International Development (Official Development Assistance Target) Bill

Lord Howell of Guildford Excerpts

Friday 6th February 2015 Lords Chamber

[Lord Butler of Brockwell (CB)]

My Lords, I support the amendment, the purpose of which is to remove a fixed target—“the”—and to replace a flexible target, “a”. That is the purpose of the amendment and it seems desirable.

I contribute to this debate as a former Permanent Secretary of the Treasury in charge of public expenditure, where the noble Lords, Lord Lawson and Lord MacGregor, who have put their names to the amendment, were my bosses. However, I support the amendment not out of Treasury niggardliness but because, like other noble Lords, I believe that this country has both an economic and moral interest in promoting the growth of the developing world.

However, there are good Treasury and government reasons against hypothecation of expenditure against a rigid target. The reasons are set out in the report of the Economic Affairs Committee. However, one reason that is not in the committee’s report is that at each public expenditure review departments have to come to the Treasury to make a case for the expenditure for which they are bidding. If there is a rigid amount hypothecated in this way, it relieves departments of having to make that case for expenditure. The removal of that discipline is likely to have the result that the expenditure would not be as effective as we would all like it to be. It would be a mistake to remove that discipline from DfID’s expenditure on development aid.

This is a matter for each Government to decide. There should not be a rigid amount and, therefore, I support the amendment to substitute the second “the” with the word “a”.

[Lord Howell of Guildford (Con)]

My noble friend Lord Lawson made an interesting speech. It did not command the total agreement of your Lordships in every aspect but it focused on some important points. It is a small, very neat, amendment but it raises implications. I beg those who are bringing forward and supporting the Bill, with the noblest intentions, to heed some of the points that are made because it will result in a better Bill.

I also apologise for not being able to join in at Second Reading—I had other commitments—and for the fact that, although I spoke frequently on Foreign Office and Commonwealth Affairs aspects of development aid from both sides of the Dispatch Box over a period of 10 years, I have not spoken on these issues from the Back Benches. However, I have been deeply concerned with development issues over a period of 50 years, going back to the era of the Colonial Development Corporation, the original CDC, before its efforts were later wrecked, I am sorry to say; and with the founding of the first Overseas Development Institute, before we even had a department of development. I regard development as the highest priority for this country and anything which gets in its way concerns me. We ought to try to clear out the obstacles. I am proud that we have become what Sir John Major called the development hub. It is a marvellous role for this country and we should pursue it in the smartest, cleverest and most effective way we can.

It worries me that without this amendment, by making it “the” duty—the first priority, in effect—of the Secretary of State to adhere to this 0.7% target, we are distorting and damaging the development cause, which has moved into a completely new phase. I read with great care the Second Reading debate—

[The Countess of Mar]

I understood the noble Lord, Lord Lawson, to say that he meant to say that it was the second “the” that was being changed, not the first one. So it would still be the duty of the Secretary of State.

[Lord Howell of Guildford]

I appreciate what the noble Countess is saying but the point is central regardless of which “the” the noble Lord, Lord Lawson, intended to remove. This is the sensible debate we should to have.

[Baroness Farrington of Ribbleton (Lab)]

My Lords, I have been listening very carefully but I have yet to hear any justification for the actual amendment that is on the Marshalled List.

[Lord Howell of Guildford]

We are trying to have, I hope, a sensible, analytical debate in your Lordships’ House on how we can strengthen this Bill and make it more effective. I have tried to speak to the amendment and I am sorry that the noble Baroness feels that she does not want to hear what I have got to say. However, I do have some important things to say on this matter.

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[Lord Skelmersdale (Con)]

I wonder whether the noble Baroness was listening when the Lord Speaker put the question. She put it very clearly that what we are discussing is the second “the” and not the first.

[Lord Howell of Guildford]

I am sorry if the noble Baroness is worried about this because she has some extremely valid and important commitments to development and aid. If it was the first “the”, it would be “a duty” or “the duty”; if it is the second “the”, it is “a target” or “the target”. We could slice this very thinly. Behind this lies the consideration that I beg the Committee to examine: that is whether, given today’s context where all the important thinking about development is that overseas official aid assistance is a less important instrument for aid, it should be “the target” or “the duty”. I believe that it is wrong to urge the Secretary of State through legislation to stick to the “the’s” rather than the “a’s”.

I say that not just because the excellent committee report by my colleagues—I did not serve on that committee—gave a whole series of very substantial reasons why one should be cautious about making it “the” target, but because of some important further reasons which are developing all the time and can be analysed by looking at the extremely learned and focused thinking going on today about how to promote development and how our United Kingdom can make its maximum effort towards promoting development in the developing world. I want to give two reasons which I hope the Committee will accept are relevant to changing from an absolute priority target; that is, from “the” to “a”. I hope that noble Lords will tolerate me giving the reasons, and indeed I will be rather sad if people are not prepared even to examine these issues.

The first is this. Most economists who have studied the issue and most of the reports that are coming out today recognise that ODA is only one component of the development effort and that ODA’s relevance to development, in today’s conditions, is declining. Other instruments that require resources are very much more important in promoting development. I mention just overseas security finance, other expenditures which may not be ODA-able such as debt relief, disease research and obviously trade promotion, a range of innovative financing and impact developments. There is also an enormous new range of impact investment that requires resources, while obviously anything that can assist with lower cost green energy is helpful. Indeed, the fall in the oil price is a huge help to developing countries in a way that ODA could not possibly compete with. These are all far more effective—

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[Noble Lords]

Hear, hear!

[Lord Howell of Guildford]

I hesitate to disagree with the noble Countess, but the Committee stage is where we should look at the details that will make a Bill better. I do not see why the noble Countess finds that so objectionable and keeps interrupting speeches. I am not sure that that is the right way in which we should proceed if we want a better Bill.

There is a school of thought called Beyond Aid, which has been looked at very closely in an excellent report in the other place on the future of UK development aid. It brings home the point that if we focus on development in this context, we have to look at other areas of ODA, which is the traditional area of budget assistance. I notice that the Japanese are planning to include aid to armed forces in their definition of ODA; I am not sure whether that is something we want to encourage at all. That is the first reason why I think that this is a good amendment and I hope that we can develop it.

The second reason derives from practical experience. For two or three years recently I was involved at the Foreign Office in dealing with what was and was not ODA, and therefore where the priorities should lie. There is no doubt in my mind that if we have a fixed percentage, it will create huge problems for aid management between the partners. My noble friend referred to the points made by the National Audit Office on that. I beg noble Lords to understand that it is not just a question of accounting methods or a difference arising from data disputes about what is or is not ODA—which are enormous—and it is not just a question of moving the goalposts, which several donor countries are interested in doing. It is a question of whether this target prevents us from prioritising the development tools that really matter. Those tools today are increasingly to be found outside ODA. I am sorry if that is a Second Reading point, but it is also a central point to this debate, and I believe that we should look at it fairly and squarely, without trying to push it aside.

We need to consider far more the spread of power to developing countries rather than just budgetary aid in cash. There are vast new networks that should be developed in order to promote development, which we are not doing. Your Lordships will not be surprised if I mention the Commonwealth network as one of them. It provides a huge flow of trusted and valued investment in a way that ODA never can. I must apologise if the following sounds like a point for Second Reading, but unfortunately DfID recently made some accidental cuts into the Commonwealth budgets, which have now been restored. I congratulate the Secretary of State for International Development on removing those cuts to the Commonwealth budgets because they have been far more helpful to development than merely dishing out cash.

I believe that this amendment will help the Bill, which otherwise could fall victim—

[Lord McConnell of Glenscorrodale (Lab)]

I wrote to the noble Lord when he left the Foreign Office because I had so much respect for the contribution he had made to this House. However, I find his attempt to filibuster this Bill really quite disappointing. Not only has there been a Second Reading debate where a clear majority of noble Lords spoke in favour of the Bill rather than against it, there has also been a debate on the report last year of the Economic Affairs Committee in which a clear majority of noble Lords spoke against its conclusions based on their experience and on evidence that perhaps was not heard by the committee. The noble Lord is simply filibustering this Bill, making speeches that are inappropriate, and he is losing the respect that he once had from many on this side of the Chamber.

[Lord Howell of Guildford]

I appreciate the contribution that the noble Lord makes, but I have not spoken against the Bill; I am speaking in favour of it. I am saying that here is a Bill full of excellent intentions but which could, if we allow it to go unamended by this kind of amendment and the amendments that we will go on to debate today, fall to the danger of being bound by the thinking of yesterday. I beg noble Lords to understand that modern thinking about development takes us away from making it the prime duty—if it is the first “the”, or the prime target, if it is the second “the”—to increase overseas development assistance or pin it to 0.7% of GNI.

[Lord McConnell of Glenscorrodale]

Will the noble Lord accept that the clause does not use the word “prime”, either with the first “the” or the second “the”? It does not say “prime” in the way he is quoting.

[Lord Howell of Guildford]

I am sorry; I am not quite sure what point the noble Lord is making. I am trying to deliver the last sentence of my contribution and I do not understand why the noble Lord feels that it is right to keep interrupting.

I am sure that your Lordships’ House is the place that can refine and improve a Bill and will not try to knock down or contain attempts to improve it, as I believe this amendment does. We have heard from the noble Lord, Lord Butler, and we have heard many wise voices from our Back Benches. We have heard from major committees in other countries, from the Dutch and German ministries and from House of Commons committees that there is a danger of too much emphasis being put on overseas development assistance as “the” target and “the” duty, which could badly distort our development priorities. Today, we need new priorities, and the Bill should reflect them and not reject them. That is why I am grateful to those noble Lords who are prepared to hear some doubts about an otherwise noble and well intentioned Bill.

[Lord Anderson of Swansea (Lab)]

My Lords, I want to make one observation, which alas may be deemed to be going for the man rather than the ball on the eve of a rather important rugby game. I listened to the noble Lord, Lord Lawson, proudly setting out his credentials as an advocate of aid. Had he been in his place at Second Reading, he would have heard the noble Baroness, Lady Chalker, for whom I have immense admiration, stating that, to her shame, during his time as Chancellor the proportion of our aid contribution fell to 0.28% of GNI. Perhaps that is something we should bear in mind when he sets out his credentials so proudly.

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I very much support the amendment, which it seems to me is one that the noble Lord ought to be able to accept and which I would have thought that the Government, as the keeper of consistency, transparency and accountability in our national statistics, would find it helpful to have included in the Bill.

[Lord Howell of Guildford]

This is a sensible change proposed by my noble friend Lord Tugendhat. It would obviously put the Bill, which we want to improve and strengthen, on to a less wobbly basis. There is an enormous debate going on in the economic world and, indeed, in the international scene generally about the nature of GNI. Colleagues will recall, certainly in the last year, or less than a year ago, that the British suddenly found that their budget contribution to the EU budget jumped by the most enormous amount. That was related directly back to redefinitions of our national wealth, product and income. The ONS redefined our national GNI as including various illegal activities and grey and black market activities—and I think, although I may be corrected, on prostitution as well. It made some assessments, which vastly increased our national figure. Instantly we were charged an extra several hundred million—was it even a billion?—for the EU budget. This is dangerous ground. It would be enormously sensible for those who want to see this Bill in place and have an effect to get a better, less shaky basis for it.

There is of course the additional point that if the 0.7% figure rose as a result of GNI rising by these slightly controversial means—I do not think this point has found favour in the House but I beg your Lordships to try to look at it—it would take resources away and put them into ODA, which, as we recognise, is a decreasingly relevant part of the development driver process. That would deprive areas where we want to see development, such as the technology to reduce energy costs, which are crucifying developing countries. We want money to be spent there and on all sorts of technological improvements, which will bring development. We want money to go into defining the law on property ownership, which Hernando de Soto has said is the key consideration in enabling developing societies to develop.

These are the things for which we feel quite passionate. To see money diverted into areas that are not promoting development, even if they add to the aid budget, is not good for this country, our pride and our development power, and it is taking the wrong turning. This is a small but sensible amendment, which I hope will be accepted without demur.

[Lord Cormack (Con)]

My Lords, I sat through virtually the whole of the Second Reading debate, as my noble friend Lord Purvis knows. He also knows why I was not able to take part in that debate. It was a very good-humoured debate, which saw this House very much at its best. I regret that the hallmarks of our debates—courteous good humour and willingness to listen to the other point of view—have not been the defining characteristic of this morning’s debate. That is a great pity.

The fact that we can all accept a principle as being wholly desirable and good does not mean that we all have to accept that every particular is also wholly desirable and good. My noble friend Lord Tugendhat moved this amendment with precision and brevity, clarity and force. He made an extremely powerful argument. I hope it is an argument that will be recognised as such by my noble friend Lord Purvis and that he will feel that an amendment of this sort—although I sincerely hope there will be no pressing to a Division today—would not in any sense invalidate or undermine his admirable Bill, but would strengthen it in the ways that have been indicated. I hope that the rest of today’s debate can be conducted in a way that is more reflective of the good humour and good temperament of your Lordships’ House than the debate on the first amendment was.

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[Lord Brooke of Sutton Mandeville (Con)]

My Lords, I have very few qualifications for speaking in these debates, although I had the extreme privilege, thanks to my noble friend Lord Lawson of Blaby, of serving as the British Minister on the Budget Council of the European Union for the four years when I was in the Treasury—I suspect that that is about as long as anyone has ever done that job. During that time, we had to deal with problems that were, effectively, intractable. The Budget Council is a body with which the noble Lord, Lord Cashman, will be familiar. I am delighted to say that it was this Government who found solutions that meant that we did not have a continuous repetition of the failure of the process at the end of the year in arriving at a budget, which, in the final analysis, was determined by the European Parliament. It was a rich and pleasurable responsibility to hold and we earned the respect of our confrères on the Budget Council—rather as DfID is earning respect—for our concentration on solutions rather than on argument.

The second thing that I wish to say—there is an enormous amount to read on this subject, particularly in the short space of time between Second Reading and Committee stage—relates to the extreme utility, on the subject that we are discussing, of the footnotes in small print in the NAO report. It propounds issues that the International Development Committee might wish to consider. At least 11 out of 15 such issues apply directly to this as a way of making what may also be relatively intractable problems easier to solve.

[Lord Howell of Guildford]

My Lords, I listened almost with amusement to the last forceful intervention of the noble Lord, Lord Cashman. He summed up in an excellent, succinct phrase exactly the content of my maiden speech in this House in 1997—namely, that economics is not a science, as many of its proponents insist, but an art, and a very ambiguous art at that, which is full of subjective views. To look back, frankly, at the development activities of the past 40 and 50 years, post the Second World War, the economists have not done a very good job. They have applied all kinds of economic rulings to the proposed triggers for development and have found that they have not worked. Of course, far more than economics is involved. There is a whole range of psychological and particularly local factors in all the countries that all of us have visited over the years—I have visited dozens of them—which are operating not to the laws of economics. I say “Well done” to the noble Lord, Lord Cashman. That is exactly the truth of the matter. We do not want to be guided too much by economists.

What we want is flexibility and room in which we can look to the future for once rather than the past and see the ways in which development can be triggered and promoted in the future. As my noble friend Lord Lawson said, the world has changed totally in the last 40 years. The developing countries are looking for new priorities and new ways of assistance. They are looking for ways in which they can graduate away from official development systems à la 20th century into new forms of support and development in the 21st century.

All sorts of distinguished reports from the other place and your Lordships’ House emphasise that. The latest report from the excellent House of Commons International Development Committee on the future—not the past—of UK development co-operation states:

“The impact of DFID’s support … depends less on the volume of financial support and more on its ability to act as a purveyor of development excellence, helping its partner countries to identify innovative solutions”.

Your Lordships’ House should be thinking about innovative solutions and not the past. The committee also states:

“As grants of aid become less appropriate in some countries, so new forms of development co-operation are necessary”.

It goes on to identify the evidence that it had gathered in the various countries that it had visited. That is the reality of the moment. New forms are required to promote development. If we glue ourselves into the old ways of thinking, we will deny ourselves the flexibility of this kind of goal, which our superb staffs in DfID, the Foreign and Commonwealth Office and other areas will seek to be guided by, and we will do a disservice to development on a massive scale.

[Lord Hamilton of Epsom]

I follow my noble friend Lord Howell on the remarks of the noble Lord, Lord Cashman. He is absolutely right that economists indulge themselves in a form of science that is not exactly reputable. Some noble Lords may remember the letter written to the Times by, I think, in excess of 360 economists, who said that the Thatcher economic policies were absolutely doomed to pitch this country into constant recession. That was the turning point for the economy in the United Kingdom, and things really took off from there. We are very much at home with him on that.

The noble Lord also spoke about how we should feel enormous compassion for those in great need in places in Africa and so forth. We all very much sympathise with where he comes from there, but the point has already been made in this debate that only 10% of what goes to these countries comes from development aid programmes. The rest comes from investments made in these countries. Let us face it: what is really going to make a difference in a desperately backward country such as the Democratic Republic of Congo is the fact that the Chinese are prepared to put in extensive railway and road networks in return for copper and cobalt concessions in that country. These are the things that will really make a dramatic difference in a country such as the DRC. In terms of relativity, development aid programmes are merely a pinprick compared with what is being invested in return for mineral resources.

To return to the amendment, the noble Lord, Lord Cashman, is right that this is not about economics. This is much more about accountancy. Some people will argue that accountancy is one of these other rather faulty arts, rather than a science, but I think it comes nearer to being a science than an art. What we are talking about here is how you manage money effectively. It must surely be right that you can take somewhat longer to meet a programme, rather than restricting yourself to 12 months. People who support this Bill have not really answered my noble friend Lord Forsyth’s point about 40% of the budget being spent in November and December of a year because it is bumping up against the end of the financial year. This should strike an enormous amount of disquiet in people’s minds, because it suggests to anybody that the expenditure of this money is being rushed. No control is being put in—we are just trying to meet targets to show that we spent all this money, and where the money goes is of much less concern.

I spent a certain amount of my youth in the army in Kenya. After independence, one of the famous elements of Kenyan politics was the Wabenzi, people in government who drove around in Mercedes-Benzes, many of which had been paid for of course by development aid money. One has to recognise that, in these sub-Saharan African countries, the elements of corruption are very great indeed and there is no respect for development aid programmes. People do not say, “This is being brought into my country to aid the poor, therefore I will not put my hands on it”. The fact is that those in charge manage to get hold of an awful lot of that money, which is why so many of them are driving around in Mercedes-Benzes today.

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[Baroness Northover]

My noble friend has made his case very clear and others have, too, but we are managing the budget over a longer period in a way that it can hit those targets in those specific years. We have mechanisms to ensure that we spend our money in a strategic and long-term way. Noble Lords are very familiar with that—not least my noble friend Lord Fowler—and it does not require that kind of potential splurging at the end of the year in order to hit the target. We make annual contributions to a number of multilateral bodies and those are organised using the notes system that I have just mentioned, which allows a note to be counted as aid when issued but it is not cashed until the money has been properly spent in the fullness of time. This means that the department has the flexibility that it needs, as other government departments do, to arrange its accounting to fulfil its obligation to spend at the 0.7% target.

My noble friend Lord Tugendhat, in withdrawing the previous amendment, clearly did not feel that I had adequately answered his question about the OBR. I apologise if I did not answer adequately, and I will look very carefully at what he said and write to him if I need to clarify anything further. However, I hope that I answered his question on whether GNI is an international standard, as I went into that in some depth. Clearly, the target does not change the way that departmental budgets are reconciled with each other—that is not a challenge that we encounter. The ODA GNI figure is a national statistic and the methodology has been agreed by the Office for National Statistics. We are bound by that methodology, which is agreed and overseen by the ONS, which is the appropriate body to deal with that.

I remind noble Lords that the International Development (Reporting and Transparency) Act 2006 established a duty on the Secretary of State to lay before each House of Parliament an annual report about the UK’s development efforts and spending, including reporting on progress towards meeting the 0.7% GNI target for ODA. Therefore, there is such an annual accounting in law anyway. Maintaining DfID’s accountability for tracking and reporting on its own spending to Parliament is more appropriate, both from a governance and a practical point of view, than putting such a responsibility on the Office for Budget Responsibility. If we were to do that, this would seem to be outside the current mandate of the OBR and might require revision of the 2006 Act.

Clearly, spending needs to be fully scrutinised, as the right honourable Margaret Hodge and the honourable Peter Luff said, and my noble friend Lord Purvis has outlined the very thorough and independent way in which that happens. I thank my noble friends Lord Howell, Lord Brooke and others for their wonderful tributes to DfID on the way that it manages this. Indeed, DfID is at the forefront of how best to assist in developing countries, which will undoubtedly change, and needs to change, over time.

Although I understand the intentions behind these amendments, I urge noble Lords to reject them.

[Lord Howell of Guildford]

Before my noble friend sits down, one point on which it would be helpful if she could come back—possibly we could discuss this on Report—is the question of what is “ODA-able”, to use an ugly phrase. The Development Assistance Committee of the OECD is in constant debate, even now as we are debating this Bill, about the new definitions that are required of what is “ODA-able”, or acceptable within the targets, and what is not. How does that link in with the concept in this Bill of the one-year, annual discipline? How will we enable the Bill to be effective in the light of the debates on changing the rules on “ODA-ability” that are raging on in the Development Assistance Committee—and, I suppose, in Whitehall—as she very well knows?

[Baroness Northover]

I do not need to come back on Report, because I hope that I can answer my noble friend now. I find it immensely helpful that there is a definition of ODA. My noble friend is right that there is discussion of whether the definition needs to be updated, but the definition as drawn at the moment, which is what we answer to, is a very useful device because it makes clear that you cannot spend money on, for example, tanks or whatever someone might feel would be a useful way of spending the money. Therefore, from my perspective, it is a very useful discipline. There are certain things you can do within ODA, and it has to support the poorest and development. The noble Lord has probably seen the definition of what is excluded, as have I, and I frequently look at it. That serves as a useful discipline because, should DfID be asked to pass money to some department to do something which it feels is not appropriate, it is easy to point out that that does not fit within ODA and it would therefore mean that we would not meet the 0.7% target.

It is true that the OECD is at the moment giving consideration to whether we need to update this given the involvement, not in military offensives and so on but in what is now done internationally in terms of peacekeeping. However, that has not yet been decided. I am glad that the OECD is looking at what might be appropriate but I do not believe that any conclusion that the OECD comes to will be at variance with the basic commitment to support development in the poorest countries and of the poorest people.