EAC Report: Development Aid

Lord Tugendhat Excerpts

Monday 22nd October 2012 Lords Chamber

[Lord Tugendhat]

My Lords, it is a pleasure to follow the noble Earl, but I am afraid that I shall be taking a somewhat different line on a number of issues to those that he put forward. However, I should like to begin, as did the noble Lords, Lord Lawson and Lord Shipley, who are on the committee, by paying tribute to the chairmanship of the noble Lord, Lord MacGregor. It was an outstanding feat to bring us to unanimous conclusions, and it was a great pleasure to serve under him.

I should also like to take this opportunity, especially in the light of recent events, to pay tribute to the stewardship of Andrew Mitchell, as Secretary of State for International Development. He was an outstanding Secretary of State—he treated it as the job of a lifetime—and his commitment and enthusiasm will be remembered for a very long time to come.

I have also been impressed by what I learnt about DfID, and about what others in the field had to say about it. At a time when there are serious doubts about the basic competence of a number of government departments, it was encouraging to find that DfID is regarded as world-class in its field so far as execution is concerned. However, that does not mean that I emerged from our inquiry in agreement with all that it is trying to do. I will concentrate on a very limited number of points.

In particular, I came away with the strong impression that it is living in the past, and is reluctant to move into the present. I fear that the same is true, in respect of aid, of the wider Government. The Prime Minister claims that it would be wrong to balance Britain’s budget on the backs of the poorest people in the world, but that is not the point at issue. The proposition that the Government and DfID must justify, and which they have failed successfully to do, is the commitment to increase the aid budget by 37% in real terms between 2010 and 2011, and between 2014 and 2015, in order to reach the arbitrary UN target of 0.7%, which was set over 40 years ago.

To increase the budget by that rate over a limited number of years, after the increases that we have already had in recent years, would be a tall order in any circumstances. However, at a time when every other public expenditure programme is either being eviscerated or, at best, held constant, it is quite simply wrong to privilege that particular programme in that way, and to seek to set standards by the amount that is spent rather than by the effectiveness of the expenditure.

I am very struck by the fact that those of us who have been on the committee appear to be unanimous in our view, while those who did not have the benefit of listening to the evidence that we received appear to take a contrary view. Moreover, the target of 0.7%, set in 1970, takes no account of the enormous changes that have taken place in the world since that time, many of them greatly for the better so far as development is concerned. By comparison with that time, as the report shows, development aid has become a relatively minor element in the capital flows from developed to developing countries.

The noble Lord, Lord MacGregor, gave the figures and I shall briefly repeat them. In 2010, development aid accounted for 10.9%, the same as that for portfolio investment; foreign direct investment accounted for 43.5%; remittances, an ever-growing source of funds for developing countries, was 27.4%; and 7.2% was accounted for by long-term private debt. In its latest issue, the Economist points out that FDI in sub-Saharan Africa alone has increased by 50% since 2005. Those are very impressive figures.

The way in which this debate has been conducted so far might give the impression that aid and development are two sides of the same coin. But, in fact, development is being fuelled by a great many other drivers as well as aid. The contribution of aid in percentage terms is diminishing as the other drivers increase. It would be very difficult to come away with that impression from some of the things which have been said earlier in this debate.

Quite apart from those factors, and in addition to them, important new donors, undreamt of in 1970, have entered the field. I refer, of course, to China but also to India and Brazil. I believe that we should rejoice in that, welcome them to the fold and welcome what they have to offer. I agree with the noble Lord, Lord Hannay, who said that we should be co-operating with the new donors and not regarding them as rivals.

The arrival of the new donors gives rise to another question. Why on earth are we still giving aid to India? I know that there are a great many poor people in India. There are more poor people in India than there are, I believe, in sub-Saharan Africa. But India is a country with a space programme, a massive defence budget and major foreign direct investments in this country as well as in others—we are very glad to have India’s direct investments in this country. It has more conspicuously high-spending millionaires than almost any other country.

Therefore, it seems extraordinary that instead of concentrating our aid effort on poor people in poor countries, we should be sending a significant proportion—described as peanuts by an Indian Minister—to India. If the Government of India choose to spend their own money helping poor people in other countries rather than doing more to help their own poor, they have the sovereign right to do so. It is a sovereign country and if it chooses to spend its money helping poor people in other countries rather than poor people in its own, it has that right. But we should not be shouldering its responsibilities to its people. The very fact that we do so reeks of a certain form of a rather depressing nostalgia.

The impression I derive from the continued commitment of DfID and the Government to the 0.7% target and aid to India is of people who are to some extent living in the past. They do not want to accept that aid contributed by richer, western countries like us, through the dedicated efforts of their own officials and NGOs, is no longer the chief instrument of development in poorer countries. Thanks in part to those efforts, and to the catalytic effect of that aid, the economies of the developing countries are now picking up speed with the help of a range of other drivers. We should rejoice in that and in the benefits that accrue to the developing countries as a result.

When the Cold War ended in victory for the West, many in the defence establishment were reluctant to face up to what this meant for them and their roles. We have not yet reached a 1989 moment so far as the development of the developing countries is concerned but much progress is being made, powerful new forces are at work and old ideas, establishments, budgets and targets need to be rethought. Now is not the time for embedding a 40 year-old target in legislation and privileging that particular budget at the expense of the National Health Service, education and all the other domestic budgets, not to mention defence and foreign affairs.