Commonwealth Development Corporation Bill

Baroness Flather 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

[Baroness Flather (CB)]

My Lords, I have no personal relationship with the CDC, although not for want of trying. I went to see Diana Noble but was dismissed—metaphorically, not literally—because she left after 20 minutes. I was trying to find out what it does and how it works, but got nothing. However, that is not the reason why I am speaking today. I was not pleased, but that is not the important part.

I wrote to the noble Baroness, Lady Verma, when she dealt with DfID issues to ask her some questions about the CDC. She did not answer them, but just repeated what the CDC had told her to say. I then wrote to the noble Lord, Lord Bates, and I must thank him, in front of all your Lordships, for writing to me properly and giving me a lot more information. But there are some issues which worry me. The noble Baroness, Lady Northover, and my noble friend Lord Sandwich made the point about poverty reduction. It is difficult to see how some of the investments I have found out about through research, which I will talk about, fulfil the objective of reducing poverty.

The other point which worries me very much is the need for a proper independent review of the CDC’s work. I think most of your Lordships have taken on board what it says, and may know more about its work in depth than I do, but since the Harvard review, which looked at 2008 to 2012, there has not been a proper independent review. Any organisation which receives government money should have regular independent reviews. Some of the things said about the CDC have not been very encouraging. The shadow Minister for Development, Mary Creagh, has said that,

“the government’s own aid watchdog gave their private sector aid spending an amber-red rating and warned that ministers lack targets and a clear focus on reducing poverty”.

Maybe that will be dealt with in the new measures we will read about. She went on:

“Ministers must ensure this new investment in the CDC is transparent, focused on helping the poorest people in the world and delivers value for money for British taxpayers.”


I think it does, but I do not know how much it does for the poorest people. There was also a certain amount of criticism about gated communities, shopping centres and luxury properties in poor countries. According to the Global Justice Now advocacy group:

“CDC have a track record of ploughing money into dubious ‘aid’ projects like the Garden City luxury housing and shopping complex in Kenya and a luxury hotel in Lagos, Nigeria”.


There are issues about the work of the CDC because we do not get outside reviewers to look at it. The noble Lord, Lord Bates, said that the National Audit Office looks at it but that is not quite what I had in mind. It has to be looked at by people who are involved in development, not national audit. Even if it spends its money properly, I doubt whether it manages to keep all of it clean, because I am sure it has to grease some palms in some of the countries it is working in—although the less said about that, the better.

It worries me that there is no real review of the CDC’s work. Let me go through some of its current investments. It has now invested $6 million in Bridge International Academies, a company that runs fee-paying schools in Kenya. That is all very well, but why does it have to invest that much money in fee-paying schools? What people need instead is non-fee-paying schools, or schools where the fees are so small that they can manage to pay them. This deeply concerns me.

Rainbow Children’s Hospitals is a corporate hospital chain in India that provides mother-and-baby care and fertility treatment. The question was asked whether India is a middle-income country or a poor country. India has more poor people than many other countries, but there is so much money that Christine Lagarde said in her lecture two years ago that the Indian billionaires could remove poverty overnight. I do not see why the CDC has to invest in the corporate sector in India. There is a lot of money for money-making in India. People do not give money for the poor or for poverty reduction, but they are very happy to invest in the corporate sector.

Finally—and the worst of all—there is Narayana Health, a corporate multi-speciality hospital chainI have made some enquiries about Narayana. It is not just a hospital chain but one of the biggest conglomerates, and does all sorts of things. Its hub is in southern India and is almost like a small town. Why are we giving it money? I do not understand why we are giving money to Narayana Health, which is one of the richest organisations. I do not want my tax money—if it is my tax money—to go to Narayana Health. It has been given $48 million. It does not need money. It has more money than it can spend.

To me, these things are very worrying. I would like somebody to take a much stronger interest in the CDC’s investment policies: which countries it is investing in and what the return is. It invested in another chain of fee-paying schools, saying, “This is very good because you only pay $6 a month to get your child in there”. Although $6 seems nothing to noble Lords sitting here, it could mean a lot to a really poor person in Africa. Will they be able to find $6 to send their child do school? So I ask the Minister please to make sure that the money is being spent for poverty reduction as well as job creation. Just creating jobs will not change a country entirely. Poverty reduction has to be a priority.

--- Later in debate ---

[Lord Bates]

My Lords, I begin by thanking all noble Lords for their contributions in what has been a thoughtful and fascinating debate that has ranged quite widely over a number of different headings. Broadly, I have categorised those—although there is a significant overlap—into: the CDC’s role in the private sector, which the noble Lord, Lord Boateng, referred to with practical examples, as did my noble friend Lord Flight with other examples, and it was also referred to by the noble Lord, Lord St John of Bletso, and my noble friend Lord Eccles; the CDC development strategy and where this Bill fits into that, which was focused on by the noble Lord, Lord Collins, along with the noble Lords, Lord Shutt and Lord Judd, the noble Baroness, Lady Northover, and the noble Lord, Lord Bruce; and, finally, the question of parliamentary scrutiny that should rightly be afforded to such an important area of public expenditure and investment, which was the focus of the noble Earl, Lord Sandwich, and the noble Baronesses, Lady Flather and Lady Sheehan. I shall take that as my rough template to draw some strands out of the initial remarks.

The first point to make, however, is that, obviously, I echo the comments made by a number of Members during the debate recognising the significant level of expertise resident in this House that can be brought to bear in scrutinising and helping to shape strategies in future.

On the strategy, the noble Lord, Lord Collins, was absolutely right to take us back to the sustainable development goals and Agenda 2030. When we look at a Bill, we look at a particular strategy in isolation, and I want to try to place this Bill in the wider context, which is that of the sustainable development goals. Goal 8 has been mentioned, but essentially it is goal 1 that we are after, the eradication of poverty, which is the mission of DfID. The noble Baroness, Lady Northover, and the noble Lord, Lord Bruce, referred to that. We have made good progress on that goal. In 1990, those living in extreme poverty numbered some 2 billion; as of 2015, that number had reduced down to 705 million—almost to one-third, at a time when global population had gone up. In many ways, that heartened and strengthened the view—because a significant proportion was drawn from the commitment to the millennium goals—that global concerted action and focus could deliver significant change, if it was co-ordinated. That was why the UN Secretary-General set up the high-level panel of which the former Prime Minister David Cameron was a co-chair, which then led to the sustainable development goals.

The sustainable development goals, which have as their target eradicating extreme poverty by 2030, with a number of successor goals to that, are very much at the heart of what we do. Because we now view development activity through the lens of the UN sustainable development goals and have our commitment—which continues to be reiterated, as perhaps it needs to be—to the 0.7%, which has been secured through legislation and our manifesto commitment, we seek to match the 0.7% with the goals. Our strategy across government for implementing the goals will be set out in a new Agenda 2030 strategy document, which will be published in the next couple of months.

I am providing a protracted introduction because my opening remarks perhaps did not quite cover the context that this Bill fits into. We have the sustainable development goals as a focus, we have a plan which is coming and we have a UK aid strategy, which sets out the importance of economic development and of jobs, which are sustainable goal 8, as well as the eradication of poverty, which, rightly, was number one. It talks about partnerships and working together. The UK aid strategy then fits into and drives the single departmental plan of the Department for International Development as the prime lever for doing this.

The noble Baroness, Lady Flather raised a point on data, and one of the most important elements in the sustainable development goals is, to the delight of mathematicians and statisticians, the incredibly complex data that will be required to track progress towards those goals. That is set by the United Nations Statistical Commission, and the Office for National Statistics will have responsibility for collating data from across government—including the Government Statistical Service and many other sources—and uploading those so that we can better track our progress. That rests in the single departmental plan, which is published.

Off the back of that, last week we published our economic development plan, which recognises the importance of private sector investment in infrastructure. Gradually, this has all been built together. All of that is then scrutinised and overseen by the Independent Commission for Aid Impact, ICAI, by the Select Committee on International Development, by the NAO, whose report has been referred to, and by the Public Accounts Committee—the noble Earl, Lord Sandwich, referred to attending the PAC meeting yesterday, where the Permanent Secretary gave evidence.

So that is the context in which this Bill needs to be set. We are arguing that it is not all about economic development; economic development is part of what DfID does—in the current year, economic development sits in an envelope of roughly £1.8 billion out of a £12 billion spend. So we are talking about funding within that envelope on economic development.

Then we come to the question of the CDC Bill itself. The argument was that, because several years had elapsed since the Act had been passed and the cap had not been moved during that time, it was right that, given that economic development was going to play a more significant role in addressing the sustainable development goals, we look at raising that cap.

Of course, the UK Government are the shareholder, so when we talk about hiving off funds, as my noble friend Lord Flight said, we are hiving off funds to ourselves. It is taxpayers—it is ourselves—who are the owner and shareholder, and we have the ultimate power as the shareholder, without wishing to worry current holders of posts, to appoint the board and appoint the chief executive. We can have a quite significant impact. I want to reassure noble Lords on that, because there was some concern in that regard.

On the CDC and its strategy, I took on board the point that was made. We are now drilling down: we have gone through the sustainable development goals and the cross-government approach to delivering on aid; we are now into economic development and we have the economic development strategy; and now we are saying that it is right that there should be an investment strategy for CDC, which should be published and discussed initially with the shareholder—namely, Her Majesty's Government.

When that was being discussed, we felt there were two alternatives: to publish the strategy alongside the Bill, or to allow the Bill to make its progress through the House and do the House the courtesy of listening to its scrutiny of the Bill. Some comments, such as the ones mentioned by the noble Lord, Lord St John of Bletso, have made a profound difference, and others, such as those brought to our attention by the noble Baroness, Lady Flather, perhaps less so. We chose to let it go through the House and for the wisdom and expertise that exists in this House to be incorporated into the final strategy that is published.

At the same time, when agreeing our process on this, we had a couple of choices regarding parliamentary scrutiny, and I want to address this quite directly. There was a debate about whether we put in £12 billion, which was what we assessed looking forward. The noble Lord, Lord Collins, referred to the estimated $2.5 trillion funding gap, so this is significant but, in terms of the need, it is not vast. It is also fair to say that the amount we allocate, as a percentage of overseas development assistance, to capital in financial institutions is significantly less than countries such as the Netherlands, Germany, France and the USA. We asked whether we should go straight to £12 billion or have an interim stage. I suppose the conclusion was that we could take this in cycles, so the initial plan will be for the next four years and then there will be a successor plan for the following five years, which will be published and discussed. Off the back of that, there will then have to be an affirmative resolution, before your Lordships’ House and the other place, to give permission for that investment to occur. We considered that point very carefully and came to the conclusion to do it in two steps. That was the rationale behind that.

The noble Baroness, Lady Sheehan, and the noble Earl, Lord Sandwich, asked about the CDC Bill being certified as a money Bill. I would like to say it was part of a strategy, but of course we have no control over that. The certification of a money Bill is the preserve of Mr Speaker in the other place, and I do not think he would take any advice from Her Majesty’s Government on this or probably any other matter. He certifies it and it is what it is, and we must work within that.

I was struck by the points made and the quality of the debate. Noble Lords suggested it would be useful to have a debate on the strategy when it is published. There will be a number of other strategies around at a similar time on a sustainable development goals—sorry, let me just clarify that there will be an affirmative resolution before the House of Commons only, which will have the opportunity to comment on this second step. On whether there should there be an opportunity for your Lordships’ House to discuss this, that would be for the usual channels to agree, but I will be very sympathetic to it on the basis of the discussion we have had this morning.

I have set out the broad headings, so let me turn in the time that remains to some brief responses to specific questions that I have not covered in my general remarks. The noble Lord, Lord Collins, asked whether there would be full disclosure of the CDC’s investments on its website. I can reassure him that a full list of investments, including the legacy investments, can be viewed on the website.

The noble Baroness, Lady Flather, and the noble Earl, Lord Sandwich, raised the point about measuring the CDC’s contribution to poverty reduction. The contribution is clear, as it is made through jobs, local taxes and infrastructure.

However, this economic development and investment have to be seen alongside the work we are doing with our multilateral partners in the development banks. The World Bank operates in a lot of these countries and international finance institutions in some regions have been mentioned, such as the Caribbean Development Bank. We also have a UK Caribbean Infrastructure Fund partnership. We use many different vehicles and direct investment is just one.

We also have a huge commitment, rightly so, in education—which the noble Baroness, Lady Northover, oversaw as well during her time as Minister. It is true that no one has ever got out of poverty by aid alone and therefore trade is required, but it is equally true that, as well as economic development, you need education. Without the skills and the workforce, then I am afraid it is not going to happen. We have a major programme in education, which then feeds into economic development and our work with our international partners in respect of that.

In terms of independent evaluations, there was an evaluation commissioned in 2015 by a team from Harvard. It reviewed the CDC’s investment for the period 2008 to 2012 and concluded that the CDC’s investments had been transformational—a point made by my noble friends Lord Flight and Lord Eccles and the noble Lords, Lord St John of Bletso and Lord Boateng—such as in the work of the Africa Enterprise Challenge Fund particularly with small and medium-size enterprises.

My noble Friend, Lord Eccles, asked about the proportion of the CDC portfolio that is now direct. The noble Lord, Lord Bruce, referred to the report on this from when he chaired the Select Committee. The CDC has built up its capacity and moved significantly from operating as a fund of funds to operating more directly where it could exert greater control and measure the results. In 2015, 67% of new commitments by value were direct investments, and we expect this ratio of about two-thirds direct to one-third through funds to continue.

The CDC was set a great challenge, and many noble Lords rightly paid tribute to the work of the current chair and current—and outgoing—chief executive, Diana Noble. I certainly echo that. The CDC’s staff are immensely high-quality and combine private sector expertise with a compassion for the world and a determination to ensure that we improve our performance in relation to the poor.

There was a criticism that the CDC has gone for easy wins. Perhaps that applies to a bygone era, as the noble Lord, Lord Boateng, referred to, when it was perhaps being “fattened up” for privatisation. When we decided during the coalition Government, when Andrew Mitchell was Secretary of State, that we wanted this to be a long-term public vehicle as part of our economic development strategy, we narrowed the focus. We said, “Where are the poor people?”. The answer is that 80% of that 700 million-plus that I mentioned still living in extreme poverty are in Africa and south Asia. Therefore, that should be the focus of our attention.

What is the greatest need in those areas? Is it for financial sector instruments? That may be part of it, but I agree with the noble Lord, Lord Collins, that the greatest need is for jobs and better jobs in those areas. So we said that the focus should be on the areas of greatest poverty and on job creation as being the objective. That is a fair area to head for.

[Baroness Flather]

I was trying to say, with some of the examples that I gave, that they do not need money: they are already very wealthy and they have jobs that they are giving to people. There has to be something focused on the areas where there is not enough money.

[Lord Bates]

That is right. The noble Baroness refers specifically to India, which is of course itself a signatory to the sustainable development goals and the eradication of poverty by 2030. That will have to be its focus.

A number of other questions and particular points were raised. I will review the record, particularly with reference to the points made by the noble Lord, Lord Judd, at the beginning, and where there are gaps or I can add anything, if it will be convenient for the House, I will write to noble Lords. I reiterate my commitment to continue to engage with the House as the CDC progresses with its strategy and we finalise the new business case.