that case strongly, so what steps have DfID and the CDC taken to work with the United Nations and the European Union on this issue? It is vital that we have that sort of response.

We have now seen the CDC investment plan and the strategic framework for the next five years. During the passage of what became the Commonwealth Development Corporation Act 2017, I think we all made the case that we wanted Parliament to have the fullest possible engagement with that five-year plan.

I am pleased that the strategy focuses on Africa and south Asia, where 80% of the world’s poorest people live. I am pleased that capital is being mobilised towards the UN SDGs. If we are to measure our success, the tools that we have are the SDGs—they are what we must always be focused on. I certainly welcome the CDC’s commitment to increase its transparency and improve accountability. It is not being critical of the CDC’s actions to say that, in the past, there has not perhaps been as much transparency as we ought to have. But with our investment strategy, we can say that a much more robust approach needs to be taken to measuring development impact. As I said before, it is simply not enough to say we have created X amount of jobs. What sort of jobs, and of what quality? What training and opportunities are there for young people? There is not enough in the strategy about the needs of young people.

Another way to increase transparency is to allow the Independent Commission for Aid Impact to play a much bigger role; for example, by carrying out a regular assessment of CDC investments. I would like Parliament to debate the CDC’s annual report. Bearing in mind how much money is now being funnelled through this important arm of government, why can we not have a yearly debate rather than having to wait for gaps in government business? Although I welcome this gap, I would like greater parliamentary involvement.

We have heard examples of the CDC’s positive impact, particularly on health. I will not repeat them all, but one thing that is worth repeating is its role when such incidents happen. For example, when Sierra Leone was hit with Ebola, the CDC’s engagement with Standard Chartered helped many businesses survive that terrible period. We talked about other incidents where the economic viability of a country can be affected, but the CDC’s work with the private sector to ensure that businesses could continue was vital, and we should say more about it.

When we are faced with negative publicity in the Daily Mail, we should not be defensive about it. I know the Minister has been very strong on this issue, but we need to talk more about how it is in our interests to support a sustainable global economy. Whatever threats Brexit will bring—and whether we are in or out of the European Union—the fact is that we need better and sustainable development. I welcome this debate and very much hope we will have more in the coming months.

I end on a point that I have made before. This generation—this Government and Opposition—has the opportunity to eliminate aid dependency for good by empowering the powerless. That is our vision and that is what we will press the Government to do.

16:54

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, I join others in paying tribute to my noble friend Lady Nicholson for securing this debate and for the excellent way in which she introduced it. I thank all noble Lords who have spoken for their outstanding contributions.

What we at the Department for International Development are united in is our mission, which is simple though complex. It is to eradicate extreme poverty in line with the sustainable development goals by 2030. When we look at the scale of that challenge, we can be heartened by the fact that in 1990 there were 2 billion people living below the international definition of extreme poverty, and that today different people variously put that figure between 700 million and 750 million. So the goal of eradicating extreme poverty is within reach. However, the international community and the international development community need to exercise an element of humility; we need to recognise that the reason why the vast majority of people have been lifted out of poverty has been not through aid alone but through trade and economic growth. As the Growth Commission puts it, economic growth,

“can spare people en masse from poverty and drudgery. Nothing else ever has”.

The only way to eliminate poverty is by creating trade, investment and jobs—quality jobs that help the world’s poorest to stand on their own two feet. The only way to end aid dependency is through inclusive economic growth—jobs, investment and trade. Many poor countries have achieved bouts of fast growth but the challenge runs deeper. Lasting progress comes from growth, which transforms economies, creates jobs and greater private sector investment, and spreads benefits right across society.

The stakes are significant and so are the opportunities. Over the next decade, as the noble Lords, Lord Collins and Lord Desai, among others, have mentioned, 1 billion more young people will enter the job market, mainly in Asia and sub-Saharan Africa. We must support this growing population by creating more and better jobs, helping people to provide for their families, expand their life choices and lead healthy and prosperous lives. That is why we published DfID’s first ever economic development strategy earlier this year. Incidentally, it was launched in Ethiopia, a country that is hosting huge numbers of refugees from South Sudan and Somalia. It was launched at the same time as a compact working to develop businesses and industry in that area. The strategy emphasises the need for a sharper focus on nutrition, human development and skills in order to build a healthy, educated and productive workforce for the future.

DfID and the Department for International Trade are working together to ensure that development and global prosperity are central to the UK’s trade and investment policy. The noble Lord, Lord Desai, said development was not just about government; it was about people. He was absolutely right. It is people—it is businesspeople—who create jobs and wealth. It is the risk-takers, the wealth-creators and the taxpayers who build strong and stable societies. The UK has introduced legislation so that we are ready to put in place a trade preferences scheme when we leave the EU. This will, as a minimum, provide the same level of access as current EU trade preference scheme commitments. My noble friend Lord McInnes mentioned the travesty that many countries find themselves put at a disadvantage when trading with the EU. We want to ensure that an independent British trade policy deals fairly with the poorest countries in the world and gives them the chance to trade their way out of poverty.

The noble Lord, Lord Bruce, mentioned the European Development Fund. That is part of the negotiations that are going forward. It is true to say that the EDF’s own rules do not permit countries that are not members of the EU to be part of it. I echo his point that we have found the EDF to be a high-performing and effective fund, and we would be interested in discussions with our European partners about how we can work together to eradicate poverty. In addition, the trade preferences scheme will offer non-reciprocal tariff reductions to around a further 25 developing counties. By helping developing countries to harness the formidable power of trade, we are creating our trading partners of the future and supporting jobs at home too. The noble Lord, Lord Bruce, also mentioned the role of the private sector with aid. I would say that it can never be a subsidy, but it can be a catalyst for growth. That is where we must focus and what we have been driving forward.

My noble friend Lady Nicholson mentioned the sustainable development goals 2030. We need to turn the trickle of private investment into a torrent. The figures for global aid flows have already been referred to. In 2015-16, they were about $150 billion. The estimated requirement to meet the 17 sustainable development goals is $3.9 trillion annually. The current level of investment in those goals is $1.4 trillion, therefore, the gap as we stand is $2.5 trillion that cannot be filled by Governments alone. We must do better at catalysing and leveraging private sector investment.

That is where the development finance institution, the CDC, is central. It is one of a handful of investors with the skills and risk appetite successfully to support businesses in the most difficult of markets. Over the past three years, companies backed by the CDC created more than 3 million new direct and indirect jobs and paid taxes to national Governments worth more than $9 billion. The CDC’s successful investments demonstrate to private investors the opportunities that exist, paving the way for other investors to follow. Last month, the UK reaffirmed our commitment to the CDC by providing a capital increase for the next five years.

I pay tribute to the work which my noble friend Lord Eccles did—I cannot remember whether it was as chief executive or general manager in those days— through his leadership of that organisation. I also echo the tribute of my noble friend Lady Jenkin to Diana Noble and the work which she did on the latest strategy, which focused our attention on the hardest-to-reach countries. It focused on Asia and Africa because that is where 80% of the world’s remaining poor live.

As one of the largest capital markets, the City of London is a natural partner to deliver the UK’s ambitions on economic development. By making the City of London a leading financial centre for the developing world, we can make it easier for developing countries to access the expertise, innovation, and capital available to meet their investment and growth needs. Many noble Lords—including my noble friends Lady Hodgson, Lady Jenkin and Lady Nicholson, and the noble Lord, Lord Bruce—pointed to the fact that in many ways, the greatest thing that we can give to the developing world and the poorest in it is our knowledge and expertise, as well as our finance.

Our universities are at the forefront of developing innovative solutions to many of the complex challenges which are faced in development, health and education in developing countries. Our universities and other institutions are providing groundbreaking work in the world of agriculture. Our experienced lawyers and trade advisers can offer great expertise.

I was intrigued by the proposition put by my noble friend Lady Jenkin and echoed by my noble friend Lady Hodgson: how do we harness more of the experienced entrepreneurs with deep expertise of what it takes to build businesses and networks and to trade internationally, to provide that expertise overseas? I will take that away. We had an excellent round table with our trade envoys, which the noble Baroness, Lady Morris, who was in her place earlier, and my noble friend Lady Nicholson attended, at which we were talking about how we could further leverage the knowledge and skills in the wider community, among entrepreneurs and also among those in this House, who could offer a huge amount.

We are focusing on specific sectors that are vital to the growth in job creation, including energy infrastructure, urban planning, manufacturing, agriculture and financial services. The scale of investment needed for infrastructure far exceeds the capacity of the public sector to respond. When we talk about mobilising investment and development, we think of some incredible, liberating technologies in places like Kenya and Bangladesh, such as mobile phone technology. But if you do not have electricity, you cannot access it. We have looked at some amazing technology used in delivering education, but without electricity, it cannot be done. Often the places we deal with are too far away from the grid to be connected, so there need to be alternatives.

We are helping to mobilise private investment through our support to the Private Infrastructure Development Group. For every one dollar that donors provide to PIDG, around $17 of private investment is raised. These investments can, for example, provide much needed electricity supplies and improved transport links to some of the poorest and most fragile countries in the world. Through the CDC’s investment in M-Kopa the UK is supporting efforts to provide solar energy to 1 million homes in Kenya by 2018. M-Kopa has already connected more than 500,000 homes. These homes now enjoy over 60 million hours of kerosene-free lighting a month, which, of course, has huge effects on the environment, too, and is projected to save up to $400 million.

Agriculture will also be a major source of economic growth in many countries for many years to come. The UK is leading efforts to clarify and strengthen land and property rights as a basic requirement for profitable and responsible investment—in particular, in our groundbreaking work in Ethiopia—by providing women with information on property and land rights. Women’s empowerment is crucial to this. No country can ever hope to lift itself out of poverty by leaving half of its population behind. Women need to be part of this, as does every other community.

DfID’s global land programme, LEGEND, works with investors to understand and manage land-related risks and with communities to help them to protect their rights and make the most of their land, resulting in raised incomes, reduced conflict and better management of natural resources. Natural disasters, to which the noble Lords, Lord Desai and Lord Bruce, referred, are an impediment to development in many countries. More than 200 million people per year are affected by these natural disasters. Economic losses are now reaching more than $60 billion every year on average. In July, I launched the UK’s new Centre for Global Disaster Protection here in London. It is a joint venture with our German friends and European partners, and the World Bank. That will strengthen disaster planning in the poorest countries and get finances in place before disaster strikes and it will ensure better management of the economic impact of emergencies.

When businesses operate responsibly they can support environmental protection, too, and work through supply chains to tackle modern slavery. DfID is partnering with organisations such as the Ethical Trading Initiative and the UN Global Compact to promote responsible business practices. DfID action alone is not enough. We need collective action from the international community, and that includes the international trade unions, which are essential partners in this effort. Some of the ILO global labour standards are very much part of that mission that we need to implement. We need collective action from the international community to stimulate economic growth. The UK is pushing the multilateral system to be more innovative and efficient. Through DfID backing, the World Bank is establishing a new $2.5 billion private sector window to boost investment in the poorest countries, as referred to by the noble Baroness, Lady Jenkin. Through the UN high-level panel, the UK’s leadership influenced leaders from business, government and international organisations to get serious about the economic empowerment of women, as the noble Lord, Lord Judd, rightly urged us to do.

Success requires a whole-government approach to economic growth. The UK used our leadership at the G20 to drive effective international action on tax. We co-launched the Addis Tax Initiative, where donors committed to double annual spend on strengthening tax systems in developing countries by 2020. That level of reach and influence is possible only through DfID working closely with the Treasury and HMRC, drawing on the full range of Her Majesty’s Government skills and networks.

The UK is unwavering in its commitment to boost global prosperity. Our pioneering approach to economic development and growth is supporting the development of future markets, leading to a more stable, prosperous and inclusive world, which is firmly in all our interests.

Today, more than ever, Britain must be an outward-looking and engaged country on the world stage. If we can build these developing markets and create these training partners as part of a new government approach to free trade, we can create jobs, investment and prosperity for British people, as well as the poorest in the world. Global Britain will take a lead in helping the world’s poorest to participate and contribute to strong, prosperous economies. We know that that is the path to end poverty and reliance on aid, because no other path has ever been proved to work.

17:10

[Baroness Nicholson of Winterbourne]

I believe it true to say that the Minister has given a full and comprehensive answer to the question posed to him by the noble Lord, Lord Collins of Highbury, which was how to empower people. The answer has been clearly identified: to create jobs and futures through the economic development strategy of the Department for International Development. If you add to that, as I did earlier, health and education, you get health, education, jobs and futures, which is what DfID can now offer, incorporating the wonderful work of the Commonwealth Development Corporation.

I draw attention to the note struck by the noble Baroness, Lady Jenkin of Kennington, in her remarks—that transparency is a key requirement. To that was added remarks about the absolute necessity of close monitoring, flexibility, subject changing and regular reviews. With those in mind, I believe that the noble Lord, Lord Collins, should be comfortable and happy and that even the noble Lord, Lord Judd, will be satisfied, because it has become clear that, throughout the entirety of the debate, that the concern is with those in greatest need.

Motion agreed.