Stephen's contribution to the CDC Bill Debate

Below is the text of Stephen's contribution to the CDC Bill on Tuesday 10th January 2017.

You can watch the speech here 

In July last year, as part of our ongoing inquiry, the International Development Committee visited the Democratic Republic of the Congo. As part of that, we went to see a hydroelectric power plant in the Virunga national park, which has been part-funded by the CDC. It is reinvesting a proportion of its earnings into community development projects and protecting the environment. The plant is bringing electricity to a region in which only 15% of the population has previously had access to power, and it has the potential to generate millions of ollars each year and thousands of jobs for local communities. I cite that because such projects are impressive and demonstrate the positive impact that the CDC is already having.

PAULINE LATHAM MP INTERVENTION - As the hon. Gentleman knows, I was also on that visit, and that is probably one of the most impressive projects I have ever seen. It provides light to so many people in the DRC who so desperately need it. Those are just the sorts of projects we have talked about and said that the CDC should be investing in more, because they create jobs and make life better for so many more people.

The hon. Lady is a highly valued member of the International Development Committee and I agree with her. The purpose of my remarks on Report this afternoon is to reinforce the point she made. Those are positive projects. We want to ensure that the high-quality we saw in that example in Congo becomes the norm for all CDC investments, particularly as the limit is increased, which I will come to in a moment.

The private sector provides around nine out of every 10 jobs in developing countries. Its development and success is vital in helping countries to achieve sustainable and long-term development. I therefore believe it makes sense to increase the CDC’s investment threshold.

Poverty reduction must be at the heart of the Government’s development agenda, which must explicitly include the work of the CDC. In 2011, the predecessor International Development Committee produced a report, “The Future of CDC”, as the group approached its then cap of £1.5 billion, as set out in the Commonwealth Development Corporation Act 1999. The Committee’s report concluded that the CDC’s mandate should be changed to a specific focus on poverty alleviation. Given that job creation is one of the very best ways to reduce poverty, it is important that the Government have a development investment arm that will help poorer countries to create new and innovative jobs.

As has been said by Members on both sides of the House, the CDC made significant changes following the 2008 National Audit Office report and the 2011 International Development Committee report in line with recommendations to move towards a focus on the alleviation of poverty. As has also been said, those changes were reviewed recently by a further NAO report released just before Second Reading of the Bill in November 2016. The report was mostly positive, and noted that the 2012 to 2016 investment strategy shifted the CDC’s investment focus to poorer countries, which is welcome. The report noted that the CDC had exceeded the targets agreed with DFID relating to financial performance and development impact. However, it also said that the CDC should do more to measure the development impact of its investments. That would not only provide a better basis for investment decisions, but increase the transparency of the CDC.

Poverty alleviation is absolutely central if we are to make a success of the global goals—the sustainable development goals agreed in 2015. Africa needs to generate 15 million new jobs every year if it is to achieve its global goals. That can be achieved only by working with the private sector, including organisations such as CDC. CDC has helped to create nearly 25,000 jobs in Africa and south Asia directly, and it says it has helped o create more than 1 million jobs indirectly. The businesses in its portfolio support around 18 million jobs. I am therefore happy to see the increase in the threshold, but I have a number of concerns to which I should like the Minister to respond.

MARK FIELDS MP INTERVENTION - The hon. Gentleman will know that I respect not only his passion, but the balanced way in which he deals with CDC issues. Does he share my concern that we risk having a more prescriptive approach towards the CDC, which is a part-private sector organisation, than we have towards a range of non-governmental organisations that are beneficiaries of large-scale DFID programmes, which might be somewhat distorting? Although he makes valid points about the concerns, if we are to hamstring CDC in the way that one or two of the proposals would have us do, it would be an undesirable outcome for DFID.

I am certainly not arguing for prescriptions to be applied to CDC that would not be applied to other organisations funded by DFID. My hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) has made the valid point that, shortly before Christmas, the Secretary of State set out a number of conditions for suppliers to the Department, and that they should apply to CDC. I am emphasising my support for the proposal to put poverty reduction at the heart of CDC. All hon. Members would agree that that should be at the heart of the Government’s entire development and aid strategy, including DFID. I can plead not guilty to the charge that the right hon. Gentleman puts to me. I am not proposing in any sense to hamstring CDC. I am certainly not proposing, and I do not believe the Opposition amendments seek, to impose any restriction on CDC that would be out of step with the restrictions we apply to other bodies funded through overseas development assistance.

STEPHEN DOUGHTY MP INTERVENTION - My hon. Friend makes a strong point, which is very much the point. The proposals are about bringing CDC more in line with DFID’s overall priority countries and sectors, and with the restrictions placed on other UK aid money.

I agree with my hon. Friend. I have read what the Minister said in Committee—reassurance can be gained from it—but I look forward to hearing him again today. It is very important that we have a sense that, with a very substantial increase in the potential money going through CDC, we will ensure that it is geared towards poverty reduction wherever it is invested. As my hon. Friend rightly points out, part of that is the question of which parts of the world and which countries the CDC will invest in. Investments in some countries can deliver a lot more jobs and poverty reduction than investments in others.

As I have said, I am happy with an increase in the investment threshold, but we must ensure that the money is spent wisely. The 2012 to 2016 investment plan has expired and we are yet to see the 2017 to 2021 investment plan. I suggest that it would have been beneficial for the Bill, the Government and CDC if Parliament had seen the plans for the next four years of investment before it as asked to raise the investment threshold. The amendment from my hon. Friend the shadow Secretary of State would ensure that, if the Government introduce regulations further to increase the limit, they would have to be preceded by a detailed plan of investment from CDC that could be scrutinised by Parliament. I welcome and support that amendment.

WES STREETING MP INTERVENTION - Successive Governments can be proud of the role played by DFID in improving lives and the economies of some of the world’s poorest countries but, in light of much of the public debate on international development spending, much of what my hon. Friend says on parliamentary scrutiny is correct in principle. Does he agree that that is absolutely essential for maintaining and building public confidence in international development spending?

I absolutely agree with what my hon. Friend says, which chimes with my conclusion on the importance of scrutiny of both CDC and the Government, including scrutiny by the House.

MARK FIELD MP INTERVENTION - I have a lot of sympathy for what the hon. Gentleman says—in the context of the debate it would be useful to have an idea of the programmes that CDC has in mind for the future. I hope that, when the Bill goes to another place, there is another opportunity to have one. However, does he recognise that, given the nature of CDC’s expertise and experience, it might to an extent have slightly different goals from other NGOs who receive DFID money? In other words, given CDC’s expertise, particularly its private sector expertise and experience, the absolute predominance of the alleviation of poverty could in some cases not entirely apply to everything it does.

The focus and priority needs to be on poverty alleviation. At the beginning of my speech, I gave the example of a project we visited—the hon. Member for Mid Derbyshire (Pauline Latham) reinforced the point. That project undoubtedly delivered things beyond poverty reduction, but at the heart of that investment and its impact was the reduction of poverty. Keeping the reduction of poverty in mind is a useful lodestar for DFID when it approaches the work of CDC. I would need some persuading that a project should be funded that did not have some connection to the alleviation and reduction of poverty.

Let me now turn to the issues of scrutiny that were referred to by my hon. Friend the Member for Ilford North (Wes Streeting). The recent NAO report, as was rightly said by the hon. Member for Bedford (Richard Fuller), revealed that the target development impact score is on average being met, but only on average. CDC is making some investments that fall below the target. Some 23% of investments since 2013 have fallen below the target score based on their investment difficulty and propensity to generate employment. Given that the objective stated in CDC’s current investment policy is to

“focus its investments into the geographies and sectors where there is the most potential for development impact”,

it is unclear why CDC is investing in projects that achieve lower scores. So I say to the Minister that, along with a more robust approach to measuring development impact, I would like a minimum threshold for impact implemented in the new investment strategy.

As with all DFID spending—and, indeed, broader aid spending by other Government Departments—the International Development Committee will scrutinise very closely CDC’s work in the months and years ahead. It is vital that we ensure the British taxpayer gets value for money for every pound spent on international development. As has been said on all sides of the House, the CDC has become more transparent following the Committee’s 2011 report and the NAO report in 2008, but more can still be done to ensure that money is being spent as well as possible. One way that could be achieved—I ask the Minister to explore this—is to allow the Independent Commission for Aid Impact to play a bigger role, for example carrying out a regular assessment of CDC investments, allowing scrutiny so we can really ensure full effectiveness and value for money of the programmes in which the CDC invests.

I think we can say that the CDC has been a world leader among development finance institutions in publishing details of its investments since 2012 under the International Aid Transparency Initiative. That is very welcome, but I suggest it would improve transparency further if it published similar details on its entire active investment portfolio, including those made prior to 2012. I ask the Minister to address that point when he responds to the debate. That would enable greater scrutiny of CDC’s entire portfolio and hopefully provide assurance to the public that all CDC investments are focused where they need to be: on the goal of poverty reduction.

In conclusion, I believe that the CDC has helped the UK to be a leader in global development, but as with any area of Government spending we need to ensure that every penny is going where it can have the greatest effect: the right places and the right people delivering value for money for the taxpayer. One way to achieve that is by regular scrutiny of the CDC, including by Parliament. I give a commitment that the International Development Committee will play its role in ensuring that we scrutinise and hold to account both the Department and the CDC as the additional money is allocated. Most importantly, as with all areas of development spending, we need to ensure that the ultimate goal is poverty alleviation and eradication, and that we never lose focus on that.