Sub-Saharan Africa (Corruption and the Economy)

Debate between Stephen Phillips and Grant Shapps

Wednesday 1st July 2015 Commons Chamber

[The Minister of State, Department for International Development (Grant Shapps)]

I congratulate my hon. and learned Friend the Member for Sleaford and North Hykeham (Stephen Phillips) on securing the debate on this important subject and on the incredibly powerful way in which he has framed his arguments. He is absolutely right to say that corruption, fraud, tax avoidance and evasion pose serious challenges in the developing world. They put an economic brake on development and help to ensure that nations fail to develop at the speed that we would all want to see. What is more, they are matters of direct interest to this House because of our impressive record in international development. However, he is right to highlight the issue of corruption. I want to turn to his speech and to other comments made in the debate.

As my hon. and learned Friend will know, the Department for International Development works in some of the poorest countries in the world, where governance arrangements are often extremely weak. He highlighted that in his passionate speech. Corruption and fraud are often commonplace. Often, there is a highly sophisticated patronage network of elite engagement. I want to outline DFID’s approach to combating corruption and fraud in sub-Saharan Africa while trying to achieve our development goals for some of the poorest people in the world.

First, however, I want to highlight the extent of the challenge facing us. My hon. and learned Friend is absolutely right that in some countries and locations the problem is endemic. That can even be the case in really good countries. Last week I was in Malawi, a functioning democracy that has been free of war for the last 51 years. Even there the President was telling me that it is difficult to get things done and the state moves at a slow pace. Although he did not mention this, we know corruption is part of that problem.

Although there is evidence that some countries in east Asia have achieved high levels of growth in spite of high levels of corruption, the evidence for sub-Saharan Africa reinforces what our common sense tells us: that corruption has a hugely negative effect on investor confidence in a country. My hon. and learned Friend mentioned $15 billion in lost revenue. In fact the World Economic Forum reported that corruption undermines prosperity by imposing a cost equivalent to 5% of global GDP, or $2.6 trillion, every year.

Corruption is ranked as one of the top two barriers to doing business in two thirds of DFID’s main partner countries, so this is a massive problem. It creates barriers to market entry. Two thirds of foreign bribery cases occurred in just four sectors related to infrastructure: 19% in the extractives sector; 15% in construction; 15% in transport and storage; and 10% in information and communication. That illustrates that corruption is huddled around specific sectors.

There is also increasing uncertainty for investors, to the detriment of long-term investment. The World Bank reports that bribery can add up to 10% to business costs globally. Corruption also limits the potential of business. It limits the growth and productivity of private sector firms, with small and medium-sized enterprises experiencing the most difficulties. Many do not even bother to show up in the first place because it is just too difficult to operate in those markets.

A corrupt society and state puts an unduly negative burden on the poorest. That is why the Prime Minister has gone to such lengths to talk about what he calls the golden thread of development. The idea is that a country can try to do everything else—build the infrastructure, put the right processes in place, sort out its health and education systems—but if it does not deal with corruption, it will never enfranchise its citizens, thereby making them all better off.

The scale and breadth of the challenge is enormous. DFID does three things to stop corruption: we work in countries to help Governments track and trace activities and funds; we build the capacity of institutions to stop behaviours; and we apply pressure on our international partners to ensure they raise their game. Most importantly—this is possibly the one respect in which I diverge from what my hon. and learned Friend said in his excellent speech—we would be wrong to inadvertently characterise the DFID budget as disappearing into some hole of corruption, for one simple reason. In the year 2013-14, DFID spent £9.791 billion—nearly £10 billion—on international development. Of that, 4% was what is known as sector support—it might be for education, for example—whereas just 1% was to general support. In other words, although my hon. and learned Friend is right to point out these problems, we are engaged in the task of making sure we do not give money to Governments who cannot, through their own procurement, be trusted to spend it.

[Stephen Phillips]

I understand that point, but let us consider the 4% we spend on education. When we build a school, DFID rightly secures three tenders, but they are essentially agreed between the tendering companies, and the British taxpayer ends up paying probably 10 times more than the actual cost. That form of corruption is hidden in the DFID budget.

[Grant Shapps]

Once again, my hon. and learned Friend is right to point out these problems, which indeed exist in many places in the world, and particularly in some of these markets. Last week, however, I was in a school in Zomba in Malawi announcing £11.6 million in DFID budget. In that case we have chosen to work with USAID, because it has an established programme. It has the contractors in place and we can be certain, as it is properly audited, that the money is being well spent. He is right to point out these issues and it is right that the Department works to clamp down on all these practices. Clearly, we must protect British taxpayers’ funds and we must, for the reasons he outlined, ensure that the worst-off people in the world—Malawi is in the world’s bottom five for income, with an average income of £179 a year—are not being subsidised, through corruption, by one of the wealthiest countries in the world, which we are fortunate enough to live in.

Sustainable Development Goals

Debate between Stephen Phillips and Grant Shapps

Tuesday 16th June 2015 Westminster Hall

[The Minister of State, Department for International Development (Grant Shapps)]

It is fantastic to see you back in the Chair, Mr Turner, and a pleasure to serve under your chairmanship. I congratulate the hon. Member for Glasgow North (Patrick Grady) on securing this debate, right up front at the beginning of this Parliament, on an issue about which I know he is passionate and has a great deal of knowledge and expertise through the Scottish Catholic International Aid Fund and through the incredible Scotland-Malawi partnership, which runs incredibly deep. As the hon. Member for Central Ayrshire (Dr Whitford) also mentioned, it is threaded through everything that goes on in international development in Scotland.

I was in East Kilbride only last week and, as the hon. Member for Ynys Môn (Albert Owen) will be pleased to hear, I will no doubt be going to the Welsh Assembly soon. One thing that I discovered there was that—I think I have these numbers right—some 157 primary schools in Scotland have direct links with Malawi, as do more than 900 different non-governmental and similar organisations and 47% of Scots. That is absolutely extraordinary, impressive and commendable, and we will seek to replicate it in other important areas of development during this Parliament.

This is a fantastic debate to have, and it has been good-natured, with some extremely important points raised. I will pick up on some of them. The hon. Member for Glasgow North mentioned the principle of dignity on behalf of some NGOs. The UK Government support the concept of dignity in development; it is absolutely right, and we welcome the Secretary-General’s report on dignity. He makes the intelligent point that prosperity and dignity, while allied, are not exactly the same thing.

As the new guy to this subject, I know this is the most fascinating topic that the Government have to deal with—perhaps only we in this Chamber know that. As the hon. Member for Liverpool, West Derby (Stephen Twigg) said, the number of people living on $1.25 a day, although falling, is not yet down where we need it. However, it is interesting that people are now living for a decade longer than they were in the 1960s, even though their income is not necessarily higher. Also, more children are going to school now. Whereas in the 1960s, only half the kids of primary age went to school, now 90% of children in the world go to school. The world is somehow getting better without prosperity necessarily rising, although we want to see that, too. However, dignity is absolutely key to this process and the hon. Member for Glasgow North is right to raise it as an issue.

The hon. Gentleman asked a direct question about the representation at the summit on sustainable development goals; the hon. Member for Central Ayrshire also referred to that. I assure both hon. Members that although the summit is in September—so still a little way away—and the exact composition of the delegations is still being worked through, I heard what they said and I will reflect on it.

There was a rather transient comment, which is none the less important to respond to, about what on earth having Trident does for supporting development goals. The answer is, quite simply, that it has prevented the world from getting into all sorts of trouble in the last 60 or so years. I will say no more about that now, but I believe that being on the Earth is an important objective in itself, rather than our being entirely wiped out.

The hon. Member for Liverpool, West Derby made some excellent points, including about the cross-governmental nature of the Department for International Development’s position. I can reassure him by saying that I absolutely know for certain that the Secretary of State for International Development regularly attends the National Security Council; I can put his mind at rest on that. Indeed, one or two people touched on cross-Government working. The level of cross-Government working at DFID is the most impressive of any Department that I have been involved or been a Minister in, or have seen operating.

I think the hon. Member for Ynys Môn asked about DFID working with the Department of Energy and Climate Change on the climate change agenda for international development. Again, the Secretaries of State for both those Departments, and the Ministers in them, including me, all work incredibly closely across government on that agenda.

DFID is different from other Departments. It does not have a role in writing to the Home Affairs Committee to seek collective agreement on policy in the same way that the Home Office, or another domestic Department, has. However, I assure the hon. Gentleman that that absolute tie-in with other Departments, many of which have a strong role in and relationship with international development—indeed, they spend some of their budget on international development—is not missing. They include DECC, the Ministry of Defence, the Foreign and Commonwealth Office, and so on. There is a very close tie-in between Departments and international development.

My hon. and learned Friend the Member for Sleaford and North Hykeham (Stephen Phillips) made an excellent speech, which included the absolutely correct observation about the extraordinary fact that there are 17 goals and 169 targets. Those numbers are rather unwieldy, but the zero base document starts to get to grips with them. I think the document comes up with nine principles, which will be easier for people to understand. However, we are where we are with this whole process, and I do not think that anyone believes that we should go back to square one and start again; it is important that we push forward. However, our goals need to have a sense of clarity, and some of the suggestions made in this debate can play an important role in achieving that.

My hon. and learned Friend was particularly exercised by the healthcare systems in countries such as Sierra Leone and by their inability to respond to the Ebola outbreak and its consequences. I want to reassure him by saying that the UK’s chief medical officer will now work with the World Health Organisation—as my hon. and learned Friend said, WHO’s difficulties, given the tools that it had available to it, were rightly pointed out by all who saw its performance—to develop a new and more advanced system to share data on disease spread on the ground. The CMO will also work with health agencies, doctors and nurses on the front line. We, as a Government, absolutely intend to make certain that the lessons are learned from what happened in Sierra Leone and elsewhere, so that we do not allow the shortcomings that existed to become problems in any future outbreak of a different disease.

My hon. and learned Friend also zeroed in on corruption and he was absolutely right to do so. Anyone who has listened to the Prime Minister talking passionately about what he calls the “golden threads” will know that having secure institutions that work on behalf of a population, rather than against it, is absolutely critical to any sense of international development. We will simply make no progress without those institutions. Anyone who has read the book, “Why Nations Fail”, will know that it is one of the inspirations for the golden threads. I think that those “golden threads” are absolutely embedded in target 3.8—no, sorry that is on universal health care, so I will have to find the exact target for my hon. and learned Friend. It is actually goal 16, which is to

“Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels”.

I hope that will reassure him.

[Stephen Phillips]

The Independent Commission for Aid Impact produced a report in November 2014 that stressed that this area of corruption was one that DFID was not concentrating on and needed to; the report raised a number of red flags. Will my right hon. Friend give an undertaking to the House that he will go and look at that report, to see whether those issues are now being dealt with?

[Grant Shapps]

Yes, I am pleased to give my hon. and learned Friend that undertaking.

I will quickly move on to the energy questions that were put by the hon. Member for Central Ayrshire. She made very sensible points. I am absolutely amazed that 1.2 billion people in the world do not have any energy in their own homes. In a world where the price of solar is tumbling, batteries are becoming more available and micropayments are available in developing countries— for example, through the British-inspired M-Pesa system— there is no reason to allow that situation to continue. I intend to spend my time in DFID particularly focusing on bringing energy to domestic housing situations, and I hope that hon. Members from all parties will join me in that work.

In Tanzania, I met a woman called Elizabeth who can now power three light-bulbs and charge her mobile phone from a tiny solar panel on her roof that is no bigger than a sheet of A4. That has changed her life; it saves her money on kerosene, and we should spread that practice to all the 1.2 billion people in the world who do not have such energy.

I disagreed with the hon. Lady when she said that somehow consumerism in the west is to blame for the situation. I do not think that is the case, but I fear that, because time is running out, I will not be able to have a longer and more interesting debate about that point.

The hon. Member for Ynys Môn talked about joined-up thinking, which I think I have covered, in addition to the visits that I have made to East Kilbride.

The hon. Gentleman and the hon. Members for Glasgow North and for Central Ayrshire will be interested to hear that I am going to Malawi next week, where I will do everything I can to push our relationship with Malawi and indeed learn from it.

Finally, I thank the hon. Member for Luton South (Mr Shuker) for welcoming me to my position. I can tell him that we have very strong plans. On inequality, for example, the UK is committed to an agenda that will end extreme poverty and build on prosperity for all. I can reassure him on that, as indeed I can on the language about climate change, where the goal is to take urgent action to combat climate change and its impacts, as a crucial part of our framework.

I would like to spend more time satisfying the hon. Gentleman about the issues he raised, but I know that there are only a couple of minutes left for the hon. Member for Glasgow North to respond to the debate.