§ Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Ainger]3.30 pm
§ The Minister of State, Department for International Development (Hilary Benn)
The latest human development report was published last week. It statesThe Millennium Development Goals present the world with daunting challenges. Unless there is radical improvement, too many countries will miss the targets—with disastrous consequences for the poorest and the most vulnerable of their citizens. Yet today the world has an unprecedented opportunity to deliver on the commitment to eradicating poverty. For the first time there is genuine consensus among rich and poor countries that poverty is the world's problem. And it is together that the world must fight it.Poverty is indeed the world's problem.
Today's debate takes place on the last parliamentary day before the recess. Only a small number of hon. Members are present, but they have the ability to contribute to this important discussion. I want to take the opportunity to reflect on where developed and developing countries have come from in trying to do something about the problem and what we have yet to do if we are to achieve the millennium development goals. The response of the rich world to the task of development—in essence the answer to the question, "What can we do to help poor people in poor countries?"—has evolved substantially in the past 30 years as we have come better to understand what works and what does not.
For example, we have realised that the 1970s ethos of funding big capital infrastructure projects is not enough to kick-start developing countries' economies to reduce poverty. The focus on technical assistance projects, which were a feature of the 1980s and 1990s, to build capacity in developing countries is also not the sole answer, because the limitations of the project approach to development have become clear. In the cases of health and education—this is true of other public services—long-term, recurrent funding is needed for teachers, books, doctors, nurses and drugs. By their very nature, projects are not always designed to address such long-term needs.
We have learned that conflict kills development as well as killing people. Conflict is the ultimate failure of governance. We appreciate the importance of sound policies and the right environment for development prospects. We have come better to understand—we have debated the issue in both this Chamber and the House—that if the world trading system is unfair, it is more difficult for countries to share in global prosperity and therefore to fund development. We have developed, particularly in the past five years, a broad consensus that development agencies must work more closely to support poverty reduction strategies, which should be led by developing countries themselves. In other words, we must back the judgment of the Governments of developing countries as they take their countries forward.
We have seen the emergence of global initiatives supported through funds, which can help to bring effort, enthusiasm and money. However, such initiatives must support country-led development efforts rather than 158WH making them more difficult. For the first time, we have a clear international consensus on what we want to achieve in the form of the millennium development goals, which were agreed at the millennium summit in 2000. Those goals will measure our progress towards eliminating poverty and improving the well-being and life chances of the world's poorest people.
The human development report, which was published the week before last, makes it clear that without rapid progress the MDGs will not be met, which means that developed nations must provide a higher volume of government assistance and that the assistance we provide must be more effective. We need to do more on debt relief. We must do more to integrate developing countries into the world trading system.
We have made some progress. It is important that we acknowledge that, not least because it shows that progress is possible, and that is needed to encourage us to do more. As a result of last year's spending review, the UK's official development assistance will increase by £1.5 billion to reach 0.4 per cent. of national income by 2005–06. That is the biggest ever rise in UK aid: a 93 per cent. real-terms increase since 1997 after a generation in which UK aid fell as a proportion of national wealth.
§ Mr. Andrew Love (Edmonton)
I thank my hon. Friend for giving way. Several countries have also taken the step of setting a date when they would reach the target of 0.7 per cent. of gross domestic product devoted to aid. Is that something that the Government are considering?
§ Hilary Benn
I am grateful to my hon. Friend for asking that question. The Government remain committed to achieving the 0.7 per cent. target. The process by which we reach it is determined by successive spending reviews and we have a commitment to reach the 0.4 per cent. figure to which I referred a moment ago. That compares with the 0.26 per cent. figure that we inherited when we came into government in 1997. The important thing is that we move in the right direction and we need to make further progress. I acknowledge that point and I look forward to having the opportunity to make that progress. As a result of that increase in UK aid expenditure, we will be able by 2006 to talk about a ?1 billion bilateral programme for Africa, which is the continent in which we need to make the biggest progress if we are to have any prospect of meeting millennium development goals.
The second change that we have made to improve the effectiveness of our aid spending has been to untie 100 per cent. of our aid. By 2006, 90 per cent. of the bilateral spending of the Department for International Development will be focused on low-income countries where it can be most effective. We are pressing other donors, including the multilateral institutions, to direct their aid in line with best practice.
There has also been progress internationally. Last year in Monterrey, and then in Johannesburg, the international community announced the first increase in official development aid for 20 years, with $12 billion a year of extra funding pledged by 2006. Members of the European Union are set to increase the average proportion of gross national income given to 0.39 per cent. by 2006. However, in respect of EU development 159WH spending, we are all working hard to increase the proportion of European Community overseas development assistance that goes to low-income countries. That figure stood at only 38 per cent. in 2000 and it rose to 44 per cent. in 2001. We are waiting for the figures for 2002—the early indications are that it will increase again, but we still have a long way to go.
§ Dr. Jenny Tonge (Richmond Park)
While we are on the subject of EU aid, will the Minister tell us whether any progress has been made in the targeting of EU aid towards the poorest countries ? Does he think that that process has become more efficient, so that the money is processed more quickly allowing projects to go ahead?
§ Hilary Benn
On the first point, the figure of 38 per cent., which was the low point of focus on low-income countries, has increased to 44 per cent. We hope that there will be a further increase when the figures for 2002 are published, but that is a long way from the objective that we have set, which is a target of 70 per cent. We need to continue to have that argument with our European colleagues because it is right and proper that we should channel European resources to the countries where we can make the biggest difference in relieving poverty.
On the hon. Lady's second question, the honest answer is that some progress has been made but there is still some way to go. The process of "deconcentration", as it is described in European parlance, is devolution of responsibility for programmes from Brussels to in-country, which reflects very much the process that DFID has been going through. One would hope that decisions taken on the ground would lead to better outcomes than decisions taken from afar. However, we must maintain our interest in the process because a significant proportion of our aid budget is channelled through the European Union.
The heavily indebted poor countries initiative has been a success, both in delivering relief and in ensuring that relief is channelled to poverty reduction. To date, it has resulted in $60 billion worth of debt relief, although we need to provide additional relief for countries as they exit HIPC if their debt continues to be unsustainable due to external factors beyond their control. We must make progress on trade, which is crucial to achieving the millennium development goals, particularly in agriculture, as three quarters of the world's poor live in rural areas.
At Doha, the international community said that it intended to put development at the heart of world trade negotiations. We are putting a great deal of effort into trying to get that right, but progress has been too slow. When we meet in Cancun in September, the responsibility for progress will clearly lie on the developed countries, which are the main perpetrators of an unfair trading system. The EU's package of common agricultural policy reforms is a first step towards making global agricultural trade fairer. We now look to others to make similar moves as we approach the Cancun negotiations.
Having said all that, the report of the high-level panel on financing for development, which is chaired by Ernesto Zedillo, estimated that at least $50 billion more 160WH in aid would be required every year to achieve the millennium goals. As a matter of urgency, we must look at ways in which the benefits of existing and future aid pledges can be maximised.
All the things that I have described are important in supporting and encouraging development. Aid makes an important contribution. For example, it has contributed to a doubling of school enrolments and a halving of infant mortality since 1970. That goes back to the point that I made earlier about progress. Recent successes in Africa show that high aid levels can provide major returns: Uganda received more than 20 per cent. of its GDP in aid in the early 1990s and has achieved decade-long growth rates of more than 7 per cent. and reduced the proportion of people living below the poverty line by more than 20 per cent.
Of course, it is equally true that there have been cases where aid has been badly used, on occasion supporting corrupt regimes or wasted on misconceived projects, but countries with fair and transparent policies have a greater ability to use aid funds effectively and make good use of additional aid.
There are several ideas in the international system about ways in which we might increase the amount of aid, which we must do if we are to make progress towards the millennium development goals by 2015. One example is the Tobin tax, which is an interesting idea. Unfortunately, without universal support it would not work. Another idea is the resumption of general special drawing rights allocations, with developed countries giving their share to developing countries, but there are difficulties with that proposal as well.
Earlier, I mentioned the 0.7 per cent. target. Although most donor countries are committed to reaching 0.7 per cent. in the long term, the global level at present is only 0.2 per cent. If we are to make progress towards the targets, we cannot wait for all countries to achieve 0.7 per cent. We must increase the amount of aid now.
§ Dr. Tonge
The Minister swiftly moved off the subject of the Tobin tax. We are always told that it will not work unless it is applied universally. Can he tell us whether international bankers and the International Monetary Fund—or whoever must be involved—are actually talking about it? Is there any possibility that it will ever happen?
§ Hilary Benn
I am not sure that I can answer the hon. Lady's last question about whether the Tobin tax will ever happen. My assessment is the one that I have just given: it is an interesting idea that dates back quite a long time, as the hon. Lady knows. It has been dusted down in the context of the debate about the need for additional aid, but in theory it relies for its success on everyone signing up to its operation, and an assessment of the debate thus far would show that we are not in that position. That is why I pointed out that it is unlikely to offer a solution to the problem that we are debating this afternoon, as it would not work unless everybody signed up.
§ Hilary Benn
I am grateful to my hon. Friend for that information. It reinforces my point; we need to focus our efforts and attention on the things that are on the table that might enable us to increase the amount of aid available. That brings me to the idea, launched by the Chancellor of the Exchequer, of the international finance facility. The facility is designed to try to achieve the millennium development goals by doubling aid for the world's poorest countries from $50 billion a year today to $100 billion a year in the years up to 2015, or in other words to meet the gap identified by Zedillo. It would do that by delivering resources up front over the next few years when they will have most impact on achieving the targets. On the basis of long-term, binding donor commitments from the richest countries, some of which have already been made, the facility would be able to lever in additional money from the international capital markets to double, in effect, the development aid. In other words, the international finance facility is intended to bridge the gap in development financing between the resources that have already been pledged and the additional funds that are now recognised as urgently needed to meet the MDGs.
Of course, we have a responsibility to ensure that development money will be used effectively, and under the proposal the developed world would make a commitment to provide long-term, untied and effective aid as investment to the countries that need it most. We see the facility as an integral part of a new agreement between developed and developing countries, with each country tackling corruption, promoting stability and agreeing the necessary transparency in economic and corporate policies to achieve that goal; we see it, too, as part of the country-owned poverty reduction strategies, involving agreement of clear and costed plans for education, health and economic capacity, so that development aid can be seen not as compensation for past failures but as investment in future prosperity and success.
For our part, we must continue our efforts with other donor partners to ensure that aid is used for poverty reduction, that it is not tied to contracts using suppliers from the donor country and that it is provided in predictable amounts so that Governments can make plans on the basis of receiving that aid. In the case of the international finance facility, it would need to be disbursed to a range of recipient countries so that no more than 5 per cent. of the total amount of finance raised through the international finance facility would go to any one country. Of course, aid would be targeted at low-income countries.
The concept of the international finance facility offers a number of advantages. It focuses on the finance necessary to help achieve the MDGs. It is founded on developed countries' long-term commitments to the countries that are striving to achieve those goals. It would bridge the gap by leveraging the long-term commitments, enabling us to move more quickly towards the target, which each donor country could achieve by contributing 0.7 per cent. of gross domestic product in development aid. One would not have to wait for the 0.7 per cent. because we could increase the value 162WH of aid that people are prepared to give, and of course the international finance facility could deploy a large amount of aid over the next few years, when it would have most impact.
At the Evian summit last month, Heads of State called for a report on the international finance facility for September. We are now working with French colleagues on that, looking closely at the question of commitments against needs, finalising an in-depth analysis on the case for bringing aid forward and some of the technical and financial aspects of the proposal that still need to be worked through. One of the most encouraging points to emerge from all the discussions on the idea of the international finance facility in past months is that there is a general acceptance—this takes us back to the point about interest in ideas that can make a difference—of the need to examine the proposal. Everybody recognises the need to make progress, not least in the poorest countries, which have expressed their support, because it provides an opportunity to take a significant step towards meeting the millennium development goals. We must not miss that opportunity for the simple reason that the human development report reminds us that time is extremely short, and that a great many people depend on us.
§ Dr. Jenny Tonge (Richmond Park)
This is a very intimate little debate—almost a private audience with the Minister. We thank him for spending time with us this afternoon when he has other things to do. It is a useful opportunity to have this private audience with the Minister, because I need to get a few things out of my head before the recess and to ask some questions. It will not be a long speech, but it will be reflective and hopefully the Minister will respond at the end. I am not clear how we are going to do this.
§ Mr. Deputy Speaker (Mr. Edward O'Hara)
Order. With permission, the Minister may wind up the debate.
§ Dr. Tonge
Thank you, Mr. Deputy Speaker.
The Minister mentioned the millennium development goals and suggested that progress had been made on them. I was extremely depressed by the departmental report, as I am sure was the hon. Member for Meriden (Mrs. Spelman). On page 72 in particular, there are graphs showing the total lack of progress towards millennium development goals in sub-Saharan Africa. It is, indeed, a depressing picture. When we talk about progress, we must always allow for middle-income countries such as Indonesia and India that may be making some progress, but in Africa we have a serious problem, which is worsening. That needs to be emphasised over and over again.
I will start with the international finance facility because I am an old cynic. I appreciate that developed countries all over the world should give 0.7 per cent. of their gross national product and I agree with the hon. Member for Edmonton (Mr. Love) that we should set a date by which we are to achieve that. We should all tighten up that target. We talk about millennium goals, so let us get on with it and have a goal for when we will achieve that 0.7 per cent. worldwide.
Something like the international finance facility is introduced, everyone agrees that it is a great idea. I do not totally understand the high finance of it, but I 163WH understand that donor Governments will give money to the finance facility, which will then issue bonds to developing countries, which in some magical way will be worth more than just giving them the money. I am prepared to accept that on trust. What worries me is not the mechanics of the facility, but whether developed donor countries will actually give the money in the first place. We do have that problem. The global health fund was a similar initiative in which donor countries contributed to the fund, but there is a shortfall. The second payment, which is due soon, is not yet fully funded.
The financial wizardry to get the money to developing countries may he ingenious, but that is no help if we do not get it in the first place. That is my great concern. Another such example is the pledges that were made at Tokyo to reconstruct Afghanistan and how slow that money was to come in. Afghanistan is still struggling to come out of the terrible conflict and poverty that it was in. It is all very well having such schemes, but they all boil down to the fact that donor Governments have to cough up the money in the first place. I am extremely sceptical about that.
§ Mr. Love
I suspect that everyone in the Chamber has some sympathy for the hon. Lady's argument, but surely the other side of that argument is that any additional pressures that can be brought to bear on the needs of Africa and other less well-developed countries through an international finance facility would increase the overall amount of aid given by the first world, which has been reluctant to increase its overall aid to the 0.7 per cent. target, as she said.
§ Dr. Tonge
Of course I agree that any initiative is worth while. I have been my party's international development spokesman for six years and was the first to congratulate the Government on what they have done about debt relief and progressing towards development goals. There is no question about that; I simply question the ability of donor Governments to provide the finance that is needed.
There is also some sleight of hand in what is happening. We hear that we have made progress on debt relief and that a global health fund has been set up. We are to have an international finance facility. Such news is always sold to us as if it is a new initiative, but everything is within the 0.4 per cent. of gross national product—I think that that is the figure that the Government are aiming at—that we donate as international aid. Nevertheless, it is of course welcome.
I want to talk about the lack of progress in trade reforms—the fiddling around at the edges, with talk about new issues and attendance at the Cancun talks. For goodness'sake, when will we do something about American agricultural subsidies and the common agricultural policy? Nothing would make more difference to poverty, particularly in some African countries, than doing something about the west's subsidies and protectionist regimes. Attention is always diverted. We talk about other issues and other things that need to be done. We must return to the basic problem that subsidies given to very rich countries for their produce, and the west's barriers against developing 164WH countries' exports, are one of the chief problems for developing countries. Wherever I have been in the world in the past couple of years, people have said, "Trade, not aid." Yes, they like the aid, but they need trade—a way of making their own living. I urge the Minister to put that issue at the top of his agenda.
What I am now going to say, briefly, is almost heresy. I shall talk about foreign investment in developing countries. We are all constantly bombarded—by the anti-globalisation movements and people who think that multinational companies are the wickedest things ever to have walked the face of the earth—with the idea that we must constantly campaign against private investment and privatisation of anything in developing countries. We need to rethink. People who campaign against multinational companies also need to rethink what they are saying.
I am not an economist or a historian, and the comparison that I want to make is probably not a good one, but back in the 19th century in Britain people were very poor; they suffered from poor health and there was little education. Where did health care and education come from? It came from big business, which made money for this country—by whatever means and I accept that that is an issue. Eventually, philanthropists emerged from many big businesses and decided that they had to do something about the state of the work force: they had to improve health care and education. That is how we became healthy, rich and powerful.
Yet we expect developing countries to concentrate on health and education before they have been through the stages that we went through in Britain in the 18th and 19th centuries. We are somehow making them do it the wrong way round and rightly so, because we feel guilty when people say that this country became rich on the backs of developing countries and therefore we should be making their progress much faster. We must bear in mind that it was big business and big businessmen who helped this country to reach the position that it is in now.
I want the Government to take a hard look at multinationals and how they operate in developing countries. When I first took over this portfolio, there were campaigns about Shell, Rio Tinto, Nestlé and the big drug companies and how wicked they were. All those companies are now getting a social conscience. At the very least, they are producing nice, glossy brochures that tell us all about their education schemes, health schemes and what they are doing for their workers in countries where they extract minerals or whatever they do. At least they are producing brochures. They did not do that 10 years ago.
The hon. Member for Meriden and I heard about the African Comprehensive HIV/AIDS Partnerships, or ACHAP, scheme in Botswana—I sent the Minister details about it and I do hope that he received them—where big business in the shape of Merck, Sharp and Dohme, a charity and a non-governmental organisation in the shape of the Bill and Melinda Gates Foundation, if one can call Bill Gates such a thing, and the Botswana Government are getting together to deal with the AIDS crisis in Botswana. How many more of those schemes can we cook up? There must be many schemes on many fronts through which we can harness the power of multinational companies and enable them to see that they will benefit, become richer and have a better work 165WH force by improving the health and the education of the countries in which they operate. The scheme was developed in Botswana because it is losing so many skilled people, who are dying as a result of the AIDS epidemic and it cannot afford to keep training new staff. Big business has seen that it is worth while investing in health care and in the prevention of AIDS. I hope that the Minister can deal with that question, however difficult it is.
Before we leave the subject, I must point out that all sorts of initiatives are needed to encourage transparency in big business. As we heard, there is a movement towards that, so that concessions given to developing countries by multinationals working in them will be made transparent. We also know that those multinational companies have huge management expertise, so if they are in some sort of partnership with the Government of the country in which they work, they can help with management expertise and capacity building.
I also make another plea for the Organisation for Economic Co-operation and Development guidelines, about which we hear so much, to be made more legally binding and for them not simply to be a voluntary code. I would also occasionally like to see a few investigations into and prosecutions of companies that have broken those guidelines. There is a mechanism for that to happen. I have inquired about it, but no cases are ever brought. It is time that they were.
Please let us embrace globalisation and multinational companies, if it is possible to do so. Let us also try to bring their huge profits and resources into the development of the poorest countries, instead of casting them mentally out into the wilderness as wicked things about which we do not want to know.
I have "AIDS" written on my notes, but I do not believe that we need to have a debate about AIDS on this occasion. We all know that it is one of the greatest problems faced in development, particularly in Africa. I add to that the problem of malaria, which is a poor sister but is still probably the biggest killer. I recently met people from a non-governmental organisation called Medicines for Malaria Venture, which sounds very much like the international AIDS vaccine initiative about which we have all heard so much. Again, the idea is to try to harness the drug companies and the research facilities to do something about malaria in the same way that the AIDS vaccine initiative is doing something about the AIDS epidemic. The problem is not a priority for the developed world: nobody dies of malaria here unless they have been abroad and not taken the right precautions. However, malaria is a huge killer in the third world, and it is another issue that needs to be addressed.
There has been progress on debt relief, although there needs to be much more and I ask the Minister in passing whether there have been any more thoughts on Iraq's situation. Iraq's development and progress will be stopped if it has to start paying back all the huge debts that it owes. That debt can be classified as odious debt—I hope that most people would say that Saddam Hussein was an odious person.
Before I sit down I shall make two other points. I would love to know how much progress is being made on micro-credit—I have saved up the annual report for 166WH the summer recess, because I have not read it properly and in detail yet. I am interested in micro-credit, which is a form of financing for development that helps the very poorest people at the grass roots, as does what I call alternative technology. When we go abroad we all see wonderful schemes involving treadle pumps—water pumps operated by children running round roundabouts—and other examples of small technology, as opposed to huge hydroelectric schemes.
The Grameen bank harnessed micro-credit and made it much more widespread, so is there any way that such simple technology, which is the obvious answer in many places throughout the third world, can be similarly harnessed and taken over by a multinational company or organisation? That way, when the hon. Member for Meriden and I go abroad, instead of seeing one or two dinky little pumps working in a remote village somewhere in Africa, we could say, "Yes, there are millions of these all over Africa, providing the clean water that people need."
Finally, every time I speak in a debate on financing development I make the same plea. I am still in total and utter confusion about the various lines of development funding and I came across another one the other day called the African and Asian development performance funds, under which it seems that money is made available for good performance—like foundation third-world countries. If such countries do well and get three stars, they become foundation developing countries and, apparently, get extra money from those funds. I would love the Department for International Development to say how many lines of funding there are and how they interlink.
§ 4.8 pm
§ Mrs. Caroline Spelman (Meriden)
I am sorry in a way, because this is an unprecedented occasion for me—I do not think that I have ever been in Westminster Hall for a debate in which there are only three speeches from Front Benchers. Perhaps it is just as well that the hon. Member for Edmonton (Mr. Love) has gone. All that I would say to the Government is that timetabling a debate on such an important subject on the very last afternoon of term will create difficulties for hon. Members who perhaps feel the call of the recess very strongly. However, what we lack in quantity, we shall endeavour to make up for in quality this afternoon.
§ Hilary Benn
In my defence, when the debate was scheduled, we were all confident that we would still be here contemplating messages from the other place.
§ Mrs. Spelman
In the end, I suppose that the allocation of time usually rests in the hands of what are euphemistically known as the usual channels. However, given the importance of the subject, I am sorry that it has been left right until the end of term.
I cannot disguise the fact that I come to our debate about financing development with a heavy heart. I spent the morning dealing with the tragic issue of the execution of street children in Latin America. When one analyses the underlying causes, one finds all too often that, as with so many shocking humanitarian problems, it is abject poverty that gives rise to such misery. We therefore supported the Government in giving the 167WH Department's work a poverty reduction focus in the International Development Act 2002. None the less, the fact that the UN estimates that there are approximately 1 million street children in the world demonstrates that the Government should attach greater priority to the issue.
The Department spent £2.4 million on producing a report about street children, but that has so far made no appreciable difference to the security of such children. I hope that the Government's budgetary support to affected countries will eventually trickle down, as the Government hope that it will, so that children can be safer on the streets. So far, however, there is little evidence that that approach to the problem is working.
No one who has spoken in the debate—there are only three of us—is under any illusion about the fact that the lack of finance for development is one of the main reasons why countries are held back. I hope, therefore, that our debate, on this sultry July afternoon, on the last day of the parliamentary term, is not simply intended to give the Government a platform from which to re-announce the benefits of the international financing facility. I have some reservations about that measure, which have been articulated by the hon. Member for Richmond Park (Dr. Tonge), and I shall return to them.
The fact is that the developing world is a long way off obtaining the finance that it needs. The announcement of the international finance facility was welcomed by the Conservative party, but it will remain only an idea unless other countries contribute. It is gratifying to hear that France is co-operating with us again and considering the proposal, which would allow the poorest countries of the world to attract private investment. However, when the Prime Minister introduced it to other world leaders at the G8 summit in Evian, it was greeted with scepticism by, among others, the United States and Germany.
The Government might say that simply getting the issue on the agenda was an achievement, and that much is perhaps true, given the amount of bad blood between those countries following the war in Iraq. However, to echo the words of the director of the Save the Children Fund:Everything depends on securing real commitment from G7 countries that is translated into a concrete plan of action.We wish the Government success in getting other countries to co-operate and, most importantly, to contribute. That must happen if the idea is to fly.
Development assistance suffers particularly from the political pitfall of unfulfilled pledges. Yesterday, I had a visit from Nirj Deva, the Conservative spokesman on international development in the European Parliament. He showed me what was, I suppose, a league table of donors' performance on the pledges that they made in Tokyo to help with the reconstruction of Afghanistan. It is significant that the hon. Member for Richmond Park and I should both alight on how the world's richest nations have delivered on their pledges to help one of the world's poorest nations. To take one of the most startling examples of underperformance, only $35 million of the $500 million pledged by the Arab Development Bank has been forthcoming. Another example of rich donors' failure to deliver on their 168WH promises is the fact that only a fraction of the more than $900 million that was pledged at the last donor roundtable for Burundi has been delivered. That is indicative of an underlying problem, and we cannot skate away from it if we are to talk about financing development.
Progress towards achieving the millennium development goals is being held back by a lack of finance. The World Bank estimated that an additional $40 billion to $60 billion is needed to fulfil the millennium development goals. That is over and above the current contribution of $57 billion, so it is effectively calling for a doubling in funding for the goals to be achieved. That probably led to the Government hitting on the idea of the international finance facility, but without the political will, there will be no guarantees.
There are steps that the Government can take to amend and improve existing financial measures, even while we live in hope that the international finance facility comes to something. The hon. Member for Richmond Park mentioned debt relief, and there is no room for complacency. Compared with the high expectation in the millennium year of how many countries would be relieved of their debts, the fact is that—unless the total has gone up—only eight countries have successfully completed the process.
There are problems with the process. It is too slow, complicated and secretive, which does not help the relationship between poor and rich nations. As I have said before, the sustainability index on which the debt relief process is based needs to be reworked. It does not cope with exogenous shocks to economies, which so many countries have faced recently. When we look to relieve a country of its debts, we try to put it on a sustainable footing, but the sustainability calculation is heavily dependent on the country's export earnings, and nothing in the formula takes into account, for example, the recent collapse in commodity prices.
I also remain sceptical about how well relieved even those eight countries are. We can take a snapshot and say that we have relieved the developing countries of their debts, based on a sustainability index and their export earnings two or three years ago, but the question is whether they are sustainable today. I remain worried about the rigidity of the sustainability calculation.
AIDS has an enormous impact on the capacity of the poorest countries to achieve sustainability. I have said that before, but I am not aware that anything has been done. With AIDS infection rates as high as 40 per cent. in Botswana and at an average of 25 per cent. of the population in sub-Saharan Africa, how sustainable will those economies be in future? We know that the disease is taking out the most economically active members of society—those who will contribute the most to their country's economic growth—but nothing in the debt relief formula takes into account the impact of HIV/ AIDS. That weakness in the calculation worries me, as does the morality of recovering debts from nations with such high rates of HIV/AIDS infection. The primary call on much of their resources must be on treating the sick and dying, trying to sustain life and achieving sustainability. I have deep concerns about the situation.
The hon. Lady spoke about the serious implications of the current world trade negotiations, and when we talk about financing for development, we cannot scuttle away from that issue. Progress on the Doha round has 169WH been deeply disappointing. We had a separate debate specifically on it, and I remain deeply concerned that the much-trumpeted CAP reform deal has failed to deliver what would most help the developing world and particularly sub-Saharan Africa: the removal of agricultural subsidies that make it impossible for the poorest countries to compete on a level playing field with the developed world.
It has been said, rightly, that Europe and America are equal offenders, but it is not satisfactory for us to blame each other as being equally guilty and then do nothing about it. I found it quite encouraging that President Chirac initially led the way by saying that he would support the cancellation of export subsidies in relation to sub-Saharan Africa, but he has withdrawn from that lead on the CAP reform deal, so it has not happened. I urge the Minister to use our recovering relations with France to revisit that proposal, because our two nations, with their long history of involvement in sub-Saharan Africa, may understand better than many others what a difference it would make to that whole continent if we reformed our agricultural subsidies.
§ Mrs. Spelman
We all know how the voting system works in the European context, but if two of the largest voting nations put their weight behind such a proposal, they would at least form a blocking minority. That would have significant weight, and it would have had a real impact on the outcome of those CAP reform negotiations.
The matter that I cannot fathom from the Government's explanation of what happened during those negotiations relates to the fact that the industry—our farmers—is willing to move on that issue. The CAP was intended to provide our farmers with a reasonable income, but it no longer serves them as it was intended to do. We all know that, these days, farmers do not have reasonable levels of income; otherwise, they would not be leaving the industry. Because the CAP no longer serves our farmers, they are willing to move on the issue, so who are we trying to help by retaining the export subsidy system?
The truth is that, so often, export subsidies help the middle man. They help those who make the money on agricultural produce before it reaches the supermarket shelf. Those interests seem to be regarded above those of our farmers or, indeed, farmers in the developing world, so I emphasise again the central importance of the export subsidy issue.
Before I leave the subject of financing development and its interrelationship with world trade, I appeal to the Minister to reconsider the proposal made by the shadow Chancellor of the Exchequer, my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard), on the advocacy fund. The sole purpose of that fund was to give developing nations a resource to enable them to be represented at trade negotiations by experts of equal calibre to our own. In practice, however, they are not. The figures are startling. At the most recent trade round, the EU had 582 170WH representatives, whereas very small countries, such as Haiti, had none. The purpose of the advocacy fund is to ensure that developing countries are properly represented.
A counter-proposal from the Government is to give the Governments of developing countries budgetary support, so that they have the funds to provide representatives, but given all the competing priorities that those countries have to deal with, when the budgetary support comes through, it is not used for that purpose. Given the urgency of the negotiations in Cancun in September, where no time can be wasted, surely my party's proposal on the advocacy fund could be revisited.
The situation is all the more urgent because, as I was disturbed to learn from the Foreign Ministers of Tanzania, Malawi and Ghana at a recent meeting of the all-party parliamentary group on Africa, there is huge pressure on African, Caribbean and Pacific countries to be fragmented and not to speak with one voice at the trade negotiations. Yielding to that pressure would immensely weaken their position.
The advocacy fund could be used to provide experts of equal calibre to those who represent the rich nations to ensure that the ACP countries hold together as a cohesive group. There is no question that the European Union and the United States, as trading blocs, wield enormous influence in trade negotiations, against which fragmented developing countries find it very difficult to hold their own. I want to impress on the Minister that he should look again at our proposal.
I was encouraged to hear the hon. Member for Richmond Park speak about private investments. I do not think it was a heresy; the hon. Lady would expect someone from the Conservative party to understand the benefit of what she described—the importance of private financial investment in developing countries. The reality is that the scale of investment enormously overshadows our overseas development assistance; it is of huge significance. The Minister attended the same all-party parliamentary group as I did, and it was refreshing to speak directly to the representatives of developing countries and to hear from them what they want. They very much want private sector investment; it is important to put that on the record. It is not something that is being unwillingly inflicted on them, which is the impression that the anti-capitalist lobby sometimes tries to create.
Genuine private sector investment, responsibly done, can have a huge transforming power on development for good. I emphasise that it must be responsibly done, because we all understand the historical pitfalls and mistakes, and we do not want them to be repeated. However, the Minister might take one thing on board and actively promote it: he might recall that at the Rio plus 10 summit in Johannesburg, the London principles for corporate social responsibility were announced. They were completely lost in the media coverage of the negative aspects of that summit and its failure to make any real progress, but there were constructive, homegrown, City of London-based proposals for actively encouraging corporate social responsibility in relation to developing countries.
That was a significant development, because in the world stock markets there is much more interest by analysts in how the private sector conducts itself in 171WH developing countries; that is healthy. For example, every company quoted on the Dow Jones index is analysed according to an index of socially responsible investment—the Dow Jones SRI. Companies cannot opt out or in; if they want to be quoted on that stock market index they have to undergo a process of analysis. There is something similar in the City of London—the FTSE 4 Good index—although it is a voluntary process of analysis. However, companies that want to be seen to be playing a socially responsible part in development seek to be assessed according to whether they operate in a socially responsible way in developing countries.
Increasingly around the world, analysts consider matters that go beyond whether there is an entry in the company's glossy annual report. The process of analysis is detailed and in depth, and the really good thing is that because there is a variety of indices on the stock markets for assessing socially responsible investment, and a degree of competition between stock markets to find out how companies are operating, the different processes of analysis get to the bottom of what is going on. I am in favour of there being more than one index, because it is much more likely that bad practice will be picked up if experts analyse the different ways in which companies conduct themselves.
§ Dr. Tonge
This is fascinating stuff and I congratulate the hon. Lady. I am enjoying her contribution. Could those stock market indices be combined with the OECD guidelines that we have heard so much about? There is no compulsion on companies at present to obey the guidelines; they are merely advisory. Could they be combined with listing on the stock market? I do not understand how these things work.
§ Mrs. Spelman
I am not a technical expert in this area. However, my instinctive feeling is that they are completely different tools, but they may have a similar effect. I support the view that the OECD guidelines must be given more teeth. It is fine to sign up to these things, but if guidelines do not have any impact on the conduct of companies, how valuable are they?
The indices of corporate social responsibility are powerful because they affect the amount of investment that companies attract on the stock market. Companies are quoted on the stock market in order to attract investment so that they can expand and grow. If they have a black mark on the index of socially responsible investment, they do not attract investors. Originally, the concept was built up because many people—I count myself among them—want to have confidence when they invest in a company that it conducts itself in an ethical manner, especially in very poor countries.
This is one of the fastest growth markets for investment. It is no longer only the specialists who want to make ethical investments. A failure in terms of socially responsible investment has a wider impact on the market of potential investors in the companies concerned. The index is therefore a powerful tool, but it is different from the guidelines. However, those tools have a similar aim.
Another important subject is financing for development in the context of aid effectiveness. We all accept that developing countries are held back by lack of 172WH finance. All three of us—a select band—are politicians and we know that one of the problems in this area is that Governments of whatever persuasion have to make difficult choices about how to disburse public money—taxpayers' money and money levied in other ways over which the Government of the day have jurisdiction.
Overseas development assistance has to compete with a lot of other priorities, all of which are screaming for the Government's attention, and it has been difficult to meet the United Nations 0.7 per cent. target for ODA spending. All three of us are committed to achieving that target. It is depressing that we spend more as a nation on ice cream than on overseas development assistance.
As politicians, we are the people who, if in power, have to persuade our colleagues—especially the Chancellor of the day—to increase ODA spending. Every time the Chancellor has increased spending on that, it has been welcomed by the shadow Chancellor. However, we have also to demonstrate to the wider public that this is a good use of their money and that our aid is effective.
I encourage the Minister to look more closely at aid effectiveness. The hon. Member for Richmond Park mentioned the effectiveness of micro-credit, and I commend that to the Minister. It has been an incredible success with regard to finance in the developing world, flying in the face of the myth that if one lends money to poor people in developing countries one never gets it back. The default rate for micro-finance is minimal compared to default rates for credit given in rich nations such as ours. That has been a successful initiative that needs more encouragement.
I would like the Minister to comment on aid effectiveness and good governance. In terms of financing development, at the moment we have a tendency to make matters worse for some developing countries that do not achieve the sort of three-star rating that the hon. Member for Richmond Park referred to. We hold back development assistance—at one level, perhaps, understandably—from countries that are in conflict or corrupt, but there must be other ways to provide aid more effectively to countries that do not qualify for budgetary support by other means. We have rather a crude mechanism at the moment, in which financing for development seems to reward good performance, although we have not found a way of reaching poor performers more effectively. We need to find a more creative solution to that.
On development assistance, politicians of all parties who are interested in the issue of how to improve finance for development have to pass what I call the cab driver test: if we went out of the Chamber this afternoon and hired a cab, and asked the driver, "Do you think that we should spend more of taxpayers' money on overseas aid?", what reaction would we get? That is the test that politicians have to undergo at every general election when making choices about how to disburse money.
The problem is that there is quite a lot of public scepticism about whether the money really gets through. A stock phrase—it is very unfair to the Swiss—comes to mind: "Doesn't it all end up in Swiss bank accounts, Mrs. Spelman?" That is what people often say to me. "Can I give with any confidence? Can I be sure that the 173WH money will get through? How can 1 be confident that my taxes will trickle down to those that really need the money?"
The focus on aid effectiveness is inextricably linked to financing development. That is not as simple as upping the percentage of aid, or selecting countries that are performing quite well; it is a complex matrix. However, the test, and our purpose in trying to raise the finance needed in the developing world, is to ensure that money is demonstrably getting through to those who need it. I urge the Minister to focus on the suggestions that both Front-Bench spokesmen have made today on how to make the work of the Department even more effective.
§ Hilary Benn
With permission, Mr. Deputy Speaker, I would like to respond to this small but not imperfectly formed debate, which has once again proved Westminster Hall's unique capacity for allowing Members to come together and debate issues in a way that allows all who contribute to add something to our understanding of the problem.
I thank the hon. Members for Richmond Park (Dr. Tonge) and for Meriden (Mrs. Spelman) for their thoughtful and stimulating contributions. The debate is part of a continuing dialogue, not only between Members of Parliament, but with the people whom we represent and across the globe, as it must be if we are to make progress and make a difference. In the end, people will judge us on whether what we have done makes a difference.
Cynicism is not a trait that I associate with the hon. Member for Richmond Park, so I took heed when she said that she was slightly cynical about the international finance facility. I hasten to point out that in describing it this afternoon I was not re-announcing it. It is out there; I was simply describing what I genuinely believe to be a creative response to the identified problem of the shortage of the money that we need if we are to make progress in achieving the millennium development goals.
Of course, the IFF will work only if a sufficient number of people sign up to it, but the beauty of the idea is that it uses what people have already committed themselves to giving. People will have to provide the committed amount in the years ahead, but the scheme uses that commitment to borrow money for expenditure up front. The facility is a kind of mortgage, because it builds on the future repayment of bonds to produce a sum that can be spent earlier. That will allow faster progress to be made towards the millennium development goals. It is the best idea around that could enable us to do that.
When we read the Zedillo report and see that there is a $50 billion shortfall, it would be easiest to throw up our hands in horror and say, "Well, isn't it all terribly difficult, and isn't it sad that we can't make any progress?" Those involved in the political process are saying about the IFF, "Well, here's an idea; how about it?" We, and others who have expressed support for the process, are trying to persuade people that the IFF is a good idea that can be made to work and will address the problem that all of us are concerned about. It is no more and no less than that. If it were to succeed and if we were to persuade people of the benefits of the facility, it would be a practical contribution to solving the problem. I want to make that clear.
174WH We have debated trade reform at some length both here and in the main Chamber. We are at one about CAP reform, which the hon. Member for Meriden spoke about with some passion. As a country, we have been trying for a long time to reform the CAP. I think back to the famous renegotiations carried out by Prime Minister Harold Wilson in 1974–75, before the referendum. That process proved extremely difficult, but I regard what was achieved three weeks ago as a significant step forward. It has begun to break the link between payment and production, while recognising the fact that member states have different interests. It is right that the Government should come under pressure from Opposition parties to do something about it, but we know that a solution can be reached only if there is agreement among member states about the need to make progress.
§ Mrs. Spelman
What troubles me about the outcome of the reform talks is that, although the intention is to break the link, a significant number of domestic subsidies have a long transition period before they are phased out. We have seen that happen before. There is an added problem in that, because there is no peace clause for the domestic subsidies after 31 December, the long transition period could result in an all-out trade war unless the subsidies are phased out more rapidly or a peace clause between the trade partners is concluded.
§ Hilary Benn
I appreciate the hon. Lady's point. No one wants an all-out trade war. The onus is on everyone at the meeting at Cancun, in particular, to build on what has already been achieved by the agreement that has been reached and to recognise that it is only a step along the way. We must all acknowledge that more must be done, especially about subsidies.
The hon. Lady talked about support for advocacy. We both attended the all-party group meeting, and what was so striking about the contribution from the three Trade, Industry and Commerce Ministers was that they were absolutely clear about what they wanted for their own country. They did not say that they had not been able to think matters through; they knew exactly what they wanted.
We hear those voices far too rarely in such debates because, too often, the debate about what is good for developing countries is conducted between people from developed countries. I wish that we could hear the voices that we heard at that meeting more often. That would lead to a more informed debate in the media and throughout the country. I was struck by the fact that those Ministers knew what they wanted.
Ours is not a counter-proposal to the advocacy fund. We are already undertaking such work. From memory, we are in the process of spending about £38 million from the £45 million. We want to build capacity within the countries concerned. I say to the hon. Lady that the right place for that capacity to be built is in Finance and Trade Ministries because that is where policy is formulated, as it is in this country. In those circumstances, if we build such capacity for the long term using budget support and other technical assistance that we provide to Governments, we will enhance the capacity of representatives at such meetings to be clear about what they want.
175WH The hon. Lady referred to pressures to fragment the developing country bloc. It is important that developing countries stick together in negotiations and use the power that they have, recognising that in the end there will have to be an agreement in Cancun to stick up for what they think is important. They will say to us, as they said very clearly at the meeting, that if any progress is to be made we will have to deliver on agriculture, on TRIPS and access to medicine and on special and differential treatment, which we have not touched on this afternoon but which is extremely important.
§ Hilary Benn
We did support the French proposals, but they did not get anywhere at the summit. We will have to return to that issue when we get to Cancun.
On foreign investment, we are, I think, at one. The hon. Lady made an important point in reminding us of our own history as a country. How did we develop economically? To draw a parallel, during the development of the mills in Leeds, people came to the city because of what had happened in the countryside. The mills were established and people invested in them. At the time, the working conditions were very bad and there was a lot of poverty. The response to the disadvantages and to the problems created by industrialisation was not to say to the mill owners, "Please take your mill and get out of town." People decided to get organised and to do something to improve the working conditions, because they recognised that they needed a way of earning a living. The issue is how to enable countries to earn their living and to pay their way, and how to give people the chance of a job and the chance to bring up a family.
The point that the hon. Lady made about the role that foreign investment plays in the process is extremely important. Again, if we reflect on our own experience, in the north-east, as traditional industries declined, the first thing that we did was to cast around for other people, including foreign people, to come to invest in the area. The same is true for developing countries. When I went to Indonesia, I asked how the rates paid by foreign-owned companies there compared with those paid by domestic industries. I was struck by the answer: it turned out that the foreign-owned companies paid—from memory—12 to 20 per cent. more.
Of course, the rates are low compared with what is paid in the United States or the United Kingdom, but in comparison to what else is on offer for people and their families, they are actually better. We need to acknowledge that, while recognising that the circumstances of foreign investment, its confidence and its willingness to stay, will depend a lot on the framework of governance, on the rules and regulations, on the recourse to the courts and on all the things that we now understand much more about. Those all contribute to the prospects for economic development. Such development is what the countries want; they only want for themselves what we want for ourselves and what we have been able to experience because of our history.
176WH The hon. Member for Meriden was absolutely right—and I agree completely with her—about the increasing interest in companies' corporate practices and ethical reputation. Undoubtedly, one of the really powerful forces in society, which will encourage companies to do things better and to do them right, is the risk of damage to their reputation if they do things badly or do them wrong. Developments such as the ethical training initiative, the Dow Jones index to which the hon. Lady referred and the extractive industries transparency initiative that we launched, which gets companies and countries in those industries to be honest and open about who pays what to whom, are all steps to make the process more transparent.
We can use the pressure to which the hon. Lady referred to improve performance, because companies are concerned about their reputation. I understood that most forcefully when I was previously at the Department and I attended a meeting of an association that brought together all the British toy manufacturers. Very few of them manufacture in the UK; most do so abroad. The person making the presentation started with a slide that showed dead bodies in a toy factory in China which caught fire. He said to the assembled ranks of the industry that the reason why they were sitting there, talking about signing up to a code of practice for sourcing toys that they import into the UK, was that they did not want that—he pointed to the slide—ever to happen again. He made the point extremely forcefully, and that is one example of how one industry is trying to improve what it does.
I would be happy to write to the hon. Member for Richmond Park on micro-credit because some developments have taken place. She referred to the Grameen bank initiative that started the process. We support micro-credit schemes in a variety of ways, and I would be happy to let her have further information on that.
The hon. Lady raised the issue of the Africa and Asia development performance funds. We put some money aside at the start of the year to be called upon, during the year, by country programmes where we think that it can be used to good effect. We could allocate all the money irrevocably at the start of the year, but we need to bear in mind that progress is made at different speeds, some things may not work and there may be delay. We have simply used that device to ensure that we use the money that we have most effectively during the course of the year. That is how it works, and it is not a matter of anything else.
I agree with the point that the hon. Member for Meriden made about the importance of aid effectiveness, including the importance of delivering if we have pledged money. In general, the UK has a pretty good record. I know that the hon. Lady was not criticising us, but she is right to draw attention to the gap that can exist between pledges and the actual commitment of money.
On debt relief, only eight countries have reached completion point, but 26 countries have reached decision point, and the debt relief kicks in at the decision point. The international community increasingly accepts the need to review and top up at completion point because of the problems of continued debt 177WH unsustainability and the question of the impact of falls in commodity prices. We have pressed for that and we continue to do so.
The hon. Lady is right about the need for overseas development assistance. The last point that I want to make links that issue and the cab driver challenge that she gave us. She is right about the need to persuade the public, our parties and the Chancellor. The truth is that some Governments are more successful than others in having that debate. Some Chancellors listen more readily than others, as the current holder of that office has demonstrated. We can see what has happened to our overseas aid budget, in absolute terms and as a share of GNP, in the six years since the current Government were elected.
The debate demonstrates the power of the political process to make a difference, and the key phrase that arises from it is political will. This is a matter of the extent to which there is the political will to have an argument with the cab driver, to persuade the Chancellor, to argue with our constituents or to persuade the parties that we represent that the matter is a priority.
There are many different ways that we can have that conversation and apply our political will to make a difference, but increasingly the world understands how much we depend on, and are affected by, events that occur in other countries compared with the situation 20, 50 or 100 years ago. That is partly because we see more of those events on our television screens. That is a great 178WH motivator for political action because people see them, are appalled and ask why we are not doing something about them. That was the case with the famine in Ethiopia.
We are now getting coverage of what has been happening in the Democratic Republic of Congo—a terrible conflict in which millions of people have lost their lives. That was largely hidden from the world's view. How did we make the modest but not unimportant step of getting an international force into Bunia? It happened because people saw the conflict. Increasingly, we experience the consequences of conflict and the failure of states when people come to this country. Certainly when, as constituency MPs, we meet asylum seekers who come to us for help, we are brought face to face with the consequences of failing to do something about the problem.
Finally, there is the moral argument, which one can never escape. It simply is not right that 130 million kids do not go to school every day or that kids die because their countries, families and medical and health systems do not have the means to deal with completely preventable diseases. The debate really does matter, because it is about the future of the world.
We may be small in number this afternoon, but we have had a very good debate, and I am grateful to my two hon. Friends, and I call them that advisedly, for their contribution.
§ Question put and agreed to.
§ Adjourned accordingly at five minutes to Five o'clock.