International Development (India)

Barry Gardiner Excerpts

Thursday 26th January 2012 Westminster Hall

[Barry Gardiner (Brent North) (Lab)]

I am delighted to take part in this well-informed debate, and I pay tribute to the right hon. Member for Gordon (Malcolm Bruce), who chairs the Select Committee, for initiating it. He spoke with great knowledge and tact, and he put his questions and criticisms in a probing rather than a partisan way. I hope the Minister will be able to respond to many of them when he sums up.

I would like the Minister to clarify the Government’s position on aid to India somewhat in the aftermath of the Select Committee report. India is home to one third of the world’s poor and to more than 20% more poor people than all of sub-Saharan Africa. Across India, a child dies every 15 minutes from a preventable disease, one in three people remain illiterate and more than 400 million Indians have no access to electricity.

As the right hon. Gentleman outlined, poverty is largely focused in four Indian states: Bihar, Madhya Pradesh, Orissa and Paschim Banga—the state whose name I think he was looking for, which used to be known to us as West Bengal. Between them, they are home to nearly one fifth of the world’s poor.

In 2009-10, Britain spent £295.1 million on development projects in India. Of that, 45% went to the Indian national Government, while 48% was spent in partnership with those four states, which are the poorest in India. Britain’s aid targets were health, education, rural poverty, trade development and civil society. Its projects are achieving quite significant progress, providing 9 million slum dwellers with access to water and sanitation last year, putting 30 million more children in primary school since 2003, saving 17,000 lives per year by improving health care and lifting 2.3 million people out of rural poverty since 2005.

The Indian federal Government no longer believe themselves to be an appropriate recipient of development aid—at least not since our Government asked whether they thought they should receive it. Previous Governments had adopted a different approach, saying that that was not a question they would ask the Indian Government and that they simply wished to provide aid to achieve the millennium development goals for the world. Of course, once we ask the question, it is difficult for a proud federal Government such as India’s to say that they still want aid. I think the Government made a mistake in asking that question, but it is on the record, and both countries have set out their position, so it has to be respected.

The International Development Secretary gave a mixed message on the future of DFID’s Indian programme in his speech on Christmas eve, and we should probe this further. He defended the Indian aid programme, highlighting the fact that

“India is a place where there are more poor people than the whole of sub-Saharan Africa”

and stressing the success the Indian Government have had. However, he went on to say:

“Now is not the time to stop the programme in India but I don’t think we will be there for very much longer.”

The Secretary of State is an eminently reasonable man, for whom I have tremendous respect, and he has done a first-class job since he arrived in the Department. He is a reasonable man and he speaks reasonably, but others do not always speak reasonably, and the right hon. Member for Gordon outlined their argument. Indeed, in yesterday’s debate on UK-India trade, which took place in this hall, the hon. Member for Banbury (Tony Baldry) put things rather differently. He spoke of India’s economic growth of 7% a year, and said that, with its nuclear and space programme, it had the responsibility to ensure that the benefits of that growth were more evenly shared among its people.

I want to take this opportunity to echo the words of the right hon. Member for Gordon and to address that distortion. India is on course to reduce poverty from 55% in 1990 to just 22% in 2015. No other country has ever managed such a sustained reduction in poverty, taking one third of its population out of poverty in a mere quarter of a century. India has put huge resources, proportional to its budget and its GDP, into poverty reduction. It spends a higher percentage of its budget on education than we do in the UK, its free food programme is the largest hunger-alleviation programme in the world and the employment guarantee scheme has been incredibly successful at getting people into work wherever possible. Since 2004, India has increased the percentage of GDP it spends on health, education and social services from 5.35% to 7.2%. As I say, it spends a higher proportion of its annual budget on education than we do in the UK—12.7%, compared with 11.5%.

Despite India’s impressive growth and her progress on infrastructure and urban development, and despite the fact that her middle classes have quadrupled in size in the past decade, India simply could not afford to alleviate her poverty on her own, even if she poured all her resources into it. A 2009 World Bank report noted that even if India legislated for a 100% marginal tax rate, the funds raised would plug only one fifth of its poverty gap. The idea has been peddled that India just needs to tax its flowering industries and its billionaires a little more, but that is a myth, and I am delighted that the Chairman of the Select Committee has nailed it this afternoon.

We must continue to support India in alleviating poverty. That is an international responsibility, and we must meet it. Will the UK Government commit to tying our aid to India to net reduction reductions in poverty and to India’s increasing ability to pay for poverty reduction itself? In that way, any decision to stop helping some of the world’s poorest people out of poverty would be based on facts on the ground, which can be established and quantified, rather than on what sometimes seem to be the whims of the populist press in the UK.

Those who argue for an end to aid should consider how things would be if Britain bordered the world’s next superpower and was surrounded on all sides by failed and unstable states, some with nuclear capacity. Would they then be so critical of relatively high spending on defence and space?

While I welcome the renewed focus on the three poorest states, I think we need clarity. As yet, we have had no comprehensive plan for how DFID will work with the private sector, but only a small number of specific examples. There are hints that much of this work will involve microfinancing, but will the Minister clarify the situation and perhaps expand on what is being done?

The Select Committee has criticised DFID’s internal knowledge of, and experience with, the private sector, particularly in-country. The delivery of such a large fund will require a far greater specialist team, but DFID has announced no plans to implement one. In total, DFID has only 58 private sector specialists, divided between all its projects across the globe. Does the Minister propose to enlarge that team to deliver the micro-level projects that such private sector funding may require?

In his Christmas comments, the Secretary of State described the fund as returnable to the taxpayer, but neither the India project plan nor individual project descriptions give any explanation of what he actually meant. The most likely explanation is that he was alluding to the fact that a large percentage of the funding will be delivered through microfinancing, which is repayable to the fund, and which can then be reinvested. If that is the case, describing it as returnable to the taxpayer in the UK may be misleading. If it is not the case, and the money will literally be repaid to DFID and then the Treasury, will the Minister tell us? We need a guarantee that when these funds are returned, they will be reinvested in full in India to alleviate poverty there.

Another area of concern is the long-term future of the India programme. The Secretary of State has guaranteed funding until 2015. We should certainly support that, but he has also said that he does not think it will continue for much longer, and that he sees it as a short-term programme. That troubles me for two reasons: first, insecurity of funding streams makes planning budgets at national, state and local levels nearly impossible. Deliverers need to be able to count on funding streams in the medium to long term to plan budgets efficiently and effectively. Secondly, although India has made progress in combating poverty, as I outlined, by 2015, 22% of the population will still be living in poverty. We need a guarantee that any reductions will be tied firstly to the rate of reduction in poverty, and, secondly, to increases in India’s capacity to bear that burden itself.

I welcome the tightening of focus on the three poorest states, but not if it comes at the expense of the many millions of people living in poverty in other Indian states. For example, Orissa, which was the fourth bilateral partner state with DFID, has, in large part through DFID’s work, succeeded in reducing the poverty rate from 21% of its population in 2006 to 4% in 2011. That is a phenomenal achievement. However, the population of Orissa is 36 million, so the remaining 4% means that there are more than 1.5 million people still below the poverty line. That is a population equivalent to the whole of Gabon, Gambia or Botswana. Yet the Department appears to be shifting its focus to sub-Saharan Africa.

The Government are, I think, pushing in the right direction on their India aid programme, but we need clarity about the detail, and we do not have that clarity yet. Will the Minister flesh out what the increased private sector focus will look like, and how and by whom it will be administered? The Government need to provide a sense of security to central and state Governments in India by guaranteeing that any cuts to the programmes will be made for the right reasons, and they need to stop playing up to the hysterical and factually incorrect opinions that too often come from their Back Benches.

--- Later in debate ---

[Mr O'Brien]

The right hon. Gentleman makes a very important point. In many degrees, this is a question of a stratified approach. It is really to do with the risk appetites and the profile of the funding instruments that lie behind it. I can certainly confirm that we hope that the revamped CDC will be able to take a greater interest in applying its patient capital approach, particularly to some of the infrastructure support that lies behind economic development, not least in the poorest states. But let us be absolutely clear, with the DFID instruments, we are able to put forward the funding that we do because our capital can take bigger risks in riskier places than even that of the CDC. We have to recognise that there is a connection, but not necessarily an overlap.

[Barry Gardiner]

I am particularly grateful to the Minister for addressing the point about the returnability of capital, because it is an important one to clear up. Will he state absolutely categorically that “returnable to the taxpayer”, which I believe is the phrase the Secretary of State used, does not mean that the capital should be returnable to the British taxpayer but that it should go back to the fund, and then, as the Minister said, be reapplied for the alleviation of poverty?

[Mr O'Brien]

I confess that, in all my briefings, I have not seen the phrase “returnable to the taxpayer” used by anybody. Let me be clear: this is returnable in relation to the repeated use of the resources for the application of their purposes in India. That is the idea. The International Development Act 2002 allows us to use returnable capital instruments, such as equity investments, guarantees and other hybrid forms—combined loans and equities—that promote development and poverty reduction.

There are entrepreneurs who improve the delivery of basic services. For instance, Irfan runs mobile clinics that provide a comprehensive range of outpatient medical services to poor people who are left out. He needs capital to buy the mobile vans and operate a professionally managed unit to provide quality service and make a profit. We can help entrepreneurs like him to do both, so that we have development and the sustainability provided by a profitable business. That is an example of a private sector programme.

The second pillar that we have agreed with the Government of India is a programme to help women and girls break the cycle of poor nutrition, poor education and early pregnancy that traps so many in India in poverty. That will focus our programme on the poorer states of India, particularly Bihar, Orissa—which has been renamed Odisha—and Madhya Pradesh.

A good example of transformation relates to some of the basic issues identified not only by the right hon. Member for Gordon, but by the hon. Member for East Kilbride, Strathaven and Lesmahagow. Mention has been made of manual scavenging—people cleaning toilets with their hands—which is not something that any of us could easily contemplate. The Department of International Development is supporting the Indian civil society organisations and there has been a series of successful local campaigns on the issue. We hope that, soon, this shameful practice will no longer exist.