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Overseas Aid (Private Sector Contracts)

Volume 560: debated on Monday 11 March 2013

(Urgent Question): To ask the Secretary of State for International Development to make a statement on her Department’s policy on tied aid, and the criteria applied to private sector contracts in the light of briefings over the weekend and her recent speech to business leaders at the London stock exchange.

I am delighted to update the House on my speech today. There is no change on the Government’s policy on tied aid. I was clear in my speech on 7 February, and again this morning when I said:

“I am not talking about tied aid. I do not believe that is the way to achieve good, sustainable development...It’s the wrong way to go about things.”

That answers the hon. Gentleman’s first point.

Department for International Development contracts are awarded in line with EU procurement regulations. The vast majority are subject to competitive tender. The evaluation process for large contracts includes an assessment of technical and commercial criteria, which are published at the outset of the tender. That answers his second question.

In relation to today’s speech on pursuing poverty reduction and an end to aid dependency through jobs, it is clear that economic growth is vital in developing countries. Wherever long-term per capita growth has been higher than 3%, we have seen significant falls in poverty. Sustainable public services in the developing world, as here in the UK, need a funding stream of tax receipts, and that means a thriving private sector. Today, therefore, I have been discussing how DFID will put increased emphasis on economic development, including through reducing overall barriers to trade and investment; unlocking the ability of entrepreneurs and business people in developing countries to drive economic growth through their own businesses; and fostering greater investment by business in developing countries and those in the UK. I want more businesses, including those in the UK, to join the development push with DFID. We all have the opportunity to help build up responsible trade with developing countries.

Finally, may I welcome the positive response from organisations such as CARE International and the Overseas Development Institute? The former said that

“it’s no longer an option for development agencies to view business as operating in a parallel universe”.

I would say to the Secretary of State that economic growth matters in all countries, although I thank her for her response, despite the fact that these policies should have been announced to the House first.

This year should have been a source of unity and pride for decent Members on both sides of the House and many campaigners across the country. This year, Britain should once again have been a light unto the nations, with the Government honouring Labour’s historic 0.7% commitment. Instead, over the past fortnight, we have seen two cynical interventions that threaten to undermine the UK’s global reputation for progressive development: first, the Prime Minister’s suggestion that holes in the defence budget would be plugged by aid money; and, secondly, the Secretary of State’s ill- advised briefings over the weekend, ahead of her speech today.

We support the private sector’s central role in stimulating jobs and growth in developing countries and welcome the fact that UK companies are seeking to access growing markets, but we are vehemently against tied aid, trickle-down economics and growth that has no focus on inequality or sustainability. I have several questions for the Secretary of State, therefore: first, why did she brief a return to tied aid over the weekend yet deny it today? Secondly, will she assure the House that no company engaged in tax dodging will receive any funding or support from DFID? Thirdly, will she confirm whether companies that are to receive DFID support will have to demonstrate decent employment practices, including acceptable levels of pay to workers in developing countries, throughout their supply chain? Fourthly, under what circumstances does she think that a British company should be awarded a contract in a developing country without having to compete in a fair and transparent tendering process?

As a substantial increase in the DFID budget is set to take effect, these interventions have nothing to do with the national interest or our commitment to the world’s poorest, but are an act of desperation by a Prime Minister who once earned cross-party respect for making the moral case for aid. He is now so weak that he is reduced to misleading the British people that UK aid in the future will largely be devoted to defence and UK business. The big society is gone, the green agenda is gone and now sound development policy has been undermined to satisfy the Tea party tendency in his party. It is the same old Tories.

The Member asking an urgent question normally has some additional questions, but I do not think the hon. Gentleman asked any. He talked about the Daily Mail. We know from his time with the shadow Culture, Media and Sport brief that he is keen on muzzling the press. I noticed that, in spite of all his rhetoric, ultimately he supports what I am saying about getting business more involved in the development push. I must remind him, however, that it was this Government, not the previous Government, who set up a private sector department within DFID. He had 13 years to do that, but failed.

I also noticed how quickly the hon. Gentleman turned to highlighting the risks of businesses getting involved in development. The Government seek to mitigate those risks and are working hard on initiatives on transparency and governance. He will be aware of the ethical trading initiative, which looks at how we can ensure that companies get involved responsibly. I want to set out today not only how we can take steps to mitigate those risks, but how we can tap into the huge opportunities that business, particularly UK business, can offer developing countries to help them develop and, in doing so, lift the poorest people out of poverty. I believe that is not just in the UK national interest—although frankly it is in our national interest to be market-making and to see more economies in this world that we can trade in—but in those people’s interest too. Men or women in developing countries say they have one top priority: to get a job. We can work with business on that.

I welcome my right hon. Friend’s statement this afternoon, but given that the £11 billion that she will have at her disposal this year comes entirely from the pockets of her, my and our collective constituents, is it not right that, wherever possible, it should be returned to British companies that offer first-class equipment and services to overseas countries, which are the beneficiaries of British taxpayers’ aid?

UK companies have a key role to play. In fact, my hon. Friend will be interested to know that, in terms of their value, more than 90% of the contracts awarded by the Government go to UK companies. That is probably because those companies out-compete other companies, but also because we have a strong corporate governance structure, which many other countries seek to emulate.

But is the Minister aware that there are genuine concerns that the objective of 0.7% of gross national income is being swallowed up—or might be—by it being diverted to the Ministry of Defence or some other Department? Does she not agree that development is about removing poverty and ensuring sustainable development? If we are to be convinced that the Government are on the right road, can we have some of the transparency that was promised, for example, in the International Development (Reporting and Transparency) Act 2006?

On the right hon. Gentleman’s last point, we do have transparency. In fact, I think I am right in saying that my Department was rated as the most transparent organisation in the series of stakeholder organisations involved in development. In answer to his earlier question, he will be aware that the definition of official development assistance—as set out by the OECD and monitored by the development assistance committee, or DAC, the organisation that brings together donors—is clear cut, and we will stay within it.

May I thank the shadow Minister for asking the question? I would like him to ask a lot more parliamentary questions such as that, because it is great to give the Secretary of State’s speeches a more widespread audience. She is absolutely right: the answer to the problem is not aid, but trade.

I agree with my hon. Friend; indeed, so would the Indian Finance Minister, who said aid is the past, trade is the future. This is about ending aid dependency by driving growth and job creation.

The Secretary of State may wish to correct the record on the private sector team: there has been one in DFID for a number of years. After the Budget next week, will the proportion of the 0.7% commitment spent by Departments other than DFID—if they meet it—be increased, and if so by how much? Will she also confirm that all our spending will be in line with the terms of the International Development Act 2002?

Our spending will be in line with the International Development Act 2002 and the ODA definition. The split of ODA across Departments can change. As the hon. Gentleman knows, we have done a lot of work with the Foreign Office and the Ministry of Defence in conflict and in fragile states. We will continue to look at how we can do that effectively, but I think I am less interested in where ODA sits than I am in the impact it has on the ground. If he really cares about getting the most out of the budget we have got, I hope he will prioritise that over taking cheap political shots.

I welcome the Secretary of State’s statement. Drawing on my experience in Oxfam, rather than the Labour party’s sources in the Daily Mail, does she agree that private sector decisions have a disproportionate impact on people’s lives, for good or ill, and that we have to engage with the private sector to have a complete view of development?

My hon. Friend is absolutely right. Major companies in the UK such as M&S know this as well—that is why it has NGOs such as Oxfam on its sustainable retail advisory board. It seems that the only people who have not caught up are the Opposition.

May I commend the Secretary of State for her courageous commitment to the 0.7% target, but say to her that the way to appease those on the Benches behind her who do not want that commitment to go through is not to try to sound right wing on aid, but to take on the argument?

We have been making the case for international development, and I would say to the hon. Gentleman that what I have announced is what I think is the right thing to do; it is not about how I want to please anybody in the House.

I thank the Secretary of State for her announcement. Does she agree that many developing countries fundamentally aspire to the dignity of moving out of donor dependency, and that one of the best ways in which we can help them to do that is by strengthening their private sector? What role does she see for parliamentarians and for businesses in our local constituencies, following her policy announcement today?

I agree with my hon. Friend about the impact that economic growth and jobs can have on reducing recipient country dependency. The President of Liberia, Ellen Johnson Sirleaf, has said that aid should not be an alternative to self-sufficiency. Developing countries want to plough their own furrow and take control of their own destiny. We want to reach out beyond the large companies with which we are already working, such as M&S, Diageo, Tesco, Sainsbury’s and other stock exchange-listed companies, to the small and medium-sized companies in Britain, to see whether we can get a broader base of companies to join the development push.

Along with other members of the International Development Committee, I have just come back from Ethiopia, and I can tell the Secretary of State that DFID staff are already working with colleagues in other Government Departments to try to involve British business in development. There is nothing wrong with that, but will she accept that there is no easy line to be drawn between tied aid and untied aid? We have only to look at the way in which the United States’ development efforts work to understand the truth of that. The Tea party tendency that my hon. Friend the Member for Bury South (Mr Lewis) referred to is alive and well in her party, so how will she prevent her announcement today from being used in some quarters to—

The US Agency for International Development—USAID—would accept that part of its development spend takes the form of tied aid, but I have made it very clear that that is not what I am talking about here. I know that the hon. Gentleman finds this issue complex, and I accept that there are risks that we will need to manage, but they can be managed. Instead of seeing only the risks, we should see the opportunities too.

I commend my right hon. Friend for her patience when listening to such sanctimonious drivel from the other side. Does she agree that while well-targeted aid from agencies can alleviate poverty and suffering in the short term, it is only through private business helping to eliminate poverty through micro-finance and through using private ownership, private innovation and private employment that we can achieve a long-term solution to the poverty that she and I are both striving to eliminate?

My hon. Friend is absolutely right. There is another reason that the involvement of the smallest companies in developing countries is so important. Many of them are agricultural smallholdings run by women, and we know that if they can invest in and grow those businesses, 90% of the income will be reinvested in their families and communities, providing a double bonus.

In her response to the shadow Secretary of State, the right hon. Lady rightly mentioned the need to increase tax receipts in developing countries and to have responsible trade. Has she had any discussions with the Chancellor of the Exchequer to advance those two causes ahead of next week’s Budget?

The hon. Lady might have seen that I have today set out our plans to work with Her Majesty’s Revenue and Customs to set up a tax capacity-building unit, which will provide tax expertise to developing countries to help them to broaden their tax base and improve their tax collection. The Chancellor has made it clear that we want to see real progress on tax and tax transparency at the G8, which is why they are on the agenda.

The hon. Member for Birmingham, Northfield (Richard Burden) and I came back from Ethiopia last week. A company called Pittards is investing money from this country to upskill people there—it has helped 1,500 so far and it wants to get up to 5,000. It is paying more than the minimum wage. Does the Secretary of State agree that that is the best way for companies to invest, to get the right products coming back to this country and exported all over the world, and to get women into better jobs?

I completely agree. My hon. Friend has provided a really good example of how this can work in practice. Another good example would be Taylors of Harrogate, which has worked to improve its tea collection and tea capability in Rwanda. It has not only improved things but brought about new products that benefit us all. This is a really practical way of lifting the poorest people in developing countries out of poverty—not just through cash transfers, but by genuinely providing them with what they want: a job.

I was pleased to hear the Secretary of State refer to ethical standards in her response to my hon. Friend the Member for Bury South (Mr Lewis). Will she outline what standards her Department requires private sector-led DFID projects to meet in respect of work and labour?

In my answer to the shadow Secretary of State, I set out the criteria we use for giving out contracts. We need to engage with the CBI—we have already had initial meetings—on how to get a more structured approach to responsibly engaging business in the development push. It is right to point out that there is a good way and a bad way of doing this, as the hon. Member for Denton and Reddish (Andrew Gwynne) says. The key thing for today is to engage in a process, working with the CBI, industry federation bodies, non-governmental organisations and stakeholders, business schools around Britain and other communities, about how to develop a proper strategy for getting business involved in the development push. That is what I want to see happen. To date, we have done a number of ad hoc projects, but now we need to pull them together and develop a more holistic strategy.

I congratulate the Secretary of State on her excellent speech this morning, and I particularly welcome what she said about relieving poverty through trade. Does she agree that one of the best ways of unlocking wealth creation is through free trade agreements in developing countries? Would she particularly welcome Trademark East Africa, a Southern African Development Community- led tripartite agreement?

Yes, I would. DFID has supported the Trademark East Africa initiative, and my hon. Friend will be aware that African Union leaders want to create a free trade area by 2017. It is an ambitious plan, but one that we should support.

Last Friday, I received a group of constituents from the IF campaign, Enough Food for Everyone, who asked me to seek assurances from the Government and the Secretary of State that the commitment to the 0.7% gross national income figure remains as strong as ever, and that she will resist any attempts to overturn it. What words of assurance can she give to my constituents?

I think we can be judged by our deeds, and also by the fact that I am wearing an IF campaign bracelet here today.

As chairman of the all-party group on Tanzania, I can say that the UK is the biggest investor and one of the biggest traders with, and donors to, Tanzania. Does my right hon. Friend agree that aid does not need to be tied to be beneficial to the UK?

My hon. Friend is absolutely right. We are talking about having a balanced approach with these countries, developing their public sector, but also helping them to develop their private sector. He is right to say that, ultimately, that is the best way to see change on the ground. I would like to see UK business and companies getting more involved with that as a means of supporting it.

Contrary to some of the rhetoric we have heard from the Government on immigration, the vectors that lead to people from these countries coming to this country and elsewhere in Europe are not the benefit system, but poverty, famine, war and insecurity in their own countries. Surely, then, part of our argument to people who are worried about our spending money on development must be that it is in our best interests to enable people to live a decent, healthy life in their home and stay there.

Does the Secretary of State agree that it is somewhat surprising to see the Opposition Front-Bench team being so negative, because this project builds on the good work done not just by this Secretary of State and the previous Secretary of State, my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell), but by the last Labour Government? In fact, the best example I can find of this succeeding was started by the last Labour Government, so perhaps they should be praising us. I refer to the Vodafone and M-Pesa deal—the type of deal we should do a lot more of, yet exactly the type of deal they are criticising today.

I agree: it is pretty bizarre. I think that we should ramp up this work, because it can have real benefits for people in developing countries. I thank my hon. Friend for his interest and his efforts, which have been incredibly important.

Last week the Secretary of State spoke about the needs of women and girls in the context of development. What explicit commitments to gender equality have been built into the Government’s plans to promote economic growth and responsible trade in developing countries, and how will that be measured?

Ensuring that we understand the impact of our programmes on women and girls is increasingly dependent on our obtaining good facts—in other words, gender-disaggregated data. All our country programmes involve thinking about how the work that we do affects women and girls. When discussing our economic development strategy with business leaders this morning, I made it clear to them that the issue of women and girls is perhaps the most powerful in driving changes on the ground, not just short-term changes through the alleviation of poverty but changes in attitudes towards women.

I congratulate the Secretary of State on her excellent statement. I believe that the current millennium development goals expire in 2015, and that—as discussed in Liberia—economic development may be one of the new goals. In my view, the public sector does not have all the answers and neither does the private sector. Might not a combination of public and private deliver some of the answers for sustainable development?

My hon. Friend is absolutely right. No one can achieve this agenda on their own. We have been working on it, but we must increasingly work on it together, adopting a single strategy rather than disparate parts. I agree with CARE that we should stop working in, as it were, a parallel universe with businesses, and start working in the same world.

Before entering Parliament, I worked for one of many good private sector companies, the John Lewis Partnership, which, through both John Lewis and Waitrose, does terrific work with suppliers overseas. Does my right hon. Friend agree that it is rather depressing that the Labour party has so little faith in the ability of such private sector companies to do good in relation to this agenda?

My hon. Friend is very well placed to ask that question, and she is entirely right. I think that we should be proud of the work of companies such as John Lewis and Waitrose, which not only makes business sense for them but makes a huge difference to the thousands of young people whom they are not only employing but “skilling up” in countries such as South Africa. We are delighted to be working with Waitrose. It is projects of that kind that have led me to announce today that I want to do more, and to do it in a more structured way.

Let me also thank my hon. Friend for the incredibly important work that she has been doing in raising awareness of female genital mutilation.

Does my right hon. Friend agree that the public sector is often too large in the poorest countries in the world? Is not the best way in which her Department can help to release people from poverty sustainably to create a climate in which the private sector in those countries can flourish? Has that not been proved in countries such as Vietnam?

My hon. Friend is right. Part of DFID’s work involves helping to create developing-country environments that are, as it were, “investable in”. That means pursuing the Prime Minister’s “golden thread” agenda in relation to the rule of law, the ability to set up contracts and the establishment of the right legal base. Those will all be key ingredients if we are to see business flourish in developing economies.

Does my right hon. Friend agree with the business leaders who are quoted in today’s Financial Times as saying that the prospects of the world’s poorest people are increasingly being defined by what businesses do, alongside the established work of Governments? Cannot private sector development simultaneously help those people, and economies throughout the rest of the world—including our own—through specialisation, trade and economic growth?

The short answers to that question are yes and yes. As was pointed out in the Financial Times, aid and business constitute a crucial alliance, which we must try to bind more closely.

It is no surprise, is it, that the Labour party’s hostility to the private sector led Opposition Members to miss my right hon. Friend’s observation that ignoring that sector’s role in development was like trying to win a football match by leaving half one’s team on the bench? Can she add to her excellent list of initiatives an initiative to tap the entrepreneurial potential of Britain’s various diaspora communities by supporting development in their countries of origin?

My hon. Friend will not be surprised to hear that this issue was raised after my speech in this morning’s question and answer session, and it is an incredibly powerful one. I believe that this country has more natural links to many of these developing economies than almost any other country in the world. We should be making the most of those and allowing our diasporas also to be part of helping the countries to which they have family links to develop.

Trade with the developing world was an insufficient priority of the previous Administration, yet it is economic dynamism, not dependency, that our development spend should be seeking to encourage. I congratulate my right hon. Friend on her speech. Does she agree that British education companies have a key role to play in developing the economic strength of developing countries, which will be good both for them and for us?

I do agree and, for example, we are talking with Pearson about how we can work more closely with it in places such as Pakistan. A number of sectors in our country’s economy have real value to add. We have talked a lot about retail today, but education is yet another sector where we have so much knowledge and so many skills. We can pass those things on to developing economies, and it is in everybody’s interests to do so.

I welcome my right hon. Friend’s statement, and I noted her mention of my former employer, Taylors of Harrogate, in both her speech this morning and in the House this afternoon. Does she agree that trade and partnership, thus creating sustainable economic growth, is the key to taking people out of poverty?

It certainly is, and statistically we have seen that that equation absolutely holds. As anybody who has ever been to Harrogate will be aware, it is definitely worth while dropping into Bettys, where people can sample some fantastic Taylors of Harrogate tea.

I congratulate the Secretary of State and the Prime Minister on their continuing commitment to standing by our international obligations to United Nations targets. Does the Secretary of State accept that it is crucial to focus on effectiveness, flexibility and value for money in each situation? Does she agree that that will be done sometimes through supporting security and sometimes through humanitarian aid, but always by using the dynamism of the private sector to maximise the long-term impact?

My hon. Friend is right. Even when we are building up core basic services, the innovation of the private sector has a real role to play, and my Department has sought to tap into that. There is a strategic question about what we need to do for ourselves and what expertise we buy in from outside, but there is no doubt a key role for the private sector to play.

Will my right hon. Friend use her position to encourage both her Department and the many aid organisations that it supports and funds to start buying more British-manufactured vehicles? Far too often we see foreign-manufactured vehicles being purchased by aid organisations, even though we all know that the best 4x4s are manufactured in the midlands and have a Land Rover badge on the front of them.

My hon. Friend has made his point, and I am sure that the non-governmental organisations will have been listening to this urgent question and will have taken note accordingly. As I have said, we aim to get best value for the taxpayer, and I am sure that in many cases that best value is indeed British.

Fifty years ago, South Korea had the same GDP per head as Ghana and now its figure is about the same as the UK’s. This has been achieved by trade, not principally aid. What more could the Department do to ensure that there are more South Koreas—we hope in sub-Saharan Africa—in the next 50 years?

In the past decade, sub-Saharan Africa has probably had one of the fastest growth rates in the global economy. As my speech set out, and as my hon. Friend rightly says, we need to do more work in this area and to work in the business environment to really drive economic development and jobs.