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Commonwealth Development Corporation

Volume 475: debated on Wednesday 14 May 2008

Motion made, and Question proposed, That the sitting be now adjourned.—[Ms. Diana R. Johnson.]

I very much welcome this opportunity to open a debate celebrating the 60th anniversary of the Commonwealth Development Corporation. The CDC came into being by way of evolution. Its genesis arose from a determination to assist in challenging poverty in developing countries. To achieve that development and to encourage enterprise, it was essential that those countries should be seen to make progress in sectors ranging from agriculture to health care, as well as energy and the provision of infrastructure.

The CDC was pivotal, and remains so, in giving assistance and encouragement in some of the most deprived areas throughout the world. Why? Because the very purpose of the CDC is to be a pioneering organisation that ventures into areas where other companies would not dare to invest. In doing so, it acts as a beacon, by setting a clear example and sending a confident message to the investment community that those areas positively invite business investment.

The CDC was a product of the Attlee Government and reflected the ethos of those post-war years. At home, we sought to introduce the NHS but, notwithstanding the colossal problems of that period, we also recognised our responsibilities to many others who, even then, were less fortunate than ourselves. It was Nye Bevan, the Secretary of State for Health, who introduced the NHS, and it was Creech Jones, who was Secretary of State for the Colonies, who presented the Colonial Development and Welfare Bill, which confirmed the role of the CDC.

Creech Jones said then:

“The Colonial Development and Welfare Act provides money for the improvement of the social and other services of the Colonies and helps to provide the basic services for further economic development in the form of improved communications, better agricultural services, water supplies and the like. This has been, and is, very useful. But it is not enough. An instrument is also required whereby we can undertake individual productive projects likely to increase the wealth of the colonies themselves and to stimulate the supply of products of which this country and the world at large stand in need.”—[Official Report, 25 June 1947; Vol. 439, c. 439.]

Today, I pay tribute to an organisation that has rightly moved with the times, addressing the problems of a modern world and working with its shareholder, the Department for International Development. Together, they play a significant role in achieving the millennium development goals. That was recognised by the statement of the Secretary of State for Environment, Food and Rural Affairs, my right hon. Friend the Member for Leeds, Central (Hilary Benn), the former Secretary of State for International Development, when he told the House:

“The purpose of CDC is to maximise the creation and growth of viable businesses in poorer developing countries, through responsible investment and mobilising private finance. The objective of the reorganisation is to enhance CDC’s capacity to fulfil its purpose, in particular the mobilisation of private and other third-party capital for investment in the poorer developing countries. This will contribute to the achievement of the millennium development goals”.—[Official Report, 12 July 2004; Vol. 423, c. 51WS.]

It was that foresight that led the Government to recognise that the CDC’s role had to change. In the ever-evolving world of business and investment, such change was necessary to reflect and keep pace with the challenges of globalisation. The CDC inevitably needed to be restructured and brought up to date; indeed, it has been restructured six times since its inception in 1948. Those changes were not simply meddling with the CDC’s role; they were about facing the fundamental new reality of changing times—a reality that any successful business needs to face.

The House recognises that the CDC, the private sector, the Government, non-governmental organisations and international institutions cannot themselves solve the problems of the developing world; Africa, in particular, has its own issues to address. The imperative for the CDC is to focus on where poverty and destitution resides across the globe and to offer a positive response.

Hon. Members will no doubt recall the International Development (Reporting and Transparency) Act 2006, which I had the privilege of piloting through the House two years ago, with wonderful support from the Under-Secretary of State for International Development, my hon. Friend the Member for Harrow, West (Mr. Thomas), who is here this morning. The main principles of that Act are reflected in what we expect from the CDC and from DFID itself. Those principles are poverty reduction—indeed, in time, the complete eradication of poverty; good governance; transparency; accountability; fair trade; a functioning civil service free of political control; and adequate infrastructures necessary to build and grow developing economies.

I would like to put on record my sincere thanks to my right hon. Friend for the work that he did on the International Development (Reporting and Transparency) Act 2006. However, since the Act has been introduced, can he tell us what evaluation has been carried out by parliamentarians on how effectively the Act is working?

I am grateful to my hon. Friend for his intervention. Perhaps the most significant development since the Act was introduced was that, last year, we had the first report to Parliament and, following that report, we had a debate in the House. That is the kind of accountability and response to parliamentarians that I hope to refer to further later on. I am grateful to my hon. Friend for the point that he made.

Will my right hon. Friend also acknowledge that one of the broader strategic impacts of the discussions that took place on the introduction of the 2006 Act, which he championed, is a demonstration of the continuing support of parliamentarians—particularly Labour Members, but hon. Members in other parties, too, and more generally outside the House—for continued progress to meet the 0.7 per cent. UN target on national incomes being spent abroad? Indeed, will he also acknowledge the continuing progress that the Government have been making to that end?

My hon. Friend the Minister is absolutely right, and he is entitled to say what he said, because he gave so much support to the 2006 Act. One of the main objectives of the Act was that the Government—indeed, all future Governments—should report on how they are achieving the 0.7 per cent. gross national income target. The truth of the matter is that, for a very long time and particularly during the last Government—I am not making a political point by saying that—we fell well behind what we were told should be the target, which is 0.7 per cent. of GNI. Therefore, it is perfectly reasonable and right for my hon. Friend to draw that to our attention, given DFID’s commitment to increasing international development aid and its endorsement of the other objectives of the Act, such as the millennium development goals and the transparency for which we called.

As a result of weak governance in developing countries, the private sector is often accused of being too avaricious. However, to their credit, diligent NGOs have provided numerous documents exposing such corporate abuses. Regrettably, that in turn has led to an increasingly common perception that those who invest in Africa or other emerging markets have done so at the expense of sustainable economic investment, environmental standards and good labour practices, including those on health and safety, and that, broadly, they have taken much from those countries and given very little in return. Thanks to organisations such as the CDC, that perception is slowly changing, but change needs to happen faster, and the CDC is one of our best instruments for bringing it about. Its status under Government ownership and its focus on profitability with best employment practice give it a unique opportunity to be a beacon.

A trend is emerging, in that how companies behave abroad has an impact on how they are perceived at home. People are asking whether they are responsible, reputable investors, and whether they engage in meaningful corporate social responsibility and sustainable ethical investment. Such questions are inevitably posed about the CDC itself.

We have seen a rise of single-issue campaign and consumer groups over the years. That is a sign that the consumer and, indeed, the investor have become more sophisticated about the choices that they make. Consumers weigh up a range of different aspects, whether choosing what they buy in their local supermarket or what companies to invest in on the stock market. Additionally, the power of institutional shareholders, such as trade unions, can bring much influence to bear on global markets and can effect behavioural change within companies. Doing business in a constructive, responsible manner is now considered a central tenet of increasing a company’s bottom line.

I hesitate to interrupt my right hon. Friend again, but as he is making a point about how ethical trading helps a company’s bottom line, will he join me in praising the work of the ethical trading initiative? As we approach the 10th anniversary of the initiative, will he join me in encouraging businesses that have not yet signed up to it—businesses that have large stores in our high streets—to take the opportunity in the run-up to the ETI’s conference in September to sign up to it?

Again, my hon. Friend the Minister is on the ball. We warmly welcome the ETI and observe that DFID is doing its very best to ensure that it is fully implemented and understood. I wish him and the conference well.

I now want to address the attitude to business. I understand where the Government are coming from with their ethical approach, and I know that my earlier comments about public perceptions are true. In common with other hon. Members, my postbag and inbox are full of mail on the issues that we are discussing, including fair trade. It is clear that a twin-track approach—not a choice between aid and trade but both—is required to encourage developing countries. That is acknowledged by the CDC.

In a recent newspaper interview, the current chief executive saw no contradiction between the demands of profit and social development. He stated:

“Most companies, if they want to be successful, will want to make sure they are not employing child labour, they are not spoiling the environment or pouring chemicals into drains. Behaving like this is not a conflict with being profitable. If you have employees who are not happy because they are not being paid properly, they are going on strike. If you pollute, the local environmental people will be on to you… There are certain areas in which we won’t invest—tobacco, drugs, pornography and armaments—but that’s it. If CDC answers to anyone, it is the Government.”

That last point is where parliamentarians necessarily become involved, because it is our job to hold the Executive to account. Indeed, that was the inspiration for the 2006 Act, as I know my hon. Friend the Minister will agree. It is all the more important when we recognise that the CDC is DFID’s largest asset, with net investments worth around £2.8 billion.

The CDC’s annual review entitled, “Generating wealth in emerging markets”, shows the diversity of investments across the whole range of geographies. Although Africa rightly remains a priority for DFID in delivering appropriate policy, there must be a recognition that extreme poverty exists in many areas of the globe, as the report states.

There are many examples of best practice in the CDC’s activities. When I visited Rwanda, I was introduced to the work of the Banque Commerciale du Rwanda. It was the CDC’s first entry into the country, which was still struggling after the genocide of 1994. As the second largest commercial bank in Rwanda, it can act as a catalyst in that resurgent sector. The CDC’s expertise helped to increase the bank’s market share from 20 to 25 per cent., and the bank has even started a leasing finance business for small companies. Thus we can see how the CDC’s investment in that area has far-reaching benefits for the whole of Rwanda’s economy.

We have to refer to Tatepa. It produces Chai Bora tea, which is Tanzania’s biggest selling brand, with a 55 per cent. domestic market share. The CDC’s involvement with Tatepa from its inception has had a significant development impact on the company, particularly on the working conditions of its staff, especially on the Kibena and Wakulima estates. Tanzania presents a particularly challenging trade environment for business. Despite that, the economy has enjoyed growth rates of close to 7 per cent. in recent years, and Tatepa has grown steadily, winning fair trade status.

In Kenya, Brookside Dairy produces superior quality milk, sourcing it from 80,000 suppliers. Seven per cent. of them are commercial farmers and the remainder are small-scale producers. The company’s sales depots now stretch from Mombasa on the east coast to Kisumu on the shores of Lake Victoria on the west coast. As well as selling to the domestic market, Brookside now exports to Tanzania, Uganda, Rwanda, Burundi and Mauritius. That is an example of development co-operation improving the lives of people not just in the country in which the investment is made, but those of people in the surrounding countries. Work is going on in central America, including Nicaragua, where there are many projects, and in Bangladesh and Fiji. I could go on, but time does not allow me to go into too much detail.

As well as celebrating the achievements of the CDC over the past 60 years, one of the main impulses for calling for this important debate is the uncertainty and speculation in the press about the future of the CDC. I feel that it is necessary to refer to that. The current investment policy expires at the end of this year and some sections of the media have reported that the Government are of a mind to sell the CDC. Plainly, I would not welcome that; nor would many hon. Members. In his closing statement, will the Minister reassure hon. Members in this Chamber about what exactly the Secretary of State has in mind for the CDC?

I said earlier that parliamentarians have the right to hold the Executive to account. That point was endorsed by my hon. Friend the Member for Paisley and Renfrewshire, North (Jim Sheridan). This is all the more relevant as the Government are the only shareholder in the CDC, so we parliamentarians have a responsibility and a vested interest on behalf of the taxpayer in respect of how the Government proceed with the development of the CDC.

Surely, the speculation surrounding the CDC must have an impact on investment, particularly in African countries. If parliamentarians are to have a role in overseeing whether the CDC will be sold off, surely that role would be ideally fulfilled by the Select Committee on International Development, which could consider the matter. As a member of that Committee, I would welcome the opportunity to speak to CDC representatives as well as the Government.

I welcome my hon. Friend’s intervention. I would encourage a close relationship between the Select Committee and the CDC. However, in respect of the specific point that I am raising, I urge a little caution on his part and invite him to wait for the reply from my hon. Friend the Minister, because we have been round this course before and I have a feeling that we might be reassured before the end of the debate.

I would not be doing a service to the CDC if I did not acknowledge that it has, from time to time, been the subject of criticism, as we have seen in some press comment. The excellent Library paper prepared for the debate gives a flavour of some of those criticisms. Today, it is important that the question of privatisation has been debated and, rightly, rejected. In common with the vast majority of non-governmental organisations, I and members of my party and others in the House, as well as those who have made a considerable input to development policy formulation, hope that the matter has now formally been put to bed.

I hope that my hon. Friend the Minister will join me in congratulating the CDC on its success. A sign of that success is that in recent years it has not received any funding from Government—actually, it has had no funding at all since 1996—yet has significantly expanded its business, which is welcome. That is a sure sign that the CDC has been meeting its commitments in terms of attracting third-party investors in developing countries and expanding the company at large. I hope that officials, Ministers, parliamentarians and the CDC will work together and support the organisation as it progresses and inevitably faces new challenges.

The CDC is not a unique organisation among European countries, although the people of Britain should be very proud of what it has achieved, not least because of its focus on the poor countries of the world. By European financial institution standards, the CDC leads the International Finance Corporation, the World Bank’s investment arm in poor countries, in terms of investment. Some 12 per cent. of the IFC’s capital investment is focused on Africa, the Caribbean and the Pacific, with the figure at 26 per cent. for all the European development investment institutions. However, 60 per cent. of the CDC’s investment is in Africa alone.

The CDC is delivering Government policy now and remains at the forefront of responsible private investment development. However, if we are to achieve the holy grail of complete poverty eradication, much more has to be done. The CDC has a good reputation in emerging markets. None the less, I urge Ministers and officials to work ever closer with the CDC in future. If the Select Committee wants to take a lead, I would encourage that. A focused, working, constructive relationship will ensure that the institution and its shareholder can go forward in tandem, so that the CDC plays a major role in meeting the Government’s poverty reduction goals.

I conclude by inviting my hon. Friend the Minister, and all my hon. and right hon. Friends in the Chamber this morning, to join me in congratulating the CDC in its 60th anniversary year. I am sure that my hon. Friend will support the organisation in its objectives. In doing so, he will reflect the enduring legacy of those Labour greats, Clement Attlee, Aneurin Bevan and Creech Jones and be true to their spirit and aspirations.

I had not intended to speak, but I saw my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) speaking on the monitor earlier and it struck me that I should congratulate him on making such a good speech on an important subject.

CDC representatives visited me some three or four months ago and took me through their projects and plans across the world, particularly in Africa. I subsequently visited the great lakes region of Africa, as I do from time to time, as my hon. Friend the Minister knows because he responded recently to a debate on that subject. The important thing about the CDC—I was not aware of it beforehand—is that it applies business assumptions to potentially emerging economies.

Rwanda is a great case in point, because when considering central Africa and the great lakes region, one tends to focus on the poverty and the terrible conditions—the violence that still exists in the eastern Congo area, and so forth—and forget that in the small country of Rwanda there is a potentially emerging economy. Among all the investors going into the region, although there are not that many, the CDC is one of the most important. I was fortunate and privileged enough to have breakfast last week with President Paul Kagame during his visit to London. We spoke for five to 10 minutes specifically about the CDC and how important priming investment is. My right hon. Friend mentioned that. When the CDC invests, as it has done in a fund in Rwanda, through Actis, and through that into a bank that is developing new products, it encourages other companies worldwide to come in as well. The CDC has a good reputation and one hopes that private sector organisations follow it.

I understand that most of the investment going into countries such as Rwanda goes into the services industry. However, investments are by no means constrained in that area. It just happens that in Rwanda, which I know a bit about, investment goes to telecoms, banking and to the emerging capital to buy such service products.

I wanted to make not so much a speech as an extended comment to congratulate my right hon. Friend on initiating the debate. It caught my eye, and I had not realised that it was due to take place. I listened to him, but I am not aware of the internal and organisational issues, and the question marks about the CDC’s future.

I am grateful to my hon. Friend for his timely speech. He mentioned Rwanda, and I put it to him that the importance of the CDC in an almost unique situation—many of us have been there and have seen the results of the genocide—is that people are now focusing on what can be positively achieved in commerce and jobs. That is bringing people together in a way that many of us in 1994 would have thought was beyond reach.

My right hon. Friend is absolutely correct, of course. The occurrence in Rwanda in 1994 was terrible, but development since then has been remarkable, supported not least by the UK Government, which I think is the largest bilateral donor to Rwanda, despite it being a Francophone country. He is right that when one thinks about these countries we tend to focus on the negative—the terrible things that are continuing to happen in some countries, the social conditions and so on. However, in Rwanda and countries where the CDC can help and for which similar funds are available from abroad, the accent is on the positive and what can be achieved.

People have their own views and comments about the leadership in such countries, and it is not for me to comment on that, but I believe from my contact with the leadership of Rwanda that it greatly appreciates the CDC’s investment and that the accent is on the positive. The Government and their investment arm, the CDC, place that accent on the upside, which from the perspective of contemporary developments in central Africa is not always the case—far from it.

I congratulate my right hon. Friend again on initiating the debate, and I hope that the organisational issues—I was not aware of them—in the CDC and the Department for International Development are sorted out to everyone’s benefit in the near future.

It is a pleasure to follow on from the hon. Member for Falkirk (Mr. Joyce), and I pay tribute to him for the significant work that he and his colleagues do on the all-party groups on Africa. He referred to his close interest in Rwanda, but I know that his interest extends to the whole region. I am delighted that he could contribute to the debate.

The hon. Gentleman is not the first hon. Member to be drawn into the Chamber by the oratory and approach of the right hon. Member for Coatbridge, Chryston and Bellshill (Mr. Clarke). I congratulate the right hon. Gentleman on securing the debate, and pay tribute to his sterling work over many years. He was able to draw attention to some of that in his speech. His legacy for all of us in the House is being able to monitor how Britain moves towards achieving its share of the millennium development goals and the like. He gave a comprehensive overview of some of the challenges still facing much of the developing world, and the importance of private capital and other organisations, particularly the CDC, in helping to achieve those aims. We owe him our gratitude for that.

Like the right hon. Gentleman, I congratulate the CDC on its significant achievement of reaching the age of 60. That is a significant milestone in anyone’s life—I have not quite reached it—not least for a public body. As he said, the CDC has been reorganised six or seven times over the years, and the question is what might happen next. I shall return to that.

I recognise that the public sector and the Government can play an important role in conjunction with the private sector in an area where capital may be in short supply. The challenge for the CDC and its ilk is surely to demonstrate how they are different—what they add to the overall process—by showing that without them, the investment would not have happened, or perhaps not in that form, without the tough ethical business arrangements that it seeks to put in place, or that the investment acts as a magnet to draw in other investors to help the economies of particular parts of the developing world to grow, as the hon. Gentleman highlighted. One of the challenges for the CDC is to demonstrate that in each of those areas it is a champion and market leader, without which much of the investment would not take place. Perhaps it must also demonstrate thought leadership to challenge the rest of the investment community to invest in particular ways. It should consider its infrastructure investments to ensure that they are sustainable, by investing as much in railways as it does in road systems and transport hubs.

There is a lot potential, and with due respect to the CDC’s management team, it is not always obvious in its annual review and broader detail of the annual accounts that that is what it is doing. None the less, the chairman, Sir Malcolm Williamson, highlights in the latest review that the CDC’s

“central purpose remains unchanged: sustainable economic development in the poorer countries of the developing world through responsible investment in the private sector.”

We all support that. The report also says:

“CDC has a long history of putting capital to work in some of the world’s most challenging economies.”

That perhaps encapsulates its unique role.

The figures are impressive and the right hon. Gentleman referred to a few of them. For example, £1.4 billion has been committed to 42 fund managers who are investing in 100 funds, and the asset base has increased two and a half times since 2004 to £2.7 billion. The report properly highlights that at the end of 2008, the investment policy and arrangements that were put in place at demerger will come to an end. That must introduce some uncertainty, and, like the right hon. Gentleman, I hope that at the conclusion of this short debate, the Minister will be in a position to address that uncertainty.

The hon. Member for Paisley and Renfrewshire, North (Jim Sheridan) and others highlighted the issue of whether the CDC is ripe for privatisation. We should bear in mind that the Treasury has just forked out an unscheduled £2.7 billion for the great Crewe tax giveaway—every little helps, perhaps. The CDC’s chief executive raised the issue of privatisation and put it in the public domain when he was interviewed on the “Today” programme in April, and he certainly did not rule it out. He indicated that it had been considered, that it had advantages, that it would be good for the public, that it would provide an opportunity for the Government to raise money, and that it would leave the CDC intact to continue investing in the poorest countries. It would be interesting to know what lies behind the choice of some of that vocabulary, and perhaps the Minister will tell us. We must be mindful that privatisation is a serious option, but the House is not at this stage in a position to judge whether it is a good move.

In an attempt to understand more about the companies that the CDC deals with, at the start of the process I tabled a series of parliamentary questions on it. I sought to get copies of the accounts of the many different subsidiaries of the CDC placed in the Library of the House. The Secretary of State responded to my question by stating:

“CDC had 79 subsidiary companies at 31 December 2007…Where they are required to do so by their relevant regulatory authorities, these subsidiary companies file their accounts in those countries and with those authorities. Accounts are therefore not available from CDC, but from the regulatory authorities in the countries in question.”—[Official Report, 20 March 2008; Vol. 473, c. 1273W.]

I was completely taken aback by that answer because it struck me as strange that the CDC does not itself have any copies of those subsidiary accounts here in London. From time to time, I am forced to disclose that in anther life I was a chartered accountant. I paid my dues and spent more hours than is reasonable auditing companies across the United Kingdom. I cannot remember an occasion when the parent company in a group of companies did not have the formal statutory accounts of each of its subsidiaries, even if they were just filed away and gathering dust in the corner.

I wrote to the Secretary of State and asked whether he would address that point. He has not yet answered—perhaps it will come following this debate. However, I also asked for further information on the details of the subsidiaries and what regulatory authorities they were registered with. He responded by stating:

“CDC has confirmed that there is no requirement for the company to hold the information on the regulatory authorities with which their accounts are filed. However, they do require subsidiary companies themselves to comply with their respective local country requirements on regulatory norms for filing and submission of accounting information.”—[Official Report, 3 April 2008; Vol. 474, c.1226W.]

A list of the subsidiaries was appended to that response. If one looks patiently at the subsidiaries, about eight or nine of them are registered in the United Kingdom. Even if we accept what has been said about the other companies, I still find it a little strange that the subsidiary accounts for the UK companies are not available for the CDC.

I have followed the questions that the hon. Gentleman tabled and the responses he received. It is perfectly reasonable for him to pursue those lines of inquiry. Does he agree that essentially two points emerge from it? First, there is a case for the CDC to work much more closely with parliamentarians. Secondly, given our endorsement of transparency and accountability, the CDC itself would be moving forward if it took the lead in introducing the kind of transparency that he advocates. That would send a message to the developing countries that the CDC seeks to serve.

I agree. I would like to put on the record that I have held a meeting with the CDC and, in due course, I hope to meet the chief executive. The CDC has been unfailingly courteous and helpful in the discussions I have had with it so far. I want to make it clear that I am not casting aspersions on the company, the Secretary of State or anyone else. I am simply saying that when there is some doubt—although that will perhaps soon be extinguished—about the future of the CDC, greater transparency is the way forward, as the right hon. Gentleman has said. Having greater transparency would address any fears or doubts on the matter.

The subsidiaries matter because they are part of understanding the nature of the beast—particularly in terms of its taxation structures. The new business model means that most of the investments are made through fund managers into particular companies and are no longer held directly. The regulatory requirements in many of the countries concerned require a subsidiary of the CDC to hold the investment and the fund, not the CDC itself. However, how those subsidiaries are structured and how they hold that investment matters, not least for taxation purposes. An issue that is surely at the heart of the debate is ensuring that people pay the right amount of tax and that they fulfil the right criteria in doing so. If we wish to set an example, we should do so in our investments through the CDC.

Again, I am not making allegations or suggesting there is anything untoward. However, it is noticeable that on different occasions, investments are being made through what we might call tax havens. That was acknowledged by the chief executive on the radio and elsewhere and is evident in the accounts. Part of the justification for that is that the CDC would not otherwise attract other investors. If that is the sole criterion, I would like to know more detail about it. That policy must be better understood so that we can get to the heart of the taxation treatment of this organisation and how it might be being prepared for either a long life in the public sector or for some form of privatisation in the near future.

If one is truly diligent—I do not claim any great diligence—and reads the relevant note in the accounts from the past year, there is, in modern accounting parlance, an interesting footnote that illustrates all the taxation treatments and how they reconcile for what looks like a small tax charge back to the fairly impressive profits that have been made. Much of that is to do with the fact that the CDC is not liable to pay tax in the UK, whereas its subsidiaries overseas are.

Perhaps it would be useful if I brought the hon. Gentleman’s attention to a question. Is he aware that the CDC is not required to pay tax to central Government? We have deliberately exempted it from having to pay tax so that it can invest all of its moneys into businesses in poor countries.

I am happy that the Minister has emphasised that point. I hope that he did not infer from what I was saying that I was suggesting that there was something wrong with the CDC not paying tax. It is an entirely legitimate policy decision to free up more capital for those investments. Without overstating it, my interest is in the taxation treatment of the subsidiaries, how they are structured and how that is relevant to the future of the company.

I do not want to be rolled up and put in with the other conspiracy theorists whom I am sure the Minister and others have to spend half their lives dealing with when responding to questions—although I am sure that is a delightful job. However, in recent years, following the sell-off of Actis, questions were asked after the event that have not yet been adequately answered. It is entirely fair and proper that Members of the House ask at least some of the relevant questions in advance of what may or may not happen. The CDC has a strong ongoing relationship with Actis, which was sold off in 2004. Actis is one of the most important, but not the only, fund manager that handles the CDC’s investments. Questions about that sell-off relate to the valuation method used and the role of former CDC employees in the sell-off, particularly regarding the potential conflicts of interests that might have arisen. Again, we need to have the relevant information to make a judgment on that. I hope that we will be able to do so.

On 21 February, I wrote to the Comptroller and Auditor General and asked for the sell-off of Actis to be investigated. I was pleased that on 27 March, Mr. Burr confirmed that he has asked his staff to

“examine the reasonableness of the sale price and the profit sharing arrangements agreed in 2004.”

It would be a great service to the House if we knew the answers to those questions so that we can either put the issue to bed or raise further issues.

I do not want any of the questions to take away from the point of the debate, which is to congratulate the CDC on 60 years of impressive and important investments in difficult parts of the world. I hope that, as a result of the debate, we will begin to tease out answers about the CDC’s future and its role in leading-edge sustainable, responsible investment and in challenging other businesses, as the Minister said, to sign up to the ethical trading initiative. Sixty years of progress and achievement are being marked today. We hope that there will be another 60. At the very least, we are at the start of a lively debate, rather than at the end of one.

It is a pleasure to serve under your chairmanship for the first time, Mr. Weir. I start, of course, by congratulating the right hon. Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) on securing this timely and very important debate. If he will forgive my saying so, it also serves as a celebration of his commitment to the issue, which was demonstrated not least by his private Member’s Bill, which is now the International Development (Reporting and Transparency) Act 2006. He made great reference to the transparency and accountability of the CDC to parliamentarians and to the Government—an issue to which I shall return. He also outlined very well the organisation’s development over the past 60 years—how it has evolved and successfully changed with the times. Like other hon. Members, I congratulate the CDC on its achievements over the past 60 years. That is worthy of celebration in today’s debate, and I look forward to the organisation operating successfully around the world for many more years.

As I said, the right hon. Gentleman made a key point on the CDC’s accountability to Parliament. I should like to explore that in a moment. We also had a brief but informed contribution from the hon. Member for Falkirk (Mr. Joyce), who once again demonstrated his first-hand knowledge of various such organisations in the field and the value of their work. The other day, I met a fascinating chap called Seb Bishop, whose efforts can be seen on a Channel 4 programme called “Millionaires’ Mission”. He went to Rwanda and, by using his own private investment in a village, ended up building a school and a hotel. The hotel has now been set up, connected to the school, and people pay to stay in the hotel and teach at the school. The funds generated by that project have created a self-sustaining educational establishment that is now servicing the areas for many miles around. That was a very good example of the type of work that we should be encouraging and of the areas in which the CDC, on a small scale and on a large scale, can make a major contribution.

We then had a very knowledgeable contribution from the hon. Member for Berwickshire, Roxburgh and Selkirk (Mr. Moore). One of the most interesting points that he made to start with, before he went into detail on the CDC’s accountability and transparency—I will probably not add anything to that, because he gave all the required detail—was that the CDC needs to establish some comparative advantage. It needs to establish what specific value it can add and how that value complements other organisations around the world. It must also ensure that it continues to act in the interests of the UK Government and DFID.

I shall touch on some of the CDC’s aspects that I feel are important for us to understand and to praise, and perhaps even a few that we should question. It is clear that the CDC plays a leading role in international development-based economic investment. The broad remit outlined by the investment policy drawn up by DFID has allowed the CDC to demonstrate to the private sector that returns can be made from emerging markets in less developed countries.

Sir Malcolm Williamson, the CDC’s chairman, said:

“Emerging markets are not for the faint-hearted. CDC has a long history of putting capital to work in some of the world’s most challenging economies. We are a patient investor and remain committed to these markets. CDC’s long term commitment is vital in uncertain times and serves as a reminder of the development impact of our capital.”

Like many others, I agree with Sir Malcolm. The CDC’s link to DFID allows it to carry out that long-term economic investment and clearly demonstrates the commitment of successive UK Governments to economic growth as possibly the most powerful method of lifting people out of abject poverty.

The right hon. Member for Coatbridge, Chryston and Bellshill gave many examples, and I shall add just one to the list: the investment in the Fairtrade tea company Tatepa in Tanzania, which has led to the creation of 27,000 jobs for small growers. Such successful sustainable projects can be achieved only through long-term investment by organisations such as the CDC and should be commended.

However, the sole focus on economic growth, creating jobs and raising revenue as a means of development has led to criticism in some parts that the investment of the CDC’s capital in certain projects has not always acted, albeit perhaps inadvertently, entirely in line with DFID’s goals. Critics highlight the actions of Globeleq, previously entirely owned by the CDC until it was floated on the US stock market in 2006-07. Before it was floated, there were reports of companies in which Globeleq, and therefore the CDC, had invested whose policies were proving counter-productive to the aim of ultimately alleviating poverty in the developing world.

Let me give just a couple of examples. Since Globeleq took control of Uganda’s national grid in 2005, domestic electricity prices have risen by 70 per cent. Of course, there may be other underlying reasons for that, but the first impressions of the local population, which are all-important, were not good. In 2004, tribes from Papua New Guinea, backed by Friends of the Earth, sent the then Secretary of State for International Development a compensation claim for £25 million that related to the damage caused to their land by CDC-funded Higaturu Oil Palms.

Such work will always be controversial, but it is only fair to say that such occurrences are very rare. It is, however, worth noting the comments in the report by the Select Committee on International Development entitled “Private Sector Development”. Paragraph 119 in chapter 5 stated:

“CDC’s portfolio of investments must continue to be carefully scrutinised for their overall contribution to poverty reduction. CDC’s social and environmental record is patchy and we recommend close monitoring by DFID on where and how CDC invests. Acting as an investment catalyst is a necessary but not sufficient contribution to poverty reduction: CDC must ensure that its ‘development footprint’ is a wholly positive one.”

The hon. Gentleman made a number of comments about Globeleq’s role in Uganda and elsewhere, albeit with the important caveat that other factors may have been at play in the problems that relate to electricity generation there. Is he aware that, in Uganda, Globeleq has helped to increase access for an additional 20,000 households a year—some 8,000 above the target that was initially set—and is he aware of the work done by Globeleq in Tanzania, which has led to the price of power to the distributor being reduced by almost 50 per cent.?

I am grateful to the Minister for intervening, but perhaps he is being slightly over-sensitive. As I hope I made clear, the occurrences referred to are very rare. The reason why I highlight them is that first impressions are the ones that count. I am trying to establish that it is vital that the CDC’s work is entirely in line with DFID’s stated objectives, because all too often it is easy for those who are quick to criticise to pick up on such examples and then the good work that he rightly highlighted can be lost.

The Select Committee report also highlighted the fact that the CDC’s work, however worthy, remained one private-sector development initiative that appeared to be inadequately linked to a broader strategy. The CDC’s role to demonstrate to the private sector that returns can be made in emerging markets despite the perceived risks is important if the economies of developing nations are to grow.

I believe that the CDC should look closely at the model being implemented by the African Development Bank, under the leadership of its president Donald Kaberuka. I spent a week at the bank at the end of last year, and it was clear that the bank had decided that it’s comparative advantage centred around infrastructure. It actively sought to encourage private sector involvement by helping to remove the political risk that so many private sector companies feared; at the same time, it ensured that projects were de-conflicted with each other and were directly in line with the bank’s stated aims. In light of that, will the Minister outline how the CDC’s development footprint can be improved, thus taking the Select Committee’s comments on board and ensuring that it remains a wholly positive one?

The CDC’s investment strategy, in line with the investment policy outlined by DFID, has demonstrated to the private sector what can be achieved in emerging markets. Although the CDC has been leading the way by investing in less developed countries for the past 60 years, it has also had a major impact on improving people’s quality of life. Infrastructure has been improved, jobs have been created and standards of living have gone up, although more needs to be done.

The CDC’s work may be the tip of the iceberg; but in the main, its efforts have been supported by DFID and many NGOs, as well as by the wider international community. If only the Minister had waited, he would have seen how balanced my comments are. By looking past the risk to the potential, unlike the private sector, the CDC has invested where others have not dared to tread. In turn, that has ensured the success of many projects that would have failed if they had been left entirely in the hands of the private sector.

Although the CDC and its subsidiary companies have invested in emerging economies that have often been described by private sector economists as being too risky, the CDC has experienced a 79 per cent. increase in total returns after tax—up to £672 million in 2007. At the same time, net assets rose 33 per cent. to £2.7 billion. With the profits being reinvested in emerging markets and less developed countries, the CDC’s power to lift people out of poverty through economic empowerment continues to grow. However, there have been limited criticisms of the Government’s target of a 5 per cent. market return on investments; the feeling is that returns should be balanced at directing finance where it is most needed to reduce poverty. Will the Minister say whether he considers a 5 per cent. market return to be reasonable given the changing economic circumstances and what the reinvestment priorities should be?

Sticking with capital, rumblings also continue over what the CDC’s future direction should be. Should it be doing more, and if so, should there be an injection of capital into the organisation and how best should that be done? As the right hon. Member for Coatbridge, Chryston and Bellshill said, the last injection of capital was made in 1996, under a Conservative Government. It has been argued that an extra £500 million should be injected into the organisation. That, of course, is not a dissimilar amount to that given by the Government in the latest replenishment of funds for the African Development Bank shortly before Christmas. Is that view shared by the Minister? If so, how exactly do the Government intend to raise the money?

I hope that the Minister will outline his vision of the CDC’s future, not only for its funding but in establishing or reinforcing its comparative advantage, as other multilateral organisations have been forced to do recently.

I am grateful to the hon. Gentleman for making a carefully considered and well-researched speech. He will be aware that a number of hon. Members have spoken about privatisation, and we look forward to the Minister’s reply on those speculations. Will the hon. Gentleman take this opportunity to tell the House the Conservative party’s view? I am sure that it will be an important consideration.

I am grateful to the right hon. Gentleman. Many people seek my party’s view on many issues, as they sense a potential change in the wind. I hope that he will forgive me for not taking that opportunity today. He is absolutely right that the subject needs careful consideration, and he does not really expect me to make policy on the hoof, so I shall resist the urge. All will become clear in due course.

Will the Minister outline his view of the future of Actis and Aureos—the companies established in 2004—not least because I believe that Actis’s contract to negotiate and manage the investment of the CDC’s capital in developing countries is due to expire at the end of this year?

There is much to celebrate on the 60th anniversary of the Commonwealth Development Corporation. I believe that there is broad agreement across the House that, although the CDC still has room to improve its development footprint and the further integration of its goals with DFID and other players in the international community, the important role that it has played and continues to play in promoting and facilitating economic growth in countries where private sector foreign investors sometimes fear to tread is vital if we are serious about building sustainable economies and institutions in developing countries. It is right that we should celebrate those achievements today.

I join others, Mr. Weir, in welcoming this opportunity to serve under your chairmanship. I congratulate my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) on securing this debate. I join him and others who have spoken today in congratulating the leadership and staff of the Commonwealth Development Corporation on its 60th anniversary.

My right hon. Friend invoked the names of Clement Attlee, Aneurin Bevan and Creech Jones, giants of our party’s and the nation’s history. As he mentioned those names, I realised that a potential minefield was opening up before me. The fact that he was able to secure the presence of my hon. Friends the Members for Paisley and Renfrewshire, North (Jim Sheridan) and for Falkirk (Mr. Joyce) and of my right hon. Friend the Member for West Dunbartonshire (John McFall), the Chairman of the Treasury Committee, served to underline recognition and awareness of the CDC across our party. I also note the continuing interest in the subject of the hon. Member for Berwickshire, Roxburgh and Selkirk (Mr. Moore); I shall deal later with some of the specific points that he raised.

I hope that the hon. Member for North-East Milton Keynes (Mr. Lancaster) will forgive me, but although his speech was balanced and although he raised one or two perfectly legitimate points, his opening comment about perceptions being important was an obvious truism given the arena in which we all have to work. Surely it is incumbent on us, as Front-Bench spokespeople, to deal with the substance and to correct erroneous impressions. Some erroneous impressions have indeed built up about the work of the CDC, but I shall come to them in a moment.

The hon. Member for Berwickshire, Roxburgh and Selkirk spoke about the need for the CDC to be a thought leader. That point was also made by my hon. Friend the Member for Falkirk and more generally by my right hon. Friend the Member for Coatbridge, Chryston and Bellshill. The Government need to do more to help to develop the private sector in developing countries. We need to consider what more we can do to catalyse more investment and interest in African and other developing countries not only by British businesses but by the international business community.

What interested me about the contribution of my hon. Friend the Member for Falkirk is that President Kagame, whom he met last week, is in London to attend a meeting convened by the Prime Minister. Seventy chief executives and a number of figures from the international donor community, including from the United Nations Development Programme, are in the UK to consider what more can be done—given that this year we are halfway to achieving the millennium development goals—to galvanise investment and interest from the private sector internationally in our efforts to tackle poverty. The CDC can continue to play an important role as we look at how to develop effective private sectors in the most challenging circumstances in the poorest developing countries.

I give an example that demonstrates the importance of that role. I do not know whether the CDC is considering investments in Afghanistan—that is not my point—but Afghan farmers invest time and effort in continuing to grow opium poppy partly because of the absence of alternative livelihoods that would generate sufficient income for them to be able to send their families to school, receive hospital treatment and so on. On occasion, they continue to grow opium because they lack the ability to access finance in a way that we would recognise. The effort to develop an alternative private sector and financial institutions that we would recognise in Afghanistan, which could loan money to Afghan farmers, help them to save and so on, must be a priority for the international community. Anything we can do to galvanise interest, not only in Afghanistan, which may be in a particular situation, but more generally in the developing world, from financial institutions and the private sector can only help.

An issue for the future of the CDC is how we can work with it and continue to refocus the effort, talent and imagination within the organisation on the most challenging markets in the poorest countries. The corporation has had many successes in the emerging, now middle-income, economies of the world, and in the poorest countries, but if we are to continue to get the best from the talent of its staff, we need to continue to work with it to ensure that it is focusing on the most challenging countries.

In recognising the good work of CDC staff, will the Minister give consideration to recognising formally the work of the CDC and in particular its 60 years of good work on its anniversary, perhaps not today, but later? Perhaps the Department has already done so.

One reason why I welcome the debate is that it has given us the opportunity to acknowledge the considerable contribution that has been made by existing staff at the CDC, to whom I again pay tribute. However, we should also recognise that we need those talented individuals to continue to work in the most challenging circumstances if we are to maximise the opportunities that the corporation provides as our development efforts go forward. I shall reflect more generally on my hon. Friend’s point—although we should celebrate the 60th anniversary and 60 years of progress, we also need to look at how we can use the occasion to concentrate on what else the CDC should do.

As my right hon. Friend the Member for Coatbridge, Chryston and Bellshill said, the organisation has a distinguished history. It has taken several forms since it was founded in 1948 as Britain’s first development institution through to its present incarnation. Rightly, my right hon. Friend said that throughout its 60 years, it has had the same mission—to reduce poverty by promoting economic growth in poor countries. However, as he acknowledged, ideas on how best to tackle poverty in developing countries have evolved in those 60 years. From a belief that the developing world should produce the commodities and raw materials that industrialised countries need, we are now convinced that the way to defeat poverty is to produce more sustainable, broader-based economic growth in poor countries, and to bring poorer countries into the global economy by increasing trade and investment. Such sustainable growth can be achieved only by building a sound private sector, which provides the type of jobs that we would recognise and generates commerce and trade. Our approach to poverty, and therefore the way in which the CDC mission is implemented, has changed to reflect that. From being an occasional source of credit, often to agricultural enterprises such as tea plantations, the corporation now provides investment capital to help businesses in poorer countries to grow and develop.

The value of the corporation’s investments stands at some £2.7 billion.

I am extremely grateful to my hon. Friend for his considered reply and for his truly remarkable commitment to everything that Creech Jones set out to achieve—he is a first-class Minister. Of the first Adjournment debate that I introduced in the House, one profile writer said that it was rather surprising, given my local government background, that I chose to speak about the Philippines. The CDC’s message even at that time was that some things were going wrong—in the Mindanao palm oil project, for example—in employee relations and other aspects of the commitment. Nevertheless, it emerged that the CDC accepted its responsibilities to ensure, in so far as it could influence matters, good employment practices, as the Minister will confirm. As was mentioned, the environment is crucial to the CDC’s objectives. Does the Minister agree that we regard such objectives as a priority?

We do regard those objectives as a priority. My right hon. Friend underlines the phrase that the hon. Member for Berwickshire, Roxburgh and Selkirk used about the need for the CDC to be a thought leader on that work. My right hon. Friend rightly alluded to the fact that businesses operate within particular climates and legislative requirements in particular countries. We sometimes need to deconstruct the circumstances and environments in which businesses operate from the practices of organisations or their subsidiaries. However, that does not in any way negate the responsibility of businesses, hence our support for the ethical trading initiative, for example. It means that we must work through our aid programmes to help developing countries to put in place the appropriate standards and regulatory framework within which the business community operates.

I was detailing some types of CDC investment. A number of hon. Members referred to the continuing role of the corporation in agriculture, which of course remains hugely important for poor countries. The CDC has investments in fruit, flower production and a range of other commodities, but it also invests in many other perfectly legitimate economic sectors such as the financial sector. More than £100 million is mobilised for investment in microfinance. As the hon. Member for North-East Milton Keynes said, it also has considerable involvement in the power sector. Both those sectors are critical to the economic development of poor countries. A sound financial sector helps economies to have the credit and financing that they need to develop and expand. The CDC’s investment in the Banque Commerciale du Rwanda, for example, led to the launch of new savings accounts and personal loans, which had not previously been available to customers.

As we have heard, the CDC has been a major player in developing-world power generation through Globeleq, and it has a series of investments in Asia, Africa and the Americas. I make no apology for the fact that it is investing in energy generation, because access to power will be one of the things that underlines our ability, or otherwise, to make progress on meeting the millennium development goals. We cannot make progress on providing access to schools and health care or on developing the private sector if people do not have reliable access to electricity. Many of the company’s electricity investments were sold to private buyers last year, and the cash raised—$1.2 billion—is largely being ploughed back into developing new power facilities for developing countries.

Today’s CDC looks very different from the original Colonial Development Corporation that Creech Jones set up. It now invests through 40 investment managers around the world, including Actis, the fund management company that we de-merged from the CDC. Many of those managers are based in the emerging economies themselves, so the CDC is developing the financial services sectors of those countries, too.

By requiring fund managers to apply business principles that demand proper environmental, financial, health and safety and labour standards in their investee companies, the CDC also promotes effective corporate social responsibility. That is a key point, and the CDC has a key role in that respect. By investing in poorer markets that private investors are reluctant to enter and showing that responsibly run companies can be good investments even in those markets, the CDC has been able to attract more private inward investment—£325 million last year alone—to countries that badly need it to drive economic growth.

As all hon. Members have made clear, the CDC needs to demonstrate developmental impact as well as financial success. Some of that impact will come from its responsible business principles and from showing that companies can look after their employees properly and be financially successful at the same time. Many of the companies in which the CDC invests also provide housing and social services for employees and their local communities.

Several hon. Members raised the example of Tanzania Tea Packers, in which the CDC invested $75 million. As my right hon. Friend made clear, the company has gained Fairtrade accreditation. However, it is important to reflect not only on the financial success of that investment, but on the fact that the Fairtrade price premium that Tanzania Tea Packers has been able to secure has allowed schools, health centres and an extensive HIV/AIDS education and training programme to be financed in local communities.

That example is replicated in all sorts of other places. In Bangladesh, for example, the BRAC bank is providing microfinance services such as small loans and savings services to tens of thousand of poor people who had previously been excluded from traditional financial services. In India, CDC investments in a 1,000-strong taxi fleet in Mumbai are helping to demonstrate that first-world vehicle and driver safety standards can be implemented in a developing country. There is a series of examples of the way in which the CDC is having a developmental impact while being a financial success.

My hon. Friend mentioned Mumbai, which I visited about a year ago as part of a group considering the very big problem of tuberculosis in India, where 1,000 people still die each year from that preventable disease. Among many other things, we discovered that some companies were willing to make a contribution and to become involved in research into prevention. Given the ethos that my hon. Friend rightly associates with the CDC, does he not agree that such an approach is right for the organisation? Indeed, it is seeking to inspire other private companies to take the same approach and to accept their responsibilities to people in the communities in which they invest.

My right hon. Friend makes an important point. The work by the CDC that he highlights is an exemplar for the business community more generally. We are working in all sorts of ways with many businesses that want to put something back into local communities and which recognise their responsibilities to their employees and the communities from which they come. At last week’s call-to-action meeting with the private sector, which was chaired by the Prime Minister, it was striking that many different businesses were interested in, and committed to, doing more. As a Government, and as parliamentarians, our role is to continue to challenge members of the business community to do yet more and to help them to get the information that they need to invest in developing countries. We look forward to continuing to work alongside them in a series of settings and in a series of ways to challenge them to do more. We also look forward to doing what we can to help to improve the investment climate for the business community in developing countries. As my right hon. Friend rightly says, it is fundamental to making the progress that we need if we are to achieve the millennium development goals.

In 20 minutes, the Minister has given us a typically eloquent journey through different aspects of the CDC that we might not have known about, and through the different themes running through Government policy. In the four minutes that he has left, however, will he please turn his mind to the questions that have been raised from both sides about the CDC’s future and specifically about privatisation?

I was coming to exactly that point. As the hon. Gentleman and my right hon. Friend have suggested, a series of rumours have been doing the rounds about what the CDC’s future might look like. As my right hon. Friend made clear in his opening remarks and in a series of interventions, the question of privatisation has surfaced several times. As I suggested in an early comment, we are looking at how best to maximise the CDC’s developmental impact, and one thing that we are working on with the company is how to ensure that it continues to prioritise markets in the very poorest countries, as opposed to those in some of the emerging economies, where it has made a series of investments to date. I should make it clear that we are not looking at privatising the company, but we are looking at tightening up its investment policy still further. We are not having a battle with the CDC about that, but working collaboratively with it on the issue.

The hon. Member for Berwickshire, Roxburgh and Selkirk raised the issue of the release, or otherwise, of the accounts of the CDC’s subsidiaries. I will take his series of very deliberate points away with me and, with the Secretary of State, look at what else we can do to make at least some of those accounts available to the House. Commercial confidentiality is a serious issue, but notwithstanding that, I recognise the need and desire of the House to have as much transparency as possible. I will, therefore, take away from the debate the specific concerns raised by the hon. Gentleman and other Members about the need for the CDC to engage in as much disclosure as possible.

This has been an important debate. I re-emphasise the Government’s recognition of the huge amount of work that the CDC has done and of the huge talents of its leadership and staff. I welcome this opportunity to celebrate the CDC’s 60 very successful years, and we look forward to working with it for many more years as we help to fight poverty around the world.