Commonwealth Development Corporation Bill

Earl of Sandwich 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

[The Earl of Sandwich (CB)]

My Lords, it is a pleasure to follow the noble Lords, Lord Bruce and Lord Boateng, with their historical experience of the CDC, and I am much looking forward to the speech of my old noble friend Lord Eccles, who has seen the CDC almost from the beginning.

I was surprised that this Bill was made a money Bill, considering the huge questions raised by the expansion of the DfID programme. I know we have limited powers in this House, but I tried to complain. I went to the Chief Whip, who agreed to talk to the Lord Speaker, but I decided I could not take it any further. A central issue in the Bill seems to me whether, in handing over such a large proportion of our aid to the private sector and to one particular body, we may be bypassing some of the core principles that have governed the aid programme over many years.

I know that the CDC has changed considerably under new management. I have discussed this directly with the CEO, Diana Noble, quite recently. My noble friend Lord St John made a very strong case for the CDC. I accept that it has responded to radical change. To take only one example, in 2015 more than 1 million jobs were indirectly created by the CDC in Africa and Asia alone. I also have great admiration for the Minister of State in another place, Rory Stewart, whose work with the voluntary sector is well known, as is the experience of our own Minister, but having read Mr Stewart’s replies to the debate in the Commons, I am not yet convinced that the CDC has embraced poverty reduction, which, incidentally, is not quite the same as job creation.

The Minister used the words “doing good while not losing money”. That does not seem to be an adequate description of our international development programme, because poverty reduction has been the focus of our aid programme for some time. We abolished tied aid a generation ago, and the failures of huge projects such as Pergau and Narmada marked the end of large-scale UK investments during the 1980s. Since then, successive Aid Ministers have listened to criticism and have won public support for more programmes which demonstrate people’s participation, meet the needs of the very poorest in society, create partnerships and bring non-governmental organisations directly into the planning and execution of projects. The noble Lord, Lord Judd, mentioned that. I was encouraged to hear the Minister say that there is still room for improvement, presumably in the direction of the very poorest. That is precisely the dilemma the CDC faces.

As someone familiar with some of the UK’s best NGOs which are working alongside the poorest and in partnership with DfID, I have seen this work at first hand and I know that it brings real benefits to society. I do not need persuading that the private sector, and the CDC in particular, can be an effective channel to the poor. In fact, business is a good route for the voluntary sector to follow. For instance, the business model in which women create their own credit and loan scheme, originated with the Grameen Bank and other microcredit organisations, is still widely respected. The noble Lord, Lord Boateng, mentioned SMEs in Africa, which are another important channel.

When it comes to investment decisions, which are not risk free, and due diligence at a higher level of management, there comes a point when must priorities change. Pay scales rise and the interests of the corporation itself may take over from those of the beneficiary. This is a built-in dilemma which was discussed in some detail yesterday in the Public Accounts Committee which I attended. Investment really belongs to a different tradition, and this is why the CDC is being kept separate from the mainstream aid programme. One might be forgiven for asking whether it needs to focus on the poor at all.

Additionally, there is the issue of accountability. Does the CDC really know how its funds are being used on the ground and where they are directed and, even more importantly, can it monitor progress and impact at a later date? Fortunately, we now have really good watchdogs in the form of ICAI, the NAO and DfID itself, not forgetting the IDC, other Select Committees and occasionally our own EU Select Committees which have occasionally covered the EU aid programme. The CDC is very closely scrutinised.

On the whole, the CDC comes out well from various reports and audits. It has responded to recommendations and its transformation is much admired. There are some criticisms worth mentioning, some of them highly technical, which were examined, inevitably in much more detail, in the Commons debates, and I am sorry that we cannot do that today. For example, the NAO found that the development impact target measures prospective impact rather than actual impact. The noble Lord, Lord Judd, raised this point. There are also recruitment and retention challenges. The CDC may be on the right track, but it still has to demonstrate that it can make a lasting difference to the lives of the poorest. ICAI reports have come out with similar comments, although they recognise the growing role of foreign direct investment in development. My noble friend Lord St John made that point.

Finally, there is also a problem of public information. Far too little is known about the CDC programme, while DfID projects are much more visible, and this creates discrepancies. ICAI last year pointed out the anomaly that the CDC is moving DfID back to BRICs and middle-income countries. While DfID has scaled down its aid programme in India, the CDC’s investment there amounts to one-quarter of its portfolio. Is the tail wagging the dog? Does this mean that India suddenly again becomes a developing country and not a middle-income country? Should not the public be aware of this, because many people have argued that the poorest in India should always be a priority? I also believe that the CDC should arrange visits, perhaps through the CPA as well as the IDC, so that more MPs and others can go out to see the work it is doing because it is so important.

I am sorry to strike a discordant note during the passage of this Bill, but while I recognise the value of the CDC’s work, I shall need more convincing that it is really about poverty. The noble Baroness, Lady Northover, mentioned the CDC’s effect on DfID, which is important. The SNP and others put down several amendments on these matters, but I think Her Majesty’s Government have still skilfully avoided the answer. The CDC apart, with the future loss of EU channels of funding and the fall in growth rates and commodity prices in Africa, DfID already faces a considerable challenge in rethinking its responsibilities to the developing world.