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.