Commonwealth Development Corporation Bill

Jeremy Lefroy Excerpts

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

[Kate Osamor]

The hon. Gentleman makes a valuable point, but the Bill still needs scrutiny. That is what I am laying out.

We all know that transparency is something that DFID does very well indeed. Its performance in the aid transparency index demonstrates an international gold standard in that regard. Historically, however, the same cannot be said for CDC. It is of the utmost importance that the proportion of the ODA budget that is channelled through CDC be subject to the same checks on outcomes and value for money to which DFID holds itself. New clause 4 lays down conditions that would guarantee transparent governance through an agreed framework reached with the Independent Commission for Aid Impact and CDC. Proper annual measurements of outcome would be a welcome addition to the Bill.

In relation to new clauses 1 and 8 and the issue of CDC use of separate financial centres where countries do not have sufficiently robust regulatory environments, now is the time to put on record the Government’s commitment to strengthening financial service centres in developing countries. The Opposition know that the importance of addressing and tackling CDC’s use of tax havens cannot be overstated. Although we heard assurances in Committee from Diana Noble, the chief executive of CDC, that using offshore financial centres ensures legal certainty and lessens risk for investors, far more than reassurance is needed to ensure transparency on that point. We need clear legislative safeguards, which is why the Front-Bench team will press new clause 1 to a vote. New clause 1 requires any proposal to increase the limit by secondary legislation to be accompanied by a thorough analysis of CDCs use of such centres. Where the countries in question do not have sufficiently robust regulatory environments, it is the UK’s job to ensure that those centres are made more robust.

[Jeremy Lefroy (Stafford) (Con)]

The hon. Lady makes some important points. Does she agree that the changes made to CDC five years ago, under which CDC was encouraged to make direct investments in developing countries—contrary to the preceding situation, in which it made investments in funds situated offshore—were a major step forward?

[Kate Osamor]

The hon. Gentleman makes a valid point, and I will touch on that in my speech. Regardless of any development, we must always be robust and we must be able to show taxpayers that we have a transparent and accountable system. That is at the forefront of our objections to the Bill.

I seek assurances from the Minister of State, the hon. Member for Penrith and The Border (Rory Stewart), that he will consider supporting the implementation of such safeguards. It is of course to be applauded that the whole ethos of CDC has been transformed since it was the subject of widespread controversy some years ago. It is testimony to the organisation’s willingness to change that it reacted to that criticism by becoming a more positive institution and implementing an overhaul of the systems that were in place. These efforts were praised in the most recent report by the National Audit Office, which assessed CDC’s progress in implementing the recommendations that the NAO made in a report in 2008. It was heartening to read in the follow-up report that CDC has proved successful in adapting its strategy in accordance with NAO’s earlier recommendations, including instituting frameworks to limit excessive pay and to refocus CDC’s priorities on the world’s very poorest nations, rather than investing in markets that already attract foreign investors.

[Jeremy Lefroy]

Will the hon. Lady give way?

[Kate Osamor]

No, I need to make some headway.

It was also encouraging to learn that CDC has not only met but exceeded the targets agreed with DFID relating to its financial performance and development impact, and has improved its procedures for documenting fraud and corruption. Although we on the Front Bench praise CDC for making those changes, we must not forget that the recent NAO report was by no means unequivocally positive, and that it highlighted significant areas for improvement. Allow me to quote directly from a passage in the report examining the efficiency of CDC’s methods of capturing its development impact:

“It remains a significant challenge for CDC to demonstrate its ultimate objective of creating jobs and making a lasting difference to people’s lives in some of the world’s poorest places. Given the Department’s plans to invest further in CDC, a clearer picture of actual development impact would help to demonstrate the value for money of the Department’s investment.”

That is quite some statement. According to the NAO, it is “a significant challenge” for CDC to demonstrate how effectively it does the very thing it was set up to do.

--- Later in debate ---

[Mrs Drummond]

No, because we are investing in very difficult areas where robust systems may not already be in place, plus the CDC has very clear guidelines about where the money is going, so we can track it much more easily than we can with other aid agencies.

[Jeremy Lefroy]

Does my hon. Friend agree that the issue is not so much about offshore centres being invested in by funds from a variety of jurisdictions, but about the tax paid in-country for activities undertaken in that country? In that respect, the investments made by the CDC are excellent and provide major tax revenues of billions of dollars a year for those country’s Treasuries.

[Mrs Drummond]

I thank my hon. Friend for his very clear explanation, which beefs up what I have said.

On the case for raising investment limits, amendments l, 3 and 6 and new clauses 2, 5 and 10 would hamper the CDC in the same way. We have already extensively debated the need to increase the limit, and we have had assurances from the Minister and the CDC that business cases for further capital will be clearly made. We will have the full strategy document this year, backed by an analysis from the CDC of the development impact. We will have both before any additional money goes through the CDC.

On the focus of spending, I agree with my hon. Friend the Minister that the question of which specific investments are made must be delegated to DFID and the CDC. That would give the Government oversight and ensure that sustainable development goals are at the heart of the investment. Putting countries or, indeed, limiting sectors in legislation would make delivering the development process cumbersome, and I believe that it would hobble the CDC.

--- Later in debate ---

[Jeremy Lefroy]

Whether people live in the United Kingdom, Tanzania or Colombia, the most important route out of poverty is a good job or a good livelihood, and that is why I fundamentally support the work of the CDC. It has done excellent work throughout the world for nearly 70 years, and in recent years it has concentrated on the most needy countries, where there is the highest level of unemployment or the highest level of poverty. I welcome the fact that the Government are to invest more through the CDC in the coming years.

However, I think that today’s debate, and our debates in Committee and on other occasions, have made it clear that the CDC must be careful. It must invest in areas in which commercial investors would not normally invest; otherwise, it should be the commercial sector that invests in them. The CDC must invest in the areas that create the greatest number of jobs in return for the investment made. That will often involve agriculture, and it will often involve difficult investments, because it is not easy to invest in agriculture in remote areas. However, that is what the CDC is there for: it is not there for an easy life. I know that—given the management that it has had recently, and given the calibre of its staff—it is up to those challenges, and I welcome the Bill.