International Development (Official Development Assistance Target) Bill

Baroness Northover Excerpts

Friday 6th February 2015 Lords Chamber

[Lord Hamilton of Epsom]

I very much support my noble friend Lord Tugendhat’s amendment. In the spirit of my noble friend Lord Cormack, I certainly do not intend to speak for very long.

The first point that my noble friend Lord Tugendhat made was one of transparency. He made the point, quite rightly, that we measure everything else in terms of GDP rather than GNI. If we want to take the public with us it seems to me to be very sensible to use GDP rather than GNI. Let us be honest: the reason why people support this Bill with the enthusiasm they do is because they want to be seen to be generous with other people’s money. We all like people to be generous with their own money; it is slightly different when they are being generous with other people’s money. As that is the purpose of the Bill, we might as well make it as clear as we possibly can by using GDP rather than GNI.

My noble friend Lord Tugendhat also made the point that the difference between GNI and GDP is very small at the moment. In that case, this is a unique and wonderful opportunity to use GDP instead of GNI before the two indices start to part from each other. We have no idea what might happen in the future; the economy of this country may change and it may well be that we start getting less money if GNI starts to increase above GDP.

If we really want to nail this down, I say to my noble friend the Minister that this is a wonderful opportunity to embrace the amendment and get it on GDP, which everybody understands. That also means that we then guarantee that the 0.7% figure means something in the future, if that is what the Bill and the House desire.

[The Parliamentary Under-Secretary of State, Department for International Development (Baroness Northover) (LD)]

My Lords, I intervene briefly at the invitation of my noble friend Lord Forsyth. Amendment 2, proposed by the noble Lords, Lord Tugendhat, Lord Lipsey and Lord Forsyth, seeks to change the 0.7% target from GNI to GDP. If my noble friend Lord Forsyth was addressing me in seeking a reaction from the Front Bench—he did say “she”—he must have misheard. I made no comment. I would not have dreamt of doing so as a comment on what he was saying, even though I have found that reading economics textbooks to my dyslexic son has helped to inform me.

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[Lord Collins of Highbury (Lab)]

That does not make it better.

[Baroness Northover]

Being somewhat short, I could not see who was over there and who my noble friend might have been addressing.

Obviously I take very seriously what my noble friends have put forward. I emphasise that the commitment to invest 0.7% of GNI in ODA is an international commitment that is reported to and monitored by the Development Assistance Committee of the OECD. The UK reports on this basis to the DAC, allowing comparison across donors. To aim at an alternative ODA target for the United Kingdom based on GDP would not only lead to multiple definitions, but create confusion. It would also undermine our intention to fulfil our international commitments. This is an international target; it would reduce our credibility and moral weight that our commitment to the 0.7% target carries with our international partners—I have encountered widespread support for the move to the 0.7% target that we have taken—which would limit our ability to press other donors to meet their obligations, for example, to the Global Fund, which my noble friend Lord Fowler mentioned. This would not be helpful or in the spirit of our commitment to the world’s poorest. Gross national income became the preferred measure of measuring a country’s wealth in 1993.

[Lord Forsyth of Drumlean]

I think my noble friend would acknowledge that the target originally set by the UN was GDP. This is a genuine question: could she explain to the House when and why it was changed from GDP to GNI on an international basis and why it is necessary for us to adopt GNI, given the implications that that would have in future, as my noble friend pointed out, of possibly less money being available and less certainty?

[Baroness Northover]

Certainly. GNI became the preferred method of measuring a country’s wealth. As I said, we are meeting an international target.

[Lord Cormack]

I do not dispute the truth of what my noble friend said, but could she tell us when and why this change came about?

[Baroness Northover]

I think I just said when this change occurred. I emphasise too that the budget is subject to annual scrutiny, as my noble friend Lord Purvis said in the debate on the previous amendment.

[Lord Purvis of Tweed]

My Lords, I regret that I cannot accept my noble friend Lord Tugendhat’s amendment. Let me explain why. In doing so, perhaps I may correct my noble friend Lord Forsyth and address specifically the point from my noble friend Lord Cormack.

Paragraph 43 of UN Resolution 2626 from 1970 is the target that we have been debating consistently in this country. Indeed, it is the foundation of the Bill. I shall quote from it and perhaps that will answer the question. It states that each economically advanced country,

“will exert its best efforts to reach a minimum net amount of 0.7 per cent of its gross national product at market prices by the middle of the Decade”.

It does not say “gross domestic product”. As the Minister clarified, the UN system of national accounts adopted by the United Kingdom in 1993, during which I think my noble friend Lord Forsyth was a Minister in the Government, had GNI as the successor of GNP as the accepted international comparator of national economic activity. He will know, as he indicated to the Opposition Front Bench, the difference between GDP, which includes foreign economic activity within the territorial area of Britain but excludes those operations owned by Britain externally, and GNI, which includes those and has therefore been considered to be the standard economic comparator. To address the point raised by the noble Lord, Lord Tugendhat, that was adopted by the United Kingdom in 1995—I think that my noble friend was in the Cabinet at that point—for European Union payments and as a standard for European Union classifications. I think that he may well have been commenting on that late last year.

As that is now the adopted framework within the OECD and a successor to the obligation that we made in 1970, any change to the Bill would be a retrograde step, as the Minister explained, because under our obligations in the OECD we would still have to report on GNI anyway.

With that explanation, and having answered the noble Lord’s specific point, I hope that he will withdraw his amendment.

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[Lord Hamilton of Epsom]

I follow my noble friend Lord Howell on the remarks of the noble Lord, Lord Cashman. He is absolutely right that economists indulge themselves in a form of science that is not exactly reputable. Some noble Lords may remember the letter written to the Times by, I think, in excess of 360 economists, who said that the Thatcher economic policies were absolutely doomed to pitch this country into constant recession. That was the turning point for the economy in the United Kingdom, and things really took off from there. We are very much at home with him on that.

The noble Lord also spoke about how we should feel enormous compassion for those in great need in places in Africa and so forth. We all very much sympathise with where he comes from there, but the point has already been made in this debate that only 10% of what goes to these countries comes from development aid programmes. The rest comes from investments made in these countries. Let us face it: what is really going to make a difference in a desperately backward country such as the Democratic Republic of Congo is the fact that the Chinese are prepared to put in extensive railway and road networks in return for copper and cobalt concessions in that country. These are the things that will really make a dramatic difference in a country such as the DRC. In terms of relativity, development aid programmes are merely a pinprick compared with what is being invested in return for mineral resources.

To return to the amendment, the noble Lord, Lord Cashman, is right that this is not about economics. This is much more about accountancy. Some people will argue that accountancy is one of these other rather faulty arts, rather than a science, but I think it comes nearer to being a science than an art. What we are talking about here is how you manage money effectively. It must surely be right that you can take somewhat longer to meet a programme, rather than restricting yourself to 12 months. People who support this Bill have not really answered my noble friend Lord Forsyth’s point about 40% of the budget being spent in November and December of a year because it is bumping up against the end of the financial year. This should strike an enormous amount of disquiet in people’s minds, because it suggests to anybody that the expenditure of this money is being rushed. No control is being put in—we are just trying to meet targets to show that we spent all this money, and where the money goes is of much less concern.

I spent a certain amount of my youth in the army in Kenya. After independence, one of the famous elements of Kenyan politics was the Wabenzi, people in government who drove around in Mercedes-Benzes, many of which had been paid for of course by development aid money. One has to recognise that, in these sub-Saharan African countries, the elements of corruption are very great indeed and there is no respect for development aid programmes. People do not say, “This is being brought into my country to aid the poor, therefore I will not put my hands on it”. The fact is that those in charge manage to get hold of an awful lot of that money, which is why so many of them are driving around in Mercedes-Benzes today.

[Baroness Northover]

My Lords, in considering this group of amendments, I hear what my noble friends are saying about seeking to help the Government to manage our spending on official development assistance in a more flexible and predictable manner. However, these amendments, if carried, would have significant disadvantages, in our view, not least in terms of the flexibility and predictability noble Lords are seeking to promote.

First, as has been made clear previously, there is a need for an internationally consistent approach. The OECD DAC is made up of 29 members, and to ensure that monitoring and reporting of DAC members’ budgets is consistent and can be reported transparently, the DAC has decided to monitor ODA on the basis of single calendar years. If the UK moved to a five-year average, the UK would still have to submit annual ODA information to the OECD DAC. The need for consistency and clarity is essential. Importantly, using an alternative definition would also undermine the weight that our commitment to 0.7% carries with our international partners, as I mentioned before.

It is also important to note that the department already manages to an annual target, as does any other government department—as the noble Baroness, Lady Farrington, mentioned—in order to deliver within annual budgets. Therefore—

[Lord Forsyth of Drumlean]

My Lords—

[Baroness Northover]

I think I had better continue. I am sure the noble Lord will wish to come in later. Therefore, a five-year target would not add additional flexibility. We have had reference to spending at the end of the 2013. I underline what my noble friend Lord Fowler said about the commitment to the Global Fund. I know how long it took to get that decision made and out, and the importance of that decision and the commitment that we made. I would also add, as I did at Second Reading, that it seems, perhaps, to have been set aside.

[Lord Forsyth of Drumlean]

My Lords—

[Baroness Northover]

I am not going to give way. I will carry on in the interests of time. We also faced Typhoon Haiyan and an unexpectedly high increase in the number of refugees fleeing violence in Syria and facing the winter in the open. I have read the NAO report. The NAO, in its scrutiny, found no evidence that the department failed to follow its normal business processes—and it looked very carefully indeed at those. For example, the report says:

“The Department took positive steps to prepare for the 33% increase in its budget in 2013-14”.

It also says:

“The Department’s decision to issue more notes to”,

the Global Fund and the World Bank,

“in 2013 did not alter the total value of notes it planned to provide them and did not affect the content and timing of the programmes”.

[Lord Forsyth of Drumlean]

I am most grateful to my noble friend for giving way. I think that her argument is that, if the department spent, say, 0.8% one year, 0.6% another year and 0.9% the year after that but it met the 0.7% target over the five years, that would not be acceptable because it would look odd in the OECD statistics. As the vast majority of OECD members are nowhere near 0.7%, why is that a problem?

[Baroness Northover]

My noble friend has made his case very clear and others have, too, but we are managing the budget over a longer period in a way that it can hit those targets in those specific years. We have mechanisms to ensure that we spend our money in a strategic and long-term way. Noble Lords are very familiar with that—not least my noble friend Lord Fowler—and it does not require that kind of potential splurging at the end of the year in order to hit the target. We make annual contributions to a number of multilateral bodies and those are organised using the notes system that I have just mentioned, which allows a note to be counted as aid when issued but it is not cashed until the money has been properly spent in the fullness of time. This means that the department has the flexibility that it needs, as other government departments do, to arrange its accounting to fulfil its obligation to spend at the 0.7% target.

My noble friend Lord Tugendhat, in withdrawing the previous amendment, clearly did not feel that I had adequately answered his question about the OBR. I apologise if I did not answer adequately, and I will look very carefully at what he said and write to him if I need to clarify anything further. However, I hope that I answered his question on whether GNI is an international standard, as I went into that in some depth. Clearly, the target does not change the way that departmental budgets are reconciled with each other—that is not a challenge that we encounter. The ODA GNI figure is a national statistic and the methodology has been agreed by the Office for National Statistics. We are bound by that methodology, which is agreed and overseen by the ONS, which is the appropriate body to deal with that.

I remind noble Lords that the International Development (Reporting and Transparency) Act 2006 established a duty on the Secretary of State to lay before each House of Parliament an annual report about the UK’s development efforts and spending, including reporting on progress towards meeting the 0.7% GNI target for ODA. Therefore, there is such an annual accounting in law anyway. Maintaining DfID’s accountability for tracking and reporting on its own spending to Parliament is more appropriate, both from a governance and a practical point of view, than putting such a responsibility on the Office for Budget Responsibility. If we were to do that, this would seem to be outside the current mandate of the OBR and might require revision of the 2006 Act.

Clearly, spending needs to be fully scrutinised, as the right honourable Margaret Hodge and the honourable Peter Luff said, and my noble friend Lord Purvis has outlined the very thorough and independent way in which that happens. I thank my noble friends Lord Howell, Lord Brooke and others for their wonderful tributes to DfID on the way that it manages this. Indeed, DfID is at the forefront of how best to assist in developing countries, which will undoubtedly change, and needs to change, over time.

Although I understand the intentions behind these amendments, I urge noble Lords to reject them.

[Lord Howell of Guildford]

Before my noble friend sits down, one point on which it would be helpful if she could come back—possibly we could discuss this on Report—is the question of what is “ODA-able”, to use an ugly phrase. The Development Assistance Committee of the OECD is in constant debate, even now as we are debating this Bill, about the new definitions that are required of what is “ODA-able”, or acceptable within the targets, and what is not. How does that link in with the concept in this Bill of the one-year, annual discipline? How will we enable the Bill to be effective in the light of the debates on changing the rules on “ODA-ability” that are raging on in the Development Assistance Committee—and, I suppose, in Whitehall—as she very well knows?

[Baroness Northover]

I do not need to come back on Report, because I hope that I can answer my noble friend now. I find it immensely helpful that there is a definition of ODA. My noble friend is right that there is discussion of whether the definition needs to be updated, but the definition as drawn at the moment, which is what we answer to, is a very useful device because it makes clear that you cannot spend money on, for example, tanks or whatever someone might feel would be a useful way of spending the money. Therefore, from my perspective, it is a very useful discipline. There are certain things you can do within ODA, and it has to support the poorest and development. The noble Lord has probably seen the definition of what is excluded, as have I, and I frequently look at it. That serves as a useful discipline because, should DfID be asked to pass money to some department to do something which it feels is not appropriate, it is easy to point out that that does not fit within ODA and it would therefore mean that we would not meet the 0.7% target.

It is true that the OECD is at the moment giving consideration to whether we need to update this given the involvement, not in military offensives and so on but in what is now done internationally in terms of peacekeeping. However, that has not yet been decided. I am glad that the OECD is looking at what might be appropriate but I do not believe that any conclusion that the OECD comes to will be at variance with the basic commitment to support development in the poorest countries and of the poorest people.

[Lord Forsyth of Drumlean]

As I understand the Bill, it places a duty on the Secretary of State to meet the target. If the target is not met, there has to be a report to Parliament. Clause 3 states:

“The only means of securing accountability in relation to the duty in section 1 is that established by the provision in section 2 for the laying of a statement before Parliament … Accordingly, the fact that the duty in section 1 has not been, or will or may not be, complied with does not affect the lawfulness of anything done, or omitted to be done, by any person”.

Does that mean that the impact of the Bill is that, if the target is not met, all the Secretary of State has to do is lay a Statement before Parliament and then there is no further sanction against the Government? Or am I missing something?

[Baroness Northover]

I am sure that my noble friend Lord Purvis will address this issue. It is a Private Member’s Bill and the Government support it as it stands, unamended.

[Lord Lawson of Blaby]

I hope very much that my noble friend Lord Purvis will give a full and complete answer to the important question which my noble friend Lord Forsyth has just put. As to what the Minister said, I find myself wholly unconvinced. She did not seem to understand the purpose of these amendments.

Before I comment on that, I must respond to the impassioned interventions of the noble Lord, Lord Cashman. He was concerned about how the reluctance to pass the Bill, almost sight unseen, will be considered outside the House. He made an emotional speech. It is true, as I said, that the Bill is a triumph of gesture politics over good government. How it is seen outside the House I do not know, but I am not aware of overwhelming popular support in the country for the Bill. Indeed, my impression is that it has minority support. However, leaving aside the question of whether you believe gesture politics is more important than good government, our responsibility as a House is with good government and we should not be diverted from that. Whatever misleading remarks the noble Lord, Lord Cashman, may care to make, it is our responsibility to promote good government, and that is the purpose of these amendments.