Tuesday 10th January 2017
(7 years, 3 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts Amendment Paper: Commons Consideration of Lords Amendments as at 10 January 2017 - (10 Jan 2017)
16:21 - The House divided: - Ayes: 246 / Noes: 293 - Question accordingly negatived.
16:35 - The House divided: - Ayes: 244 / Noes: 299 - Question accordingly negatived.
Kate Osamor (Edmonton) (Lab/Co-op)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Mrs Eleanor Laing)
With this it will be convenient to discuss new clause 2—Condition for exercise of power to increase limit: report and business case—
“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—
“15A Condition for exercise of power to increase limit: business case and strategic plan
(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if the Secretary of State has also laid before the House of Commons the documents specified in subsections (2) and (3).
(2) The document specified in this subsection is a business case for the proposed use of the new investment enabled by the proposed increase in the limit in force which includes information on—
(a) the expected market demand,
(b) the proposed sectors,
(c) the proposed locations, and
(d) the prospective development returns.
(3) The document specified in this subsection is a strategic plan for the development of the activities of the CDC in consequence of the proposed increase in the limit in force.””
This new clause would require any draft regulations to increase the limit on government assistance under section 15(4) to be preceded by the laying before the House of Commons of a detailed business case for the proposed additional investment and a strategic plan in relation to the additional investment.
New clause 3—Condition for exercise of power to increase limit: poverty reduction purposes for spending outside LDCs—
“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—
“15A Condition for exercise of power to increase limit: poverty reduction purposes for spending outside LDCs
(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if the Secretary of State is satisfied that the condition in subsection (2) or the condition in subsection (3) is met.
(2) The condition in this subsection is that any new investment enabled by the proposed increase in the limit in force is in a country which is classified as one of the least developed countries.
(3) The condition in this subsection is that the Secretary of State is satisfied that any new investment enabled by the proposed increase in the limit in force will have a significant impact on the reduction in poverty (within the meaning given in section 1(1) of the International Development Act 2002) in the country or countries concerned.
(4) In determining the classification of a country for the purposes of subsection (2), the Secretary of State shall use the latest analytical classification of the world’s economies prepared by the World Bank.””
This new clause would require any draft regulations to increase the limit on government assistance under section 15(4) to be for additional investment which is either in least developed countries or which makes a significant impact on poverty reduction in another country.
New clause 4—Condition for exercise of power to increase limit: independent assessment of aid impact—
“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—
“15A Condition for exercise of power to increase limit: independent assessment of aid impact
(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if the Secretary of State is satisfied that arrangements are in place for the independent assessment of the aid impact of new CDC investment which meet the conditions in this section.
(2) The first condition is that a framework agreement has been reached between CDC and the Independent Commission for Aid Impact for the Commission to carry out such an assessment on an annual basis.
(3) The second condition is that each annual assessment will be able to assess projects with a monetary value equivalent to at least 5 per cent of the total value of current investments in the year in question by the CDC.
(4) The third condition is that the Secretary of State is satisfied that the Independent Commission for Aid Impact has the additional resources required to carry out such annual assessments without impairing its capacity to undertake its other work.””
This new clause would require any proposal to increase the limit by secondary legislation to be contingent on an agreement being reached for an annual independent assessment of aid impact to be carried out by the Independent Commission for Aid Impact covering at least 5% of CDC’s investment portfolio at the time.
New clause 6—Condition for exercise of power to increase limit: review of poverty reduction impact and contribution to Sustainable Development Goals—
“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—
“15A Condition for exercise of power to increase limit: poverty reduction
(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he has also laid before the House of Commons a review in accordance with subsection (2).
(2) A review under this subsection must provide the Secretary of State’s assessment of the extent to which the increase in the limit on the Crown’s assistance to the Corporation is likely to contribute to—
(a) a reduction in poverty, and
(b) achievement of the Sustainable Development Goals.
(3) In this section—
“reduction in poverty” shall have the same meaning as in section 1(1) of the International Development Act 2002; and
“the Sustainable Development Goals” means the Goals adopted at the United Nations on 25 September 2015.””
This new clause would require any draft regulations to increase the limit on government assistance under section 15(4) to be preceded by a review, also to be laid before the House of Commons, of the extent to which the increase in the limit will contribute to a reduction in poverty, the aim of development assistance, and to the achievement of the Sustainable Development Goals.
New clause 7—Condition for exercise of power to increase limit: prohibition on investment in certain sectors—
“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—
“15A Condition for exercise of power to increase limit: prohibition on investment in certain sectors
(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he is satisfied that the condition in subsection (2) is met.
(2) That condition is that any new investment enabled by the proposed increase in the current limit at the time is not in any of the following sectors—
(a) education providers that charge the end user,
(b) healthcare providers that charge the end user,
(c) the real estate sector,
(d) mineral extraction,
(e) the palm oil sector,
(f) the fossil fuel sector.
(3) In this section—
“the current limit at the time” means—
(a) prior to the making of any regulations under section 15(4), £6,000 million,
(b) thereafter, the limit set in regulations made under section 15(4) then in force.””
This new clause would prohibit any new investment arising from any increase in the limit on government assistance under regulations under section 15(4) from being in the sectors specified in subsection (2).
New clause 8—Condition for exercise of power to increase limit: prohibition on use of tax havens—
“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—
“15A Condition for exercise of power to increase limit: prohibition on use of tax havens
(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he is satisfied that the condition in subsection (2) is met.
(2) That condition is that any new investment enabled by the proposed increase in the current limit at the time is not in either—
(a) an investment entity, or
(b) a company
which uses, or seems to the Secretary of State likely to use, tax havens.
(3) In determining whether the condition in subsection (2) is met, the Secretary of State shall consider—
(a) information provided by the OECD on countries or territories which are considered to be tax havens, and
(b) such information as is available to the Secretary of State, whether supplied by the CDC or others, about the current location of funds of the potentially relevant entities for the purposes of subsection (2).
(4) In this section—
“the current limit at the time” means—
(a) prior to the making of any regulations under section 15(4), £6,000 million,
(b) thereafter, the limit set in regulations made under section 15(4) then in force.””
This new clause would prohibit any new investment arising from any increase in the limit on government assistance under regulations under section 15(4) from going to an investment vehicle or company which uses or seems likely to use tax havens.
New clause 9—Conditions for exercise of power to increase limit: countries, poverty reduction and SDGs—
“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—
“15A Conditions for exercise of power to increase limit: countries, poverty reduction and SDGs
(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he is satisfied that the conditions in subsection (2), (4) and (5) are met.
(2) The condition in this subsection is that any new investment in a country enabled by the proposed increase in the current limit at the time is in a country which is classified as either—
(a) one of the least developed countries, or
(b) one of the other low income countries.
(3) In determining the classification of a country for the purposes of subsection (2), the Secretary of State shall use the latest analytical classification of the world’s economies prepared by the World Bank.
(4) The condition in this subsection is that the Secretary of State is satisfied that any new investment enabled by the proposed increase in the current limit at the time is likely to contribute to a reduction in poverty.
(5) The condition in this subsection is that the Secretary of State is satisfied that any new investment enabled by the proposed increase in the current limit at the time is likely to contribute to achievement of the Sustainable Development Goals.
(6) In this section—
“the current limit at the time” means—
(a) prior to the making of any regulations under section 15(4), £6,000 million,
(b) thereafter, the limit set in regulations made under section 15(4) then in force;
“reduction in poverty” shall have the same meaning as in section 1(1) of the International Development Act 2002; and
“the Sustainable Development Goals” means the Goals adopted at the United Nations on 25 September 2015.””
This new clause would limit any new investment arising from any increase in the limit on government assistance under regulations under section 15(4) to the least developed countries and other low income countries and require the Secretary of State to be satisfied that such new investment contributed to the reduction of poverty and the achievement of the Sustainable Development Goals.
New clause 10—Condition for exercise of power to increase limit: proportion of annual official development assistance—
“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—
“15A Condition for exercise of power to increase limit: proportion of annual official development assistance
(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he is satisfied that the conditions in subsection (2) is met.
(2) The condition in this subsection is that the total value of any re-capitalisation of CDC enabled by the proposed increase in the current limit at the time will not, in any one calendar year, constitute more than 5% of total official development assistance.
(3) In this section—
“official development assistance” has the same meaning as in the most recent annual report laid before each House of Parliament in accordance with the provisions of section 1 of the International Development (Reporting and Transparency) Act 2006;
“the current limit at the time” means —
(a) prior to the making of any regulations under section 15(4), £6,000 million,
(b) thereafter, the limit set in regulations made under section 15(4) then in force.””
This new clause would limit any new investment arising from any increase in the limit on government assistance under regulations under section 15(4) to 5% of official development assistance in any one calendar year.
Amendment 2, in clause 1, page 1, line 4, leave out “£6,000 million” and insert
“the amount specified in subsection (1A)”.
This amendment paves the way for amendment 3.
Amendment 5, page 1, line 4, leave out “£6,000” and insert “£4,000”.
Amendment 3, page 1, line 4, at end, insert—
“(1A) After subsection (1), insert—
“(1A) The amount specified in this subsection is whichever is the lesser of the following amounts—
(a) £6,000 million,
(b) £1,500 million plus the amount determined in accordance with subsection (1B).
(1B) The Secretary of State shall determine the amount for the purposes of this subsection by estimating the amount which will constitute 4% of official development assistance in the relevant period determined in accordance with subsection (1C).
(1C) That period begins with the financial year in which the Secretary of State considers that the Crown’s assistance to the Corporation (determined in accordance with subsection (2)) will exceed £1,500 and ends at the end of the fourth subsequent financial year.
(1D) For the purposes of this section, “official development assistance” has the same meaning as in the most recent annual report laid before each House of Parliament in accordance with the provisions of section 1 of the International Development (Reporting and Transparency) Act 2006.””
This amendment would replace the proposed limit on government assistance under section 15 with a new amount, expressed as either £6 billion or the existing investment of £1.5 billion plus a sum not more than 4% of forecast official development assistance over a five year period, whichever is the lesser amount.
Amendment 6, page 1, line 5, leave out subsection (3).
This amendment removes the power of the Secretary of State to set a limit on government assistance above £6 billion up to £12 billion by means of secondary legislation.
Amendment 4, page 1, line 7, leave out “£12,000 million” and insert
“the amount specified in subsection (4A).
(4A) The amount specified in this subsection is whichever is the lesser of the following amounts—
(a) £12,000 million,
(b) the current limit at the time plus the amount determined in accordance with subsection (4B).
(4B) The Secretary of State shall determine the amount for the purposes of this subsection by estimating the amount which will constitute 4% of official development assistance in the relevant period determined in accordance with subsection (4C).
(4C) That period begins with the financial year in which the Secretary of State considers that the Crown’s assistance to the Corporation (determined in accordance with subsection (2)) will exceed the current limit at the time and ends at the end of the fourth subsequent financial year.
(4D) For the purposes of this section—
“the current limit at the time” means—
(a) prior to the making of any regulations under subsection (4), £6,000 million,
(b) thereafter, the limit set in regulations made under subsection (4) then in force;
“official development assistance” has the same meaning as in the most recent annual report laid before each House of Parliament in accordance with the provisions of section 1 of the International Development (Reporting and Transparency) Act 2006.”
The amendment would set a new limit on the power to make regulations to increase the limit on government assistance under section 15, expressed as either £12 billion or the current limit at the time plus 4% of official development assistance over a five year period, whichever is the lesser amount.
Amendment 1, page 1, line 8, at end insert—
“(4A) The Secretary of State may not exercise the power under subsection (4) to increase the limit by more than the amount that the Secretary of State estimates is required to meet the plans for investment by CDC in the ensuing three years.”
This amendment has the effect of restricting each increase in the limit by secondary legislation to an amount necessary to support additional investment by CDC over a three year period.
Kate Osamor
Labour Members are unswerving in our belief that the UK must continue to spend 0.7% of gross national income on overseas aid. It is imperative, however, that the Government deliver this aid in a way that is accountable, ensures value for money, and delivers on the UK’s development objectives.
Although we support the aims of the Bill—it has reached Report without amendment—we remain concerned about the lack of safeguards. In new clause 2, we ask that no increase in the limit be granted without a report or business case. New clauses 3 and 9 are at the heart of the work of the Department for International Development, which leads the UK’s work to end extreme poverty. We on the Front Bench ask the Government to make sure that the Minister is satisfied that any new investment enabled by a proposed increase in the limit will have a significant impact in reducing poverty.
The Department must be at the forefront of tackling global poverty reduction. It is vital that the bolstering of CDC’s resources does not mean a reduction in funds for emergency and humanitarian aid in places such as northern Nigeria, Yemen and Syria, and in other parts of the world that face grave humanitarian crises. Will the Minister commit to ring-fencing such funds so that those in the direst need of help are able to receive it? Long-term investment and the establishment of a sustainable economy in order to kick-start jobs and growth are, of course, crucial to any credible development programme, but a development programme should, at its core, be a coalition of long-term investment and short-term relief. The consequences of losing sight of the latter element would be grave indeed. Just as the UK has a duty to help to lay the foundations for secure, sustainable economies in the poorest areas, where investment is a risk that few are willing to take, the UK also has a duty to assist those who bear the full force of conflict, climate change and food insecurity.
As was laid out on Second Reading, transparency should be the driving force behind any shift in the focus of the aid budget. I now speak to new clauses 4 and 8. It is vital that taxpayers’ money is spent not only effectively, but as transparently as possible. To that end, it is incumbent on the Government to put in place mechanisms that ensure maximum visibility regarding where aid money is being spent, and that minimise public scepticism. We all know that transparency is something that DFID does very well indeed.
Richard Fuller (Bedford) (Con)
Before the hon. Lady moved on to the important issue of transparency, she was talking about balance. It is fair to make the point, is it not, that CDC’s proportion of our development budget for its type, as foreign direct investment, is lower, at 4%, than comparables such as the French FDI of 12% and the Dutch at 30%? For the sake of proportion, it is fair to say that even with that increase, the UK will still spend more on development aid than most of our European peers do, and the proportion of FDI will be smaller than it is for many of those peers.
Kate Osamor
The hon. Gentleman makes a valuable point, but the Bill still needs scrutiny. That is what I am laying out.
We all know that transparency is something that DFID does very well indeed. Its performance in the aid transparency index demonstrates an international gold standard in that regard. Historically, however, the same cannot be said for CDC. It is of the utmost importance that the proportion of the ODA budget that is channelled through CDC be subject to the same checks on outcomes and value for money to which DFID holds itself. New clause 4 lays down conditions that would guarantee transparent governance through an agreed framework reached with the Independent Commission for Aid Impact and CDC. Proper annual measurements of outcome would be a welcome addition to the Bill.
In relation to new clauses 1 and 8 and the issue of CDC use of separate financial centres where countries do not have sufficiently robust regulatory environments, now is the time to put on record the Government’s commitment to strengthening financial service centres in developing countries. The Opposition know that the importance of addressing and tackling CDC’s use of tax havens cannot be overstated. Although we heard assurances in Committee from Diana Noble, the chief executive of CDC, that using offshore financial centres ensures legal certainty and lessens risk for investors, far more than reassurance is needed to ensure transparency on that point. We need clear legislative safeguards, which is why the Front-Bench team will press new clause 1 to a vote. New clause 1 requires any proposal to increase the limit by secondary legislation to be accompanied by a thorough analysis of CDCs use of such centres. Where the countries in question do not have sufficiently robust regulatory environments, it is the UK’s job to ensure that those centres are made more robust.
Jeremy Lefroy (Stafford) (Con)
The hon. Lady makes some important points. Does she agree that the changes made to CDC five years ago, under which CDC was encouraged to make direct investments in developing countries—contrary to the preceding situation, in which it made investments in funds situated offshore—were a major step forward?
Kate Osamor
The hon. Gentleman makes a valid point, and I will touch on that in my speech. Regardless of any development, we must always be robust and we must be able to show taxpayers that we have a transparent and accountable system. That is at the forefront of our objections to the Bill.
I seek assurances from the Minister of State, the hon. Member for Penrith and The Border (Rory Stewart), that he will consider supporting the implementation of such safeguards. It is of course to be applauded that the whole ethos of CDC has been transformed since it was the subject of widespread controversy some years ago. It is testimony to the organisation’s willingness to change that it reacted to that criticism by becoming a more positive institution and implementing an overhaul of the systems that were in place. These efforts were praised in the most recent report by the National Audit Office, which assessed CDC’s progress in implementing the recommendations that the NAO made in a report in 2008. It was heartening to read in the follow-up report that CDC has proved successful in adapting its strategy in accordance with NAO’s earlier recommendations, including instituting frameworks to limit excessive pay and to refocus CDC’s priorities on the world’s very poorest nations, rather than investing in markets that already attract foreign investors.
Kate Osamor
No, I need to make some headway.
It was also encouraging to learn that CDC has not only met but exceeded the targets agreed with DFID relating to its financial performance and development impact, and has improved its procedures for documenting fraud and corruption. Although we on the Front Bench praise CDC for making those changes, we must not forget that the recent NAO report was by no means unequivocally positive, and that it highlighted significant areas for improvement. Allow me to quote directly from a passage in the report examining the efficiency of CDC’s methods of capturing its development impact:
“It remains a significant challenge for CDC to demonstrate its ultimate objective of creating jobs and making a lasting difference to people’s lives in some of the world’s poorest places. Given the Department’s plans to invest further in CDC, a clearer picture of actual development impact would help to demonstrate the value for money of the Department’s investment.”
That is quite some statement. According to the NAO, it is “a significant challenge” for CDC to demonstrate how effectively it does the very thing it was set up to do.
Fiona Bruce (Congleton) (Con)
The hon. Lady refers to a quote about the challenges of capturing impact. That is an ongoing challenge in all aid work. In terms of efficiency, which is what she is referring to, the NAO report concluded:
“Through tighter cost control, strengthened corporate governance and closer alignment with the Department’s objectives, CDC now has an efficient and economic operating model.”
Does the hon. Lady agree that that is a testament to the improvements that have been made to CDC’s work over the last few years?
Kate Osamor
I said in my opening remarks that CDC has improved, but the report says that it is still very hard to know and to demonstrate the impact of development, and work on that still needs to be done. The report is not totally scathing, but we must pick up such objections. If CDC was transparent, I am sure Labour Members would not have to stand up in the Chamber and say what we are now saying.
New clause 7, tabled by my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), lays down conditions about investing only in certain sectors and about not investing in sectors that provide little or no development impact in ending poverty. These sectors include the fossil fuel sector, the primary education and healthcare sectors that charge at the point of contact, the building of real estate, mineral extraction and work in the palm oil sector. If DFID’s investment in CDC is to increase the level proposed in the Bill, this challenge must be urgently addressed and resolved.
In spite of CDC’s very welcome improvements, the NAO’s recommendations show that we should not forget that it remains very much a work in progress for this organisation to demonstrate transparently and robustly that it is achieving its objectives. With that in mind, we cannot regard the Bill as the end of the process. There is no room for complacency within CDC or DFID on the need to alter the organisation’s processes further to ensure and to demonstrate the delivery of its goals. Given the scale of the proposed increase in DFID funding—from a limit of £1.5 billion to one of £6 billion —and the resulting consequences both for the UK’s development programme and indeed for the developing countries it supports, it is right that the Bill is robustly challenged and meticulously scrutinised where it is found lacking, and that stringent precautions are appended to it where necessary.
New clause 10 lays out that any proposed increase in the current limit would not in any one calendar year constitute more than 5% of total official development assistance.
Wendy Morton (Aldridge-Brownhills) (Con)
I want to take the hon. Lady back to new clause 7—I tried to intervene earlier—when she listed the sectors that she feels should be excluded. Does she not agree, however, that by specifically mentioning
“education providers that charge the end user”
as an exception, she risks children in some of the most underprivileged communities not being able to access education? From some Select Committee work, we know that such means are the only way of getting education for many of these children.
Kate Osamor
The hon. Lady makes a valid point, but I am talking about private education, for which someone with no money would have to pay. I do not think we should support that in a developing country, because we do not do it in this country. If someone wants to pay to go to university, there are challenges in relation to that, but I am talking, ideally, about primary education.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
New clause 7 is in my name, and I will speak about it in due course. Does my hon. Friend agree that there is an important choice for DFID to make? It previously invested significantly in promoting free healthcare and education—making it available to all people, and removing such user fees—so to allow the CDC to continue to invest in private, fee-paying education is a significant shift away from the work the Department did in the past.
Kate Osamor
My hon. Friend makes a valid point, with which I totally agree.
Kate Osamor
I now need to make some progress.
Labour Members remain positive about the Bill’s ability to achieve its aim of improving the quality of life of people in some of the least developed countries in the world, but we believe that this can be achieved to its fullest extent only if appropriate safeguards are put in place. We retain our right to withdraw our support for the Bill if it becomes clear that the Government have not made sufficient progress.
Mrs Flick Drummond (Portsmouth South) (Con)
Thank you, Madam Deputy Speaker—[Interruption.]
Madam Deputy Speaker
Order. It is the beginning of a new term after a long Christmas holiday, but may I remind Members that, if they want to speak, it is really easy—they just have to stand up?
Mrs Drummond
Sorry, Madam Deputy Speaker. I was expecting the Minister to respond to the first speaker, and I did not realise that I would be called next.
Stephen Doughty
I am listening with interest to the hon. Lady’s point, but does she not accept that there is a bit of a double standard? The Secretary of State issued a letter on 16 December to other DFID suppliers—institutions, non-governmental organisations and people in receipt of our aid money—making it very clear that they should not invest in tax havens, yet she seems unwilling to apply the same to the CDC, which is also in receipt of taxpayers’ funding. Is that not a double standard?
Mrs Drummond
No, because we are investing in very difficult areas where robust systems may not already be in place, plus the CDC has very clear guidelines about where the money is going, so we can track it much more easily than we can with other aid agencies.
Jeremy Lefroy
Does my hon. Friend agree that the issue is not so much about offshore centres being invested in by funds from a variety of jurisdictions, but about the tax paid in-country for activities undertaken in that country? In that respect, the investments made by the CDC are excellent and provide major tax revenues of billions of dollars a year for those country’s Treasuries.
Mrs Drummond
I thank my hon. Friend for his very clear explanation, which beefs up what I have said.
On the case for raising investment limits, amendments l, 3 and 6 and new clauses 2, 5 and 10 would hamper the CDC in the same way. We have already extensively debated the need to increase the limit, and we have had assurances from the Minister and the CDC that business cases for further capital will be clearly made. We will have the full strategy document this year, backed by an analysis from the CDC of the development impact. We will have both before any additional money goes through the CDC.
On the focus of spending, I agree with my hon. Friend the Minister that the question of which specific investments are made must be delegated to DFID and the CDC. That would give the Government oversight and ensure that sustainable development goals are at the heart of the investment. Putting countries or, indeed, limiting sectors in legislation would make delivering the development process cumbersome, and I believe that it would hobble the CDC.
Pauline Latham
Does my hon. Friend agree that supporting the CDC is absolutely vital if we are to achieve the global sustainable development goals by 2030? We need to mobilise the private sector to fill an annual financing gap of about $2.5 trillion every year.
Mrs Drummond
My hon. Friend makes an excellent point. One reason that I am so passionate about the CDC is that we need to build the capacity of developing countries. In my first speech on this subject, I said give a man fish and he will eat it, but give him a fishing rod and he is set for life. That is exactly the philosophy behind the CDC that I am so keen on.
There are circumstances in which some relatively more developed countries are host to companies involved in much poorer ones. As with the misplaced fears about offshore financial centres, we should not close off any path to investment and development. New clauses 3, 4, 6 and 9 all fail in that respect. All the amendments before us share a fundamental weakness and a misunderstanding of the CDC’s role in the world. We put less of our development investment through the CDC than other countries do through their equivalent bodies, as my hon. Friend the Member for Bedford (Richard Fuller) mentioned earlier. We should be doing more through the CDC if we want to develop mature and robust market economies in the developing world, which is why I welcome the Bill.
Markets are transparent and flexible, and they empower people who take part in them. The aim of our development policy should always be to encourage self-sufficiency and the development of market economies. As I said in my first contribution on the Bill, the CDC is transparent, as the NAO report agreed. I champion the CDC’s philosophy of enabling people to build their own businesses, rather than handing out grants. It is an efficient and transparent model, and we should all give the Bill our wholehearted support and continue to be a major investor in improving the lives of our fellow citizens in developing countries.
Patrick Grady (Glasgow North) (SNP)
I will speak to amendment 3 and new clause 6, which are in my name, and I will offer support for the Labour party’s amendments that I have added my name to.
Nobody here is arguing that the CDC should not exist. We all recognise there is a role for development finance and private investment. As I noted on Second Reading, the Scottish Government have just set up their own investment mechanism in Malawi. But even if we wanted to change some of the deeper fundamentals, that is not in the scope of the Bill. The Government, probably deliberately, have presented a very narrow Bill with the aim of increasing the statutory limit of their investment. Therefore, by definition, that is what our amendments must focus on.
I hope that the Government will see—certainly in the amendments I have tabled and, I think, in the Labour ones—that we have tried to respond to and take on board some of their concerns about some of our amendments in Committee. It is up to the Government to respond and indicate how they will take our concerns on board. We all want to work constructively with the Government on the Bill. We want to recognise and maintain the consensus on the importance of aid, our commitment to 0.7% and the effective use of those resources.
Amendment 3, which is in my name, and amendments 2 and 4, which are contingent on it, gets to the heart of the technical aspect of the Bill: what the cap on investment in the CDC should be. The Government have been repeatedly asked for their reasons behind the figures of £6 billion and £12 billion in the Bill, and I am afraid that they have still come up short. The best we have heard is that this is roughly what they think is needed, or could be managed, over the coming years. In the lifetime of this Parliament, that could still equate to an additional £1.5 billion to £2 billion a year of investment from the official development assistance budget to the CDC. As we have repeatedly said, every penny invested in the CDC is a penny not invested in other mainstream, grassroots and not-for-profit development projects and support.
On Second Reading, I asked about the use of a formula to link the cap with overall ODA budgets, and I proposed such a formula in Committee. The Minister’s first concern about a formula was that it would blur the line between stock and flow. But the aid budget is a flow. It goes up and it can, theoretically, go down as well. I recognise that the CDC investment is a stock: once funds are transferred, that is where they stay and they remain part of the overall capital fund. However, the formula would ask the Government, each time they want to disburse funds to CDC, to calculate how those funds will relate to overall aid spending in the coming years.
The Minister’s second concern was that my formula in Committee effectively discounted the £1.5 billion already invested in the CDC. Amendment 3 and the contingent amendments take that into account. By my calculations, based on figures from the Library, this formula would still allow the Government to invest an extra £3 billion, or a total of £4.5 billion, in the CDC by 2021. Even if the Government will not accept the amendment and we cannot persuade enough of their Back Benchers to join us in the Lobby to support it, I hope that they will commit to recognising that the £6 billion figure currently stated in the legislation is a maximum and that any additional investment they intend to make will ultimately reflect the ebb and flow of overall ODA calculations in any given spending round.
Irrespective of the caps and limits, much concern has been expressed throughout the passage of the Bill over how some aspects of the CDC’s resources have been spent in the past and how they will continue to be spent in the future. That is what I seek to address with new clause 6, which is particularly important in the context of increasing—potentially quadrupling—the overall resources available to the CDC. I welcome the range of amendments in Committee and here today that attempt to place various conditions on the exercise of the power to increase the limit.
As I said at the start, owing to the scope of the Bill, my amendments and those of Labour Members must relate to the increase in the limit from £6 billion to £12 billion under the terms of section 15(4) of the Commonwealth Development Corporation Act 1999. Try as we might, it has not been possible to find a way to attach conditions to the investment of up to £6 billion. The Government have indicated that the timetable for using the statutory instrument powers would be some way in the distance, so it is not unreasonable to suggest that there should be some kind of conditionality and review process before those powers are used, especially given that we will apparently have so much time to prepare.
New clause 6 combines two conditions I called for in Committee: before the Government could increase the limit of their investment, the Secretary of State would be required to make an assessment of how an increased limit would contribute to a reduction in poverty, which is the statutory aim of ODA in the International Development Act 2002, and how that increase would help to meet the sustainable development goals. The Government have repeatedly argued that the CDC is doing both those things very effectively, in which case this is hardly an onerous request, but the new clause would have the effect of making it much clearer that this is the CDC’s overall purpose and that commercial gain, returns on investment and even raw figures on the number of jobs created are not an end in themselves, but only the means to the end of reducing poverty and building a more stable and secure world. Again, the responsibility is on the Government, if they will not accept our amendments, at least to acknowledge the concerns being expressed and to give commitments to show in any business case they publish for further investment how the key pillars of poverty reduction and the global sustainable development goals will be advanced.
I briefly speak in favour of, and indicate the Scottish National party’s support for, the range of thoughtful amendments tabled by the Labour shadow team and by the hon. Member for Cardiff South and Penarth (Stephen Doughty), who serves on the Select Committee on International Development. I welcome the fact that there has been cross-party support for the amendments and suggest that the Government pay attention to that. There remains consensus in this House and across the country in support of the principle of aid, the 0.7% target and, of course, the effective use of that aid. Many of Labour’s amendments, as the hon. Member for Edmonton (Kate Osamor) said, simply ask DFID to hold the CDC to the same standards that the Government now demand of their external stakeholders. Their recent bilateral and multilateral development reviews were pretty much unilateral declarations of everything that was terrible and wasteful on the part of so many of their stakeholders and demanded that the highest standards of efficiency, impact and transparency be applied to them. It stands to reason that those standards should also be demanded of the CDC.
A Government who say they want to crack down on tax dodging should not be allowing an agency of which they are the sole stakeholder to be making use of offshore tax havens. A Government who want value for money and clear impact from their aid budget should not be afraid to ask for reporting on exactly those areas. My colleagues and I will be happy to join the Labour party, hon. Members from other Opposition parties, and any Conservative Member persuaded of the case in the Lobby in support of any amendments they wish to press.
I said on Second Reading that it was disappointing that the scope of the Bill was so narrow. The Government had the opportunity to widen the scope to strengthen the CDC’s effectiveness, transparency and accountability. They also had that opportunity with the substantial and, in some cases, creative amendments that have been proposed by Opposition Members from different parties. If Ministers continue to indicate an unwillingness to accept amendments—it is disappointing that they did not table any of their own to reflect the concerns raised by Members—they must give the strongest possible commitments now in response to the concerns we have raised. The Government must recognise, as the Labour Front Bench spokesperson said, that this is the beginning, and not the end, of a process.
Several hon. Members rose—
Richard Fuller
Thank you very much, Madam Deputy Speaker. I am taking absolutely to heart your suggestion that, this being the new year, we have to stand up to get the chance to speak.
I would like to start by thanking all the members of staff at the CDC for the work they do on behalf of British taxpayers and, more importantly, for the people who depend on the CDC for their employment in many of the most troubled and difficult countries in the world. Over the past few weeks, the CDC has been the subject of much ill-founded and hostile criticism, and that must make its job much, much harder, so it is important to put on record our support for the work they do in helping to achieve our country’s development goals.
I would also like to thank the Front-Bench spokesman for the Labour party, the hon. Member for Edmonton (Kate Osamor). She did a very good job in putting forward some points of scrutiny and in holding back on some of the wilder suggestions that might have been foisted on her in order to batter the Bill. The fact that historically there has been a cross-party consensus—given what she has said, it continues—on the valuable role of the CDC in achieving our development goals is important. It is a long-standing institution in our country; it is part of the British brand internationally, and she has done a great service today by focusing on the one amendment she wishes to press to a vote but pushing back on other ideas, which other Opposition Members might have asked her to press.
Pauline Latham
I am sure my hon. Friend is aware that the CDC last year upped its investment rate to $1.5 billion, which is the level projected for the next five years. Does that investment rate show that recapitalisation is not about some supposed new direction for the CDC but about allowing the good work it has done under its management to continue?
Richard Fuller
My hon. Friend is absolutely right. We have to be clear what is being proposed today. The proposal is not to do more than is being done now, but to enable the CDC to continue to do what it is doing now. If we were to take some of the suggestions from the SNP and others, that might imply that that support should be reduced in the future, and that would be to the detriment of the countries affected and the British taxpayer.
Patrick Grady
ODA flows and gross national income can go up or down, so if, for some reason, GNI were to contract, and the ODA budget were to contract, surely it would make sense for the amount of overall capital investment in the CDC to contract so that more money was available for the traditional aid flows.
Richard Fuller
That is the hon. Gentleman’s point of view, but it is not my point of view, and I will come to the point about balance in a minute.
A general view of the amendments is that they seek to solve problems that do not exist, but that may exist. Statute is not the right way to approach such circumstances; that is a matter for oversight and scrutiny by the departmental Ministers and by us here in Parliament on behalf of our taxpayers—it is not about putting things into Bills. On that basis, I will oppose every amendment that has been proposed today.
There would be some validity to the amendments if there was a question about this aspect of foreign direct investment being unusually large. There might be something to them if the CDC had a poor investment record because it was losing shed loads of taxpayers’ money by making poor investments, if it was clearly ignoring development goals and was being held to account in reports for doing that, or if a problem in reporting oversight was evident and explained in various reports. However, not a single one of those conditions pertains to the circumstances of the CDC, so there is no a priori reason to put these amendments in place.
As I mentioned earlier, the proportion of our development budget that goes to our development finance institution—the CDC—is 4% if taken over five years, which is the usual investment period for a fund. That compares to PROPARCO of France, which has 12% of the development budget; DEG in Germany, which has 8% of the budget; and FMO in Holland, which is a very successful DFI, and which has 30% of the budget. So we are not unusually large—we are actually unusually small. In terms of such initiatives, we should be looking for a measured and slow increase in our ability to invest, so that we can play a fuller role. So I do not think that the point about that really holds.
The point about the poor investment record does not hold either. I have the numbers here, and the truth of the matter is that in terms of its annual return—this is a commercial return, and we have to understand that there are commercial returns for funds—the CDC was set a target of 3.5%, and it achieved 7.8% over the past five years. So there are not really grounds for saying that it is a poor performer in terms of its core function of investing on a commercial basis or that it is doing something untoward.
On the missing development goals, I understand that there is a bit of a laundry list of sectors that the hon. Member for Cardiff South and Penarth (Stephen Doughty) wishes to turn his nose up to. I have no idea whether the list in his new clause is a full list or whether it just contains things he does not like. One of my hon. Friends made a good point about why there are good reasons to support parts of them. We will hear from the hon. Gentleman in a minute, and I am sure he will make an excellent case for that laundry list. However, in the meantime, I would say that there is not really any evidence of the CDC missing its development goals. Even the National Audit Office report mentioned that the CDC had met the targets for its financial performance, which was point 11 in its summary. In point 12, it said that the
“CDC has exceeded the target for prospective development impact it agreed with the Department.”
So there is no basis in that respect for the amendments.
Are there concerns about reporting for CDC? There may be, but I have not heard them. I cannot point to something that says there are concerns. I do not think that we have heard concerns about reporting on Second Reading, in the evidence stages or today. There may be additional pieces of information we wish to have, and they are listed in some of the amendments, but no real concerns have been raised that these things have not been provided in the past and that we should therefore ensure that the CDC provides them. Therefore, on the issue of whether there is a problem at the CDC that the amendments are needed to correct, there is no justification for the amendments whatever.
We have to be clear about what the role of tax havens has been. The hon. Member for Edmonton was very fair in pointing out that the CDC’s chief executive had made it clear that the CDC does not use tax havens in its policies, and the chief executive explained where those are used and why they are used. I am perfectly happy to rest on the judgment of the CDC, on its governance structures and on the oversight by the Department to make sure that that continues. I do not need to put a statutory underpinning on that. I also do not see that there is a problem at the moment in terms of the CDC having wandered off from what it said it would do. If there was such a problem, I would say, “Okay, maybe it is time for statute,” but the hon. Lady has not presented—maybe others will—a recent concern where that has happened. Therefore, I cannot see a reason for supporting new clause 1, although I understand that she wants to put it to a vote. I think we broadly accept—from that point of view, having a discussion about this is perhaps valuable—that there should be a strong message from Parliament about the use of tax havens and about what is and is not appropriate. If that is her intention, that is a perfectly reasonable point for her to make.
The CDC is a valuable institution. It has support from both sides of the House. I look forward to having further discussion on the amendments and then supporting the Bill on Third Reading.
Stephen Twigg (Liverpool, West Derby) (Lab/Co-op)
In July last year, as part of our ongoing inquiry, the International Development Committee visited the Democratic Republic of the Congo. As part of that, we went to see a hydroelectric power plant in the Virunga national park, which has been part-funded by the CDC. It is reinvesting a proportion of its earnings into community development projects and protecting the environment. The plant is bringing electricity to a region in which only 15% of the population has previously had access to power, and it has the potential to generate millions of dollars each year and thousands of jobs for local communities. I cite that because such projects are impressive and demonstrate the positive impact that the CDC is already having.
Pauline Latham
As the hon. Gentleman knows, I was also on that visit, and that is probably one of the most impressive projects I have ever seen. It provides light to so many people in the DRC who so desperately need it. Those are just the sorts of projects we have talked about and said that the CDC should be investing in more, because they create jobs and make life better for so many more people.
Stephen Twigg
The hon. Lady is a highly valued member of the International Development Committee and I agree with her. The purpose of my remarks on Report this afternoon is to reinforce the point she made. Those are positive projects. We want to ensure that the high-quality we saw in that example in Congo becomes the norm for all the CDC’s investments, particularly as the limit is increased, which I will come to in a moment.
The private sector provides around nine out of every 10 jobs in developing countries. Its development and success is vital in helping countries to achieve sustainable and long-term development. I therefore believe it makes sense to increase the CDC’s investment threshold.
Poverty reduction must be at the heart of the Government’s development agenda, which must explicitly include the work of the CDC. In 2011, the predecessor International Development Committee produced a report, “The Future of CDC”, as the group approached its then cap of £1.5 billion, as set out in the Commonwealth Development Corporation Act 1999. The Committee’s report concluded that the CDC’s mandate should be changed to a specific focus on poverty alleviation. Given that job creation is one of the very best ways to reduce poverty, it is important that the Government have a development investment arm that will help poorer countries to create new and innovative jobs.
As has been said by Members on both sides of the House, the CDC made significant changes following the 2008 National Audit Office report and the 2011 International Development Committee report in line with recommendations to move towards a focus on the alleviation of poverty. As has also been said, those changes were reviewed recently by a further NAO report released just before Second Reading of the Bill in November 2016. The report was mostly positive, and noted that the 2012 to 2016 investment strategy shifted the CDC’s investment focus to poorer countries, which is welcome. The report noted that the CDC had exceeded the targets agreed with DFID relating to financial performance and development impact. However, it also said that the CDC should do more to measure the development impact of its investments. That would not only provide a better basis for investment decisions, but increase the transparency of the CDC.
Poverty alleviation is absolutely central if we are to make a success of the global goals—the sustainable development goals agreed in 2015. Africa needs to generate 15 million new jobs every year if it is to achieve its global goals. That can be achieved only by working with the private sector, including organisations such as CDC. CDC has helped to create nearly 25,000 jobs in Africa and south Asia directly, and it says it has helped to create more than 1 million jobs indirectly. The businesses in its portfolio support around 18 million jobs. I am therefore happy to see the increase in the threshold, but I have a number of concerns to which I should like the Minister to respond.
Mark Field (Cities of London and Westminster) (Con)
The hon. Gentleman will know that I respect not only his passion, but the balanced way in which he deals with CDC issues. Does he share my concern that we risk having a more prescriptive approach towards the CDC, which is a part-private sector organisation, than we have towards a range of non-governmental organisations that are beneficiaries of large-scale DFID programmes, which might be somewhat distorting? Although he makes valid points about the concerns, if we are to hamstring CDC in the way that one or two of the proposals would have us do, it would be an undesirable outcome for DFID.
Stephen Twigg
I am certainly not arguing for prescriptions to be applied to the CDC that would not be applied to other organisations funded by DFID. My hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) has made the valid point that, shortly before Christmas, the Secretary of State set out a number of conditions for suppliers to the Department, and that they should apply to the CDC. I am emphasising my support for the proposal to put poverty reduction at the heart of the CDC. All hon. Members would agree that that should be at the heart of the Government’s entire development and aid strategy, including DFID. I can plead not guilty to the charge that the right hon. Gentleman puts to me. I am not proposing in any sense to hamstring the CDC. I am certainly not proposing, and I do not believe the Opposition amendments seek, to impose any restriction on the CDC that would be out of step with the restrictions we apply to other bodies funded through overseas development assistance.
Stephen Doughty
My hon. Friend makes a strong point, which is very much the point. The proposals are about bringing the CDC more in line with DFID’s overall priority countries and sectors, and with the restrictions placed on other UK aid money.
Stephen Twigg
I agree with my hon. Friend. I have read what the Minister said in Committee—reassurance can be gained from it—but I look forward to hearing him again today. It is very important that we have a sense that, with a very substantial increase in the potential money going through the CDC, we will ensure that it is geared towards poverty reduction wherever it is invested. As my hon. Friend rightly points out, part of that is the question of which parts of the world and which countries the CDC will invest in. Investments in some countries can deliver a lot more jobs and poverty reduction than investments in others.
As I have said, I am happy with an increase in the investment threshold, but we must ensure that the money is spent wisely. The 2012 to 2016 investment plan has expired and we are yet to see the 2017 to 2021 investment plan. I suggest that it would have been beneficial for the Bill, the Government and the CDC if Parliament had seen the plans for the next four years of investment before it was asked to raise the investment threshold. The amendment from my hon. Friend the shadow Secretary of State would ensure that, if the Government introduce regulations further to increase the limit, they would have to be preceded by a detailed plan of investment from the CDC that could be scrutinised by Parliament. I welcome and support that amendment.
Wes Streeting (Ilford North) (Lab)
Successive Governments can be proud of the role played by DFID in improving lives and the economies of some of the world’s poorest countries but, in light of much of the public debate on international development spending, much of what my hon. Friend says on parliamentary scrutiny is correct in principle. Does he agree that that is absolutely essential for maintaining and building public confidence in international development spending?
Stephen Twigg
I absolutely agree with what my hon. Friend says, which chimes with my conclusion on the importance of scrutiny of both the CDC and the Government, including scrutiny by the House.
Mark Field
I have a lot of sympathy for what the hon. Gentleman says—in the context of the debate it would be useful to have an idea of the programmes that the CDC has in mind for the future. I hope that, when the Bill goes to another place, there is another opportunity to have one. However, does he recognise that, given the nature of the CDC’s expertise and experience, it might to an extent have slightly different goals from other NGOs who receive DFID money? In other words, given the CDC’s expertise, particularly its private sector expertise and experience, the absolute predominance of the alleviation of poverty could in some cases not entirely apply to everything it does.
Stephen Twigg
The focus and priority needs to be on poverty alleviation. At the beginning of my speech, I gave the example of a project we visited—the hon. Member for Mid Derbyshire (Pauline Latham) reinforced the point. That project undoubtedly delivered things beyond poverty reduction, but at the heart of that investment and its impact was the reduction of poverty. Keeping the reduction of poverty in mind is a useful lodestar for DFID when it approaches the work of the CDC. I would need some persuading that a project should be funded that did not have some connection to the alleviation and reduction of poverty.
Let me now turn to the issues of scrutiny that were referred to by my hon. Friend the Member for Ilford North (Wes Streeting). The recent NAO report, as was rightly said by the hon. Member for Bedford (Richard Fuller), revealed that the target development impact score is on average being met, but only on average. The CDC is making some investments that fall below the target. Some 23% of investments since 2013 have fallen below the target score based on their investment difficulty and propensity to generate employment. Given that the objective stated in the CDC’s current investment policy is to
“focus its investments into the geographies and sectors where there is the most potential for development impact”,
it is unclear why the CDC is investing in projects that achieve lower scores. So I say to the Minister that, along with a more robust approach to measuring development impact, I would like a minimum threshold for impact implemented in the new investment strategy.
As with all DFID spending—and, indeed, broader aid spending by other Government Departments—the International Development Committee will scrutinise very closely the CDC’s work in the months and years ahead. It is vital that we ensure the British taxpayer gets value for money for every pound spent on international development. As has been said on all sides of the House, the CDC has become more transparent following the Committee’s 2011 report and the NAO report in 2008, but more can still be done to ensure that money is being spent as well as possible. One way that could be achieved—I ask the Minister to explore this—is to allow the Independent Commission for Aid Impact to play a bigger role, for example carrying out a regular assessment of CDC investments, allowing scrutiny so we can really ensure full effectiveness and value for money of the programmes in which the CDC invests.
I think we can say that the CDC has been a world leader among development finance institutions in publishing details of its investments since 2012 under the International Aid Transparency Initiative. That is very welcome, but I suggest it would improve transparency further if it published similar details on its entire active investment portfolio, including those made prior to 2012. I ask the Minister to address that point when he responds to the debate. That would enable greater scrutiny of the CDC’s entire portfolio and hopefully provide assurance to the public that all the CDC investments are focused where they need to be: on the goal of poverty reduction.
In conclusion, I believe that the CDC has helped the UK to be a leader in global development, but as with any area of Government spending we need to ensure that every penny is going where it can have the greatest effect: the right places and the right people delivering value for money for the taxpayer. One way to achieve that is by regular scrutiny of the CDC, including by Parliament. I give a commitment that the International Development Committee will play its role in ensuring that we scrutinise and hold to account both the Department and the CDC as the additional money is allocated. Most importantly, as with all areas of development spending, we need to ensure that the ultimate goal is poverty alleviation and eradication, and that we never lose focus on that.
Paul Scully (Sutton and Cheam) (Con)
Thank you, Madam Deputy Speaker. I am grateful for your generosity in allowing me to contribute for a short time.
The CDC has a really important discrete role in our international development portfolio. There are few organisations with the skills and abilities to manage such risk in the most difficult markets. Often, it will bring an economic frontier country, area or sector the opportunities leading towards a risk profile that more established and traditional investment vehicles can get involved in. That is to be welcomed. It supports more than 1,200 businesses in more than 70 developing countries to create jobs.
We discussed a number of issues in Committee, including the fact that investments are not necessarily direct. Amendments tabled both in Committee and on Report address whether that serves to divert resources from the least-developed countries. I would say that it is sometimes necessary to invest in opportunities in other countries as long as the outcomes go to the most needy and the least-developed countries. At the end of the day, that is what we are trying to do with our international development effort.
As many Members have said, it is important to concentrate on our core goals and the SDGs. In Committee, the Minister was explicit in saying he did not believe we needed more legislation. The International Development (Official Development Assistance Target) Act 2015 already enshrines in legislation the need to focus on poverty reduction and the SDGs, and they are already enshrined in DFID’s own principles and processes, so I do not believe that we need to have yet more primary legislation.
On the limits referred to in relation to some of the amendments, we have to remember this is effectively an enabling Bill, which is why it is so short. It is not an immediate call to spend. It is not a case of saying, “Here’s £6 billion tomorrow and then we’re going to raise it further the day after.” The Bill simply seeks to bring the CDC in line with other organisations that have similar requests of Departments. In Committee, the Minister said that any requests for money would have to be subject to DFID’s strategy and have to have a robust business plan that was considered fully before any money was handed over. That can easily be done on a departmental level. I totally agree with my colleague and Chair of the International Development Committee, the hon. Member for Liverpool, West Derby (Stephen Twigg). As a new Member, I look forward to being able to scrutinise the work of CDC.
I note that the CDC has changed. I agree with my hon. Friend the Member for Bedford (Richard Fuller) that some amendments address problems that may not occur or rehearse old problems from before 2010 when the then Secretary of State reorganised the CDC. I do not support amendments on problems that may or may not happen, or have happened in the past but have been largely sorted out. The CDC has moved from pre-2010 looking at low impact, high return investment programmes, to a far more proactive viewpoint to ensure we take into account the SDGs and poverty reduction. I will be scrutinising that along with my colleague the Chair of the Select Committee, but I will not be supporting the amendments, for the reasons I have set out. This can best be done at Department and Committee level through post and pre-decision scrutiny. In conclusion, I look forward to the Bill becoming an Act.
Stephen Doughty
I rise to speak in favour of new clause 7 and the other new clauses and amendments in my name and those of my right hon. and hon. Friends.
It is fantastic to see so great a consensus in the room around the 0.7% aid target and Britain’s role in international development—in contrast, perhaps, to the shriller debate in the media in recent weeks. It might surprise those hon. Members who have criticised my amendments that there is actually much agreement around the role of CDC; I believe it has a vital role to play—I made this clear in Committee, as I am sure the Minister would acknowledge—in the wider portfolio of our international development effort and in the spending of our official development assistance.
I would like to thank my fellow Co-operative party MPs and the shadow Front-Bench team, as well as other Members from across the House, for adding their names to many of my amendments. It shows the level of very reasonable concern around the many unanswered questions concerning the priorities and operations of CDC. Those questions need to be addressed before we can countenance such a large increase in the official development assistance resources it receives from DFID. I am not suggesting that CDC should not get any more resources—it has reached the cap of £1.5 billion set in 1999 and clearly needs some increase and headroom to expand its activities—but it is worth recognising that it has coped well by recycling resources within itself, partly thanks to some of the investment successes it has enjoyed.
Richard Fuller
Is not the level of investment now consistent with this increase? For CDC’s current level of activity to be maintained, it requires this level of increase, so cannot concerns about too rapid growth perhaps be overstated?
Stephen Doughty
I do not believe that that case has been made; there has been no justification at any point for the actual figures. To maintain CDC at its current level of activity, we need to realise that it has managed perfectly well with £1.5 billion since 1999 and has recycled it within its own budgets. If it was going up by £1.5 billion or £2 billion, I could understand it with a view to creating space for the next 10 years, but £6 billion and £12 billion seem to me to be well out of the appropriate range.
Wendy Morton
From my understanding of the Bill and on the basis of evidence given in Committee, I would like to read the quote that
“no money will go to CDC until a full business case is written in huge detail, which will be prepared in the summer of 2017.”––[Official Report, Commonwealth Development Corporation Public Bill Committee, 6 December 2016; c. 9.]
The suggestion that we are going to give a huge chunk of money to CDC straight away is perhaps creating an unfair impression.
Stephen Doughty
Clearly, the hon. Lady did not listen to what I was saying. I did not say that. I said that the Minister had acknowledged that it was not going to be spent in one year, which was the fear when this was initially proposed. What we are asking for in the amendments is just that clear business case. I hope that the Minister—he was nodding earlier—will be able to set out how that process and scrutiny of it will occur, which is only right. There was only limited scrutiny of the last amounts spent, which were quite significant.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
What my hon. Friend describes is, in civil service language, the ghastly phrase “absorptive capacity”. He will know that, unfortunately, the Department for International Development has allocated some funding into various World Bank trust funds that have not been fully spent with the originally envisaged timescale, suggesting that the Department is beginning to struggle to find suitable sources that can absorb its money as it wants. My hon. Friend is, in my view, right to worry aloud that this is a huge increase in money without any proven capacity to spend it.
Stephen Doughty
Indeed. My hon. Friend, one of the longest-serving Ministers at DFID, knows this only too well. He makes a very important point. I have spoken to other experts in the sector who suggest that to absorb that amount, even a doubling would be a struggle, so it certainly applies to the levels we are seeing. That is why it would be much more helpful if the Minister were clear about the schedule for this spending. What is his idea of the number of years over which this increase would be spent before we might require another Act to increase it even further?
We tabled some crucial amendments, as did SNP Members, in new clauses 3, 4 and 6 and my own new clause 9, emphasising the importance of focusing on the poorest, least developed and low-income countries and of ensuring that we remain coherent with the sustainable development goals—the global goals agreed by the UN—and focused on poverty eradication rather than other priorities.
Mr Ivan Lewis (Bury South) (Lab)
My hon. Friend is making an excellent case. Has not DFID led the world on the importance of aid transparency and a focus on poverty reduction? The problem at the heart of these proposals is that there is very little prospect of transparency of how these resources are spent. Equally, there is very little ability for the Government to guarantee that the resources will be deployed and focused on poverty reduction. Is that not a matter of major concern?
Stephen Doughty
I think it is, and that gets to the point. A lot of information is provided by CDC online, and it is important to acknowledge that much of it is helpful. We can get into individual projects and see the particular spending on those individual projects. However, it is not the same when it comes to the level of spending, which is what the NAO was looking at. It is important to be able to prove prospective development impact and show where it is going.
To take just one example, the NAO looked at the issue of funding going into the health sector in India, and tried to get clear information about where the money was being spent in a particular hospital group. It looked at whether it was going to the poorest or to middle-income patients. The NAO told us in its evidence that it was going to middle-income patients, which does not strike me as a correct use of CDC’s money. That is not to say that the investment is not good in and of itself—I am sure that enabling access to hospital for people in general is a good thing. The question is whether we should be spending our aid money on that. Surely we should be focusing on the poorest.
When we examine the figures in depth—they can be found in a House of Commons Library research paper—we see that although the proportion of CDC’s investments in the least developed countries has increased, it is still significantly lower than the proportion of its investments in middle-income countries. As for spending in individual countries, it is a fact that in India most of CDC’s money is being spent in what are known to be the richest states. The highest proportion of its investments goes to Maharashtra, which is where Mumbai is located. I am not saying that the individual investments there are not good, effective or useful; I am saying that it is a question of priorities. In Committee, it was helpful to hear the Minister speak of the possibility of a cap or restriction on funds that go to India and elsewhere in south Asia rather than to Africa. Giving evidence to the Committee, Professor Paul Collier said that he shared the concern that had been expressed about whether CDC was focusing enough resources on the poorest countries. New clause 9, for instance, relates to those issues.
The wider issue of spending routes that is raised in both the SNP’s amendment 3 and our new clause 10 is crucial. We are not suggesting that CDC should not be given more money, or that it should not have a chance to expand its operations and the autonomy that it enjoys, but we believe that those elements should be in proportion to other forms of official development assistance. It is important that we introduce safeguards. By 2019-20, 6% of United Kingdom official development assistance will be spent by other Government Departments. Money goes into the prosperity fund and other Government funds, and there is often far less scrutiny and oversight than there is in DFID. That worries me, and I know that it worries other Members on both sides of the House.
We need to achieve a fair balance. CDC has its role to play in the portfolio, but that must be proportionate to other ways in which we can spend the money. We must ensure that we are pulling all the levers of development, rather than just one at the expense of others. For that reason, I am inclined to support amendment 3 if it is pressed to a vote.
I want to say something about tax havens, although I shall not do so at length, because we discussed the issue a great deal in Committee and we have also discussed it today. I find it surprising—this relates to new clauses 1 and 8—that CDC continues to use tax havens such as the Cayman islands and Mauritius. A fair point has been made about the importance of stable financial arrangements for investments. In some countries it is clearly not possible to set up arrangements within the legal structures of those countries to ensure that the right fiduciary controls are in place. However, I do not understand why we are not setting up such vehicles in England and Wales, or in other jurisdictions. Why are so many of them in the Cayman islands and Mauritius?
Moreover—I have asked parliamentary questions about this—we are paying management fees to financial services organisations, in the Cayman islands and elsewhere, that also support the far less transparent activities of other corporations and individuals. I find it deeply worrying that, whether or not there is anything untoward about an individual CDC investment, we may be indirectly supporting the flourishing of the tax avoidance and evasion that exists in overseas territories.
Mr Gareth Thomas
Is my hon. Friend aware of comments made by the Secretary of State when she was a Treasury Minister about tax evasion and the need to limit the use of tax havens? Why does the Treasury seem to be concerned about the issue, and why is DFID suddenly not concerned about it? One would have thought that, when it came to such a crucial issue, there would be joined-up government.
Stephen Doughty
That was also a great surprise to me. I referred earlier to the letter that the Secretary of State sent to many of the other DFID contractors on 16 December. That letter was very clear about tax avoidance measures and tax havens. It contained a series of criteria, most of which I think are very reasonable, and which we should expect to be observed by organisations that are benefiting from our aid spending. My question is this: why are those criteria not being applied to CDC? The Secretary of State repeatedly refused to confirm that they would be. There seems to be one rule for one organisation and a different rule for others.
Eurodad research found that 118 out of 157 fund investments made by CDC went through jurisdictions that feature in the top 20 of the Tax Justice Network’s Financial Secrecy Index. That does not seem to me to be coherent with the other statements that are being made by the Government. Indeed, the will of the House has been shown by cross-party support for amendments to other Bills that would crack down on tax avoidance and evasion.
Lastly, I want to return to the issue of coherence, and I urge colleagues to support new clause 7. The hon. Member for Bedford (Richard Fuller) referred to this as some sort of laundry list and suggested I was creating hypothetical straw men that did not actually exist and was dealing with things that have happened in the past. That is not the case; I am talking about things that are happening now. It is a fact that, as data revealed to me since the Committee stage in parliamentary questions show, in 2015 alone CDC invested £56.9 million in private fee-paying education and £117.9 million in private fee-paying healthcare.
Tommy Sheppard (Edinburgh East) (SNP)
I shall speak in support of a number of the measures on the amendment paper, but first I want to make a couple of comments about the political context in which this debate is taking place. I turned on the television over the weekend to see on the tickertape at the bottom of the news channel screen the information that our Government had stopped funding a girl band in Africa. I was shocked by this—I did not realise we were funding girl bands or bands of any other kind in Africa or elsewhere—so I thought I would look into the matter a little more. Of course, on doing so, I discovered that that was not the story at all.
The story was loosely based on a project in Ethiopia called Girl Effect, which is a huge programme that is aimed at empowering young women throughout that country. It has 500 direct participants and more than 10,000 participants online, and it operates from 8,000 schools throughout the country. It is designed to use music and performing arts to give young women in that country confidence so that they can take part in Ethiopian political and social life. It is undeniably a good thing. It was set up by DFID in 2011, and every time that DFID has reviewed it, it has been given an A* rating. It is exactly the type of project that we should be supporting, but it is unusual and unconventional. It is not the same as handing out food to people who are starving, so the case needs to be made for it. We also need to be aware of how these things can be caricatured and used to argue against the provisions that we are talking about today.
That entire Girl Effect project was described in the Daily Mail as the British Government funding the equivalent of the Spice Girls. The implication was quite clear: millions of pounds of our taxpayers’ money was being used not to feed the poor, the starving or the illiterate, but to fund five young women and turn them into rich pop stars. That was not true. The reporting was a good example of what we might call fake news—I believe that that is the term used these days. It was connected to reality by the thinnest threads of truth, yet for many people reading the Daily Mail and the other papers that took up the story, or looking at the tickertape along the bottom of their screen, it created the impression that they were given.
Lots of people, including some in this Chamber who ran to the press to comment on that story, will use these caricatures to denigrate and oppose any foreign aid activity by this country. They use the ridiculous argument that we should be spending money at home before we spend it abroad, as though the poverty and inequality in this country, which we must tackle, was on a par with the hell in sub-Saharan Africa, where poverty, oppression and the daily grind are the normal way of existence for the mass of people in those countries. Knowing that those caricatures exist and that we need to be careful about how we present these arguments brings me to the new clauses and amendments before us today.
Andrew Bridgen (North West Leicestershire) (Con)
The hon. Gentleman makes a good case, but considering that a third of all Ethiopian girls do not go to school, would it not be better for female empowerment if the money were spent on giving them an education? Would that not be more empowering than promoting a pop group?
Tommy Sheppard
I do not want to have a big discussion about the project, but I will respond by saying that we should do both. Of course we should also try to put money into formal education, but the importance of that project was that it understood that digital communication was a much more effective way of reaching young people in Ethiopia than the bricks and mortar of a formal educational establishment. It also understood that music and lyrics can sometimes be better than formal texts at getting through to people, educating them and inspiring them with big ideas. That is true in this country as well. Those things have contributed to the social education of young women in Ethiopia. As I said, the Department for International Development itself said that the project was worth supporting.
The important point in all these debates is that we can win public support for foreign aid and rally the public behind the 0.7% contribution, provided that we are transparent about what we are doing, and that we demonstrate at every turn that the people who are getting the money are those who really need it. It is therefore important that those criteria are demonstrated through the work of CDC Group and others, and that evidence is produced.
I am not sure which amendments and new clauses will be pressed to a Division, but I will vote for whichever ones are, because they would all strengthen the Bill. In my 20 months in this Chamber, this is the first time that I have seen a Bill come back on Report without a single Government amendment. I find that surprising. I know that the Bill is concise and brief, but given the concerns that were expressed on Second Reading about the work of CDC Group, I would have thought that the Bill could have been tightened up a little. I hope that the Government will consider supporting some of the new clauses and amendments because they would make the Bill more efficacious in achieving its objectives.
New clause 6 states that before CDC Group gets a major uplift in funding, the case will have to be made that it is meeting the sustainable development goals and tackling poverty and inequality in the country in which the money is deployed. Let me put it another way. If a project was not tackling poverty or combating inequality, and not contributing to achieving the sustainable development goals, why on earth should we fund it? When it comes to prioritising when money is tight, we have to make sure that it is spent on what it is supposed to be spent on.
On Second Reading we discussed some of the—shall we say?—past mistakes in a number of CDC’s decisions. We talked about the shopping malls, luxury hotels and other inappropriate projects in which CDC Group invested, and we were assured—by the Minister of State, I think—that those things were in the past, that we had learned from them and that they would not be repeated in the future. Well, if that is the case, what is the difficulty in building such a provision into the Bill so that when CDC gets a budget uplift, it will have an obligation to demonstrate that what that uplift is spent on will contribute to meeting these goals and fulfilling these criteria? That is self-evidently a way of ensuring that we do not rely on hope by instead writing down what, as a matter of policy, we want.
Amendments 3 and 4, to which I have put my name, would link an uplift in CDC Group’s funds to the overall ODA budget. It is important to look at doing that; the formula that has been suggested is not onerous and is perfectly achievable. There is an idea abroad that what might be happening is the outsourcing or privatisation of our foreign aid activity, and that pre-eminence is given to a market approach. We will have problems if that impression is not countered, because the truth of the matter is that there is a role for spending public money to try to support the creation of a small business sector in developing countries, to invest in such sectors and to create jobs, but let us not kid ourselves. The vast bulk of our priority aid should be directed at people who need it in order to combat the malnutrition, illiteracy, poverty and starvation that are present throughout such countries. That cannot be done by setting up a small business; it needs to be done through direct state and NGO intervention. That is why we should make it clear that the vast bulk of our foreign aid effort will remain in that sphere.
Although CDC Group and the market have a contribution to make, particularly in countries that are some stages along the process of development, that will not be the primary way in which we do things. I commend amendments 3 and 4 to the House because if we were to agree to them, we would strengthen the Bill and demonstrate to people what our intentions really are: to ensure that the hard-earned taxes that they pay—people politically agree that a small slice should be deployed for foreign aid—are spent doing the things that they want to be done. Those things are combating poverty and inequality in the developing world, and making sure that we get to a more equal world society, which of course is in our long-term interest, too.
Mrs Madeleine Moon (Bridgend) (Lab)
I am particularly pleased to follow the hon. Member for Edinburgh East (Tommy Sheppard). I am speaking today because of concerns brought to me by constituents, and only concerns brought to me by constituents. No NGOs have lobbied me. Constituents contacted me before Second Reading to express concern that, if the Bill were passed, we would run the real risk of aid money being spent inappropriately, and of our commitment to aid, of which we can all be proud, being undermined. I return to that concern, which I raised on Second Reading, and to what for me and my constituents are the core issues: directing the money to where it is needed most; scrutiny; and transparency.
On Second Reading, I quoted the recent NAO report on CDC. I know that has already been quoted today, but it bears listening to again. The report concluded:
“It remains a significant challenge for CDC to demonstrate its ultimate objective of creating jobs and making a lasting difference to people’s lives in some of the world’s poorest places. Given the Department’s plans to invest further in CDC, a clearer picture of actual development impact would help to demonstrate…value for money”.
We are not getting the actual development impact promised. We cannot see what the development proposals are for the future; we are being asked to trust. Perhaps the Lords will see that, but we cannot.
The Minister of State, Department for International Development (Rory Stewart)
I begin by thanking right hon. and hon. Members. This has been a very instructive process. The new clauses and amendments tabled reflect what was a really good Bill Committee stage. The Government have huge respect for the intelligence, focus and precision of these amendments, and we hope that Members will see that all the concerns that have been expressed are going to be addressed through the strategy that is produced.
Before I address the new clauses and amendments in turn, I pay tribute very strongly to the Members on both sides of the House who have demonstrated their support for international development. I pay particular tribute to the hon. Member for Edinburgh East (Tommy Sheppard), who gave an extremely powerful speech in support of international development and about the importance of standing up and having the courage to defend complex and innovative projects.
Mr Gareth Thomas
At the outset of his remarks, will the Minister explain why the legislation has preceded the strategy?
Rory Stewart
I shall deal with that when discussing the second set of amendments, which relate to that directly, but first I want to continue to pay tribute to other Members of Parliament, from both sides of the House, for their support for CDC. I was struck by the support of the hon. Member for Liverpool, West Derby (Stephen Twigg) for the Virunga project in the Democratic Republic of the Congo, by the in-principle support of the hon. Member for Glasgow North (Patrick Grady), and particularly by the phrase produced by the hon. Member for Edmonton (Kate Osamor) that is absolutely right in guiding us as we go forward: we need to get the right balance between long-term investment and short-term need.
I should just recapitulate the extraordinary work that CDC has done and echo the thanks of the hon. Member for Bedford (Richard Fuller). It has been a really tough time. As Members of Parliament, we are used to being under full public scrutiny and attack. CDC works very hard and has delivered some high-quality projects, and this has been a very tough period for it.
Three types of amendments have been tabled. The first set basically says yes, we should be giving money to CDC, but we should be giving slightly less money to CDC; the second set says that there should be restrictions on the Government’s ability to give money to CDC; and the third set would restrict what CDC itself can do with the money. Essentially, the Government’s position is that these are all good points, but they are better dealt with through the governance mechanisms and the strategy than through statutory, primary legislation.
I shall deal first with amendments 1 to 5 and new clause 10, which essentially say yes, we should give money to CDC, but we should give less money to CDC. Why do we disagree with what was essentially the argument put forward by the hon. Member for Cardiff South and Penarth (Stephen Doughty)? First, because, with respect, I still believe that the hon. Member for Glasgow North is confusing the stock and the flow. The fact is that the money put into CDC will be recycled. For the sake of argument, if an investment was 10 to 12 years in length and CDC had $12 billion in the pot, it would be in a position to maintain the current rate of investment of around $1 billion a year—the money would come back and go bounce again at around $1 billion a year. It is not fair to compare what happens in a capital stock used for equity debt investment with the annual expenditure of a Department.
Secondly, there is the question of demand, which the hon. Member for Cardiff South and Penarth referred to. The demand is almost limitless. It is calculated that $2.5 trillion is going to be required annually by 2030 to meet the sustainable development goals, which is why the relevant question is not the demand for the money but the question of the absorptive capacity, which the hon. Gentleman raised.
Thirdly, the Bill is enabling legislation that sets a ceiling—a maximum limit; it is not saying, “This is the amount of money we are going to give.” Fourthly, the design is for the money to go into patient, long-term investment. The three-year review proposed in one of the amendments simply will not work for investments that are intended to be, on average, 10 years in length.
Mr Ivan Lewis
If the Bill is passed and its consequences are added to the fact that more than 25% of DFID’s spending currently goes through other Government Departments, the result will be that more than 50% of our aid will no longer be spent through DFID. Does it not raise serious questions about the Government’s intentions for DFID to remain as a stand-alone Department with a place at the Cabinet table if more than 50% of its spending will be spent by CDC and other Departments? No other Government Department would come to the House and ask for more than 50% of its resources to be spent via other means.
Rory Stewart
There are two distinct points there: DFID’s spending and the proportion of the spending. The first thing to understand is that CDC is 100% owned by the Department for International Development, which is one reason why a number of these amendments are not appropriate. On the proportion of money spent, as my hon. Friend the Member for Bedford (Richard Fuller) eloquently pointed out, the small increase that we are talking about in terms of the annual amount that CDC will be able to invest will still be much smaller than comparable organisations in Holland, Germany and France. It will be about a third of the amount that the Overseas Private Investment Corporation can invest—OPIC is just one of the US’s development finance institutions that is able to invest—and only about a sixth of what the International Finance Corporation puts out a year. We are not talking—comparatively, globally—about a large amount of money. We are talking about something in the region of 8% at maximum—even if we hit the maximum of official development assistance—and the other 92% will continue to go in the normal way through non-governmental organisations and organisations such as UNICEF for the objectives that we pursue.
Stephen Doughty
It would be helpful if the Minister clarified the time period over which this increase, if it was granted, would be played out with CDC. The explanatory notes to the Bill say very clearly that the £6 billion is intended to be used in this spending review to accelerate CDC’s growth. Is that his view, and what about the £12 billion? Is that spread over a 10-year period, a 20-year period or a five-year period? Can he give us a ballpark figure?
Rory Stewart
Let me clarify this. The £6 billion represents an additional £4.5 billion, because CDC already has £1.5 billion. We anticipate that that would cover the next five-year period to enable CDC, at maximum—we do not expect it to draw down the maximum amount—to be able to make the kinds of levels of investment that it made last year. The next £6 billion—it is not an additional £12 billion, but an additional £6 billion—would apply to the next five-year period. We are looking at a steady state allocation, which might, at maximum, allow CDC to meet the kind of expenditure levels that it gets next year.
Let me move on now to new clauses 2, 5 and 6 and amendment 6. Essentially, these are a series of measures that restrict the power of the Government to give money to CDC. They do that either by saying that they should not be able to boost the amount of money that CDC has through delegated legislation, or through asking for a strategy to be put in place before the money is disbursed. Again, these measures are not appropriate. The role of Parliament as specified for CDC in the Overseas Resources Development Act 1948 and the Commonwealth Development Corporation Act 1999 quite correctly relates to two things: the setting up of this body and the creation of a cap on the amount of money that this body is given.
However, it is not normal for Parliament to get involved in the detailed implementation of specialist business cases. That is true in everything that the legislature does in its relationship to the Executive. The money allocated to our Department in general through the Budget, which this House votes on, is then delegated to civil servants and to the Government to determine how it is spent. The same will be true here, but the strategy that will come forward will reflect very closely the arguments that have been made at the Committee stage and on Report. We will continue to remain in very close touch with Members of Parliament, and we will be judged by our ability to deliver, through that strategy, something that will address those concerns—above all, through the development impact grid and the development impact assessments on the individual business cases, which will address these particular issues.
Mr Gareth Thomas
Will the Minister specifically comment on the use of tax havens by CDC, and will he and other Ministers in his Department echo previous statements by the Secretary of State and instruct CDC to desist from using tax havens for future investments?
Rory Stewart
That is an invitation to move on to the last group of amendments, which comprises new clauses 8, 9, 3 and 7, one of which relates to the issue of offshore financial centres. These are restrictions on what CDC itself can do. There is a suggestion that there should be an annual obligation on ICAI to produce reports on CDC. Then there are restrictions on the routes through which CDC can put its money, and there are attempts through the new clauses to restrict the sectors and the countries in which CDC can invest. Let me take them in turn.
On ICAI, we are very open to scrutiny. The CDC has been scrutinised by the International Development Committee, the National Audit Office and the Public Accounts Committee. We expect it to be scrutinised in that way and to be scrutinised by ICAI. We welcome scrutiny from ICAI. However, we do not think it is for the Government to impose obligations on an independent regulator. It should be for ICAI to determine its priorities and where it thinks the problems are, and to be able to apply its scrutiny accordingly. It may determine that an annual scrutiny of 10-year investments does not make sense and decide to do it more frequently, but that should be for ICAI, not for statutory legislation of this House.
Rory Stewart
I beg to move, That the Bill be now read a Third time.
I would like to begin by reiterating my thanks and the tribute we owe to right hon. and hon. Members on both sides of the House for their shared belief in the importance of international development. At the absolute core of the Bill is our moral obligation to some of the very poorest and most vulnerable people in the world. I pay tribute to right hon. and hon. Members for the important points raised, which will be reflected in the new strategy as it comes forward.
I will briefly lay out once more why believe that this is a good Bill. At its core is our understanding that there is extreme poverty and suffering in the world and that economic development will play an important part in addressing it. There is enormous demand in the poorest countries of the world for well-paid jobs. It is one of the first things that any of us discover when we go to Africa and other developing regions. As the Chairman of the International Development Committee, the hon. Member for Halton (Derek Twigg) said, 90% of the growth and employment in the poorest countries of the world is currently driven by the private sector. As he also said, Africa requires 15 million more jobs a year. Every one of those well-paid jobs is an opportunity for a family to deliver the stuff we all care about—for parents to provide education for their children and the healthcare their families need. Above all, it is through the revenue these jobs generate for Governments that a long-term sustainable future can be maintained. That is what allows a Government to pay for their education and healthcare systems and, if there is an earthquake or some other natural disaster, to access the resources to address it. In the end, the only long-term sustainable path is through the generation of that economic development and growth.
Why CDC? We have chosen CDC because it brings together two important things: on the one hand, the rigour of the private sector and its ability to work out whether investments make sense—are there genuine markets for these goods; can these jobs really be sustained? —and, on the other hand, the values of the public sector. The latter are what ensure we go into the hardest countries in the world—for example, that we do renewable energy in Burundi or the Central African Republic or get into Sierra Leone when Ebola happens—and, above all, ensure that investments are not about short-term commercial returns but are patient, long-term investments of the kind that the commercial sector will often not deliver.
Why CDC? Well, having been established in 1948, it is the longest-serving, as well as the best, development finance institution in the world. It proved it in the 1960s, through its investments in Kenya, and, much more recently, since 2012, with its fantastic reforms, which we have talked about at all stages of the Bill, on salaries, transparency, offshore financial centres, the geography of investments and the sectors in which we invest, all of which is summed up in the development impact grid. That is what answers a lot of the points made in the discussion today, and that is what allows us to make sure that every investment focuses on the areas that generate the most jobs and on the countries where investment is most difficult, where the least capital is available and where GDP per capita is lowest.
We can see this in the real world: in the 17 million indirect jobs created by CDC; in its investments in places such as Burundi and the Central African Republic; in the hydroelectric investment in eastern Democratic Republic of the Congo—not an easy place to invest in—which the Chairman of the International Development Committee referred to; and, actually, in the Globeleq investment, where CDC’s investment will help to generate 5,000 MW of power in Africa over the next decade. To put the latter in context, Africa managed only 6,000 MW over the previous decade, so that is almost the entire generation of Africa over the previous decade being driven by a single company supported by CDC. Moreover, there is value for money for the taxpayer because the money is recycled, and the need is absolutely there, as we can see from the fact that we need $2.5 trillion of investment by 2030.
In conclusion, our Department will do many other things besides CDC. Much of the money will continue to flow through NGOs such as Save the Children, CARE and Oxfam. Many of our investments will be with valued partners such as UNICEF. More than 90% of the money we will spend through overseas development assistance will continue to go to health, education and humanitarian assistance. Within that, not all the money in economic development will go through CDC. It will also go through our investments that will take place through support to Governments and technical assistance. However, that CDC investment, combining the rigour of the private sector, the focus on markets and the values of the public sector, reflects the values of the British public who care about poverty and show in their own philanthropic giving how much they care about some of the most vulnerable people in the world. We are showing our respect for the British people by pushing forward with a proven model that will provide the sustainable growth required to address some of the most vulnerable and poorest people in the world. This is our moral obligation.
Imran Hussain (Bradford East) (Lab)
I associate myself with the Minister’s comments in thanking right hon. and hon. Members of all parties who have participated in what I believe has been a very constructive debate—irrespective of whether the amendments and new clauses have been accepted. What they set out has been utilised in the best possible way, as hon. Members have used them to raise some very important points. I offer my thanks, too, to all the non-governmental organisations that supported us throughout the process, to those who came before us in Committee to present written and oral evidence and to staff in the Public Bill Office, whose assistance has been invaluable, as always.
I would like to thank my hon. Friends who have spoken with great concern and passion about the Bill, and I particularly mention my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), whose experience in the Department for International Development is widely respected and was visibly expressed in today’s debate. I thank my hon. Friend the Member for Wirral South (Alison McGovern), who is no longer in her place, who also served outstandingly in Public Bill Committee. I do not want my hon. Friends’ valuable contributions to go unnoticed, and I include that of my hon. Friend the Member for Liverpool, West Derby (Stephen Twigg), the Chair of the International Development Committee, who always makes a passionate case and has an informed stance on the matters in hand.
Let me be clear that in today’s constructive debate no Member has opposed the principle or spirit of the CDC itself, and no one has criticised its role and mission statement. All Members, particularly Opposition Members, have made the point time and again that we must not lose sight of the CDC’s sole or founding principle, which is poverty alleviation. We have all accepted that, and we have had constructive debates in Committee and on Report. The amendments and new clauses that were tabled have had some support from across the House. Some were tabled as probing amendments, but some were amendments intended to strengthen the Bill.
Throughout the Bill’s passage, we outlined a number of concerns that we held over its provisions, including on the accountability and scrutiny of the investments made by the CDC, on the need of the CDC to focus its investments on efforts to alleviate poverty and on the necessity of a business case from the CDC. These concerns have been fundamental to our position on the Bill, and they are concerns about which we have sought strong assurances from the Government.
On accountability and scrutiny, we had concerns, as illustrated in our amendments, over the fact that the CDC’s investments are not independently assessed on a frequent and regular basis. The absence of such assessments undermines the credibility of the CDC and its investments, and it weakens public confidence that taxpayers’ money, through DFID, is being spent by the CDC on efforts to alleviate poverty and help the poorest in the world. It is vital for every pound, every penny, of development to be directed towards that goal, and strong, independent scrutiny of the development impact of the investments would assure us of that.
We have heard assurances from the Minister today and in Committee that he would welcome further independent assessment by the Independent Commission for Aid Impact. I feel that he has listened, and I am grateful to him for that. We have also been assured that the annual reports and accounts provided by the CDC contain ample information, and that the CDC will be held to account for any discrepancies by either the Public Accounts Committee or the International Development Committee. I am sure that they will make any such discrepancy the subject of inquiries, as they have in the past.
As I have said, it is vital for us to ensure that the CDC’s investments focus on the alleviation of poverty, which is DFID’s legal aim and purpose. Given past investments involving the construction of luxury hotels and shopping centres in well-developed areas, Labour Members were concerned about the possibility that the CDC would use its additional finance to return to such activity. However, the National Audit Office report, which was published just before the debate on Second Reading, makes it clear that that is no longer the case, following the important reforms set in motion by the right hon. Member for Sutton Coldfield (Mr Mitchell), who is not in the Chamber today.
The Minister has been kind enough to provide assurances in response to some of the concerns that have been expressed today, so we will not oppose the Bill’s Third Reading.
Jeremy Lefroy
Whether people live in the United Kingdom, Tanzania or Colombia, the most important route out of poverty is a good job or a good livelihood, and that is why I fundamentally support the work of the CDC. It has done excellent work throughout the world for nearly 70 years, and in recent years it has concentrated on the most needy countries, where there is the highest level of unemployment or the highest level of poverty. I welcome the fact that the Government are to invest more through the CDC in the coming years.
However, I think that today’s debate, and our debates in Committee and on other occasions, have made it clear that the CDC must be careful. It must invest in areas in which commercial investors would not normally invest; otherwise, it should be the commercial sector that invests in them. The CDC must invest in the areas that create the greatest number of jobs in return for the investment made. That will often involve agriculture, and it will often involve difficult investments, because it is not easy to invest in agriculture in remote areas. However, that is what the CDC is there for: it is not there for an easy life. I know that—given the management that it has had recently, and given the calibre of its staff—it is up to those challenges, and I welcome the Bill.
Patrick Grady
My I add my thanks to all the stakeholders and staff who have contributed to the Bill process? This is the first piece of legislation on which I have worked as an SNP spokesperson, so I am particularly grateful to the Clerk of Bills for his advice, to my staff and the SNP research team, and to the various non-governmental organisations that have provided input. I thank my hon. Friends the Members for Edinburgh East (Tommy Sheppard), for Coatbridge, Chryston and Bellshill (Philip Boswell) and for Kilmarnock and Loudoun (Alan Brown) for their contributions during the Bill’s various stages. I also recognise the commitment and hard work of the CDC’s staff, and their positive engagement with the Opposition parties.
This is the first piece of DFID legislation in the current Parliament, but I wonder whether it will be the last. The Minister might be aware that I tabled a question to the Secretary of State about the applicability of the International Development (Reporting and Transparency) Act 2006 now that the millennium development goals it requires DFID to report on have been replaced by the sustainable development goals. The International Development Committee proposed a consolidating international development Act to bring together all the various pieces of legislation passed over recent years. Perhaps that is not such a bad idea, especially as the debate about the purpose of aid and development seems to be getting louder.
As my hon. Friend the Member for Edinburgh East said on Report, throughout the Christmas recess there seemed to be a drip-feed of very negative stories about aid spending, particularly in the gutter press. It is absolutely right that examples of waste and inefficiency are exposed and questions asked about value for money, but the answer is to improve transparency and efficiency, and to measure impact—especially over the longer term—and not simply to cut off the supply or take heavy-handed, but ultimately counter-productive, action.
The debate on the CDC Bill has catalysed a broader debate about the use and purpose of aid, and the Government can be assured in the coming months that the SNP will be happy to support the cross-party and public consensus on our moral duty to help people most in need around the world, and the symbolism and very real impact of meeting the 0.7% aid target. However, as we have just heard on Report, if the highest standards of transparency and effectiveness are to be demanded from DFID’s external stakeholders, they must equally be applied across Government and to their arm’s-length agencies, starting with the CDC in this Bill.
The Government did not accept amendments, but I join the Opposition Front-Bench team in welcoming the commitments the Government have given. We will, through the procedures of this House, hold them to account for those commitments. There is a consensus behind the need for continual improvement of the CDC, and we want to maintain that consensus.
The Government will see this legislation passed today—their majority in the House assures them of that—and it is unlikely, due to the nature of the Bill, that the House of Lords will have any opportunity to amend or delay its progress on to the statute book. So the Government are being given a significant responsibility today; they are asking for the power to quadruple the budget of an agency which has a long but chequered history. The CDC has had significant successes in its history, but significant concerns have been raised and remain. If its resource base is to be massively scaled up, so must be its accountability and the standards it is held to. I hope the Secretary of State and her Ministers will confirm that they are prepared for the CDC, the Department, and themselves as Ministers, to be held to those standards.
Sir Peter Bottomley (Worthing West) (Con)
I will say about three sentences.
It is both a moral and practical responsibility and an opportunity to aid other countries. Christian Aid was set up after the second world war to develop Europe, and its success over the next 20 years was fantastic. The same can apply to Africa and other parts of the world, and the CDC has the opportunity, through infrastructure and education, to achieve that.
We must reduce barriers and provide opportunities, and provide a welcome to other countries having the same aspirations and achievements we have had ourselves.
Stephen Doughty
I, too, want to place on record my thanks to the Clerk of Bills and all my colleagues on the Front and Back Benches who have taken part. We have heard excellent contributions from both sides of the House in what has been a very informative and useful process of scrutiny of this Bill through Second Reading, Committee and Report. Lords Amendments Time for conclusion of proceedings Nos. 24, 96, 134, 136 to 142, 159, 302, 305 and 307 90 minutes after the commencement of proceedings on consideration of Lords Amendments Nos. 1 to 23, 25 to 95, 97 to 133, 135, 143 to 158, 160 to 301, 303, 304 and 306 Three hours after the commencement of those proceedings
I was pleased to hear the Minister setting out a little more detail on the period over which we can expect the CDC to be drawing down moneys. His suggestion that it will be a five and 10-year period in two tranches is much more reassuring than some of the earlier suggestions. There will, however, be a temptation to draw that down at a faster rate because of changes in reporting how our aid is calculated and what proportion the CDC counts towards that. So while I take what the Minister said with great sincerity, I urge him to caution against those who would suggest dumping money, as it were, into the CDC as a way of artificially meeting the 0.7% target. He should only go there with a clear plan and business case, and a clear understanding of how that is going to contribute towards poverty eradication.
I am concerned that we are still not going far enough on tax havens. I listened to what the Minister said and will look with interest at that strategy and what practical steps are taken to see us moving resources out of those jurisdictions, and the secondary effects we can have there.
I wholeheartedly agree with the hon. Member for Stafford (Jeremy Lefroy) about the role that the CDC should play. It should not go for an easy life by going where commercial resources already go. There was some suggestion in the debate that we were almost the only source of funding for many of these investments, but that is patently not the case. In our development spending overall, and certainly in the case of the CDC, we ought to be acting as a catalyst for the very best in poverty eradication, for placing the very best focus on difficult sectors, areas and countries where others will not go, and for achieving the highest standards in sustainability and human rights. We ought to be acting as a catalyst in the world, not just going for an easy return and an easy life.
There is something that I still do not quite understand, and I hope that Ministers will reflect on this. The Secretary of State set out some good principles in her letter of 16 December on transparency, on open-book breakdowns of salaries, tenders and material costs, on due diligence in supply chains, on tax status and compliance, and on disclosures of conflicts of interest. I do not see why those principles cannot be applied equally to the CDC, just as they will be applied to other spenders of our aid spending. I urge Ministers to look carefully at this again. That is a reasonable set of requirements and it would be helpful if they could be applied to the CDC.
On the question of the countries that the CDC focuses on, there has been a shift. It is important to recognise that the CDC is investing more in the poorest countries, but it needs to go much further. I urge Ministers not to have any poverty of ambition in setting the framework and parameters for the CDC, particularly in relation to future disbursements, to ensure that the money goes to the poorest countries and not to middle-income countries that can often draw down other sources of funding and finance.
It was reassuring to hear many positive voices today making the case for our wider role in international development and for our 0.7% aid target. Indeed, it was good to hear the Prime Minister the other day rejecting the more shrill views from some on her own Benches and from the likes of the Daily Mail that we should scrap the aid target and that we should not be spending any international development money at all. She rejected that. This is not a zero sum game. It is not only morally wrong for us to ignore gross poverty, instability and insecurity, as the Minister said; it also fundamentally goes against our national interest and security and global security and stability. Those are good reasons why, with reasonable scrutiny and with reasonable questions being asked about all areas of our development spending, we must maintain our wider commitment to the poorest people and countries in the world.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Policing and Crime Bill (Programme) (No. 3)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Policing and Crime Bill for the purpose of supplementing the Order of 7 March 2016 in the last Session of Parliament (Policing and Crime Bill (Programme)) and the Order of 26 April 2016 in the last Session of Parliament (Policing and Crime Bill (Programme) (No. 2)):
Consideration of Lords Amendments
(1) Proceedings on consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion three hours after their commencement at today’s sitting.
(2) The proceedings shall be taken in the order shown in the first column of the following Table.
(3) The proceedings shall (so far as not previously concluded) be brought to a conclusion at the times specified in the second column of the Table.
Subsequent stages
(4) Any further Message from the Lords may be considered forthwith without any Question being put.
(5) The proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.—(Mark Spencer.)
Question agreed to.