Global Poverty

Jeremy Lefroy Excerpts

Thursday 1st July 2010 Commons Chamber

[Jeremy Lefroy (Stafford) (Con)]

I congratulate those hon. Members who have made their maiden speeches today, including my hon. Friends the Members for Wirral West (Esther McVey) and for Stevenage (Stephen McPartland), and the hon. Member for Rochdale (Simon Danczuk).

Last year, my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell), whom I welcome to his position as Secretary of State, wrote:

“In a globalised world, we are all bound together, our destinies linked.”

I fully agree with that. He has made a compelling case for the importance of the UK’s international development programme. That case is a moral case, and we have heard the reasons behind it, including the fact that 25,000 children die of preventable diseases every day. However, there is also a case to be made for our national interest, and I would go beyond saying that it lies simply in ensuring that people no longer wish to flee the conditions in their own countries to seek a better life elsewhere. That is part of it, but I would echo the words of Sir Terry Leahy this week. He said that

“we need to think more about how we can engage in the world as it is and will be.”

He went on to say:

“I think it is a wonderful thing that already a billion, and potentially billions, are going to be taken out of poverty”

leading to

“an incredible business opportunity where Britain is well positioned.”

I pay credit here to the work of the previous Government on international aid.

For much of my working life, I have worked in developing countries in business and I therefore declare an interest. I remember that in the late 1980s there was always a lot of tension between those involved in business and those involved in development. These days, it is very different. It is accepted that the best way to tackle poverty is through economic development and that the private sector will play the leading role in that. Indeed, the private sector has come a long way in recognising that it, too, has social responsibilities. It recognises that Government and development organisations are its partners. If there is no functioning health system, its staff and customers will suffer. If schools are inadequate, where will it recruit the staff that it needs? I have the good fortune of being married to a doctor who ran a health education programme for 11 years in Tanzania, and she always reminded me of the importance of that sector.

There are three areas in which aid has an important role to play in economic development. The first is agriculture, which has been so eloquently described by my hon. Friend the Member for Oxford West and Abingdon (Nicola Blackwood). There was a tendency in some parts of the developing world to see agriculture, and in particular smallholder agriculture, as a business of the past, to be superseded by the brave new world of state-owned industry. Many of those factories have long ceased to function while the smallholders continue to earn their living from the land.

Agriculture is a business of the future, certainly in Britain, in my constituency and around the world. Any country, including ours, that ignores the potential of agriculture does so to its cost. The OECD’s report on sustainable agriculture states that in 2005 to 2030, food demand is expected to increase by 50% across the world. That is a huge opportunity for farmers in developing countries. Agriculture, especially on small farms, is an excellent way to promote economic development. The International Fund for Agricultural Development has found that a healthy agricultural sector acts as a multiplier in local economies, spurring higher incomes and increasing access to markets. That is why I am delighted that the Secretary of State has highlighted agriculture as an essential building block of wealth creation.

The second area in which aid is important is small businesses, which have been mentioned. I might as well say “other small businesses”, as smallholder farmers are business men and business women. In the UK, we recognise small and medium-sized enterprises as the engine of the economy, and it should be no different in developing countries. Employment and unemployment are critical, as the hon. Member for Glasgow North (Ann McKechin) said, yet anyone wishing to set up a business in many developing countries faces great problems: the cost of registration, tax authorities that often want taxes to be paid before the business has started trading, and, above all, lack of finance. That was mentioned by my hon. Friend the Member for East Hampshire (Damian Hinds), who talked about microfinance.

Of course, the growth of microfinance has been a great success story in the past 15 years, but there is a gap between microfinance and the level at which private risk capital will lend—typically, $50,000 or $100,000 and above. Banks do not fill the gap and they usually require security, which the entrepreneur cannot provide. I urge the Secretary of State to consider how the UK can work to overcome that financing gap. It is not straightforward, as I know from being involved over the past six years in helping to finance small businesses in Tanzania through a charity, but it can be done. Well-managed revolving equity or quasi-equity funds enable a pound of aid to be used several times over. The Secretary of State rightly emphasises the importance of the effectiveness of aid, and that is an opportunity.

The third area in which aid is important is infrastructure. It is of little use to produce crops only for them to rot in the field because they cannot reach the market. Transport costs in Africa have been estimated to be on average double those in Asia. Infrastructure projects in the past have been riddled with corruption and beset by special interests, but if countries come forward with serious business cases for not only building but maintaining the necessary infrastructure, we should look at them. As the Conservative party’s Green Paper states

“we are convinced that effective support for infrastructure has a central role to play in boosting growth and development around the world, particularly in Africa.”

I have spoken about agriculture and infrastructure, and to some this might seem a throwback to the early days of international development. People might point out that many countries have not yet thrown off the shackles of poverty, but it was precisely because agriculture was ignored for 20 years and infrastructure was built and not maintained that the benefits of that investment were often not realised. What is, perhaps, new is the appreciation at last that no country will develop economically without allowing its small businesses, including smallholder farmers, to flourish. Give them firm property rights, fair taxation, access to affordable finance that will not take the shirt off their back if things go wrong, and a good basic infrastructure, and they will create the jobs that are so desperately needed. They will also create the tax revenues that will pay for the health, education and other services on which they depend, as well as the stability without which no real development is possible.