Queen’s Speech

Lord German Excerpts

Thursday 17th May 2012 Lords Chamber

[Lord German]

My Lords, I wish to address two issues that came up in the gracious Speech a few days ago: international development assistance and state pension reform. I have struggled to find a link between the two since we can speak only once, and I hope that I have found a tenuous one—noble Lords will probably spot it.

I support the words of the right reverend Prelate the Bishop of Lichfield and the noble Earl, Lord Sandwich, in seeking to get a response to the request for the legislative locking in of the commitment to 0.7% of GNI. That is in the coalition agreement, which says that we will make it a legal requirement to stick to that commitment, and we need that reassurance so that not only are this Government committed to that but future Governments cannot move away from it. The Government are to be congratulated on reaching that target as we are one of only six countries in the whole world, and by far the largest of them, to have done so. We can pat ourselves on the back since we have achieved it well ahead of many other developed large economies.

I would like to suggest to Ministers some ways of spending this money slightly differently from how they are doing it at the moment. It will not come as a surprise to the Minister that I am going to talk about Lesotho. I declare my interest as honorary president of the Dolen Cymru Wales Lesotho Link; my pecuniary interest is that my wife is an employee of that charity. It is in its 27th year and it links Wales with Lesotho, a country-to-country link that brings together the third sector, the state sector and communities and third-sector organisations. In their consideration of how they will use international aid, I hope that the Government will consider the needs of this poor and ravaged country. It is the only Third World country completely surrounded by a developed-economy country—in this case, South Africa. Twenty-seven years ago Lesotho was roughly the same size, and had roughly the same population, as Wales, but it has lost one-third of its population because of HIV/AIDS, which still has a 24% incidence rate, and its average life expectancy is 40. Less than a quarter of the population has electricity. Most of the population are subsistence farmers. There has been massive soil erosion, which has made food security a critical issue. Half the population now receives help from an internationally aided feeding programme.

However, Lesotho is a Commonwealth country with a developed democracy and a multiparty system. In nine day’s time, there will be a general election. It shares the same electoral system as Wales and Scotland. Unfortunately, UK Governments have progressively backed away from this country. I know that the Welsh Government are seeking a way of building a new partnership with the UK Government to see whether they can assist in this matter. I understand why DfID is reluctant to work with relatively small pots of money when it wants to work in partnership with its funding and get a bigger return. I hope the Government will commit themselves to looking favourably upon a relationship with Wales and the Welsh Government to see whether they can lever some of the additional funding that has been announced towards this very poor country.

One of Lesotho’s primary concerns is that it has a very poor private sector. Here, I want to address microfinance. Lesotho’s economy has been built upon subsistence farming, and it has to develop. It has large water resources, nearly all of which go to South Africa. It has diamond mines, yet most are owned by companies in the West, including in the United Kingdom. It needs to build its private sector, and to do that, it has big microfinance needs. As in other countries, there is a huge demand for small-scale financing. There is apparently about $40 billion of microfinance funds around the world at the moment, but demand for them is growing by 20% to 30%, which is outstripping the core sources that we can all think about in the way that this money has arrived. There are 150 million to 200 million recipients of microfinance, but the UN suggests that that figure will grow to 1 billion. Only one fund has so far worked its way through in providing that money through the whole lifecycle. It had a 6% return. So what organisations in the United Kingdom might provide funds? Pension funds look for a long-term, steady return, and if they could get a 6% return, they might be able to come up with some of the financing to make sure that that growing demand is dealt with. I hope the Government will encourage pension funds.

That is my link to state pension reform. People in this country are living longer. One person in six now lives to the age of 100, yet fewer people are saving for retirement. Our current system also supports inequality as women, the low paid and the self-employed tend to lose out, usually having lower than average state pensions. Ultimately, a pension scheme that has been changed by means-testing and other changes has become very complex and people do not know what they should do. Consequently, they are not saving enough for their retirement. It used to be calculated that people could expect to retire on 45% of what they were earning, but by 2055 their state pension will be only 32% of their earnings during their working life. The single-tier system greatly simplifies the system. It provides a clear outline of what people can expect from the state at present and in retirement. It provides a firm foundation for saving, reinforces our commitment to auto-enrolment and balances the risks of defined contribution pension systems. People will qualify as individuals. It will provide people with a clear incentive to save. This is the citizen’s pension that many on these Benches have been campaigning for and pressing for for many years, and we are about to see it come to fruition.