Commonwealth Development Corporation Bill

Viscount Eccles Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords & Report stage (Hansard): House of Lords
Thursday 9th February 2017 Lords Chamber

[Viscount Eccles (Con)]

My Lords, I worked for the CDC from 1981 to 1994. As the noble Lord, Lord Judd, said, for nine of those years, I was its chief executive. There is one other coincidence: my noble friend Lord Flight now lives in a house in which I lived for a while and in which Lord Reith, who was a most successful chairman of the CDC in the 1950s and 1960s, had also lived. I do not know whether there is any message in that coincidence, but it is interesting.

I would like to concentrate on the period from 2010, on which the debate is concentrating. My period is irrelevant, except that I endorse what the noble Lord, Lord Judd, said about technology transfer and capacity building. A development finance institution such as CDC does not have a role unless it is involved in both technology transfer and capacity building and, therefore, the creation of greater human capacity for people to do things that they did not know how to do before. I could tell your Lordships many stories about how CDC has achieved that in the past, but I would like to concentrate on the period from 2010.

Before doing that, I want to refer to some comments made by the noble Lord, Lord Boateng, about the period before 2010. We are all talking about CDC, but that is inaccurate. It is, in fact, the CDC Group. In 1997, the decision was made in the manifesto that a Bill would be put before Parliament which would have the purpose of changing CDC from being a loan-financed public corporation to becoming an institution with share capital which would then become 75% private and 25% continuing to be owned by the Government.

That is the 1999 Act that we are talking about amending today. It set up the possibility of CDC, then renamed the CDC Group with a shareholding, becoming 75% private owned and 25% retained by the Government. That did not happen. I will not go into the story of why it did not happen, although I am pretty familiar with it. I will just say that I believe that the 1999 Bill was a mistake and that there should never have been a campaign to take any part of the CDC out of public ownership. It should always have remained in public ownership. Although I sit on this side of the House, I can assure your Lordships that, when I was chief executive of CDC in the days of Margaret Thatcher, I was completely consistent with my board that it would be wrong for CDC to seek to be privatised; it should stay in public ownership.

That is where CDC is today and that is why what has happened since 2010 is of very great interest to Parliament. It is a great pleasure to find that Parliament is again debating CDC. Although years ago, CDC was quite frequently debated in Parliament, there was a big gap from about 2004 until 2010 when, frankly, the general opinion was, “Sweep it under the carpet and don’t talk about it”.

From 2010, under the Secretary of State, Andrew Mitchell, a decision was made by the coalition Government to see if they could put CDC back on track. It had become, as I think a noble Lord mentioned, a fund of funds. As a fund of funds it was no longer a development finance institution. The chain of accountability to Parliament was broken by CDC becoming a fund of funds and that needed to be restored. That was spotted by the coalition Government and, as has been said, they made arrangements to appoint a new chief executive, Diana Noble, who has done an extremely fine job, and a chairman, Graham Wrigley, who, in my opinion, has also done an extremely fine job. They have been getting the CDC back on track.

While the Bill is extremely welcome, we need to keep close attention on the business plans of CDC. It is a very important duty not only of DfID but also of Parliament to understand where CDC is going. As your Lordships will understand, it takes a very long time for the things that have been brought into CDC’s portfolio to work out. The usual time before a CDC investment is realised may be about 10 years. We are still living with a great deal of what CDC invested in as a fund of funds before 2010, which is going to take quite a long time to work its way out.

In the strategic future, the question which has been raised by many noble Lords is what proportion of the CDC portfolio is going to be directly invested. Only a direct investor can encompass innovation and going to places where the private sector will not naturally go. Several of those places have been mentioned, including northern Nigeria and the Congo. We can all think of many places in Africa where the fully private sector will hesitate to go. These are the places into which CDC in—it is true—70 years has always been willing to go and had the capacity to go without making serious mistakes.

With a small exception in the period between 1999 and 2010, CDC always made a surplus of income over expenditure throughout the years. When we authorise this increase in capital, we should not worry that CDC will lose that money. If it is true to its past, it will not. It will keep that money and use it as a revolving fund which will enable it to do more and more economic development.

As a condition of that economic development, I come back to the transfer of the knowledge of technologies such as from—I do not know—a generic pill manufacturer. That would be a very beneficial thing to be happening to a greater extent in Africa. However, anyone investing in that would need to know about pharmaceuticals and how to set up and manage a factory. It is very important that, when a strategic plan comes, we can see that CDC has proprietary technology of its own. It has always had some and still has—power generation and mobile telephones are two examples of where CDC has had technology and has deployed it.

The people in CDC are also very important. The staff has been built up recently from, I think, 50 when it was just a finance house to about 250 today. Within the capacity of staff employed by CDC, we need people who understand businesses and how to set up and manage them, as well as people who know how to finance them.

I welcome the Bill and believe very strongly in economic development, not only in financial rates of return but also in what I would call, not development impact, but economic rates of return, in which the social as well as other effects are measured. CDC going forward in that way, rebuilding itself as it has already done with very considerable success, will get even more into the forefront of being out there, doing things that the fully private sector is not in a position or not ready to do. As it goes forward, it will leverage in money from less certain people, because they know that if they come in alongside CDC, it is likely to work and to work well.