Skip to main content

DfID: Tied Aid

Volume 744: debated on Monday 11 March 2013


My Lords, I will now repeat the Answer to an Urgent Question asked in the other place earlier today. The Answer, given by my right honourable friend the Secretary of State, is as follows:

“I am delighted to update the House on my speech today. There is no change on Her Majesty’s 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 his first point. DfID 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 critical. Wherever long-term per capita growth has been higher than 3%, we have also 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.

DfID will be putting an increased emphasis on economic development, including: 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. I want to see more businesses, including those in the UK, joining the development push with DfID. We all have the opportunity to help build up responsible trade with developing countries.

Finally, I welcome the positive response from organisations like CARE International and the Overseas Development Institute, with the former saying that,

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

That concludes my right honourable friend’s Statement.

My Lords, we also welcome UK companies seeking access to growing markets across the developing world. However, from the media reports at the weekend, the Government’s policy was not clear. We are vehemently against tied aid, trickle-down economics, and growth that has no focus on either inequality or sustainability. I have two specific questions for the Minister. Can she tell the House what steps her department will take to ensure private sector-led projects by DfID will be required to meet decent work and labour standards? Secondly, under what circumstances does she believe it right that a British company should be awarded a contract in a developing country without having to compete in a fair and transparent tendering process?

My Lords, I thank the noble Lord for his acceptance that economic growth through the expansion of businesses and so on is very important for developing countries, as it was in the United Kingdom. As we have seen in China and India, it obviously has a transformative effect. I reassure noble Lords that DfID remains poverty focused. That underpins everything that we do. Therefore, we are trying to ensure the development of the private sector, it is so that those long-term aims of relieving poverty are addressed. On how British companies would be awarded contracts, as I said in the Statement from my right honourable friend, contracts awarded to British companies by DfID go through the EU procurement regulations. However, the focus of DfID is always on the relief of poverty.

My Lords, I, too, am grateful for the Statement repeated by the noble Baroness. Could the noble Baroness reassure the House that actions are always in place to ensure that when these decisions are made the beneficiaries receive the benefit—I am expressing this badly but noble Lords know what I mean—that the money goes to the right place for the right purposes, that it is properly monitored and that we are reassured that it is not being diverted into other means?

I thank the noble Lord for that question. I assure both noble Lords that DfID supports responsible business standards, which are very relevant here, through various schemes such as the Ethical Trading Initiative, the UN global compact, OECD guidelines for multinational enterprises and so on. One striking thing about the United Kingdom’s potential help for developing countries is what we can offer by way of our law and justice system. I was struck in meeting the Minister responsible for mines from Afghanistan the other day to learn how initially they found that in dealing with Chinese companies the benefit was probably not for Afghanistan so much as for the Chinese companies, but that now they are rooting it very much in British law guided by British companies. That is an instance where it is of mutual benefit. Of course, it is of benefit in business to the British companies working in this area, but you can see immediately the effect in terms of the poorest in Afghanistan. That is where the greatest benefit is. Therefore, these things can be looked at as of not exclusive but mutual benefit.

My Lords, I am left with the very clear impression from the Minister’s Statement that there will be no difference as far as the future is concerned in the total amount of aid that is disbursed at every level and in every way. If that be so, I heartily congratulate the Government. It is all very easy when the going is benign and happy to be charitable, but it is in situations of difficulty such as this that the true test of a community’s charity is put to the proof.

I appreciate what the noble Lord has to say, and I hope that he continues to say such things loud and clear, because in a time of austerity there is a clamour of voices asking whether this is the right thing to do. As we meet the 0.7% commitment, which we have built to and kept to, we have a moral obligation to address the difference in the levels of need around the world. There is also the interest in terms of greater stability. If you are addressing the most abject poverty around the world, that helps to stabilise things for everybody, whether in that region or in our own.

Does the Minister agree that Africa is now one of the fastest growing regions in the world and that we should all be very pleased about that? Aid is now a relatively small proportion of the disbursements that go from the developed world to what used to be called the developing world. Remittances and direct investment have grown enormously, and the role of aid is far less significant than it used to be. It is not a question of this Government cutting back on what they have been giving; the extraordinary thing about this Government is that, at a time when they are cutting back on almost everything else, they have been increasing the overseas aid budget by 30%. I find that barely explicable.

If the noble Lord listens to Bill Gates, for example, he will hear how small contributions looked at globally can leverage an enormous effect. The noble Lord is right that remittances are coming in and there is more inward direct investment and so on, and that is very welcome. We have to make sure that, as the noble Lord, Lord Laming, indicated, the poorest are included in that benefit and that there is the health and education provision to make sure that there is a skilled workforce to benefit from this, because it is in nobody’s interest to have countries with the instability and inequalities that that lack of provision would ensure. It is extremely important that we retain our commitment in this area, but at the same time we must make sure that these other areas, such as direct investment, grow as well and that they are to the benefit of the poorest in these countries.

I thank the Minister for repeating the Statement. I was very pleased to hear her strictures on tied aid and her support for competition. Will she confirm that the same applies to consultancies? The only thing that worried me in her Afghan homily was the interjection that investors in mining in Afghanistan were advised by British companies. When such advice from consultancy firms comes from the aid programme is it subject to the same degree of open competition? In developing countries, one sometimes hears that rather a large share of the British aid programme does not go into projects on the ground but into consultants in London.

The Afghan Government chose to gain their legal advice in the way that I indicated. Consultancies are subject to open competition, so the noble Lord can be reassured in that regard.

I agree with what my noble friend set out as her department’s general policy. I have a specific question about the statement by the former Secretary of State that new money, extra money, would be going to the global fund for HIV and other diseases. Will that pledge be kept?

I am going to have to write to my noble friend to clarify that. I know that the Global Fund had some problems, with which he will be extremely familiar. I also know that DfID was working extremely closely with the Global Fund, because it had been so effective in the past, to bring it back to that position. I have not had the most recent update. I will make sure that he gets it.