Points of Order

Patrick Grady Excerpts

1st reading: House of Commons
Wednesday 16th November 2016 Commons Chamber

[Mr Speaker]

That is not a point of order, as the barely concealed grin of the hon. Gentleman in raising the matter eloquently testifies. Nevertheless, what I will say to the hon. Gentleman, who is certainly a quick learner in the House, because he entered only last year, is that, as he knows, he has now found his own salvation. I have a feeling that his clarification in the Chamber may well communicate itself, or be communicated, to media outlets across Torbay and possible elsewhere.

[Patrick Grady (Glasgow North) (SNP)]

On a point of order, Mr Speaker. At Prime Minister’s Question Time, the Prime Minister alluded to a written ministerial statement to be published later today on the fate of hundreds of UK citizens—in other words, on whether or not the Chagos islanders will finally be granted their right to return. That written statement has yet to make an appearance, but the Government’s decision has been reported all over the morning papers, and apparently that decision is to maintain the 40-year injustice. Is it in order for us to read about Government policy in the papers before it has been reported to this House? What opportunities are available to us to question Ministers on such disappointing decisions?

[Mr Speaker]

The short answer is that it is up to the Government to decide whether the matter warrants an oral statement or a written statement, and that is not for the Chair to judge. What I will say to the hon. Gentleman, however, is that it is highly undesirable for there to be a significant time lag between public disclosure and parliamentary opportunity. He will know that other business has so far occupied us today. But that is true of today. The written statement that he legitimately anticipates has not yet been made. Doubtless it will be, and that may well lead Members to want to raise the matter in coming days, particularly if there has been no substantial parliamentary discussion of it beyond the brief exchange at Prime Minister’s questions. I am sure that the hon. Gentleman will be ready to explore what utensils are available to him.

Commonwealth Development Corporation Bill

Patrick Grady Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 29th November 2016 Commons Chamber

[Patrick Grady (Glasgow North) (SNP)]

I hope, Madam Deputy Speaker, that before I begin my remarks on the Bill, you and the House will allow me to note that today marks the third anniversary of the Clutha tragedy, when a police helicopter crashed into the Clutha bar in Glasgow, killing 10 people. We remember them and pay tribute to them and to the first responders on the scene that night. We hope that, in due time, families and friends will get the closure they require and the answers they seek through a fatal accident inquiry process.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I am sure that the whole House joins the hon. Gentleman in remembering those who lost their lives that day, and their families and friends.

[Patrick Grady]

Thank you very much, Madam Deputy Speaker.

The Bill is a rare piece of DFID-led legislation—the first in this Parliament, I believe—so I take this opportunity to welcome the new Ministers to the Government Front Bench and the shadow Ministers on the Opposition Front Bench. Lots of Scottish National party spokespeople seem to have been doing that in recent weeks and months, so at least there is consistency from our Benches.

Today’s debate gives us the opportunity to look in detail at the Government’s specific proposals on increasing the funding they can provide to what was the Commonwealth Development Corporation, now more regularly known as CDC Group or the CDC. In doing so, it is worth exploring how the Bill fits into the broader context of the UK’s aid spending and the direction the Secretary of State is setting, and how those fit with the global framework and consensus on poverty reduction.

Aid works. It has saved and transformed countless lives around the world. I have had the privilege of witnessing that with my own eyes in places such as Malawi and Zambia, and of meeting people from all over the world whose lives have been transformed by aid, when they have travelled to Scotland and the rest of the UK to share their testimony.

SNP Members happily give credit to the UK Government for meeting, in recent years and after 40 years of delay, the 0.7% of gross national income target for overseas development assistance spending. Despite the progress made in recent years, the need for aid spending has not gone away. As many analysts and institutions have said, including the International Development Committee, aid flows will need to continue to grow from the billions to the trillions if we are to meet the sustainable development goals—they are also known as the global goals—that have been agreed at the United Nations and if we are to tackle the challenge of climate change. The Secretary of State spoke about market failure. Lord Stern once upon a time described climate change as the biggest market failure of all, and that must be at the forefront of our minds.

I give credit to the Government for their leadership in negotiating and building consensus on the sustainable development goals, but the task is to continue to show leadership as the world works towards meeting them to end poverty and hunger, achieve universal education and gender equality, eliminate preventable disease and empower communities around the world. The first and most important question we must ask of the Bill is how it will help to meet those goals. What assurances can the Government give us that, in their agreements with the CDC and in setting policy direction, the investments that the CDC makes will be geared to the achievement of the global goals?

As a number of hon. Members have said, the Bill is tightly focused, which is perhaps a missed opportunity, because there is a chance to make more explicit in the Bill or the Commonwealth Corporation Act 1999 that poverty reduction is as much a duty of the CDC as it is of the Department for International Development. It is not clear in the Bill how much scope there is for amendments, but who knows how creative hon. Members will be in Committee?

Such a reassurance from the Government would help to make a stronger and clearer case for the role of development finance and for that specific development finance institution. The CDC is rightly proud of being the oldest such institution in the world. As a pioneer, it has had numerous successes, as we have heard, but it has also learned a number hard lessons over the years. To maintain support in the House, it will need to continue to do so. Stories of lavish expenses and inflated salaries, of channelling funds through tax havens, and of investing in luxury hotels and shopping malls, will not inspire confidence among the aid community or the public at large. As we have heard, the National Audit Office yesterday raised a number of concerns about transparency and impact measurement. Despite the progress and reforms of recent years, in 2013 still only 12% of new investments were made in the least developed countries of the world.

Since the Secretary of State’s appointment, she has made great play of seeking value for money for the taxpayer and increasing aid spending transparency. Will she commit to holding the CDC to the same standards as other stakeholders and recipients of DFID funding? She said in her speech that transparency would happen as part of the Bill, but I do not see it in the Bill, so how can we have those transparency guarantees? The right hon. Member for Sutton Coldfield (Mr Mitchell) asked who else could scrutinise the work of the CDC. The hon. Member for Edmonton (Kate Osamor) rightly suggested that the Independent Commission for Aid Impact could continue to have a role. Perhaps that provision should be in the Bill.

[Mr Mitchell]

The hon. Gentleman is right that ICAI should have a role, which it has because it can follow all official development assistance expenditure. He can rest assured that I should have added ICAI to my list.

[Patrick Grady]

I am happy to take that reassurance from the former Secretary of State, but I hope to hear it from current Ministers.

[Fiona Bruce]

As chair of the sub-committee of the International Development Committee that scrutinises the work of ICAI, perhaps our sub-committee could be added to that list.

[Patrick Grady]

DFID and the other bodies rightly face considerable scrutiny, which is as it should be, but we must ensure that it is extended and applied equally to all DFID stakeholders and all the resource that is spent. Perhaps there was an opportunity for the Bill to go further and to place statutory duties on the CDC to report on all its spending to the standards set by the international aid transparency initiative. I wonder what creative amendments might appear in that respect.

Let me be clear that I am not objecting in principle to the concept of development finance. There is a role for the private sector to play in stimulating the economies of developing countries and helping people into work—if carefully managed, it can support innovation and diversification. The Secretary of State’s letter to Members in advance of the Bill gave the example of the CDC’s early investment in the African mobile phone operator that eventually became Celtel. The investment was made when the technology was unproven and the market barely existed. I have seen first hand the impact that mobile phone technology makes in improving people’s lives across sub-Saharan Africa. Indeed, I have been a customer and user of Celtel services on many occasions.

The Scottish Government recently launched their own development finance initiative as part of their international development strategy. The Minister for International Development and Europe, Dr Alasdair Allan, announced in October £1 million of Scottish Government funding to help Malawian businesses over a three year period, which will be match-funded by private investors, providing £2 million in total to invest in Malawi. Those investments will be managed by a new Scottish company, the African Lakes Company Ltd, which has been registered as a limited company for that purpose. The African Lakes Corporation was originally established in Glasgow in 1878 to develop trade as an effective way of displacing slavery in Malawi. More than a century on, that mission has been revived with a contemporary view to investing in Malawi’s future. Through their support for that venture, the Scottish Government aim to show that responsible investment can help Malawi and similar countries to reduce dependence on aid, support the growth of existing businesses and create sustainable livelihoods.

The question is therefore less about the principle of development finance and more about how it is managed and how it fits within the overall picture of aid spending. The Scottish Government commitment of £l million over three years represents just under 4% of their annual development fund budget. The figures proposed in the Bill are of a far greater order—the Bill proposes the quadrupling of the funding cap from £1.5 billion to £6 billion, which would take the total amount that DFID can invest to the equivalent of around half the annual aid budget. I take the Secretary of State’s point that that will not necessarily be invested in one go, but if my understanding of the Bill is correct, it could be invested in one go in principle, which is a concern to some of us. The new maximum, which will be decided by statutory instrument, could be £12 billion, which is approximately the total annual aid budget. It is therefore worth asking, as the hon. Member for Edmonton did, where those figures came from and how they were arrived at. Why £6 billion and not £5 billion or £7 billion? Where is the needs analysis behind that figure?

As we heard in Treasury questions today, total aid spending is very likely to fall as a result of a slowing economy. The 0.7% target is by definition a proportion of total GNI. With further economic uncertainty on the horizon, there is no guarantee that the current figures will remain stable, let alone increase. Would it have been more sensible for Ministers to express the funding limits in the Bill as a percentage, or through some kind of formula that relates to the total amount of aid funding, to make investment in the CDC relate more clearly to the total aid budget at any one time? Although making the cap a proportion recognises the importance of development finance, it also recognises that it is only one small tool in a box, as the Secretary of State said.

We have been presented with the Bill, which incidentally was not mentioned in the Queen’s Speech, without seeing the long-promised policy statements in the shape of the bilateral and multilateral aid reviews. We therefore have no real idea exactly how the increase in the investment cap fits with DFID’s broader policy direction and goals. The Secretary of State has said that no disbursements will be made to the CDC without a robust business case. Will she assure us today that such business cases will have poverty reduction and the sustainable development goals, and people rather than profit, at their heart? As I asked earlier, has she given any consideration to the opportunity for building that into the Bill as a statutory duty on the CDC? [Interruption.] If the Secretary of State is not here, I hope that at least one DFID Minister can answer those questions at the end of the debate.

I and many other Members are keen to explore in Committee and other stages the question of how that significant scaling-up of DFID finance to the CDC fits into its broader policy goals and the wider global aid agenda. If satisfactory answers are not forthcoming, and if the Government are not willing to offer the reassurances and amendments we suggest, we reserve the right to oppose the Bill in its entirety on Third Reading.

Greater clarity is urgently needed from DFID and the Government as a whole on the purpose of their aid budget and how they will achieve that purpose. A global consensus framework exists, which this Government, or at least the Government elected in May 2015, helped to negotiate and write in the shape of the sustainable development goals. I said last week in Westminster Hall that, despite what may be read in some of the gutter and right-wing press, there is still public and political consensus in the UK on the importance of aid and the need to tackle global poverty.

The Secretary of State talks increasingly about making aid work in the national interest, but that raises the question: what is the national interest and how is it different from the goal of poverty eradication? Surely meeting the global goals in and of themselves is in the national interest, otherwise there is the implication that previously aid did not work in the national interest or that we have a deeper interest in its effectiveness beyond what the SDGs aim to achieve. If that is the case, what is that interest? What better or more noble purpose is there than the eradication of poverty and disease and the building of peace and equality for all? Surely a global community where everyone’s basic needs are met, where education allows people to thrive and where health and wellbeing contribute to more peaceful societies is by definition in our own interests, as well as the interests of those we are seeking to help.

That is why the goals must be at the heart of the work of the CDC. Ending poverty should not be a happy or convenient by-product of profitable investments; it should be the other way around. If investments that create jobs and provide services that lift people out of poverty go on to make surpluses that can be reinvested in more of the same, all to the good, but it should not be assumed, especially in the context of fragile and developing countries and economies, that generating a return on investment will of itself provide a rising tide that floats all boats. Old-style aid-for-trade and trickle-down investment have left us with a world where we still need a 15-year timetable to meet the global goals, after 15 years working towards their predecessors, the millennium development goals; yet we live in a world of plenty with the knowledge, resources and capacity to meet and exceed all the targets in the goals. What is lacking is the political will. The Government must show they understand that and that their support for the CDC is but one small and proportionate intervention in the struggle for a fairer, more just and more peaceful world.

Every penny that the Government invest in the CDC is a penny not invested in traditional, proven methods of aid delivery, so they have to show why each of those pennies is not better spent on gender empowerment, nutrition, farming, education or any of the other programmes working in partnership, on a non-profit basis, with specialist and grassroots organisations on the ground in developing countries. If they want to maintain the consensus in the House on the use and purpose of aid, the Government must show willingness in the coming stages of the Bill to engage on the points that I and others have raised. I look forward to continuing that debate in the coming days.

Commonwealth Development Corporation Bill (First sitting)

Patrick Grady Excerpts

Committee Debate: 1st sitting: House of Commons
Tuesday 6th December 2016 Public Bill Committees

[Alison McGovern]

Q Minister, you mentioned the index that is designed to drive investment to the poorest parts of the world, yet we have heard about investment in online retail in India. My understanding was that the Government’s policy is to move investment away from middle income countries, or countries towards the middle income range, such as India. How can the two approaches fit together? It makes no sense.

Rory Stewart: In the grid, we break India down by state and target the poorest states. There is a transition in India. You are absolutely right that the Government have decided to move away from traditional development grants and into technical assistance and the kind of financing that CDC would produce. We do two things in an Indian context: we target the poorest states and, specifically on the question of the online retailer, we are able to do things in India that we might not be able to do in some of the more testing, difficult markets. With that particular online retailer we are also able to focus on driving up labour standards and making sure that skills and worker safety are protected. It is worth bearing it in mind that India, despite all its very strong economic performance, still has some of the very poorest areas in the world. Enormous numbers of people are on less than $2 a day, and many are on less than $1 a day.

[Patrick Grady (Glasgow North) (SNP)]

Q I would like to probe a little more on the specifics of the hard figures in the Bill—the £6 billion and the ultimate cap of £12 billion. Where do those numbers come from? What was the needs assessment that these are about the amounts of money that the Department feels CDC needs? Was there dialogue between the Department and CDC to reach those amounts? Why go for such hard figures, rather than some kind of proportional formula? Is there any indication of a timescale in which these amounts might eventually be reached?

Rory Stewart: It is a question of setting a ceiling. We welcome this, but it is quite unusual in the Department’s spending to have to go through primary legislation in order to make a financial allocation. I mentioned to Ms McGovern that, in a three-year period, we would allocate, say, £3.3 billion to the World Bank. We do not do that through primary legislation. This Bill attempts to give the Department the ability to do what we do with the rest of our budget, which is to make decisions on the basis of ministerial decisions, accountability to Parliament and strategic decision making. Specifically in relation to CDC, we would like the ability, should a business case emerge, to give it more money without having to come back to Parliament with primary legislation every time we wished to do so.

Where was the figure arrived at? Well, the figure was arrived at after a discussion with CDC about the maximum possible amount it could realistically require over the period, which takes into account its staff resources, the demand in the developing world and its past spend. If you look at CDC’s last round, it put about £1.2 billion through in a year, of which £735 million was a recapitalisation from the Government.

Looking forward over the next five years—2016 to 2021—this would allow them to draw down something of the order of £1 billion a year. In effect, it is only £4.5 billion because of that £6 billion they already have £1.5 billion. On the next bit of what they take in the future, if I’m honest with the Committee, my preference would have been to say, for the reasons and principles I laid out in relation to our other spend—our investment to the World Bank—that Ministers could come back through secondary legislation. A statutory instrument is how I just did a £350 million addition to the World Bank. I think you were on that Committee, Mr Grady. That would be the process we would hope to do with CDC.

My preference would have been to just give Ministers the power to go to a Statutory Instrument Committee to ask for that money, but the Clerks of the House advised us that it would be better to set a financial limit to that power, so we chose for the period 2021 to 2026 the same amount we chose for 2016 to 2021. That is how that figure is arrived at.

[Imran Hussain (Bradford East) (Lab)]

Q Just to build on the point made by Mr Grady in his question to the Minister, I listened to the answer, but in the absence of a business case strategy or investment policy I am finding it difficult to understand how we can arrive at those specific figures because there is nothing to suggest how that money will be spent.

Secondly, does CDC have the capacity, given the totality of its lifetime spend of £1.5 billion? Such a massive increase would be an issue. Another question, probably to the Minister, is around the point made earlier by Ms McGovern and the areas where we have availability of private sector financing. Is there any idea of where the new strategy or investment policy will go with that? I take on board the example used—India. I accept that India has pockets of poverty, but in comparison private sector financing is more readily available perhaps than for other target areas.

Rory Stewart: Those are three very good questions around the business case, capacity and private sector financing. I will take them one by one.

The idea of this proposal—the primary legislation—is to provide an indicative ceiling around which a business case can be organised. Within the Department, we would expect to produce a business case and to have some sense of what money would be available. Currently, there would be no money available so it would not be possible at the moment for anyone to write, as the Department would hope, the forward strategy for future investment or produce a business case, which we hope to do in the summer of next year because Parliament would not have given us permission to give any more money to CDC.

Bluntly, if the Committee decided not to pass this legislation, CDC would have to start reducing staff and we would have to scale down significantly the future programme of investments because there would simply be no money legally available to CDC and there would be no purpose in producing a business case in the summer for future investment because that money has already been allocated. So we believe it is important to get your permission in principle for a seemly amount that we could give CDC should a business case be produced to meet it. That brings me to the second question.

I will hand over to Graham and Diane in a second, but I am absolutely certain that the board of CDC and its chief executive will not request the money from us if they do not feel they have the capacity to spend it and if market demand does not exist for that expenditure. They are under a strong obligation to their board to make sure they take this money responsibly, so even in a case in which DFID does its business through consultation with CDC and we decided, for the sake of argument, that a reasonable sum of money going forward over a five-year period was, let us say, £3 billion—I chose £3 billion because the £4.5 billion is a ceiling and we are not saying we will take that. That is what this business case is about. So let’s say it was £3 billion. They would then effectively be able to draw down on a promissory note, effectively. The Department would be saying, “You can draw down that money over a five-year period.” CDC would then have to come up with individual proposals—“Here is a solar programme in Burundi that we think is worth investing in”—and draw down the money from us. I do not want to speak for CDC, but it would certainly not be drawing down money if it did not feel that it had the resources to spend it responsibly.

That brings me to the third question of private sector financing and to Ms McGovern’s question. We are absolutely clear that we do not want to be in the business of crowding out private sector finance. One of the really good criticisms made of CDC in the National Audit Office report, the Public Accounts Committee report and the ICDC report was that it was doing exactly that, for example by making investments in coastal China. We stopped those things from 2012 onwards. The investments that we are now talking about in India are in places such as Bihar or the poorest bits of Uttar Pradesh, where the business environment is very difficult and very little capital is going in. We are also making sure that the grid is followed absolutely with every investment, so that we are not falling into that trap.

Graham Wrigley: This very important question is about how CDC and the shareholder respond to what we think is the very clear need for long-term, patient, impact-driven and additional capital in low-income countries, and about how we do that in a responsible and thoughtful way. We fully understand that this will be a very significant step in CDC’s history, but from our perspective, having worked on this for the last five years, this is evolution, rather than revolution as it might look from the outside.

Let me explain why. If we go back to 2012, when an entirely new mandate was created, a new team was empowered to go off and explore and see what would happen. At that time, the projections showed that if things went well, more capital would be required. That is precisely what happened, and it led to the recapitalisation in 2015. As the Minister has just said, we structured that recapitalisation such that the money could be drawn down if and when there was the market demand. Indeed, it was only this week that the first promissory note for that recapitalisation was called.

Going into the next five years, the team has now been established. It was 40 people back in 2012; we are now at 220. The commitment rates have gone up. We believe that the market need in our markets is growing, and for the last year we have also been working with the Department on a series of potential new programmes focused on high risk and on unlocking new forms of development impact.

The quantum and timing of any capital given to CDC will depend on two things: first, the shareholder making its decision about how CDC stacks up against other opportunities—the opportunity cost was debated in Parliament last week; and secondly, the view from CDC. As chair of CDC, I feel deeply responsible for making sure that any capital that we call is allocated for the purpose of development impact, and that our teams can execute that responsibly. That is the context for where we are now and for the Bill. We see this as a long-term discussion about the shareholding of CDC. CDC has to perform it for the purpose of development impact, which I promise you is what drives everybody who works in CDC.

Rory Stewart: Just to confirm, Graham, am I right that you are formally saying to the Committee that you would not draw down this money if you did not feel that you could spend it responsibly and have the resources to do that?

Graham Wrigley: No, we would not do that.

--- Later in debate ---

[The Chair]

So we move on to Patrick Grady.

[Patrick Grady]

Q I want to press you a little bit more on some of the policy and decision making and the opportunities we have with the Bill. ODA has a clear definition, and the various international development Acts put in place a duty to achieve poverty reduction, but is that sufficient for CDC, as was? We have heard about these business cases and impact grids. All these are policy-level decisions. The 1999 Act does not mention poverty, impact or international development. So, why not take the opportunity with this legislation to do what some of the amendments are attempting to do, which is to make it clear that CDC would have a statutory duty to meet those objectives or, at the very least, to put some of these processes into the legislation? Would that not help to reduce the risk of backsliding, returning to the days of excesses and concerns—which, I accept, are in the past?

Rory Stewart: Mr Grady, broadly speaking we are in sympathy. We are very clear that we expect all investments made by this Department to aim at poverty alleviation and, to relate to one of your amendments, to reinforce the sustainable development goals. The particular space that CDC operates within is our economic development space. We believe that the correct way to respond effectively to a changing world, to allow Ministers and elected Governments to put their policies through, is through the process we have of setting strategy and governance. One thing I was pleased with in the NAO report was the praise it brought forward for our governance. Any money we give to CDC has to follow that test. That is the fundamental test applied, whether we are giving money to CDC, IFC or a UN agency, or whether it is any of the £5 billion a year of multilateral spending. The way in which we control it is through not primary legislation but Government strategy documents.

Graham Wrigley: May I add, from the CDC perspective, that we have developed some organisational principles and pillars that we have shared with the shareholder? They cover the following things. The first is that our purpose is development. That is why everybody at CDC is there—Diana, me and everybody else. Secondly, we are the world’s oldest DFI, set up by Clement Attlee, supported by both major parties over the decades and 100% owned by the UK shareholder. We are very proud of that fact.

We have to balance—a question was asked earlier about this—development impact and financial return. That creates perpetual paranoia about whether we get the right balance. We see our goal as meeting the needs, and Diane will give you an example of that in a sec—

[The Chair]

She might not. We will draw things to a close now with two more quick questions.

--- Later in debate ---

[Richard Graham]

Q So you do not believe that creating jobs through business is a constructive way of meeting development aims?

Saranel Benjamin: I don’t think that that is the only thing that should be done in terms of development, but from CDC’s point of view, that seems to be not just about job creation, but about supporting projects that have absolutely nothing to do with poverty reduction. I cannot see how supporting top-level real estate in Kenya, for example, is about poverty reduction.

[Patrick Grady]

Q I just want to ask any panel member who might want to reflect on the levels of transparency in CDC and the opportunities for parliamentary scrutiny. I particularly want to ask the reps from War on Want and Oxfam how their transparency in reporting requirements from DFID have changed in recent years and whether they have any views on how they should apply to CDC.

Gideon Rabinowitz: Oxfam is a signatory to the international aid transparency initiative, which is the comprehensive aid transparency framework that is applied across the development community. The initiative was started and promoted by the UK Government, who have obviously played an important leveraging role in promoting transparency across the world.

We are ambitious implementers of IRT and in our dialogue with DFID right now, we are being encouraged to look at how we can apply those standards and the standards introduced by the initiative further down our supply chain with our local partners. It will be a challenge, but one that we shall pursue head on. Throughout the chain of delivery partners we work with, we will look at ways we can address those standards.

One of the questions we think it would be really useful for the Committee to think about is, how—whatever is agreed through the legislation—can we help to ratchet up the level of transparency of CDC? It has made progress, but the last time it was assessed against IRT standards, it scored “poor”. We have not seen a fundamental change in the level of information that is currently reporting, so it has some catching up to do. We hope this legislation can help.

Saranel Benjamin: That is a really good question, because while listening to everybody talking, I was thinking that when we have to apply to DFID for funding, there is absolutely no way we would get funding if we just went and said, “Can I have £500,000 and I will give you the strategy later?” That would never happen for the development sector.

[James Duddridge]

Q You are not owned by DFID. It is not like for like at all, is it?

Saranel Benjamin: No, but it is still the use of taxpayers’ money, which DFID—

Commonwealth Development Corporation Bill (Second sitting)

Patrick Grady Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 6th December 2016 Public Bill Committees

[James Duddridge]

Fantastic. My Front Bench also seems to be aware of that situation. I look forward to listening to the SNP’s contribution on amendments 3 and 4 and to seeing how its Front Bench is taking things forward.

Amendments 1 and 2, which I tabled, are probing amendments. I had taken myself off to table amendments that increased, not decreased, the amount and was told that while it would be permissible to table them, it would not be permissible for them to be selected, because of the money resolution. I therefore want to enter into a debate about whether it is the right amount. I have tabled an amendment that would make it lower, rather than higher, although I believe that there is capacity to invest more money in CDC, and faster. I do not share the scepticism of others around the table. I hope to see the £6 billion target reached earlier, rather than later.

This morning’s evidence session was incredibly useful and covered a lot of the points and queries that I would have wanted the Minister to address in his remarks. With that in mind, I will not detain the Committee any further.

[Patrick Grady (Glasgow North) (SNP)]

It is a pleasure to serve under your chairmanship, Ms Ryan. I will speak to amendments 3 and 4, which stand in my name and that of my hon. Friend the Member for Coatbridge, Chryston and Bellshill.

I agree with pretty much everything the hon. Member for Cardiff South and Penarth had to say. The Minister has been asked repeatedly how the figures of £6 billion and £12 billion were arrived at. It increasingly sounds as if they were arbitrary figures based on a best-guess discussion with the CDC about what it might manage to spend over a particular period in the coming years.

Amendments 3 and 4 try to relate the amount of investment in the CDC more clearly to the overall amount of official development assistance the Government are likely to have at their disposal over a spending review period of the lifetime of a Parliament. Of course, the amount of ODA can go up or down in any given year, because it is, by definition, a proportionate target: it is a percentage of gross national income. Indeed, in the autumn statement a couple of weeks ago, the ODA forecasts were revised down because the economy as a whole is contracting, not least because of the Brexit result.

Using those forecasts, the Library estimates that amendment 4 would mean that £3.77 billion of additional investment could be made on top of the £1.5 billion already invested, making a total investment of £5.02 billion. The effect of amendment 5, which I appreciate we are not discussing immediately, would be to bring the upper cap to £9.77 billion. As the hon. Member for Rochford and Southend East just said, the money resolution means that those numbers cannot go above £6 billion or £12 billion in any event. It is worth noting that introducing such a formula would mean that in the event of a significant decline in GNI—some sort of catastrophic economic collapse, which I am sure will not happen under this Government—the cap on investment could reduce, meaning that the Government would have to divest.

[James Duddridge]

The first time the hon. Gentleman mentioned a contraction in the economy I let it go, but I thought the economy was growing at about 2.2%. It is the fastest growing economy in either the G7 or the G8—forgive me for not knowing which. Does he have the wrong numbers, or is he drawing a distinction between GNI and GDP and being selective?

[Patrick Grady]

As I said, the autumn statement demonstrated that GNI will go down and therefore the ODA forecasts are being revised down as well. The point I am trying to make is that if we are going to find a way of varying the cap on investment in the CDC, finding a way to make it proportionate to overall aid spending would seem to be the more sensible way of doing that.

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

In amendments 4 and 5, my hon. Friend and I have suggested a percentage adjustment mechanism. In this case, the figure of 5% is proffered. Does he agree that such a mechanism is altogether more equitable and appropriate? Will he elaborate on that for the Committee’s further consideration?

[Patrick Grady]

I thank my hon. Friend for that point. The point of equity and proportionality is what I am trying to test. As I have said, under my formula, the figures would come out not that much lower than the caps proposed in the Bill. Let us accept, in good faith, that we will hear some rationale for those caps. My formula would take us not a million miles away from those numbers. The point is that under my formula, the caps would vary over time, depending on what the total ODA spend was likely to be.

Even if the Minister objects to the particular formula, I will be keen to hear why some kind of proportionate formula is not preferable to the hard numbers in the Bill. We have heard about other amendments that probe those numbers. A formula that linked the caps to the total ODA spend over a period of time surely would help to clarify the link with the overall amount of ODA and the balance of the Government’s development priorities, which we will discuss when we debate the new clauses.

[Jeremy Lefroy]

I will make four brief points. First, there are several reasons for bringing forward the Bill, but one of the major reasons is that reducing the expected rate of return of the CDC’s investments, which I absolutely agree with, creates a need for more capital.

Under the last Labour Government, the CDC grew substantially, was well managed, invested in funds and made a lot of money out of significant investments, such as that in Celtel. All of that was good and I welcomed it, but it perhaps was not in accordance with the CDC’s original mission, although I would argue that it helped to reduce poverty. Capital was generated internally to quite a considerable extent. The required rate of return was relatively high, those returns came in and that money was reinvested.

Now that CDC is quite rightly supposed to focus on harder investments with lower rates of return and higher risk, there inevitably will not be as much free cash flow or free capital available for investment, so the shareholder —the UK Government, DFID and the taxpayer—needs to be prepared to put in more capital if we are to meet those objectives.

The second point is about middle-income countries. I fully accept the Minister’s point about the importance of targeting lower-income countries wherever possible, but let us not forget that the range for middle-income countries is, frankly, ridiculous. It goes from just over £1,000 to £13,000 per year. At the lower end are countries that are basically low-income countries and at the higher end are relatively wealthy countries. If we categorise all middle-income countries as somehow moderately wealthy, that is simply not the case. There was a point—not now, sadly, because of what is happening there—when South Sudan was briefly a middle-income country; look at where it is now. We have to be very careful when we talk about middle-income countries as though they are a homogenous group; they are not.

--- Later in debate ---

[James Duddridge]

I shall raise only two points. I made all the comments I could possibly make on amendment 2 in the previous debate, so I will not detain the Committee further. I am sure it is terribly bad form, but I hope, Ms Ryan, that you will not mind, if we are still sitting when the business in the Chamber gets to the Adjournment debate, which is on rail services in my constituency, Southend, that I rush off before any possible vote.

[Patrick Grady]

I share many of the concerns outlined by the hon. Member for Cardiff South and Penarth. Amendment 5, tabled in my name, would apply the same formula to the upper cap as my previous amendment, and I have obviously heard the Committee’s view on that. I heard the Minister’s view as well and I appreciate the fact that he has given it some consideration. Even if that particular formula would not meet the standards that DFID would like it to meet, it would be interesting to see whether there was a way of coming up with a proportionate formula. That would answer a number of points that have been made today.

We have heard from a number of witnesses and in other evidence to the Bill, as well as from other hon. Members on Second Reading and since, that the £12 billion figure is particularly high, especially as it might theoretically be some years down the line before that maximum is reached or a need for it is felt. In that case, the points made by the hon. Member for Cardiff South and Penarth about the use of a statutory instrument are correct; it would perhaps be better if the Government were to come back with primary legislation in due course. We may come on to some of these issues in the debates on the new clauses, but the hon. Gentleman made a point earlier about the number of other arm’s length bodies that have the potential to receive an 800% increase in their funding from the Government with so little scrutiny. We should bear that in mind.

[Richard Fuller]

It is a great pleasure to serve under your chairmanship, Ms Ryan. I speak against amendment 7 —that will be no surprise—and in favour of clause 1(3). I would like to use the opportunity to probe the Minister a little, without straying too much into strategies, about the general thinking on direct versus indirect investing and how that relates to the figures, particularly the figure of £12 billion.

It is my view that the CDC has had unparalleled success in identifying and stimulating people in a variety of countries to set up first-time funds that then contribute to economic development in countries around the world. That role is, in itself, a tremendous aspect of British development policy—finding people in new countries who can then assist in the economic development of their countries.

We heard on Second Reading from the former Secretary of State about why getting the CDC to focus a bit more on direct investing had an advantage, in that people would then recognise that the CDC was there—it was good branding for us, developed a deeper understanding of countries and we were less stand-offish—but there is a value in indirect investing. As the Minister will know, the UK budget is only part of the money in that role. There is a multiplier effect from the CDC providing its money into first-time funds, because those funds then attract third-party funds as well. Does the Minister feel there is the right balance between direct and indirect investing? Can he reassure me that the CDC will continue to focus on the identification and creation of first-time funds in developing countries and that he shares the view of its role in the development agenda for the United Kingdom?

--- Later in debate ---

[Rory Stewart]

As hon. Members will be aware, clause 2 is entirely standard. The only point of any note is that in this case, the Bill will come into force on Royal Assent. As we have discussed, this is an enabling Bill. The amendment made by the Bill to the cap and the introduction of the delegated power have no immediate effect and nothing is gained by subjecting them to delay or later commencement by Ministers, so it is appropriate that they come into force on the day the Bill is passed.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

New Clause 1

Condition for exercise of power to increase limit: poverty reduction

“After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—

‘15A Condition for exercise of power to increase limit: poverty reduction

(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he has also laid before the House of Commons a review in accordance with subsection (2).

(2) A review under this subsection must provide the Secretary of State’s assessment of the extent to which the increase in the limit on the Crown’s assistance to the Corporation is likely to contribute to a reduction in poverty.

(3) In this section, “reduction in poverty” shall have the same meaning as in section 1(1) of the International Development Act 2002.’” —(Patrick Grady.)

This new clause would require any draft regulations to increase the limit on government assistance under section 15(4) to be preceded by a review, also to be laid before the House of Commons, of the extent to which the increase in the limit will contribute to a reduction in poverty, the aim of development assistance.

Brought up, and read the First time.

[Patrick Grady]

I beg to move, That the clause be read a Second time.

I mentioned during the evidence session that nowhere in the Commonwealth Development Corporation Act 1999 do we find the words “poverty” or “impact,” or even the phrase “international development”. We have heard much on Second Reading and in Committee—in evidence and during our debates—about the robust business cases, policies and decision-making procedures that are in place in DFID and CDC, but at the end of the day, that is all they are: policies and procedures. New clause 1—and perhaps some of the other new clauses—attempts to make it much clearer in the legislation that governs the CDC that it must meet the same high standards set for DFID and all the other Departments that spend money towards the ODA target. The new clause would require any proposal by the Government to raise the limit on Government assistance to CDC to be accompanied by a report to the House about how such an increase in investment was expected to lead to a reduction in poverty, as defined by the International Development Act 2002.

As we have just heard, the Government are asking for authority to increase their investment in CDC to up to £12 billion by statutory instrument. That is both a significant amount in itself and nearly 10 times the current investment cap. As I said a minute ago, I wonder how many other arm’s length bodies have received or have the potential to receive such an increase—800%—in their funding from the Government by statutory instrument without any additional information justifying that being required to be laid before Parliament.

If Parliament is to be asked to increase the funding cap, it should have information at its disposal to help it make that decision. Ministers keep telling us that robust business cases will be presented, but—

[Philip Boswell]

Will my hon. Friend give way?

[Patrick Grady]

Yes, I will.

[Philip Boswell]

My hon. Friend quite rightly focuses on the robust business case that is required. New clause 2 would better enable transparent goals and practice in terms of checks and balances to be implemented prior to a commitment on funds—

[Philip Boswell]

My apologies, Ms Ryan; I meant new clause 1. Given the previous concerns about potential bad practice, which were raised on Second Reading, does my hon. Friend recognise the potential for misuse of this substantial fund as an enticement in titanic and desperate international trade negotiations due to Brexit? Should not a serious, transparent and fully accountable stage-gate approval review be implemented before any funding is approved on a case-by-case basis?

[Patrick Grady]

My hon. Friend makes an important point. As I said, Ministers have told us that robust business cases will be presented, but that is an assurance from the current crop of Ministers and the current generation of CDC officials. Putting reporting requirements in the Bill would help to future-proof against any risk of CDC backsliding into the kinds of questionable behaviours that were raised on Second Reading. My hon. Friend also raises interesting points about precisely how this massive potential investment in CDC relates to the Government’s ongoing trade agenda and their interests in trading with different parts of the world, especially in the light of Brexit.

The mechanism proposed in the new clause may not be perfect, and some of the other new clauses are, in some ways, a bit more robust and may place a heavier burden on the Government, but are the Government prepared to use this opportunity to make it clear in the Bill—as they seem to be doing in debate and in the evidence we have heard—that the primary purpose of the CDC and the taxpayers’ money that it spends is to reduce poverty around the world, and that people come before profit?

--- Later in debate ---

[Rory Stewart]

To conclude, and to follow up from my hon. Friend the Member for Gloucester, the questions about poverty and the impacts of our investments need to be asked again and again, right through the process. They need to be asked in Parliament; they can be asked through urgent questions; they can be asked through this process. They also need to be asked primarily in details about the CDC’s mission, its investment policy, the ex ante decision making based on the development impact grid, through the development impact theory on each individual investment, and we have to do it in a way that gets a very difficult balance right, because the National Audit Office has been very clear that it does not want the Department micromanaging and interfering in individual business cases and decisions. We are supposed to be setting the overall strategy, driving where the money is meant to be and driving it towards exactly the kind of indicators that right hon. and hon. Members have raised. Given the number of measures that the Government will be taking to address exactly the issues raised, not in the Bill but through all the existing other processes, within both the CDC and the Department and the wider parliamentary and public accountability process, I ask politely that the new clause be withdrawn.

[Patrick Grady]

That was an interesting and helpful response from the Minister. He has repeatedly said throughout this process that the CDC is different from all the organisations that DFID disburses funds to, precisely because of the way it is constituted in statute and the historical legacy, going back 70 years. This is an important opportunity to include in the Bill some of the assurances that the Minister continues to give us, to make it clear that poverty reduction is one of the purposes of the CDC. I hear what the Minister says about withdrawing the new clause at this stage. If I do so, I hope that he will understand if we choose to come back at a later stage with more detail. Perhaps the Government would indicate that they are willing to work on how we can build into the legislation some of the reassurances that we keep asking for and they say they are going to give us. On that basis, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 2

Condition for exercise of power to increase limit: Sustainable Development Goals

After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—

“15A Condition for exercise of power to increase limit: Sustainable Development Goals

(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he has also laid before the House of Commons a review in accordance with subsection (2).

(2) A review under this subsection must provide the Secretary of State’s assessment of the extent to which the increase in the limit on the Crown’s assistance to the Corporation is likely to contribute to achievement of the Sustainable Development Goals.

(3) In this section, “the Sustainable Development Goals” means the Goals adopted at the United Nations on 25 September 2015.””—(Patrick Grady.)

This new clause would require any draft regulations to increase the limit on government assistance under section 15(4) to be preceded by a review, also to be laid before the House of Commons, of the extent to which the increase in the limit will contribute to achievement of the Sustainable Development Goals.

Brought up, and read the First time.

[Patrick Grady]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss new clause 10—

Condition for exercise of power to increase limit: assessment of contribution to Sustainable Development Goals

After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—

“15A Condition for exercise of power to increase limit: assessment of contribution to Sustainable Development Goals

(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he has also laid before the House of Commons the documents specified in subsection (2).

(2) The document specified in this subsection is a report containing an assessment by—

(a) CDC, and

(b) the Secretary of State

of the extent to which the proposed use of the new investment enabled by the proposed increase in the current limit at the time will contribute to progress in relation to the Sustainable Development Goals.

(3) In this section—

“the current limit at the time” means—

(a) prior to the making of any regulations under section 15(4), £6,000 million,

(b) thereafter, the limit set in regulations made under section 15(4) then in force;

“the Sustainable Development Goals” means the Goals adopted at the United Nations on 25 September 2015.””

This new clause would require any draft regulations to increase the limit on government assistance under section 15(4) to be preceded by the laying before the House of Commons of assessments by both CDC itself and the Secretary of State of the extent to which additional investment will contribute towards progress towards the Sustainable Development Goals.

[Patrick Grady]

I have already explained why reporting requirements are important and we heard the Minister’s response. The new clause asks for a report on how increasing the limit on Government assistance would help to achieve the sustainable development goals. It is worth putting on record why that is important. The sustainable development goals ought to be the overriding framework that explains in more detail what poverty reduction and international development look like in practice in the 21st century.

As I did on Second Reading, I pay tribute to the work of the previous Prime Minister in leading the process that drafted and achieved the agreement of the global sustainable development goals by every country at the United Nations. The emphasis now has to be on meeting those goals.

I received correspondence from the Secretary of State in response to my contribution on Second Reading and she emphasised the CDC is working towards some of the specific SDG goals: number 8 on employment, number 5 on gender empowerment, number 7 on energy access and number 13 on climate change. But the SDG framework is holistic and it is important to show how progress is being made across the board, and that progress in one area is not being traded off against progress in another.

As with the previous requirement to report on poverty reduction that we had hoped for, this proposed new clause would help prevent any risk of backsliding. It would clearly frame the work of the CDC in a global context that would shape the global development agenda through to 2030. Even if the Minister is not willing to accept the new clause, here or on Report, it would still be useful to hear assurances on how the totality of the sustainable development goals are to be reflected in the CDC’s work through the additional funding of this Bill.

[Stephen Doughty]

I want to make some brief comments. As with the previous new clause proposed by the hon. Gentleman, it is helpful to align more closely the CDC to the overarching frameworks that apply to DFID and our aid budget. DFID has been a leader in going out to fight for the global goals, and in working with other Government Departments. However, the global goals do not apply only to DFID; they apply to our domestic Departments. They bring up important issues of coherence and focus, as I touched on earlier. If we are using them to apply to other areas of DFID spending such as our bilateral programme, funding through other multilaterals, the ODA being spent by other Government Departments and domestic policy on climate change, there is no reason to expect that the CDC should do any less.

We have heard the idea of micromanaging CDC discussed a few times. When we look at the sectors it is investing in at the moment, there are clear inconsistencies. I know the Minister does not like me to bring up examples but I will because they are important and I want to understand why those inconsistencies arise. We could include a much clearer framework about poverty eradication around those 17 global goals that cover everything from hunger, health and wellbeing, the quality of education and affordable and—crucially—clean energy. It is slightly odd that the CDC seems to be investing in fossil fuels.

The goals also include sustainable cities and communities, climate action, peace, justice, strong institutions and partnerships. The crucial issue is, who is involved in development and taking decisions? Are these measures just done to people in developing countries by corporations or investors or do they involve people living in poverty or excluded in some way in decisions about their future? Those are admirable goals and should form a guiding framework for the work and spending of our aid money, whether that is by an NGO, DFID directly or the CDC.

--- Later in debate ---

[Rory Stewart]

It is a good challenge. We invest enormously in renewable energy. We have just made a difficult investment in solar energy in Burundi and the Central African Republic—not a place where most people want to go into investment. Unfortunately, Africa’s need for energy is extraordinary. We do not invest in coal, for example, that is not something we go into, but we support some gas-powered stations through Globeleq. That is a difficult trade-off, but we believe Africa is currently falling behind. As I have mentioned before, China has been building about 8 GW of power in a two-month period, with Africa delivering 6 GW of power over a decade.

I feel that we have to get the balance of our investments right and I respectfully disagree with the argument put. I do not think it would be responsible for economic development in Africa to put us into a position where we cannot invest at all in any conventional energy source. With that, I would ask that new clause 2 be withdrawn.

[Patrick Grady]

What the Minister said at the end was disappointing, because, in fact, there is an opportunity for Africa and many parts of the developing world to leapfrog the technologies that have polluted our skies and buildings and all the rest of it over so many years. Surely, if the CDC’s investment is for anything, it should be in innovative, clean technologies. That is what we are trying to get to with the various amendments and new clauses we have been tabling, to make it clear in statute that this is its duty and not to allow it space to make excuses such as “Well, it’s difficult” and “We have to do this” and that jobs are more important than the longer-term viability of the planet. I am not convinced that is the case.

That is why we continue to seek assurances. Again, if we withdraw this new clause, we hope the Minister will reflect on the points made over the course of the debate in Committee. When the Bill comes back to the House on Report there might yet be ways in which it can be strengthened to take some of the points on board and reflect them going forward. On that basis, however, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 3

Condition for exercise of power to increase limit: prior bilateral programme

After section 15 of the Commonwealth Development Corporation Act 1999 (limit on government assistance), insert—

“15A Condition for exercise of power to increase limit: prior bilateral programme

(1) The Secretary of State may only lay a draft of regulations under section 15(4) before the House of Commons if he is satisfied that the condition in subsection (2) is met.

(2) That condition is that any new investment in a country enabled by the proposed increase in the current limit at the time is in a country to which the Secretary of State provides assistance through a bilateral programme at the time.

(3) In this section—

“country” has the same meaning as in section 17 of the International Development Act 2002;

“the current limit at the time” means—

(a) prior to the making of any regulations under section 15(4), £6,000 million,

(b) thereafter, the limit set in regulations made under section 15(4) then in force;

“assistance” has the same meaning as in section 5 of the International Development Act 2002.””—(Stephen Doughty.)

This new clause would limit any new investment arising from any increase in the limit on government assistance under regulations under section 15(4) to countries where the United Kingdom maintains a bilateral programme at the time.

Brought up, and read the First time.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

I beg to move, That the clause be read a Second time.

Commonwealth Development Corporation Bill

Patrick Grady Excerpts

Programme motion: House of Commons & 3rd reading: House of Commons & Report stage: House of Commons
Tuesday 10th January 2017 Commons Chamber

[Mrs Drummond]

My hon. Friend makes an excellent point. One reason that I am so passionate about the CDC is that we need to build the capacity of developing countries. In my first speech on this subject, I said give a man fish and he will eat it, but give him a fishing rod and he is set for life. That is exactly the philosophy behind the CDC that I am so keen on.

There are circumstances in which some relatively more developed countries are host to companies involved in much poorer ones. As with the misplaced fears about offshore financial centres, we should not close off any path to investment and development. New clauses 3, 4, 6 and 9 all fail in that respect. All the amendments before us share a fundamental weakness and a misunderstanding of the CDC’s role in the world. We put less of our development investment through the CDC than other countries do through their equivalent bodies, as my hon. Friend the Member for Bedford (Richard Fuller) mentioned earlier. We should be doing more through the CDC if we want to develop mature and robust market economies in the developing world, which is why I welcome the Bill.

Markets are transparent and flexible, and they empower people who take part in them. The aim of our development policy should always be to encourage self-sufficiency and the development of market economies. As I said in my first contribution on the Bill, the CDC is transparent, as the NAO report agreed. I champion the CDC’s philosophy of enabling people to build their own businesses, rather than handing out grants. It is an efficient and transparent model, and we should all give the Bill our wholehearted support and continue to be a major investor in improving the lives of our fellow citizens in developing countries.

[Patrick Grady (Glasgow North) (SNP)]

I will speak to amendment 3 and new clause 6, which are in my name, and I will offer support for the Labour party’s amendments that I have added my name to.

Nobody here is arguing that the CDC should not exist. We all recognise there is a role for development finance and private investment. As I noted on Second Reading, the Scottish Government have just set up their own investment mechanism in Malawi. But even if we wanted to change some of the deeper fundamentals, that is not in the scope of the Bill. The Government, probably deliberately, have presented a very narrow Bill with the aim of increasing the statutory limit of their investment. Therefore, by definition, that is what our amendments must focus on.

I hope that the Government will see—certainly in the amendments I have tabled and, I think, in the Labour ones—that we have tried to respond to and take on board some of their concerns about some of our amendments in Committee. It is up to the Government to respond and indicate how they will take our concerns on board. We all want to work constructively with the Government on the Bill. We want to recognise and maintain the consensus on the importance of aid, our commitment to 0.7% and the effective use of those resources.

Amendment 3, which is in my name, and amendments 2 and 4, which are contingent on it, gets to the heart of the technical aspect of the Bill: what the cap on investment in the CDC should be. The Government have been repeatedly asked for their reasons behind the figures of £6 billion and £12 billion in the Bill, and I am afraid that they have still come up short. The best we have heard is that this is roughly what they think is needed, or could be managed, over the coming years. In the lifetime of this Parliament, that could still equate to an additional £1.5 billion to £2 billion a year of investment from the official development assistance budget to the CDC. As we have repeatedly said, every penny invested in the CDC is a penny not invested in other mainstream, grassroots and not-for-profit development projects and support.

On Second Reading, I asked about the use of a formula to link the cap with overall ODA budgets, and I proposed such a formula in Committee. The Minister’s first concern about a formula was that it would blur the line between stock and flow. But the aid budget is a flow. It goes up and it can, theoretically, go down as well. I recognise that the CDC investment is a stock: once funds are transferred, that is where they stay and they remain part of the overall capital fund. However, the formula would ask the Government, each time they want to disburse funds to CDC, to calculate how those funds will relate to overall aid spending in the coming years.

The Minister’s second concern was that my formula in Committee effectively discounted the £1.5 billion already invested in the CDC. Amendment 3 and the contingent amendments take that into account. By my calculations, based on figures from the Library, this formula would still allow the Government to invest an extra £3 billion, or a total of £4.5 billion, in the CDC by 2021. Even if the Government will not accept the amendment and we cannot persuade enough of their Back Benchers to join us in the Lobby to support it, I hope that they will commit to recognising that the £6 billion figure currently stated in the legislation is a maximum and that any additional investment they intend to make will ultimately reflect the ebb and flow of overall ODA calculations in any given spending round.

Irrespective of the caps and limits, much concern has been expressed throughout the passage of the Bill over how some aspects of the CDC’s resources have been spent in the past and how they will continue to be spent in the future. That is what I seek to address with new clause 6, which is particularly important in the context of increasing—potentially quadrupling—the overall resources available to the CDC. I welcome the range of amendments in Committee and here today that attempt to place various conditions on the exercise of the power to increase the limit.

As I said at the start, owing to the scope of the Bill, my amendments and those of Labour Members must relate to the increase in the limit from £6 billion to £12 billion under the terms of section 15(4) of the Commonwealth Development Corporation Act 1999. Try as we might, it has not been possible to find a way to attach conditions to the investment of up to £6 billion. The Government have indicated that the timetable for using the statutory instrument powers would be some way in the distance, so it is not unreasonable to suggest that there should be some kind of conditionality and review process before those powers are used, especially given that we will apparently have so much time to prepare.

New clause 6 combines two conditions I called for in Committee: before the Government could increase the limit of their investment, the Secretary of State would be required to make an assessment of how an increased limit would contribute to a reduction in poverty, which is the statutory aim of ODA in the International Development Act 2002, and how that increase would help to meet the sustainable development goals. The Government have repeatedly argued that the CDC is doing both those things very effectively, in which case this is hardly an onerous request, but the new clause would have the effect of making it much clearer that this is the CDC’s overall purpose and that commercial gain, returns on investment and even raw figures on the number of jobs created are not an end in themselves, but only the means to the end of reducing poverty and building a more stable and secure world. Again, the responsibility is on the Government, if they will not accept our amendments, at least to acknowledge the concerns being expressed and to give commitments to show in any business case they publish for further investment how the key pillars of poverty reduction and the global sustainable development goals will be advanced.

I briefly speak in favour of, and indicate the Scottish National party’s support for, the range of thoughtful amendments tabled by the Labour shadow team and by the hon. Member for Cardiff South and Penarth (Stephen Doughty), who serves on the Select Committee on International Development. I welcome the fact that there has been cross-party support for the amendments and suggest that the Government pay attention to that. There remains consensus in this House and across the country in support of the principle of aid, the 0.7% target and, of course, the effective use of that aid. Many of Labour’s amendments, as the hon. Member for Edmonton (Kate Osamor) said, simply ask DFID to hold the CDC to the same standards that the Government now demand of their external stakeholders. Their recent bilateral and multilateral development reviews were pretty much unilateral declarations of everything that was terrible and wasteful on the part of so many of their stakeholders and demanded that the highest standards of efficiency, impact and transparency be applied to them. It stands to reason that those standards should also be demanded of the CDC.

A Government who say they want to crack down on tax dodging should not be allowing an agency of which they are the sole stakeholder to be making use of offshore tax havens. A Government who want value for money and clear impact from their aid budget should not be afraid to ask for reporting on exactly those areas. My colleagues and I will be happy to join the Labour party, hon. Members from other Opposition parties, and any Conservative Member persuaded of the case in the Lobby in support of any amendments they wish to press.

I said on Second Reading that it was disappointing that the scope of the Bill was so narrow. The Government had the opportunity to widen the scope to strengthen the CDC’s effectiveness, transparency and accountability. They also had that opportunity with the substantial and, in some cases, creative amendments that have been proposed by Opposition Members from different parties. If Ministers continue to indicate an unwillingness to accept amendments—it is disappointing that they did not table any of their own to reflect the concerns raised by Members—they must give the strongest possible commitments now in response to the concerns we have raised. The Government must recognise, as the Labour Front Bench spokesperson said, that this is the beginning, and not the end, of a process.

[Several hon. Members rose—]

--- Later in debate ---

[Richard Fuller]

My hon. Friend is absolutely right. We have to be clear what is being proposed today. The proposal is not to do more than is being done now, but to enable the CDC to continue to do what it is doing now. If we were to take some of the suggestions from the SNP and others, that might imply that that support should be reduced in the future, and that would be to the detriment of the countries affected and the British taxpayer.

[Patrick Grady]

ODA flows and gross national income can go up or down, so if, for some reason, GNI were to contract, and the ODA budget were to contract, surely it would make sense for the amount of overall capital investment in the CDC to contract so that more money was available for the traditional aid flows.

[Richard Fuller]

That is the hon. Gentleman’s point of view, but it is not my point of view, and I will come to the point about balance in a minute.

A general view of the amendments is that they seek to solve problems that do not exist, but that may exist. Statute is not the right way to approach such circumstances; that is a matter for oversight and scrutiny by the departmental Ministers and by us here in Parliament on behalf of our taxpayers—it is not about putting things into Bills. On that basis, I will oppose every amendment that has been proposed today.

There would be some validity to the amendments if there was a question about this aspect of foreign direct investment being unusually large. There might be something to them if the CDC had a poor investment record because it was losing shed loads of taxpayers’ money by making poor investments, if it was clearly ignoring development goals and was being held to account in reports for doing that, or if a problem in reporting oversight was evident and explained in various reports. However, not a single one of those conditions pertains to the circumstances of the CDC, so there is no a priori reason to put these amendments in place.

As I mentioned earlier, the proportion of our development budget that goes to our development finance institution—the CDC—is 4% if taken over five years, which is the usual investment period for a fund. That compares to PROPARCO of France, which has 12% of the development budget; DEG in Germany, which has 8% of the budget; and FMO in Holland, which is a very successful DFI, and which has 30% of the budget. So we are not unusually large—we are actually unusually small. In terms of such initiatives, we should be looking for a measured and slow increase in our ability to invest, so that we can play a fuller role. So I do not think that the point about that really holds.

The point about the poor investment record does not hold either. I have the numbers here, and the truth of the matter is that in terms of its annual return—this is a commercial return, and we have to understand that there are commercial returns for funds—the CDC was set a target of 3.5%, and it achieved 7.8% over the past five years. So there are not really grounds for saying that it is a poor performer in terms of its core function of investing on a commercial basis or that it is doing something untoward.

On the missing development goals, I understand that there is a bit of a laundry list of sectors that the hon. Member for Cardiff South and Penarth (Stephen Doughty) wishes to turn his nose up to. I have no idea whether the list in his new clause is a full list or whether it just contains things he does not like. One of my hon. Friends made a good point about why there are good reasons to support parts of them. We will hear from the hon. Gentleman in a minute, and I am sure he will make an excellent case for that laundry list. However, in the meantime, I would say that there is not really any evidence of the CDC missing its development goals. Even the National Audit Office report mentioned that the CDC had met the targets for its financial performance, which was point 11 in its summary. In point 12, it said that the

“CDC has exceeded the target for prospective development impact it agreed with the Department.”

So there is no basis in that respect for the amendments.

Are there concerns about reporting for CDC? There may be, but I have not heard them. I cannot point to something that says there are concerns. I do not think that we have heard concerns about reporting on Second Reading, in the evidence stages or today. There may be additional pieces of information we wish to have, and they are listed in some of the amendments, but no real concerns have been raised that these things have not been provided in the past and that we should therefore ensure that the CDC provides them. Therefore, on the issue of whether there is a problem at the CDC that the amendments are needed to correct, there is no justification for the amendments whatever.

We have to be clear about what the role of tax havens has been. The hon. Member for Edmonton was very fair in pointing out that the CDC’s chief executive had made it clear that the CDC does not use tax havens in its policies, and the chief executive explained where those are used and why they are used. I am perfectly happy to rest on the judgment of the CDC, on its governance structures and on the oversight by the Department to make sure that that continues. I do not need to put a statutory underpinning on that. I also do not see that there is a problem at the moment in terms of the CDC having wandered off from what it said it would do. If there was such a problem, I would say, “Okay, maybe it is time for statute,” but the hon. Lady has not presented—maybe others will—a recent concern where that has happened. Therefore, I cannot see a reason for supporting new clause 1, although I understand that she wants to put it to a vote. I think we broadly accept—from that point of view, having a discussion about this is perhaps valuable—that there should be a strong message from Parliament about the use of tax havens and about what is and is not appropriate. If that is her intention, that is a perfectly reasonable point for her to make.

The CDC is a valuable institution. It has support from both sides of the House. I look forward to having further discussion on the amendments and then supporting the Bill on Third Reading.

--- Later in debate ---

[Patrick Grady]

My I add my thanks to all the stakeholders and staff who have contributed to the Bill process? This is the first piece of legislation on which I have worked as an SNP spokesperson, so I am particularly grateful to the Clerk of Bills for his advice, to my staff and the SNP research team, and to the various non-governmental organisations that have provided input. I thank my hon. Friends the Members for Edinburgh East (Tommy Sheppard), for Coatbridge, Chryston and Bellshill (Philip Boswell) and for Kilmarnock and Loudoun (Alan Brown) for their contributions during the Bill’s various stages. I also recognise the commitment and hard work of the CDC’s staff, and their positive engagement with the Opposition parties.

This is the first piece of DFID legislation in the current Parliament, but I wonder whether it will be the last. The Minister might be aware that I tabled a question to the Secretary of State about the applicability of the International Development (Reporting and Transparency) Act 2006 now that the millennium development goals it requires DFID to report on have been replaced by the sustainable development goals. The International Development Committee proposed a consolidating international development Act to bring together all the various pieces of legislation passed over recent years. Perhaps that is not such a bad idea, especially as the debate about the purpose of aid and development seems to be getting louder.

As my hon. Friend the Member for Edinburgh East said on Report, throughout the Christmas recess there seemed to be a drip-feed of very negative stories about aid spending, particularly in the gutter press. It is absolutely right that examples of waste and inefficiency are exposed and questions asked about value for money, but the answer is to improve transparency and efficiency, and to measure impact—especially over the longer term—and not simply to cut off the supply or take heavy-handed, but ultimately counter-productive, action.

The debate on the CDC Bill has catalysed a broader debate about the use and purpose of aid, and the Government can be assured in the coming months that the SNP will be happy to support the cross-party and public consensus on our moral duty to help people most in need around the world, and the symbolism and very real impact of meeting the 0.7% aid target. However, as we have just heard on Report, if the highest standards of transparency and effectiveness are to be demanded from DFID’s external stakeholders, they must equally be applied across Government and to their arm’s-length agencies, starting with the CDC in this Bill.

The Government did not accept amendments, but I join the Opposition Front-Bench team in welcoming the commitments the Government have given. We will, through the procedures of this House, hold them to account for those commitments. There is a consensus behind the need for continual improvement of the CDC, and we want to maintain that consensus.

The Government will see this legislation passed today—their majority in the House assures them of that—and it is unlikely, due to the nature of the Bill, that the House of Lords will have any opportunity to amend or delay its progress on to the statute book. So the Government are being given a significant responsibility today; they are asking for the power to quadruple the budget of an agency which has a long but chequered history. The CDC has had significant successes in its history, but significant concerns have been raised and remain. If its resource base is to be massively scaled up, so must be its accountability and the standards it is held to. I hope the Secretary of State and her Ministers will confirm that they are prepared for the CDC, the Department, and themselves as Ministers, to be held to those standards.