International Development (India)

Stephen O'Brien Excerpts

Thursday 26th January 2012 Westminster Hall

[The Parliamentary Under-Secretary of State for International Development (Mr Stephen O'Brien)]

I congratulate the Chairman of the International Development Committee, the right hon. Member for Gordon (Malcolm Bruce), on securing this important debate, and I thank him for his excellent speech, which reflected the combined work of him and his Committee members. It not only focused on the India programme, but set it in a context that had a huge read-across to the justification and principles that underlie where we should place our UK effort to be partners in aid, and then to graduate to development and to securing a better future for people who have many disadvantages. His comprehensive, thorough, thoughtful and evidence-based speech got the debate off to a most respectful and useful start. Our timing happily coincides with the Foreign Secretary making, as we speak, a keynote speech to launch the King’s India Institute at King’s College, on what is India’s republic day and the 62nd anniversary of the signing of its constitution, so there is some poignancy to the debate.

Let me put the debate into context. When the coalition Government came into office in 2010, we made it clear that we wanted to build a different style of international development, one based on dynamic partnerships that reflected our networked world and focused on a relentless pursuit of results and value for money in the Department for International Development’s work. Our vision acknowledges the prominence and value of Britain’s involvement in the alliances on development that were so important in the past, but also looks to the relationships and international forces that will shape the future.

Engagement with the emerging powers is a cornerstone of the policy, as the Secretary of State for International Development set out in a speech at Chatham House in February last year. I am sure that Members will have noted, as did the Secretary of State in that speech, that in the space of a few short decades the world has become a very different place. Whether we are talking about the BRIC countries—Brazil, Russia, India and China—the Asian dragons, the tiger economies or the gulf giants, the new powers will influence world affairs in the future, and it is therefore in our interests to engage with them now.

Of all the emerging powers, it is India with which we will have the most multidimensional relationship and partnership. Our shared history, and political and personal links, all mean that India is important to the United Kingdom, and the Prime Minister’s visit so soon after the election in 2010 reflected the importance we attach to the relationship.

As the right hon. Member for Gordon is aware, in the last year we have completed a root-and-branch review of the aid programme to ensure that our spend is targeted where it can achieve the greatest results. The review made it clear that we can achieve real results for poor people in India. Why? Because the Indian Government are ploughing record tax revenues into poverty reduction programmes, and in that environment, our development expertise can ensure that the impact of those resources is maximised for the benefit of the poorest in Indian society. Indeed, we estimate that the United Kingdom’s aid has lifted 2.3 million people out of poverty in rural India in the past five years and put an additional 1.2 million Indian children into primary school since 2003, demonstrating that there has been a succession of Administrations with a shared responsibility.

The value of these efforts received cross-party endorsement when the International Development Committee completed its assessment of the UK’s development programme in India and concurred with our decision to continue our funding until 2015. I recognise the right hon. Gentleman’s perfectly legitimate, well-articulated and constructive criticism, and his constructive approach to holding a Department of State to account—through his Select Committee, in this case—and I hope it is noted that DFID delayed finalising the 2011 to 2015 operational plan for India until after his Committee had made its recommendations. We were then able to take the recommendations into account before publishing the operational plan on the DFID website in October 2011.

The pace of India’s transformation to date has been remarkable, as hon. Members have noted. Although economic growth has slowed in recent months, India is still achieving enviable rates of growth—rates we would give our eye teeth for—lifting 15 million people out of poverty every year. But we know that the benefits of the growth are not being shared equally and the scale of Indian poverty remains massive. India’s poorest states—each of them larger than most African countries, as has been well noted—still face huge development challenges. More than half the girls in Madhya Pradesh do not yet go to secondary school, more than half the young children in Bihar are undernourished, and one quarter of all pregnancies are unwanted or mistimed.

Our decision to maintain our programme in India was coupled with a very clear conviction, well picked up by the Select Committee, that the programme should also be radically different. Because of India’s economic growth and its own increasing resources, we are bringing the development partnership up to date. Since the publication of the International Development Committee’s report on the future of aid to India, we have agreed a new approach with the Government of India, and I think that the right hon. Member for Gordon importantly wanted to ensure that that had happened.

The approach has three main pillars. The first is an innovative new private sector programme, using returnable capital to promote pro-poor private investment in India’s poorest states. Rather than just read out the bullet points, I will give a bit more detail, to pick up on some of the points raised, particularly by the hon. Members for East Kilbride, Strathaven and Lesmahagow (Mr McCann) and for Brent North (Barry Gardiner). It is in the interests of the poor and the UK taxpayer that resources are used sparingly and only where most needed, attracting private capital where possible, but it makes good value-for-money sense, and it is certainly good for poverty reduction, to use our resources over and over again if we can. So the answer is yes, the resources will be reapplied for India. I say “if we can,” because we must ensure that we preserve at all times the ability to apply rigour.

[Malcolm Bruce]

Is my hon. Friend able to say what the CDC’s role will be? The CDC is being revamped, and it seems that some of this returnable kind of capital would be appropriately delivered through that body. Is there an active dialogue between DFID and the CDC about how the private sector funding will develop in India?

[Mr O'Brien]

The right hon. Gentleman makes a very important point. In many degrees, this is a question of a stratified approach. It is really to do with the risk appetites and the profile of the funding instruments that lie behind it. I can certainly confirm that we hope that the revamped CDC will be able to take a greater interest in applying its patient capital approach, particularly to some of the infrastructure support that lies behind economic development, not least in the poorest states. But let us be absolutely clear, with the DFID instruments, we are able to put forward the funding that we do because our capital can take bigger risks in riskier places than even that of the CDC. We have to recognise that there is a connection, but not necessarily an overlap.

[Barry Gardiner]

I am particularly grateful to the Minister for addressing the point about the returnability of capital, because it is an important one to clear up. Will he state absolutely categorically that “returnable to the taxpayer”, which I believe is the phrase the Secretary of State used, does not mean that the capital should be returnable to the British taxpayer but that it should go back to the fund, and then, as the Minister said, be reapplied for the alleviation of poverty?

[Mr O'Brien]

I confess that, in all my briefings, I have not seen the phrase “returnable to the taxpayer” used by anybody. Let me be clear: this is returnable in relation to the repeated use of the resources for the application of their purposes in India. That is the idea. The International Development Act 2002 allows us to use returnable capital instruments, such as equity investments, guarantees and other hybrid forms—combined loans and equities—that promote development and poverty reduction.

There are entrepreneurs who improve the delivery of basic services. For instance, Irfan runs mobile clinics that provide a comprehensive range of outpatient medical services to poor people who are left out. He needs capital to buy the mobile vans and operate a professionally managed unit to provide quality service and make a profit. We can help entrepreneurs like him to do both, so that we have development and the sustainability provided by a profitable business. That is an example of a private sector programme.

The second pillar that we have agreed with the Government of India is a programme to help women and girls break the cycle of poor nutrition, poor education and early pregnancy that traps so many in India in poverty. That will focus our programme on the poorer states of India, particularly Bihar, Orissa—which has been renamed Odisha—and Madhya Pradesh.

A good example of transformation relates to some of the basic issues identified not only by the right hon. Member for Gordon, but by the hon. Member for East Kilbride, Strathaven and Lesmahagow. Mention has been made of manual scavenging—people cleaning toilets with their hands—which is not something that any of us could easily contemplate. The Department of International Development is supporting the Indian civil society organisations and there has been a series of successful local campaigns on the issue. We hope that, soon, this shameful practice will no longer exist.

[Jeremy Corbyn]

I am glad that the Minister is addressing this issue. What monitoring is taking place of private sector organisations that might be in receipt of equity capital via Britain or public sector organisations, in order to ensure that there is no discrimination anywhere on the basis of caste and descent? We should support the Dalit civil rights organisation and others, as the Minister has rightly said, to lift them out of the poverty and discrimination from which so many of them suffer.

[Mr O'Brien]

I listened carefully to the hon. Gentleman’s speech. He focused in particular on the Dalit population, and the third pillar that we have agreed with the Indian Government directly addresses his point. It is a new programme of co-operation with India on global issues, such as climate change, trade and food security. Linked to that is addressing full-on social exclusion. We have agreed with the Government of India and Odisha to set up a conditional cash transfer scheme to help more than 220,000 tribal and Dalit girls who are currently in the last year of upper primary school get the opportunity of secondary education.

Our civil society programmes in India are consistent and directly target the poorest and most vulnerable people, particularly the Dalits. They also target tribal people, Muslims, women and disabled people in order to get them to organise, understand their rights and get access to services and opportunities that they have often been denied. In direct response to the International Development Committee’s recommendation, we will increase the funding available to civil society organisations to work with the poorest and most excluded people in the poorest states. That will cover 120 of the poorest districts in India. DFID’s poorest areas civil society programme—PACS—focuses explicitly on tackling social exclusion, discrimination and inequality. The hon. Gentleman rightly mentioned monitoring and evaluation, which are crucial because otherwise we would not receive any feedback. They are designed into the programmes, so we will be able to report on them as they develop and make sure that we are held to account on their performance.

[Mr McCann]

On pro-poor private investment, one of the Committee’s issues was how that would be scaled up so that half the budget could go on those types of projects. We have witnessed microfinance projects, but the scaling up of those would mean thousands, if not hundreds of thousands, of individual projects. We are most concerned about how that would be managed. Will the Minister provide more detail on whether he expects microfinance projects to be the foundation of how the money will be spent?

[Mr O'Brien]

I hope that I will have enough time to answer that question. I have a great slug of information to add on the private sector but, given the topic of the debate, I want specifically to cover the recommendations of the IDC’s report. The IDC has made a valuable contribution to the new shape of our programme in India and its recommendations encompass the points highlighted by the Opposition spokesman, the hon. Member for Bethnal Green and Bow (Rushanara Ali).

As the Committee noted, UK aid matters in the poorest states, where there are the fewest donors and where growth has not yet made a significant impact on poverty. We are therefore focusing on those poorest states, and we will help states access India’s own resources, improve the environment for business and investment, make sure that the public get a better deal from public services, improve financial procedures and reduce corruption.

We have taken note of the Committee’s recommendation to concentrate more resources on needy sectors, and we plan to double our support—this is an important point, first raised by the Chairman of the Committee—for water and sanitation over the next four years, giving 5 million people access to better sanitation. We want to increase the amount of burden-share that others may assist us with, but let us be clear that, through community approaches, for every pound we spend on sanitation, we expect Government partners to spend approximately £20. We are piloting community-led total sanitation in Bihar and, assuming that it proves effective, will roll it out.

The Prime Minister of India recently described child malnutrition—another point raised by the Committee Chairman—as a national shame. Over the next four years, DFID aims to reach more than 3 million children through nutrition programmes, including—not least over the first 1,000 days and with the Governments of Madhya Pradesh, Bihar and Odisha—a programme on child-feeding, micronutrient supplements and diarrhoea management. Trained community health workers are very much part of that programme. Our energies are focused on delivering the results expected of our programmes. For instance, 447,000 births between 2011 and 2015 will be delivered with the help of nurses, midwives and doctors in those three states, but it is too early to finalise our plans for post-2015.

I appreciate the interest of the Committee, but let us be clear that we will not be in India in a development relationship for ever. Our aim over time is to move from an aid-based relationship to one based on shared contributions to global development issues, not least climate change.

[Malcolm Bruce]

Will the Minister acknowledge that, according to our discussions with the Indian Government, they themselves see the relationship changing and coming to an end? It is not just a decision for the United Kingdom Government; it will be a joint decision between the UK and the Indian Government.

--- Later in debate ---

[Mr O'Brien]

I appreciate that. It has to be a progressive partnership throughout. There will be some gradations of transfer. As I think the right hon. Gentleman recognises, in the past it was not appropriate to draw a line and there will be no absolute cut-off in the future.

We all know how important the private sector will be. The Secretary of State visited India recently. We believe in helping entrepreneurs who have innovative and creative ideas get access to some form of funding—above and beyond microfinance—to help them have a lasting impact on poor people. That is demonstrated by the increasing numbers of staff in our Indian office who are focused on these matters. The Secretary of State also secured the Government’s approval of a new programme promoting investment in India’s poorest states. The Samridhi partnership is the first private sector development project, and it will be delivered in partnership with the Small Industries Development Bank of India. He also supported the expansion of microfinance plus patient capital to entrepreneurs. Such projects will be developed and we will have to monitor and evaluate them, but the important thing is to make sure that they deliver the necessary profitable, sustainable businesses, as well as the pro-poor development goals that we all want to achieve.

As the Secretary of State found on his visit, we have made progress on the transformation of our programme. Our challenge now, as noted by the Committee Chairman, is to press ahead with work to achieve ambitious results. We plan to deliver for India’s poor and to work together with India to secure development outcomes on a global scale and in the context of a gradual but important process of graduation from aid to, ultimately, a truly global partnership based on trade.