Commonwealth Development Corporation Bill

Ivan Lewis Excerpts

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

[Stephen Doughty]

Indeed. My hon. Friend, one of the longest-serving Ministers at DFID, knows this only too well. He makes a very important point. I have spoken to other experts in the sector who suggest that to absorb that amount, even a doubling would be a struggle, so it certainly applies to the levels we are seeing. That is why it would be much more helpful if the Minister were clear about the schedule for this spending. What is his idea of the number of years over which this increase would be spent before we might require another Act to increase it even further?

We tabled some crucial amendments, as did SNP Members, in new clauses 3, 4 and 6 and my own new clause 9, emphasising the importance of focusing on the poorest, least developed and low-income countries and of ensuring that we remain coherent with the sustainable development goals—the global goals agreed by the UN—and focused on poverty eradication rather than other priorities.

[Mr Ivan Lewis (Bury South) (Lab)]

My hon. Friend is making an excellent case. Has not DFID led the world on the importance of aid transparency and a focus on poverty reduction? The problem at the heart of these proposals is that there is very little prospect of transparency of how these resources are spent. Equally, there is very little ability for the Government to guarantee that the resources will be deployed and focused on poverty reduction. Is that not a matter of major concern?

[Stephen Doughty]

I think it is, and that gets to the point. A lot of information is provided by CDC online, and it is important to acknowledge that much of it is helpful. We can get into individual projects and see the particular spending on those individual projects. However, it is not the same when it comes to the level of spending, which is what the NAO was looking at. It is important to be able to prove prospective development impact and show where it is going.

To take just one example, the NAO looked at the issue of funding going into the health sector in India, and tried to get clear information about where the money was being spent in a particular hospital group. It looked at whether it was going to the poorest or to middle-income patients. The NAO told us in its evidence that it was going to middle-income patients, which does not strike me as a correct use of CDC’s money. That is not to say that the investment is not good in and of itself—I am sure that enabling access to hospital for people in general is a good thing. The question is whether we should be spending our aid money on that. Surely we should be focusing on the poorest.

When we examine the figures in depth—they can be found in a House of Commons Library research paper—we see that although the proportion of CDC’s investments in the least developed countries has increased, it is still significantly lower than the proportion of its investments in middle-income countries. As for spending in individual countries, it is a fact that in India most of CDC’s money is being spent in what are known to be the richest states. The highest proportion of its investments goes to Maharashtra, which is where Mumbai is located. I am not saying that the individual investments there are not good, effective or useful; I am saying that it is a question of priorities. In Committee, it was helpful to hear the Minister speak of the possibility of a cap or restriction on funds that go to India and elsewhere in south Asia rather than to Africa. Giving evidence to the Committee, Professor Paul Collier said that he shared the concern that had been expressed about whether CDC was focusing enough resources on the poorest countries. New clause 9, for instance, relates to those issues.

The wider issue of spending routes that is raised in both the SNP’s amendment 3 and our new clause 10 is crucial. We are not suggesting that CDC should not be given more money, or that it should not have a chance to expand its operations and the autonomy that it enjoys, but we believe that those elements should be in proportion to other forms of official development assistance. It is important that we introduce safeguards. By 2019-20, 6% of United Kingdom official development assistance will be spent by other Government Departments. Money goes into the prosperity fund and other Government funds, and there is often far less scrutiny and oversight than there is in DFID. That worries me, and I know that it worries other Members on both sides of the House.

We need to achieve a fair balance. CDC has its role to play in the portfolio, but that must be proportionate to other ways in which we can spend the money. We must ensure that we are pulling all the levers of development, rather than just one at the expense of others. For that reason, I am inclined to support amendment 3 if it is pressed to a vote.

I want to say something about tax havens, although I shall not do so at length, because we discussed the issue a great deal in Committee and we have also discussed it today. I find it surprising—this relates to new clauses 1 and 8—that CDC continues to use tax havens such as the Cayman islands and Mauritius. A fair point has been made about the importance of stable financial arrangements for investments. In some countries it is clearly not possible to set up arrangements within the legal structures of those countries to ensure that the right fiduciary controls are in place. However, I do not understand why we are not setting up such vehicles in England and Wales, or in other jurisdictions. Why are so many of them in the Cayman islands and Mauritius?

Moreover—I have asked parliamentary questions about this—we are paying management fees to financial services organisations, in the Cayman islands and elsewhere, that also support the far less transparent activities of other corporations and individuals. I find it deeply worrying that, whether or not there is anything untoward about an individual CDC investment, we may be indirectly supporting the flourishing of the tax avoidance and evasion that exists in overseas territories.

--- Later in debate ---

[Rory Stewart]

I shall deal with that when discussing the second set of amendments, which relate to that directly, but first I want to continue to pay tribute to other Members of Parliament, from both sides of the House, for their support for CDC. I was struck by the support of the hon. Member for Liverpool, West Derby (Stephen Twigg) for the Virunga project in the Democratic Republic of the Congo, by the in-principle support of the hon. Member for Glasgow North (Patrick Grady), and particularly by the phrase produced by the hon. Member for Edmonton (Kate Osamor) that is absolutely right in guiding us as we go forward: we need to get the right balance between long-term investment and short-term need.

I should just recapitulate the extraordinary work that CDC has done and echo the thanks of the hon. Member for Bedford (Richard Fuller). It has been a really tough time. As Members of Parliament, we are used to being under full public scrutiny and attack. CDC works very hard and has delivered some high-quality projects, and this has been a very tough period for it.

Three types of amendments have been tabled. The first set basically says yes, we should be giving money to CDC, but we should be giving slightly less money to CDC; the second set says that there should be restrictions on the Government’s ability to give money to CDC; and the third set would restrict what CDC itself can do with the money. Essentially, the Government’s position is that these are all good points, but they are better dealt with through the governance mechanisms and the strategy than through statutory, primary legislation.

I shall deal first with amendments 1 to 5 and new clause 10, which essentially say yes, we should give money to CDC, but we should give less money to CDC. Why do we disagree with what was essentially the argument put forward by the hon. Member for Cardiff South and Penarth (Stephen Doughty)? First, because, with respect, I still believe that the hon. Member for Glasgow North is confusing the stock and the flow. The fact is that the money put into CDC will be recycled. For the sake of argument, if an investment was 10 to 12 years in length and CDC had $12 billion in the pot, it would be in a position to maintain the current rate of investment of around $1 billion a year—the money would come back and go bounce again at around $1 billion a year. It is not fair to compare what happens in a capital stock used for equity debt investment with the annual expenditure of a Department.

Secondly, there is the question of demand, which the hon. Member for Cardiff South and Penarth referred to. The demand is almost limitless. It is calculated that $2.5 trillion is going to be required annually by 2030 to meet the sustainable development goals, which is why the relevant question is not the demand for the money but the question of the absorptive capacity, which the hon. Gentleman raised.

Thirdly, the Bill is enabling legislation that sets a ceiling—a maximum limit; it is not saying, “This is the amount of money we are going to give.” Fourthly, the design is for the money to go into patient, long-term investment. The three-year review proposed in one of the amendments simply will not work for investments that are intended to be, on average, 10 years in length.

[Mr Ivan Lewis]

If the Bill is passed and its consequences are added to the fact that more than 25% of DFID’s spending currently goes through other Government Departments, the result will be that more than 50% of our aid will no longer be spent through DFID. Does it not raise serious questions about the Government’s intentions for DFID to remain as a stand-alone Department with a place at the Cabinet table if more than 50% of its spending will be spent by CDC and other Departments? No other Government Department would come to the House and ask for more than 50% of its resources to be spent via other means.

[Rory Stewart]

There are two distinct points there: DFID’s spending and the proportion of the spending. The first thing to understand is that CDC is 100% owned by the Department for International Development, which is one reason why a number of these amendments are not appropriate. On the proportion of money spent, as my hon. Friend the Member for Bedford (Richard Fuller) eloquently pointed out, the small increase that we are talking about in terms of the annual amount that CDC will be able to invest will still be much smaller than comparable organisations in Holland, Germany and France. It will be about a third of the amount that the Overseas Private Investment Corporation can invest—OPIC is just one of the US’s development finance institutions that is able to invest—and only about a sixth of what the International Finance Corporation puts out a year. We are not talking—comparatively, globally—about a large amount of money. We are talking about something in the region of 8% at maximum—even if we hit the maximum of official development assistance—and the other 92% will continue to go in the normal way through non-governmental organisations and organisations such as UNICEF for the objectives that we pursue.