Draft Asian Infrastructure Investment Bank (Initial Capital Contribution) Order 2015

Seema Malhotra Excerpts

Monday 19th October 2015 General Committees

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Gray, and to respond to the comments of the Chief Secretary to the Treasury. As he mentioned, this is a timely debate—the Chinese President Xi Jinping will arrive today, and the AIIB was proposed by China in 2013. In the spirit that the Minister outlined, we welcome the Government’s participation in and contribution to the AIIB, which is an important development for progress in the Asia-Pacific region and represents our sense, as a nation, of being part of and engaged in a global economy in which we participate as partners in development.

In the Labour party, we are committed to international development in commerce, trade and services, and to the investment in infrastructure through which we see nations develop and generate new possibilities for businesses and industry. Indeed, this delegated legislation is possible only because of the International Development Act 2002, which was passed by the last Labour Government.

We have a strong history of trade and economic relations with other countries, and in that spirit, we support the move being made today, but I acknowledge some points made by observers that it very much contrasts with the lack of investment made in our own industry in recent days and weeks, particularly the steel industry, which has been in such need of Government attention. I hope the Minister will reflect on that in his response.

[The Chair]

Order. The Minister would be quite out of order if he did so.

[Seema Malhotra]

In which case the Minister may want to make some comments outside the Committee.

We recognise the spirit in which the bank is being set up, our role in it and the contribution we can make to it. The Minister has outlined some of the important priorities for the bank. For some of the nations that it will assist where poverty is still so rife, investment is absolutely vital in ensuring a greater quality of life and the opportunity for economic development in all parts of those nations. It is also vital in tackling poverty, for example, in India, the Philippines and many other nations, where there are issues with access to water, power and infrastructure, and where so many people live below the poverty line.

I hope the AIIB will live up to some of the expectations, but I also have a number of further questions for the Minister. First, how will we ensure that the investments made by the bank will be in the interests of those populations and make good on the commitment to the outcomes that we want it to achieve? How will we be sure that UK capital will not be used to support any kind of exploitative working conditions in projects in which we have a stake?

Secondly, as the Minister has outlined and as the explanatory notes show, our contribution will be $3 billion, or £2 billion, over five years. Will the Minister confirm that the capital contribution means an increase in the UK’s national debt, albeit corresponding to an increase in the value of assets? Will he also clarify whether the contribution counts towards the Government’s commitment to maintaining overseas development aid as a share of GDP? What are the implications for the Government’s new fiscal plan and charter commitments in the unlikely but possible event that contingent liabilities are called upon? Might the Government be forced to make other cuts or raise taxes to make good any temporary or permanent loss?

Thirdly, the Opposition want to ensure that our contribution represents value for money for the taxpayer. Will the Minister explain how that was weighed against the wider developmental or foreign policy benefits of the commitment? Finally, we want any contribution to be accounted for adequately and transparently—I am sure the Minister wants that, too—so that the Government can be accountable to Parliament and to the taxpayer about our contribution. We want the relationship to get off to a good start, and we need to set the expectations of, and rules and relationships for, the new bank to ensure a positive, constructive long-term relationship that meets the expectations and ambitions of the bank’s founder nations and of UK citizens.

--- Later in debate ---

[Greg Hands]

I thank colleagues for their questions. In response to the hon. Member for Feltham and Heston and her questions on how we ensure that investments are in the interests of the citizens of the recipient countries, and that we avoid exploitation, I say two things. First, we are debating today the capital contribution that the UK is making. There will be a separate opportunity in the House precisely to debate the function of the AIIB. However, the UK being there from the beginning, or near the beginning—we were the first European country in the bank—and with significant presence, will make it more likely that we will be of influence.

[Seema Malhotra]

The Minister talked about the functioning of the AIIB being subject to a separate debate. Will he clarify that that will include governance, role, transparency and accountability, and a voice in the governance of projects as well as of the bank?

[Greg Hands]

Everything the hon. Lady mentions is laid out in the Act. There will be two other orders to debate. Today’s is purely about the capital contribution. It would be beyond me to say precisely what will or will not be debated under the other two statutory instruments, which are coming through other Departments.

The hon. Lady mentioned the increase in the UK national debt, but, importantly, not the deficit. It is important to recognise that we are purchasing an asset—shares in a bank—and to date no multilateral bank has ever called in a contingent liability from the UK, so that is unlikely to happen.

My hon. Friend the Member for Stafford asked a question that was also asked by the hon. Member for Feltham and Heston, which was whether the contribution could be classed as ODA. We are awaiting a pronouncement from the OECD, which monitors the ODA rules. We expect that pronouncement by May 2016 and it would be retrospective as to whether something was ODA.

[Seema Malhotra]

The Minister is right on the low risk of contingent liabilities being called in, but will he clarify whether the Government have a process for the circumstances in which that might occur? Has he thought through what could happen in such circumstances?

[Greg Hands]

The Government have in place a number of procedures. Such contingent liabilities have been around for some decades. For example, the UK has been a contributor to the International Monetary Fund since the 1950s, and an interesting question might be whether the Opposition’s position is to continue being a contributor to the IMF, given that they voted against that in the previous Parliament. I will not dwell on that, however.

My hon. Friend the Member for Stafford asked why the World Bank is dealt with by the Secretary of State for International Development and the AIIB is dealt with by the Chancellor. That is a divide across various international financial institutions. The Treasury deals with the IMF, the European Investment Bank and others that focus on the market, whereas DFID concentrates on the World Bank, the Asian Development Bank and so on. The purpose of the AIIB is to support economic growth, which is clearly within the Chancellor’s remit, bearing in mind that we are talking about infrastructure.

My hon. Friend also asked about climate finance. The president-designate of the AIIB, Mr Jin, has made it clear that his vision is for a “lean, clean and green” bank; and the UK is at the table helping to make those decisions, by being an early contributory member. My hon. Friend’s point about the parliamentary network of the 57 countries was interesting, and we will reflect on whether there should be a parliamentary network in a similar way to what can happen for other multilateral institutions. I will perhaps write to him about that.

The hon. Member for Copeland asked whether there should be primary legislation, but the Opposition cannot have it both ways. They cannot claim that the orders result from their own Act—the International Development Act 2002—and at the same time question why there is no primary legislation. Perhaps they should get their position in order first.