International Development (Official Development Assistance Target) Bill

Lord Tugendhat Excerpts

Friday 6th February 2015 Lords Chamber

Moved by

[Lord Tugendhat]

2: Clause 1, page 1, line 4, leave out “national income” and insert “domestic product”

[Lord Tugendhat (Con)]

My Lords, this amendment stands in my name and in the names of my noble friend Lord Forsyth and the noble Lord, Lord Lipsey. It would replace the words “national income” with the words “domestic product” on page 1, line 4 of the Bill. I hope that, in view of the exchanges in the previous debate, we can all agree that that is what we are debating on this occasion.

Before coming to the substance of the amendment, I want to make it absolutely clear that, as I said in the Second Reading debate, I support the British aid budget, I am quite prepared to see it increased further in the light of economic circumstances, and I admire the achievements of DfID, which, as the result of our examination in the Economic Affairs Committee, I recognise is held in high esteem across the world. I hope that there is no misunderstanding on that point and that noble Lords do not mistake criticisms of the Bill as it stands as being criticisms of the aid project. It is very important to clarify that.

My objection is to a legally enforceable annual expenditure target and my views on that subject are very close to those enunciated by the noble Lord, Lord Butler of Brockwell, speaking from his great experience. I not only oppose a legally enforceable limit in respect of the aid budget but would do so in respect of any budget, because I believe that it will lead to the misallocation of resources and distortions of various kinds. If it is adopted in its present form for the aid budget, that will in due course bring the aid budget into disrepute.

However, as the Government want to go down this road, and as the development community very much supports that, it is our task in this House, as far as possible, to save them from the consequences of that folly by improving the Bill. This amendment would go a small way—not more than that—towards doing that. I say that because the Bill confers on the aid budget, as others have pointed out, a unique privilege: it gives it a guaranteed share of national wealth, something that is denied to the National Health Service, education, defence, and other very important programmes. Therefore we must be sure, both for that reason and because of the legal obligation of the expenditure target, that the expenditure can be measured in the most precise and accurate way. I hope that no one would disagree with that.

The Bill defines the 0.7% in terms of a percentage of GNI and defines the period as a calendar year. Of course, as the House very well knows, the vast bulk of UK public expenditures are recorded as a percentage of GDP and on the basis of the financial year. This amendment would have the effect of enabling aid expenditure to be measured and recorded on the same basis as the overwhelming bulk of the budget. This is not a question of quantity—I am advised that the change from GNI to GDP would make virtually no difference on that score—but it would greatly increase transparency, which is something that in general the House approves of, and it might also avoid problems in future. Although there is not very much difference, as I understand it, between GNI and GDP at present, one has only to look at what happens with cost of living indices, whereby the differences between RPI and CPI can fluctuate quite markedly and lead to a great deal of misunderstanding. In that sphere, pensions, index-linked bonds and so on are measured by RPI, while other things are measured by CPI—and distortions arise. I suspect that distortions would also arise in relation to the difference between GNI and GDP.

If, as I suspect, this amendment is rejected, I think that the proposer of the Bill and the Minister—I emphasise “and the Minister”—should answer three questions. First, why use GNI? Presumably, it is being used for international reasons, but can we have an explanation as to precisely why it is GNI? Secondly, how will the aid expenditure figures and those relating to other programmes be reconciled? It is very important that the Government answer that question at the Committee stage. Thirdly, have the Government sought advice from the OBR or the NAO on this matter, and what did they say?

Let me just repeat the point about the Minister. Noble Lords will remember that about a year ago we debated the European Union (Referendum) Bill. I found myself at that time closer to the Liberal Democrat party and the Labour Party than to my own party. My noble friend Lord Dobbs, who proposed the Private Member’s Bill, summed up at the end of each amendment debate but the Minister on the Front Bench also intervened because of the implications for government policy. I have asked three absolutely relevant and explicit questions, which lie not in the province of my noble friend who proposes the Bill but in the province of the Government. I very much hope that the Minister will be able to answer the questions that I have put forward. I beg to move.

[Lord Forsyth of Drumlean]

My Lords, I rise to support my noble friend’s amendment. It may seem a nitpicking point to distinguish between GDP and GNI—the noble Baroness on the Front Bench says, “Yes, it is”. But I suspect that that is because she does not know the difference between them, because if she did know the difference she would know that it was not a nitpicking point.

--- Later in debate ---

[Lord Purvis of Tweed]

We are making law and debating an amendment that proposes a change to the Bill. I have explained why that would not be appropriate and why we operate under our system of national accounts, which we adopted 20 years ago when my noble friend was a Cabinet Minister. On that basis, I invite my noble friend to withdraw his amendment.

[Lord Tugendhat]

My Lords, I thank those noble Lords who have participated in the debate. I also thank the proposer, who, in so far as he is responsible for the Bill, sought to meet the points that I raised. However, I have to confess that I am slightly disappointed with the Minister’s reply, and I hope very much that the Government will be able to put up a better performance on Report.

First, the noble Baroness explained, as did my noble friend who introduced the Bill, the external considerations that have led to the adoption of GNI, and I understand those. However, I raised—I think talking about British budgetary procedures is quite legitimate in the British Parliament—the difficulties that will be caused by measuring this expenditure against other public expenditure programmes. That is something that the Government ought to be very much concerned with. Of course, they ought to be concerned with international considerations, but they ought also to be concerned with domestic budgetary considerations. I raised specific questions in relation to those, which the Minister simply did not answer. She did not address the points at all. I also asked whether the Office for Budget Responsibility and the NAO had been asked for their opinions and what they had said. Again, answer came there none.

As I made quite clear when I introduced the amendment, I support the aid programme and its objectives. I have no problem with its increase in relation to national circumstances. However, it will be very dangerous if the aid budget is put into a uniquely privileged position. It is already having privileges lavished on it by a guaranteed share of the national income. That is one big privilege that I think will lead to it coming into disrepute. Now, the Minister compounds the problem by completely failing to take any account of the questions that I raised about the interaction between this budget and the domestic budget.

I very much hope that the Government will be able to put on a better show on Report and, for the sake of clarity, answer the specific questions that I have raised. First, what steps are they taking to reconcile these different measurements in terms of the domestic and international considerations? Secondly, have they consulted the NAO and the OBR, which they certainly should have done? If they have, what did the NAO and the OBR say? If they have not, why not?

In the—I hope not forlorn—hope that the Government will come back with a better answer on Report, I currently beg leave to withdraw the amendment.

Amendment 2 withdrawn.

--- Later in debate ---

[Lord Tugendhat]

My Lords, I had not intended to speak a second time, but I feel that I cannot allow the words of the noble Lord, Lord Cashman, to go unanswered. I and a number of other noble Lords have made it clear that we support the British aid programme and its objectives and we understand that DfID is a very good administrator in these fields. The suggestion that in trying to improve the Bill one is in some way trying to deny the needy or trying to take food from the hungry is quite unjustified. I very much hope that he was not uttering those words in a personal sense.

Let me continue, because there has been a certain amount of moral indignation, which I find very difficult to take. Noble Lords, including two former Chancellors of the Exchequer and a former Chief Secretary to the Treasury—I am a former Budget Commissioner in the EU and have had a lot to do with large expenditure programmes in the private sector and the public sector—owe it to the House to draw on our experience to seek to improve the legislation that comes before us. I recognise that, as my noble friend Lord Fowler says, we are in a minority. I also recognise that although the Economic Affairs Committee, which is made up of members from all parties, reached a unanimous conclusion, its view is in a minority in this House.

However, the fact that one is in a minority does not mean that one should be constrained from drawing on one’s experience in trying to improve legislation. I believe that this Bill is flawed and that the amendments will improve the Bill. If the Bill can be improved, it will be more effective. However, if the Bill falls, that will in no way interrupt the flow of British aid or inhibit the Government’s ability to spend 0.7% or 0.8%. I hope that noble Lords, such as the noble Lord, Lord Cashman, and others who think like him, will accept that we are speaking with good intentions.

[Lord Cashman]

I thank the noble Lord. I am happy to go back to the record but I think that it will show that I stated to your Lordships that that is how this debate will be reviewed and viewed outside this House.

[Lord Tugendhat]

Perhaps I may ask the noble Lord whether he believes that the way in which one’s words are viewed and reviewed should be an inhibiting factor in drawing on one’s experience in order to seek to improve legislation.

[Lord Cashman]

My Lords, I have always believed that we must speak in defence of our principles without hesitation and bring to that our wisdom. However, one must also be aware of the weight of one’s words and how those words will be represented. In terms of one’s experience, I also said that economics is being viewed as a science. If it is such a science, how come economists and Chancellors have got it so wrong for so long?

[Lord Tugendhat]

I am afraid that the way in which human beings are constructed means that error is endemic in all our assessments, but that should not be an inhibition in drawing on our experience to try to improve the proposals before us. I quite accept the point made by the noble Lord about how statements may be viewed and reviewed. I would also say to him that there is a danger of them being misrepresented and that what he has said will encourage that.

[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.