Commonwealth Development Corporation Bill

Lord Judd Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords & Report stage (Hansard): House of Lords
Thursday 9th February 2017 Lords Chamber

[Lord Judd (Lab)]

My Lords, I thank the Minister for that clear introduction to the Bill. I am glad he is in the post that he is in, because he is a man who has taken our responsibilities in this sphere very seriously during his life. I am also very glad indeed that the noble Viscount, Lord Eccles, will be speaking in the debate, as he made a distinguished contribution to the history of the CDC when he was leading it.

I declare an interest because, for a short while in the mid-1970s, I was the sponsoring Minister for the CDC and I took great interest in it. What I liked about the CDC in those days was that it took very seriously the issue of the development of human capacity. When I visited, the staff took great pleasure in telling me how they were developing hands-on capacity.

That was important to see in the context of the Conservative Party’s own record. I was frankly rather impressed in the 1960s, when the Conservative Government took the initiative in setting up government machinery to meet third-world commitments. They called the department the Department of Technical Cooperation. Indeed, I do not mind telling the House that I spent a certain amount of time at our party headquarters trying to argue that it was a good title; if we were going to have a great emphasis—as we did, thank God—on the central role of overseas development in our programmes, then we ought to look seriously at the title the Conservatives had used. I never felt that the Ministry of Overseas Development quite got to the heart of the concept as the notion of technical co-operation did. I saw the CDC as fulfilling the spirit that says, “Nothing will succeed unless we are developing human capacity”.

I am therefore rather sad that, given the history of the CDC, it has now gone down the road of becoming, in effect, just another merchant bank. It seems to me that the emphasis, originality and creativity that was there has been lost. I do not believe that responsibility for this development can be laid entirely at the feet of the party opposite. Whether it was inadvertent, or however it happened, we were not as vigilant on this point as we should have been.

The Minister has explained the origins of the Bill. It is true that in the informed constituency in this country—a very real and good one on these matters—there is and has been a certain amount of concern. Here I declare an interest as a former director of Oxfam. We are well blessed to have the quality of NGOs we have operating in this sphere, and we should take their concerns very seriously.

What are those concerns? Some are centred on the real development impact of the CDC as it is today and whether recent reforms have adequately improved its effectiveness. It continues to face challenges relating to transparency, monitoring and reporting on its development impact, as well as on routing its investments through tax havens. The Bill provides us with our first opportunity since 1999 to shape the legislative framework for government oversight of the CDC and update it to clarify the purpose of public funding for the CDC, a suitable level for future public funding and the conditions under which it is to be provided and utilised; how the CDC will address the UK Government’s priorities for aid, such as transparency, value for money and achieving development results; and how the CDC can improve its investment standards—for example, on the use of tax havens.

More specifically, concerns have been centred on an overconcentration on the higher rates of returns on its investments. A focus on large formal enterprises, the use of narrowly defined impact indicators, and minimal investment in sectors such as agriculture and manufacturing raise concerns about its development impact for ordinary human beings. The National Audit Office’s recent review of the CDC reported that 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”.

That observation cannot be cast lightly aside.

As for transparency, the CDC was assessed as poor, with 22.5%, in the Aid Transparency Index, and there have been no major improvements in its transparency since then—or none that I can detect. I acknowledge that the Government and the CDC itself take these concerns seriously but, as late as 2013, 75% of the CDC’s investments were routed through jurisdictions that feature in the top 20 of Tax Justice Network’s financial secrecy index.

During deliberations on the Bill in the other place, Ministers failed to provide a clear and robust case for why the CDC required the level of additional funding and whether it had the capacity and opportunities to invest it effectively. This therefore remains a major question, especially as in DfID’s business case for the £735 million in funding committed to the CDC in 2015 it stated that the CDC had assessed that it had the capacity to invest an additional £1 billion and would require additional funding from DfID only in 2019.

I conclude by putting specific questions to the Minister. I do not want to overdo it, but I repeat the points because I have very great respect for the present Minister and I am sure he will take these questions seriously. First, why have the Government introduced the Bill before publishing the CDC’s investment strategy for 2017-21? Why does the Bill allow the Government to utilise the ceiling of £6 billion to £12 billion for funding the CDC, given that in 2015 it assessed it could invest an additional £1 billion for the Government? Why have the Government not included in the proposed Bill standards that the CDC should meet in order to address the Government’s commitment to transparency, value for money and tracking development results, as well as on issues such as the CDC’s use of tax havens for its investments? How will the CDC be asked to improve its functioning and contribution to development results as a condition of future funding increases? How will the CDC be asked to improve its transparency and reduce the volume of investments it routes through tax havens as a condition of future funding? Finally, how have DfID’s investment plans for the CDC been informed by assessing other options for investing these resources and comparing their value for money and potential for development impact?

As somebody who worked in this sphere for a good deal of my life and who continues to work in an honorary capacity in many ways since becoming a Member of this House, I have difficulty with the term “development impact”. I believe the real heart of the challenge of our co-operation with communities across the world is their empowerment. It is about their taking control themselves. It is about enhancing their capacity. “Impact” suggests it is us bringing something to the country, which we are then evaluating. Our evaluation needs to concentrate far more on how the local community appreciates and benefits from what happens.

My other point, and it is not a popular one in the age of the market, is that in real human terms very often the real effect of this co-operation will not be judged until perhaps decades later. The constant pressure to produce immediate evidence of impact sometimes distorts lasting effective development. I ask the Minister to consider these matters seriously and I look forward greatly to his reply.

--- Later in debate ---

[Lord Bates]

That is right. The noble Baroness refers specifically to India, which is of course itself a signatory to the sustainable development goals and the eradication of poverty by 2030. That will have to be its focus.

A number of other questions and particular points were raised. I will review the record, particularly with reference to the points made by the noble Lord, Lord Judd, at the beginning, and where there are gaps or I can add anything, if it will be convenient for the House, I will write to noble Lords. I reiterate my commitment to continue to engage with the House as the CDC progresses with its strategy and we finalise the new business case.

[Lord Judd]

I am grateful to the Minister for what he has said and the fact that he will write to me, although it is a pity that, because this is a money Bill, we do not have the opportunity to go into these things in Committee. However, will he agree with what has been said by quite a number of noble Lords in this debate, that the CDC, which of course has a lot of admiration, must remember that job creation and the eradication of poverty are not synonymous? Job creation can play an important part, but the eradication of poverty is a greater issue. We must not let one become a substitute for the other.

[Lord Bates]

I defer to the noble Lord’s great experience in this area. He is right. He is also right to say that it must not be perceived as an imposition. This must be something that comes from the ground up. It must be about strengthening capacity within the countries. That is why education, healthcare and all the other things that we are doing in terms of infrastructure are so critical to the overall success. I accept that.

The CDC is the oldest development finance institution in the world. It is a great British institution that reflects the values of the British public, who consistently demonstrate their concern for and generosity towards the poorest. We will make sure that we can all continue to be proud of the life-changing, pioneering work that this institution does. With that, I ask the House to give the Bill a Second Reading.

Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.