Brexit: The Future of Financial Regulation and Supervision (European Union Committee Report)

Lord Bruce of Bennachie Excerpts

Wednesday 6th June 2018 Lords Chamber

[Lord Bruce of Bennachie (LD)]

My Lords, as a member of the committee, I too thank my noble friend Lady Falkner for the way that she chaired it and for her succinct opening speech, summarising both the report and its recommendations. I think we all acknowledge the staff who contributed to it in really quite difficult circumstances. I should say to the noble Lord, Lord Liddle, that I very much take many of his points but the committee took the view that we were taking evidence from the City on the proposition that we are leaving. How were we to explore how we leave and what we do? However, I also agree with the noble Baroness, Lady Liddell, that in the evidence we got month after month of no clarity, no sense of purpose or destination. We still do not have that and it is a matter of great concern.

In this House and the other place, but certainly across the wider community, there may not be much sympathy for a sector which many people thought brought the house down, took reckless risks with other people’s money and rewarded itself handsomely. It is therefore easy to say, “Who cares about the financial services sector?” But the answer is that we all have to care, and also to hope with some justification that lessons have been learned—although probably not all of them. To put it in a positive framework, we first need to recognise that financial services are a crucial part of our economy. At 7.2% of the economy, it has over 1 million jobs and a £60 billion trade surplus in a country that has the biggest balance of payments deficit in recorded history. It is the biggest contributor to minimising that and we are about to undermine it. It also delivers £24.4 billion in tax revenue each year. I do not suggest for a minute that, because of Brexit, all that will disappear but there is a lot of confusion and uncertainty. Much of the sector will migrate. The question is: how much?

The second important thing is that even if people are sceptical about the value of the industry in its own right, it is important. I echo the point about the dispersal of the jobs as I think there are 160,000 people employed in Scotland in financial services, which is more by a significant margin than are employed in the oil and gas industry. Much more importantly, it is also the lubricant of the entire economy and, when it works well, partly the lubricant of an international economy. Many people complain that the City or the financial services tend to think big, so it is much easier to raise £100 million than £100,000. The reality is that a lot of this business is for small businesses and individuals managing their savings and pensions, and creating the liquidity for investment at home and abroad. We know that domestic investment and inward investment have collapsed. The money has got to go somewhere, so it is going to leave the country. That is a matter of grave concern if we do not get it right.

We also heard consistent concerns about the future of contracts—insurance contracts and others—if there is no continuity agreement. The Bank of England Financial Policy Committee report stated that insurance contracts representing £55 billion of liabilities, involving 38 million policyholders across the EEA and with bilateral derivatives of £26 trillion and cleared derivatives of £70 trillion could all be affected. These are phenomenal numbers, even beyond telephone numbers, for which there is no clear contractual future as of the end of next March. I find it mindboggling that people calmly contemplate this and say, “It’ll be all right. It’ll be fine”, when we have absolutely no sense of progress. When people say we could be heading for a cliff edge we are told, as I have been told in a few cases, that we are fine. Nothing has happened. The economy is still functioning. We have to keep saying to people that we have not left and that we are still a member of the European Union until the end of March. That is when the cliff edge is approaching, not now. It is amazing how many people think we left the day after the referendum because they do not engage in the detail. Why would they? They have got lives to live, unlike us here who have to engage in the detail.

If we get to that situation, rule taker or rule maker becomes purely academic because we are either completely shut out of the European Union or we have to take its rules. There is nothing in between if we do not have an agreement, and there is no history of a financial services agreement. We know that mutual recognition is not going to be acceptable, and we know that all the alternatives fall far short of what is needed. The irony is that the financial regulatory arrangements of the EU have substantially been driven by the United Kingdom over the past 25 years to the benefit of both the European Union and the United Kingdom, yet in nine months’ time it will lose our expertise and we will lose its protection and access to its services if we do not get an agreement. That is the “if”, but many people will be forgiven for assuming that we may not get an agreement, given that two years down the road we have no inkling in any kind of detail of what kind of transitional arrangement we will get and when it will finish. Witness after witness said that they had no alternative but to do what the Bank of England has asked them to do, which is to assume that at the end of March next year we will be outside the European Union with no agreement, and that they were planning on that basis.

We know that jobs are going, investment is going, offices are being rented and people are being served notice. All this is happening. Companies will not put out press releases about this; they will just do it because they have businesses to run. They will get on and do it, as they are doing. That makes me concerned that it is worse than the maxim that people talk about—nothing is agreed until everything is agreed—because it is “nothing is agreed because nothing is agreed and nothing is going to be agreed”. I wonder when people will realise when we have fallen off the cliff. Will it be two-thirds of the way down—so far, so good—or will it be when we hit the rocks at the bottom?

The Government have not delivered the White Paper, but they have seen this report based on extensive evidence from all the senior players in this sector who have calmly and clearly told us of their concerns and their needs but who have heard nothing significant back from the Government in terms of outcomes. On a positive note, they all say that they believe that civil servants and everybody engaged in the sector know what can be done and that it could be done, but they do not know whether the Government will do it or are capable of doing it. One very senior player in the sector said to us, “We believe there is a basis from which we can manage the future of our financial services sector and maintain a connection with the EU and our international pre-eminence. We could negotiate this. We think we know how we could do it. Our only problem is that we do not know whether the Government think we are more or less important than the fishing industry”. That is a pretty savage indictment of the relationship in practical terms between the Government and this crucial sector.

I found how the financial services sector is regulated through Parliament interesting. Our sub-committee is part of the process for the UK. Obviously the Treasury Committee and the European Affairs Committee in the House of Commons are part of the process. The role of the European Parliament is also interesting. It has far more resources, in terms of people, money and powers, to shape the regulations and the legislation, as it has done over many years. It is way beyond anything that the UK Parliament provides, needed to provide or needs to provide as long as we are a member of the European Union. We are, after all, participants in the European Parliament, although I am told that British MEPs are now relegated to the back row along with supplicants and are no longer treated as if they are Members of the European Parliament. Be that as it may, the UK is still a member of the European Parliament. Once we are not, we will not have the benefits of scrutiny by a European Parliament which has an obligation to us, as well as the other 27 members.

The Government should understand that the industry has given us quite detailed evidence, without being too prescriptive, that there are decisions that will need to be made by the regulators, there will be some decisions that might need to be made, particularly in the short term, directly by Ministers, but there are many other decisions, particularly in terms of legislative or regulatory changes, which will need to be made by a proper parliamentary process that will require resources far beyond anything that has been provided to our Parliament in the past. That is something the Government should take on board, not least because it is in the Minister’s interests, I would have thought, to have a parliamentary dimension to a sector which is so complicated and so wide reaching in its impact.

I plead with the Government to recognise that if we leave the EU—I notice that Gordon Brown said yesterday that he thought we probably will not and that if we did we would be applying to rejoin immediately afterwards—we not only need to negotiate a working agreement and to have a clear idea of how we manage regulation but we need to demonstrate and understand that Parliament has to have a much more substantial role in protecting our interests.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, I start by congratulating the committee and my noble friend Lady Falkner on what is a very meaty report—I fully accept that. But I am afraid that I find myself in the camp of the noble Lords, Lord Davies, Lord Liddle and Lord Desai, and my noble friend Lord Bruce in this debate.

I start by trying to find at least a little bit of common ground. We can all agree that the financial services industry is absolutely crucial to this country. My noble friend Lord Bruce quoted the number of employees and the tax that it generates, and 30% of that is generated from an EU client base—the client base within the 27. A very significant part of the financial services industry that we have here and which underpins so much of our economy is essentially generated out of the 27. We access that, as others have described, through a very diverse set of regulations and directives, from direct passporting for the banking industry and much of the insurance industry, and rights of delegation for asset management. The reason why we can have the London Stock Exchange acting as the global foremost CCP which clears virtually all euro-denominated derivatives as well as many in other currencies is because of liquidity provided by the European Central Bank and underpinned by a location policy. Many of the fintechs that the noble Baroness, Lady Neville-Rolfe, talked about survive because they were pan-European from the day when they were born and function across borders through the e-commerce directive. Many of them have based their future plans and what they expect and hope for on the single digital market. So we are deeply embedded in this process.

There are two other big issues for our financial services industry. I am not going to address them here, but let me mention them by title. There is freedom of movement. So many of the staff—one-third of all those in our fintech operations, for example—come from continental Europe. They are not going to come here under visa terms, because why should they live with those restrictions when they can live without them elsewhere. Then there is the whole issue of data exchange.

I want to go back and pick up the point that the noble Lord, Lord Desai, made. The British-to-British conversation that takes place all the time, about how we manage to keep financial services thriving at the current level and growing in a post-Brexit world, comes without any recognition of where the European Union is coming from—and positions that we ourselves would take if we were in its position. I hear so often, “They need us more than we need them”. You hear that almost on a continuous basis. But there is a lack of capacity in the rest of Europe. Over the last 10 or 20 years, nearly all financial services capacity has been sucked into London. It has thrived in London and has come to this financial centre, particularly with regard to the wholesale markets. That is where things are today. If you are sitting in the EU, you recognise that as a reality, but it is a reality for now. Five years or 10 years from now, why should that continue to be so? Surely, you look for an arrangement, when the UK decides that it is going to step out of the club, leave the EU and become a third country, and you look for an opportunity to bring that business back into the EU, perhaps salami slice by salami slice, and build capacity gradually.

We often hear from the British the threat that, “If the business doesn’t thrive in London, it will move to New York”. That is just from one third country to another third country—perhaps a less attractive third country, and perhaps one where the time difference is more of a problem. But it is frankly not a major issue, if you are sitting within the EU and what you are looking to do is to over time build that capacity. To think that the EU 27, which by purchasing power is the second largest economic bloc on the globe, would allow its crucial financial centre to be outside its supervision and control, is fairly extraordinary. We would have to make an exceptional case to argue that that should happen. I do not think that any of that is recognised in the discussions that we constantly have about the solution that we would like.

That leads me to the issue of what is often called bespoke dynamic mutual recognition. We will have mechanisms where we recognise them as acceptable players and they recognise us as acceptable players, but when we dig beneath that we find that it requires fundamental change in the EU to achieve it. This is an organisation that lives in a rules-based society and has a legal framework structured through the ECJ, and all that would have to be reconfigured to meet the requirements of mutual recognition. New institutions would have to be created, staffed and funded, and the EU would fundamentally have to change how it operates. Why would it do that?

I am afraid that the very unsatisfactory third-country equivalence that is on offer—and I agree that it is very unsatisfactory—works perfectly well for the EU. Nobody in the UK is going to stop them coming to use London markets and say, “No, you can’t come here and have access, we’re going to take it away from you”. We need their business. It is perfectly acceptable for them to work on a basis whereby, essentially, on 29 days’ notice the European authorities can simply remove the business or set in place new requirements or new rules—and it works very well with that strategy of moving attractive pieces of business salami slice by salami slice back to continental Europe as the capacity develops and as it is capable. We delude ourselves in thinking that the EU is going to go through extraordinary contortions and change its fundamental way of working to accommodate a mutual recognition framework, even though we think that for us that would be ideal.

The same thing could be said of a free trade agreement. I would love to see a free trade agreement that contained services. I was at an event today at the City of London where the speaker said, “If the EU wishes to prove itself to be the leading free trader in the world, it would be an excellent opportunity to create the template to include financial services in a free trade agreement”. I just do not see that that is where the EU is at this moment in time. It is not on its priority list to identify itself as the leading free trader and start to create a framework that redefines global trade and WTO rules. If it does have that ambition, it is certainly not going to be doing it in the next 12 months or two years. That is the kind of thing that you might develop over five or 10 years. It would be long and tough and, obviously, it would have to be framed as an arrangement that has served not just an arrangement with the UK but with all the other various financial centres around the globe. So it is not something that is going to be immediately available, which drives us back to this very unsatisfactory arrangement of—I am now losing the terminology. What is the word that I want? It begins with “e”.

[Lord Bruce of Bennachie]

Equivalence.

[Baroness Kramer]

Equivalence. I do have this problem.

The other issue that I have heard discussed here and which bothers me hugely is the discussion about how, after we leave, we can reframe our rules to allow more risk-taking. To pick up exactly the point that the noble Lord, Lord Davies, picked up, if you were sitting in the European Union and looking at the UK in 2008, you saw a financial crisis to some significant degree attributable to light-touch regulation—and how we touted light-touch regulation and told everyone that it was the way to go. It is exactly a return to that language of light-touch regulation. We have mistrust within our own country—people mistrust the industry and the regulators, so it is wrong to suggest that in the European Union they are going to say, “No, no, no—these people have changed completely. When they talk about reducing regulation it will be in the context of being absolutely safe”. It is not—it is in order to create competitive advantage.

As noble Lords know, Barney Reynolds is a great promoter of that particular approach. I took some quotes from the report that he submitted, where he talks about a “market-friendly” financial services framework. That sounds very good, if you believe that market forces are the answer, but not if you believe that market forces ran rampant and out of control in 2008. International competitiveness should be a “statutory objective” for all our UK financial service regulators—that is the kind of language. That is a race to the bottom. This is precisely the accusation that is being levied: international competitiveness means that you always have the least-regulated structure. We are seeing in the United States, again, that a lot of the regulation that was put in place following the 2008 crisis is now being pulled back. That creates an added level of discomfort with this kind of Anglo-Saxon approach and framework. I do not think that we should underestimate how much we are caught in that particular view.

I also have to say that, when I ask those at any financial services entity, “Where are you looking for a change in regulation?”—the noble Lord, Lord De Mauley, hit on it exactly—they say that it is on remuneration: lifting the cap on bankers’ bonuses. If ever there were an example that inspires mistrust and a sense that we are returning to the bad old days, it is that. It is always represented as the key and most important regulation that the financial service industry would like to see lifted.

I am desperate to keep the financial services industry here to the extent that we can, but I think we have to be realistic. A lot of it has already left. As my noble friend Lord Bruce said, this is not done with press releases and open discussion; no company wants to create concern among its customers, suppliers or regulators by saying, “We are at risk if we stay within the UK”, but these companies are very quietly moving and we are beginning to see a series of announcements. It was also an iconic moment when Lloyd’s of London dropped “London” from its title. It is now established in Brussels. It has 600 staff in London; 100 of them are moving to the Brussels office—it is just the beginning. Insurance companies, because of the reasons of contractual continuance that have been raised here, have all been moving over the last 24 months. I just say to the noble Baroness, Lady Neville-Rolfe, that the fintechs are moving as well. I have talked to so many of them that are applying or have applied for a licence in Dublin—but the real risk is Paris. She spoke about the innovative approach that we have to regulation of the fintech industry, and I agree, but it has spread rapidly and she perhaps does not know that the Paris equivalent has an MoU with the FCA to make sure that it takes an equivalent approach to regulation and sandbox to Paris. It is to Paris that a lot of the fintechs are moving; it is an attractive lifestyle and many of them are fans of Macron. They see a future there and there is real competition for that particular industry.

What do we do under these circumstances? I, like others, think that the only route we can take that leaves us with something other than this unsatisfactory third-country equivalence is, frankly, to stay within the single market one way or another. Without that, it seems to me that we will be on the outside. If we are going to be on the outside and trapped within just equivalence, our whole negotiation has to be focused on trying to make sure we have a voice at the table. I do not see the Government doing that; I see them going down the mutual recognition route, basically with pages of demands that require the European Union to restructure the way that it works, to change everything that it does, to shift its principles and to have 27 countries operate under a rules-based system and the 28th without that. If we can get the Government to pull back from that and to pursue an opportunity—I would prefer it to be in the single market but it has to be an equivalent to try to get us a voice at the table through some mechanism or other—we might have some possibility and some hope. The complexity around this industry more than illustrates the fact that there are only downsides to Brexit. One can find a few upsides but, my goodness, weigh them on the scale and they are very small.

Sub-Saharan Africa: Public Services and Governance

Lord Bruce of Bennachie Excerpts

Tuesday 23rd January 2018 Lords Chamber

Asked by

[Lord Bruce of Bennachie]

To ask Her Majesty’s Government how much Official Development Assistance they will spend on supporting sustainable public services and good governance in sub-Saharan Africa over the next two years.

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

My Lords, we know that the way in which power is shared and used in many sub-Saharan African countries can provide a major boost to or constraint on the provision of essential public services and inclusive growth. The UK is working to support more inclusive societies, with open and accountable institutions and peaceful political processes that are better able to meet the needs of their citizens and sustain development over the longer term.

[Lord Bruce of Bennachie (LD)]

My Lords, I thank the Minister for that reply and draw attention to my entry in the register of interests. Does he acknowledge that, in the past few years, humanitarian assistance has doubled, the commitment to private sector development is due to increase dramatically, more development spending will go to departments other than DfID and the value of the pound has fallen by 20%? In these circumstances, can the Government give an assurance that they will maintain their commitment to sub-Saharan Africa, and in particular to sustainable services, especially in health, education, equality, social security and good governance, because these are absolutely essential to delivering the sustainable development goals and ending absolute poverty?

[Lord Bates]

I can certainly give that assurance. Over the past few years, the amount going to overseas development assistance has steadily increased in sub-Saharan Africa in those areas of governance. I think the total is now in the region of £1.1 billion. That is very important because, as the noble Lord knows from his time as chair of the International Development Committee in the other place, it is essential to get that governance right so that economic growth can occur and countries can eventually stand on their own two feet.

HIV: Global Response and Young People

Lord Bruce of Bennachie Excerpts

Thursday 30th November 2017 Lords Chamber

[Lord Bates]

By making sure that people are educated and aware, there are many ways in which infection can be prevented—and prevention is far better than cure in virtually every circumstance. We are looking for opportunities to provide better education and sexual and reproductive advice to inmates as well as the wider population.

[Lord Bruce of Bennachie (LD)]

My Lords, DfID should be congratulated on the work it has done with marginal groups. Does the Minister acknowledge that in too many countries, because drug abuse, sex between men and sex trafficking are criminal, many Governments refuse to engage with those sectors, and yet they are the drivers of AIDS? Will DfID keep up its good work in that sector?

[Lord Bates]

There are 72 countries around the world which criminalise same-sex relationships, eight of which have the death penalty. Therefore, having an open conversation about how to address these issues is very difficult in those circumstances. Sadly, 36 of those countries are also members of the Commonwealth. The Prime Minister has said that we will be taking the opportunity at the Commonwealth Heads of Government Meeting to raise those issues in that summit to ensure that there is change.

DfID Economic Development Strategy

Lord Bruce of Bennachie Excerpts

Monday 27th November 2017 Lords Chamber

[Lord Bruce of Bennachie (LD)]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

British Overseas Territories: Transport and Infrastructure

Lord Bruce of Bennachie Excerpts

Thursday 7th September 2017 Grand Committee

[Lord Bruce of Bennachie (LD)]

My Lords, I, too, wish to associate myself with the remarks about Hurricane Irma in the Caribbean, which is clearly on an unprecedented scale. In my capacity as president of the Caribbean Council, I know that many of the people whom we are associated with will be affected by it. I also congratulate my noble friend Lord Shutt on this debate. I know he has a long-standing interest and has had the advantage of going to St Helena, which not all of us have.

My involvement in this goes back about 10 years. I freely admit that it was only in my capacity as chair of the International Development Committee that it was brought to my attention that the future of St Helena was believed to depend on the development of an airport, which at that time was not at all a firm commitment but a consideration. The process of getting to the final commitment was a pretty convoluted and stop/start one, in any case.

What I remember from that time is this fundamental point, which relates to what has been said about Ascension, too: the survivability of these communities depends on having a functioning economy, albeit maybe a subsidised one. There is a clear worry that these territories will become the 21st century’s St Kilda and that the lack of support, investment and infrastructure will be such that it will be declared impossible to support the communities and they will be abandoned. I would like the Minister to assure me that the Government have a real commitment to ensuring that these communities can and should survive. I do not want to be in any way contentious in saying this but, partly because of the conflict, the Falkland Islands have had a lot of attention and a huge amount of investment, whereas these other communities have, frankly, been almost forgotten. It is time that was redressed.

The point made to me when I was being lobbied, apart from that fundamental one that it was important for the viability, economic development and opportunity of the St Helena community, was that the ship—which was, incidentally, built in Aberdeen—was reaching the end of its life. Rather than build another ship, it was therefore said that it would be better to put the money towards an airport, which is the modern means of communication, although I appreciate the worry about having no shipping. I then heard the objections or issues from various sources, the first of which was the cost of developing an airport, the difficult terrain being very remote and there being no heavy lifting equipment on the island. It all had to be brought in and subsequently removed, which is a problem now, and that consideration made it more expensive.

The second concern was about the environment, both the physical impact on the appearance of the island and the disruption to wildlife—I have heard about other consequences—on the grounds that the ecosystem was part of the island’s attraction, and so should not be damaged or destroyed. There were people actually saying, “Let’s not have the airport”, but the argument was won and it was clear that the overwhelming majority of the community wanted it.

What I never heard about, not once, was the possibility of wind shear. I heard about it only last year, as I think most of us did, apparently when flying into the airport started to be thought about. I have read that there were test flights and calibration measures. I was told that the islanders could tell just by watching the birds that there was a wind issue. There is a question of whether the process of reorganising the landscape to build the airport had any effect on aggravating the wind shear. I have no idea—it would be interesting to know about that—but what is now clear is that the wind shear exists. It also now appears that there is a partial resolution, which my noble friend Lord Shutt referred to, as it is a problem from one way at the airport but not the other. You can land more safely with a tail wind—I have just seen the video—but the problem is that when you land, you keep on going and at the end, there is the sea. It is therefore unsuitable for heavier planes to do that because the runway is not long enough.

That brings me to the question of what to do now. For example, is there a possibility of an extension to the runway, because it is slightly shorter than was originally envisaged? Would that help? Could any other measures be put in place that might affect the wind shear? Again, I do not have the technical knowledge to know whether that is possible. The point about Ascension then comes into play, because it gives you alternatives. Apart from direct flights from Angola, South Africa or Namibia, it would also perhaps be possible, if the runway in Ascension were in use, to take larger planes into Ascension and then have a more regular link service for smaller planes into St Helena, which might deliver volume if the demand developed.

We should step back and recognise that the hope for this was to create a significant opportunity for the island to sustain and grow its economy as a unique tourist destination. It would obviously not be for the mass market; it would be both expensive and special, but it requires reliability of the service, and the knowledge that you can get on and off the island at reasonable intervals. It would require decent accommodation and facilities to enable people, if they are to be there for a week or 10 days, to benefit from what the island has to offer and have reasonable comfort.

The point being made about the developers and the CDC is to get to find a reasonable solution to guarantee an amount of flying capacity on a regular basis. That should give confidence for developers to provide the tourism facilities that would benefit from this. The CDC should reasonably regard that as within its remit.

When I was chairman of the International Development Committee, people asked why we were spending money in this small community, when there is much greater need in Africa and elsewhere. I understand that argument. As a committee, we decided to leave it alone, because we did not want to be seen to be standing in the way of the needs of the St Helenians. The reality is that it is the Government’s responsibility. It qualifies for ODA, so maybe it should legitimately be DfID’s, but it should be done nevertheless and the Government should have a commitment. There should be an assurance that there is a real future, a solution that can be sustained and the ability to support the economy’s development, in the terms that the local community hoped for when the decision to go ahead with the airport was taken.

Education: Disability Financing

Lord Bruce of Bennachie Excerpts

Monday 10th July 2017 Lords Chamber

[Lord Bates]

I am very happy to give that assurance, and I pay tribute to the noble Lord for his work on the steering group of this very valuable report. We are still digesting a lot of its conclusions—but, undoubtedly, the one that we should focus on is that 90% of children in the developing world with disabilities are not in school. Clearly, that is contrary to the UN Convention on the Rights of Persons with Disabilities and to at least goal 4—and probably goals 8 and 10—of the sustainable development goals. It is something that we are committed to responding to, and I will be very happy to speak to the noble Lord afterwards to outline some of the thoughts that we have in this area about what we hope to bring forward in response to the report.

[Lord Bruce of Bennachie (LD)]

In response to the report on disability from the International Development Committee three years ago, the Government adopted a disability framework. What progress is being made in evaluating the data to identify how many disabled children in particular are affected in countries where DfID has programmes and to what extent is DfID targeting them, as well as on employing disabled staff in the department to ensure that there is a real connection between the rights of disabled people and the need to serve their needs?

Overseas Development Assistance

Lord Bruce of Bennachie Excerpts

Tuesday 4th July 2017 Lords Chamber

[Lord Bates]

I am very happy to do that and also to invite along my noble friend Lord Ahmad, who leads on religious freedom in these areas at the Foreign Office. Human rights are a fundamental building block of human development. We all appreciate that. Therefore, Article 18 of the universal declaration is a key element. I was looking at the Prime Minister’s words on 28 February when she spoke at a reception in Downing Street. She said:

“It is hard to comprehend that today people are still being attacked and murdered because of their Christianity. We must reaffirm our determination to stand up for the freedom of people of all religions to practice their beliefs in peace and safety”.


We stand by that.

[Lord Bruce of Bennachie (LD)]

Together the member states and the EU collectively deliver more than half the world’s official development assistance. This will not be the case when Britain leaves the European Union, yet we rate the EU as one of our best partners. It is not just about transition. Is it not about having a long-term commitment to work with allies across Europe who share the same values, including the only countries that have actually delivered 0.7%?

[Lord Bates]

I agree that there has got to be that essential partnership. There has got to be an essential partnership with the US as a major deliverer of international aid. We have to work with the Commonwealth, which is a major recipient and also an important partner in resolving a lot of the conflicts. We work with the Nordic Plus states in the development arena. We have to work in partnership. We have an overarching aim, whether we are in the EU or not, and that is the sustainable development goals. That is our target: the eradication of extreme poverty by 2030. We are all working towards that wherever we are.

Development Aid Budget

Lord Bruce of Bennachie Excerpts

Monday 3rd July 2017 Lords Chamber

[Lord Bruce of Bennachie (LD)]

My Lords, I, too, thank the noble Baroness, Lady D’Souza, for giving us the opportunity to have this debate. I found her opening speech interesting and a little challenging. Having had the privilege of being chair of the International Development Committee when ICAI was set up, seeing that process proceed and working with the National Audit Office, I agree that we have got to a much better system for accountability, but there is always room for improvement. In the beginning, ICAI was accountancy-led, but it became much more understanding of the complexity of development and therefore more effective. There is certainly justification for transparency, but we also have mechanisms in place that can improve it. The noble Baroness identified that there is a danger that if we call for too much we will create a whole other industry of evaluation and monitoring that might get in the way of delivery. I draw noble Lords’ attention to my interests as set out in the register.

Not surprisingly, given my background, I am a strong believer in the effectiveness of UK aid and its impact. I have had the privilege of seeing it in action in many parts of the world. However, I recognise that the way aid is carried out and its objectives are not well understood, certainly by the wider public. As many people have said, we should do it, because in spite of all our problems we are a rich country and, frankly, people living in this country cannot really comprehend how you can live on less than $2 a day.

I also accept that it is perfectly reasonable for the Government to want to offer practical examples of positive results and to show that aid is justified by altruism—there is nothing wrong with that—but it also serves the national interest. There is nothing wrong with using aid to strengthen the economic capacity of developing countries so that they can grow their income and tax base and lift their people out of poverty. On the contrary, in the end that is how we can achieve sustainable development. It is also in our interest to ensure that as countries industrialise, which the right reverend Prelate mentioned, they do so in the cleanest and most environmentally sensible way, which is not necessarily the cheapest, so it is perfectly legitimate for them to look for some assistance.

Most of us welcome the cross-party commitment to delivering 0.7% and wish it to continue and to continue to be pro poor. I hope that the Government will continue to resist calls to cut the aid budget—as, for example, this weekend, in order to fund ending the cap on public sector pay. That would be raiding the poorest people in the world in order to fund easing relative poverty at home and would be a shameful misuse of resources.

It is also worth noting that, contrary to what many critics believe, the aid budget is under pressure. There is an idea that we cannot get rid of the money and that somehow spending it is difficult. The refugee crisis has led to unprecedented sums being spent supporting displaced people across the Middle East. The UK can be justifiably proud of that response, but it has come at the expense of longer-term development funding. Clearly, the devaluation of sterling in the past year has reduced the purchasing power of the UK aid budget. The exchange rate differential between the UK and developing countries has altered by more than 20% in many cases. Can the Minister give any indication of how many programmes have or are having to be cut as a result? People in the department have told me that that is clearly happening.

The IDC recently reported on the role of contractors and partners. NGOs, private sector contractors, think tanks and private businesses are all legitimate and important partners, but the recent report on that use of private contractors led to a focus on Adam Smith International, which was severely criticised for co-ordinating its evidence to the Select Committee. Although there is no evidence that the evidence was actually fraudulent, it was certainly not particularly well constructed. As a result of that, my understanding is that DfID has halted or cancelled a significant number of ASI programmes, leading to about a third of the staff in that company being made redundant currently. That is unfortunate, because it is the dedicated professional delivery staff who are losing their jobs as a result of mismanagement at senior management level. Again, this could have implications for the delivery of programmes if they are terminated before they are followed through or completed. Can the Minister indicate how many programmes have been disrupted and what action is being taken to ensure that the aims of these programmes can still be achieved? I make it clear that I have no interests in ASI and no connection with it; nor have I spoken to it. This is only what I see and hear.

Can the Minister also explain how DfID monitors and works with the impact of ODA spending by other government departments? A number of noble Lords have raised this point. We have had indications or hints in the past of a turf war, with some Ministers being reportedly, not publicly, less respectful of the role of DfID in ensuring that ODA is compliant with both UK and international law and that it meets genuinely pro-poor development objectives. I am in favour of joined-up government, and there is nothing wrong with ODA being spent by several government departments as long as it is co-ordinated and coherent and the same rules apply across the piece. The noble Baroness who spoke before me mentioned King’s and the Ebola crisis in Sierra Leone, which was a good example of cross-government and cross-departmental work that helped to deliver a solution to a problem that got out of control.

Generally speaking, the Foreign Office and DfID can work well together, especially where they are collocated in our embassies overseas, which mostly they are. Indeed, that is a virtue, because it is good to get the political environment and development objectives co-ordinated and not operating in separate silos. I am certainly in favour of that.

According to the Library briefing, the business department is the department that accounts for the largest share of non-DfID ODA. Again, this is not necessarily a problem, but I do not think many of us are really quite clear exactly what the business department is doing with that ODA money. Most of it may well be going into the climate fund and/or the prosperity fund, but, again, could the Minister, either now or subsequently in writing, give more details of the main development objectives in the business department? That would reassure people who are concerned and give us a better understanding of how the departments work together.

I will raise another issue quickly. Can the Minister provide an update on DfID gender policy and the prioritisation of disability in our aid objectives? Canada has just published its new development strategy—I have a copy here—which it explicitly defines as feminist. There is no doubt that the low status of women and girls in many countries is the single biggest barrier to development. I know this issue is dear to the heart of the noble Baroness, Lady Tonge, who is speaking after me. Access to effective family planning and safe abortion is craved by millions of women, along with freedom from violence, from female genital mutilation, from child marriage and from exploitation. Lack of legal and financial rights also holds development back.

The Canadian example contrasts sharply with the Trump policy, which really is trying to deny women access to these services. The Government have a very good record on this, but now that the Netherlands and Canada have stepped up to the plate I wonder whether it will be pushed even further up the priority list in their new development strategy.

Can the Minister give us any update on disability commitments, which my noble friend Lady Featherstone championed when she was a Minister, as she did the issues of violence and female genital mutilation? I have a particular interest in deafness, but I believe that standing up for the rights of all disabled people in poor developing countries is something that donors such as the UK should prioritise. Too often they are swept away, ignored and stigmatised. Challenging stigma and encouraging all policymakers to champion a positive approach to supporting disabled people should surely be an integral part of development programmes.

I conclude by saying that providing women with legal rights, access to contraception and better maternal and child healthcare has been shown to have a positive impact on reducing poverty and limiting potentially explosive population growth. Back that up with better education and skills training and the seeds of successful development are sown. Let us not be diverted by cutting our aid budget or redefining it in ways that reduce the impact on ending poverty. Let us do what we set out to do, which is to use our aid budget to make the quality of life of the world’s poor better and to eliminate poverty by 2030.

Commonwealth Development Corporation Bill

Lord Bruce of Bennachie Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords & Report stage (Hansard): House of Lords
Thursday 9th February 2017 Lords Chamber

[Lord Bruce of Bennachie (LD)]

My Lords, I am very pleased to follow the noble Lord, Lord Boateng, and I agree with much of what he said. I draw the House’s attention to my entry in the register of Members’ interests. I have a particular interest because when I chaired the International Development Committee in the House of Commons, we carried out an inquiry published in 2011, before the change in strategy. The noble Lord anticipated some criticisms of the Labour Government, which I did not want to make too forcefully, but he was right that the corporation was being looked at for privatisation. Douglas Alexander got it focused more on poverty but it really took Andrew Mitchell and a wholesale review to come to a strategic change.

One recommendation in our report was to split the fund. The Government did not agree, but did split the corporation’s objectives from being just a fund of funds to separating funds and direct investment and going back to some of the traditions of the early days of the CDC when it invested directly in companies and enterprises, not just through funds. That has obviously had an impact over the last few years and is becoming a more significant part of the portfolio, but it is still very small. I hope that the new strategy will help to explain how we can achieve more of that and find ways to fill the market failures in those gaps to make the transformation. The reality is that I do not believe that any country has significantly lifted its people out of poverty without having a vibrant private sector. The role of development finance funds of the CDC’s kind is extremely important in helping that to happen.

My noble friend Lady Northover identified a number of concerns, which I hope that the Minister will directly address. There have been reservations expressed that we are going for a quadrupling, and then a further doubling, when we do not have a strategy nor yet a clear indication of how that money will be spent. The Minister rightly says that there is a huge demand for a huge amount of money; the question is how much of that would be more appropriately met by an organisation such as CDC, as opposed to the wider market. Given the sort of criticisms that the sector currently faces, the Government need to be careful about putting substantial additional funds into CDC—although I would not put it in these terms—without being absolutely clear that there will be proper accountability, proper results and a proper strategy. If they are not, they will find the sort of heat that they have experienced in the popular press being turned on them for exactly this. It would be extremely unfortunate if that were to happen and we must make sure that it does not.

The reality is that we need to invest in projects that are riskier and offer a poorer return, because those are precisely the projects that the private sector, and by definition the market, will not address. The CDC has shown that they are there and can generate a return. The question is whether there will really be £12 billion of that kind of investment available over the next few years.

The Secretary of State has said that she wants the focus of UK aid to be on trade and investment. That is a kind of mantra across the Government, who are desperate to demonstrate that we can get agreements on trade and investment. But there is a consensus in this House, which I hope is not under challenge, that our aid and development focus should be on poverty reduction. That is our fundamental objective. The noble Lord, Lord Boateng, mentioned the importance of creating jobs and livelihoods. Quite terrifyingly, the forecast of job requirements in Africa alone is not in the millions or even the tens of millions. Hundreds of millions of jobs will have to be found in a relatively short time, which is really quite a scary thought because, if those jobs cannot be found, there will be an awful lot of idle hands looking for something to do—and I fear that those things may not always be positive and constructive. There is no doubt at all that we need to do that.

The other thing I will talk about is the mix of our aid budget and focus, because this is a big increase in one particular component of DfID’s spending. The Minister gave me a reply earlier this week relating to the Government’s humanitarian response. He said that our spend over the last three years has gone from £826 million to £1,266 million—that is, from 12% of total ODA to 17%. Everybody understands why that has happened and there is clear public support for that. Nevertheless that is an increasing proportion of the budget which, by definition, is not available for other aspects of development spending. There have been indications of cutbacks in some development programmes, partly because of that pressure.

The second thing is that the depreciation in the value of the pound—on average 20%—means that the purchasing power of our aid budget has been correspondingly reduced and so there is less scope. Those people who seem to think, because of our commitment of 0.7%, that somehow DfID and our development budget is awash with funds are not really facing up to the pressures of impending famines as well as of traditional development.

There is a clear synergy between the role of development and the role of private sector investment. Clearly investors, whether they are indigenous to a country or outside it or in partnership, benefit from having an educated, healthy workforce and decent infrastructure investment. The two things fit together. Indeed, one of the reasons that many enterprises are reluctant to invest in developing countries is a lack of those things, coupled with problems of governance and corruption that make them difficult places to do business. If the CDC and development can work together to make that environment more conducive, the private sector will be able to take more of the burden on itself and help to address the development needs. We can look to countries such as China, India and Vietnam that have demonstrated how that kind of partnership can lift millions of people out of poverty over a relatively short period of time.

There is a clear need to ensure that extra money going into the CDC is not at the expense of development programmes. I completely agree that the objective in the end is for countries to have the capacity and the resources to run their own services and be free of aid, but we should not cut off that aid prematurely before they have actually established that degree of viability. That would be a point of concern for me. I know it is unpredictable but it would be helpful if the Government and DfID gave us a little bit more guidance on their strategic objectives in terms of how much they feel is reasonable for humanitarian support, how much is going into development and how much is going into the private sector. It would help us to get a clearer idea of the strategy behind it.

Just as a general comment, the people in the sector whom I meet, whether they work for private contractors, NGOs or organisations generally working with development, feel very beleaguered at the moment. They feel under sustained attack—not all of it justified or even accurate—not only from the popular press but also from the more serious media with an inadequately robust response and defence from DfID as well as across the Government. Much more can be done to explain how transformational UK aid is and how effective we are at delivering real results, giving people the good-news stories that are out there of how, thanks to our intervention and the partnerships we build both from our own expertise and that of the country we are operating in, we are helping to make a real difference.

People who say aid does not work are simply ignoring the facts. We have reduced poverty, we have massively delivered on health objectives, we have got more children into education and we are beginning to raise the quality of these services. We have set ourselves an ambition of ending absolute poverty by 2030—no mean commitment—and to do that we will have to maintain our level of commitment but we also have to explain it much more fully and clearly.

Therefore, while the CDC has a role to play, its changed focus over the past five or six years makes it better equipped to spend more fully. I still have reservations about whether there are enough of the right kind of projects to absorb this extra spending, and I would be interested to see the strategies around how that could be done. I support what we are trying to do, but it is important that we show how the CDC fits in with the strategy of development, humanitarian response, building resilience and capacity and helping, as the second-largest bilateral donor in the world, to lead the way to end absolute poverty by 2030. This has to be a contribution to that.

International Development (Official Development Assistance Target) (Amendment) Bill [HL]

Lord Bruce of Bennachie Excerpts

2nd reading (Hansard): House of Lords
Friday 18th November 2016 Lords Chamber

[Lord Bruce of Bennachie (LD)]

My Lords, I do not wish to respond to a speech with which I disagree entirely and which I believe is not backed up by evidence. However, I am very pleased to be able to speak on this topic in this House. I draw attention to my entry in the register of Members’ interests.

The UK’s commitment to and delivery of 0.7% has hugely enhanced our country’s standing in the world. Having had the privilege of chairing the International Development Committee for 10 years, I continue to be connected with the development sector and, having travelled extensively all across sub-Saharan Africa and South Asia, I have met the recipients of UK and international aid and can say that it is well received. In many areas, it is game-changing in very positive ways; it cannot be done by blackmail or bullying but it can by engagement. Our standing among developed countries as the first and only G20 country to have delivered 0.7% has also given us considerable moral authority and leadership, not least because it is about not just the commitment to 0.7% but the quality of what we do across the piece with our aid budget.

Regarding the commitment to 0.7% causing waste, or uncontrolled or not well-monitored spending, there is not a great deal of evidence to support that. There was a problem—I say this with no degree of negativity—about the Labour Party’s commitment in government to deliver 0.7%, which I absolutely accept was genuine. The cross-party consensus was crucial. Nevertheless, it was done on a sort of hockey-stick approach: it was deferred and deferred so that once we got to the point of committing to 0.7%, a very substantial increase was required in one year. It would have been better phased in over several years and, yes, it did lead in that year to some difficulties. But none of those difficulties led to any evidence that the money was not spent effectively in delivering aid and development assistance.

We have of course now achieved the 0.7% and therefore that problem no longer arises to anything like that degree because the budget is much more predictable and the variation is much more manageable. The department is well capable of managing those fluctuations. There is of course a slight problem in the fact that government operates on a financial year and the 0.7% target is based on the calendar year, which is why there may be some variations. I do not think that anybody is concerned about a shortfall or a slight overshoot in any given year, which would require a report to Parliament, but it would be quite a different proposition if that was allowed to slip over five years.

In fact, with all respect to the noble Lord, Lord Lipsey, who argued his case very cogently and consistently —I understand that—I would nevertheless regard his Bill as a Trojan horse for those who wish to see the aid programme substantially cut back and dismantled. This is not least because it is a well-known fact of our constitution that Parliaments cannot bind their successors. It would therefore be perfectly possible for a Government to slash the aid programme on the grounds that it would be the responsibility of the next Parliament in some four or five years’ time to make up the difference and do it within a legal framework. That was surely why we introduced the legislation in the first place: to ensure that the commitment was maintained, and maintained on an annual basis.

There is also an absolute right to ensure that we get value for money and that we attack corruption and waste wherever it occurs. I acknowledge the right reverend Prelate’s contention that we need to differentiate between measured outputs and long-term outcomes, which are about changing societies and creating sustainable long-term capacity and development.

The Secretary of State, who has made some quite strong pronouncements, will however need to recognise that she is constrained in what she can do—I am glad to say that she is—by both British law and international law. For example, to suggest that we can use our aid and development budget to promote trade and investment as we negotiate our way out of the European Union would simply be illegal. It would not qualify as aid and would therefore not enable us to achieve our 0.7%. Parliament has rightly imposed that constraint on successive Governments to ensure that our aid is untied, is pro-poverty reduction and is not about furthering the commercial or political interests of this country. As the noble Lord, Lord Judd, said, it is about delivering real benefits to the poorest people on the planet.

I make just one comment on the suggestion that we disengage with countries which have practices we do not like. That would be pretty well all of our aid programme going out the window. We are not a colonial power; we do not have the right to go in and say, “Our aid is conditional on you doing these things”. What we do is, first, to work with the people—all right, with the agreement of a Government—to address problems which they have and which we can assist with. In the process, we also engage in discussions about child marriage, which we have had a fantastic impact on in Ethiopia—I have seen that programme in action myself—and on FGM in many countries, where we are beginning to get traction and support those campaigning within those organisations which need the support of outside agencies to enable them to deliver real support.

Another thing is that the aid budget is already under pressure. The idea that we cannot spend this money and that there is not enough need is really not supported by any evidence whatever. There has been a massive increase in the requirement for humanitarian assistance, to which the UK has responded extremely generously, but in the process of doing that DfID has acknowledged that on occasions it has had to cut development programmes in order to support the humanitarian programme. This immediately demonstrates that there is constraint within the existing budget, which was a problem before the consequences of the referendum diminished the spending or purchasing power of our aid budget by the fall in the value of sterling. This has effectively cut the purchasing power by around 10% and in some countries by significantly more. The idea that the department somehow or other has difficulty spending money is belied by the fact that it is under pressure to ensure that it can cover all its commitments in these changing circumstances.

To those who are at all minded to support the Bill, I suggest that the idea that we should commit to 0.7% and maintain that commitment year-on-year is crucial to ensuring that the department, and those other government departments which spend ODA, have a clear framework and a budget for what they are doing. The UK should not find itself in the situation any time soon where, having achieved the 0.7% and shone out as a beacon to other countries for what we can do, we find ourselves slipping away and having to explain why our aid commitment has fallen back from 0.7%. It is interesting to note—I think I am right in this—that all those countries that have delivered the 0.7%, of which there are too few, have worked really hard to ensure that they maintain it. Some have even tried to exceed it and, in some cases, set higher targets.

Nothing should give the impression that the UK is turning its back on its commitment to be the second-largest aid donor in the world—in my view, the best in terms of what we deliver—and implying that somehow or other we were looking to our own domestic circumstances as a priority over the needs of the poorest people in the world. To quote Andrew Mitchell when he was the Secretary of State:

“We will not balance the books on the backs of the world’s poorest”.

I cannot think of anything that would compound the damage we have already done ourselves by disengaging from the European Union than suggesting that we were going to disengage from the poor people of the rest of the world. I am sorry to say to the noble Lord, Lord Lipsey, that although it is not his intention, I believe that both the implication of the Bill and its practical output would have exactly that impact.