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.