Commonwealth Development Corporation Bill (Second sitting)

Debate between Stephen Doughty and Jeremy Lefroy

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

[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.

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[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.

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[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.

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[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.

Trade Union Bill

Debate between Stephen Doughty and Jeremy Lefroy

Tuesday 10th November 2015 Commons Chamber

[Jeremy Lefroy]

Yes, and they do. As I mentioned in an intervention on the hon. Member for Cardiff West (Kevin Brennan), some councils make a surplus from it that goes towards their services.

As has been pointed out, clause 14 singles out union subscriptions. There is no prohibition on other deductions for which there might not be compensation to the employer, such as deductions for season tickets, which have been mentioned, or professional fees. Even on my payslip as a Member of Parliament, the top deduction every month is £2 for the Members fund. There will be no prohibition on that deduction, unless the Members fund is a national union of Members of Parliament, which I do not think it is.

Other people have made the case much more eloquently than I have, so I will not detain the House any longer on this point.

[Stephen Doughty]

The hon. Gentleman makes a convincing and measured case, and I have looked closely at the wording of his amendment and think it very reasonable. Given what he has just said, if the Government are unwilling to accept this reasoned amendment, does he think that we should test the view of the House on it this evening?

[Jeremy Lefroy]

I will wait to hear what the Minister says. He is an extremely reasonable person and there are other ways in which such things can happen. I encourage the Government to accept the amendment because I do not want to see this clause unamended in an Act of Parliament signed by Her Majesty.

Let me quote someone I greatly admire:

“In most parts of the world the suggestion that someone might be both conservative and liberal would be viewed as absurd…In the UK there is no finer tradition, no more established custom and no stronger institution than that of freedom under the law…That’s why in Anglo-Saxon countries conservatism is freedom’s doughtiest defender and why the advance of freedom gives conservatism its moral purpose.”

Those are the words of the Minister, my hon. Friend the Member for Grantham and Stamford (Nick Boles), and I entirely agree with him.