Commonwealth Development Corporation Bill

Imran Hussain Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 29th November 2016 Commons Chamber

[Imran Hussain (Bradford East) (Lab)]

It is a pleasure to follow so many distinguished speakers in all parts of the House. I thank them all for their contributions.

Let me begin by paying tribute, like many others, to the right hon. Member for Sutton Coldfield (Mr Mitchell), the former Secretary of State for International Development, for the good work that he has done. He gave us an eloquent history lesson, explaining how the CDC began. I accept much of what he said, but I think the whole House is united in accepting that his important reviews of the CDC back in 2011, and the strategies and policies that developed as a result, have left the CDC in a better place than it was in four years ago.

The hon. Member for Glasgow North (Patrick Grady) rightly reinforced the House’s commitment to the 0.7% target. He also made an important point, which has not been made enough today, about the implications for our strategic development goals. He welcomed the National Audit Office report, as do I, but urged caution in respect of its findings on transparency and the impact of monitoring, about which I shall say more later. He rightly pointed out that we are still awaiting the important multilateral and bilateral aid reports. However, the Secretary of State has assured me that they will be published on Thursday, and I am grateful for that speedy response.

I think the whole House agrees that my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) is a passionate advocate, and he demonstrated that again today. He made some very important points about the sheer level of funding, another issue about which I shall say more later. He also drew attention to three boxes that needed to be ticked. I agree with him that the case has yet to be made.

The hon. Member for Edinburgh East (Tommy Sheppard), as always, made a passionate speech in his own style. He made an important point about the strategy and policy investment that was not forthcoming, and, like many Members, suggested that we were virtually putting the cart before the horse.

We on this side of the House want to reaffirm our commitment to poverty alleviation, which should be at the centre of DFID’s work. We recognise that the development of businesses around the world has a strong role to play in international development, through building economies by improving infrastructure and helping to put money into people’s pockets at the end of a hard day’s work, which is one of the surest ways of alleviating poverty. We also recognise that it has a strong role to play in the achievement of the eighth sustainable development goal: promoting economic growth, productive employment and decent work. It is therefore right that during the passage of the Bill we scrutinise both the Bill itself and what it will do, or will not do, for developing countries and the ability of the CDC to deliver for them.

Despite the Bill’s small size, it will have huge ramifications for the developing world and the UK’s development agenda. As previously outlined by my hon. Friend the shadow Secretary of State, we have several important points that we would like to see addressed.

The first is the worrying concern about the sheer size of the increase in assistance that DFID will be able to give to the CDC. In 2015, the previous International Development Secretary committed an additional £0.7 billion of funding to the CDC, but the Bill seeks to dwarf that by a large measure, by increasing the assistance to £6 billion. Moreover, the Secretary of State seeks the power to increase the limit to £12 billion through a statutory instrument, creating unease on the Opposition Benches that the Secretary of State will easily be able to extend the limit by £6 billion just through an SI, a move we believe to be wrong in principle.

We acknowledge that the assistance limit may have been reached—a substantial limit that has stood for just as substantial a period of time—but increasing assistance to this level has the potential to result in a considerable movement of ODA spending away from DFID in the traditional sense. That is particularly troubling given that the answer provided to my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) stated that 25% of ODA will be spent outside DFID and that the Secretary of State repeatedly states an intention to move DFID’s focus towards trade over traditional aid and development. If the Government want to move so much of DFID funding through the CDC, we need assurances that it is not a mechanism through which they can effectively privatise development, placing more money in the hands of investment funds whose main focus at the end of the day is not poverty but profit, while at the same time moving it out of the hands of development NGOs.

This takes us on to the next issue that we have raised today: for what purpose does the CDC require further assistance? After all, the current £1.5 billion assistance limit has stood a strong test of time and the CDC’s business model sees it largely self-financing, with healthy profits reinvested in projects. Therefore, if we are to support this Bill throughout its passage, we need to see updated documents provided and published by the CDC—namely, a new strategy for 2017 onwards, alongside a new investment policy for the next five years, both of which must set out what the CDC intends to do with such massive assistance being made available to it. Essentially, we must avoid a situation in which we would be putting the cart before the horse by granting funding assistance before actually seeing what purpose it will be used for.

Another area of concern raised is the scrutiny and oversight of the CDC’s development impact. On this issue, we note the findings of yesterday’s NAO report. The accuracy of the CDC’s self-assessment through its development grid and its declaration of the development impact of its investments cannot be guaranteed, because it assesses their prospective impact rather than the actual impact. Consequently, the CDC might believe that it is having a positive impact, but the actual impact could be very different. If DFID wants to increase its assistance to the CDC, it must carry out full, frequent and regular assessments of the development impact, beyond the CDC’s own measuring criteria.

We on this side of the House have raised concerns over the use of tax havens by the CDC, and our concerns are well founded. In 2013, £180 million of the £375 million given to investment funds by the CDC went to funds domiciled in notorious tax havens such as the Cayman Islands, Guernsey and Jersey. That is almost 50%. This use of tax havens denies tax revenue to developing countries, avoids capital gains tax and deepens existing governance and corruption issues in developing countries. This is happening despite the Prime Minister’s recent announcement of a crackdown on the use of offshore tax havens in the wake of the BHS scandal, and it is exactly the opposite of the kind of work that the CDC has a duty to carry out.

We have outlined our substantial and genuine concerns about the Bill, and we hope that the Government will give us a genuine response to those concerns and to the six questions that the shadow Secretary of State set out earlier. We look forward to hearing their response. We will not oppose the Bill’s Second Reading this afternoon, but if we do not receive adequate assurances or see positive steps being taken by the Government to address our concerns, we reserve the right to withhold our support for the Bill on Third Reading. Facilitating economic growth is of course important in the developing world, but development should always be the focus, and we on this side of the House will work to ensure that it remains so.

Commonwealth Development Corporation Bill (First sitting)

Imran Hussain Excerpts

Committee Debate: 1st sitting: House of Commons
Tuesday 6th December 2016 Public Bill Committees

[Patrick Grady (Glasgow North) (SNP)]

Q I would like to probe a little more on the specifics of the hard figures in the Bill—the £6 billion and the ultimate cap of £12 billion. Where do those numbers come from? What was the needs assessment that these are about the amounts of money that the Department feels CDC needs? Was there dialogue between the Department and CDC to reach those amounts? Why go for such hard figures, rather than some kind of proportional formula? Is there any indication of a timescale in which these amounts might eventually be reached?

Rory Stewart: It is a question of setting a ceiling. We welcome this, but it is quite unusual in the Department’s spending to have to go through primary legislation in order to make a financial allocation. I mentioned to Ms McGovern that, in a three-year period, we would allocate, say, £3.3 billion to the World Bank. We do not do that through primary legislation. This Bill attempts to give the Department the ability to do what we do with the rest of our budget, which is to make decisions on the basis of ministerial decisions, accountability to Parliament and strategic decision making. Specifically in relation to CDC, we would like the ability, should a business case emerge, to give it more money without having to come back to Parliament with primary legislation every time we wished to do so.

Where was the figure arrived at? Well, the figure was arrived at after a discussion with CDC about the maximum possible amount it could realistically require over the period, which takes into account its staff resources, the demand in the developing world and its past spend. If you look at CDC’s last round, it put about £1.2 billion through in a year, of which £735 million was a recapitalisation from the Government.

Looking forward over the next five years—2016 to 2021—this would allow them to draw down something of the order of £1 billion a year. In effect, it is only £4.5 billion because of that £6 billion they already have £1.5 billion. On the next bit of what they take in the future, if I’m honest with the Committee, my preference would have been to say, for the reasons and principles I laid out in relation to our other spend—our investment to the World Bank—that Ministers could come back through secondary legislation. A statutory instrument is how I just did a £350 million addition to the World Bank. I think you were on that Committee, Mr Grady. That would be the process we would hope to do with CDC.

My preference would have been to just give Ministers the power to go to a Statutory Instrument Committee to ask for that money, but the Clerks of the House advised us that it would be better to set a financial limit to that power, so we chose for the period 2021 to 2026 the same amount we chose for 2016 to 2021. That is how that figure is arrived at.

[Imran Hussain (Bradford East) (Lab)]

Q Just to build on the point made by Mr Grady in his question to the Minister, I listened to the answer, but in the absence of a business case strategy or investment policy I am finding it difficult to understand how we can arrive at those specific figures because there is nothing to suggest how that money will be spent.

Secondly, does CDC have the capacity, given the totality of its lifetime spend of £1.5 billion? Such a massive increase would be an issue. Another question, probably to the Minister, is around the point made earlier by Ms McGovern and the areas where we have availability of private sector financing. Is there any idea of where the new strategy or investment policy will go with that? I take on board the example used—India. I accept that India has pockets of poverty, but in comparison private sector financing is more readily available perhaps than for other target areas.

Rory Stewart: Those are three very good questions around the business case, capacity and private sector financing. I will take them one by one.

The idea of this proposal—the primary legislation—is to provide an indicative ceiling around which a business case can be organised. Within the Department, we would expect to produce a business case and to have some sense of what money would be available. Currently, there would be no money available so it would not be possible at the moment for anyone to write, as the Department would hope, the forward strategy for future investment or produce a business case, which we hope to do in the summer of next year because Parliament would not have given us permission to give any more money to CDC.

Bluntly, if the Committee decided not to pass this legislation, CDC would have to start reducing staff and we would have to scale down significantly the future programme of investments because there would simply be no money legally available to CDC and there would be no purpose in producing a business case in the summer for future investment because that money has already been allocated. So we believe it is important to get your permission in principle for a seemly amount that we could give CDC should a business case be produced to meet it. That brings me to the second question.

I will hand over to Graham and Diane in a second, but I am absolutely certain that the board of CDC and its chief executive will not request the money from us if they do not feel they have the capacity to spend it and if market demand does not exist for that expenditure. They are under a strong obligation to their board to make sure they take this money responsibly, so even in a case in which DFID does its business through consultation with CDC and we decided, for the sake of argument, that a reasonable sum of money going forward over a five-year period was, let us say, £3 billion—I chose £3 billion because the £4.5 billion is a ceiling and we are not saying we will take that. That is what this business case is about. So let’s say it was £3 billion. They would then effectively be able to draw down on a promissory note, effectively. The Department would be saying, “You can draw down that money over a five-year period.” CDC would then have to come up with individual proposals—“Here is a solar programme in Burundi that we think is worth investing in”—and draw down the money from us. I do not want to speak for CDC, but it would certainly not be drawing down money if it did not feel that it had the resources to spend it responsibly.

That brings me to the third question of private sector financing and to Ms McGovern’s question. We are absolutely clear that we do not want to be in the business of crowding out private sector finance. One of the really good criticisms made of CDC in the National Audit Office report, the Public Accounts Committee report and the ICDC report was that it was doing exactly that, for example by making investments in coastal China. We stopped those things from 2012 onwards. The investments that we are now talking about in India are in places such as Bihar or the poorest bits of Uttar Pradesh, where the business environment is very difficult and very little capital is going in. We are also making sure that the grid is followed absolutely with every investment, so that we are not falling into that trap.

Graham Wrigley: This very important question is about how CDC and the shareholder respond to what we think is the very clear need for long-term, patient, impact-driven and additional capital in low-income countries, and about how we do that in a responsible and thoughtful way. We fully understand that this will be a very significant step in CDC’s history, but from our perspective, having worked on this for the last five years, this is evolution, rather than revolution as it might look from the outside.

Let me explain why. If we go back to 2012, when an entirely new mandate was created, a new team was empowered to go off and explore and see what would happen. At that time, the projections showed that if things went well, more capital would be required. That is precisely what happened, and it led to the recapitalisation in 2015. As the Minister has just said, we structured that recapitalisation such that the money could be drawn down if and when there was the market demand. Indeed, it was only this week that the first promissory note for that recapitalisation was called.

Going into the next five years, the team has now been established. It was 40 people back in 2012; we are now at 220. The commitment rates have gone up. We believe that the market need in our markets is growing, and for the last year we have also been working with the Department on a series of potential new programmes focused on high risk and on unlocking new forms of development impact.

The quantum and timing of any capital given to CDC will depend on two things: first, the shareholder making its decision about how CDC stacks up against other opportunities—the opportunity cost was debated in Parliament last week; and secondly, the view from CDC. As chair of CDC, I feel deeply responsible for making sure that any capital that we call is allocated for the purpose of development impact, and that our teams can execute that responsibly. That is the context for where we are now and for the Bill. We see this as a long-term discussion about the shareholding of CDC. CDC has to perform it for the purpose of development impact, which I promise you is what drives everybody who works in CDC.

Rory Stewart: Just to confirm, Graham, am I right that you are formally saying to the Committee that you would not draw down this money if you did not feel that you could spend it responsibly and have the resources to do that?

Graham Wrigley: No, we would not do that.

[The Chair]

That well known Labour Member, James Duddridge.

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[The Chair]

Final question.

Rory Stewart: I am sorry; there was a strange comment coming from Mr Doughty who, when he is not texting, throws things from the chair. We believe very strongly that economic development and job creation are absolutely core activities in the elimination of poverty. The distinction that Mr Doughty is trying to draw between economic development, job creation and poverty alleviation is extremely unorthodox and it is not one that the chief economist of our Department, or indeed any of the officials of our Department, would accept.

[Imran Hussain]

Q I have a final question for the Minister. While the CDC has made some progress since 2011, as I have said in the Chamber, does he at least accept that there is room for improvement around a greater focus on poverty alleviation, around greater overview and scrutiny and avoiding tax havens and so on?

Rory Stewart: Yes, we need to continually improve. One reason why this debate is useful, and why the primary legislation is useful, is to shine a light on all this stuff. None of us is at all complacent. These things are very difficult. The DFI is the leader in the world, we believe, in terms of trying to measure things that are very difficult to measure—how to treat job creation and economic development in some of the toughest environments in the world. We can keep improving and you are absolutely right that those things you have mentioned are exactly the kinds of things that our new strategy will attempt to improve, including, for example, caps on the amount of investment that goes to India.

[The Chair]

Thank you for getting that all done within time. We thank our expert witnesses and the Minister.

Examination of Witnesses

Sir Paul Collier, Tom McDonald, Terry Caulfield, Saranel Benjamin and Gideon Rabinowitz gave evidence.

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[Fiona Bruce]

Q I am probing a little, if I may. You say that it is up to us how we do it, but you have just spent eight months looking at CDC day in and day out. I am seeking to glean the benefit of that detailed insight when the Independent Commission for Aid Impact and our Sub-Committee, which scrutinises it, looks at the issue. What should we be focusing on? Where should we be asking questions?

Tom McDonald: If you look at our value for money conclusion, we essentially divided it between, on one hand, the economy and efficiency with which CDC was being run and with which DFID was overseeing it, and the effectiveness of CDC. Looking at the first two e’s, we concluded that DFID’s oversight of CDC has improved considerably, and that CDC’s operating model is now pretty economic and efficient. It is a pretty good way for CDC to organise itself and spend the money that DFID has allocated to it.

On the subject of effectiveness, which we discussed at the beginning, this is clearly not an easy thing, but we still think there is more to do. There is more on which DFID could press CDC, and there is perhaps more on which Parliament could press both DFID and CDC to give a better picture of what CDC itself says is its ultimate objective: changing people’s lives, not just creating jobs.

[Imran Hussain]

Q Just a further question to Ms Benjamin from War on Want, to follow up from colleagues. I am slightly lost. Are you saying that you are principally against the development finance institution model—that would considerably weaken where I thought you were coming from—or are you concentrating on specific instances where you think the money was not spent well and most efficiently to target poverty alleviation? You gave the example of the Republic of the Congo. Can you elaborate on that and be more specific about where you are heading? I am slightly confused about where you are going with it.

Saranel Benjamin: As I said, we come from very different development backgrounds. For War on Want, a charity that works with partners in the global south, it is not about creating jobs; that is our approach. We are about supporting grassroots communities and organisations to allow them to envision the change that they want to see in their own countries. For me, when I see a private firm like CDC investing or looking for opportunities, I see it looking for an entry point for the UK to make a profit in the global south. For me, that is what it looks like. Given the use of tax havens, those countries are not really benefiting from what is being invested in those countries.

Again, look at the quality of jobs being created. Feronia in the DRC is one example. Workers are being paid less than $2 a day. Are you telling me that that is poverty reduction? Is that job creation? There is a dispute about the land on which Feronia operates; it is a 100-year-old land struggle. The largest investor in Feronia is CDC, which holds 67% of the investments owned in Feronia. The land dispute has been going on for a number of years, and communities have been displaced off that land. CDC claims that it is all legitimate, but it refuses to make the lease agreements or concessions publicly available. We have requested them from CDC, and have yet to have an acknowledgment that the email was received.

[The Chair]

Are you happy with that answer, Imran?

[Imran Hussain]

Yes.

[Rory Stewart]

Q Very quickly, for Tom McDonald and Sir Paul Collier, Saranel has just said that CDC exists for the UK to make a profit in the global south, and the countries are not really benefiting from those investments. Do you agree with that?

Tom McDonald: We did not assess the whole portfolio, in terms of the impact that it was having. We have to rely to some extent on the prospective assessment of impact that CDC is now doing on a regularised basis for all its investments. I honestly cannot give a yes or no answer as to the impact on the south.

Commonwealth Development Corporation Bill (Second sitting)

Imran Hussain Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 6th December 2016 Public Bill Committees

[Stephen Doughty]

But the CDC has not made such a request and, as the NAO said this morning, it is the cart before horse. That is the problem. I do not expect the Minister to provide a detailed analysis of every single project that we will invest in over the next 10 years, but a paragraph in the explanatory notes and some vague assurances about market demand are simply not good enough. We are talking about spending, potentially, billions of pounds of taxpayers’ money. Would we suggest the same amount went to a non-governmental organisation such as Oxfam or indeed the World Bank?

[Imran Hussain (Bradford East) (Lab)]

Does my hon. Friend agree that the central issue is not an increase in funding but the sheer level of funding? This is an organisation that in its whole life has had funding of £1.5 billion. On the Opposition Benches we want to probe why there is such a significant increase, which is a reasonable view to take.

[Stephen Doughty]

Absolutely, and that gets to the nub of the issue. The Minister has been a veteran of many debates in this House and in Committee, so he knows full well the format in which debate takes place on amendments. Amendments are tabled to discuss the fundamental issues and the matters around them. Therefore, given the faux outrage at me for suggesting £3 billion versus £6 billion, he needs to explain—he has not done yet—his rationale for £6 billion and £12 billion, which I have yet to hear.

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[Imran Hussain]

It is a pleasure to serve under your chairpersonship today, Ms Ryan.

I will sum up the points that we are making. My hon. Friend the Member for Cardiff South and Penarth has gone into some detail, as always, on where we stand. I want to place the Labour Front Bench firmly in line with his views, to answer the point made by the hon. Member for Rochford and Southend East.

The issue here is the Government’s intention. We are not in any way, shape or form anti-DFI or against the spirit of the corporation. It was brought in by a Labour Government many years ago and we accept, on the record, that the CDC has been improved since 2011, as I said on Second Reading. As my hon. Friend the Member for Cardiff South and Penarth set out, we want to be satisfied on the rationale behind the level of increase; the lack of strategies and investment policies—the phrase “cart before horse” has been mentioned on many occasions and I will not go into it further—the CDC’s capacity; and the fact that it has not requested this money. Those are all pertinent points. Finally, regarding the concern about where and how this money is currently being spent, I agree with Members on both sides of the Committee on the logical point of view that has been put forward. Nevertheless, that concern remains.

The Minister’s earlier intervention was most helpful, when he set out his reason for why the business case, the strategy and the investment policy were not forthcoming. He gave the guarantee, which I want to press him on, that no money would go to the CDC unless it was requested by the CDC. Even so, it has to be done in the light of a proper business case, a strategy and an investment policy. Secondly, I press him to give some indication as to when those important strategies and policies will come forward. They are central to these proposals and I hope he genuinely gives us dates and assurances in that regard.

[Rory Stewart]

It is a great pleasure to serve under your chairmanship, Ms Ryan.

I will begin by saying that I have a lot of sympathy with the points that the hon. Member for Cardiff South and Penarth is making; they are all incredibly important. He has an encyclopaedic knowledge of CDC and has identified a number of issues in relation to CDC that we take very seriously. They range across its accounting principles, its reporting framework, the scope of the countries in which it operates, its overall effectiveness, its absorptive capacity, the strategy and business case systems, theories of change and types of investment. I think these are all good concerns and there is nothing mentioned by the hon. Gentleman that I would disagree with in principle. These are the kinds of questions we would expect DFID and Parliament to ask, as well as CDC to ask of itself before it makes an investment.

The real question is what is appropriate to put in the Bill, what is appropriate to be done through Parliament, what is appropriate to be done through the Department and what is appropriate to be done through CDC. That is where I hope I can provide a bit of assurance to right hon. and hon. Members of all parties.

I think we can take it as read that there is an overall agreement that we should give some more money to CDC. There is some disagreement about how much more money—the different amendments suggest different views on how much money and how that money is calculated—but the basic principle is that CDC is a good thing, that economic development is a good thing, that DFIs are a good thing and that, particularly at this moment, as Sir Paul Collier pointed out strongly in this morning’s evidence session, we should be investing more in economic development and jobs in Africa. That is something we all agree. The question is how we do it and how we ensure that it is done in the right way.

The hon. Member for Glasgow North proposed a quite detailed amendment, but there is a small technical issue. He suggested that we aim at a 5% ODA amount, but there are two issues with that. We considered looking at that in the Bill, but the reasons we rejected it were twofold. There is an issue with confusing a stock with a flow. In other words, the measure is designed to create the capital that is invested and reinvested over time— that initial investment made by the Attlee Government continues to be recycled nearly 70 years later—whereas the ODA allocation is an annual allocation and an annual spend.

There is an issue around trying to compare a stock and a flow, and we can go on to that. In fact, rather good graphs have been produced, comparing stock and flow investments of Germany, France and the Netherlands, showing that, in proportional terms, Germany is spending nearly three times as much and France is spending nearly twice as much as we are. The reason I have not deployed those kinds of arguments is that I just do not think that that stock and flow comparison is good.

However, there is a more technical reason why we would reject the exact amendment. The way in which the amendment is written—at least on the basis of the analysis by our in-house lawyers—is that it would refer to the entire cap for the entire sum available to CDC. In other words, that 5% would not be 5% of future money. The way in which the amendment is drafted means that it would incorporate the £1.5 billion of its existing money. That would therefore limit us to only a further £1.5 billion over a five-year period. That would not be 5% of ODA. It would be about 2.5% of ODA, which we think would be considerably lower. The £3 billion number, which is what right hon. and hon. Members have been getting at, is a more plausible figure as an additional amount to the £1.5 billion. We can talk about that over time.

Very quickly, I will deal with the question of additional responsibilities, which is at the core of the questions asked by the shadow Secretary of State—the hon. Member for Edmonton—and the shadow Minister, the hon. Member for Bradford East. The basic questions are: are we are putting the cart before the horse, why are we using taxpayers’ money for this kind of investment, when will we present our strategy, what are our real intentions, and what kind of guarantees are taking place? The answer is that, in effect, we have a whole series of procedures. What we are asking Parliament to do is only the first stage of a whole series of checks and balances.

We are asking this Committee, and we are asking Parliament, to agree to the principle of lifting the existing cap on CDC—in other words, putting CDC more into the type of arrangement that we would have with any of our other donors. It is very unusual that CDC has a capped amount. That is not true for the amount of money we give to an NGO or to the World Bank. In fact, we are actually giving more to the World Bank than we would envisage giving to CDC. We are asking Parliament to lift the cap.

The next bit—the question of how the business strategy, the business case and individual investment decisions are written—would then be taken forward by the Department, in line with the UK aid strategy, and debated in Parliament. Directly to answer the question of the hon. Member for Bradford East, who wanted dates, in December 2016 we will complete our business strategy, which will lay out the strategy for the next five years for CDC. It is the strategy that the hon. Member for Cardiff South and Penarth was referring to as our last strategy. We will have a new strategy of that sort. That strategy will do a number of things that will address concerns raised in many of the amendments as the Bill passes through the House. It will, for example, tighten our impact assessments, put more focus on gender and set a cap on India. The next thing that will happen is that in summer 2017—this is quite a slow process—we will bring together a business case to draw down a promissory note of money; in other words, to say, “This is the amount of money we believe is the kind of money that CDC may need to call up.”

[Rory Stewart]

Indeed. I am happy to repeat that for the record. The intention is that, in our forthcoming business strategy, there will be a cap on the amount that CDC can spend on India.

As we move forward to the summer, we will produce the business case. The business case will define the amount of money, whatever that is. It could be, for example, £3 billion, which is roughly in line with some of the amendments that have come forward, but we would have the option to go up to £4.5 billion. I do not honestly believe that that business case will be going up to £4.5 billion, but we would have the option to do that.

The next stage is that CDCs needs to make very detailed investment decisions, which take a long time. A lot of these investment decisions take two to three years. Let us say that CDC was going into solar power in Burundi. It would have to get in on the ground. It would have to ensure that it had a viable business and then it would have to go through our development grid, which is the next stage of the process. That means ensuring that it had checked GDP per capita, it had checked the amount of capital available, it had checked the business environment and it had checked that this is a sector that creates jobs. That is just the first stage.

The next stage CDC needs to go through is to present a development impact theory. That individual investment needs to have a theory: exactly what contribution is this going to make to jobs, economic development and poverty alleviation? Within our strategy, at the end of this year, DFID will ask CDC to publish that development impact theory, so that the theory can be seen case by case with every investment and it will be possible to challenge that theory.

At that stage, CDC would then come back and call down on the promissory note to call down that money. Then other forms of monitoring come on. We are a 100% shareholder of CDC, which is why some of the analogies with giving money to NGOs or World Bank institutions are slightly different. This is us giving money to a wholly owned DFID institution. Every quarter, we as DFID shareholders meet the board and assess its performance. We have an annual review process. On top of that we have all the other processes: NAO, Public Accounts Committee and the International Development Committee. Independent Commission for Aid Impact reports would also be able to get into the business of CDC. It is that and, finally, it is our basic confidence in our institution that allows us to even begin the process. We would not come to the Committee asking for permission to make more money available unless we were confident that we had a good management team in place with a strong history and a strong track record of development; otherwise, we would be wasting hon. Members’ time.

We believe that this is a good institution that will be in a position for us to produce the business case, and that it will be in a position to find investments. I absolutely guarantee—

[Imran Hussain]

Is the Minister giving an absolute assurance that no further investment will go to CDC before the full, thorough business case and investment policy comes before the House again?

[Rory Stewart]

I am giving an absolute assurance to the hon. Gentleman that no money will be given to CDC until a full strategy is developed and published, which can be debated in the House—that is a strategy coming in December—and no money will go to CDC until a full business case is written in huge detail, which will be prepared in the summer of 2017. Following on from that, there will be the individual investment decisions. I am happy to give that assurance. On that, I would ask the hon. Gentleman kindly to withdraw the amendment.

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[Jeremy Lefroy]

I accept that the potential increase from £6 billion to £12 billion is very substantial. I note that subsection (3) talks about regulations. Does the Minister envisage gradual increases, perhaps of a billion at a time, through regulations under secondary legislation? I believe that secondary legislation is a very adequate way in which to do this and that hon. Members need to take it very seriously, as the hon. Member for Cardiff South and Penarth has mentioned. However, it might reassure Members if somewhere in the Bill or in an amendment it was stated that the increases would be no more than, say, £2 billion at a time. After all, we are now considering raising the amount by £4.5 billion in the Bill, yet, as I understand it, we are looking to put it up by £6 billion through secondary legislation. It might therefore be proportionate to indicate that we would expect the Government to come back to the House on more than one occasion if the sum were to go from £6 billion to £12 billion.

[Imran Hussain]

For the sake of avoiding repetition, I will cite the case I previously outlined, because I think the arguments are exactly the same. The only additional point is that I agree with my hon. Friend the Member for Cardiff South and Penarth, who makes the point that using a statutory instrument to double the increase, if not more, is something that MPs will be uncomfortable with, for obvious reasons.

[Rory Stewart]

Ms Ryan, thank you very much for chairing this debate. I will deal with these issues very quickly, because I do not wish to detain people very long. A few issues of fact: first, this will not be an additional £12 billion on top of the £6 billion. We are talking about lifting the ceiling, so it will be an additional £6 billion. Essentially, the whole debate—we keep coming back to it in different ways—is about the fact that the CDC, through an accident in history, is governed by completely different rules from any other body to which we can give money. In the initial legislation, from 1948 onwards, a cap was put on the amount of money that the Government could put in. An additional cap was put in during the early 2000s when the Government were proposing to sell off CDC. The cap was put in there simply so that the Government did not pump more money into this organisation before it was sold off. That was a perfectly legitimate intention of primary legislation, but it puts us in an eccentric position in that it is possible for us to give, theoretically, unlimited money to an NGO, to a research council or any other body, to the World Bank and to other financial institutions, whereas the CDC is the only institution for which we have to return to primary legislation every time we wish to give it money.

The point about this ability to go up to £12 billion in the future would be that it would try to put the CDC into a similar position to the other recipients. In other words, on the basis of Parliament, the Minister and the Department, a decision would be made on the strategy on how the money was to be allocated. Money could be allocated to an NGO, it could be allocated to CDC, and we would do that through the normal departmental process.

The hon. Member for Cardiff South and Penarth asked about time. My strong belief, which I am happy to put on the record, is that the money we are asking for—that first ability to increase by £4.5 billion—would be the absolute maximum over the next five-year period up to 2021. We do not intend to come back for the next money until at least after 2021-22. At that point a new Government—it could be a Government, theoretically, of the Labour party—would have the option to come, through secondary legislation, and ask for the ability to increase the cap up to £12 billion. That, again, I would anticipate being for continuous, steady state investment. That £12 billion simply reflects, again, about £1 billion a year from the 2021 period going forward to 2026. That is the kind of money we are talking about and that is the kind of plan that is in place.

To conclude, we have heard very detailed, powerful and encyclopaedic speeches from the hon. Member for Cardiff South and Penarth. He has already made enormous arguments about the sectors and countries in which we should be investing. I request, if possible, that we do not return to those when the amendments are discussed, because they have already been made in enormous detail during the debate so far.

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I hope the Minister will accept new clause 2 in good faith. It is not meant to constrain or restrict. It is about ensuring that the CDC adheres to stated Government policy. The global goals are important. We need to ensure coherence across Government and the new clause would be very helpful in achieving that.

[Imran Hussain]

I associate myself with comments made by the SNP Front Bench team and, indeed, my hon. Friend the Member for Cardiff South and Penarth. I am not going to repeat what has been said, but I will make two additional points. The CDC should work towards the SDGs as much as possible, but as we stand, there is some confusion around their overall monitoring. Those criteria have not been released and I urge the Minister to consider that.

The other option, not the least option open to the Minister—and I am sure he will give assurances—is a matter that can also be dealt with through the business case and the strategies enshrined in that, to make sure the most effective way of contributing to the SDGs is laid out before Parliament.

[Rory Stewart]

This is an example of a clause where we strongly agree that SDGs are central to what the CDC should be doing. We are already delivering on these things. In 2015 alone, 326 women received jobs through the CDC investments; that is SDG 5. We provided 56,000 GW of electricity; that is SDG 7. SDG 8 on economic growth is, of course, central to everything the CDC does.

The bigger argument is that, as the SDGs were presented, people talked about a $2.5 trillion demand per annum for investment in the world’s poorest countries. The CDC is the major instrument that will be used by the British Government to deliver that kind of investment into the private sector.

However, to respond to the shadow Minister’s point, I think this is a good way of focusing the Department’s mind and making sure that, as we develop the strategy for the CDC going forward over the next five years, the SDGs are baked into that process. We take the SNP spokesman’s suggestion that it is important to understand the SDGs as a holistic set: that we do not simply look at them goal by goal, but that we group them together.

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[Jeremy Lefroy]

Yes, it has, absolutely, but what I am saying is that the new clauses are not specific enough to achieve what the hon. Gentleman wants.

I must also repeat my earlier point that middle-income countries are a very broad church. I think I mentioned that they cover gross national incomes between £1,000 and £13,000; forgive me, but I meant between just over $1,000 and just over $13,000—dollars, not pounds, although that is less of a difference than it was a year ago. I believe firmly that a country with a gross national income of $2,000 or $3,000 per head per year is absolutely the kind of country that we should be investing in to create the jobs I referred to earlier, but it would be counted as a middle income country.

My final point is that when we invest in multilateral institutions such as the World Bank through IDA, we are investing in low income countries; but when we invest through the International Bank for Reconstruction and Development, which is the major part of the World Bank, we are investing indirectly in middle income countries, including India, China, Brazil and all the other countries that the hon. Gentleman mentioned. I would not like us to treat the CDC differently from our investments in the World Bank or in other multilateral institutions such as the Global Fund.

[Imran Hussain]

Again, I associate myself with the comments made by my hon. Friend the Member for Cardiff South and Penarth. I have two additional general points. We have to look at the 2011 review. There were clear purposes behind it, one of which was that the CDC had lost its focus. As a result of the review, we saw the new universe of countries and, as I said earlier, have ended up in a better place today than we were in four or five years ago.

My hon. Friend is absolutely right that we must not lose our focus on development impact and where it can be greatest, and nor must CDC. We must continue to focus on the poorest countries, where the impact will be felt the most and where it is most needed. The CDC’s ultimate goal must be to alleviate poverty, and that goal is not best achieved in some of the countries that have been used as examples.

[Rory Stewart]

If I may, I will focus not on particular sectors but on the issues addressed by the new clauses: the type of countries in which CDC should be working.

I wish to make four arguments. First, there are significant technical problems with the amendments, but I do not wish to take up too much of the Committee’s time with them, so I will move on.

Secondly, there is a conceptual difference between DFIs and the bilateral programmes at DFID. It is perfectly reasonable for a Government looking at their overseas development programme not to limit themselves to where they happen to have a bilateral programme. A bilateral programme traditionally means somewhere where we happen to have a DFID office and are running our own bilateral programmes through our own staff. There might be an argument that we do not wish to have a bilateral programme in a country because we already have CDC operations taking place in that country.

The third argument, which I again do not wish to rehearse because it covers a lot of the issues that we have talked about today, is how to get the balance right between Parliament—it is absolutely right that Parliament should have the job of determining the overall financial allocation—and the discretion given to the Secretary of State and the Department to determine country programmes. It would be unfortunate if we ended up specifying in primary legislation a specific list of countries where we would and would not operate, as a result of the judgment calls that a Secretary of State or Department, from any party, has to make—the world changes very quickly.

Right hon. and hon. Members have raised some difficult judgment calls. India has 35% of the world’s population who exist on $1.25 a day, which is more, in absolute numbers, than the number of poor people in sub-Saharan Africa. That is a difficult philosophical discussion, and different people on different sides of the House will have different views on whether we wish to focus on that, but whether we focus on those people or not seems reasonably to be a judgment call for the Department and perfectly in accordance with the International Development Act 2002. It is also true that it may be necessary to make investments in a wealthier state in order to help a poorer state. It may be necessary to use South Africa’s financial institutions in order to support poverty alleviation in other African countries.

Finally, it may be necessary to respond to quickly changing events in the world. For example, nobody predicted the conflagration in Syria. We are suddenly having to put bilateral programmes into middle income countries—Syria, Iraq, Jordan, Lebanon—where we never had bilateral programmes four years ago, in order to deal with 3.5 million refugees, horrendous killing, an extreme humanitarian disaster and a UN tier 3 emergency. The International Development Committee has been asking us to get the CDC to invest in exactly those situations. The new clause would prohibit us in primary legislation from doing that. With respect, I believe that these things are best left to the discretion of the Department. We are very happy to share all our thinking on how those decisions are made with Parliament in the normal fashion. With that, I hope that the new clause will be withdrawn.

Commonwealth Development Corporation Bill

Imran Hussain Excerpts

Programme motion: House of Commons & 3rd reading: House of Commons & Report stage: House of Commons
Tuesday 10th January 2017 Commons Chamber

[Imran Hussain (Bradford East) (Lab)]

I associate myself with the Minister’s comments in thanking right hon. and hon. Members of all parties who have participated in what I believe has been a very constructive debate—irrespective of whether the amendments and new clauses have been accepted. What they set out has been utilised in the best possible way, as hon. Members have used them to raise some very important points. I offer my thanks, too, to all the non-governmental organisations that supported us throughout the process, to those who came before us in Committee to present written and oral evidence and to staff in the Public Bill Office, whose assistance has been invaluable, as always.

I would like to thank my hon. Friends who have spoken with great concern and passion about the Bill, and I particularly mention my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), whose experience in the Department for International Development is widely respected and was visibly expressed in today’s debate. I thank my hon. Friend the Member for Wirral South (Alison McGovern), who is no longer in her place, who also served outstandingly in Public Bill Committee. I do not want my hon. Friends’ valuable contributions to go unnoticed, and I include that of my hon. Friend the Member for Liverpool, West Derby (Stephen Twigg), the Chair of the International Development Committee, who always makes a passionate case and has an informed stance on the matters in hand.

Let me be clear that in today’s constructive debate no Member has opposed the principle or spirit of the CDC itself, and no one has criticised its role and mission statement. All Members, particularly Opposition Members, have made the point time and again that we must not lose sight of the CDC’s sole or founding principle, which is poverty alleviation. We have all accepted that, and we have had constructive debates in Committee and on Report. The amendments and new clauses that were tabled have had some support from across the House. Some were tabled as probing amendments, but some were amendments intended to strengthen the Bill.

Throughout the Bill’s passage, we outlined a number of concerns that we held over its provisions, including on the accountability and scrutiny of the investments made by the CDC, on the need of the CDC to focus its investments on efforts to alleviate poverty and on the necessity of a business case from the CDC. These concerns have been fundamental to our position on the Bill, and they are concerns about which we have sought strong assurances from the Government.

On accountability and scrutiny, we had concerns, as illustrated in our amendments, over the fact that the CDC’s investments are not independently assessed on a frequent and regular basis. The absence of such assessments undermines the credibility of the CDC and its investments, and it weakens public confidence that taxpayers’ money, through DFID, is being spent by the CDC on efforts to alleviate poverty and help the poorest in the world. It is vital for every pound, every penny, of development to be directed towards that goal, and strong, independent scrutiny of the development impact of the investments would assure us of that.

We have heard assurances from the Minister today and in Committee that he would welcome further independent assessment by the Independent Commission for Aid Impact. I feel that he has listened, and I am grateful to him for that. We have also been assured that the annual reports and accounts provided by the CDC contain ample information, and that the CDC will be held to account for any discrepancies by either the Public Accounts Committee or the International Development Committee. I am sure that they will make any such discrepancy the subject of inquiries, as they have in the past.

As I have said, it is vital for us to ensure that the CDC’s investments focus on the alleviation of poverty, which is DFID’s legal aim and purpose. Given past investments involving the construction of luxury hotels and shopping centres in well-developed areas, Labour Members were concerned about the possibility that the CDC would use its additional finance to return to such activity. However, the National Audit Office report, which was published just before the debate on Second Reading, makes it clear that that is no longer the case, following the important reforms set in motion by the right hon. Member for Sutton Coldfield (Mr Mitchell), who is not in the Chamber today.

The Minister has been kind enough to provide assurances in response to some of the concerns that have been expressed today, so we will not oppose the Bill’s Third Reading.