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Queen’s Speech

My Lords, my purpose is narrow. I look forward to the promised draft international development legislation, ""to make binding my government's commitment to spend 0.7 per cent of gross national income on international development by 2013"." I wonder why the draftsman slipped in the accurate word "spend". Surely, to be consistent, the word should be "invest". Everything else is investment, is it not? I declare an interest because I was the Commonwealth Development Corporation’s chief executive for some nine years, ending in 1994, in the days when CDC was of continuing and almost always friendly interest to Parliament. We were sometimes confused with the Overseas Food Corporation and groundnuts, but the OFC was summarily dissolved. CDC continues to this day and is still wholly owned by the taxpayer and a public corporation. I shall return to CDC later, but first I refer to two very differing economic achievements over the past 50 years, in Ghana and Malaysia. These two are now a classic case of dramatically different performance, about which I was first asked in Accra long ago, in the early 1990s. A group of businessmen challenged me to explain how it was that Ghana and Malaysia started at independence with the same income per head, 10 million people each, a comparable stock of natural resources, similar education systems and the legacy of British administration and law yet, after 30 years, Malaysians were achieving 10 times the Ghanaian income per head. I did my best but, whatever the explanation then, this startling disparity has continued. Now, with 25 million people each and with progress in each, Malaysia is a middle income country. While Ghana is well ahead of much of sub-Saharan Africa, its income per head is still only one-tenth of Malaysia’s. Twenty-eight per cent of Ghanaians are below the one-dollar-a-day poverty line, but only 5 per cent of Malays. I could offer an explanation, but it would be long and complex, following in the footsteps of Lord Bauer rather than those of Bob Geldof. No relevant comments can be found in the Africa Commission’s report of 2005, signed by both Tony Blair and Gordon Brown, nor in DfID’s 2009 White Paper, so I conclude that I am out of joint with the times, because I still believe in private sector economic development as the best and fastest way out of absolute poverty. Yet even if I am wrong, we need DfID’s explanation of the two completely different experiences of Ghana and Malaysia—or will the Minister provide the explanation today? It has already been the subject of discussion within Government. Given the belief that economic development, primarily but not exclusively driven by the private sector, is the surest way to achieve sustainable reductions in poverty, why does it not come top of the list of DfID’s objectives? For some reason, DfID believes that it cannot be directly involved, for example in contributing to the acquisition or even in the provision of the necessary foreign capital. Aspects of that leverage between public and private money were referred to by the noble Baroness, Lady Kinnock. No poor country is likely to find the capital it needs from its own savings—not on any acceptable timescale, at least—yet all that DfID believes we can do is to enable for some deferred future, pursuing good governance when we know it is very likely that people will govern themselves better when they are already better off. Indeed, I seem to remember that we were, from time to time, very critical of Malaysian governance as they progressed to middle income. A second DfID priority is emphasising climate change to people who have no electricity. A third is looking for less conflict, when we know that people will often only think twice about starting a fight when they have something to lose. In summary, our policies look forward to the often distant days of top-down success when we know that a degree of prosperity is a necessary condition for the rule of law and its acceptance. In addition, we politicise development and so slow it down by demanding solutions to the issues that trouble us, rather than by identifying economic opportunities and then, in partnership, exploiting them to improve the lot of people. Indeed, our eventual success or otherwise in Afghanistan will, in my opinion, turn on our ability to improve the lot of the Afghan people. We urgently need to identify economic opportunities and to overcome the obstacles to their development, including security. I fear that DfID is almost completely unsuited to the Afghan challenge. Your Lordships will not be surprised to hear that I now come back to CDC, which used to find economic opportunities in places where, and at times when, there was not market capital available. CDC went into these gaps to fund companies where the risk- reward prospects looked unattractive to quoted market players, and where the local skills base was not yet sufficiently developed. In order to offset this high-risk profile, CDC received modest injections of capital in the form of long-term Treasury loans on favourable interest rates. There is no such capability available to DfID today. Indeed, and most unfortunately, CDC is the subject of controversy and misunderstanding, as the recent frustrating and frustrated dialogue between the Public Accounts Committee, DfID and CDC clearly shows. Only Private Eye comes out a carping winner from this sad dialogue. The frustration is understandable; no parliamentary committee likes to find itself questioning a wholly owned public body that has negotiated its way out of parliamentary accountability. The history of its escape is revealing. In 1997, somebody advised Tony Blair to turn CDC into a public-private partnership, whatever that was meant to mean or to achieve. The public-private partnership written into the manifesto never happened. In its mistaken efforts to conform, CDC severely damaged its balance sheet. By 2004, it seemed to the Government that something—anything—needed to be done. It was then, by agreeing to CDC becoming a fund of funds in an attempt to clear up the mess made by the failed 1997 policy, that CDC escaped from its accountability and DfID was excused from a relationship that it found embarrassing. In effect, CDC now subcontracts its developmental role to third-party fund managers. It only takes responsibility for those with whom it places its money, and then depends upon the financial results of the fund managers who deploy that money. CDC has thus given up its responsibility for what happens on the ground. It manages no assets itself, so nothing that it says or somewhat petulantly protests in its reply to the Public Accounts Committee will gainsay the way in which the parliamentary chain of accountability is broken, or gainsay the very indirect relationship between CDC and our aid programme. The Government’s handling of its relationship with CDC has been a disgrace. DfID appears pleased to be shot of it, yet CDC is still 100 per cent publicly owned. What now drives CDC is for others to say, but it is not the British public policy in sub-Saharan Africa, or in the more difficult parts of south-east Asia such as Papua New Guinea or the troubled Solomon Islands. I believe it is high time that Parliament was told how the Government defend their stewardship of that public corporation. They should answer the question: where does hands-on economic development feature in DfID’s forward plans? At present, we seem to be overwhelmed by an inward-looking political agenda, with little time and space left for the vital task of economic development needed to lift the lost billion out of absolute poverty.