Draft Commonwealth Development Corporation (Limit on Government Assistance) Regulations 2023

Andrew Mitchell Excerpts

Wednesday 5th July 2023 General Committees

[The Chair]

Before I call the Minister, I want to say that it is very warm and close in here, so if right hon. and hon. Members wish to take their jacket off, they have my permission. Minister, will you be good enough to move the motion?

[The Minister of State, Foreign, Commonwealth and Development Office (Mr Andrew Mitchell)]

I beg to move,

That the Committee has considered the draft Commonwealth Development Corporation (Limit on Government Assistance) Regulations 2023.

The draft statutory instrument was laid before Parliament on 6 June, in accordance with section 15(6) of the Commonwealth Development Corporation Act 1999. It is subject to the affirmative procedure and will be made once approved by the House.

I will start with a brief overview of British International Investment. The primary purpose of the draft regulations is to permit the Government to increase the assistance available to BII—formerly the Commonwealth Development Corporation—from £6,000 million to £9,500 million. The increase will enable the Foreign Office to increase financial support to BII in line with the new five-year technical strategy. As the UK’s development finance institution, BII invests long-term patient capital in private companies in developing countries’ pioneer markets. That delivers benefits that last. BII has a dual mandate of development impact and financial sustainability.

BII has a rich history and long commitment to supporting development around the world. Over the previous five-year strategy, from 2017 to 2021, BII made £7 billion-worth of investment in more than 600 investments, mobilising about £2.5 billion in additional capital from the private sector. I hope that right hon. and hon. Members will join me in recognising just how extraordinary and impactful those numbers are, and what they represent. Over the same period, BII supported businesses that employed more than 1 million workers, generated 277,000 GWh of electricity, and paid more than £10,000 million in taxes into the relevant exchequers.

BII’s investments are largely self-financing. Increases in taxpayer support allow it to accelerate the speed at which it makes new investment, thereby increasing its development impact. That increase in speed and size helps it to contribute more to the achievement of the UN sustainable development goals. The Commonwealth Development Corporation Act 2017 amended the Commonwealth Development Corporation Act 1999 to increase the limit on taxpayer assistance to BII from £1,500 million to £6,000 million, with a further power to increase taxpayer assistance to an amount not exceeding £12,000 million by way of a statutory instrument.

The aggregate amount of assistance provided to BII by the taxpayer to date is £5.2 billion. We launched BII’s 2022 to 2026 technical strategy in November 2021. In support of that, a new share subscription agreement was approved by His Majesty’s Treasury on 7 December 2022, based on the current spending profile. Under that agreement, the Foreign Office will reach the £6 billion maximum limit for support of BII by June 2024. The funding profile agreed under the share subscription agreement in December 2022 is required to enable BII to deliver on its 2022 to 2026 technical strategy ambitions.

The strategy commits BII to greater ambition on geographical spread, climate and gender impact. The provision of increased support is critical for BII to continue implementing this strategy, which is the cornerstone of wider publicly announced ambitions under the Government’s British investment partnerships, the international development strategy 2022 and the UK’s commitment to provide at least £11.6 billion of international climate finance between 2021 and 2026. Expanding BII’s reach into new markets of strategic importance to the UK, consistent with its mandate laid down by the shareholder, will enable it to continue as a key vehicle for our economic development objectives, helping to build greener and more prosperous economies.

In summary, my priority is to ensure that UK aid is used effectively to help achieve the sustainable development goals, to achieve value for money for UK taxpayers and to deliver in our national interests. The regulations will enable us to deliver on BII’s full potential in continuing to promote productive, sustainable and inclusive development. I commend the regulations to the Committee.

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[Mr Mitchell]

I am grateful to the hon. Members who have contributed to today’s debate, and I will try and address the questions and points that they have raised. First, I am grateful to the hon. Member for East Renfrewshire for her support; she raised exactly the right questions.

The hon. Member for Cardiff West and I have been in this House for quite a long time; no one would ever criticise him for lack of diligence and hard work, and he sort of explained his attendance in the Committee today. I want to make it clear that none of us on Government Benches would ever accuse him of showboating—apart from my hon. Friend the Member for Orpington, of course.

I have four points to make in response to the debate. First, the hon. Member for Cardiff West talked about spending in Ukraine. He will know that at the Ukraine Recovery Conference it was made clear that BII would play a modest part further down the track, putting its shoulder to the wheel of our national interests, which I think is the right thing to do. Ukraine is not an area that it would normally invest in, but by co-investing with organisations such as the European Bank for Reconstruction and Development, it can help to move forward a policy that both the UK and the Ukrainians want to see realised.

BII has a role in respect of social enterprises, which I will explain later in my response to the hon. Member for Birmingham, Edgbaston. She raised four points, and was very supportive of the concept of BII. She appreciates the all-party basis on which the reforms that I enacted 10 years ago were carried out. We were careful to ensure that we carried the sector and the Opposition with us on those reforms. That is a very valuable consensus, which has propelled BII into a position where it is viewed with enormous respect and is widely regarded as the most effective and best development finance institution in the world. It is not a coincidence that that has happened on the back of the all-party support it has received.

The hon. Lady mentioned the difficulty of allocating ODA money in a very constrained environment, and asked if we should spend it in another area and not on BII. As she knows, under the Act we could have said that BII should receive an extra £6 billion, rather than an extra £3.5 billion—that is what the Act says. We are not doing that; we have reined it right back so that it is taking the same haircut as much else in the ODA budget is taking. I hope she accepts that we have exercised constraint and not just given the BII what it the Act as originally passed entitled it to. In trying to slice the cake with a very constrained ODA budget, we require maximum effectiveness and results for the British taxpayer, and for the aims and aspirations that she and I both want this country to pursue in international development.

Think what BII has achieved: it has directly employed 1 million people, and it is working in the most difficult, pioneering countries for the private sector. Putting food on the tables of, effectively, 1 million people and families is a remarkable result. Look at the massive increase in off-grid and grid electricity and the amount of money paid in tax by BII investments into the treasuries and exchequers of poor countries. Not all that money will necessarily be used well, and another part of that budget tries to ensure that it is used more transparently and better. Nevertheless, raising £10,000 million in tax predominantly in poor or very poor countries is a significant development achievement. I want to make that point to the hon. Member for Birmingham, Edgbaston.

Secondly, the hon. Lady made the point that BII does not, by definition, engage in the most egregious extent of poverty; other parts of the development budget do that. If we take a holistic view across the piece of where we should put our taxpayers’ money for maximum effect in achieving the SDGs and driving forward our climate financing and climate result objectives, we must make that allocation. We do not expect BII to address some of the most egregious effects of poverty; we use grant funding and co-financing, and we do it bilaterally and multilaterally through other mechanisms.

Thirdly, the hon. Lady said that she had read my speech at Chatham House—I am grateful to her for doing that—and pointed to the importance of transparency. On that, she, I and the International Development Committee, which is conducting an inquiry and has done so much good work in this area, are more or less agreed. We want greater transparency, partly because if there is not transparency, people think that something is being hidden when perhaps it is not being hidden at all. BII has a vested interest in greater transparency too, and we are talking to the board. We are waiting to see the advice of the International Development Committee on the issue, but we will then be driving forward on transparency as the hon. Lady suggested.

The hon. Lady mentioned that BII scored poorly on Publish What You Fund; actually, it came 12th out of the 21 non-sovereign development finance institutions. I emphasise to the Committee that that resulted partly from a technical issue on the website that prevented data from being unloaded, which has now been resolved. Publish What You Fund has indicated that BII, if it were to remark it now, would be towards the top end of the league table. I am completely with the hon. Lady on her overall point about the importance of transparency, and I hope that we will be able to move forward on that agenda after the International Development Committee has published its report.

The hon. Lady’s final point was about the Kenya hospital and the upsetting circumstances that she described. I should make it clear that BII takes all allegations of this sort extremely seriously, and the Foreign, Commonwealth and Development Office is working closely with BII on the matter. We encourage Oxfam to share any further evidence it holds of the alleged cases so that we can accelerate those investigations. I should also make clear that BII has already taken steps at Nairobi Women’s Hospital. A new fund manager was put in place in 2019. The new fund manager has put in a new management team at the hospital, including a new CEO, and strengthened procedures. The next five years will see BII prioritise investing in the manufacturing of medicines, vaccines, devices and equipment, pharmacy and early stage funding for health technology.

[Kevin Brennan]

I think the Minister said that he would say a few more words on social enterprise. I apologise if I missed those in his remarks.

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[Mr Mitchell]

My point was really about the waterfront of different interventions on development. Social enterprise has certainly benefited indirectly from BII investments, but BII is predominantly an equity investor. Countries receive this equity. They do not have to provide a sovereign guarantee and they are not on the hook for paying back the money; it is an equity investment. As I have tried to set out to the Committee, that has a huge role in driving forward the international development aims that we all, across this Committee, want Britain to achieve.

Question put and agreed to.