Draft International Development Association (Multilateral Debt Relief Initiative) (Amendment) Order 2022
Draft International Development Association (Twentieth Replenishment) Order 2022
(2 years ago)
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The Minister for Development (Mr Andrew Mitchell)
I beg to move,
That the Committee has considered the draft International Development Association (Multilateral Debt Relief Initiative) (Amendment) Order 2022.
The Chair
With this it will be convenient to consider the draft International Development Association (Twentieth Replenishment) Order 2022.
Mr Mitchell
It is a great pleasure to serve under your benign chairmanship, Mr Sharma. It is 10 years since I last had the last had the privilege of addressing the House on the subject of international development as a Minister and 25 years since I last spoke as a Minister on a statutory instrument, when I was a junior Minister in the Department of Social Security, which is now the Department for Work and Pensions. It is a pleasure to be back.
Both orders were laid before the House on 23 September. They will permit the UK Government to make financial contributions to the World Bank’s International Development Association—or IDA for short—up to the stated values. IDA provides grants or loans on concessional terms to 74 of the world’s poorest countries. It uses an innovative finance model that combines donor contributions with income from loan repayments and borrowing from the markets. That means that for every £1 we put in, IDA generates more than £3.50 for the world’s poorest countries, providing excellent value for money for UK taxpayers.
IDA is normally replenished by donors every three years. However, to respond the impacts of the pandemic, IDA stepped up to provide $35 billion dollars annually to the poorest countries in the financial years 2020-21 and 2021-22, rather than the $27 billion dollars previously envisaged. As a result, the latest replenishment, IDA20, took place one year early.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
May I say what a pleasure it is to have the right hon. Gentleman back as a Minister? We always liked him when he was in the role previously. There obviously is life after death, politically.
I used to chair a committee of the World Bank. I am a bit worried, because the Minister is saying this after a weekend when we heard that some international aid money is going to be spent on work with poor families within the United Kingdom. When I worked for the World Bank, some of the match funding came from pretty dubious sources such as big oil companies; is that still the case?
Mr Mitchell
It is a pleasure to see the hon. Gentleman in his place, because I know how much he did for the World Bank and Britain’s relationship with it. The reports at the weekend were about spending on refugees in particular, principally from Ukraine but also from Afghanistan, Syria and Hong Kong. In the first year of their residence here, it is entirely in accordance with the principles that govern the official development assistance rules—in other words, the development spend—that the first year’s expenditure should be covered. As the hon. Gentleman implied, that of course imposes considerable strains on the development budget and leads to spending in the UK, but we all accept that it is perfectly legitimate public expenditure within the definition.
Following negotiations throughout 2021, the UK and other donors committed to a record-breaking $93 billion replenishment in December. As announced to Parliament through a written ministerial statement earlier this year, the UK pledged £1.4 billion, positioning us as the third largest donor after the US and Japan. That was a 54% reduction on our pledge to the previous replenishment round, IDA19. This is in line with our international development strategy, which set out how we will rebalance the aid budget towards the bilateral programmes, thereby giving us greater control and flexibility over how taxpayers’ money is spent.
Since the replenishment was agreed in December, Vladimir Putin’s illegal invasion of Ukraine has had a devastating impact on developing countries across the globe, which face growing debt, food and energy crises. As a result, extreme poverty is rising for the first time in two decades. Once again, IDA is responding flexibly, using financing from the UK and other donors, to support the poorest countries to respond to rising inflation and food insecurity.
The World Bank is providing $36 billion this year as part of its wider global crisis response package. For example, over the last few months, IDA has financed social protection payments to support over 400,000 households in Somalia who face food insecurity. It is helping half a million households in Ethiopia to cope with drought by providing livestock feed, water and veterinary drugs. IDA has also provided an additional $1 billion of exceptional financing for Ukraine without diverting funds from the poorest countries.
The UK can be proud of our role as a major donor to IDA. We have shaped its strategic direction and priorities to align them with our own, and ensured that IDA resources have the best possible impact on the world’s poorest people. That was confirmed by the review into IDA by the Independent Commission for Aid Impact—ICAI—earlier this year. It found that the UK was the most influential donor, that IDA represented excellent value of money, and that our priorities were well aligned.
In the IDA20 replenishment negotiations, the UK secured commitments from the World Bank to use IDA’s balance sheet to increase the overall volume of financing by an additional $14 billion, reduce learning losses in 20 countries, with a particular focus on girls’ education, support all IDA countries to better prepare for and respond to future crises, expand the provision of core services to people with disabilities, and strengthen disability statistics in 34 countries.
Mr Sheerman
My daughter, who works for the International Rescue Committee, has just come back from Somalia. She is very worried that so much aid is not getting to the people who really need it, particularly people with disabilities. I am keen to understand whether we are ascertaining that aid gets to the right places at the right time.
Mr Mitchell
The hon. Gentleman’s daughter is right, and all of us are horrified and extremely worried about what is happening in the horn of Africa, where the dreadful spectre of famine looms, and indeed has started in some parts. There is no question about that. He will understand that it is 10 years since I last stood at the crease, but I am pretty confident that the quality of development spending over those last 10 years has increased. He is quite right to put his finger on the importance of getting humanitarian aid speedily to the people who most need it. Without it they will perish. I am afraid that there is no better example of that than the horn of Africa at this time.
IDA will also help to deliver the Glasgow climate pact by using 35% of its finance to tackle climate change, and by supporting 30 countries to develop long-term strategies to transition towards net zero. Since its creation, there has been strong support across the House for IDA, and recognition of the positive impact it has had on the lives of millions of the world’s poorest people, including people from marginalised groups, such as those with disabilities, women and girls.
The other draft order permits the UK Government to provide an additional £119 million to support IDA’s participation in the multilateral debt relief initiative, which, through the G8 presidency, the UK played a leading role in creating in 2005. The multilateral debt relief initiative enables the World Bank and the African Development Bank to cancel debts that were owed to them by countries at the time through an agreement that donors would compensate the banks for the loss of repayments. The order allows the Government to continue to make good on that commitment by contributing £119 million between 2031 and 2033.
IDA is an important development partner; it tackles global challenges that the UK cannot address alone. The contributions covered by these two orders will deliver UK foreign policy and development objectives in countries with the greatest need, and they are an important part of this country’s commitment to the world’s poorest. I commend the orders to the Committee.
Preet Kaur Gill (Birmingham, Edgbaston) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Sharma. I congratulate the right hon. Member for Sutton Coldfield on his appointment, and I look forward to working with him. There is much that we agree on, but I will certainly still be on his case and hold him to account. I am grateful to him for outlining the draft International Development Association orders and I welcome the support they indicate for tackling poverty and disease, giving millions the opportunity of an education and tackling climate change in line with the Paris agreement.
Global co-operation has never mattered more: the world reels from the pandemic; we face energy, debt and food crises; the climate emergency is wreaking havoc; and 100 million people are now displaced around the world. Over the past 62 years, the International Development Association has provided nearly half a trillion dollars of investment in 114 of the world’s poorest countries. The technical assistance and grant and concessional finance that IDA provides has been vital for those countries, which are unable to borrow on global markets to develop their economies and lift their populations out of poverty. As a result, many borrower countries have since graduated from debt distress and gone on to be real success stories of the world. Our country can be proud of the role it has played in supporting that historic progress, where many hundreds of millions more human beings have been able to flourish and live good lives.
It has been 18 years since a quarter of a million people marched on the streets of Edinburgh as part of the Make Poverty History movement. I know that the right hon. Member for Sutton Coldfield was a strong supporter of that campaign in the run up to the historic Gleneagles G8 summit. It was an outstanding example of what British leadership on the world stage can achieve, and one of the proudest legacies of the last Labour Government. Since then, the multilateral debt relief initiative has enabled us to make substantial progress toward the global goals. It has had a transformative impact on many poor countries, freeing up their Governments to invest billions in global goods, such as health systems, climate action and education, that would otherwise have been spent servicing debts. Will the Minister tell us how much debt UK support has enabled IDA to cancel over the recent accounting period?
Much of the progress we have made in recent decades is at risk of reversal. The pandemic and Putin’s disastrous war in Ukraine have knocked us backward. Some 263 million more people will crash into extreme poverty this year. In times of crisis, the British public have stepped up, whether by helping neighbours through covid or opening their wallets and homes for Ukrainian refugees, and they expect their Government to play their part too. The aims of the 20th IDA replenishment are to support poor countries to recover and rebuild from the pandemic, while fostering greener, more resilient and more inclusive development. We strongly support these aims, so we will not seek to divide the Committee on these orders.
However, I must raise several issues of concern with the Minister, not least the impact of his Government’s decision to reduce the UK’s contribution to the International Development Association by half. The decision to reduce our contribution by £1.5 billion was first reported in March, as part of the former Foreign Secretary’s strategy to divert aid spending from multilateral to bilateral projects. This is less than half of the £3.1 billion provided in 2020, and the lowest for 20 years. The international development strategy, when it was finally published in May, confirmed this tilt away from our historical strengths in poverty alleviation toward transactional objectives and short-term political self-interest.
Since then, we have had two more Prime Ministers and two new Development Ministers, and these orders appear to have been the last thing that the hon. Member for Chelmsford did before she returned to the Back Benches. Can I check with the Minister that this is still his policy? With specific regard to the decision to take from the budget’s multilaterals, I remind the Minister of his comments in response to the international development strategy. He said this was a decision that the former Foreign Secretary
“should never have had to make”.—[Official Report, 6 July 2022; Vol. 717, c. 921.]
He went on to make some good points that I agreed with, because they are points that I have made time and again.
The shift to bringing more programming in-house is a huge strategic call, because it puts significant additional pressures on British international development expertise to design and deliver effective multimillion-pound programmes. Yet, since this Government’s disastrous decision to abolish the Department for International Development, we have seen a brain drain of development expertise from Government. This has been bad for transparency, for British influence and impact and for securing value for taxpayers’ money, as the appalling mess that has been made of the FCDO budget this year shows. As the right hon. Member for Sutton Coldfield himself said, the merger has been an absolute disaster. He said,
“Most importantly, the top 100 people who were responsible for driving forward the Government’s agenda in DFID have gone. Of course they have, because they have been headhunted by the international system, whether in New York, Geneva or the charitable sector. They have gone because they see a Government who do not recognise or appreciate that extraordinary skill that existed in DFID. The Government are now faced with a large budget but a diminishing level of expertise.”—[Official Report, 6 July 2022; Vol. 717, c. 923.]
I ask the Minister how he expects to secure value for taxpayers’ money when this Government have vandalised the very expertise they need to take on this increased responsibility. Does he dispute the findings of his Government’s own multilateral development review, which found that funding through multilaterals can deliver more bang for buck, reduce admin costs to the taxpayer and reach places the UK itself cannot? He may be aware that in that review the International Development Association received top marks from this Government, both for its strength as an organisation and its alignment with the UK’s own policy objectives. Out of 38 multilateral agencies, only investments in the World Bank and the Global Fund achieve that. However, if rumours are true, we are about to decimate our contribution to both those organisations.
Even the explanatory memorandum to the replenishment order we are discussing explicitly says that IDA is
“well-aligned to UK development priorities”
and
“one of the most important partners to the United Kingdom for achieving its poverty reduction aims”.
It acknowledges that
“for every £1 of grant finance provided by the United Kingdom, the Association will provide around £3.95 support to borrower countries”.
That was echoed in the Independent Commission for Aid Impact’s review of IDA earlier this year, which found it to be in alignment with UK priorities. The review said IDA’s ability to generate significant amounts of funding from other sources, and the scale and reach of its operation and expertise, provided good value for money. Could the Minister explain why this Government are targeting IDA for cuts while no other G7 economy is reducing its contribution in that way?
IDA’s contribution to global development is great, and I praise its work during the covid pandemic and the speed of its response, especially in terms of funding social protections for those who lost livelihoods and funding vaccines for low-income countries, which was essential. We do not seek to divide the Committee on the replenishment order, as we recognise the importance of IDA’s work. However, I would like to request further information from the Minister on how the UK Government are improving the management of IDA, ensuring that it maximises its poverty reduction efforts and works to strengthen its focus on climate action. How will he ensure that we remain a strong and influential presence at the World Bank while reducing our contribution?
What are the Government doing to ensure IDA is laser-focused on helping the poorest and most fragile countries? As ICAI has recommended, will the Minister confirm that he will not reduce the engagement and technical expertise that the UK invests in its relationship with IDA, so that we can remain an influential presence? Does he accept ICAI’s recommendations of increased accountability for the “leave no one behind” commitment and compliance with agreed standards for environmental and social protections?
One area where we would like to see more progress is IDA’s dependence on lending to Governments, which means many valuable projects in fragile countries get stuck due to concerns about corruption. It has meant that while IDA disbursements to non-fragile countries have doubled in 15 years, support to some of the most fractured, conflict-driven countries has grown much less. Does the Minister agree that IDA can do more to diversify the delivery partners it works with to ensure that projects in fragile countries actually reach the people they are meant to?
As Labour raised during the previous replenishment, we remain concerned about the declining development impact of the International Finance Corporation and the net loss it has incurred to the World Bank in recent years. What representations have Ministers made about the decision to subsidise underperforming IFC projects? Given that the IFC as a whole is focused on larger formal sector firms in richer countries with easier access to market finance, does he share my concerns that these investments represent a relatively ineffective approach to poverty reduction, particularly during the downturn of the pandemic?
Finally, I was profoundly disappointed to read that the new Prime Minister has decided not to attend COP27 in Egypt as we hand over our presidency. It is a crucial opportunity to meet other global leaders, see to fruition some of the good work started in Glasgow last year, and galvanise ambitious global action to tackle the issue that will define this century. It is an issue we all have a common interest in fighting and something that this Government have called their No. 1 international priority. Can I ask the Minister if that remains the case? If so, will he accept ICAI’s recommendation to advocate for a stronger focus on climate action at IDA if the Government are to meet their own climate ambitions?
The next Labour Government’s approach to international development would underline the importance of tackling global poverty, reclaiming the UK’s past leadership in international development and within the multilateral system and bringing Britain back to the world stage as a trusted partner. For Labour, the power of co-operation is unmistakeable: we can choose to turn to each other when confronted with global crisis, rather than inwards. We can choose to renew and update the world’s approach to international development, learning from each other.
We can, and must, address the world’s biggest challenges together. The International Development Association has played a big part in helping us achieve that goal over many years, and has been a very effective vehicle for doing so. The Labour party will not oppose today’s orders, but I reiterate my concern about the decision of this Government to retreat from the multilateral system, doing such damage to Britain’s reputation and influence on the world stage.
Vicky Ford (Chelmsford) (Con)
I rise to congratulate my right hon. Friend the Member for Sutton Coldfield on taking on the incredibly vital job of Minister for Development. It was 17 years ago that he first gave me the opportunity to be part of a community in Africa: it was a pre-school in an orphanage, and we were able to roll up our sleeves and see at first hand what a difference our international aid and international help can make, not only helping the local community to build but helping our own safety and security at home. It is heart-wrenching to leave a job that I loved so much, but it is absolutely wonderful that it is being taken on by such a brilliant champion for development. I know that we will all have his back.
Covid, conflict and climate change have had a desperate impact on the world’s poorest countries, and all have been exacerbated by the war in Ukraine, which has pushed millions more people into poverty, hunger and starvation. However, against that backdrop, the World Bank does exceptional work for the world’s poorest. My biggest bugbear with the World Bank is not what it does, but the fact that it does not talk nearly enough about what it does—so many people should be so joyful about that great work. Not only do we have a uniquely strong voice as one of the largest shareholders in the World Bank, but we are one of the few that uses it. As such, I encourage my right hon. Friend to use that voice for the vulnerable in three different ways.
First, please encourage the World Bank and all multilateral development banks to look not only at immediate needs, but deeply at tackling the impact and causes of climate change. During my visit to Ethiopia two weeks ago, I saw how tempting it is to continue to fund day-to-day needs, but the needs of climate change are the biggest ones. It is the biggest issue that we face; if we do not get to grips with it, every other issue will continue to explode.
Secondly, with so many countries facing unstable debt, please continue to use our voice to ask creditors to act quickly in debt negotiations. We know from our constituents that if an individual or a company, let alone a country, is facing unsustainable debt, the longer that issue is left to fester, the worse the rot becomes. It becomes septic, and the economic situation just spirals down and down. That is not in the interests of the creditor or the debtor, so please continue to press for creditors to come to the table.
Thirdly, please continue encouraging the World Bank to innovatively expand its balance sheet. That is an issue that the UK has been pressing on, because we know that across the world many developing countries need more financial assistance. We also know that traditional donors cannot plug all the holes in that assistance, so finding new ways to fill those holes is vital. I know that my right hon. Friend, with all his experience in financial services as well as in the developing world, will be a great champion of bringing those two parts together.
Amy Callaghan (East Dunbartonshire) (SNP)
It is a pleasure to serve under your chairmanship, Mr Sharma. I will be brief, because most of what I was going to contribute has been said already.
The SNP’s position on this matter is clear: we have long supported the relief and cancellation of debt for poorer, struggling countries, empowering them to better tackle poverty and to build and improve their infrastructure. As an executive board member of the International Monetary Fund, the UK is in a prime position to raise that sensible and just proposition. I urge the Minister to relook at the example of Zambia, and to stop ordinary people paying the price of aid debt. The decision to reduce official development assistance was cited as a temporary measure. Does the Minister intend to shift away from that policy, or will it continue under his tenure in the Department? I would like to have some answers on those matters, and hopefully we can continue to discuss them further.
Richard Graham (Gloucester) (Con)
I will contribute two quick thoughts. First, I echo what has been said by several people: it is great to see my right hon. Friend the Member for Sutton Coldfield back in a place that he knows so well.
Secondly, the hon. Member for Birmingham, Edgbaston made a point of signalling her party’s enthusiasm for re-separating what was the Department for International Development from the Foreign and Commonwealth Office—that is, separating out what is now the combined Foreign, Commonwealth and Development Office. As my right hon. Friend will know, some 36 years ago, as a young first secretary at the British high commission in Nairobi, I was responsible for small aid projects. One thing that I quickly learned at that time, when ODA was part of the FCO, was that structures are much less important than actually doing the business required.
Page 4 of the explanatory notes on the draft International Development Association (Twentieth Replenishment) Order 2022 talks about the financing needed across east and southern Africa, with particular emphasis on starving people in Ethiopia, Somalia and the horn of Africa in general. It is incredibly important to be able to use a hub such as Kenya as the place from which a lot of help can be directed. In that context, it is even more important that the work being done on international development should be well co-ordinated and come under the leadership of our high commissioner in Nairobi—exactly as it used to when I worked in our high commission there all those years ago.
I urge my right hon. Friend to focus on what really matters—getting the right help to the right people, at the right time and in the right way—rather than on structures and reorganising and separating Departments. That is not, and should not, be the focus of His Majesty’s Government.
Mr Mitchell
I welcome the comments made by members of the Committee. The IDA is an important partner in delivering life-changing support for the poorest and most vulnerable people around the world. It increases the reach and scale of UK aid spending, and represents considerable value for money.
I start by responding to the hon. Member for Birmingham, Edgbaston, with whom I work very closely back in Birmingham. Indeed, we co-chair—or I did until last Thursday—the all-party parliamentary group for levelling up Birmingham. I wish her every success in that work, and I will be supporting her all the way. She made the very good point that this is not a Conservative or Labour policy, but a British policy. Many people in Britain are immensely proud of the good that Britain does in some of the poorest and most wretched parts of the world. The policy is not owned by any one party; it is something that is of value to all of us, and we all strongly support it.
The hon. Lady asked me a number of questions. I have identified seven, but if I miss anything out I will certainly respond to her by letter. She asked how much debt has been cancelled during this period. The figure is £3.2 billion, of which the UK has paid £1 billion; if I am not correct, I know that an official near me will shake their head. The total value of the multilateral debt relief initiative, including all the MDBs, is £43.3 billion. She referred to the “brain drain” from dismantling DFID, and quoted a number of things that I have said. I am pleased to assure the Committee that collective responsibility is not retrospective, and so I cannot be held to account by the Government for what I have said in the past.
The hon. Lady made several extremely good points, and I am very happy to take responsibility from now on for the work that the Government do on development. She mentioned the importance of improving the quality of IDA. I will write to her on that point, because she is on to an extremely good issue; it would be good for me to be able to come back to her and set out precisely how IDA has improved since I last had responsibility for this matter. She asked whether the spending of IDA is still focused on the poor, and I can assure her that it certainly is. IDA is still providing the vast majority of financing to Governments—50% of it is spent in Africa, and 40% is spent in fragile states. I hope that that reassures her.
The hon. Lady also asked whether I accept ICAI’s recommendations. I set up ICAI 12 years ago, and it is a brilliant organisation. It is the taxpayer’s friend. It often causes Ministers and civil servants discomfort, but that is its purpose. It is there to stand up proudly and independently, and to confirm whether the expenditure is in the best interests of the taxpayer and is doing what it says on the tin. I have enormous respect for ICAI, which is an extremely good organisation, and I hope that its power will continue to increase.
Anthony Mangnall (Totnes) (Con)
I am delighted to hear my right hon. Friend make the case for ICAI. As he has professed his keenness on the organisation, does he support ICAI’s recommendations on preventing sexual violence in conflict and the need for us to do more for women and girls through our development policy?
Mr Mitchell
My hon. Friend has done a lot of work in this area, for which he deserves both thanks and credit. The answer is that I do support those recommendations. It is a very good report by ICAI, and I very much support what it has said.
There were two more questions from the hon. Member for Birmingham, Edgbaston. She is absolutely right to say that we are providing substantially less money, but we have been right at the top of the list in the past. Indeed, before 2010, we were the largest provider at the IDA replenishment. Our contribution was scaled back a bit then, because my view was that it was too much. It has now come back to a more European level, and it is still larger than the amounts in the replenishment that France and Germany have allocated. I hope that the hon. Lady will accept that this is a prudent way to adjust a budget that has been diminished by the reduction in gross national income, and by the decision of the Government to lower the amount temporarily from 0.7% to 0.5%. It does not in any way express a diminution in the respect that we hold for the work of the World Bank and IDA; indeed, that work is absolutely brilliant. IDA is one of the only organisations where, through a trust fund mechanism, it is possible to pursue very direct needs and requirements and to bring the might of the World Bank to bear on that in a multi-country way. I hope that I have dealt with the majority of what the hon. Lady said.
I thank the hon. Member for East Dunbartonshire for her remarks, and I hope that I have covered them in what I have said already. I thank my hon. Friend the Member for Gloucester for his kind words, but also for reminiscing about 36 years ago, which was just before I was first elected to the House of Commons. It shows that we are both older than we look. He is right in saying that the brilliant work that the high commission in Kenya is leading is very important, and I pay tribute to the staff for that and for the important work that they do in the region. He talked about the structures, but I do not think that today is the time for me to respond to that. However, he also advocated the one-platform approach, with which I strongly agree. Although that was there anyway, it would, of course, have been strengthened by the merger. The grip on that, which is now quite rightly exercised by the high commissioner or the ambassador, is absolutely right.
I come finally to my right hon. Friend and predecessor, the Member for Chelmsford. I pay tribute to her for the work she did in this job. Of course, it came as no surprise to me, when I came to the Department, to hear what a fantastic contribution she made during her time there. That is because, as she rightly said, many years ago she and I went to Rwanda to learn at first hand what works and what does not work in international development and to see what was happening in a very poor country that had had the most traumatic and dreadful past and how it was pulling itself up by its bootstraps and making changes to its social infrastructure, educating girls and boys and developing healthcare. She and I learned valuable lessons from that trip, I hope.
I am very grateful for what my right hon. Friend has said today. She rightly pointed out the importance of focusing on the poorest. She talked about the importance of focusing on debt, and gave good examples of why that was so. She talked about the importance of innovation and expanding the balance sheet of what the World Bank does, so that, at this critical time, it can go even further.
It is 10 years since I was last the British governor at the World Bank—it is a position that I understand I have now taken up again. I give the Committee this assurance: I will seek to ensure that the World Bank continues the magnificent work it has done in the past and that Britain’s diminished replenishment does not affect our absolute commitment to the noble goals and aspirations that the World Bank epitomises.
Question put and agreed to.
Resolved,
That the Committee has considered the draft International Development Association (Multilateral Debt Relief Initiative) (Amendment) Order 2022.
Draft international Development Association (Twentieth Replenishment) Order 2022
Resolved,
That the Committee has considered the draft International Development Association (Twentieth Replenishment) Order 2022.—(Mr Andrew Mitchell.)