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.