Syria

Stephen Doughty Excerpts

Monday 30th April 2018 Commons Chamber

[Penny Mordaunt]

Expenditure from that fund has already been put into Idlib in particular. I am looking to do more with DFID’s funding in Idlib and in other areas that are next in the firing line. We still have some access to four such areas, and I can write to let my hon. Friend know exactly what expenditure has come out of the CSSF.

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

I thank the Secretary of State for her statement. I associate myself with her comments about South Sudan, and I put on the record my deep concern about today’s situation in Kabul, where we have seen significant loss of life, including journalists and others.

The Secretary of State talks about the importance of humanitarian access. Given the issues we have seen with Turkey’s operations in and around Afrin and Turkey’s role in controlling many of the crucial border points around Idlib where, unfortunately, we expect there to be significant military action in the near future, what conversations have she and her ministerial colleagues had with the Turkish Government at the highest levels to ensure that those border posts are open for humanitarian access?

Aid Sector: Safeguarding

Stephen Doughty Excerpts

Tuesday 20th February 2018 Commons Chamber

[Penny Mordaunt]

I can give my right hon. Friend that assurance. That is why, although Oxfam has said it will not bid for any new funding, I have paused what I am going to do with current programming until I have assurances about every other partner operating in the same theatres. I will then take a decision on whether I can have confidence in what Oxfam is currently doing in those locations, or whether I need to adjust how we are doing that aid delivery.

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

I completely share the horror and revulsion about the revelations. I praise the Secretary of State for the very robust and comprehensive way in which she has handled the situation over the past 10 days. As a former Oxfam staff member, I feel let down. I know that many current Oxfam staff members feel completely let down, too, both by the actions of those who carried out these terrible incidents and by the failure to deal with them robustly at the time. The Secretary of State mentioned the situation regarding UN peacekeeping. That area has long been on public record as one where there has been serious sexual abuse and exploitation, with the use of prostitutes and all sorts of terrible things. Will she say a little more about the conversation she is going to have with the Defence Secretary and others about how we can ensure very high standards, in particular when UK funding is being used to support that important work, where there have been serious abuses?

[Penny Mordaunt]

I thank the hon. Gentleman for his comments. It is good that the message has gone out from this House that we recognise the good work that is done by many people working and volunteering for Oxfam. We can all go into our local Oxfam shop and give them our support at the weekend, and we should do that. We should recognise that our armed forces have already done a lot to raise the standards of peacekeeping troops. We do a huge amount of capacity building. We do a huge amount of work to address gender-based violence and exploitation and to enable people to recover in the aftermath of conflict and war. We have huge expertise and I am very interested in how we can use that expertise. I have spoken to other nations with similar programmes, such as Canada, to see what we can do to help to raise standards. I am open to ideas, but that is the nature of the conversation I will be having with the Defence Secretary.

Oral Answers to Questions

Stephen Doughty Excerpts

Wednesday 29th March 2017 Commons Chamber

[Priti Patel]

My hon. Friend is right to highlight that, and I am glad that the Select Committee saw the strong work DFID is doing, in partnership, on education in both Kenya and Uganda. We of course provide a range of support, and in our education support and our programme work we look at all aspects of water, food and provision of healthcare, and at how we can support vulnerable households.

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

I pay tribute to the many people across Cardiff, including local football teams, who have been raising funds for drought-affected areas, in Somaliland in particular. I have heard worrying concerns from the Government of Somaliland and others that some of the aid pledged to the region is not getting through. Will the Secretary of State investigate this and do what she can to provide support?

[Priti Patel]

I thank the hon. Gentleman for raising that point. We must always challenge the system, but also challenge Governments and authorities. As he will know, there are issues in Somaliland specifically, because it is very challenging and difficult terrain. I will always press, be vocal about and call out those who are preventing aid access, so I will absolutely look into the point he has made.

Commonwealth Development Corporation Bill

Stephen Doughty Excerpts

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

[Kate Osamor]

The hon. Lady makes a valid point, but I am talking about private education, for which someone with no money would have to pay. I do not think we should support that in a developing country, because we do not do it in this country. If someone wants to pay to go to university, there are challenges in relation to that, but I am talking, ideally, about primary education.

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

New clause 7 is in my name, and I will speak about it in due course. Does my hon. Friend agree that there is an important choice for DFID to make? It previously invested significantly in promoting free healthcare and education—making it available to all people, and removing such user fees—so to allow the CDC to continue to invest in private, fee-paying education is a significant shift away from the work the Department did in the past.

[Kate Osamor]

My hon. Friend makes a valid point, with which I totally agree.

--- Later in debate ---

The CDC has never invested in a particular way to dodge tax or get round a regulatory framework, and the concern that it would do so seems to me to be misplaced. The financial and regulatory frameworks of developing countries will never develop if we treat them with such suspicion and starve them of investment. The purpose of the CDC is to go into places where conventional investors may fear to tread. We should not be trying to prevent that in legislation. I hope for a time when the regulatory system will be robust enough that we do not have to use offshore centres, but we are not yet at that point.

[Stephen Doughty]

I am listening with interest to the hon. Lady’s point, but does she not accept that there is a bit of a double standard? The Secretary of State issued a letter on 16 December to other DFID suppliers—institutions, non-governmental organisations and people in receipt of our aid money—making it very clear that they should not invest in tax havens, yet she seems unwilling to apply the same to the CDC, which is also in receipt of taxpayers’ funding. Is that not a double standard?

[Mrs Drummond]

No, because we are investing in very difficult areas where robust systems may not already be in place, plus the CDC has very clear guidelines about where the money is going, so we can track it much more easily than we can with other aid agencies.

--- Later in debate ---

[Stephen Doughty]

My hon. Friend makes a strong point, which is very much the point. The proposals are about bringing the CDC more in line with DFID’s overall priority countries and sectors, and with the restrictions placed on other UK aid money.

[Stephen Twigg]

I agree with my hon. Friend. I have read what the Minister said in Committee—reassurance can be gained from it—but I look forward to hearing him again today. It is very important that we have a sense that, with a very substantial increase in the potential money going through the CDC, we will ensure that it is geared towards poverty reduction wherever it is invested. As my hon. Friend rightly points out, part of that is the question of which parts of the world and which countries the CDC will invest in. Investments in some countries can deliver a lot more jobs and poverty reduction than investments in others.

As I have said, I am happy with an increase in the investment threshold, but we must ensure that the money is spent wisely. The 2012 to 2016 investment plan has expired and we are yet to see the 2017 to 2021 investment plan. I suggest that it would have been beneficial for the Bill, the Government and the CDC if Parliament had seen the plans for the next four years of investment before it was asked to raise the investment threshold. The amendment from my hon. Friend the shadow Secretary of State would ensure that, if the Government introduce regulations further to increase the limit, they would have to be preceded by a detailed plan of investment from the CDC that could be scrutinised by Parliament. I welcome and support that amendment.

--- Later in debate ---

[Paul Scully (Sutton and Cheam) (Con)]

Thank you, Madam Deputy Speaker. I am grateful for your generosity in allowing me to contribute for a short time.

The CDC has a really important discrete role in our international development portfolio. There are few organisations with the skills and abilities to manage such risk in the most difficult markets. Often, it will bring an economic frontier country, area or sector the opportunities leading towards a risk profile that more established and traditional investment vehicles can get involved in. That is to be welcomed. It supports more than 1,200 businesses in more than 70 developing countries to create jobs.

We discussed a number of issues in Committee, including the fact that investments are not necessarily direct. Amendments tabled both in Committee and on Report address whether that serves to divert resources from the least-developed countries. I would say that it is sometimes necessary to invest in opportunities in other countries as long as the outcomes go to the most needy and the least-developed countries. At the end of the day, that is what we are trying to do with our international development effort.

As many Members have said, it is important to concentrate on our core goals and the SDGs. In Committee, the Minister was explicit in saying he did not believe we needed more legislation. The International Development (Official Development Assistance Target) Act 2015 already enshrines in legislation the need to focus on poverty reduction and the SDGs, and they are already enshrined in DFID’s own principles and processes, so I do not believe that we need to have yet more primary legislation.

On the limits referred to in relation to some of the amendments, we have to remember this is effectively an enabling Bill, which is why it is so short. It is not an immediate call to spend. It is not a case of saying, “Here’s £6 billion tomorrow and then we’re going to raise it further the day after.” The Bill simply seeks to bring the CDC in line with other organisations that have similar requests of Departments. In Committee, the Minister said that any requests for money would have to be subject to DFID’s strategy and have to have a robust business plan that was considered fully before any money was handed over. That can easily be done on a departmental level. I totally agree with my colleague and Chair of the International Development Committee, the hon. Member for Liverpool, West Derby (Stephen Twigg). As a new Member, I look forward to being able to scrutinise the work of CDC.

I note that the CDC has changed. I agree with my hon. Friend the Member for Bedford (Richard Fuller) that some amendments address problems that may not occur or rehearse old problems from before 2010 when the then Secretary of State reorganised the CDC. I do not support amendments on problems that may or may not happen, or have happened in the past but have been largely sorted out. The CDC has moved from pre-2010 looking at low impact, high return investment programmes, to a far more proactive viewpoint to ensure we take into account the SDGs and poverty reduction. I will be scrutinising that along with my colleague the Chair of the Select Committee, but I will not be supporting the amendments, for the reasons I have set out. This can best be done at Department and Committee level through post and pre-decision scrutiny. In conclusion, I look forward to the Bill becoming an Act.

[Stephen Doughty]

I rise to speak in favour of new clause 7 and the other new clauses and amendments in my name and those of my right hon. and hon. Friends.

It is fantastic to see so great a consensus in the room around the 0.7% aid target and Britain’s role in international development—in contrast, perhaps, to the shriller debate in the media in recent weeks. It might surprise those hon. Members who have criticised my amendments that there is actually much agreement around the role of CDC; I believe it has a vital role to play—I made this clear in Committee, as I am sure the Minister would acknowledge—in the wider portfolio of our international development effort and in the spending of our official development assistance.

I would like to thank my fellow Co-operative party MPs and the shadow Front-Bench team, as well as other Members from across the House, for adding their names to many of my amendments. It shows the level of very reasonable concern around the many unanswered questions concerning the priorities and operations of CDC. Those questions need to be addressed before we can countenance such a large increase in the official development assistance resources it receives from DFID. I am not suggesting that CDC should not get any more resources—it has reached the cap of £1.5 billion set in 1999 and clearly needs some increase and headroom to expand its activities—but it is worth recognising that it has coped well by recycling resources within itself, partly thanks to some of the investment successes it has enjoyed.

--- Later in debate ---

[Richard Fuller]

Is not the level of investment now consistent with this increase? For CDC’s current level of activity to be maintained, it requires this level of increase, so cannot concerns about too rapid growth perhaps be overstated?

[Stephen Doughty]

I do not believe that that case has been made; there has been no justification at any point for the actual figures. To maintain CDC at its current level of activity, we need to realise that it has managed perfectly well with £1.5 billion since 1999 and has recycled it within its own budgets. If it was going up by £1.5 billion or £2 billion, I could understand it with a view to creating space for the next 10 years, but £6 billion and £12 billion seem to me to be well out of the appropriate range.

[Wendy Morton]

From my understanding of the Bill and on the basis of evidence given in Committee, I would like to read the quote that

“no money will go to CDC until a full business case is written in huge detail, which will be prepared in the summer of 2017.”––[Official Report, Commonwealth Development Corporation Public Bill Committee, 6 December 2016; c. 9.]

The suggestion that we are going to give a huge chunk of money to CDC straight away is perhaps creating an unfair impression.

[Stephen Doughty]

Clearly, the hon. Lady did not listen to what I was saying. I did not say that. I said that the Minister had acknowledged that it was not going to be spent in one year, which was the fear when this was initially proposed. What we are asking for in the amendments is just that clear business case. I hope that the Minister—he was nodding earlier—will be able to set out how that process and scrutiny of it will occur, which is only right. There was only limited scrutiny of the last amounts spent, which were quite significant.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

What my hon. Friend describes is, in civil service language, the ghastly phrase “absorptive capacity”. He will know that, unfortunately, the Department for International Development has allocated some funding into various World Bank trust funds that have not been fully spent with the originally envisaged timescale, suggesting that the Department is beginning to struggle to find suitable sources that can absorb its money as it wants. My hon. Friend is, in my view, right to worry aloud that this is a huge increase in money without any proven capacity to spend it.

[Stephen Doughty]

Indeed. My hon. Friend, one of the longest-serving Ministers at DFID, knows this only too well. He makes a very important point. I have spoken to other experts in the sector who suggest that to absorb that amount, even a doubling would be a struggle, so it certainly applies to the levels we are seeing. That is why it would be much more helpful if the Minister were clear about the schedule for this spending. What is his idea of the number of years over which this increase would be spent before we might require another Act to increase it even further?

We tabled some crucial amendments, as did SNP Members, in new clauses 3, 4 and 6 and my own new clause 9, emphasising the importance of focusing on the poorest, least developed and low-income countries and of ensuring that we remain coherent with the sustainable development goals—the global goals agreed by the UN—and focused on poverty eradication rather than other priorities.

[Mr Ivan Lewis (Bury South) (Lab)]

My hon. Friend is making an excellent case. Has not DFID led the world on the importance of aid transparency and a focus on poverty reduction? The problem at the heart of these proposals is that there is very little prospect of transparency of how these resources are spent. Equally, there is very little ability for the Government to guarantee that the resources will be deployed and focused on poverty reduction. Is that not a matter of major concern?

[Stephen Doughty]

I think it is, and that gets to the point. A lot of information is provided by CDC online, and it is important to acknowledge that much of it is helpful. We can get into individual projects and see the particular spending on those individual projects. However, it is not the same when it comes to the level of spending, which is what the NAO was looking at. It is important to be able to prove prospective development impact and show where it is going.

To take just one example, the NAO looked at the issue of funding going into the health sector in India, and tried to get clear information about where the money was being spent in a particular hospital group. It looked at whether it was going to the poorest or to middle-income patients. The NAO told us in its evidence that it was going to middle-income patients, which does not strike me as a correct use of CDC’s money. That is not to say that the investment is not good in and of itself—I am sure that enabling access to hospital for people in general is a good thing. The question is whether we should be spending our aid money on that. Surely we should be focusing on the poorest.

When we examine the figures in depth—they can be found in a House of Commons Library research paper—we see that although the proportion of CDC’s investments in the least developed countries has increased, it is still significantly lower than the proportion of its investments in middle-income countries. As for spending in individual countries, it is a fact that in India most of CDC’s money is being spent in what are known to be the richest states. The highest proportion of its investments goes to Maharashtra, which is where Mumbai is located. I am not saying that the individual investments there are not good, effective or useful; I am saying that it is a question of priorities. In Committee, it was helpful to hear the Minister speak of the possibility of a cap or restriction on funds that go to India and elsewhere in south Asia rather than to Africa. Giving evidence to the Committee, Professor Paul Collier said that he shared the concern that had been expressed about whether CDC was focusing enough resources on the poorest countries. New clause 9, for instance, relates to those issues.

The wider issue of spending routes that is raised in both the SNP’s amendment 3 and our new clause 10 is crucial. We are not suggesting that CDC should not be given more money, or that it should not have a chance to expand its operations and the autonomy that it enjoys, but we believe that those elements should be in proportion to other forms of official development assistance. It is important that we introduce safeguards. By 2019-20, 6% of United Kingdom official development assistance will be spent by other Government Departments. Money goes into the prosperity fund and other Government funds, and there is often far less scrutiny and oversight than there is in DFID. That worries me, and I know that it worries other Members on both sides of the House.

We need to achieve a fair balance. CDC has its role to play in the portfolio, but that must be proportionate to other ways in which we can spend the money. We must ensure that we are pulling all the levers of development, rather than just one at the expense of others. For that reason, I am inclined to support amendment 3 if it is pressed to a vote.

I want to say something about tax havens, although I shall not do so at length, because we discussed the issue a great deal in Committee and we have also discussed it today. I find it surprising—this relates to new clauses 1 and 8—that CDC continues to use tax havens such as the Cayman islands and Mauritius. A fair point has been made about the importance of stable financial arrangements for investments. In some countries it is clearly not possible to set up arrangements within the legal structures of those countries to ensure that the right fiduciary controls are in place. However, I do not understand why we are not setting up such vehicles in England and Wales, or in other jurisdictions. Why are so many of them in the Cayman islands and Mauritius?

Moreover—I have asked parliamentary questions about this—we are paying management fees to financial services organisations, in the Cayman islands and elsewhere, that also support the far less transparent activities of other corporations and individuals. I find it deeply worrying that, whether or not there is anything untoward about an individual CDC investment, we may be indirectly supporting the flourishing of the tax avoidance and evasion that exists in overseas territories.

[Mr Gareth Thomas]

Is my hon. Friend aware of comments made by the Secretary of State when she was a Treasury Minister about tax evasion and the need to limit the use of tax havens? Why does the Treasury seem to be concerned about the issue, and why is DFID suddenly not concerned about it? One would have thought that, when it came to such a crucial issue, there would be joined-up government.

[Stephen Doughty]

That was also a great surprise to me. I referred earlier to the letter that the Secretary of State sent to many of the other DFID contractors on 16 December. That letter was very clear about tax avoidance measures and tax havens. It contained a series of criteria, most of which I think are very reasonable, and which we should expect to be observed by organisations that are benefiting from our aid spending. My question is this: why are those criteria not being applied to CDC? The Secretary of State repeatedly refused to confirm that they would be. There seems to be one rule for one organisation and a different rule for others.

Eurodad research found that 118 out of 157 fund investments made by CDC went through jurisdictions that feature in the top 20 of the Tax Justice Network’s Financial Secrecy Index. That does not seem to me to be coherent with the other statements that are being made by the Government. Indeed, the will of the House has been shown by cross-party support for amendments to other Bills that would crack down on tax avoidance and evasion.

Lastly, I want to return to the issue of coherence, and I urge colleagues to support new clause 7. The hon. Member for Bedford (Richard Fuller) referred to this as some sort of laundry list and suggested I was creating hypothetical straw men that did not actually exist and was dealing with things that have happened in the past. That is not the case; I am talking about things that are happening now. It is a fact that, as data revealed to me since the Committee stage in parliamentary questions show, in 2015 alone CDC invested £56.9 million in private fee-paying education and £117.9 million in private fee-paying healthcare.

--- Later in debate ---

[Rory Stewart]

There are two distinct points there: DFID’s spending and the proportion of the spending. The first thing to understand is that CDC is 100% owned by the Department for International Development, which is one reason why a number of these amendments are not appropriate. On the proportion of money spent, as my hon. Friend the Member for Bedford (Richard Fuller) eloquently pointed out, the small increase that we are talking about in terms of the annual amount that CDC will be able to invest will still be much smaller than comparable organisations in Holland, Germany and France. It will be about a third of the amount that the Overseas Private Investment Corporation can invest—OPIC is just one of the US’s development finance institutions that is able to invest—and only about a sixth of what the International Finance Corporation puts out a year. We are not talking—comparatively, globally—about a large amount of money. We are talking about something in the region of 8% at maximum—even if we hit the maximum of official development assistance—and the other 92% will continue to go in the normal way through non-governmental organisations and organisations such as UNICEF for the objectives that we pursue.

[Stephen Doughty]

It would be helpful if the Minister clarified the time period over which this increase, if it was granted, would be played out with CDC. The explanatory notes to the Bill say very clearly that the £6 billion is intended to be used in this spending review to accelerate CDC’s growth. Is that his view, and what about the £12 billion? Is that spread over a 10-year period, a 20-year period or a five-year period? Can he give us a ballpark figure?

[Rory Stewart]

Let me clarify this. The £6 billion represents an additional £4.5 billion, because CDC already has £1.5 billion. We anticipate that that would cover the next five-year period to enable CDC, at maximum—we do not expect it to draw down the maximum amount—to be able to make the kinds of levels of investment that it made last year. The next £6 billion—it is not an additional £12 billion, but an additional £6 billion—would apply to the next five-year period. We are looking at a steady state allocation, which might, at maximum, allow CDC to meet the kind of expenditure levels that it gets next year.

Let me move on now to new clauses 2, 5 and 6 and amendment 6. Essentially, these are a series of measures that restrict the power of the Government to give money to CDC. They do that either by saying that they should not be able to boost the amount of money that CDC has through delegated legislation, or through asking for a strategy to be put in place before the money is disbursed. Again, these measures are not appropriate. The role of Parliament as specified for CDC in the Overseas Resources Development Act 1948 and the Commonwealth Development Corporation Act 1999 quite correctly relates to two things: the setting up of this body and the creation of a cap on the amount of money that this body is given.

However, it is not normal for Parliament to get involved in the detailed implementation of specialist business cases. That is true in everything that the legislature does in its relationship to the Executive. The money allocated to our Department in general through the Budget, which this House votes on, is then delegated to civil servants and to the Government to determine how it is spent. The same will be true here, but the strategy that will come forward will reflect very closely the arguments that have been made at the Committee stage and on Report. We will continue to remain in very close touch with Members of Parliament, and we will be judged by our ability to deliver, through that strategy, something that will address those concerns—above all, through the development impact grid and the development impact assessments on the individual business cases, which will address these particular issues.

--- Later in debate ---

[Stephen Doughty]

I, too, want to place on record my thanks to the Clerk of Bills and all my colleagues on the Front and Back Benches who have taken part. We have heard excellent contributions from both sides of the House in what has been a very informative and useful process of scrutiny of this Bill through Second Reading, Committee and Report.

I was pleased to hear the Minister setting out a little more detail on the period over which we can expect the CDC to be drawing down moneys. His suggestion that it will be a five and 10-year period in two tranches is much more reassuring than some of the earlier suggestions. There will, however, be a temptation to draw that down at a faster rate because of changes in reporting how our aid is calculated and what proportion the CDC counts towards that. So while I take what the Minister said with great sincerity, I urge him to caution against those who would suggest dumping money, as it were, into the CDC as a way of artificially meeting the 0.7% target. He should only go there with a clear plan and business case, and a clear understanding of how that is going to contribute towards poverty eradication.

I am concerned that we are still not going far enough on tax havens. I listened to what the Minister said and will look with interest at that strategy and what practical steps are taken to see us moving resources out of those jurisdictions, and the secondary effects we can have there.

I wholeheartedly agree with the hon. Member for Stafford (Jeremy Lefroy) about the role that the CDC should play. It should not go for an easy life by going where commercial resources already go. There was some suggestion in the debate that we were almost the only source of funding for many of these investments, but that is patently not the case. In our development spending overall, and certainly in the case of the CDC, we ought to be acting as a catalyst for the very best in poverty eradication, for placing the very best focus on difficult sectors, areas and countries where others will not go, and for achieving the highest standards in sustainability and human rights. We ought to be acting as a catalyst in the world, not just going for an easy return and an easy life.

There is something that I still do not quite understand, and I hope that Ministers will reflect on this. The Secretary of State set out some good principles in her letter of 16 December on transparency, on open-book breakdowns of salaries, tenders and material costs, on due diligence in supply chains, on tax status and compliance, and on disclosures of conflicts of interest. I do not see why those principles cannot be applied equally to the CDC, just as they will be applied to other spenders of our aid spending. I urge Ministers to look carefully at this again. That is a reasonable set of requirements and it would be helpful if they could be applied to the CDC.

On the question of the countries that the CDC focuses on, there has been a shift. It is important to recognise that the CDC is investing more in the poorest countries, but it needs to go much further. I urge Ministers not to have any poverty of ambition in setting the framework and parameters for the CDC, particularly in relation to future disbursements, to ensure that the money goes to the poorest countries and not to middle-income countries that can often draw down other sources of funding and finance.

It was reassuring to hear many positive voices today making the case for our wider role in international development and for our 0.7% aid target. Indeed, it was good to hear the Prime Minister the other day rejecting the more shrill views from some on her own Benches and from the likes of the Daily Mail that we should scrap the aid target and that we should not be spending any international development money at all. She rejected that. This is not a zero sum game. It is not only morally wrong for us to ignore gross poverty, instability and insecurity, as the Minister said; it also fundamentally goes against our national interest and security and global security and stability. Those are good reasons why, with reasonable scrutiny and with reasonable questions being asked about all areas of our development spending, we must maintain our wider commitment to the poorest people and countries in the world.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Policing and Crime Bill (Programme) (No. 3)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Policing and Crime Bill for the purpose of supplementing the Order of 7 March 2016 in the last Session of Parliament (Policing and Crime Bill (Programme)) and the Order of 26 April 2016 in the last Session of Parliament (Policing and Crime Bill (Programme) (No. 2)):

Consideration of Lords Amendments

(1) Proceedings on consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion three hours after their commencement at today’s sitting.

(2) The proceedings shall be taken in the order shown in the first column of the following Table.

(3) The proceedings shall (so far as not previously concluded) be brought to a conclusion at the times specified in the second column of the Table.

Commonwealth Development Corporation Bill (Second sitting)

Stephen Doughty Excerpts

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

[The Chair]

We now begin line-by-line consideration of the Bill. Before we begin, I ask that everyone ensures that all electronic devices are turned off or are switched to silent mode. Members may remove their jackets if they wish—although it may be a little chilly today for that.

The selection list for this afternoon’s sitting is available in the room. It shows how the selected amendments have been grouped together for debate. Amendments grouped together are generally on the same or similar issues. A Member who has put their name to the leading amendment in a group is called first, and other Members are then free to catch my eye to speak on all or any of the amendments within that group. A Member may speak more than once in a single debate.

Please note that decisions on amendments do not take place in the order that they are debated, but in the order in which they appear on the amendment paper. In other words, debate occurs according to the selection and grouping list, and decisions are taken in the order on the amendment paper. I hope that explanation is helpful to Members.

Clause 1

Amount of the limit on government assistance

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

I beg to move amendment 6, in clause 1, page 1, line 4, leave out “£6,000” and insert “£3,000”.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 1, in clause 1, page 1, line 4, leave out “£6,000” and insert “£5,999”.

Amendment 3, in clause 1, page 1, line 4, leave out “£6,000 million” and insert

“the amount specified in subsection (1A)”.

This amendment paves the way for amendment 4.

Amendment 4, in clause 1, page 1, line 4, at end insert—

“(1A) After subsection (1), insert—

(1A) The amount specified in this subsection is whichever is the lesser of the following amounts—

(i) £6,000 million,

(ii) the amount determined in accordance with subsection (1B).

(1B) The Secretary of State shall determine the amount for the purposes of this subsection by estimating the amount which will constitute 5% of official development assistance in the relevant period determined in accordance with subsection (1C).

(1C) That period begins with the financial year in which the Secretary of State considers that the Crown’s assistance to the Corporation (determined in accordance with subsection (2)) will exceed £1,500 million and ends at the end of the fourth subsequent financial year.

(1D) For the purposes of this section, “official development assistance” has the same meaning as in the most recent annual report laid before each House of Parliament in accordance with the provisions of section 1 of the International Development (Reporting and Transparency) Act 2006.””.”.

This amendment, together with amendment 3, would replace the proposed limit on government assistance under section 15 with a new amount, expressed as either £6 billion or 5% of forecast official development assistance over a five year period, whichever is the lesser amount.

[Stephen Doughty]

It is a pleasure to serve under your chairmanship, Ms Ryan, and for the first time, I think. I know you take a keen interest in these matters, so it is particularly delightful to serve under you, as it was to serve under Mr Streeter this morning—I know he is equally interested in the Bill. We had a wide-ranging debate on Second Reading and a wide range of issues were also explored by all members of the Committee during some excellent scrutiny of the witnesses who were before us this morning.

Amendment 6 stands in my name and those of my hon. Friends the Members for Edmonton and for Bradford East. It regards the nub of the matter, which is the amount of money—aid money; taxpayers’ money—that the Bill intends to allow the CDC to receive. It is a very large sum: up to £6 billion, leading up to £12 billion, which I know we will come to discuss in due course.

As I said on Second Reading, I am not opposed to the existence of the CDC and I am not opposed to much of the important work that it does; I recognise that it does some excellent work. Indeed, the National Audit Office is clear that the CDC is largely meeting its own standards and the strategy that was set for it in 2012. However, that is not the issue before the House or, indeed, the Committee; rather it is whether we should grant such large sums of money to CDC as opposed to directing that important aid money to other uses.

Despite having listened carefully to the Minister and the CDC itself—I have met its representatives—and reading much of the documentation about the Bill, I am still at a loss as to where the £6 billion and £12 billion figures have come from; I do not believe that the case has been made for that expenditure. There may be a case for increasing capital for the CDC, and I am sure we will hear many of those arguments today, but I have certainly not seen the case to justify the expenditure of a potential extra £4.5 billion over this spending round, as implied by the Minister’s earlier comments and the contents of the explanatory notes to the Bill, nor do I see the rationale for potentially expanding that sum to £12 billion.

The information we have before us is very vague. Paragraph 10 of the explanatory notes to the Bill says:

“Increasing the limit on government assistance to £6,000 million will enable the Secretary of State to accelerate CDC’s growth over the current Spending Round in response to forecast market demand—”

which is not actually explained anywhere, nor has it been explained in answers to questions I have put to Ministers—

“over CDC’s next strategy cycle and in order for CDC—”

this, again, is very vague—

“to play a fuller role in the delivery of the UK’s international development objectives.”

Those are very short sentences and paragraphs to justify the potential spending of £6 billion, rising to £12 billion. Let us remember that the CDC only required capitalisation from the UK Government of £1.5 billion over the entire period between 1999 and 2016. We understand that the bulk of that has come at the CDC’s request, although I know that there are a variety of views out there on that. In recent years, we have seen the big recapitalisation of £735 million in two tranches, which I am glad to say was accompanied by a business case. Not all of that case was met, but at least there was some rationale for it—whether it should have gone through is not relevant now—whereas there is no rationale for the proposed increase.

I think it was the NAO that said that there is a cart-and-horse problem here. This is a huge potential uplift and we have not seen any kind of rationale for it, any clear statistics, analysis of markets or suggested project sectors, just a vague assurance that it will all be all right on the night and that Parliament should therefore go ahead and approve large sums of money on the nod. We have also heard doubts expressed by the NAO and others about whether the CDC even has the absorptive capacity to accept that sort of uplift in such a short space of time.

We had reassurances from the Minister that the uplift would only come in response to clear demand and with the clear ability to take it on, but the reality is that the NAO has criticised the CDC for risks in its staffing and for its organisation. Even regardless of that criticism, I question whether any organisation could take such an uplift in such a short space of time, whether it was a non-governmental organisation, the World Bank or a UN agency. We ought to treat our scrutiny of development finance institutions and multilateral agencies with the same brush, whether they are close to the Department for International Development or slightly further away; I will come back to that point in due course.

The other issue is that there is an opportunity cost here that I hope we will be able to explore in the debate. The Minister earlier seemed to suggest that if we do not give the money to the CDC, we will inevitably have to give it to a development finance institution that is performing less well or is perhaps even less focused than the CDC, but I do not think that he has made that case very clearly.

I have read in detail the multilateral aid review that the Minister published last week and that we scrutinised in an urgent question on Friday. It does a lot of good things; it gets into the meat of what some agencies are doing and it points out agencies that are not performing well. Has the CDC been put through that level of rigour? Is it subject to the same expectations of transparency, poverty focus, effectiveness and accountability to beneficiaries, taxpayers and the Government? I am not sure that it is. Where would it appear in the multilateral aid review’s graph of agencies? Undoubtedly it would do well in some areas but in others I suspect it would not, particularly given the NAO’s commentary.

Given what DFID expects not only of multilaterals but of its bilateral partnerships and its partnerships with civil society organisations, there seems to be a double standard. One example is that DFID now expects multilateral agencies to publish details of everything they spend over £500. That is a good thing, but we clearly do not have the same transparency from the CDC. Yet we are planning to give it extra billions of taxpayers’ money via the Bill—initially up to £6 billion and later up to £12 billion. At the very least, we ought to provide a level playing field for assessment and expectation, so that we are absolutely sure we are investing our money in the routes that will lead to the greatest reduction in poverty, that align with our wider development objectives, that are coherent and that meet the wider objectives of the Government and the Department.

Conversations with the CDC and comments from the Minister have revealed a crucial issue: the CDC has not requested this capital increase. The Minister told me that in a written answer last night and confirmed it in this morning’s Committee sitting, and the CDC itself has also confirmed it to me. That seems a very odd situation. I can understand a generic conversation—“Well, if x were y and y were z, we might be able to take a bit more money or do this or that”. But not even to have a request, never mind a clear rationale or expectation of what could be done with £6 billion of taxpayer funding—let alone £12 billion—is extremely concerning. Is the tail wagging the dog? Is this Ministers putting pressure on an organisation to accept significant increases in money, perhaps for some other purpose which I will come on to, rather than it being based on a real set of demands and a real set of expectations of what could be delivered? I am concerned when I hear that from the Minister or from the CDC, and I am concerned when it is confirmed in writing. It is in contrast to the situation in which it made a request for recapitalisation in the last year. It was perfectly reasonable for there to have been a request—I do not know about the value—but the CDC put forward a business plan which was discussed over a period and the Department agreed the £735 million.

[The Minister of State, Department for International Development (Rory Stewart)]

indicated dissent.

[Stephen Doughty]

The Minister is shaking his head but the CDC did request £735 million; it told me so. Perhaps the Minister wants to intervene? The Minister’s own written answer to me last night, when I had asked him specifically what recapitalisations had been requested by the CDC in each of the past six years, told me that it had requested £735 million. So I am confused as to why he is shaking his head; perhaps he would like to intervene?

[Rory Stewart]

Thank you. It is a great pleasure, Ms Ryan, to serve under your chairmanship. I will try not to intervene too much, since this is not really my responsibility, but as a point of information, I think there are two separate issues here. The first is the question of the CDC calling on a promissory note, which is what would happen in the future. In terms of the £735 million request the hon. Gentleman is talking about, when the Government have funds available and have legislative authority to allow money to go into the CDC, the CDC will then make a request. That would be true in the future too, so if the Bill gets through Parliament and the money is available, so the option is available, and the promissory note and the business case from DFID are in place, at that point the request would come from the CDC. One would not anticipate the request coming from the CDC at this stage. That has not happened in the past and it would not happen in the future.

[Stephen Doughty]

I find that a very odd suggestion when we are talking about such large sums. One would expect there to be the architecture of a request, or the basic bare bones of a request, even if the specific details were not there. We are not talking here about £100 million or £200 million, large sums as those are, we are talking about £6 billion and £12 billion. These are huge sums as a proportion of the overall aid budget and in terms of our commitments to other multilateral development finance institutions. Now the Minister suggests that we just accept these back-of-a-fag-packet calculations— £6 billion, £12 billion—without any kind of rationale for what they are. He said earlier that the department had come up with those figures, that he had come up with those figures, and they had been presented to the CDC, rather than the other way around. One would expect the CDC, as the expert in the markets and sectors it is investing in, to be suggesting to Ministers, perhaps, where potential investments could be made, where returns could be achieved and where poverty eradication could be delivered.

[Rory Stewart]

I am contradicting myself by intervening again. There is an important distinction here. This is a piece of enabling legislation. The CDC is in a very unusual position. Unlike our normal relationship, where we can, for an NGO such as Oxfam, give money without coming to Parliament, or for a multilateral organisation such as the World Bank, go through secondary legislation, a statutory instrument, this is unusual. This is one of the only organisations we deal with where Parliament had imposed a cap. So what we are asking for is enabling legislation which would allow DFID, if it had a request from the CDC, to give it the money. This is not our giving it the money, it is creating an option and a ceiling against which, in the future, the CDC would be able to present a business case.

[Stephen Doughty]

The Minister suggests we should not be sceptical of the Government and their intents. It is the role of this House to be sceptical of the Government and their intents. To suggest that Ministers are going to take powers but might not use them is a slightly curious argument: I have not seen many cases of that in the past. The timing of this is very odd, given some of the other circumstances, which I will come on to.

[Jeremy Lefroy (Stafford) (Con)]

Will the hon. Gentleman give way?

[Stephen Doughty]

I will give way in a moment, but I just want to make one point. We have seen a very important change in the definition of the ODA, which occurred only last year. Previously, as I said on Second Reading, it was the issue of the CDC net disbursements that contributed to our ODA figures. Normally we looked at the money that the CDC was investing, returns from that investment, the function of the two and ended up, usually, with a positive number. Over the past five years it had been a £100 million or £200 million positive contribution to our aid effort. In fact, last year it would actually have been a negative contribution of minus £9 million. However, the Government changed the rules. They decided to count the capital inflow into the CDC—all of it, in its entirety—as ODA, as aid, rather than the function of what is actually, potentially, being achieved.

--- Later in debate ---

[Jeremy Lefroy]

It is a pleasure to serve under your chairmanship, Ms Ryan. The hon. Gentleman raises a very important point about the capacity of DFID and, indeed, the capacity of the two continents—Africa and part of the continent of Asia, south Asia—to absorb this kind of money, but does he not agree that one major challenge facing the world at the moment is the need to create in the next 15 years 1 billion jobs, most of which will be in those countries, and that the amount of money that we are talking about is tiny in comparison with the amount that would be required to create those jobs and thereby to alleviate poverty?

[Stephen Doughty]

I agree that the challenge of creating jobs is huge and one in which we and others should be playing a role, but it is not solely our role. Again, I hope that one question that we will get on to discussing is whether we should be providing what is in effect private capital in some of these locations or whether the capital should be coming from other sources: other Governments, institutions or DFIs. Indeed, should that be the responsibility of the Governments themselves? We will undoubtedly come on to that in discussion of some of the new clauses, but one of my fundamental questions is about the focus of this money: where is it going currently, and is it doing all that it could do? Professor Collier himself said this morning, in relation to the current bias of funding towards south Asia and India in particular, that he thought that there should be more focus on Africa. I agree.

[Jeremy Lefroy]

I agree, too, on that point. Will the hon. Gentleman also accept this point about the other DFIs? The Dutch DFI has invested far more money than we have, and the Netherlands has a population one quarter the size of the UK’s. The French Proparco is in a similar position to the UK, but the Germans have invested three times as much. We are laggards in this respect.

[Stephen Doughty]

We are not here to discuss the Dutch DFI, but I do know a reasonable amount about it. It provides only marginally more than us. It does do interesting work; it does not do exactly the same work as us. I do not know its history of recapitalisations and how much additional ODA money it has received recently. It would be interesting to look at that. However, the question here is this. What is the best use of our money? Are we not investing or have we reduced investment in other sectors where we could be using our aid in order to do this, and is that the right choice? That is the question before us, and when we look at, for example, DFID’s closures of bilateral programmes in places such as Burundi, we do not have clarity from the bilateral aid review on whether there will be further closures or changes.

We have heard worrying things about cuts in bilateral funding for HIV/AIDS programmes, despite the good money that is going into the global fund. We have seen a shift away from certain sectors and from budget support. We have seen a shift away from investing in free healthcare and education, and in teacher salaries, and with removing user fees for healthcare, for example. When the CDC invests in private healthcare and private school systems, we might have a debate about the role that voluntary and private play in healthcare and schools, but again it is an opportunity cost—it is a choice about where we invest these things.

I accept the hon. Gentleman’s wider point about the importance of jobs, investing and crowding in capital into some of these sectors, but we have to question what we should be doing with our money and whether that is right versus other potential sources. I contend that the Government simply have not come forward with a case that justifies this level of cap. Some increase in the CDC’s budget might be justified, but certainly not at this level.

[Rory Stewart]

Will the hon. Gentleman give way?

[Stephen Doughty]

I will give way in a moment, once I have made another point.

All that needs to be seen in line with some of the other issues. I mentioned the diversion of aid and the shifting of aid between priorities, but by 2019 26% of ODA will be spent by Departments other than DFID. That is a significant shift from where it was. As the hon. Member for Rochford and Southend East knows, I am not opposed to cross-Government working or other Departments spending ODA, but that level of it is concerning. With the CDC on top of that, as well as the prosperity fund, which we discover was given £1.3 billion of ODA in September this year—much of it spent through other Departments and yet ending up in India, China, Malaysia, Mexico and other locations—the picture of where our aid spending is shifting to gets worrying. Is it shifting away from the poorest countries and the poorest people, and from the core services that I believe we should be supporting?

[Rory Stewart]

Given that the hon. Gentleman seems to have such fundamental concerns about the CDC—its accounting practices, the role of Government, its strategy, its spending—will he clarify why he is proposing to give it £3 billion in his amendment?

[Stephen Doughty]

As the Minister knows, in this House we have a thing called probing amendments and, like the Minister, I have drawn up a suggested figure—

[Rory Stewart]

On the back of a fag packet?

[Stephen Doughty]

Indeed. We can put any figure down and, without the rationale, we can have a debate—the Minister might criticise me for a £3 billion figure, I can criticise the Minister for a £6 billion figure. The fact, however, is that the Minister has not provided a clear rationale or business case for £6 billion—nor has he for £12 billion—and there are some interesting suggestions from the SNP Members about proportions. Those are all issues that we ought to discuss. I made it clear earlier, I am not opposed to the CDC getting more money, but I am concerned about the period over which it gets it, the total amount and the caveats that we might then place on the CDC to receive it.

[Rory Stewart]

rose—

[Stephen Doughty]

I will happily give way, although the Minister said that he would not intervene all the time.

[Rory Stewart]

I am just trying to understand. The hon. Gentleman is seriously proposing an amendment to this House which we will vote on to give £3 billion to the CDC. Will he justify why he wishes to give it £3 billion? This is a real amendment, to a real piece of legislation before this Committee.

[Stephen Doughty]

It is not Question Time for me; it is Question Time for the Minister—[Interruption.] It is Question Time for the Minister proposing the legislation. He must explain the rationale—[Interruption.]

[The Chair]

Order. May we keep this within the rules? If people want to make an intervention and the Member gives way, that is fine; shouting across the Floor is not fine. Everyone will get an opportunity to speak.

[Stephen Doughty]

The hon. Member for Rochford and Southend East is looking anxious to intervene. He has, for example, posted an amendment suggesting reducing the CDC funding to £1—I will happily give way to him to explain that.

[James Duddridge (Rochford and Southend East) (Con)]

It is actually £1 million, but my amendment is probing, as the hon. Gentleman’s is. What the hon. Gentleman is getting wrong—I do not think wilfully—is that the Minister does not need to present a business case and, indeed, he should not present a business case now. This is a figure that might be reached on the basis of drawdown and a request of the CDC with a business case which he will then analyse.

[Stephen Doughty]

But the CDC has not made such a request and, as the NAO said this morning, it is the cart before horse. That is the problem. I do not expect the Minister to provide a detailed analysis of every single project that we will invest in over the next 10 years, but a paragraph in the explanatory notes and some vague assurances about market demand are simply not good enough. We are talking about spending, potentially, billions of pounds of taxpayers’ money. Would we suggest the same amount went to a non-governmental organisation such as Oxfam or indeed the World Bank?

[Imran Hussain (Bradford East) (Lab)]

Does my hon. Friend agree that the central issue is not an increase in funding but the sheer level of funding? This is an organisation that in its whole life has had funding of £1.5 billion. On the Opposition Benches we want to probe why there is such a significant increase, which is a reasonable view to take.

[Stephen Doughty]

Absolutely, and that gets to the nub of the issue. The Minister has been a veteran of many debates in this House and in Committee, so he knows full well the format in which debate takes place on amendments. Amendments are tabled to discuss the fundamental issues and the matters around them. Therefore, given the faux outrage at me for suggesting £3 billion versus £6 billion, he needs to explain—he has not done yet—his rationale for £6 billion and £12 billion, which I have yet to hear.

[Richard Graham (Gloucester) (Con)]

I am curious, partly because the hon. Gentleman’s amendment proposes an absolute sum of money, but more because everything he has said so far suggests that he is almost as close to the lady from War on Want in disapproving strongly about the activities of the CDC and the ability of Government to allow it to access more capital if it makes the right case for doing so. Therefore, I suggest the emphasis is slightly on him to try to demonstrate to members of the Committee why he has decided that £3 billion is the appropriate figure. I imagine that he was influenced this morning by hearing Sir Paul say that we need to get on with investing more in business in order to provide the jobs that Africa in particular so badly needs. I leave it to him to point out that that is what he thinks.

[Stephen Doughty]

The hon. Gentleman clearly did not listen to what I said either on Second Reading or in Committee this morning. He knows full well that I do not support the views of War on Want on the role of business and private capital in supporting developments, jobs and job creation. I made it clear that I did not support that part of its views. What I did support was the suggestion that the CDC is being given a different set of rules to play by from other development finance institutions and indeed other routes on which we can put our valuable aid money, for which we should demand the highest levels of scrutiny, transparency and effectiveness, and coherence with the rest of our programme.

I do not want to stray too far from the terms of the amendment, but in the new clauses we will discuss some of those issues of coherence. Without additional safeguards and caveats on where that money is spent, the transparency arrangements, the business case that should be presented and so on, whatever number we put in, whether it is £1 million less that the hon. Member for Rochford and Southend East suggests, the £3 billion less that I suggest or indeed any other figure, or a proportion as suggested by SNP Members, we could see multiple distortive effects. For example, the value of investments currently going into middle-income countries is still significantly higher than into lower-income countries. The value of investments going into Africa has gone down and the value of investments going into south Asia—mostly to India, a country to which we were supposed to end giving aid—has in fact gone up. The reality is, if we boost the CDC’s budget further without any change in that overall strategy, we will see a multiplication of that effect.

[Richard Fuller (Bedford) (Con)]

On a point of clarity, when the hon. Gentleman talks about the value of investments, does he mean the valuation of investments made historically, and therefore revalued on the balance sheet, or is he talking about new disbursements?

[Stephen Doughty]

I am talking about the issue before us today, which is about new investment and new disbursements. The figures I am referring to about those shifts relate to new disbursements by CDC—new investments made in recent years. We can have a lengthy debate about what went on in CDC before 2012 and the legacy investments that are still part of the portfolio—

[The Chair]

Not here.

[Stephen Doughty]

We are not going to do that here. We are talking about the future. We are talking about where this money would go. I am concerned that in recent years, despite the progress, there has not been a big enough shift into the types of markets, sectors and places that would fit more coherently with DFID’s objectives. The CDC is operating in 65 countries and DFID in only 35. I accept that there might be some difference in that and some difference of focus, but that is a huge difference and yet potentially we will decide to give billions more.

I will draw my remarks to a close, but I simply do not see that the case has been set out or the rationale has been given. I do not think there is enough clarity on the absorptive capacity. I do not think there is enough justification of the opportunity costs of not investing by other routes. The crucial fact is that the CDC did not request this money. Did it even request the legislation, I wonder? Perhaps the Minister will be able to provide us with documents to that effect, asking for the legislation to be made available. The CDC has just been given £735 million extra. It seems slightly odd that it then requests a Bill for £6 billion or £12 billion more.

I am very interested to hear what the SNP has to say about its proposals to other Members.

--- Later in debate ---

[The Chair]

Order. Will the hon. Gentleman stick to the issues in front of us? A discussion of Short money is not relevant here.

[Stephen Doughty]

rose—

[James Duddridge]

I give way.

[Stephen Doughty]

I am sure that my hon. Friends on the Front Bench will confirm that they are in full support. In fact, we have discussed the amendments at great length. It is simply a procedural point. I was not aware until I was informed by the Clerk earlier about the ordering of names, despite having been on many Bill Committees. I was informed by the Chair at the start that I would be called first because my name came first in the list. I assure the hon. Gentleman that the amendments have been fully discussed with the Front Benchers and have their full support. No doubt the Front Benchers will speak to the amendments in due course.

[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.

--- Later in debate ---

[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.

[Stephen Doughty]

The hon. Gentleman is making an important point and I have no doubt we will discuss this further. Is he not concerned, though, when he looks at the amount that is going into India, for example, and at individual states within India, where the majority of even the CDC’s new disbursements are still going to the richest states rather than the poorest? The top disbursement was to Maharashtra, where Mumbai is.

[Jeremy Lefroy]

Absolutely, we should look at that. However, there are more of the poorest people in India than in the whole of sub-Saharan Africa. If you take the view that a company in India in which you invest is likely to have national ambitions and wants to work across India, you would hope that it would therefore target the poorest as well as those who are perhaps better off. I agree, though, that the CDC needs to look at this and ensure that it does not stray back into the realms of investing only in fairly soft, nice, high rate of return investments.

My third point is about employment. I have already mentioned the figure of 1 billion jobs. The World Bank says that 600 million jobs are required across the world in the next decade; others have put it as high as 1 billion. There will be more of those 1 billion jobs in the middle-income countries than in the low-income countries, so we need to invest across the two if we are to tackle this enormous threat.

I was in Tunisia last week at the launch of the Parliamentary Network’s middle east and north Africa chapter—I chair the global network. The problems that a country such as Tunisia faces, with a population of 10 million and unemployment among graduates of 60%, are enormous. We know the social consequences of that. Tunisia has a very high rate of young people who have gone to Syria and Iraq to fight for Daesh. That is one consequence of the very high rates of unemployment and the lack of hope in those countries.

Finally, this is about investment. We talk about money being spent, but it is actually investment. Once it goes in, provided it is well-managed, it is recycled. As I have said, the money that made about £500 million of profit from Celtel under the last Labour Government was recycled into investment and is still there. Some of it may have been invested twice since then. This is not a one-off hit where we make a grant to an organisation and it does excellent work, but is then gone. It is money that goes round and round, that is recycled and that creates jobs.

[Stephen Doughty]

The hon. Gentleman makes an interesting point and I agree that it is investment and it is recycled—the CDC has shown that. However, does he not agree that that applies to our whole aid budget? If we invest in the education of a girl through a bilateral programme, with the opportunities that provides in her life and the opportunity it gives her to contribute to the economy, that is, similarly, an investment.

[Jeremy Lefroy]

Yes; I do not disagree with that.

--- Later in debate ---

[Rory Stewart]

It is a great pleasure to serve under your chairmanship, Ms Ryan.

I will begin by saying that I have a lot of sympathy with the points that the hon. Member for Cardiff South and Penarth is making; they are all incredibly important. He has an encyclopaedic knowledge of CDC and has identified a number of issues in relation to CDC that we take very seriously. They range across its accounting principles, its reporting framework, the scope of the countries in which it operates, its overall effectiveness, its absorptive capacity, the strategy and business case systems, theories of change and types of investment. I think these are all good concerns and there is nothing mentioned by the hon. Gentleman that I would disagree with in principle. These are the kinds of questions we would expect DFID and Parliament to ask, as well as CDC to ask of itself before it makes an investment.

The real question is what is appropriate to put in the Bill, what is appropriate to be done through Parliament, what is appropriate to be done through the Department and what is appropriate to be done through CDC. That is where I hope I can provide a bit of assurance to right hon. and hon. Members of all parties.

I think we can take it as read that there is an overall agreement that we should give some more money to CDC. There is some disagreement about how much more money—the different amendments suggest different views on how much money and how that money is calculated—but the basic principle is that CDC is a good thing, that economic development is a good thing, that DFIs are a good thing and that, particularly at this moment, as Sir Paul Collier pointed out strongly in this morning’s evidence session, we should be investing more in economic development and jobs in Africa. That is something we all agree. The question is how we do it and how we ensure that it is done in the right way.

The hon. Member for Glasgow North proposed a quite detailed amendment, but there is a small technical issue. He suggested that we aim at a 5% ODA amount, but there are two issues with that. We considered looking at that in the Bill, but the reasons we rejected it were twofold. There is an issue with confusing a stock with a flow. In other words, the measure is designed to create the capital that is invested and reinvested over time— that initial investment made by the Attlee Government continues to be recycled nearly 70 years later—whereas the ODA allocation is an annual allocation and an annual spend.

There is an issue around trying to compare a stock and a flow, and we can go on to that. In fact, rather good graphs have been produced, comparing stock and flow investments of Germany, France and the Netherlands, showing that, in proportional terms, Germany is spending nearly three times as much and France is spending nearly twice as much as we are. The reason I have not deployed those kinds of arguments is that I just do not think that that stock and flow comparison is good.

However, there is a more technical reason why we would reject the exact amendment. The way in which the amendment is written—at least on the basis of the analysis by our in-house lawyers—is that it would refer to the entire cap for the entire sum available to CDC. In other words, that 5% would not be 5% of future money. The way in which the amendment is drafted means that it would incorporate the £1.5 billion of its existing money. That would therefore limit us to only a further £1.5 billion over a five-year period. That would not be 5% of ODA. It would be about 2.5% of ODA, which we think would be considerably lower. The £3 billion number, which is what right hon. and hon. Members have been getting at, is a more plausible figure as an additional amount to the £1.5 billion. We can talk about that over time.

Very quickly, I will deal with the question of additional responsibilities, which is at the core of the questions asked by the shadow Secretary of State—the hon. Member for Edmonton—and the shadow Minister, the hon. Member for Bradford East. The basic questions are: are we are putting the cart before the horse, why are we using taxpayers’ money for this kind of investment, when will we present our strategy, what are our real intentions, and what kind of guarantees are taking place? The answer is that, in effect, we have a whole series of procedures. What we are asking Parliament to do is only the first stage of a whole series of checks and balances.

We are asking this Committee, and we are asking Parliament, to agree to the principle of lifting the existing cap on CDC—in other words, putting CDC more into the type of arrangement that we would have with any of our other donors. It is very unusual that CDC has a capped amount. That is not true for the amount of money we give to an NGO or to the World Bank. In fact, we are actually giving more to the World Bank than we would envisage giving to CDC. We are asking Parliament to lift the cap.

The next bit—the question of how the business strategy, the business case and individual investment decisions are written—would then be taken forward by the Department, in line with the UK aid strategy, and debated in Parliament. Directly to answer the question of the hon. Member for Bradford East, who wanted dates, in December 2016 we will complete our business strategy, which will lay out the strategy for the next five years for CDC. It is the strategy that the hon. Member for Cardiff South and Penarth was referring to as our last strategy. We will have a new strategy of that sort. That strategy will do a number of things that will address concerns raised in many of the amendments as the Bill passes through the House. It will, for example, tighten our impact assessments, put more focus on gender and set a cap on India. The next thing that will happen is that in summer 2017—this is quite a slow process—we will bring together a business case to draw down a promissory note of money; in other words, to say, “This is the amount of money we believe is the kind of money that CDC may need to call up.”

[Stephen Doughty]

It is very helpful of the Minister to set out this process. Did I hear him correctly a moment ago when he said there would be a cap on India?

[Rory Stewart]

Indeed. I am happy to repeat that for the record. The intention is that, in our forthcoming business strategy, there will be a cap on the amount that CDC can spend on India.

As we move forward to the summer, we will produce the business case. The business case will define the amount of money, whatever that is. It could be, for example, £3 billion, which is roughly in line with some of the amendments that have come forward, but we would have the option to go up to £4.5 billion. I do not honestly believe that that business case will be going up to £4.5 billion, but we would have the option to do that.

The next stage is that CDCs needs to make very detailed investment decisions, which take a long time. A lot of these investment decisions take two to three years. Let us say that CDC was going into solar power in Burundi. It would have to get in on the ground. It would have to ensure that it had a viable business and then it would have to go through our development grid, which is the next stage of the process. That means ensuring that it had checked GDP per capita, it had checked the amount of capital available, it had checked the business environment and it had checked that this is a sector that creates jobs. That is just the first stage.

The next stage CDC needs to go through is to present a development impact theory. That individual investment needs to have a theory: exactly what contribution is this going to make to jobs, economic development and poverty alleviation? Within our strategy, at the end of this year, DFID will ask CDC to publish that development impact theory, so that the theory can be seen case by case with every investment and it will be possible to challenge that theory.

At that stage, CDC would then come back and call down on the promissory note to call down that money. Then other forms of monitoring come on. We are a 100% shareholder of CDC, which is why some of the analogies with giving money to NGOs or World Bank institutions are slightly different. This is us giving money to a wholly owned DFID institution. Every quarter, we as DFID shareholders meet the board and assess its performance. We have an annual review process. On top of that we have all the other processes: NAO, Public Accounts Committee and the International Development Committee. Independent Commission for Aid Impact reports would also be able to get into the business of CDC. It is that and, finally, it is our basic confidence in our institution that allows us to even begin the process. We would not come to the Committee asking for permission to make more money available unless we were confident that we had a good management team in place with a strong history and a strong track record of development; otherwise, we would be wasting hon. Members’ time.

We believe that this is a good institution that will be in a position for us to produce the business case, and that it will be in a position to find investments. I absolutely guarantee—

[Rory Stewart]

I am giving an absolute assurance to the hon. Gentleman that no money will be given to CDC until a full strategy is developed and published, which can be debated in the House—that is a strategy coming in December—and no money will go to CDC until a full business case is written in huge detail, which will be prepared in the summer of 2017. Following on from that, there will be the individual investment decisions. I am happy to give that assurance. On that, I would ask the hon. Gentleman kindly to withdraw the amendment.

[Stephen Doughty]

This has been a helpful debate and we have covered some useful issues. I am still not convinced but I appreciate the steps the Minister has taken to explain some of the process and his assurances that issues that I and others have raised are being taken seriously. I welcome that; the Minister said nothing in principle that I would disagree with. I will record that and remember that as the Bill passes through its remaining stages.

I am intrigued by the Minister’s admission that there would be a cap on India. I would certainly like to know more about that. Is he able to give us a specific value or percentage? Given some of the wider points I have made, and no doubt will make with regard to other amendments, it would help if he would explain whether the Department has thinking on that on other countries. On the subject of middle-income countries versus lower-income countries, there are some odd situations where CDC seems to be putting money into places like Egypt. That country is not without its problems and not without poverty, but is not exactly a focus country for DFID. I would say there is a huge divergence between where DFID is operating bilaterally and where CDC is.

It would help if the Minister explained where CDC sits in relation to the transparency that is expected of other development finance institutions. It is all very well to go through the scrutiny and the checks and balances, because it is clear what those are, but it appears to me —I am not satisfied on this point—that CDC is being held to a different standard. We might not be a 100% shareholder in the World Bank, but we hold significant shareholdings as a major donor, and we take those very seriously. We use our influence there as a voting board member to take decisions, whether on individual loans or overall strategies.

--- Later in debate ---

[The Chair]

Before I call the hon. Member for Cardiff South and Penarth, it may be helpful for the Committee to be aware that, if amendment 7 is agreed to, not only will all of the other amendments in the group fall, but all of the new clauses cannot be debated because they all refer to a provision that amendment 7 would remove. Nevertheless, I have decided that it would be helpful for there to be separate debates afterwards on some of the new clauses—but I do not wish to hear repeated arguments about the principle of the delegated power.

[Stephen Doughty]

I beg to move amendment 7, in clause 1, page 1, line 5, leave out subsection (3).

This amendment removes the power of the Secretary of State to set a limit on government assistance above £6 billion up to £12 billion by means of secondary legislation.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 2, in clause 1, page 1, line 7, leave out “£12,000” and insert “£11,999”.

Amendment 5, in clause 1, page 1, line 7, leave out “£12,000 million” and insert

“the amount specified in subsection (4A).

(4A) The amount specified in this subsection is whichever is the lesser of the following amounts—

(i) £12,000 million,

(ii) the current limit at the time plus the amount determined in accordance with subsection (4B).

(4B) The Secretary of State shall determine the amount for the purposes of this subsection by estimating the amount which will constitute 5% of official development assistance in the relevant period determined in accordance with subsection (4C).

(4C) That period begins with the financial year in which the Secretary of State considers that the Crown’s assistance to the Corporation (determined in accordance with subsection (2)) will exceed the current limit at the time and ends at the end of the fourth subsequent financial year.

(4D) For the purposes of this section—

‘the current limit at the time’ means—

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

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

‘official development assistance’ has the same meaning as in the most recent annual report laid before each House of Parliament in accordance with the provisions of section 1 of the International Development (Reporting and Transparency) Act 2006.”.

This amendment would set a new limit on the power to make regulations to increase the limit on government assistance under section 15, expressed as either £12 billion or the current limit at the time plus 5% of official development assistance over a five year period, whichever is the lesser amount.

Clause stand part.

[Stephen Doughty]

I am conscious of your admonishment not to repeat the arguments I made when I moved amendment 6, Chair. I will discuss a few other issues, specifically around the use of a statutory instrument in this way, the value of it and the way in which other replenishments and funding rounds are agreed for development finance institutions.

Many of the arguments that we have already discussed also apply to amendment 7, although I will come to one that we did not cover, but the fundamental issue is whether the Government should be given this level of power. There is a debate to be had about how much we give CDC, over what time period and with what caveats, but giving the Secretary of State the power to come back at the time of their choosing, which could be next week or in 10 years’ time, and not just increase the amount by another couple of billion but double it, is very significant. I am always extremely reluctant to grant Ministers such powers, whether they are financial powers or Executive powers.

We all know that despite the procedures of this House and the fact that many Members take an active interest in Delegated Legislation Committees and statutory instruments, secondary legislation often does not receive the same scrutiny as primary legislation. It often goes through on the nod or is scheduled on funny days when Members are not available. Obviously it is the responsibility of all Members to turn up and hold the Government to scrutiny, but given the debate we have had on the matter in this Committee and in the legislative process, it seems odd not to ask the Government to come back later with another Bill.

Let us not forget that a Bill was not required from 1999 to today, when only £1.5 billion was used. Even if there was an expansion, not to require another Bill for quite a significant period and just to put through another uptick, perhaps by a mischievous future Secretary of State or the current one, seems very odd.

I must come back to the Minister’s point about other development finance institutions and the processes they are subject to. Most development finance institutions, including the global health fund, the World Bank’s International Development Association, individual development banks and UN agencies, tend to go through replenishment rounds. They agree a set period, put out strategies and requests to donors for funding and come back on a three or four-year cycle. Those requests have to be justified so that we can scrutinise them and say whether we agree. Indeed, that is the very purpose of the multilateral aid review: to look into whether we are giving money in all the right areas and where we think some development finance institutions are underperforming.

I am concerned that, although CDC may be doing better in line with its 2012 plan, making improvements and shifting its focuses, as we have heard from the Minister, without any ability to come back and have a full, thorough debate about the nature of the organisation, the caveats that are placed on it and the overall cap of funding that it should receive, we are giving Ministers a completely open-ended power to increase that funding very significantly. Let us not forget that £12 billion is equivalent, roughly, to the annual aid budget—I know the Minister has made it clear that it will not be used in one year, but it is a very significant sum of money. We ought to be acting with real caution when giving Ministers such powers.

It would help if the Minister could be clear about the time periods he is looking at. If he is talking about 20 years, let us hear him say that. I would still be nervous even so, because a future Secretary of State or Minister might change their mind, but it would help to smooth the debate if we heard that statement from the Minister.

The other issue that the Committee did not discuss in our consideration of the previous amendment was the focus on sectors. I mentioned the problem of multiplying potential shifts into certain countries or regions, away from stated objectives; that argument applies equally to sectors. If we increased the limit to £12 billion, it would be magnified even further. I was concerned to receive an answer from the Minister today about certain sectors in which he stated that the CDC continues to disburse into some really questionable areas. One is private, fee-paying education—the CDC’s portfolio value in 2015 was £56.9 million. Another is private healthcare providers and services, in which the CDC had a total portfolio value in 2015 of £117.9 million. Its portfolio value in extractive industries—metals and mining—was £9.3 million; the portfolio value in palm oil, which we have discussed in relation to the Feronia case and other matters, was £20.4 million; the value of the investment in real estate is £147.7 million; and in fossil fuels, the current value of CDC’s portfolio is £250 million. That seems to me to be at complete odds with DFID’s wider development objectives for Government coherence.

To come back to the nature of the amendment—I can see Ms Ryan looking anxiously at me—those sorts of issue will be magnified even further by rapid increases in the budget without caveats being placed on it. Ms Ryan, you have rightly said that were we to vote on the amendment, and were it to pass, we would not get a chance to discuss some of those other matters, but the power being given here without assurances is simply not acceptable and I have great concerns about giving that power to Ministers.

[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.

--- Later in debate ---

[Rory Stewart]

Ms Ryan, thank you very much for chairing this debate. I will deal with these issues very quickly, because I do not wish to detain people very long. A few issues of fact: first, this will not be an additional £12 billion on top of the £6 billion. We are talking about lifting the ceiling, so it will be an additional £6 billion. Essentially, the whole debate—we keep coming back to it in different ways—is about the fact that the CDC, through an accident in history, is governed by completely different rules from any other body to which we can give money. In the initial legislation, from 1948 onwards, a cap was put on the amount of money that the Government could put in. An additional cap was put in during the early 2000s when the Government were proposing to sell off CDC. The cap was put in there simply so that the Government did not pump more money into this organisation before it was sold off. That was a perfectly legitimate intention of primary legislation, but it puts us in an eccentric position in that it is possible for us to give, theoretically, unlimited money to an NGO, to a research council or any other body, to the World Bank and to other financial institutions, whereas the CDC is the only institution for which we have to return to primary legislation every time we wish to give it money.

The point about this ability to go up to £12 billion in the future would be that it would try to put the CDC into a similar position to the other recipients. In other words, on the basis of Parliament, the Minister and the Department, a decision would be made on the strategy on how the money was to be allocated. Money could be allocated to an NGO, it could be allocated to CDC, and we would do that through the normal departmental process.

The hon. Member for Cardiff South and Penarth asked about time. My strong belief, which I am happy to put on the record, is that the money we are asking for—that first ability to increase by £4.5 billion—would be the absolute maximum over the next five-year period up to 2021. We do not intend to come back for the next money until at least after 2021-22. At that point a new Government—it could be a Government, theoretically, of the Labour party—would have the option to come, through secondary legislation, and ask for the ability to increase the cap up to £12 billion. That, again, I would anticipate being for continuous, steady state investment. That £12 billion simply reflects, again, about £1 billion a year from the 2021 period going forward to 2026. That is the kind of money we are talking about and that is the kind of plan that is in place.

To conclude, we have heard very detailed, powerful and encyclopaedic speeches from the hon. Member for Cardiff South and Penarth. He has already made enormous arguments about the sectors and countries in which we should be investing. I request, if possible, that we do not return to those when the amendments are discussed, because they have already been made in enormous detail during the debate so far.

[Stephen Doughty]

Ms Ryan, I am sure that you, rather than the Minister, will decide what is in order. I have no doubt that we will want to explore some of those issues in further detail. I am sure the Minister does not want to, but I hope we can prevail on you. The fundamental issue here concerns my outstanding question: why £12 billion? Where has this figure come from? What is it based on? It seems to have been arbitrarily picked out of the air. It is an 800% potential increase, as the hon. Member for Glasgow North pointed out along the way.

It is helpful that the Minister talked about the timescale. He says that it goes up to 2021 and that he does not intend to come back before 2022. My question is, why give this power now at all? Why not just require another simple, one-clause Bill to increase the cap if CDC is shown to be performing, to be reforming, to be diverting its focus more to poverty eradication, more to some of the countries we want to work in, or some of the sectors we would like to see it working in? Why not come back? This happens with other legislation. An armed forces Bill comes through regularly to maintain funding for our standing armed forces, and there are many other instances where simple pieces of legislation are proposed and receive the required level of scrutiny—indeed, this has happened with the CDC in its lifetime. My concern is why we would give such extensive powers at this stage. I take in good faith the assurance of the Minister, but obviously, as I have said before, that does not apply to future Ministers. The Minister mentioned the issue of selling off CDC; what if a Minister wanted to do that in the future? This would allow a Government to pump money into it before a sell-off. That is concerning and should concern all of us in this Committee.

I was interested in the point made by the hon. Member for Stafford about gradual increases. Will the Minister reflect on the possibility of considering an India cap of a certain amount beyond which CDC could not increase, whether it be £1 billion or less, at a time, whether that was a year or a two-year period, and coming back with secondary legislation to do that? That might give a lot more assurance as to the scale of the increase and it would not be prey to the sorts of pressures that I know exist within the Department in terms of overspending more generally. We have a 0.7% target that we need to meet. As the CDC contributes to that, it is incredibly tempting, if there has been underspending in one Department or another, to suddenly pump a load of new capital into it, record it as official development assistance for that year, as has happened, and have it contribute to the overall figure.

However, I think the Minister has said some important things. I want to hear more about the caveats and strategy for CDC going forward and while I wholly object to the suggestion of giving statutory instrument powers, secondary legislation powers, I am sure that this will be an issue that those at the other end of the building will look at in great detail in due course. At this stage I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 ordered to stand part of the Bill.

Clause 2

Short title, extent and commencement

Question proposed, That the clause stand part of the Bill.

[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.

--- Later in debate ---

[Stephen Doughty]

I am interested in this new clause. I think it will be very helpful to have the CDC more tightly linked to the terms of the International Development Act 2002. That set an important legal framework, which has guided the use of our ODA aid over the past 14 years, and therefore there are important safeguards within it that need to be closely looked at as regards the CDC. One of the issues is with the transparency around the CDC. Perhaps the Minister can clarify some of these, but when someone delves into the detail of some of the projects, organisations and programmes that we are funding, although there are a significant number of projects that are clearly focused on poverty reduction and are in some of the poorest countries in the world, there are others where it is questionable as to what the poverty-focused role is.

We heard this morning about the private healthcare provider in India. We could, but will not at this stage, get into a lengthy debate about the merits of private and voluntary healthcare versus public funded healthcare in developing countries, the role in transition and so on. It concerns me that CDC appears to be investing in a private fee-paying hospital without a focus on access for some of the poorest patients, for example, or some explanation as to why that money is focused on poverty eradication rather than as just a generalised investment.

I looked into one of the others called Qiming Venture Partners, which is a Chinese-based entrepreneurial fund. It describes itself as one of the top funders of entrepreneurs in the internet and consumer products; I struggle to see how that relates to poverty reduction. It has some very interesting pictures on its website of its staff sitting on tanks in Mongolia. I am happy for the Minister to clarify the nature of that investment, and if it is something completely different I will happily withdraw my comments about it, but it is very odd.

Another one we heard about this morning was Feronia. Clearly that is an investment in agribusiness, and we can see links there to poverty reduction and jobs in the agribusiness sector. However, there are also questions about the potential negative effects on livelihoods and poverty eradication because the investment is in palm oil. There are questions about land grabs, the rights of people living in the area and whether that is even a sustainable product to be investing in. Again, it seems odd that we are investing in fossil fuel projects when we are told that climate change is one of the biggest threats to developing countries and people in the poorest countries. I know that that is not just a problem to CDC; it applies to some of our investments through other development finance institutions, and is something we ought to look at much more closely.

I feel that tying CDC more closely to the wider terms under which DFID operates, and the wider terms in which our ODA is spent, would be helpful. Otherwise we might get some very interesting challenges and could even have legal challenges—judicial reviews—on some of these projects, particularly if we were to put in large sums of new money. I am sure that some of the campaigning organisations would take great interest in seeing whether some of these projects actually adhere to the principles that we set out for the Department and the spending of our ODA. I am encouraged by the new clause, and am certainly interested in the Minister’s comments on it.

[Rory Stewart]

This is an important principle—we should be focused on poverty reduction and the particular aspect of poverty reduction through job creation and economic development. I absolutely agree, and that is central to the mission of the CDC and its investment policy, but we are circling around a bigger issue: where is the appropriate place for this to happen?

I think that the only disagreement between myself and the hon. Member for Glasgow North is that this is a straightforward Bill, which is designed to lift the cap. We believe that the appropriate place to determine spending decisions and exactly how strategy works is through the normal departmental process. That would be true for our investments in the World Bank and in Unicef, money we would give to Oxfam or Save the Children, or anybody. We have procedures and processes to do that, which do not happen through primary legislation. We will continue to present that five-year strategy in December for the hon. Member for Glasgow North and other right hon. Members to interrogate. We will continue to present the business cases. We will be held absolutely accountable in law. In 2015 we passed a law that we would spend 0.7% on overseas development assistance as defined by the OECD. The money we are giving is governed by that legislation, which commits us legally to make sure that that money is driven precisely in the directions that the hon. Member has raised.

The hon. Member for Cardiff South and Penarth continues to raise many different issues. I am struggling to work out in which sequence to answer them, because many of them are things I thought the hon. Gentleman was attempting to raise in later amendments. I hope that we are not going to keep hearing again and again about the same caseloads.

--- Later in debate ---

[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]

This is an example of a clause where we strongly agree that SDGs are central to what the CDC should be doing. We are already delivering on these things. In 2015 alone, 326 women received jobs through the CDC investments; that is SDG 5. We provided 56,000 GW of electricity; that is SDG 7. SDG 8 on economic growth is, of course, central to everything the CDC does.

The bigger argument is that, as the SDGs were presented, people talked about a $2.5 trillion demand per annum for investment in the world’s poorest countries. The CDC is the major instrument that will be used by the British Government to deliver that kind of investment into the private sector.

However, to respond to the shadow Minister’s point, I think this is a good way of focusing the Department’s mind and making sure that, as we develop the strategy for the CDC going forward over the next five years, the SDGs are baked into that process. We take the SNP spokesman’s suggestion that it is important to understand the SDGs as a holistic set: that we do not simply look at them goal by goal, but that we group them together.

[Stephen Doughty]

The Minister made helpful comments earlier on about capping aid to India. Is he willing to consider looking at restricting, for example, the CDC’s ability to invest in fossil fuels, as this seems at odds with the global goals?

[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.

[The Chair]

With this it will be convenient to discuss the following:

New Clause 4

Condition for exercise of power to increase limit: limitation to eligible countries

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

“15A Condition for exercise of power to increase limit: limitation to eligible countries

(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 enabled by the proposed increase in the current limit at the time is in a country in Schedule 2A (Eligible countries).

(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.”

(2) After Schedule 2 of the Commonwealth Development Corporation Act 1999 (Modification of Companies Act 1985 &c), insert—

“Schedule 2A

Eligible Countries

[Stephen Doughty]

The new clauses are all probing and designed to get further into this issue of the CDC’s disjoint from DFID’s overall focus, whether that is the disjoint from the Department’s bilateral programme, from its focus on individual countries, or from its focus on income and countries considered to be least developed or low income. Again, I mention the Minister’s interesting comments about India; I would be interested to know if he would consider looking at the broader issue.

The three new clauses look separately at the respective issues. The first one would amend the Bill to require that the CDC’s new money was only invested in countries where DFID has a bilateral programme. New clause 4 would set out a very specific list as to where CDC was able to invest. I know that it already has a list, but I think that it should be shorter and I have suggested some countries that could be removed from it. I am sure we can have a debate about that.

New clause 5 suggests that any new disbursements should be focused on those countries defined as least developed or low income, rather than on middle-income countries where the significant proportion of the CDC spending does appear to be going.

The disjoint is very clear on the bilateral front. DFID currently invests in 35 countries. We are not sure where that is going because we do not have any detail on the bilateral aid review—perhaps the Minister could enlighten us as to whether that list is likely to increase, decrease or change in some way—but the CDC is in 63 countries. When we look at where other aid is being spent through other Government Departments, that number gets even higher. This is a worrying trend.

Library briefings for this Bill go into quite a bit of detail, particularly with regard to new clause 5, on relative investment by income group between 2010 and 2013. I am referring to page 5 of the Commons briefing for those who have it with them. It reflects that there has been an improvement in the situation, and it says that there is

“an increased emphasis on the poorest countries brought about by the new investment policy between 2010 and 2013. The share of new investments in the very poorest least developed countries (LDCs) increased from 4% to 12%, and from less than 1% to 4% in other low income countries (LICs). The share decreased in both lower middle income (LMICs) and upper middle income countries (UMICs).”

I did try to get the data on the two most recent years but I understand that the OECD has not given its full analysis of which countries fall into those categories and, conscious of some of the points made earlier, that information would be very helpful. I hope for, and would expect that there has been, a further trend in the direction highlighted. Again, it would be helpful for the Minister and the Department’s statisticians to set this out for us. However, there is still a huge distortive effect. The share of new investments even just up to 12% in the least developed countries—12% of the CDC’s investments by income group—is not a lot. I am not saying that investments in the middle-income countries are not going to the poorest people, because in some of those cases they clearly are, but when we delve into the detail, as we have done in the case of India, the picture is not clear and the majority of the investments, as of today, still go to the richer states rather than the poorest.

South Africa is another concerning example. The situation with South Africa and whether the CDC is allowed to invest is a complex one, but I asked the Minister in a written question whether or not there was an analysis of investment by state and I was told that the CDC does not assess its South African investments by state. We are not even able to understand whether the CDC’s investments are going into poorer or richer parts of South Africa. We get an answer by portfolios and by sectors, but that is concerning to me.

[Richard Graham]

It looks as if new clauses 3, 4 and 5 offer three different options on the way in which the CDC could spend money geographically. They do so first by limiting its list of eligible countries to those where bilateral aid is already happening; secondly, by limiting that list to a new schedule to the Bill in new clause 4—schedule 2A—that the hon. Gentleman has tabled, which looks to be of about 43 countries and gives no particular explanation as to how those were chosen or why they differ; and thirdly new clause 5 uses other multilateral definitions. Which option is the hon. Gentleman advocating? All three contradict each other to some extent.

[Stephen Doughty]

Indeed, but—the hon. Gentleman will be familiar with the flow of debate in Committee—the tabling of probing amendments to discuss and debate different suggestions is very much the way in which we scrutinise, suggest alternatives and allow debate in the House. Personally, I think the latter option in new clause 5—some sort of measure based around ensuring that the CDC more closely focuses on the LDCs and LICs—would allow the CDC to have a little bit more flexibility than by restricting it to the bilateral programme.

That option would recognise some legacy investments—for example, those that have been mentioned in which money being spent in one country might actually benefit another. Perhaps some of the partnerships between India and Africa, which are very interesting, are such examples. I do not want to completely rule those out; there are some legitimate reasons for them. I want to see a much tighter focus on the poorest countries than appears to be the case at the moment. It is difficult to see where things are without the data for the last year, but we can see where they were a couple of years ago.

If we look at the trend in the last few years, in terms of new investments by region, another briefing helpfully provided by the House of Commons Library shows that the share of the total percentage of investments going to Africa has actually declined since 2012, while the share going to south Asia—which I would imagine, were we to delve into the detail, is going to India—has gone up. That concerns me, not least given what Professor Collier said, and what other Members who I know support the CDC getting more money have said. Those are the facts and statistics provided by the neutral House of Commons Library; they are there. It will be much more helpful to see where those trends are going and where the focus is, and then to be assured that Ministers were going to bear down in terms of setting caveats for the CDC—whether those are over specific countries where DFID has synergies with its bilateral programme, or, indeed, an overall focus on poverty eradication.

I am intrigued to hear that the CDC plans to expand its network of offices. At a time when we are talking about one UN and bringing UN agencies together in one office, and about an enhanced in-country co-operation between DFID and the Foreign Office, it seems slightly odd that the CDC could open new offices in locations where we do not maintain a bilateral programme and where there are not necessarily those synergies. I think that Ministers ought to look much more carefully at that, to ensure that there is coherence between what the CDC is doing and what the rest of Government are doing.

I will leave to one side comments on the detail of some of the sectoral arrangements in some of the locations. I conclude by appealing to the Minister to give us a bit more detail and a bit more assurance on what sort of caveats and guidance will be given—not micromanagement but clear guidance about what kind of shift Ministers expect in return for a new investment, particularly if it is a large one. For example, would they expect the CDC to stop investing completely in middle-income countries over the next three or four years? That seems to be incongruous with what the Department itself has said; the Government have made a big deal of ending aid to India, China, South Africa and other locations, yet we see aid to those locations increasing through this CDC route. That seems to be a difficult argument to make.

We all struggle with making the argument for international development to our constituents. At the moment, there is a good degree of cross-party consensus in the House about the importance of international development and aid, but I have difficulty explaining why we should be supporting some of the poorest people in the world to my constituents; I have real difficulty explaining why aid money should be used to fund a private hospital in India. We all need to take care to ensure that we are robustly focusing our aid, our effort and our limited taxpayer funding on the poorest and on the countries that align most closely with our existing development programmes, where we have an added advantage.

[Jeremy Lefroy]

I have to say that I agree with a considerable number of the hon. Gentleman’s points, although I see some problems with the way in which the new clauses address them. For instance, if we restricted new capital to a certain list of countries, where would that leave the self-generated capital, both from existing investments and from these investments once they are sold? That does not seem to be clear, so in effect we would have to segregate capital raised through the profits or the free cash flow of the sale of existing investments, and capital raised through the sale of new investments that had been restricted to certain countries.

[Stephen Doughty]

The hon. Gentleman will correct me if I am wrong, but has that not already happened with regard to legacy investments in Latin America, for example, as a result of the changes in the strategy for CDC in 2012?

[Jeremy Lefroy]

Yes, it has, absolutely, but what I am saying is that the new clauses are not specific enough to achieve what the hon. Gentleman wants.

I must also repeat my earlier point that middle-income countries are a very broad church. I think I mentioned that they cover gross national incomes between £1,000 and £13,000; forgive me, but I meant between just over $1,000 and just over $13,000—dollars, not pounds, although that is less of a difference than it was a year ago. I believe firmly that a country with a gross national income of $2,000 or $3,000 per head per year is absolutely the kind of country that we should be investing in to create the jobs I referred to earlier, but it would be counted as a middle income country.

My final point is that when we invest in multilateral institutions such as the World Bank through IDA, we are investing in low income countries; but when we invest through the International Bank for Reconstruction and Development, which is the major part of the World Bank, we are investing indirectly in middle income countries, including India, China, Brazil and all the other countries that the hon. Gentleman mentioned. I would not like us to treat the CDC differently from our investments in the World Bank or in other multilateral institutions such as the Global Fund.

[Rory Stewart]

If I may, I will focus not on particular sectors but on the issues addressed by the new clauses: the type of countries in which CDC should be working.

I wish to make four arguments. First, there are significant technical problems with the amendments, but I do not wish to take up too much of the Committee’s time with them, so I will move on.

Secondly, there is a conceptual difference between DFIs and the bilateral programmes at DFID. It is perfectly reasonable for a Government looking at their overseas development programme not to limit themselves to where they happen to have a bilateral programme. A bilateral programme traditionally means somewhere where we happen to have a DFID office and are running our own bilateral programmes through our own staff. There might be an argument that we do not wish to have a bilateral programme in a country because we already have CDC operations taking place in that country.

The third argument, which I again do not wish to rehearse because it covers a lot of the issues that we have talked about today, is how to get the balance right between Parliament—it is absolutely right that Parliament should have the job of determining the overall financial allocation—and the discretion given to the Secretary of State and the Department to determine country programmes. It would be unfortunate if we ended up specifying in primary legislation a specific list of countries where we would and would not operate, as a result of the judgment calls that a Secretary of State or Department, from any party, has to make—the world changes very quickly.

Right hon. and hon. Members have raised some difficult judgment calls. India has 35% of the world’s population who exist on $1.25 a day, which is more, in absolute numbers, than the number of poor people in sub-Saharan Africa. That is a difficult philosophical discussion, and different people on different sides of the House will have different views on whether we wish to focus on that, but whether we focus on those people or not seems reasonably to be a judgment call for the Department and perfectly in accordance with the International Development Act 2002. It is also true that it may be necessary to make investments in a wealthier state in order to help a poorer state. It may be necessary to use South Africa’s financial institutions in order to support poverty alleviation in other African countries.

Finally, it may be necessary to respond to quickly changing events in the world. For example, nobody predicted the conflagration in Syria. We are suddenly having to put bilateral programmes into middle income countries—Syria, Iraq, Jordan, Lebanon—where we never had bilateral programmes four years ago, in order to deal with 3.5 million refugees, horrendous killing, an extreme humanitarian disaster and a UN tier 3 emergency. The International Development Committee has been asking us to get the CDC to invest in exactly those situations. The new clause would prohibit us in primary legislation from doing that. With respect, I believe that these things are best left to the discretion of the Department. We are very happy to share all our thinking on how those decisions are made with Parliament in the normal fashion. With that, I hope that the new clause will be withdrawn.

[Stephen Doughty]

I thank the Minister and the hon. Members who have taken part in the debate for their comments. In response to the hon. Member for Stafford, I should point out that the fact that some of the other DFIs are focused in some of those other middle income countries is all the more reason for the CDC to have a different focus. We have less control in those organisations, by being a part-shareholder and part-donor. We have 100% control over what the CDC does. If we are contributing in that way to some particular important niche project that the World Bank is funding, for example, why do we need to add to that with an organisation over which we have a greater degree of strategic control? We are supposed to be leading—that is the mantra—and setting an example. We should perhaps be going to some of those more difficult locations that Professor Collier was talking about and addressing some of the innovative solutions that the hon. Member for Glasgow North was talking about on green energy. We ought to be leading, not just matching what other development finance institutions are doing.

The Minister makes a good point about not limiting the provisions to the bilateral programme in strictly defined terms, as the new clause—a probing amendment—would do. The example that he gave of Syria was a good one. There is also a very good argument to be made about francophone Africa, where CDC and our bilateral programme could play a bigger role and we could perhaps come alongside other investors. The Minister had a fair point on tight definitions and on listing countries.

I would ask the Minister to look again at the issue of the rankings of countries. In terms of CDC’s total disbursements in Africa and south Asia over the past seven years, the lion’s share has gone to India and South Africa, with £760.5 million and £194 million respectively. Money has also been disbursed to some very odd locations —these are not small amounts. Some £27.6 million has gone to Mauritius, £12.6 million to Morocco, £53.6 million to Egypt and £9.8 million to Algeria. That does not seem to fit into the categories that the Minister alluded to.

There is a debate to be had about India. I accept the point that he made, but it is not the argument that has been used in the past by advisers in his Department. In fact, the special adviser to the Department when he was at the TaxPayers’ Alliance resoundingly criticised DFID for continuing aid to India which, he argued, had a space programme and everything else. He said that all aid should be stopped. The Government, including his Government, have made a big fanfare to the public and to this House about aid to India ending, and yet it continues. I think there is an inconsistency there, and it would be useful to know where we stand and where we are heading, because it is not what is being said.

[Rory Stewart]

Just to clarify the position on the record. The Government intend to stop all conventional bilateral grant aid to India. Support in India will then be targeted through technical assistance and through the CDC instrument of financial investment in private sector companies.

So the distinction that the Government are making is between traditional bilateral grant aid and instruments such as the CDC. Specifically on the question of balance, I absolutely take these points on board—60% of the investments since 2012 have been made in Africa, only 40% in south Asia, including Pakistan and Bangladesh. I absolutely understand the importance of keeping a rigorous development grid and development impact theory to make sure that CDC focuses on the countries that need aid most.

[Stephen Doughty]

I thank the Minister for his point. It was not the impression that was given by the Government at the time about aid to India. The clarification is helpful, but again we get into the value and the total amount that is going to India rather than other locations. For me, and for many others who contributed to this debate, it is simply too high. That is why I welcome what the Minister has said about a cap. However, I urge him to look at a cap in some of these other countries. There are some very odd outlier examples here which do not really fit in any way with our wider objectives, our strategic interests, or our poverty reduction objectives. There does not seem to be any clear explanation, and I think we ought to be bearing down more tightly on that.

It would be helpful for the Minister to explain, as we go through the next few days on the Bill, whether he would consider tough stretch targets.

[Andrew Griffiths]

Next few days?

[Stephen Doughty]

Well, we do have another day—the Whip is commenting—which we could get to, depending on where we are. We will certainly have time on Report and Third Reading, but it would be helpful to know by then the sort of stretch targets that the Minister envisages for the CDC, if it were to get extra money, and where it would be forced, perhaps not completely banning it from all investment in middle income countries—I accept some of the points that have been made—to have a much, much more significant focus for where its new investments are going, because it is clearly not meeting that at the current time. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 6

“Condition for exercise of power to increase limit: prohibition on use of tax havens

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

“15A Condition for exercise of power to increase limit: prohibition on use of tax havens

(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 enabled by the proposed increase in the current limit at the time is not in either—

(a) an investment entity, or

(b) a company

which uses, or seems to the Secretary of State likely to use, tax havens.

(3) In determining whether the condition in subsection (2) is met, the Secretary of State shall consider—

(a) information provided by the OECD on countries or territories which are considered to be tax havens, and

(b) such information as is available to the Secretary of State, whether supplied by the CDC or others, about the current location of funds of the potentially relevant entities for the purposes of subsection (2).

(4) 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.””.—(Stephen Doughty.)

This new clause would prohibit any new investment arising from any increase in the limit on government assistance under regulations under section 15(4) from going to an investment vehicle or company which uses or seems likely to use tax havens.

Brought up, and read the First time.

[Stephen Doughty]

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

This new clause relates to the issue of tax havens, which has been a persistent concern, not just on this side of the House, which is why it is in the name of myself and of my hon. Friends. I know that it is a matter of concern to Members across the House and to many of the campaigning organisations out there. There seems to be a major issue of incoherence between the Government’s stated policy to bear down on tax avoidance and the types of vehicles that facilitate it, and CDC’s continued investment, even to this year, through these vehicles.

I have had the argument made to me about the reason for using investment vehicles and companies that are not located in the country where the investment takes place. I think that it is a very reasonable argument, in that sometimes the legal framework—the fiduciary control frameworks—whatever they might be, are not good enough for us to be spending taxpayers’ money, or for CDC to be spending its own funds, or, when it comes to other investors, for them to be willing to accept the risk of, for example, a fund in a particular African country.

However, I struggle to understand why so many of the investments continue to be made through offshore havens such as the Cayman Islands and Mauritius rather than simply under the law of England and Wales. Some would argue that the UK is a tax haven. We are not going to get into that debate here, but I do not understand why these investments are being made through Cayman in particular.

--- Later in debate ---

[Stephen Doughty]

The Minister provided some helpful assurances, but again, I want to see much clearer targets and guidance. I still do not feel satisfied on the indirect effects. He mentioned that we do not invest in Panama, but of course, many of the CDC’s investments turned up in the Panama papers. The reputational damage that does not only to the United Kingdom but to the CDC is significant, because it suggests an organisation and a Government who do not take these commitments seriously, however much we might be able to explain an individual instance.

The 2014 report from Eurodad—the European Network on Debt and Development—found that 118 out of 157 fund investments made by the CDC went through jurisdictions that feature at the top of the financial secrecy index. To be clear on the scale, between 2000 and 2013, these funds received a total of $3.8 billion in original CDC commitments, including $553 million in 2013 alone. Whether or not there is avoidance or malfeasance going on with the CDC portion of these investments, the indirect effects in terms of payments being made to fund managers and financial services businesses in the Cayman Islands and others that may be engaged in other activities is significant. Transparency is also significant, in terms of being able to assess and properly scrutinise the information available. I am keen to press the new clause to a vote. It is important that we test the Committee’s view on it, although no doubt we will return to this issue in due course.

Question put, That the clause be read a Second time.

--- Later in debate ---

Brought up, and read the First time.

[Stephen Doughty]

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

This new clause regards prohibitions on the sectors in which the CDC can invest. I have chosen four issues about which I think there are questions—and questions have been asked. We could equally add the issue of fossil fuels, which has already been discussed. I have specified the for-profit education sector, the for-profit health sector, the real estate sector and mineral extraction. [Interruption.] I notice the Minister disappearing for a moment; I will allow him a moment to use the bathroom.

[The Chair]

Moving swiftly on.

[Stephen Doughty]

Moving swiftly on. I hope that the Whip can report my comments to him.

My concern—obviously I have been through some of the examples before—is the percentage investment in different sectors. We have heard the presentations, whether from the Secretary of State, or the chief executive and chair today, about how wonderful the CDC is, and all the wonderful work that it does; but they tend to draw on specific projects, which I do not doubt do excellent work on poverty eradication, and make a difference. However, those reflect only part of the picture.

From an overview of the CDC’s portfolio, 40% is invested in what, I think, according to the House of Commons Library, is designated as “other”; 16% is in the financial sector; 8% is in power; 9% is in industry and manufacturing; 12% is in other infrastructure; 6% is in agribusiness; and 9% is in services. When we look at new CDC investments by sector from 2012 to 2015, according to the Library the share of new investment seems heavily focused on the financial services industry.

I know that the CDC makes many important investments that the Government promote, including access to microfinance, technological solutions or enhancing banking services for the poor. I have nothing against the financial services industry. Indeed, I have many financial services industries in my constituency. I am well aware of the important work that has been done under many Governments on investing in mobile phone banking technology, for example; again, that work began under a Labour Government but has continued to a great fruition in recent years.

There seems, however, to have been a very heavy focus on the financial services sector and very little on anything else, whether industry, healthcare, education or other sectors. Of the investment in education and healthcare, for example, as we saw from the example of India, a significant proportion seems to be going to the for-profit sector. I do not want to reiterate statistics that we heard earlier, but that seems to me to be of great concern. It does not seem to be in line with DFID’s previous objectives of expanding free healthcare and investing in health systems.

I worry—and this is where we come to the issue of opportunity costs of investment in the CDC versus other potential routes—that the Department has started to skew significantly away from some of the work that was done to support the development of strong, national, public, free-at-point-of-use healthcare and education systems. We know how much of a deterrent user fees are to the poorest and to other excluded groups in accessing healthcare.

We also know from DFID’s past how strategic catalytic investment in those sectors has resulted in massive uptake. Importantly, there is also a secondary effect—citizens demanding from their Governments that public health and education services should be provided. That creates the virtuous circle, the social contract, and has much wider benefits for governance, relationships between citizens and the state, and the promotion of democracy and stability. I am therefore concerned that CDC is investing in private solutions, that money still appears to be going into things such as real estate, and that there are questionable investments in such things as palm oil.

I mentioned South Africa earlier, but did not talk about specific sectors. We can see that the bulk of investments in South Africa went into the financial sector, and then agribusiness and food. That is surprising. I have visited South Africa many times and, if we are investing in some of the poorest people there, the issues are often food security and access to HIV treatments, among others. Yes, financial services are important, but the skewing that appears to be happening in the projects seems odd. Again, without being able to access detailed information on the nature of individual investments, we cannot necessarily create aggregates for whether the investments in healthcare or education, for example, are to help more vulnerable and more excluded people to get services, albeit at a low cost, or whether we just see a generalised investment, as in the Rainbow Hospitals in India.

Can the Minister explain the plans the Department has for pushing the CDC and why he thinks the split is so geared towards financial services as opposed to other sectors? Can he also specifically comment on the investments in the for-profit education and health sectors and the other ones I mentioned in this new clause?

[Rory Stewart]

These are a very good set of questions. Indeed, we are concerned—as is the hon. Gentleman—about which sectors we invest in. To reveal a little of the thinking in the forthcoming strategy, we are likely to put more of an emphasis on agriculture. The biggest element for investment is infrastructure and energy and I spoke at length on Second Reading about why we take electricity generation so seriously. I am not going to rehearse those arguments now. The hon. Gentleman will be aware of why that is an important sector for Africa.

Financial services is also a vital sector, for the reasons laid out by Sir Paul Collier in the evidence session, which we all had the privilege to hear today. Poverty alleviation in Africa will have to be driven by much more productive, specialised businesses. In addition to energy, the fundamental constraint on the development of those business at the moment is the availability of capital. Foreign direct investment levels in Africa are at an all-time low. We see this in livelihoods and supporting these lower income groups, through the support we provide through microfinance. Indeed, microfinance and all that kind of activity is included within financial services.

Large sums of capital available for medium and larger-sized enterprise, however, are going to be central. To pin down what we mean by this with an example, in Sierra Leone after the Ebola crisis, a number of serious investments were possible but were stopped because of people’s fear about the Ebola crisis. It was our ability to take a more patient, long-term view as a public investor that allowed us to provide the capital investment that generates those jobs. A lot of these economic development opportunities and jobs we are talking about are driven by financial services.

To return to the shadow Minister’s challenge, this is assessed by us in the individual development impact theory attached to each case. With regards to the new clause under consideration, we would oppose the idea of limiting in the Bill the sectors in which someone could invest, because sectors are very country-specific. To take an example from Afghanistan, I can completely understand why the hon. Member for Cardiff South and Penarth wishes to say there should be no investment in the mineral sector. However, in a country such as Afghanistan, the mineral sector is almost the only credible possibility for macroeconomic growth and therefore for the country as a whole. Supporting marble, jewellery extraction and other exploitation of natural resources in Afghanistan is a lifeline for that country in a place where they are struggling to generate private-sector investment and have a huge effect on revenue.

We will not get drawn into a difficult discussion about the position of private health and education, except to say again, from an Afghan context, I have seen directly how some of the poorest people who have been unable to access healthcare manage to access it through affordable, low-cost health clinics. This is in Kabul, where wealthier people are giving about $1 or $1.50 a day to be able to go to a health clinic. That money is then often recycled to allow a proportion of people to access the clinic at a more affordable rate.

Even without that cross-subsidy, in many countries, the only way we can get health and education to people in the short term, unfortunately, is by supporting these structures. There is a disagreement that we are not going to be able to resolve today, where we believe the private provision of education and healthcare can be a good way of delivering those kinds of service. With that, I ask that the new clause be withdrawn.

[Stephen Doughty]

I thank the Minister for his comments. I was pleased to hear that he thinks there might be more of a focus on agriculture and a strategy for it. That is an important step forward. As I made clear, I think that financial services are important, and I agree with many of the points he made. My question is, is there too much going into them to the exclusion of other sectors? I and other Members want there to be a clearer rationale for why that is happening at the expense of other things.

I do not think there is much disagreement about the importance of investing in infrastructure and energy, with the exception of the point about fossil fuels, which we discussed earlier. I wish we had done more of that in this country—that is what the previous Labour shadow team argued for, and we continue to do so. However, there remains an outstanding question about why so much of the new investment is going into just that one sector and why small amounts are going into others.

The point that the Minister made about the mineral sector in Afghanistan is fair, but I am sure he understands why there is a lot of scepticism, given the history of exploitation and poverty creation through the extractive industries, particularly in Africa and elsewhere. The UK led on the extractive industries transparency initiative, the Kimberley process and other measures for bearing down on the negative side effects. I hope that, if CDC invests in those potentially highly controversial sectors in the future, it will have a very clear public rationale for why it is doing so and will set out what the benefits are and what safeguards have been put in place; otherwise, there is the risk of creating a different impression.

The Minister is right that we do not agree on the issue of health and education. I do not think that the UK Government should be investing in private healthcare and education in developing countries. There is a role for the private health and education sectors in those countries—I am not opposed to the existence of a private health and education sector in this country, although I would not choose to use it myself—but should we be helping to expand them? Should we be bankrolling them by investing taxpayers’ capital into, for example, private hospitals, when it is not clear how those services will be made more accessible to the poorest? I urge the Minister to look more closely at that issue.

I came across the example—perhaps the Minister can write to me about it—of an investment we are making in an education programme called GEMS Africa, which appears to be running a series of private schools in what it describes as leafy residential suburbs in Nairobi and charging up to £10,000 a year. That does not sound like low-cost education—it is certainly not no-cost. It would be good to have some clarity about the type and nature of some of these investments, because that does not seem to be right. I think the Department should focus its resources on supporting the development of strong public health and education systems that are free at the point of use. We did excellent work on that previously, and it is a shame that we have moved away from that. I hope the Department will rethink that. I am sure we will debate this issue further, so I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 8

Condition for exercise of power to increase limit: adherence to DFID partnership principles

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

“15A Condition for exercise of power to increase limit: adherence to DFID partnership principles

(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 enabled by the proposed increase in the current limit at the time will be an entity which has agreed to adhere to the DFID partnership principles.

(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 DFID partnership principles’ means—

(a) the principles set out in the DFID guidance note of March 2014 entitled ‘the Partnership Principles’, or

(b) any DFID guidance note of the same title issued with the approval of the Secretary of State.”—(Stephen Doughty.)

This new clause would require any new investment arising from any increase in the limit on government assistance under regulations under section 15(4) to go only to entities which agree to adhere to the DFID partnership principles.

Brought up, and read the First time.

[Stephen Doughty]

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

I do not want to detain the Committee for too long on this new clause, because it refers to some of the issues that we discussed earlier, in terms of setting the overall framework for what CDC is doing and ensuring it is coherent with what the rest of Government—specifically DFID—are doing. Members may or may not be familiar with the partnership principles, which are an important set of principles that underpins DFID’s bilateral work, the types of relationships it has and the kinds of restrictions and caveats it places on that work.

For the benefit of the Committee, there are four partnership principles. The first is a commitment to reducing poverty and achieving what was then the millennium development goals—I am sure it is now the sustainable development goals. That is the commitment of a partner to address the constraints to poverty reduction and progress against those goals. The second is a commitment to respecting human rights and other international obligations. That is the commitment of a partner to respect human rights—particularly economic, social and cultural rights—as well as the civil and political rights of poor people. Third is a commitment to strengthen financial management and accountability and to reduce the risk of funds being misused through weak administration or corruption. The fourth is a commitment to domestic accountability, which is enabling people—a little bit to do with what I was just talking about with private healthcare and education—to hold their Government and public authorities to account for delivering on their commitments and responsibilities, and not undermining that either by supplanting those relationships or by diverting people’s attention.

--- Later in debate ---

[Rory Stewart]

Again, I shall endeavour to be short, before we move on to the final new clause, because Members need to go.

I am very pleased with the tone of the debate. As a result of the Opposition challenges, we will take their proposed measures seriously. The Opposition will hold us to account when they see the strategy and how we plan to address things. Unfortunately, however, there is a technical reason why we are reluctant to accept the new clause, which is that partnership principles are primarily addressed to Governments. At the core of our partnership principles is the intention to strengthen

“the management of public finances”

and to enable

“people to hold the government and public authorities to account”,

so we would be reluctant to extend them for technical reasons.

The basic theme behind the new clause, however, is correct, and we shall deal with that through internal processes. We now have a team in CDC who focus on issues of ethics, and they look exactly at business integrity. Until about three weeks ago, in fact, we had a larger team looking at such issues than the International Finance Corporation itself has.

We touched on Feronia, and I am happy to talk about it in more detail—perhaps we can even visit it. The case is a difficult one. The company has been around in various forms for 100 years. It is trying to sustain jobs three weeks upriver in the Democratic Republic of the Congo. We are really serious about improving standards there and, since we increased our investment, we have been pushing up wage rates and improving safety standards, but there are huge challenges. We have inherited some 19th-century boilers and other challenges, and we have to work closely, but it is a classic example of the challenges of CDC going into a real frontier market, in a difficult and sometimes dangerous place, where 9,000 people depend on us directly and 30,000 indirectly for their jobs. We are trying to get the balance right as we gradually increase standards while maintaining that important part of the economy of the area.

With that, I ask politely for the amendment to be withdrawn.

[Stephen Doughty]

I appreciate the spirit in which the Minister took the new clause. I accept the technical reason. Obviously, the partnership principles apply to partner Governments, but it seems they could be transposed quite easily. It is quite clear that the headline standards CDC would be expected to adhere to would be the same as the Department’s bilateral programme as a whole.

I appreciate the Minister’s comments about Feronia. It would be good to have more information in writing about that and what steps are being taken. I accept his point that there are sometimes difficult examples and situations. Professor Collier made the point this morning that we should be taking more risk, and we do not expect everything to be perfect or right from day one, particularly when we are operating in difficult environments. However, when repeated concerns are raised about a particular case but there appears to not be the clearest response, we risk going back to the darker days of CDC’s past and some of the other investments. There were serious issues, which I do not want to dwell on, off the coast of west Africa and so on that enjoyed a great deal of scrutiny and criticism at the time.

A key point we have been debating is that if we expand CDC’s resources at a huge pace and by such a significant amount, without safeguards, particularly if we are increasing the appetite for risk, there is a risk that more will go wrong. Without a clear caveat, clear standards and transparency, so that we here in Parliament and citizens of developing countries can scrutinise fully these investments and whether they hold to principles of human rights and ethics, we will potentially get ourselves into very serious difficulties. That is why I am so worried about the quantum of increase, despite the Minister’s welcome statement about his intentions. I hope he will look seriously at the possibility of ensuring CDC adheres in that way. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 9

Condition for exercise of power to increase limit: report and business case

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

“15A Condition for exercise of power to increase limit: report and business case

(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 subsections (2) and (3).

(2) The document specified in this subsection is a report submitted by the CDC to the Secretary of State giving an account, in respect of the most recently completed financial year, of—

(a) the investment activities of the CDC by country and sector, and

(b) the remuneration of staff, including anonymised information on individuals receiving a salary during the financial year in question in excess of £150,000.

(3) The document specified in this subsection is a business case for the proposed use of the new investment enabled by the proposed increase in the current limit at the time which includes information on—

(a) the expected market demand,

(b) the proposed sectors,

(c) the proposed locations, and

(d) the prospective development returns.

(4) 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.”—(Stephen Doughty.)

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 an annual report for the preceding financial year giving information on investment activities and remuneration and a detailed business case for the proposed additional investment.

Brought up, and read the First time.

[Stephen Doughty]

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

I will not dwell on this new clause too long, because it simply states some of the arguments I made earlier about the sort of business case and rationale that my hon. Friends and I feel should be provided before significant increases in CDC’s capital receipts go ahead.

The new clause mentions expected market demand, proposed sectors, proposed locations and prospective development returns, as well as clear and transparent information on the investment activities of CDC and on remuneration. I have not dwelled too much on remuneration, but it bears looking at. Although the headline salaries of CDC’s chief executive and others have come down significantly, which I welcome, they are still substantial. The number of staff within CDC who are in the higher income brackets concerns me. I realise there is a trade-off here, and it is not a debate we will conclude today, but we should set out all that information clearly before Parliament authorises such significant increases of money.

I feel we have had a productive debate today on many of the issues. I welcome the new information that the Minister provided. It would be good to see some of that in writing, and perhaps through further amendments, but I still fundamentally feel that the increase is too big, with too much power being given to Secretaries of State. Who knows if the Minister will be in his place in the future? It is too much of a temptation, without clear safeguards.

I hope that other Members who join us on Report will look carefully at these issues. I have no doubt that my hon. Friends will table amendments for the whole House to vote on, in the light of information we have heard today from the Minister. Serious concerns remain. I do not think the Minister has made the case yet, and certainly not for this level of increase, but I do not intend to press the new clause to a vote.

[Rory Stewart]

With your permission, Ms Ryan, I hope to thank people more formally on a point of order, but this has been an excellent and testing debate. I will try to come back to that point.

We take the issues that the hon. Member for Cardiff South and Penarth has raised seriously. We have an online searchable database in which is contained all the remuneration, every investment decision and every fund, including the name, description, location and sector. The annual reports and accounts are now published with that information. We are pushing—he will see this in the new strategy coming forward—for even more transparency.

We already feel that CDC is a real leader among DFIs in the world, but that is not good enough. It is not good enough for us to be better than other DFIs. We can keep improving. After the evidence session, I had a conversation with Oxfam about the concrete proposals it has for more that we could do internally. We are very open to those kind of challenges. There are absolutely no issues from us or from CDC in trying to prove again and again that we are a world leader on transparency. I thank the hon. Gentleman for saying that he will withdraw the new clause.

[Stephen Doughty]

I thank the Minister for his remarks. I think it would be helpful and more likely to gain support across the House were he to come back with a lower level of increase over a defined period and were he not to give those secondary powers. I do not think anyone is suggesting that there is not the potential for more good work to be done through CDC, but it is the question of the value and the caveats that need to be put in place before that goes forward. I do not think that the Government have made that business case yet. I look forward to hearing more from the Minister in due course, and I thank everyone who has taken part in today’s debate. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

[Rory Stewart]

On a point of order, Ms Ryan. I put on record my enormous thanks to the Bill team, to the Doorkeepers, to Hansard, to the Clerks and to you for your chairmanship. Please put on record that we have explored all the amendments at great length and are finishing the Committee half a day early. In particular, I give huge thanks to all the Members—the hon. Member for Coatbridge, Chryston and Bellshill, my hon. Friend the Member for Congleton, the hon. Member for Cardiff South and Penarth, my hon. Friends the Members for Rochford and Southend East and for Bedford, the hon. Member for Glasgow North, my hon. Friend the Member for Gloucester, the hon. Member for Bradford East, my hon. Friend the Member for Stafford and the hon. Member for Edmonton—who contributed greatly to our debates. I also thank my hon. Friends the Members for Rochester and Strood and for Sutton and Cheam, the hon. Member for Wirral South, my hon. Friend the Member for Burton and the hon. Member for Ogmore for their attendance.

I will conclude with a personal note. I pay huge tribute to the level of scrutiny I have received from the hon. Members for Cardiff South and Penarth and for Glasgow North. I am extremely pleased, to be honest, that I am defending an institution that I am genuinely proud of and that does a genuinely good job. If I was not confident about the institution I am defending, it would have been extremely uncomfortable to be subjected to that level of expertise and scrutiny. I thank them so much for doing such a good job of holding us to account. I again thank the Clerks, the Doorkeepers, Hansard and everybody for allowing us to conclude half a day early.

Commonwealth Development Corporation Bill (First sitting)

Stephen Doughty Excerpts

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

[Richard Graham]

Q Sixty-three countries at the moment. What about Palestine, for example?

Rory Stewart: This very interesting discussion has gone back and forth. As you are aware, the International Development Committee asked CDC to look strongly at investment to deal with the crisis around Syria and at what we can do to help bring stability to the middle east, for example. At the same time, other members of the IDC tabled amendments to the Bill that would not only take us out of middle-income countries in the middle east but would restrict investment to the countries with which DFID has bilateral programmes. My gut instinct is that that is an issue not for primary legislation but for Departments to address through their strategy in response to a changing world.

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

Q I apologise for my late arrival. I was hosting a general from the British Army. Minister, I want to ask a very specific question about where these figures come from. I want to probe you further on them. You answered a written question from me yesterday—for Hansard, it is 55702—and said that the only capital requests that you received from CDC were for the £735 million. You said that you have not had any others. Can you be clear about whether CDC has requested capital increases to you beyond the £735 million?

Rory Stewart: The process is threefold. We will seek permission from Parliament to be able to recapitalise CDC. We want to know whether you are prepared to allow us to give any more money to CDC—£1, £10, £1 billion or £6 billion. We are looking for the option to give it more money. Then we will produce the five-year forward strategy for CDC, which will come together at the end of the year. Then we will produce a business case in the summer to lay out what we believe, in consultation with CDC, its likely requirements are in order to prepare our promissory notes. The final stage is that CDC will make a request on the basis of the projects it has. That is exactly what we have done with the £735 million.

We have discussed the ceiling that we are proposing to you in detail with Graham and Diana. At this early stage, they believe it is a reasonable maximum limit for the amount that they could conceivably need between 2016 and 2021.

[Stephen Doughty]

Q Who came up with the figure? Was it Ministers or CDC?

Rory Stewart: We did. Our Department came up with the figure.

[Stephen Doughty]

Q Okay. May I ask you a separate question? A minute ago, you said that CDC’s support to India is targeted at the poorest states, but you told me yesterday in a written parliamentary answer—55689—that the majority of new disbursements are still going to the richer states in India. In fact, the top disbursement is to Maharashtra, which is where Mumbai is located. You told me that 42%—that is only this year; it has been going up steadily—goes to the poorest, but the majority goes to the richest. Can you explain why that is, and do you want to clarify what you said earlier?

Rory Stewart: My understanding of what is happening there is that every business case in India needs to be scored against our development impact grid. To achieve the score that we are looking for—I believe it is a 2.3 score, and we are generally crossing 3.0—we have to reconcile on the X and Y axes the number of jobs that would be created through the investment. In other words, we focus on the sector, then on GDP per capita, which is broken down by state, then on the difficulty of investment, and then on the amount of available capital. Any investments, even in the wealthier states in India, will have gone through that grid.

[Stephen Doughty]

Q But the majority is not going to the poorest states. Is that correct?

Rory Stewart: Let me hand over to Diana on this.

Diana Noble: Can I explain our strategy? In a lot of cases, when you want to help poor countries, it is better to back businesses that exist elsewhere and encourage them to expand into those countries. Therefore, a lot of our investment is about the vision that we can create through these investments.

Let me illustrate that with a quick example. Last year, we invested in a mid-size Indian bank—RBL. The vision was to help it expand its business into rural areas, to the rural poor and into poorer states. That is, as I am sure you know, a big priority for the Modi Government. CDC did not just provide capital to RBL; we also helped it with expanding financial literacy training to 25,000 really poor women in Madhya Pradesh to explain to them how they can benefit from savings accounts and bank accounts. There are already results from that. RBL now has 1.9 million new customers in the rural and poorer areas. We are evaluating that by doing a random sample of loans to understand how that translates into new jobs as well. That is a really good example of our having a partnership with a high-quality operator, going to poorer places, helping them and sharing the results.

Rory Stewart: I did not answer your question directly. The answer at the moment is that, from our portfolio, 42% of the investment in India goes into the poorer states. The rest—the remaining 58%—does not go into the poorer states, but into states where we believe the business will benefit the people in India who are in need. Many of those investments are intended to be regional investments, so we may invest in a bank, for example, that is not located in one of the poorer states, in order to benefit ultimately the people in the poorer states.

The best way to evaluate such decisions is by looking at the individual investment and giving us an opportunity to discuss with you the individual company in which we have invested, so that we can discuss our theory of change. It is difficult to decide whether to make a regional investment to help the poorer states or whether to go straight to the poorer states. I think we should be accountable and talk to you about those individual investments so that we can explain why we have a theory of change and investment in a particular company.

[The Chair]

We need to move on.

--- Later in debate ---

[The Chair]

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

[Stephen Doughty]

Q Some new research by the House of Commons Library suggests that CDC’s new investments, as a proportion, to Africa are actually falling over the past few years, with a majority going to south Asia, largely to India. Are you satisfied with that, given the poverty focus that is supposed to exist?

Rory Stewart: These are all really good questions. Fundamentally, things will change year on year. We would expect that with an investment strategy, because these guys have to make very difficult decisions. The NAO has been very clear that it does not want DFID Ministers micromanaging or interfering in the individual business decisions of CDC. I hope you would agree with that: if we were in the business of signing off on every single investment CDC makes, it would become a political arm of the Government, where we could be directing it to how it invests.

We set the overall strategy and framework; we have taken CDC out of places like China and given it the freedom to invest in south Asia and Africa. We have agreed a development grid; we are conducting a lot of research on how that happens, but I think it is perfectly reasonable that over a period more investment one year might go into south Asia than Africa. I think the way that we deal with that is through the next strategy that we produce, continuing this process of tightening accountability, but I do not think it is appropriate for me to start vetoing individual investment decisions by the board.

[Alison McGovern]

Q In this session, Minister, you said that you do not yet have CDC’s strategy, which we knew. We have discussed the fact that there was not much clarity about investments in India and whether or not they were going to the poorest states. You have explained that you are expecting CDC to increase the risk of the investments it makes at the same time as you are radically increasing the amount of capital available to it. So just for clarity, which do you believe to be CDC’s greatest priority? Is it the reduction of poverty; or is it return on investment, so that the CDC has continuity of capital?

Rory Stewart: The priority of CDC has to be to do good without losing money. The point is not to lose money while doing good, so we are focused on jobs and economic development without losing money. That is the guiding principle that CDC follows in everything it does.

[Stephen Doughty]

It’s not poverty—

[The Chair]

Final question.

Rory Stewart: I am sorry; there was a strange comment coming from Mr Doughty who, when he is not texting, throws things from the chair. We believe very strongly that economic development and job creation are absolutely core activities in the elimination of poverty. The distinction that Mr Doughty is trying to draw between economic development, job creation and poverty alleviation is extremely unorthodox and it is not one that the chief economist of our Department, or indeed any of the officials of our Department, would accept.

--- Later in debate ---

[Stephen Doughty]

On a point of order, Mr Streeter. May I clarify something? The Minister made a comment a moment ago about me allegedly texting. I have actually been checking his written answers on my phone, which allows me to check the parliamentary system.

--- Later in debate ---

[The Chair]

I am sure that those points will come out in further questions; this is becoming a bit of a statement.

Gideon Rabinowitz: I will be very brief. The final point is that, whatever new resourcing authority is given to the Government through the Bill, we want it to leverage a continued focus on ratcheting up CDC’s development performance on those issues.

Saranel Benjamin: War on Want’s position is that we believe that UK taxpayers’ money should not be given to private funds that are going to be investing in projects, because that is basically getting returns on poverty—off the backs of the poor. It makes us very uncomfortable that UK taxpayers’ money is being used for that purpose. However, as we heard from the first panel this morning, the percentage of projects in which CDC is investing in Africa has reduced significantly. We were talking about agriculture; we have moved away from projects that were supporting small-scale farmers to those supporting large-scale agribusiness. That is causing displacement of people whose lands are being taken away and it is also creating a loss of livelihoods. I wonder how that goes together with the whole question of poverty eradication, when we are actually perpetuating it. I will come back to that later and maybe talk about a case study that we are looking at.

[Stephen Doughty]

Q I have a question to the National Audit Office. You have visited a number of CDC projects as part of your review, and you obviously saw some very positive examples in CDC’s portfolio. I think we discussed one in Sierra Leone, but you also visited a number of those in India—I believe it was Terry who visited those projects. Could you say a little bit about the projects that you visited, particularly with regard to the investment in healthcare? I know that CDC is investing in a lot of private healthcare in India, but not necessarily specifically in stuff that benefits poorer people—it is more a kind of general investment.

Terry Caulfield: Yes, we visited two healthcare facilities in Bangalore in India. One of them was perhaps more intended for middle-income families and one was more down the lower end. We came away with the feeling that they were doing a range of things. At the lower end, they were trying to provide maternity facilities for families who would not otherwise have access to them, perhaps for financial or educational reasons or because of other hurdles that they might have had to get over. In that particular case, they were looking to expand the facility in that location and then use that to expand further out. Against the backdrop of an understanding of how access to Indian healthcare works, they were coming in at a number of different levels. There is a diversity there.

[Stephen Doughty]

Q You make a big point about the issue of prospective development impact and whether CDC can prove its impact. Were you concerned when you heard the earlier panel talking about investments in richer places that theoretically will lead to jobs for poorer people, as people perhaps move to cities and take advantage? Do you think that is a bit too hazy? Can you explain a bit more about where you felt the CDC could be doing better to demonstrate impact?

Tom McDonald: One of the things that struck me from the projects that I visited in Uganda and Kenya was the need for a portfolio approach. Some of the projects clearly will have more of a development impact, and some will clearly do better financially. Some of them are harder to measure than others, particularly if the investment is through a fund or an intermediary.

In the report we say that, despite Parliament having expressed some concerns in 2008 and 2009 about how CDC measures impact, CDC has still been a little slow to put together a comprehensive picture of the approach it would expect to take, together with DFID, to provide Parliament and the taxpayer with a good view of what impact looks like. I should say that we are not suggesting that there is some simple way of doing that. Measuring all the different indirect and direct effects of the investments is complicated. For example, to answer your question directly, there was a commitment in 2012 to put together a measure of what quality of employment would look like. It has not made much progress on that. It has plans in place to try to evaluate some of its major investments and to improve the impact reporting, but for us, it is about the pace and comprehensiveness of that reporting.

[James Duddridge]

Q May I ask Sir Paul Collier a question in relation to the amount of capital that CDC has? There seems to be a view that CDC can absorb about £1 billion a year. Given your work on urbanisation and the vast amount of infrastructure investment that is needed, do you think that CDC could be challenged to spend much more on an annual basis or to ramp up to that point? That relates in particular to funding the urbanisation that Africa needs to attract the companies that you referred to earlier.

Sir Paul Collier: Africa is going through a rapid and very necessary urbanisation. Africa’s future is urban, but not all cities are environments in which ordinary people can be productive. You can have a mega-slum. At the moment in Dar es Salaam, the modal enterprise has one worker: scale zero, productivity zero, specialisation zero—doomed. Cities need to become platforms where proper firms can function. They need energy supplies and decent connectivity. That is what the infrastructure is there to do, basically: energy and connectivity. That is expensive.

[Stephen Doughty]

Q CDC could spend £1 billion just in Dar es Salaam.

Sir Paul Collier: CDC needs to scale up and scale up fast. I am hesitant about tying it in knots trying to get precise measures for this and precautionary measures for that, when the reality is that there are no techniques out there. Everyone is trying to build better measures. The International Finance Corporation has just hired for the first time a chief economist at vice-president level, designed to do that. People are trying to develop techniques, but it is difficult. To my mind, CDC’s priority, now that it has got sound, motivated management, needs to be to scale up. The task ahead for Africa is to get both the infrastructure and the private firms in before it is too late.

[James Duddridge]

Q Should not we be encouraging it to give more than £1 billion a year?

Sir Paul Collier: Yes, of course. The future of aid is to get decent firms to go to places where they will not make much money until there are lots more of them.

--- Later in debate ---

[Richard Fuller]

It is, Mr Streeter.

[Stephen Doughty]

Q I have a follow-up question for Oxfam or War on Want. I do not agree with everything War on Want says, but a good point it made was about the differing standards that appear to be applied to the CDC as opposed to non-governmental organisations, other multilaterals and so on. The multilateral aid review is pretty robust on how we should deal with multilaterals—publish every item of spending over £500 and so on. Gideon, perhaps you could say a little more about where a double standard might be going on here in expectations.

Gideon Rabinowitz: I have made the point already: it is clear and on the record that the CDC has a bit of catching up to do on transparency. One of the reasons why it would be helpful for it to make progress on transparency is that everyone would then know a lot more about where it is investing, what it is investing in, what the justifications for those investments are, and why it thinks it is providing financial and value additionality in those investments. We would all be starting this debate from a different position if there was greater awareness of what the CDC was doing and how it is working.

The other point that we are keen to emphasise is that if there is some way in which the Bill can leverage that additional transparency to include encouragement of reporting around a wider range of development impacts and indicators to help secure our confidence that the CDC is focused on the right investments, that would be very valuable. The type of indicators that we have to report against in our programmes could be rolled out more broadly in some of those investments.

[Stephen Doughty]

Q May I ask a separate point, Paul? You said, “Take more risk. Get in there. Get things done.” Are you not worried that the CDC’s profile appears to be declining in Africa and still heavily focused on middle-income countries? Looking at the projects in lower-income countries, there appears to be quite a lot of diversity, but do you think that they ought to be even more risky, more poverty-focused, or more focused on Africa than on, say, India?

Sir Paul Collier: Yes, I do. I should also say that with risk comes an incidence of failure. The CDC is in a risk business in difficult environments; we should all get used to accepting a rate of failure. The CDC should not be judged by the fact that it will have some failures. If it has no failures, it is not doing its job.

[Stephen Doughty]

Q It is too risk-averse at the moment, do you think?

Sir Paul Collier: That may be true, actually. The emphasis on scrutiny, scrutiny, scrutiny, without any understanding of context, drives people into that sort of risk-averse behaviour. Yes, we need transparency and scrutiny, but that has to be in the context of an understanding that the basic mission we want the CDC to do is difficult and will involve a rate of failure.

[The Chair]

Final question: Fiona Bruce.

Aid Reviews

Stephen Doughty Excerpts

Friday 2nd December 2016 Commons Chamber

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

(Urgent Question): To ask the Secretary of State for International Development if she will make a statement on the aid reviews published by her Department yesterday.

[The Parliamentary Under-Secretary of State for International Development (James Wharton)]

The House will be aware that the Government published yesterday, “Raising the standard: The Multilateral Development Review 2016” and, “Rising to the challenge of ending poverty: The Bilateral Development Review 2016”. These reviews set out how the UK will address the global response to problems that threaten us here at home, such as the migration crisis, cross-border conflict, climate change and disease pandemics.

In the reviews, the International Development Secretary makes it clear that Britain’s aid contribution is an investment in our future security and national interest. As the reviews describe, the UK will champion an open, modern and innovative approach to development that will effectively tackle the global challenges of the 21st century while delivering the best results for the world’s poorest. This is clearly in our national interest.

The reviews are an extensive and detailed look at the UK bilateral and multilateral development systems. They confirm the geographic regions of focus for the UK, which multilateral organisations the Department for International Development will work with and the tools that will be used to maximise our impact as we tackle poverty across the globe. They also highlight best practice in the global development system, as well as examples of poor performance that will face urgent action.

The Government are clear that the global approach to development needs to adapt and reform to keep pace with our rapidly changing world. As a world leader, the UK will be at the forefront of these efforts, promoting pioneering investment in the most challenging and fragile countries, making greater use of cutting-edge technology, and sharing skills from the best of British institutions, from the NHS to our great universities. Improving the way the UK delivers aid along with our multilateral partners is vital to delivering the best results in fighting poverty and value for taxpayers’ money. Global Britain is outward looking, and we will use our aid budget to help build a more stable, more secure, and more prosperous world for us all.

[Stephen Doughty]

I thank the Minister for his answer, although I am disappointed, given the importance of these matters, that it took an urgent question rather than an oral statement to raise them in the Chamber. Perhaps the Secretary of State did not want to draw too much attention to the fact that, despite her previous statements about abolishing her Department and claiming that our aid was being stolen and squandered, she will now, as the Minister has confirmed, continue with many of the policies of the previous Labour and Conservative Administrations, not least with the preservation of a separate Department for International Development and, on the face of it, meeting the 0.7% aid target. As the Minister said, these issues enjoy cross-party support, they are a moral duty and are firmly in Britain’s national interest.

The reviews raise many important issues—the work that the Government are doing to bear down on multilateral institutions to ensure they spend our aid well; the work in fragile and conflict-afflicted countries; our support for the global fund for HIV AIDS, tuberculosis and malaria; the emphasis on disability; and the work on women and girls—but there remain many unanswered questions. First, no data or spending plans are attached to the reviews, so will the Minister explain whether any DFID bilateral programmes will close or be drawn down over the next few years of the spending review? Will he publish data and put them in the House of Commons Library? Secondly, EU agencies, such as the Directorate-General for European Civil Protection and Humanitarian Aid Operations—ECHO—and the European Development Fund, are rated among the highest-performing international agencies. Will we continue funding them, regardless of the Brexit process?

Thirdly, we see in the reviews a shift to spending aid not through DFID but through institutions such as the Commonwealth Development Corporation and a new fund called the prosperity fund, which has been given £1.3 billion of aid money that is being spent in China, Malaysia, Mexico, India and other higher-income countries, not the poorest in the world. Will the Minister explain why that is happening? Are we keeping the poverty focus? Is it even legal and in line with international development legislation? In the last few days, Lord Bates, in answer to a written question, claimed that aid was being given to China to “maximise UK-China trade”. Where are sustainability and climate change in the economic development plan?

It is good to see the commitments to humanitarian aid, but, finally and on a separate issue, will the Minister reconsider the issue of humanitarian airdrops in Aleppo?

[James Wharton]

I am conscious of the time limit and the fact that hon. Members will want to avail themselves of the opportunity to ask questions, so I shall be brief.

I welcome what was, begrudgingly and hidden beneath the veneer of criticism in the hon. Gentleman’s comments, an acceptance that in this area there is much cross-party support that cuts across the political divide sometimes separating us in this place. We are all determined to see the maximum value delivered for the taxpayer, in our national interest and that of those helped by our international aid spend. Will bilateral aid programmes close? Well, some will, I am sure, but that will be done on an ongoing basis. All programmes are always kept under review. New programmes come into existence and some programmes, when they do not deliver to the expected standard, are of course closed down, so I could not stand here and promise that no bilateral programmes will close in the years ahead. That said, there remain clear commitments to the 0.7% spend, to having a separate Department and to doing aid in the right way to deliver real change and improvement in people’s lives—as has been encapsulated in comments by the Secretary of State and in some of the findings in the reviews.

The hon. Gentleman asked about EU agencies and whether Brexit might divert funding from them. I do not want to pre-empt the process of Brexit, but I would suspect that where it could deliver value for money we would look to work with international institutions, of whatever type, in order to secure the outcomes we want—because it is on outcomes that we are focused. We want to ensure maximum value for money, help the most people and drive development in the most effective way. He also asked about climate change. International climate finance is a large part of what DFID does, and we have significant commitments in that area that we will continue to meet. The CDC and the prosperity fund each can be powerful tools in driving aid and development and have enjoyed, I think, more than a modicum of cross-party support, which I hope will continue into the future.

Commonwealth Development Corporation Bill

Stephen Doughty Excerpts

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

[Priti Patel]

I thank the right hon. Gentleman for that welcome and for his remarks. He is right: successive British Governments have been very clear not just about their commitment to the CDC but about our collective focus on humanitarian need at times of crisis. I look forward to seeing the delegation from the all-party group later today, when I will of course speak more about the work that the Government are doing in Yemen, where we are seeing the most awful and horrendous catastrophe. I will speak to the right hon. Gentleman later in more detail about the type of interventions and the support we are providing to those trapped in that dreadful conflict.

By 2020, we will save 1.4 million children’s lives by immunising 76 million children against killer diseases. We will help at least 11 million children in the poorest countries to gain a decent education, improve nutrition for at least 50 million people who would otherwise go hungry, and help at least 60 million people get access to clean water and sanitation. We will lead the response to humanitarian emergencies. We will lead a major new global programme to accelerate the development of vaccines and drugs to eliminate the world’s deadliest infectious diseases, while investing to save lives from malaria and working to end preventable child and maternal deaths. We will also continue the inspirational leadership of my predecessor, my right hon. Friend the Member for Putney (Justine Greening), on women and girls.

Those commitments stand, along with our commitment to human development and directly meeting the needs of the world’s poorest, which is absolute and unwavering. Indeed, the first major decision I took in my role as Secretary of State for International Development was to increase the UK’s contribution to the Global Fund to Fight AIDS, TB and Malaria from £800 million to £1.1 billion. That will help to save millions of lives in the years ahead.

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

The Secretary of State is outlining a long list of the Department for International Development’s achievements and her plans for the future, and she is praising her predecessors. Can she explain what has happened since she called for the Department to be scrapped and since she told the Daily Mail this year that most of our aid budget was being “stolen” and “squandered”? Those are her words.

[Priti Patel]

The hon. Gentleman has just heard not only what DFID has done in the past under two outstanding Secretaries of State—my predecessors, my right hon. Friends the Members for Sutton Coldfield (Mr Mitchell) and for Putney—which is a legacy that we will stand by in our manifesto commitments, but—[Interruption.] If the hon. Gentleman wants an answer, he should listen to my response.

I have already said that we will lead on major global programmes to accelerate the development of vaccines and drugs to eliminate many of the world’s diseases. The hon. Gentleman has also heard me respond to the right hon. Member for Leicester East (Keith Vaz) on the question of humanitarian crises and many of the immediate needs to which we are responding. Indeed, the hon. Gentleman will be aware that the very Select Committee of which he is a member is witnessing at first hand how aid is being spent in crisis situations, in refugee camps, and providing opportunities and, frankly, a lifeline to people around the world who are suffering. That is exactly what my Department is doing and what I am doing as Secretary of State, and I am disappointed that the hon. Gentleman—[Interruption.] This is not about briefing the press, and, if I may say so, I think the hon. Gentleman’s remarks do a huge disservice to the international development community. He is sitting there smugly smiling, but it is an international community that comes together—[Interruption.]

[Priti Patel]

It is not just in times of crisis that the international development community comes together. My Department is championing economic development and investing in people and human capital. I appreciate that the hon. Gentleman may not like that and may disagree with it, but that is the core purpose of the Department.

[Stephen Doughty]

The Secretary of State is making some very strong statements. Of course I do not deride the work of the Department; I think it is doing a fantastic job. She has outlined many of the positive things it is doing and the humanitarian aid it is providing to refugees, but why did she say that most of the Department’s budget was being stolen and squandered, without any justification?

[Priti Patel]

As the hon. Gentleman knows from my appearances at the Select Committee, I have clearly stated that I will drive transparency and accountability in the Department. There have been examples. I am sorry that on an issue as important as not only saving lives but transforming lives and investing in people, he chooses to take such a narrow focus.

--- Later in debate ---

[James Duddridge (Rochford and Southend East) (Con)]

rose—

[Stephen Doughty]

rose—

[Priti Patel]

No, I will not give way.

Under its new leadership, the CDC has transformed itself. As I said, it operated a financial-return-first strategy before 2011. It has now introduced dual objectives to deliver development impact and financial return. It has developed completely new ways of assessing and measuring development through job creation and of screening prospective investments for development impact. It is an innovative and intelligent investor with a core mission of fighting poverty. That was recognised in yesterday’s NAO report, which stresses that DFID’s oversight of the CDC led to

“important, positive changes...a significant departure from the previous strategy”.

Following new objectives agreed with the UK Government, the CDC now invests only in Africa and south Asia, where 80% of the world’s poorest live, and where private capital is scarce. The CDC focuses now on the sectors that create the most jobs and on sectors that create environments for other businesses to thrive, such as infrastructure and financial services. In the last year, CDC-backed businesses have helped to create over 1 million new jobs, and they have paid over $7 billion in local taxes in the last three years. That is money that Governments can use to invest in vital services, such as health and education.

As yesterday’s NAO report recognised, the CDC has addressed Parliament’s concerns about pay, and salaries have been cut, as I have just outlined. The whole ethos of the organisation has changed and, importantly, strengthened, with oversight from DFID. The CDC of today is a different, and much improved, organisation from the one it was many years ago. Some of the media coverage in recent days has not properly reflected that important shift, and I urge all Members to look carefully at the facts rather than some of the reporting.

Of course, there is more to do. Therefore, as part of the Bill, my Department will work to improve the transparency of the organisation further and to strengthen further the assessment of its development impact. As the NAO recognised, my Department has commissioned several independent evaluations of the CDC’s impact. Just last year, a team from Harvard, reviewing the CDC’s investments from 2008 to 2012, concluded that they had been “transformational”, creating hundreds of thousands of new direct jobs and billions of pounds in increased earnings. We are currently in the design stages of a complex new study to generate even more detailed data on the wider market impacts of CDC investments. We are the first Government ever to conduct such an in-depth study into their development finance institution.

There is no question but that the CDC offers value for money. Over the last five years, we have seen significant returns from it. Every penny of profit generated by the CDC is reinvested into businesses across the world’s poorest and most fragile regions, making every taxpayer pound invested in the CDC go further. The NAO further concluded that the CDC now has

“an efficient and economic operating model”

with low costs, compared with other development finance institutions. CDC salaries are covered by the returns the CDC makes on investments, not from development budgets.

Wherever possible, the CDC invests in countries, and it uses neutral jurisdictions only when it is absolutely necessary to do so, to protect taxpayer moneys from being lost to weak legal systems and to bring confidence to other global investors in the hardest-to-reach markets. However, the CDC uses only financial centres that are compliant with international tax transparency standards, as monitored by the OECD’s global forum on transparency and exchange of tax information. There are no exemptions.

Far from hiding investments, the CDC was one of the first development finance institutions to make public investment information about every single investment. In fact, with DFID’s support, the CDC is now a global leader on transparency. It has signed up to the international aid transparency initiative and has an online searchable database on its website, allowing users to access information on every investment and fund in the CDC’s portfolio. I can assure the House that my Department will continue to be an active and engaged shareholder in the CDC, ensuring that it continues to deliver for the world’s poorest and the UK taxpayer.

--- Later in debate ---

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

I have clearly touched a nerve with some of my comments about the Bill, which I am afraid I will not be giving the wholehearted support that some in the House have given it today.

The Government have attempted to portray the Bill as a minor technical matter, which should go through on the nod with minimal scrutiny and to which we should all give a big hurrah. What appears to be a minor technical two-clause Bill, however, is in fact far more significant and controversial. As we have heard, it proposes an immediate quadrupling of the limits on taxpayer funding of the CDC and then suggests a further doubling at the whim of the Secretary of State and without further primary legislation.

Now the CDC expansion, which has been significant from 1999 to the present day, has required only £1.5 billion of taxpayers’ money, a large amount of it in the recapitalisation that took place last year. By stark contrast, the Bill will permit an increase of up to £12 billion over an as yet undefined period, although the explanatory notes make it clear that the Secretary of State intends to

“accelerate CDC’s growth over the current Spending Round”.

That could imply giving three times extra to the CDC— £4.5 billion—in three to four years’ time than it has needed in the last 17 years. According to the explanatory notes, this is justified as a response to an as yet undefined or evidenced

“forecast market demand over CDC’s next strategy cycle and in order for the CDC to play a fuller role in the delivery of the UK’s international development objectives.”

Ministers rarely take powers without the intent to use them fully, and the transfer of powers to use secondary legislation should always be subject to robust scrutiny. I will explore in due course whether I believe this Bill, and the proposed increase for the CDC, meets three key tests. It is not whether it has met its plans as defined in 2012, but whether, first, it has demonstrated enough effectiveness to justify such a huge increase; secondly, whether it ensures an adequate focus on tackling poverty in the poorest countries; and thirdly, whether it acts in a coherent way with respect to the rest of DFID and indeed wider HMG policy.

Let me first suggest my own answer as to why such a huge increase has been proposed, and why now. One of the primary reasons may lie in a little noticed change to the reporting of our aid spending—official development assistance or ODA—last year, which saw the CDC’s contribution to meeting the 0.7% aid target dramatically altered. Until 2015, the investment activities of the CDC could either add to or subtract from our total aid spending. Simply put, we used to look at the net benefit of the CDC to developing countries by subtracting money flowing back to the CDC from the new investments it was making. In fact, this resulted in a positive contribution to our aid spending of £228 million in 2010; £91 million in 2011; £103 million in 2012; £100 million in 2013; and £42 million in 2014.

In 2015, however, there was a significant change. Instead of reporting with the same measure, which incidentally would, according to the House of Commons Library, have resulted in a negative contribution to the aid budget of minus £9 million, DFID changed its reporting so that the capital flow from the UK Government to the CDC is scored as ODA by DFID rather than the CDC scoring its own net disbursements as ODA. Instead of a negative impact on aid last year, the UK reported the capital increase reported to the CDC as aid, which was £450 million—a stark difference. We now looking at the total money DFID puts into the CDC counting as aid, regardless of which country or sector it ends up in, let alone whether it resulted in a net flow of resources to the poorest countries.

Why does this matter and how does it relate to the Bill? It matters because it would allow the Secretary of State to classify the entirety of future capital increases to the CDC as ODA or aid, potentially diverting, and effectively privatising, up to £12 billion of our future aid via the CDC, yet continuing to count it towards the 0.7% target. This is particularly important, given the different focuses and priorities of the CDC. I acknowledge that the differences have narrowed in recent years, and I shall come on to praise the work undertaken by the right hon. Member for Sutton Coldfield (Mr Mitchell) in this area. However, the differences between the CDC and DFID’s objectives, and indeed its stated aims, are still significant, not least over whether our aid is focused on the very poorest countries that most need our support or on higher-income countries where we can more easily achieve quicker and bigger returns on investment. I shall return to this point.

[Fiona Bruce]

The hon. Gentleman suggests that the aims are significantly different, yet 83% of the new CDC investments are in DFID partner countries and 56% of new investments are now in fragile and conflict-affected countries. Is that not in line with DFID’s objectives?

[Stephen Doughty]

As I shall come on to explain more fully, there has been a significant change and there has been a narrowing, but there is still a significant difference. If we look at the bulk of the spending still being in India, we see a significant divergence from DFID’s priorities, as I shall come on to show. We were told that aid to India had ended, but apparently it has not.

This is also significant when coupled with an answer I received to a parliamentary question. I discovered that the amount of aid—ODA—to be spent by Departments other than DFID is set to increase from 18% this year to 26% in 2019. That is over a quarter of our aid spending going through Departments other than DFID. Even if we focus on the lower end of the implied proposal to spend billions extra via the CDC by the end of the spending review—let alone the £12 billion—we could be looking at anywhere from 35% to 45% of the DFID budget being spent, but not by DFID in the traditional sense. If the Secretary of State used her full power and more quickly than expected, it could be even higher. It is particularly ironic that the Secretary of State who promised us greater effectiveness, transparency and accountability in our aid spending appears to be willing to hand over billions of our aid funding to less transparent and less accountable parts of government.

[James Duddridge]

The hon. Gentleman seems to be implying that aid spent through other Departments is a bad thing. He is shaking his head, which is good, because far from being a bad thing, I would view it as a good thing. If we are helping education institutions in developing countries, we should use the expertise in our Department for Education. If we are looking at tackling local government, it should not be looked at through the DFID lens, but should involve our expertise. The key thing is having the same standards across those Departments and meeting the high quality that DFID deploys.

[Stephen Doughty]

I was shaking my head because I agreed with much of what the hon. Gentleman was saying, but my question is about the volume—the amount—and the fact that it is increasing so rapidly. It is well known that many other Departments have looked enviously at DFID’s budget and have attempted to take parts of its cash for many years. My questions are these. Is the aid being spent effectively; is it being used in accordance with the correct principles; and is it coherent across Government policy? As the hon. Gentleman will know, there are some fantastic examples of joint units involving the Foreign Office and DFID, but over a quarter of our aid budget is being spent on a massive increase, and that is a big issue.

[Mr Mitchell]

Surely the hon. Gentleman can be reassured by the fact that the Government have a double commitment, applying not just to the 0.7% but to the way in which it is spent under strict rules. Of course, any money that is spent by another Department is subject to the full investigation and rigour of the Independent Commission for Aid Impact, which is a very important part of the equation. All ODA expenditure is subject to review and analysis by the development watchdog.

[Stephen Doughty]

It is indeed. I am a member of the ICAI sub-committee, and I hope that we will look into these matters in due course, as, I understand, will the National Audit Office. That scrutiny is very important.

[Mrs Madeleine Moon (Bridgend) (Lab)]

I have seen the NAO’s report, and what concerns me is the fact that it states:

“It remains a significant challenge for CDC to demonstrate its ultimate objective of creating jobs and making a lasting difference to people’s lives in some of the world’s poorest places. Given the Department’s plans to invest further in CDC, a clearer picture of actual development impact would help to demonstrate…value for money”.

Is that not the central problem? Does it not lie at the heart of the Bill?

[Stephen Doughty]

Absolutely. I shall return shortly to what the NAO report actually said, as opposed to the slightly glossed-over version that we heard from the Secretary of State.

[Fiona Bruce]

The hon. Gentleman is a member of the International Development Committee. He will therefore be aware that the Committee has committed itself to scrutinising ODA whichever Department it is spent through and that the Secretary of State has confirmed that we should have full authority, and her backing, to do so. If he had attended the ICAI sub-committee meeting last week, he would have seen that, for the first time, we had before us a witness from another Department who was scrutinising its spending of ODA.

[Stephen Doughty]

Indeed. I apologise for not being present at that meeting, but, as you will know, Madam Deputy Speaker, I had other commitments at the time. Obviously, the hon. Lady cannot attend all the meetings of all the groups in the House at any time either; she and I are both busy people. I hope that the Committees will investigate those matters, not least because of the volumes that we are talking about, but also because of the lack of transparency when it comes to documentation and the ability to scrutinise CDC’s spending, not least through its use of tax havens.

These dramatic shifts—under the cover of a “minor technical change” that we should all rush through in the House—must always set the alarm bells ringing for those of us who seek to scrutinise the Government and their decisions. I do not want to spend long on this, but we must feel additional alarm when we look at the agenda of the Secretary of State and consider what she has said about the Department being scrapped and about money being “stolen” and squandered. She does not like some of the headlines that have appeared in the Daily Mail. Obviously, she does not like the headlines that have appeared in newspapers such as the Financial Times. However, we are now seeing wild claims and accusations in the right-wing press which are clearly coming from her Department. Indeed, her special adviser has previously called for the 0.7% target to be abandoned, and in 2013 in The Sun described aid as an

“unaccountable, bureaucratic and wasteful industry”.

Why does all this matter to the Bill? I believe that, faced with the legislative and political constraints of the cross-party support for the 0.7% aid target, the Secretary of State has opted for a stealthier route and has chosen to undermine the Department by diverting and reclassifying aid. I appreciate that others may not share my sense of scepticism, so let me now deal with three practical objections to the Bill. The Secretary of State said that she wanted facts, so let us have some.

I should make it clear at the outset that I am not opposed to the existence of a development finance institution of the CDC’s nature, or to its playing its part in our portfolio of international development efforts. Nor, obviously, do I oppose the funding of private sector projects. The development of a vibrant private sector, key infrastructure and the support of new and emerging businesses in the world’s poorest countries should be a key part of any balanced portfolio of development assistance, alongside investments in basic public services such as health, education, water, and support for agricultural improvement to tackle hunger and nutritional challenges.

The Secretary of State likes to give us the impression that she is the only person ever to have realised the importance of private sector development and trade to tackling poverty and promoting economic development, but the fact is that both have been at the heart of DFID’s work since it came into being, under Governments of all political persuasions. Supporting trade is crucial to international development.

[James Duddridge]

I totally agree with the hon. Gentleman’s point that economic development has been important to DFID, but does he agree with me that successive Governments have been wholly unresponsive to co-ordinated work on economic development, whether we call it prosperity or trade? Successive Governments have not pulled that together and grabbed the opportunity, which could really help to grow continents such as Africa out of poverty. Much more should be done, and this House should be holding the Government and future Governments to account on this, and ask them to do more, not less, with the private sector.

[Stephen Doughty]

It is a mixed record. We had a joint DFID-DTI—as I think the Department was called then—Trade Minister, my hon. Friend the Member for Harrow West (Mr Thomas), who did a lot of good work in trying to bring those things together, ensuring investment went to key infrastructure projects, different corridors in Africa and elsewhere, but it is a mixed record and the hon. Gentleman makes an important point.

There are many CDC investments that I and others welcome, which are well run and have delivered poverty-reducing outcomes in the poorest countries. We have heard about some of them today, such as those in Sierra Leone and Uganda. Indeed we were with the National Audit Office earlier today talking about some of the projects it had visited which clearly do justify our investment.

But where is the robust business case for such a large increase of billions of pounds of taxpayer spending? Why has this Bill been published before a CDC investment strategy? In the explanatory notes, the Secretary of State describes forecast market demand as the justification for the Bill. However, she has not explained this at all there; neither has she done so today, and nor did she in answer to a parliamentary question I put to her. I asked her to explain this concept of forecast market demand, but instead of an assessment that might justify this spending of up to £12 billion of taxpayers’ money, I was given some classic development waffle, such as:

“As set out in the UN’s Global Goals, urgent action is needed to mobilise”.

The answer did not go into any level of detail that we would expect on the spending of such a considerable sum of money.

Let me also be clear that, as Members may have gathered earlier, I am also critical of a whole series of actions and policies at the CDC that I am sorry to say occurred under the previous Labour Government; the sell-off of Actis was mentioned, and there was also excessive remuneration, and massive investments made in markets that already attracted foreign investors—which incidentally is still going on. These are just some of the issues that should have inspired tougher intervention. To give credit where it is due, many of the actions that the right hon. Member for Sutton Coldfield (Mr Mitchell) took in agreeing that new strategy took us away from some of the mistakes made in the past, but my question is whether they have gone far enough in justifying such a huge increase in the funding.

We should look at what the NAO said. Yesterday’s report noted:

“Our previous scrutiny of the Department’s oversight of CDC led to important, positive changes.”

It points to improvements in financial performance, organisation and prospective—let us return to that issue in a moment—development impact, as well as the clamping down on executive remuneration. The NAO also agrees that the strategy set by the Department in 2012 has been met.

However, as my hon. Friend the Member for Bridgend (Mrs Moon) pointed out, the question for the House today is not merely whether the CDC has made improvements on a previous record deeply mired in controversy, or whether it is now adhering to the strategy set for it—which we can argue was right or wrong—in 2012; the question before us is whether a good enough case has been made that the CDC is performing so well and so effectively that it should receive that volume of increase in funding versus other potential outlets for that development spending.

It is common sense that asking any institution, let alone one with a history of recent problems, to take on a significant increase in its funding over a short space of time may lead to less optimal outcomes and, at worst, failure. Were we proposing an additional £12 billion for those dangerous campaigning NGOs or the dastardly World Bank, or worse still the EU development funds, I have no doubt that the Government Benches would be crewed by the anti-aid brigade warning of the risk of our aid being “stolen” or squandered. But because it is for a more obscure part of our development finance architecture and has the words “private equity” and “private sector” associated with it, we seem to be willing to accept a lower level of assuredness.

[Mrs Flick Drummond (Portsmouth South) (Con)]

Did the hon. Gentleman also read the bit of the report that says:

“Through tighter cost control, strengthened corporate governance and closer alignment with the Department’s objectives, CDC now has an efficient and economic operating model”,

and DFID’s

“governance arrangements of CDC are thorough”?

[Stephen Doughty]

I did; I have read the whole report. It also states:

“It remains a significant challenge for CDC to demonstrate its ultimate objective of creating jobs and making a lasting difference to people’s lives in some of the world’s poorest places.”

It goes on to make other serious criticisms. On reporting impact, the NAO says:

“Changes in reporting development impact over the last four years have made it difficult for CDC and the Department to set out a consistent picture of what has been achieved.”

It criticises the CDC’s failure to deliver on the evaluation contract, which was a key part of the business case for the last recapitalisation involving more than £700 million. It criticises the CDC’s claim to have created 1 million jobs, stating that

“in 2015 it reported that more than one million direct and indirect jobs had been created…CDC does not attribute these jobs directly to the investment it makes in the company. Since 2012 it has been considering how to measure job quality but has not yet established an overall methodology to do so…its progress has been slow”.

Worryingly, the NAO warned that

“recruitment and retention challenges remain a significant risk to CDC’s operations.”

That is crucial for an organisation planning a massive financial expansion.

The CDC has indeed clamped down on excessive pay, although the CEO still takes home more than £300,000 a year, which is significantly more than the Prime Minister. However, the NAO also reports that

“the Department and CDC will shortly be negotiating a new remuneration framework”.

Could we expect salaries to go back up? Particularly worrying, one would think, for a Secretary of State who thinks that most of our aid is being “stolen” or squandered is some of the NAO commentary on the CDC’s efforts to tackle fraud and corruption. The NAO tells us that the CDC has

“only recently established systems to consolidate records of all the allegations it receives…This made it harder for it to provide comprehensive reporting to the Department. ”

The NAO report states that DFID’s own internal audit team concluded that the figure of just four allegations of fraud and corruption at the CDC in the entire period from 2009 to 2016 was “surprisingly low”. At the very least, the CDC is worthy of the same level of robust scrutiny and criticism that is levelled at other development funding outlets.

[Fiona Bruce]

The hon. Gentleman asks where the business case is. Has he seen the letter of 23 November from the Secretary of State? In it, she says:

“No new capital to CDC would be released without a business case subject to full Ministerial scrutiny and approval and the agreement of CDC’s board.”

[Stephen Doughty]

That might be reassuring to the hon. Lady, but it does not reassure me, not least because the CDC has not even let the evaluation contract that was a key part of the last business case.

Let me turn to the disjoint between DFID’s priority countries and those in which the CDC operates. That disjoint is likely to grow even larger with such a significant uplift in funding. Even with the refocus in 2012, the list of 63 countries in which the CDC is allowed to invest is significantly larger than the approximately 35 countries on which DFID normally focuses its efforts. The list includes many countries to which DFID has ended its bilateral funding. The CDC can invest in India, South Africa—albeit with caveats—the luxury Indian ocean islands of the Seychelles, the Maldives and Mauritius, and many countries across north Africa including Egypt. Despite their problems and challenges, those countries would not normally be regarded as among the poorest in the world.

According to the House of Commons Library, the CDC spends more in gross aid and official development assistance than DFID does in certain—often middle income—countries and regions, including some rather odd examples such as Algeria, Costa Rica, Mauritius, Morocco, South Africa and Thailand, as well as the more expected locations such as Cameroon, Niger and Côte d’Ivoire. Even if we discount the pre-2012 legacy investments in Latin America, the CDC is still investing the largest amounts in higher-income countries, according to data released to me in another parliamentary question.

At the top of the CDC investment list are India, which has received £760.5 million since 2009, South Africa with £194 million and, oddly, Egypt with £53.6 million. If we include the pre-2012 legacy investments, we find even more odd examples. India, South Africa—with caveats, as I said—and Egypt remain on the list of eligible countries for CDC investments, which is rather remarkable, given the fact that the last three Conservative Secretaries of State have made a huge meal of the fact that aid to India was ending. I find this strange. I took a long time to be convinced of the need to end our aid programme in India. There is clearly severe poverty in a whole series of Indian states. It is odd that a lion’s share of the CDC’s investments continue to go into a country that is not exactly the kind of frontier place for investment that the Secretary of State was talking about earlier. Is she really saying that India struggles to attract private investment capital and that we should be there at the forefront of those giving aid? I would find that hard to believe.

The House of Commons Library has found that the share of new investments in the poorest least-developed countries increased, but from just 4% to 12%, and the increase was from less than 1% to just 4% in the lower-income countries. The lion’s share of the CDC’s investments remained in the lower middle-income countries. The CDC’s own annual report for 2015 admits that its top four highest country exposures are India with 23%; China with 14%; Nigeria with 7%; and South Africa with 6%. It also tells us that just 6% of its investment goes into agriculture and just 6% into education. Bizarrely, those are not far ahead of real estate and mineral extraction. Focus has clearly improved, but the easiest and quickest returns for the CDC remain in certain sectors that are far removed from traditional, vital development impacts and in huge markets such as India and South Africa, not the world’s poorest countries. If the Secretary of State’s agenda is all about building a bilateral trading relationship with India in the post-Brexit environment and if we need to push our aid that way to sweeten deals, we should come clean about that. Many people feel that things are headed that way. Funds are not going towards the Department’s original development objectives.

Why does the CDC require such a potentially massive capital injection of taxpayers’ money when it managed perfectly well without one until last year? It recycles 100% of its profits and has total net assets of £4 billion, which rose by 16% in the last year, and an investment portfolio of £3 billion. Why does it need additional money in such large volumes?

Turning to tax havens and coherence, the Chancellor told us in last week’s autumn statement that the Government are committed to tackling tax evasion, avoidance and aggressive tax planning, and today the Business Secretary told us all about Government plans to crack down on corporate governance. The Government have repeatedly claimed that they have attempted to crack down on tax havens—not least in the aftermath of the Panama papers. Yet we find the CDC’s investment vehicles in those very papers. No less than 11 CDC subsidiaries are located in the Cayman Islands, 40 in Mauritius, and five in the Channel Islands. Oxfam points that three quarters of CDC investments in 2013 were routed through jurisdictions that feature in the top 20 of the Tax Justice Network’s financial secrecy index. Christian Aid has also been critical of the CDC, stating that it

“has been shown to be a heavy user of secretive tax havens, which serve both to obscure what is really going on with its investments and can also reduce the amount of tax its investee companies pay in poor countries”.

Even if Ministers, the International Development Committee or others wanted to scrutinise properly what is going on, the lack of transparency and detail provided by the CDC and the fancy shell companies make it incredibly difficult.

Our wider development and sustainability policies might also be incoherent. Many CDC projects are clearly coherent with DFID objectives and the sustainable development goals. We heard about electricity in Uganda and other excellent examples of investment in micro-finance, so there are clearly many high-quality projects, but there are some odd inconsistencies. The CDC apparently invests £29.2 million in GEMS Education Africa, the website of which describes a network of private fee-paying schools and education providers in “leafy, residential” locations that charge anything from around 582,000 to 1,287,000 Kenyan shillings a year—up to £10,000. The CDC also holds a 22.8% share in Rainbow Children’s Medicare Private Ltd, a fee-paying private hospital group in India that the NAO visited as part of its inquiry, saying that the investment was apparently in the whole company and not even focused on improving access for the poorest, for example. The former Secretary of State, the right hon. Member for Sutton Coldfield (Mr Mitchell), mentioned Feronia Inc. in which the CDC has invested £15.1 million. The main boast on its website is of replanting 13,000 hectares of palm oil, a commodity which is linked to deforestation, habitat degradation and climate change.

Without being able to get more detail from the CDC’s documents, it is difficult to know where the money is going and what it is being used for, but those are odd examples of spending going towards wonderful development objectives. The CDC continues to operate free from day-to-day policy guidance and intervention from Ministers. Oxfam points out that the CDC was assessed as poor in the aid transparency index in 2012, but there have been few improvements since then. All who support the cause of international development and poverty eradication face a tough task in justifying that spending to the public—however small a proportion of overall Government spending it remains. I am sorry to say that the task is not helped in any way by the misleading spin put out weekly in tabloid newspapers by the current Secretary of State, which was not a hallmark of her Conservative or Labour predecessors.

I am normally able to make a case for our development spending by appealing to moral duty and our national interest, not least when it comes to dealing with countries of conflict or instability, or with the huge migration flows we see. I am heartened by those among the younger generations who care about the prospects of our fellow humans around the world. I recently visited Moorland Primary School, in one of the more deprived areas of my constituency, where children told me that they wanted me to speak to Ministers to get more money provided for education in the poorest countries and to ensure that children are able to go to school and that they have healthcare and clean water. I will struggle to explain to those children why the Secretary of State wants to spend billions of our taxes handing money to what is, in effect, a privatised firm that does not need this amount of money; that gives large portions of it to countries that do not need it; that pays its chief executive officer more than £300,000 a year; and that invests through tax havens. It has some laudable aims, but it is not proving its effectiveness.

In conclusion, the Bill massively increases that funding to CDC and it fails three crucial tests. The first of those is the effectiveness test; the NAO assessment simply does not provide the evidence needed to back up such a huge increase in funding—has CDC even requested it? Secondly, it fails the poverty-focus test, as CDC remains massively focused on higher-income countries and high-return sectors, rather than on those that we should be pushing our efforts into. Thirdly, it fails the coherence test, given the continued use of tax havens and projects that simply do not sit comfortably with our wider development objectives. In its current form, this is a bad Bill. That does not mean that I do not support the continuation of the CDC and that I do not recognise that much of its work is good, but this level of increase is a stealthy way of diverting money away from our work in DFID, alongside the diversion to other Departments. We ought to scrutinise the Bill very carefully in Committee.

--- Later in debate ---

[Fiona Bruce (Congleton) (Con)]

On behalf of other members of the Select Committee, I inform the House that many of them are abroad on a visit to the middle east but would have spoken in the debate had they been here. It would be wrong for me to indicate how they would have spoken or whether, like me, they support the Bill, but I will put on the record one or two comments previously made by members of the Committee. As long ago as 2011, my hon. Friend the Member for Stafford (Jeremy Lefroy) said in a debate on the CDC:

“It is extremely important that the Government should continue to support CDC.”—[Official Report, 14 July 2011; Vol. 531, c. 169WH.]

An IDC report on jobs and livelihood in the last Parliament stated:

“We are encouraged that CDC has followed our recommendations and has refocused on job creation.”

A final Select Committee example is a recent report on the sustainable development goals, which stated:

“The Government must ensure that the work it carries out to encourage private sector investment, through CDC…is focused on developing and fragile states”.

It went on to mention

“a positive impact on the achievement of the SDGs”,

which the CDC had the potential to achieve. It was interesting to note that in response the Government stated:

“CDC’s mandate is aligned with achievement of the Goals”.

Before I touch on a few of my prepared remarks, I would like to deal with some of comments made by another member of our Select Committee, the hon. Member for Cardiff South and Penarth (Stephen Doughty). He mentioned his concerns about the effectiveness, the poverty focus and the coherence of the CDC’s work, and I would like to respond to these.

The hon. Gentleman said that there should be more emphasis on health and education. However, the CDC’s development impact is amplified by the billions of pounds in local taxes that are generated by the companies it invests in. These help to support the public services such as health and education in developing countries. Over the past three years alone, these companies have generated over £7 billion-worth of local tax revenue. It is important to remember the impact that these taxes can have on those kinds of essential services.

The hon. Gentleman spoke about coherence, and he and others have mentioned transparency, but DFID works very closely with the CDC to ensure that it is at the forefront of global standards of transparency in development impact. Information about all the CDC’s investments is available on a comprehensive database on its website, with details of the name and location of every investment in the portfolio. I am sure that further information would be made available if members of the Select Committee requested it. If DFID is working, as we know it is, with the CDC on a new results framework, this will result in an even better capture of the broader impact of investments on development—even beyond job creation and tax revenue generated.

Finally, the hon. Gentleman raised his concerns about investment by the CDC in a private, fee-paying hospital in India, stating that this might be at odds with DFID’s general approach towards the expenditure of UK aid. However, I clearly remember the Select Committee visiting a private, fee-paying school in Africa not so long ago, and Committee members agreed that DFID’s support for that school was, in fact, well spent, particularly when there was no other option for children in that area to obtain an education. I believe these issues need to be looked at in context, and I am not so sure that support for this hospital is so out of line with DFID’s general approach.

[Stephen Doughty]

The hon. Lady raises the issue of private fee-paying education and health. The issue is about where we focus our efforts. Does she not accept that if we continue to support the expansion of private healthcare and education as opposed to supporting public systems that enable free access to healthcare and education, we will effectively supplant countries’ ability to provide national healthcare and education systems that support all their citizens, including the poorest?

[Fiona Bruce]

As with so many of these cases, it is not an either/or. It is often both when the need is clearly there and the money can be well spent.

I shall move on to my few prepared remarks about the Bill. I absolutely support the Bill and speak in favour of it. It is essential to look at how to support capital investment in countries where there is a paucity of it. A 2014 report from the UN Conference on Trade and Development calculated a £2.5 trillion annual investment gap in key sustainable development sectors, so the CDC has a very important role to play. It is important to remember that the Bill will allow DFID and the British people, as the CDC’s motto states, “to do good without losing money” on an even greater scale than hitherto. I cannot believe that anyone, even aid sceptics, could really object to that.

The NAO report, published yesterday, chronicles the many positive steps that the CDC has taken and the many improvements that it has made. We have heard many references to the report. It says that through

“tighter cost control, strengthened corporate governance and closer alignment with the Department’s objectives, CDC now has an efficient and economic operating model.”

This morning I spoke to NAO officers who had produced the report over eight months and had visited many projects, including some in Africa. They said that DFID now had a really good grip on the CDC’s work, that there were good lines of communication between the CDC and DFID, and that DIFD’s in-country know-how was being utilised, while it was rightly not interfering in day-to-day management. They identified several cases of CDC investments in areas where the private sector would not have initially dared to go, but three years later private sector money had come in. Indeed, in several instances they saw the results of what they described as “catalytic” investments. They said of the 13 or 14 funds they had inspected in Africa that, with one exception, they were “transformational”. I think that we have a really positive report on which to act.

Of course, there are views about previous investments, but I think it encouraging that 98% of investments are now in Africa and south-east Asia and 82% are in one of the seven priority sectors identified in DFID’s key objectives, which were devised in 2012, following the excellent review conducted by my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell).

Without further ado, I shall end my speech, although there is much more that I would like to say in praise of the CDC.

--- Later in debate ---

[The Minister of State, Department for International Development (Rory Stewart)]

I want to say a great thank you to all the hon. and right hon. Members who have taken part in the debate. I particularly praise the tone set by the hon. Member for Edinburgh East (Tommy Sheppard) and the way in which he picked up on the good atmosphere in the Chamber. I also pay tribute to the tone set by the shadow Secretary of State, the hon. Member for Edmonton (Kate Osamor) and by the shadow Minister, the hon. Member for Bradford East (Imran Hussain), and to the constructive way in which they have approached this short but quite technical piece of legislation.

Four major types of concern seem to have been raised today, and I will try to deal with them briefly, with the aim of stopping at exactly 5.20 pm. Those questions were as follows. Why are we focusing on private sector-led economic development? How do we balance the private and public inclusion in that development? Why are we using development finance institutions and, in particular, what quantity of money are we putting into them? Why are we specifically putting money into the CDC? That last question relates to concerns that have been expressed about the governance and transparency of the CDC. I shall try to deal with those four types of challenge in turn.

The first is a general concern about the weight that we place on the private sector’s role in economic development in general. That concern was expressed by a number of people today, particularly Members on the Opposition Benches. The shadow Secretary of State used the word “profiteering”, and the hon. Member for Edinburgh East talked about international capitalism. The right hon. Member for Leicester East (Keith Vaz) spoke of distracting our attention away from humanitarian concerns, and the hon. Member for Glasgow North (Patrick Grady) was worried that some of the investments might be made at the cost of other potential investments. The hon. Member for Kilmarnock and Loudoun (Alan Brown) emphasised the fact that aid is needed as well, and the hon. Member for Cardiff South and Penarth (Stephen Doughty) emphasised the importance of health and education.

The way in which to deal with these generic concerns about the role played by the private sector in economic development—and with all the matters in the general portfolio of the Department for International Development —is to state that what we are talking about today is just a part, not the whole, of what DFID does. Economic development is absolutely vital—I will come on to that—but it is currently less than 20% of the Department’s overall portfolio. The shadow Secretary of State quite rightly raised water and sanitation as important elements of our Department’s strategy—they are—but they are not primarily delivered through development finance institutions. The £204 million that we spent in 2015-16 came from other parts of the Department’s budget. As for the humanitarian concerns mentioned by the right hon. Member for Leicester East, the £2 billion that we are spending over this period on Syria alone comes from other parts of the departmental budget.

However, as pointed out by the hon. Member for Yeovil (Marcus Fysh), poverty alleviation cannot happen without economic growth, and that relies on the private sector. It relies on the private sector for jobs, for Government revenues and for the services that the sector provides. It is not a zero-sum game. The hon. Member for Glasgow North issued a challenge when he talked about investments coming at the cost of others, but it is not that kind of zero-sum game. To take a specific example, we were criticised by one Member for some of our investments in electricity, as opposed to other forms of infrastructure, as though that was somehow at the expense of other developmental objectives. However, that electricity not only delivers jobs through the business side, but allows us to deliver our objectives in health and education. We cannot have a decent education service and get children into school if there is no electricity and they have to go 10 miles to pick up firewood. We cannot deliver decent healthcare in Africa unless there is refrigeration for immunisation drugs and unless we have the electric lighting that allows doctors to perform surgery in the clinics.

We are delivering on the STGs, particularly goals 7 and 8 on energy and economic growth. Ellen Johnson Sirleaf, who is both a distinguished international civil servant and a President of an African state, has said that poverty in Africa cannot be eliminated without private sector growth. That also reflects the demands of Africans themselves. I was taken by the statements of my hon. Friend the Member for Bedford (Richard Fuller) about mutual respect. Recent surveys conducted in sub-Saharan Africa show that sub-Saharan Africans identify energy and jobs as two of their top three priorities at a level of 80% or 90%. We should respect their wisdom and desires when we talk about the kind of development investments that we make.

The next question is how to balance the roles of the public and private sectors in delivering development. I do not want to talk about this too much, but it is clear that there are serious constraints on the public sector’s ability to deliver all forms of commercial activity, partly because it often lacks the skills to ensure that those things happen. It lacks the skills to understand the market dynamics, the logistics, the productivity and the efficiency. We have all seen well-intentioned charitable and Government development projects attempt to set up businesses that have not worked. However, as Opposition Members have pointed out, the private sector cannot do it on its own—there are clear market failures. Returning to electricity in Africa as a good example, the private sector has clearly failed. If the private sector had been able to do things on its own, we would not be in a position where only 6 GW of power generating capacity has been built in Africa over the past decade. In China, 8 GW of capacity is built every one to two months.

That brings us to the question why we are putting money into DFIs, which was the particular challenge of the shadow Minister. The shadow Minister and the hon. Members for Glasgow North, for Cardiff South and Penarth and for Edinburgh East focused on the quantity of investment. The response is that I am afraid that some people still confuse stock and flow—in other words, the annual overseas development spend and the creation of a capital fund. The second response is that it is an option, not a commitment. What we are doing is raising the ceiling for what CDC, through rigorous business cases, can request; we are not imposing this on CDC. Over a five-year period, even if the maximum were drawn down, we would be talking about 8% of the total anticipated ODA spend, which is smaller than the amount I calculate the Scottish Government appear to be putting into a similar instrument in proportional terms.

There have been challenges on strategy. The strategy will be produced in line with departmental practice at the end of this year, but this Bill is enabling legislation, so we are putting the horse before the cart. We need the enabling legislation in place—we need the ceilings to be lifted—before we can look at individual business cases that wish to draw down on that money.

That brings us to the overall question why use DFIs at all, and I wish to pay a huge tribute to my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell), who provided perhaps the most powerful explanation of why we go into these mechanisms in the first place. The answer of course is that they bring together the very best of the private sector and the very best of the public sector. They provide the discipline of the private sector in insisting on returns that produce sustainable enterprises and sustainable revenues; and they provide freedom from political interference and they provide leverage. To respond to my hon. Friend the Member for Bedford, let me say that they also allow us, as my hon. Friend the Member for Portsmouth South (Mrs Drummond) pointed out, to draw in other forms of capital behind. Some £4 billion of investment from the CDC has drawn an extra £26 billion into our investments in Asia and Africa. In addition, this approach provides good value for money for the taxpayer.

[Stephen Doughty]

The Minister is talking about the capital that this approach has brought in, but that has not always been in areas where capital has not been available—I think of places such as India. Given that he is about to publish the bilateral aid strategy, will he consider forcing the CDC to look more closely at the lower-income countries in Africa and elsewhere that need the investment the most?

[Rory Stewart]

I am trying to move towards my 5.20 pm conclusion, but let me deal with that quickly. As I was saying—and this partly answers the point—we are combining the best of the private sector incentives with the best of the public sector, because we are exactly able to prioritise maximising development impact. That is where our development impact grid, which, with respect, the hon. Gentleman is not providing enough focus on, answers his question. Members on both sides of the House should be aware that that grid targets explicitly countries with the lowest GDP per capita, countries where investment capital is not available and countries where the business environment is worse—that is the Y axis of the grid. On the X axis of the grid, we have sectors in which the maximum employment is generated. Every business case since 2012 has been assessed exactly against those criteria, which is why, as my right hon. Friend the Member for Sutton Coldfield has pointed out, many of the criticisms made today—the idea that somehow the CDC has lost its way—are not appropriate for the CDC of 2106; they are appropriate for the CDC of 2012 or 2010.

Let me deal with a few of the objections. An investment in Guatemala was mentioned, but all investments in Latin America stopped in 2012. An investment in Xiabu Xiabu in China was mentioned, but all investments in China were stopped in 2012. The issue of pay was raised, but, as has been pointed out again and again, the pay of the chief executive has been reduced by two thirds, to a third of its predecessor. Tax havens were mentioned, but we no longer, in any way, ever invest for reasons of tax or secrecy; we invest only to find secure bases for investment and to pool other forms of capital. All our investment goes simply into locations that meet the highest OECD transparency standards. On development impact, our DFID chief economist, Stefan Dercon, has worked with some of the most distinguished academics in the world, from Harvard and elsewhere, to create exactly the kind of impact that people are pushing for.

That is why right hon. and hon. Members should support this Bill. It is not only because of the history of the CDC, to which the shadow Secretary of State paid such good tribute to in her opening remarks: its experience of 70 years; the culture it has developed; the extraordinary brand that the institution has in Africa and south Asia; and the focus that my right hon. Friend has brought to this institution since 2010—its rigour and its narrowness of focus, which makes it very unusual among DFIs. It is one of the only DFIs in the world to be spending so much in conflict-affected states. It is accountable directly to DFID, which owns 100% of its shares. The examples of its performance today can be seen in the DRC; in places such as Burundi, where off-grid power would not be built without the CDC; and in its investment in energy through Global in Africa.

In conclusion, we should take pride in this institution; it is a very great British institution. In its historic evolution it has gone from a past where it was dominated in the 1950s by ex-military officers interested in building rafts and going into jungles to its current leadership under Diana Noble, a chief executive who exemplifies much of the best in development thinking and some of most progressive intuition in the British Government. She ensures that we are delivering in Pakistan gender-based programming that affects workers’ rights and that we have an institution that is today highly relevant and that faces and solves some of the greatest development challenges in this century.

Question put and agreed to.

Bill accordingly read a Second time.

Commonwealth Development Corporation Bill: Programme

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Commonwealth Development Corporation Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 8 December 2016.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Proceedings on Consideration and up to and including Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on Consideration.

(5) Any proceedings in legislative grand committee and proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion four hours after the commencement of proceedings on Consideration.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.

Other proceedings

(7) Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Andrew Griffiths.)

Question agreed to.

Commonwealth Development Corporation Bill: Money

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Commonwealth Development Corporation Bill, it is expedient to authorise:

(1) any increase in payments out of the National Loans Fund or money provided by Parliament resulting from provisions of the Act—

(a) increasing the limit in section 15(1) of the Commonwealth Development Corporation Act 1999 to £6,000 million; and

(b) conferring power to increase that limit to an amount not exceeding £12,000 million;

(2) any increase attributable to those provisions in the extinguishing of liabilities in respect of guarantees under the Commonwealth Development Corporation Act 1999; and

(3) any increase attributable to those provisions in payments into the National Loans Fund or the Consolidated Fund.—(Andrew Griffiths.)

Question agreed to.

Yemen

Stephen Doughty Excerpts

Tuesday 18th October 2016 Commons Chamber

[Keith Vaz]

I agree with the hon. Gentleman, who is vice-chairman of the all-party group. He is right to highlight, as I have done, the role of the right hon. Member for Rutland and Melton. There is a vacancy for a special envoy for Yemen, and if I could persuade the Prime Minister to send him there, among all his other duties, the right hon. Gentleman would make a very good contribution.

Amid this lack of diplomatic progress, the intervention by the Saudi-led coalition has become central to the crisis. This coalition intervened at the request of the legitimate Government of Yemen. However, 18 months on, the airstrikes, which are heavily impacting on the civilian population, have become counter-productive—so counter-productive that it has become the eye of a storm of intense criticism, which overshadows every other element of the crisis. These airstrikes, which Save the Children believes to be responsible for 60% of all civilian deaths in the conflict, are breeding hostility inside and outside Yemen.

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

My right hon. Friend is making a strong speech. He will be aware of the reports of the International Development Committee and the Business, Innovation and Skills Committee on this very matter, but is he aware that yesterday a number of us, along with UK Government Ministers, met the Saudi Foreign Minister? While we had a frank and candid discussion about the terrible attack on the funeral hall, the Saudi Foreign Minister refused to give any clarity about when and to what level investigations would take place into the hundreds of other incidents reported by leading non-governmental organisations. Does my right hon. Friend agree that it is imperative that the Saudis are clear about what has happened in those incidents and allow an independent investigation?

[Keith Vaz]

My hon. Friend is absolutely right, and I commend him for the work he has done. I know he has a large Yemeni community in Cardiff South and Penarth. It is right to bring this to the attention of the Saudis—a theme I hope to develop later in my speech.

--- Later in debate ---

[Rory Stewart]

I pay tribute to Jane Marriott, our ambassador at the time, to the work done by her predecessor, John Wilkes, and to the DFID work that took place behind the scenes. Such things are difficult and I am not in the business of second guessing officials, but the lesson we should draw from all these conflicts is the one that I pointed to earlier: the international community must be cautious not to become over-optimistic and to be aware of the ways in which talking to an elite in the capital and engaging with the civil society in Sana’a misled us about the real resentment that existed in the countryside.

How do we address the situation now? Central to that is understanding that decades of ex-President Saleh’s policies lie underneath the problems we face today. He deliberately exacerbated those tribal divisions, and deliberately created that culture of corruption and impunity, which he is now so expertly exploiting in order to maintain instability in that country. But we cannot be naive here: simply removing ex-President Saleh is not going to solve this problem on its own. The problems in Yemen go much deeper than that and need to be addressed systematically, from politics through to the humanitarian dimension.

Let me touch on those two things. As the right hon. Gentleman pointed out, politics is at the centre of this—politics, politics, politics. Characteristically, he asked 10 questions, which I have to deal with in less than 10 minutes, but I will try to deal with them quickly before moving on. Hon. Members will notice that his 10 questions have largely focused on what I would call the high politics and diplomacy, and I will try to address them one by one and then take this into the bigger issue of the solution to the Yemeni conflict. First, he asked what the UK’s position is in relation to the Kuwait talks. The answer is that those talks were held between the parties in the conflict—the regional players and the Yemenis themselves. The UK ambassador to Yemen was present and was in the room, but in a diplomatic capacity and not as a party to the conflict.

Secondly, the right hon. Gentleman asked what support we are providing to Saudi Arabia. The current operations are, of course, Saudi-led, and the United Kingdom is not embedded in the Saudi military operations. As the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for Bournemouth East (Mr Ellwood) pointed out in his statement today, we are very clear that the investigation needs to be led, in the first instance, by the Saudi Government, just as similar investigations of the United States or the United Kingdom Governments for actions taking place in Afghanistan and Iraq were led first and foremost by those Governments. He has said, however, that if that investigation is not adequate, he will look at this again.

[Stephen Doughty]

The Saudi Foreign Minister told us yesterday that the UK had provided both technical and personnel support to investigations for the past six to eight months, and that advice had been provided on targeting. As one of the guardians of the humanitarian principle, will the Minister be clear about what support has been provided by the Department for International Development specifically in relation to investigating violations of humanitarian law?

[Rory Stewart]

I am happy to provide more detail, but, in essence, we currently provide two forms of support and I will elaborate on this in a written answer. We provide training and capacity support, which includes statements about international humanitarian law, but that is not about this military operation—that is in general for the royal Saudi air force. Secondly, my Department and the Foreign Office have worked together through the UN process on international humanitarian law, particularly in a meeting in Geneva last month—this is partly in response to the question raised by the right hon. Member for Leicester East—where we are pushing for more staffing for the independent UN investigation on human rights through the Office of the UN High Commissioner for Human Rights and, in particular, its Yemen office.

The right hon. Gentleman asked a question about arms sales. We take those sales very seriously. As Members from both sides of the House are aware, the report by the Committees on Arms Export Controls was divided, but we continue to monitor carefully all actions of international humanitarian law, although this is not a prime responsibility of my Department. He asked whether we would be in the room for peace talks, and we absolutely will. Our current ambassador, Edmund Fitton-Brown, is very close to the UN representative, and so long as these are not talks taking place between the parties to the conflict, the UK is present in a diplomatic capacity.

The right hon. Gentleman asked whether the Prime Minister would be prepared to call King Salman of Saudi Arabia and President Hadi. Of course, as the right hon. Gentleman is aware, on Sunday the Foreign Secretary met the Saudi Foreign Minister, but more than that the Saudi Foreign Minister came to this House of Commons yesterday to be directly accountable to this Parliament. Indeed, the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for Bournemouth East spoke to President Hadi in a visit to Saudi Arabia last week. The right hon. Gentleman asked about sanctions. Of course we will continue to put pressure on all parties to this conflict to support the current peace. He asked whether we are providing support for the special envoy, and the answer is that the UK Government are providing more than £1 million of direct support for the staff of Ismail Ould Cheikh Ahmed, the UN special envoy to Yemen.

In the remaining minutes, I hope to talk about the broader context, in addition to all the good 10 points the right hon. Gentleman raised. We need to look at politics at local and regional level.

Oral Answers to Questions

Stephen Doughty Excerpts

Wednesday 14th September 2016 Commons Chamber

[Priti Patel]

My hon. Friend makes a very important point. He will know of, and be familiar with, the regulations on procurement, but I want to assure him and the House that British firms and British small and medium-sized enterprises win a significant proportion of our work. In the last financial year, 74% of our supplier spend was with UK firms.

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

The Secretary of State has clearly been very busy briefing The Mail on Sunday, along with her anti-aid special adviser. She mentioned transparency, so can she explain why funding for South Sudan, an area of great interest not only to our security forces but to our development needs, is to receive a cut in its budget next year from her Department? Will she continue to fund crucial humanitarian causes such as that one?

[Priti Patel]

I hope, Mr Speaker, that the hon. Gentleman heard my words earlier about the tremendous work of our Department when it comes to humanitarian aid, support and saving lives. The hon. Gentleman is absolutely right: we will continue to champion those individuals whose lives need saving where support is required in many countries around the world. That includes a lot of the institutional reform and the support that we bring.