Commonwealth Development Corporation Bill

Kate Osamor Excerpts

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

[Kate Osamor (Edmonton) (Lab/Co-op)]

The vast majority of Members of this House support the UK’s guarantee to spend 0.7% of gross national income on international development. This view is supported by the people of this country, who understand that our aid programme makes a significant contribution to creating peace and economic sustainability around the world and to building a more secure and stable international community. Our aid budget makes a huge difference to the lives of hundreds of thousands of the world’s poorest people. Underpinning the faith that the British people have in our aid programme is the knowledge that the money that is spent in developing countries—taxpayers’ money—is transparent; that the funds are provided for projects that have clear objectives and tangible outcomes; and that the money goes directly to source, with no middlemen, no creaming off the top, and no profiteering from people’s poverty.

We will always welcome any measures that aim to improve the quality of life of those less fortunate than ourselves. This Bill, with the right safeguards, could achieve that. The job of Opposition Members, and of the whole House, is to ensure that some of the previous excesses and failures of the Commonwealth Development Corporation are not repeated. I say that as a friend of the CDC. It was the post-war Labour Government of Clement Attlee who created the forerunner of the CDC. Much of the work of the CDC is vital, and we should of course work to strengthen its ability to support businesses and create jobs around the world.

However, we have a number of serious reservations about this Bill. Since the Government are proposing up to an eightfold increase in the amount it can contribute to the CDC, it is right that we ask questions. Let me begin with executive pay at the CDC. While we would all acknowledge the steps that have been taken to curtail the excesses of the past, what guarantees have the Government received that we will see no repetition of the eye-watering salary hikes that people awarded themselves in the past? It would be fundamentally wrong for the extra money proposed in this Bill to be used to fill the bank accounts of the executives of the CDC instead of going to those who need it the most.

[James Duddridge]

Does the hon. Lady accept that no one is considering going back to those bad old days? While I do not want this to be a partisan issue, because I think there is a wide degree of consensus, the original deal with the chief executive was signed off by Clare Short, and the new deal, which reduced the salary by a third and placed a cap on the maximum, was signed off by my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) when he was Secretary of State. There is no going back to those bad old days; this is about working together on the new framework.

[Kate Osamor]

I thank the hon. Gentleman for his intervention. I am concerned that we learn from the past. I am not here to pull punches: this is about learning from the past and ensuring that we move forward in the correct, transparent way.

The second question the Government must answer is on the priorities of the CDC. Recent history is not kind to the CDC and the decisions it has made on the allocation of its funds—UK taxpayers’ money. In recent years, the CDC has become a more commercial organisation. In 2004, the CDC created the private equity arm, Actis. In a deal that raised serious concerns on the governance of the corporation, 60% of the equity firm was sold to managers at the CDC at a bargain basement price. In the space of a few years, they had turned the CDC from an aid agency into a cash machine. With the focus turned to maximising profits, mainly for those who worked at the CDC, the traditional areas of financial support that the CDC had focused on for nearly 60 years were being abandoned. Food security through agriculture programmes went, safe and clean water projects were cancelled, and transport and infrastructure projects were abandoned. Poverty reduction—surely key to any development objectives—withered on the vine of self-interest and, I am afraid to say, earning a fast buck.

It is worth comparing the principles and values on which the CDC was founded to achieve its aims with the realities of its present-day operation. In 1998, the CDC spent 50% of its budget on agribusiness in Africa. That investment had two virtues: first, it helped to feed people in those countries, where starvation and hunger were rife; and, secondly, it enabled communities to become more self-sufficient, created jobs, and was a step on the ladder out of poverty. Today, funding for agribusiness has dropped to just 5%.

We see similar patterns in the CDC’s infrastructure programme. For people to live healthy lives, and to enable communities to thrive, not simply survive, we need to help create a solid infrastructure as part of our development priorities. Dirty water and poor sanitation robs the lives of over 300,000 people each year. Infants and young children are especially susceptible to diseases because of their immature immune systems. Their young bodies simply do not have the right immune system to cope with waterborne diseases. According to UNICEF, over 40% of medical facilities in Africa do not have access to clean water. Dirty water and a lack of good sanitation do not just rob people of their lives; they make a country less productive. A recent study estimated that there was a $150 million shortfall for water and sanitation projects in sub-Saharan countries, while the World Health Organisation estimates that we need £535 billion in investment to achieve universal access. I accept that those are huge sums of money, but look at the benefits. It is estimated that every dollar spent on improving water quality and sanitation delivers $4 in increased productivity. With such overwhelming evidence for the health and economic benefits, the case for investing in infrastructure programmes should be beyond doubt.

[Mr Jim Cunningham (Coventry South) (Lab)]

Another dimension, when we are talking about health, is the pharmaceutical industry and the products that it sells to some African countries. Surely, the Government should be looking at this area and trying to make pharmaceuticals a lot cheaper for those countries.

[Kate Osamor]

I totally agree with my hon. Friend. We need not only to look at the health of poorer people but to make sure that they can access water and sanitation.

It is surprising, if not shocking, that the CDC reduced infrastructure support for water, sanitation and roads from 35% of its budget in 1999 to just 8% a decade later. If the money is no longer going to support agribusiness or infrastructure, where is the CDC spending it? Let us begin by looking at some of its recent investments, such as Xiabu. I do not know about you, Madam Deputy Speaker, but I am partial to a takeaway on a Friday night—so, it seems, is the CDC, because it has provided thousands of dollars to the Chinese fast food chain Xiabu. That may be a good commercial investment, but is it the best use of the CDC’s resources? Can the Secretary of State set out what guarantees she has obtained that the UK’s increased contribution to the CDC will not go towards such projects?

While the Secretary of State is here, I would like to hear from her that the Government will seek assurances that in Africa the CDC will put more emphasis on food security than it puts into funding the building of new shopping malls at present. I have no doubt that the people of Accra are grateful for their brand new shopping mall, but what strategic role it plays in increasing life expectancy in Ghana is a mystery to me.

[James Duddridge]

The people who were employed in the construction of those shopping malls in Accra—I have seen them recently—would disagree with the suggestion that that has not helped families in Accra and in nearby villages. Less than 1% of the CDC budget has gone on shopping and infrastructure, which provide a lot of jobs. Agriculture, which the hon. Lady talked about earlier, is incredibly important, but it is less important than it used to be in the modern economy in Africa, where there is a greater degree of diversification and urbanisation.

[Kate Osamor]

I thank the hon. Gentleman for his intervention. I know that he went around Africa in his previous role as a Minister, so he knows a lot about Africa, but there are parts of Ghana where there is no electricity and parts of Ghana where there is no water. Yes, middle-income families may enjoy going to malls, but while many people are living in poverty I do not think that a mall is the best use of CDC resources and money.

The examples that I have given lead me to my third and fourth questions for the Secretary of State. The Government propose to increase funding from £1.5 billion to £6 billion, with the option for the Secretary of State to raise it to £12 billion at a future date. But it seems she is putting the cart before the horse. As yet, the CDC has not published its investment strategy for 2017 to 2021. In the absence of an investment strategy outlining how the additional resources would be spent by the CDC, the Government are essentially proposing that we provide the CDC with a multibillion-pound blank cheque. In 2015, the coalition Government gave the CDC a cash injection of £735 million, and the Secretary of State published the business case for that increased funding at the time. Will the Secretary of State place in the House of Commons Library the full business case for the increase to £6 billion of funding to the CDC? Will she assure the House that if the Government wish to extend that to £12 billion, a business case will be brought to the House?

[Keith Vaz]

My hon. Friend was in the House when the Secretary of State gave me a very welcome assurance concerning Yemen, which we appreciate. Does my hon. Friend agree that it is so important that emergency and humanitarian aid should be ring-fenced and that any resources to the CDC—whatever they may be, after the business case has been prepared—should not take money away from that emergency and humanitarian aid, which is important in Yemen and in other parts of the world?

[Kate Osamor]

I thank my right hon. Friend for his intervention. Yes, humanitarian aid is paramount. In times of crisis, we need to know that that money will be ring-fenced to ensure that those who need it most will be able to get it.

During proceedings on the Bill, we will be setting the Government six questions, which we hope they will be able to address and gain our support. I began my response to the Secretary of State’s opening speech on Second Reading today by setting out the key principle that should guide us on international development funding—transparency. Indeed, the lack of transparency over the CDC’s work has created considerable scepticism about its activities and some of its investments. When spending taxpayers’ money on international development in an age of austerity, it behoves the Government to do all in their power to reassure everyone that their money is being spent properly and effectively. The Secretary of State would alleviate some of the concerns felt by Opposition Members—and, I am sure, in the country at large—if she were to insert a transparency clause into the Bill, which would meet the Government’s stated aim and their commitment to transparency, value for money and tracking development results.

That is particularly important when it comes to the CDC’s use of tax havens for its investments. It is extraordinary that the CDC has routed its investments through tax havens. The CDC and DFID have a moral duty to adopt the highest ethical standards if they are to have moral authority as the UK’s leading development actors. We should not be rewarding tax havens with UK taxpayers’ money, and the Government could and should lever the CDC away from the use of tax havens. Not a penny of the proposed £6 billion should find its way to a tax haven, and the Bill should be explicit in enshrining that principle.

Providing any organisation with £6 billion—and potentially £12 billon—is a significant step, and that is particularly true of an organisation with such a chequered recent past. The House would welcome a clear sense from the Secretary of State of how her Department has evaluated the costs and benefits of providing the CDC with such a significant sum of public money. There is a clear need for the Minister to set out how DFID’s investment plans for CDC have been informed. Has that been achieved by assessing other options for investing these resources. Has it been achieved by comparing their value for money and the potential for development impact?

There are two issues that the Secretary of State should address to demonstrate the Government’s commitment to transparency. At present the CDC is not subject to the scrutiny of the Independent Commission for Aid Impact. That is an anomaly, and it should be rectified immediately. Will the Secretary of State insert into the Bill a provision to enable ICAI to scrutinise and audit the effectiveness of the CDC, particularly given the significant increase in the CDC’s funding proposed in this Bill? Secondly, I would like an assurance from the Government that the CDC will not be sold off or privatised during this Parliament. It would, surely, be wrong for this House to provide billions of pounds of taxpayers’ money, only for the CDC to be handed over to a private equity firm or suchlike company.

When the Colonial Development Corporation was established in 1948, it had bold ambitions. For much of its life, the CDC has achieved those ambitions, first as the Colonial Development Corporation and then as the Commonwealth Development Corporation. Lives have been saved and lives have been improved as a direct result of the CDC. Sadly, the CDC has lost its way in recent years. The ethos and values that drove its inception six decades ago have been lost, sacrificed on the altar of fast-buck economics. We are beginning to see some welcome reforms to the CDC, but history has taught us that we must remain vigilant.

As I set out at the beginning of my speech, the Opposition firmly believe in the principle of aid as a vehicle for improving the life chances of millions of people. The question the Government must answer before they gain our full support for the Bill is: will they provide the assurance and the guarantee to deliver what we all seek, which is a CDC that truly lives up to its mission

“to support the building of businesses throughout Africa and South Asia, to create jobs and make a lasting difference to people’s lives in some of the world’s poorest places”?

To achieve this, the Government must place the right safeguards in the Bill in Committee. If they do, and the Bill achieves the twin objectives of supporting the people who need it the most and of making the funding fully transparent, the Government will have our support.

Commonwealth Development Corporation Bill (First sitting)

Kate Osamor Excerpts

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

[The Chair]

Do any members of the Committee wish to make declarations of interest? No? Good. We will now hear oral evidence from the Minister and from the chair and chief executive of the CDC. Before calling the first member to ask a question, I would like to remind all members that questions should be limited to matters within the scope of the Bill, and we must stick to the timings in the programme motion agreed by the Committee. We have until 10.30 am for this session. Could the witnesses introduce themselves for the record?

Diana Noble: I am Diana Noble and I am the Chief Executive of CDC.

Graham Wrigley: I am Graham Wrigley and I am the chairman of CDC.

Rory Stewart: I am Rory Stewart and I am the Minister of State, Department for International Development.

David Kennedy: I am David Kennedy and I am the director general for economic development at DFID.

[Kate Osamor (Edmonton) (Lab/Co-op)]

Good morning. CDC’s operational policy published in March 2014 on the payment of taxes and the use of offshore financial centres dictates that CDC would invest through a jurisdiction that is not successfully participating in the Global Forum only in exceptional cases. What would be the exceptional cases in which it would use these jurisdictions?

Diana Noble: Let me first say that CDC’s use of OFCs has nothing to do with secrecy or reducing tax. We take pride in the payment of corporation tax by our portfolio companies in the countries where we invest— it is one of our development indicators. We use OFCs for two important reasons. One is for legal certainty; the other is to pool capital in neutral places. Let me explain both of those. CDC’s mission is to invest and grow businesses in some of the poorest companies in the world. Unfortunately, many of those places do not have legal systems that allow us to invest with certainty that, if there is a dispute, we will be able to get our money back. Of course, one of our big areas of responsibility is to look after UK taxpayers’ money: that is part of our mandate. So unfortunately, for some places where we invest we have to go through an offshore structure.

The second point is that we have a very important mission to pool capital from other investors to come in alongside us into difficult countries. This is an enormously important role. If we look at CDC’s investments from 2004 until now, we have supported fund of funds that total $30 billion in Africa and south Asia, of which CDC has only provided $5 billion—so that is $25 billion from other investors. Those investors come from lots of different jurisdictions themselves, so the capital does have to be pooled somewhere. Those investors, who are already cautious about the countries in which the investments are being made, have a lower risk tolerance than CDC does, for legal certainty; so they insist on a safe jurisdiction. We, however, do play our role, because we insist that that pooling is done in the best, or the most compliant, of the offshore centres in the OECD register.

Do we think that the situation is ideal? We don’t. We look forward to the day when every country where we invest has a safe legal regulatory system, where we can invest directly in every single country; but that is not the case today. What we have done, though, is encourage an important project that we have been working with DFID on, to examine the possibility of an onshore centre in Africa. That work has led to the Governments of Kenya and Rwanda taking this very seriously. It would be a very long-term project, but we are very keen that it gets progressed over time.

[Kate Osamor]

Q How many offshore jurisdictions do you currently use?

Diana Noble: It is a short list. We can provide absolute clarity about exactly how many, subsequent to this Committee. On the list are certainly Mauritius, which is well accepted as a place for pooling capital, particularly for Africa and south Asia; Guernsey; and Cayman Islands.

Rory Stewart: I have the list: at the moment, it is Cayman Islands, Guernsey, Jersey, Luxembourg and Mauritius.

[The Chair]

Kate Osamor—are you happy?

[Kate Osamor]

Yes.

[Richard Fuller (Bedford) (Con)]

Q I apologise, Mr Streeter, for being slightly late. Graham, can I ask you a little about the potential for the CDC to attract investment from other investors? Diana was just talking about the fund of funds drawing funds in, but at the top level of the CDC are there opportunities to get sovereign wealth or other enlightened investors, perhaps high net worth individuals, to put their money alongside the increasing capital of the CDC?

Graham Wrigley: That is an interesting question. The other day someone asked us whether it would be possible to turn the CDC into an ISA or a PEP. Looking at how other DFIs are funded, the IFC has created a vehicle whereby people have invested alongside the IFC; the FMO is owned partly by some banks as well as—

--- Later in debate ---

[The Chair]

Thank you.

[Kate Osamor]

Q Thank you, panel. This question is for all panel members. Do you feel that CDC is sufficiently focused on poverty eradication in line with DFID’s outcomes?

Sir Paul Collier: In a word, yes. I have been working on Africa for 40 years and it has been frustrating, because Africa is still poor. This year, per capita GDP in Africa is falling. We have a quiet crisis of trying to rekindle African growth. There is no secret about what rekindling growth and getting out of poverty means: it means raising the productivity of ordinary people and we know how to do that. Raising the productivity of ordinary people is what proper firms do. They perform a miracle of productivity every day by bringing ordinary people together at scale and specialisation, and making them dramatically more productive than they would be as isolated individuals. Africa is desperately short of proper firms, and the public interest in getting proper firms to go to Africa is enormous. That is the underlying rationale for CDC, and that is what it is doing.

CDC went through a very poor patch with this fund of funds idea, which was a crazy idea. It now has really expert management. What CDC is doing, and what DFID is doing to support it, is absolutely standard. This is what International Development Association money, which is the collective, concessional money given by the world’s rich countries to the World Bank, is being devoted to. The transfer to the International Finance Corporation—[Interruption.] I will shut up.

[The Chair]

Thank you, Sir Paul. Let us hear from Oxfam and War on Want.

Gideon Rabinowitz: Thank you for having us on this panel; we appreciate it. Oxfam recognises the importance of investing in economic development and the private sector as a fundamental part of our development efforts. Economic development needs to be a core part of what DFID and the British Government do with regard to aid. Our concern is to make sure that any aid funds that are invested in those causes really support the right types of jobs, growth and investment that reach the very poorest. The international community agreed at the UN that all development effort should be focused on reaching those left behind. That needs to be the prism through which we see this. Given that prism, we recognise that the reforms agreed in 2011 to CDC were a really important step forward. They focus CDC more on the poorest countries and strengthen its focus on looking at development impact and its investment standards, but we also think that that is the start of a journey that CDC needs to go on in the coming years to ensure that it is focused not only on DFID’s mission of development and poverty reduction, but on the international development community’s focus on leaving no one behind.

We want to note a number of areas where we think CDC can do more. The first point relates to its focus on the least developed countries. Only 12% of CDC’s investments currently go to the least developed countries—the most economically and socially vulnerable countries as measured by a comprehensive index by the UN. We have some questions about whether the sector focus is right. Agriculture, where the majority of the world’s poor make their livelihoods, accounts for only 5% of CDC’s investments at present. A decade and a half ago that figure was one third. There needs to be a re-engagement in sectors such as agriculture.

Commonwealth Development Corporation Bill (Second sitting)

Kate Osamor Excerpts

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

[Jeremy Lefroy]

I will conclude by saying that I feel a little like I am in the middle of a great argument, but I probably agree in some way with both Members.

[Kate Osamor (Edmonton) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Ms Ryan. This is the first time for me, but I am sure there will be many more.

I want to speak about investment. That word has been used many times and in the absence of an investment strategy from the CDC, we feel very sceptical about why we should use taxpayers’ money in this way. It is only fair to ask the Minister to present that to us, so that we can have a debate in which we feel we have all the information. That is my brief contribution on this group of amendments.

--- Later in debate ---

So I hope that the Minister can explain, first, what sort of indirect effect might be encountered by the CDC using these vehicles, and secondly, whether he thinks it acceptable in terms of transparency—and even if we cannot get transparency directly from the tax havens, whether there is another way of providing that information so that we can see what is going on. Thirdly, I have concerns that a number of these vehicles are bringing together other capital investors. Even if I believe that the CDC is not deliberately trying to avoid paying taxes, I am not so convinced about some of the partners, and there is no way of finding out. Many of the types of arrangements involved other funds, including Actis. I do not want to suggest that Actis has done anything wrong, but it has obviously been subject to controversy in the past. There are other partners involved, and it is very difficult to get clear about whether, by our relationships and our partnerships, we are facilitating tax avoidance and, fundamentally, affecting the flow of resources to developing countries that could be used for tackling poverty. This is a serious issue. I am concerned at the number of havens that are being used and I hope that the Minister can provide answers about how we are going to bear down on this.

[Kate Osamor]

I have not spoken a lot today. That is not because I have not been in support of my hon. Friend the Member for Cardiff South and Penarth, which I believe is the right way of saying it—I have heard many versions today. I want to speak on this clause, because my issue relates to tax havens and the way the CDC is using them. In the evidence session earlier today, Diana Noble of the CDC admitted that at times it has to use tax havens, but I feel that DFID should be looking at transparency. We should be working more closely with CDC because we are setting up a system that could be exploited, and I am concerned that we could be sitting back and not using the power that I believe DFID could be using.

This is the time to look at how the relationship was initially set up and at how we might reform that relationship, not because we should be micromanaging but because we should be taking some responsibility for taxpayers’ money. I say that because, while there is cross-party support for DFID in this House, there is a lot of tension outside among people who do not agree with the way we are spending money. If this was highlighted and got into the wrong hands—the Daily Mail—it could turn into a situation in which the Government would have to fight back. I ask that we look at that relationship, make it a lot more transparent and also look at what will happen when Diana Noble moves on, because a new CEO may not able to turn things around the way she has. She has made great changes, but she is moving on, so we need to look at how that new relationship with DFID will be, and this is the time to change that situation.

I support the clause and I hope that the Minister can reassure us that we will not be in a situation going forward whereby the CDC, or similar organisations, have to use tax havens because the country they are functioning in does not have systems to take the tax.

[Jeremy Lefroy]

I have a lot of sympathy with the points made. I cannot support this new clause because I do not think that the international situation lends itself to being practical for the CDC at the moment. Regrettably, there is not the range of options for CDC to make its investments at the moment alongside other partners. When it is direct investments, which I am very glad to see the CDC has started to do again since the new arrangements in 2011-12, there is absolutely no reason why the investment cannot be made directly into the share capital of the company in which the investment is being made. However, when you are trying to leverage other investments, as the CDC often does, alongside other DFIs or other private sector entities, you have to arrive at a mutual agreement as to what jurisdiction is most suitable, both from the point of view of the ability of the legal system to uphold agreements and in terms of when dividends are paid, and whether double tax arrangements and so on are in place.

These are all practical matters, but I very much agree with the hon. Member for Edmonton and the hon. Member for Cardiff South and Penarth that there is an opportunity here for the CDC to set the pace—for instance, here in the United Kingdom, where we have such a fine legal system, as is being displayed right at this very moment across the road.

--- Later in debate ---

[Rory Stewart]

On a point of order, Ms Ryan. I put on record my enormous thanks to the Bill team, to the Doorkeepers, to Hansard, to the Clerks and to you for your chairmanship. Please put on record that we have explored all the amendments at great length and are finishing the Committee half a day early. In particular, I give huge thanks to all the Members—the hon. Member for Coatbridge, Chryston and Bellshill, my hon. Friend the Member for Congleton, the hon. Member for Cardiff South and Penarth, my hon. Friends the Members for Rochford and Southend East and for Bedford, the hon. Member for Glasgow North, my hon. Friend the Member for Gloucester, the hon. Member for Bradford East, my hon. Friend the Member for Stafford and the hon. Member for Edmonton—who contributed greatly to our debates. I also thank my hon. Friends the Members for Rochester and Strood and for Sutton and Cheam, the hon. Member for Wirral South, my hon. Friend the Member for Burton and the hon. Member for Ogmore for their attendance.

I will conclude with a personal note. I pay huge tribute to the level of scrutiny I have received from the hon. Members for Cardiff South and Penarth and for Glasgow North. I am extremely pleased, to be honest, that I am defending an institution that I am genuinely proud of and that does a genuinely good job. If I was not confident about the institution I am defending, it would have been extremely uncomfortable to be subjected to that level of expertise and scrutiny. I thank them so much for doing such a good job of holding us to account. I again thank the Clerks, the Doorkeepers, Hansard and everybody for allowing us to conclude half a day early.

[Kate Osamor]

Further to that point of order, Ms Ryan. I want to tag on to the Minister’s remarks and thank everyone who contributed today. My hon. Friend the Member for Cardiff South and Penarth has worked tremendously hard, and I wanted to thank him for all his work and the scrutiny he has put the Minister under. I appreciate it, and it has helped the debate no end.

Bill to be reported, without amendment.

Commonwealth Development Corporation Bill

Kate Osamor Excerpts

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

[Kate Osamor (Edmonton) (Lab/Co-op)]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

With this it will be convenient to discuss new clause 2—Condition for exercise of power to increase limit: report and business case—

“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—

“15A Condition for exercise of power to increase limit: business case and strategic plan

(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if the Secretary of State has also laid before the House of Commons the documents specified in subsections (2) and (3).

(2) The document specified in this subsection is a business case for the proposed use of the new investment enabled by the proposed increase in the limit in force which includes information on—

(a) the expected market demand,

(b) the proposed sectors,

(c) the proposed locations, and

(d) the prospective development returns.

(3) The document specified in this subsection is a strategic plan for the development of the activities of the CDC in consequence of the proposed increase in the limit in force.””

This new clause would require any draft regulations to increase the limit on government assistance under section 15(4) to be preceded by the laying before the House of Commons of a detailed business case for the proposed additional investment and a strategic plan in relation to the additional investment.

New clause 3—Condition for exercise of power to increase limit: poverty reduction purposes for spending outside LDCs—

“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—

“15A Condition for exercise of power to increase limit: poverty reduction purposes for spending outside LDCs

(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if the Secretary of State is satisfied that the condition in subsection (2) or the condition in subsection (3) is met.

(2) The condition in this subsection is that any new investment enabled by the proposed increase in the limit in force is in a country which is classified as one of the least developed countries.

(3) The condition in this subsection is that the Secretary of State is satisfied that any new investment enabled by the proposed increase in the limit in force will have a significant impact on the reduction in poverty (within the meaning given in section 1(1) of the International Development Act 2002) in the country or countries concerned.

(4) In determining the classification of a country for the purposes of subsection (2), the Secretary of State shall use the latest analytical classification of the world’s economies prepared by the World Bank.””

This new clause would require any draft regulations to increase the limit on government assistance under section 15(4) to be for additional investment which is either in least developed countries or which makes a significant impact on poverty reduction in another country.

New clause 4—Condition for exercise of power to increase limit: independent assessment of aid impact—

“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—

“15A Condition for exercise of power to increase limit: independent assessment of aid impact

(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if the Secretary of State is satisfied that arrangements are in place for the independent assessment of the aid impact of new CDC investment which meet the conditions in this section.

(2) The first condition is that a framework agreement has been reached between CDC and the Independent Commission for Aid Impact for the Commission to carry out such an assessment on an annual basis.

(3) The second condition is that each annual assessment will be able to assess projects with a monetary value equivalent to at least 5 per cent of the total value of current investments in the year in question by the CDC.

(4) The third condition is that the Secretary of State is satisfied that the Independent Commission for Aid Impact has the additional resources required to carry out such annual assessments without impairing its capacity to undertake its other work.””

This new clause would require any proposal to increase the limit by secondary legislation to be contingent on an agreement being reached for an annual independent assessment of aid impact to be carried out by the Independent Commission for Aid Impact covering at least 5% of CDC’s investment portfolio at the time.

New clause 6—Condition for exercise of power to increase limit: review of poverty reduction impact and contribution to Sustainable Development Goals—

“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—

“15A Condition for exercise of power to increase limit: poverty reduction

(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he has also laid before the House of Commons a review in accordance with subsection (2).

(2) A review under this subsection must provide the Secretary of State’s assessment of the extent to which the increase in the limit on the Crown’s assistance to the Corporation is likely to contribute to—

(a) a reduction in poverty, and

(b) achievement of the Sustainable Development Goals.

(3) In this section—

“reduction in poverty” shall have the same meaning as in section 1(1) of the International Development Act 2002; and

“the Sustainable Development Goals” means the Goals adopted at the United Nations on 25 September 2015.””

This new clause would require any draft regulations to increase the limit on government assistance under section 15(4) to be preceded by a review, also to be laid before the House of Commons, of the extent to which the increase in the limit will contribute to a reduction in poverty, the aim of development assistance, and to the achievement of the Sustainable Development Goals.

New clause 7—Condition for exercise of power to increase limit: prohibition on investment in certain sectors—

“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—

“15A Condition for exercise of power to increase limit: prohibition on investment in certain sectors

(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he is satisfied that the condition in subsection (2) is met.

(2) That condition is that any new investment enabled by the proposed increase in the current limit at the time is not in any of the following sectors—

(a) education providers that charge the end user,

(b) healthcare providers that charge the end user,

(c) the real estate sector,

(d) mineral extraction,

(e) the palm oil sector,

(f) the fossil fuel sector.

(3) In this section—

“the current limit at the time” means—

(a) prior to the making of any regulations under section 15(4), £6,000 million,

(b) thereafter, the limit set in regulations made under section 15(4) then in force.””

This new clause would prohibit any new investment arising from any increase in the limit on government assistance under regulations under section 15(4) from being in the sectors specified in subsection (2).

New clause 8—Condition for exercise of power to increase limit: prohibition on use of tax havens—

“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—

“15A Condition for exercise of power to increase limit: prohibition on use of tax havens

(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he is satisfied that the condition in subsection (2) is met.

(2) That condition is that any new investment enabled by the proposed increase in the current limit at the time is not in either—

(a) an investment entity, or

(b) a company

which uses, or seems to the Secretary of State likely to use, tax havens.

(3) In determining whether the condition in subsection (2) is met, the Secretary of State shall consider—

(a) information provided by the OECD on countries or territories which are considered to be tax havens, and

(b) such information as is available to the Secretary of State, whether supplied by the CDC or others, about the current location of funds of the potentially relevant entities for the purposes of subsection (2).

(4) In this section—

“the current limit at the time” means—

(a) prior to the making of any regulations under section 15(4), £6,000 million,

(b) thereafter, the limit set in regulations made under section 15(4) then in force.””

This new clause would prohibit any new investment arising from any increase in the limit on government assistance under regulations under section 15(4) from going to an investment vehicle or company which uses or seems likely to use tax havens.

New clause 9—Conditions for exercise of power to increase limit: countries, poverty reduction and SDGs—

“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—

“15A Conditions for exercise of power to increase limit: countries, poverty reduction and SDGs

(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he is satisfied that the conditions in subsection (2), (4) and (5) are met.

(2) The condition in this subsection is that any new investment in a country enabled by the proposed increase in the current limit at the time is in a country which is classified as either—

(a) one of the least developed countries, or

(b) one of the other low income countries.

(3) In determining the classification of a country for the purposes of subsection (2), the Secretary of State shall use the latest analytical classification of the world’s economies prepared by the World Bank.

(4) The condition in this subsection is that the Secretary of State is satisfied that any new investment enabled by the proposed increase in the current limit at the time is likely to contribute to a reduction in poverty.

(5) The condition in this subsection is that the Secretary of State is satisfied that any new investment enabled by the proposed increase in the current limit at the time is likely to contribute to achievement of the Sustainable Development Goals.

(6) In this section—

“the current limit at the time” means—

(a) prior to the making of any regulations under section 15(4), £6,000 million,

(b) thereafter, the limit set in regulations made under section 15(4) then in force;

“reduction in poverty” shall have the same meaning as in section 1(1) of the International Development Act 2002; and

“the Sustainable Development Goals” means the Goals adopted at the United Nations on 25 September 2015.””

This new clause would limit any new investment arising from any increase in the limit on government assistance under regulations under section 15(4) to the least developed countries and other low income countries and require the Secretary of State to be satisfied that such new investment contributed to the reduction of poverty and the achievement of the Sustainable Development Goals.

New clause 10—Condition for exercise of power to increase limit: proportion of annual official development assistance—

“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—

“15A Condition for exercise of power to increase limit: proportion of annual official development assistance

(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he is satisfied that the conditions in subsection (2) is met.

(2) The condition in this subsection is that the total value of any re-capitalisation of CDC enabled by the proposed increase in the current limit at the time will not, in any one calendar year, constitute more than 5% of total official development assistance.

(3) In this section—

“official development assistance” has the same meaning as in the most recent annual report laid before each House of Parliament in accordance with the provisions of section 1 of the International Development (Reporting and Transparency) Act 2006;

“the current limit at the time” means —

(a) prior to the making of any regulations under section 15(4), £6,000 million,

(b) thereafter, the limit set in regulations made under section 15(4) then in force.””

This new clause would limit any new investment arising from any increase in the limit on government assistance under regulations under section 15(4) to 5% of official development assistance in any one calendar year.

Amendment 2, in clause 1, page 1, line 4, leave out “£6,000 million” and insert

“the amount specified in subsection (1A)”.

This amendment paves the way for amendment 3.

Amendment 5, page 1, line 4, leave out “£6,000” and insert “£4,000”.

Amendment 3, page 1, line 4, at end, insert—

“(1A) After subsection (1), insert—

“(1A) The amount specified in this subsection is whichever is the lesser of the following amounts—

(a) £6,000 million,

(b) £1,500 million plus the amount determined in accordance with subsection (1B).

(1B) The Secretary of State shall determine the amount for the purposes of this subsection by estimating the amount which will constitute 4% of official development assistance in the relevant period determined in accordance with subsection (1C).

(1C) That period begins with the financial year in which the Secretary of State considers that the Crown’s assistance to the Corporation (determined in accordance with subsection (2)) will exceed £1,500 and ends at the end of the fourth subsequent financial year.

(1D) For the purposes of this section, “official development assistance” has the same meaning as in the most recent annual report laid before each House of Parliament in accordance with the provisions of section 1 of the International Development (Reporting and Transparency) Act 2006.””

This amendment would replace the proposed limit on government assistance under section 15 with a new amount, expressed as either £6 billion or the existing investment of £1.5 billion plus a sum not more than 4% of forecast official development assistance over a five year period, whichever is the lesser amount.

Amendment 6, page 1, line 5, leave out subsection (3).

This amendment removes the power of the Secretary of State to set a limit on government assistance above £6 billion up to £12 billion by means of secondary legislation.

Amendment 4, page 1, line 7, leave out “£12,000 million” and insert

“the amount specified in subsection (4A).

(4A) The amount specified in this subsection is whichever is the lesser of the following amounts—

(a) £12,000 million,

(b) the current limit at the time plus the amount determined in accordance with subsection (4B).

(4B) The Secretary of State shall determine the amount for the purposes of this subsection by estimating the amount which will constitute 4% of official development assistance in the relevant period determined in accordance with subsection (4C).

(4C) That period begins with the financial year in which the Secretary of State considers that the Crown’s assistance to the Corporation (determined in accordance with subsection (2)) will exceed the current limit at the time and ends at the end of the fourth subsequent financial year.

(4D) For the purposes of this section—

“the current limit at the time” means—

(a) prior to the making of any regulations under subsection (4), £6,000 million,

(b) thereafter, the limit set in regulations made under subsection (4) then in force;

“official development assistance” has the same meaning as in the most recent annual report laid before each House of Parliament in accordance with the provisions of section 1 of the International Development (Reporting and Transparency) Act 2006.”

The amendment would set a new limit on the power to make regulations to increase the limit on government assistance under section 15, expressed as either £12 billion or the current limit at the time plus 4% of official development assistance over a five year period, whichever is the lesser amount.

Amendment 1, page 1, line 8, at end insert—

“(4A) The Secretary of State may not exercise the power under subsection (4) to increase the limit by more than the amount that the Secretary of State estimates is required to meet the plans for investment by CDC in the ensuing three years.”

This amendment has the effect of restricting each increase in the limit by secondary legislation to an amount necessary to support additional investment by CDC over a three year period.

[Kate Osamor]

Labour Members are unswerving in our belief that the UK must continue to spend 0.7% of gross national income on overseas aid. It is imperative, however, that the Government deliver this aid in a way that is accountable, ensures value for money, and delivers on the UK’s development objectives.

Although we support the aims of the Bill—it has reached Report without amendment—we remain concerned about the lack of safeguards. In new clause 2, we ask that no increase in the limit be granted without a report or business case. New clauses 3 and 9 are at the heart of the work of the Department for International Development, which leads the UK’s work to end extreme poverty. We on the Front Bench ask the Government to make sure that the Minister is satisfied that any new investment enabled by a proposed increase in the limit will have a significant impact in reducing poverty.

The Department must be at the forefront of tackling global poverty reduction. It is vital that the bolstering of CDC’s resources does not mean a reduction in funds for emergency and humanitarian aid in places such as northern Nigeria, Yemen and Syria, and in other parts of the world that face grave humanitarian crises. Will the Minister commit to ring-fencing such funds so that those in the direst need of help are able to receive it? Long-term investment and the establishment of a sustainable economy in order to kick-start jobs and growth are, of course, crucial to any credible development programme, but a development programme should, at its core, be a coalition of long-term investment and short-term relief. The consequences of losing sight of the latter element would be grave indeed. Just as the UK has a duty to help to lay the foundations for secure, sustainable economies in the poorest areas, where investment is a risk that few are willing to take, the UK also has a duty to assist those who bear the full force of conflict, climate change and food insecurity.

As was laid out on Second Reading, transparency should be the driving force behind any shift in the focus of the aid budget. I now speak to new clauses 4 and 8. It is vital that taxpayers’ money is spent not only effectively, but as transparently as possible. To that end, it is incumbent on the Government to put in place mechanisms that ensure maximum visibility regarding where aid money is being spent, and that minimise public scepticism. We all know that transparency is something that DFID does very well indeed.

[Richard Fuller (Bedford) (Con)]

Before the hon. Lady moved on to the important issue of transparency, she was talking about balance. It is fair to make the point, is it not, that CDC’s proportion of our development budget for its type, as foreign direct investment, is lower, at 4%, than comparables such as the French FDI of 12% and the Dutch at 30%? For the sake of proportion, it is fair to say that even with that increase, the UK will still spend more on development aid than most of our European peers do, and the proportion of FDI will be smaller than it is for many of those peers.

[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.

[Fiona Bruce (Congleton) (Con)]

The hon. Lady refers to a quote about the challenges of capturing impact. That is an ongoing challenge in all aid work. In terms of efficiency, which is what she is referring to, the NAO report concluded:

“Through tighter cost control, strengthened corporate governance and closer alignment with the Department’s objectives, CDC now has an efficient and economic operating model.”

Does the hon. Lady agree that that is a testament to the improvements that have been made to CDC’s work over the last few years?

[Kate Osamor]

I said in my opening remarks that CDC has improved, but the report says that it is still very hard to know and to demonstrate the impact of development, and work on that still needs to be done. The report is not totally scathing, but we must pick up such objections. If CDC was transparent, I am sure Labour Members would not have to stand up in the Chamber and say what we are now saying.

New clause 7, tabled by my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), lays down conditions about investing only in certain sectors and about not investing in sectors that provide little or no development impact in ending poverty. These sectors include the fossil fuel sector, the primary education and healthcare sectors that charge at the point of contact, the building of real estate, mineral extraction and work in the palm oil sector. If DFID’s investment in CDC is to increase the level proposed in the Bill, this challenge must be urgently addressed and resolved.

In spite of CDC’s very welcome improvements, the NAO’s recommendations show that we should not forget that it remains very much a work in progress for this organisation to demonstrate transparently and robustly that it is achieving its objectives. With that in mind, we cannot regard the Bill as the end of the process. There is no room for complacency within CDC or DFID on the need to alter the organisation’s processes further to ensure and to demonstrate the delivery of its goals. Given the scale of the proposed increase in DFID funding—from a limit of £1.5 billion to one of £6 billion —and the resulting consequences both for the UK’s development programme and indeed for the developing countries it supports, it is right that the Bill is robustly challenged and meticulously scrutinised where it is found lacking, and that stringent precautions are appended to it where necessary.

New clause 10 lays out that any proposed increase in the current limit would not in any one calendar year constitute more than 5% of total official development assistance.

[Wendy Morton (Aldridge-Brownhills) (Con)]

I want to take the hon. Lady back to new clause 7—I tried to intervene earlier—when she listed the sectors that she feels should be excluded. Does she not agree, however, that by specifically mentioning

“education providers that charge the end user”

as an exception, she risks children in some of the most underprivileged communities not being able to access education? From some Select Committee work, we know that such means are the only way of getting education for many of these children.

--- Later in debate ---

[Kate Osamor]

The hon. Lady makes a valid point, but I am talking about private education, for which someone with no money would have to pay. I do not think we should support that in a developing country, because we do not do it in this country. If someone wants to pay to go to university, there are challenges in relation to that, but I am talking, ideally, about primary education.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

New clause 7 is in my name, and I will speak about it in due course. Does my hon. Friend agree that there is an important choice for DFID to make? It previously invested significantly in promoting free healthcare and education—making it available to all people, and removing such user fees—so to allow the CDC to continue to invest in private, fee-paying education is a significant shift away from the work the Department did in the past.

[Kate Osamor]

My hon. Friend makes a valid point, with which I totally agree.

[Pauline Latham (Mid Derbyshire) (Con)]

Will the hon. Lady give way?

[Kate Osamor]

I now need to make some progress.

Labour Members remain positive about the Bill’s ability to achieve its aim of improving the quality of life of people in some of the least developed countries in the world, but we believe that this can be achieved to its fullest extent only if appropriate safeguards are put in place. We retain our right to withdraw our support for the Bill if it becomes clear that the Government have not made sufficient progress.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

I call Flick Drummond.