Clause 1: Duty to meet United Nations 0.7% target from 2015
1*: Clause 1, page 1, line 2, leave out first “the” and insert “a”
My Lords, I regret and apologise for the fact that I was unable to be here in the House for the Second Reading of this Liberal Democrat Private Member’s Bill. However, my regret is somewhat tempered by the fact that contributions were limited to five minutes. This is a very important subject; it is an extremely complex subject; and there is no way that justice can be done to it in five minutes. So I hope that we shall have a little bit more time today.
It is a thoroughly bad Bill. It represents the triumph of gesture politics over good government.
My Lords, I hope that the noble Lord will not mind me interrupting, but this is Committee stage and, although the noble Lord did not come for the Second Reading, I hope that he is not going to make a Second Reading speech and that he will attend to the amendment in hand.
I am speaking to the amendment. It is a very modest amendment: it just introduces the word “a”. The purpose of the amendment is to give the Secretary of State slightly greater flexibility which can be used in the light of changing circumstances as they evolve in the future. That is clearly desirable.
It is one of a number of amendments and I must explain to the noble Countess why it is necessary to look more broadly. A large number of amendments are down on the Marshalled List, which noble Lords will have recognised. None of them is a wrecking amendment. They are all designed to make the Bill somewhat less bad. I hope that that is a proper exercise for this Committee to be engaged in.
Noble Lords will have noticed that pretty much all the signatories to the amendments on the Marshalled List were members of the Economic Affairs Committee of this House under the excellent chairmanship of my noble friend Lord MacGregor when we produced our report in 2012 on the economic effectiveness of development aid. We produced a unanimous, all-party report based entirely on the evidence, which was overwhelming. I reassure the noble Countess that I am not going to make this speech on each of the amendments, but this is the first one and it is necessary to explain why we have put down all these different amendments to try to make the Bill slightly less bad.
The Economic Affairs Committee report had a number of findings. First, it found that the 0.7% target should not be a plank, let alone the main plank, of British aid policy. Secondly, it found that the,
“Government should therefore drop its commitment”,
to establish in law the requirement to spend 0.7% of GNI on aid. Thirdly, it found that,
“the evidence that aid makes a contribution to growth in recipient countries is inconclusive”.
But aid certainly makes a great contribution to corruption in recipient countries. This is a major problem which comes up time and again and was most recently identified in the report of the House of Commons Public Accounts Committee earlier this week.
Since this is a Liberal Democrat Bill, if the Committee will allow me, I will quote from a letter written to me by—
We will see about the support. I am sure my noble friend is right that there different views in different parts of the Committee, but it is significant—and I repeat this since perhaps she did not hear—that the Economic Affairs Committee of this House, which took extensive evidence on this, produced a unanimous all-party report with the conclusions that I summarised a moment ago.
I apologise for intervening on my noble friend. After five minutes he is obviously gearing up to begin his arguments. His amendment states,
“leave out first “the” and insert “a”.
That would change the wording of the Bill to:
“It is a duty of the Secretary of State to ensure that the target for official development assistance”.
Does he actually mean to delete the second “the” in that sentence rather than the first “the”. Can he clarify that for the benefit of the Committee?
My noble friend is absolutely right. It is the second “the” that I seek to change. I am most grateful to him and I will be grateful for any further interventions that he may wish to make.
I will for his benefit read out a letter from the former Liberal Democrat mayor of Guildford. He is interesting in this context because he was for many years a senior official in the ODA, which was the predecessor of DfID, and he has maintained a continued interest since his ODA days in the aid programme in its reality. He writes:
“I would be prepared to brief anyone who needs to be convinced that there is a now a massive misuse of our aid programme—most recently in Ghana, Mozambique, Nepal, Malawi, Uganda, Rwanda—not to mention Nigeria, Kenya or Pakistan—to which must be added the transfers to the IBRD and other organisations in excess of our obligations to them”.
The corruption issue—
I am making a speech which puts the context, which is essential for all the amendments on the Marshalled List. I am sorry that noble Lords are terrified of the argument. They realise that this is an absurd Bill. They are not prepared to listen to any arguments against it. Noble Lords will want to read the report of the Economic Affairs Committee. We have ample evidence of all the corruption there is.
Let me make two things absolutely clear. First, we are not discussing humanitarian aid. My view is that it would be good for us to do more than we do at present in humanitarian aid, but 90% of the British aid programme is so-called development aid, and that is what we are debating today in this Bill. Secondly, I am not at all opposed to the great cause of alleviating poverty in the poorest countries of the world. Indeed, I have always been strongly supportive of that and was lucky enough to be in a position to do something about aid. Some noble Lords will remember the so-called Toronto terms of 1988, which were called the Toronto terms because they were finally agreed at the G7 summit in Toronto. Their aim was to give debt relief to the poorest of the poor countries.
That is a question for the promoters of this Bill, not for me. However, it is certainly a good question. I am not in favour of any kind of ring-fencing, whether it is aid, defence or anything else.
In defence of my own record, let me refer to the definitive IMF study published in 1999 entitled, From Toronto Terms to the HIPC Initiative: A Brief History of Debt Relief for Low-Income Countries. There it states—
I am talking about debt relief for low-income countries. This is just prolonging the debate. I do not wish to prolong it but it is being prolonged as a result of the interventions. The IMF study states:
“1987 marked a watershed in the financing of LICs. In April, Nigel Lawson, then UK Chancellor of the Exchequer, launched the first of what proved to be a series of UK LIC debt Initiatives by arguing that Paris Club rescheduling for the LICs should be at below market rates of interest. Thus, for the first time it was proposed that reschedulings of commercially priced ECA debt should involve a reduction in the present value of the debt outstanding”.
My Lords, I support the amendment, the purpose of which is to remove a fixed target—“the”—and to replace a flexible target, “a”. That is the purpose of the amendment and it seems desirable.
I contribute to this debate as a former Permanent Secretary of the Treasury in charge of public expenditure, where the noble Lords, Lord Lawson and Lord MacGregor, who have put their names to the amendment, were my bosses. However, I support the amendment not out of Treasury niggardliness but because, like other noble Lords, I believe that this country has both an economic and moral interest in promoting the growth of the developing world.
However, there are good Treasury and government reasons against hypothecation of expenditure against a rigid target. The reasons are set out in the report of the Economic Affairs Committee. However, one reason that is not in the committee’s report is that at each public expenditure review departments have to come to the Treasury to make a case for the expenditure for which they are bidding. If there is a rigid amount hypothecated in this way, it relieves departments of having to make that case for expenditure. The removal of that discipline is likely to have the result that the expenditure would not be as effective as we would all like it to be. It would be a mistake to remove that discipline from DfID’s expenditure on development aid.
This is a matter for each Government to decide. There should not be a rigid amount and, therefore, I support the amendment to substitute the second “the” with the word “a”.
My noble friend Lord Lawson made an interesting speech. It did not command the total agreement of your Lordships in every aspect but it focused on some important points. It is a small, very neat, amendment but it raises implications. I beg those who are bringing forward and supporting the Bill, with the noblest intentions, to heed some of the points that are made because it will result in a better Bill.
I also apologise for not being able to join in at Second Reading—I had other commitments—and for the fact that, although I spoke frequently on Foreign Office and Commonwealth Affairs aspects of development aid from both sides of the Dispatch Box over a period of 10 years, I have not spoken on these issues from the Back Benches. However, I have been deeply concerned with development issues over a period of 50 years, going back to the era of the Colonial Development Corporation, the original CDC, before its efforts were later wrecked, I am sorry to say; and with the founding of the first Overseas Development Institute, before we even had a department of development. I regard development as the highest priority for this country and anything which gets in its way concerns me. We ought to try to clear out the obstacles. I am proud that we have become what Sir John Major called the development hub. It is a marvellous role for this country and we should pursue it in the smartest, cleverest and most effective way we can.
It worries me that without this amendment, by making it “the” duty—the first priority, in effect—of the Secretary of State to adhere to this 0.7% target, we are distorting and damaging the development cause, which has moved into a completely new phase. I read with great care the Second Reading debate—
We are trying to have, I hope, a sensible, analytical debate in your Lordships’ House on how we can strengthen this Bill and make it more effective. I have tried to speak to the amendment and I am sorry that the noble Baroness feels that she does not want to hear what I have got to say. However, I do have some important things to say on this matter.
I understood the mover of the amendment to accept that it was not what he intended to achieve. He was corrected by the noble Lord who moved this part of the Bill. It is therefore wrong for people to speak to what they wished the amendment to say rather than what it does say.
I am sorry if the noble Baroness is worried about this because she has some extremely valid and important commitments to development and aid. If it was the first “the”, it would be “a duty” or “the duty”; if it is the second “the”, it is “a target” or “the target”. We could slice this very thinly. Behind this lies the consideration that I beg the Committee to examine: that is whether, given today’s context where all the important thinking about development is that overseas official aid assistance is a less important instrument for aid, it should be “the target” or “the duty”. I believe that it is wrong to urge the Secretary of State through legislation to stick to the “the’s” rather than the “a’s”.
I say that not just because the excellent committee report by my colleagues—I did not serve on that committee—gave a whole series of very substantial reasons why one should be cautious about making it “the” target, but because of some important further reasons which are developing all the time and can be analysed by looking at the extremely learned and focused thinking going on today about how to promote development and how our United Kingdom can make its maximum effort towards promoting development in the developing world. I want to give two reasons which I hope the Committee will accept are relevant to changing from an absolute priority target; that is, from “the” to “a”. I hope that noble Lords will tolerate me giving the reasons, and indeed I will be rather sad if people are not prepared even to examine these issues.
The first is this. Most economists who have studied the issue and most of the reports that are coming out today recognise that ODA is only one component of the development effort and that ODA’s relevance to development, in today’s conditions, is declining. Other instruments that require resources are very much more important in promoting development. I mention just overseas security finance, other expenditures which may not be ODA-able such as debt relief, disease research and obviously trade promotion, a range of innovative financing and impact developments. There is also an enormous new range of impact investment that requires resources, while obviously anything that can assist with lower cost green energy is helpful. Indeed, the fall in the oil price is a huge help to developing countries in a way that ODA could not possibly compete with. These are all far more effective—
The Committee has been very patient. This is a Second Reading speech and these are arguments that should have been developed at that stage, not in Committee. May I ask the noble Lord to cut short his speech and just to attend to the amendment on the Marshalled List?
I hesitate to disagree with the noble Countess, but the Committee stage is where we should look at the details that will make a Bill better. I do not see why the noble Countess finds that so objectionable and keeps interrupting speeches. I am not sure that that is the right way in which we should proceed if we want a better Bill.
There is a school of thought called Beyond Aid, which has been looked at very closely in an excellent report in the other place on the future of UK development aid. It brings home the point that if we focus on development in this context, we have to look at other areas of ODA, which is the traditional area of budget assistance. I notice that the Japanese are planning to include aid to armed forces in their definition of ODA; I am not sure whether that is something we want to encourage at all. That is the first reason why I think that this is a good amendment and I hope that we can develop it.
The second reason derives from practical experience. For two or three years recently I was involved at the Foreign Office in dealing with what was and was not ODA, and therefore where the priorities should lie. There is no doubt in my mind that if we have a fixed percentage, it will create huge problems for aid management between the partners. My noble friend referred to the points made by the National Audit Office on that. I beg noble Lords to understand that it is not just a question of accounting methods or a difference arising from data disputes about what is or is not ODA—which are enormous—and it is not just a question of moving the goalposts, which several donor countries are interested in doing. It is a question of whether this target prevents us from prioritising the development tools that really matter. Those tools today are increasingly to be found outside ODA. I am sorry if that is a Second Reading point, but it is also a central point to this debate, and I believe that we should look at it fairly and squarely, without trying to push it aside.
We need to consider far more the spread of power to developing countries rather than just budgetary aid in cash. There are vast new networks that should be developed in order to promote development, which we are not doing. Your Lordships will not be surprised if I mention the Commonwealth network as one of them. It provides a huge flow of trusted and valued investment in a way that ODA never can. I must apologise if the following sounds like a point for Second Reading, but unfortunately DfID recently made some accidental cuts into the Commonwealth budgets, which have now been restored. I congratulate the Secretary of State for International Development on removing those cuts to the Commonwealth budgets because they have been far more helpful to development than merely dishing out cash.
I believe that this amendment will help the Bill, which otherwise could fall victim—
I wrote to the noble Lord when he left the Foreign Office because I had so much respect for the contribution he had made to this House. However, I find his attempt to filibuster this Bill really quite disappointing. Not only has there been a Second Reading debate where a clear majority of noble Lords spoke in favour of the Bill rather than against it, there has also been a debate on the report last year of the Economic Affairs Committee in which a clear majority of noble Lords spoke against its conclusions based on their experience and on evidence that perhaps was not heard by the committee. The noble Lord is simply filibustering this Bill, making speeches that are inappropriate, and he is losing the respect that he once had from many on this side of the Chamber.
I appreciate the contribution that the noble Lord makes, but I have not spoken against the Bill; I am speaking in favour of it. I am saying that here is a Bill full of excellent intentions but which could, if we allow it to go unamended by this kind of amendment and the amendments that we will go on to debate today, fall to the danger of being bound by the thinking of yesterday. I beg noble Lords to understand that modern thinking about development takes us away from making it the prime duty—if it is the first “the”, or the prime target, if it is the second “the”—to increase overseas development assistance or pin it to 0.7% of GNI.
I am sorry; I am not quite sure what point the noble Lord is making. I am trying to deliver the last sentence of my contribution and I do not understand why the noble Lord feels that it is right to keep interrupting.
I am sure that your Lordships’ House is the place that can refine and improve a Bill and will not try to knock down or contain attempts to improve it, as I believe this amendment does. We have heard from the noble Lord, Lord Butler, and we have heard many wise voices from our Back Benches. We have heard from major committees in other countries, from the Dutch and German ministries and from House of Commons committees that there is a danger of too much emphasis being put on overseas development assistance as “the” target and “the” duty, which could badly distort our development priorities. Today, we need new priorities, and the Bill should reflect them and not reject them. That is why I am grateful to those noble Lords who are prepared to hear some doubts about an otherwise noble and well intentioned Bill.
My Lords, I want to make one observation, which alas may be deemed to be going for the man rather than the ball on the eve of a rather important rugby game. I listened to the noble Lord, Lord Lawson, proudly setting out his credentials as an advocate of aid. Had he been in his place at Second Reading, he would have heard the noble Baroness, Lady Chalker, for whom I have immense admiration, stating that, to her shame, during his time as Chancellor the proportion of our aid contribution fell to 0.28% of GNI. Perhaps that is something we should bear in mind when he sets out his credentials so proudly.
My Lords, perhaps I could make a very brief intervention. My noble friend referred to the Colonial Development Corporation. In my time it was the Commonwealth Development Corporation—now called CDC. It may come as some surprise to your Lordships that it is still 100% owned by the taxpayer, but that is now a well kept secret. When I was fortunate enough to be its chief executive, we were much interested in income as well as in expenditure. One of the difficulties and the need for flexibility in this target is that if you are interested in income as well as expenditure, you cannot very well set the figure before the beginning of the year with any great accuracy. You need some flexibility.
That leads me on to a thought that is also a very strong reason for there being flexibility, as the noble Lord, Lord Butler, said. Life moves on. Things change very rapidly. Without the flexibility to adjust to those changes, you can be in great trouble. It has always seemed strange to me that, ever since the great days of Lord Bauer and Lord Balogh debating aid seriously in this House, in the 15 years that I have been in this House I have not yet heard a really serious debate about third world, second world or whatever world development—not one. In those days, there were serious debates on the subject and they got down into the depths of it, as indeed my noble friend Lord Howell was trying to indicate—much, I think, to the disappointment of the House.
I end by saying that I hope your Lordships will not regard the whole business of overseas development as a shut subject: “There is nothing more to say about it, we all know the answers and so we set this fixed, rigid target”. Finally, I think the structure when ODA came under a Minister of State within the Foreign Office was a much better structure than the one we have today.
My Lords, I was not able to attend Second Reading because of long-term commitments in Norfolk. The noble Lord, Lord Lipsey, who has his name on some of the amendments today, is unable to attend because of other commitments, and asked me to give his apologies.
I would like to say at the outset that there are two themes in the amendments that we have put forward. One is the issue that the noble Lord, Lord Butler, raised, which I entirely agree with, and this amendment is relevant to that. The other is to do with making sure that aid is effective and that it deals with corruption and things of that sort. Those are the two themes. If we are to have this argument about this amendment, we shall go on all day. I want to make my point on this amendment in relation to the first theme and I do not want to repeat it afterwards, so that we can go swiftly through the remainder of the amendments. But if we are not even able to do that on this amendment, I have to say that I do not think that this House is performing its function of scrutinising legislation in detail. I say to those who fear a filibuster—and there is not; we have a number of objections for a number of purposes—that I intend to make most of my arguments on this amendment so that I do not have to repeat them. But if I am not allowed to do so, I have to ask: who is preventing this Bill going forward?
We all know that there is a tight timetable. It should have been a government Bill but it is a Private Member’s Bill, which adds to the difficulties, and we all know we are coming right up to the end of the Parliament. I want to try to make the Bill more effective, as I believe this House should do, and I hope I will be allowed to develop my argument on this amendment; otherwise, I shall have to repeat it on all the other amendments. Let me make my position on that clear.
I congratulate the noble Lord, Lord Purvis of Tweed, on his very impressive speech at Second Reading—of course, I have read the whole debate—and his recognition of some of the concerns we have. I am in total agreement with him about the importance of development aid and I am proud of the contribution this Government make and the lead they give internationally. But I have some concerns about the Bill. The first set is all about the points that the noble Lord, Lord Butler, made. I hope I do not have to repeat them on the later amendments.
The point of principle here is that I am opposed to the principle of enshrining any area of public expenditure in legislation as a proportion of GDP or GNI for each and every year. It leads to the inevitable point, which the noble Lord, Lord Butler, was making: if aid, why not health, education—so politically important—or defence? Arguably, at a time when our national security is under such serious threat, that is one of the most deserving of all for that particular purpose, and it gets only 2% of GDP—not that much above the 0.7% for aid. If we do not protect our national security, we shall be in no position to continue our very substantial aid programme. If one tries to preserve, as the Bill does, the hypothecation principle, it sets the example for all those other areas. The political commitments being made now in advance of the election mean that we are close to ring-fencing the health and education budgets as well. The problem is that the more we make it a legal commitment, added to a political one, the more the pressure to cut back on all other areas of public expenditure, including welfare, transport, capital expenditure generally and so on. The pressures on all those other areas are even higher when public expenditure has to be contained at times of economic crisis or because of the need to reduce the fiscal deficit.
The noble Lord, Lord Butler, referred to the fact that I was Chief Secretary when he was the Permanent Secretary—and an admirable one he was. That is why I believe, having been involved in many public expenditure rounds, that public expenditure decisions should be taken in the light of all considerations in each public expenditure round and not be bound by particular legislative commitments.
There is another problem. As our Economic Affairs Committee report put it, having a fixed target has certain consequences, such as,
“it wrongly prioritises the amount spent rather than the result achieved … it makes the achievement of the spending target more important than the overall effectiveness of the programme”.
We have some amendments that deal with that very point, where there is some evidence that the department has rushed out a lot of expenditure simply to meet the target in the past year. The report goes on to say that,
“the speed of the planned increase risks reducing the quality, value for money and accountability of the aid programme … reaching the target increases the risk … that aid will have a corrosive effect on local political systems”.
There are many arguments against having a fixed percentage in legislation. That is why we have put forward a number of amendments to deal with that point.
I have a number of views on value for money and so on that I was going to express now to avoid having to repeat them later. I shall confine myself simply to this point on this occasion but I repeat: there are strong arguments against hypothecation. That is what the Bill is doing and it will lead to the issue of whether other areas of expenditure, which for the general public are more important, should be hypothecated as well, and we run into a very serious situation if we continue on this tack. This is only one of several amendments that we have put forward on this theme, and I hope we do not have to repeat the arguments every time we come to it.
Perhaps the noble Lord might be able to help me and in so doing, I hope, help the House. I understand very well the argument that he is making. He has put it very clearly that he is against hypothecation of any proportion of GNI for any particular purpose. However, I am not quite clear on how this amendment assists that argument. If the noble Lord objects to the hypothecation of 0.7% of GNI for development aid, it matters not whether it is “the” target or “a” target; it is still a target. This amendment would not get rid of that hypothecation.
My Lords, there are two themes to all our amendments: hypothecation is one and the other is value for money et cetera. This is not the most important amendment to deal with hypothecation but it happens to be the first. That is the point. A lot of the other amendments—which I hope we can deal with much more swiftly because we will have dealt with the general arguments—are more designed to ease the target so as to deal with problems such as, for example, having in one given year to go on spending to meet the target when it might have been better to spread that over a few years. We have other amendments on those themes to deal with that problem. This is not the most important amendment but it happens to be the one where we can make the general case.
My Lords, with some trepidation I rise to speak to this amendment. Perhaps I should make it absolutely clear that I am not against the Government spending 0.7%, 0.8% or 1% of gross national income on aid. I am not opposed to aid; indeed, I have raised quite a lot of money for women in India. For me, the central argument is what we are trying to do here. I hope that I can avoid the noble Countess calling me to order in speaking to this amendment.
By the way, I do not know why there is confusion about which “the” it is. The amendment says:
“Page 1, line 2, leave out first ‘the’ and insert ‘a’”.
We are talking about “a” duty of the Secretary of State rather than “the” duty.
Very occasionally, my noble friend gets things wrong. I thought that we should speak to the amendment on the Marshalled List. If the noble Countess wishes me to speak to the other amendment, I can make the same speech because I want to focus on what duty we are placing on the Secretary of State and what is the target.
The noble Lord’s noble friend—the noble Lord, Lord Skelmersdale—reminded the noble Baroness, Lady Farrington, that the Lord Speaker said the second “the” when she proposed the amendment. Would the noble Lord, Lord Forsyth, like to speak to that one?
In which case my noble friend got it right and that is what we will discuss. If we are to talk about the target, that is what I want to address. My understanding of the Bill and its genesis—the idea was included in our manifesto as something that we would do in the first Session of this Parliament; the timetable has slipped a little—was that we wanted to enshrine in statute the UN target of 0.7%. That is what I thought we were trying to do. The UN resolution made in 1970 in respect of the target that we are apparently signing up to said:
“In recognition of the special importance of the role which can be fulfilled only by official development assistance, a major part of financial resource transfers to the developing countries should be provided in the form of official development assistance. Each economically advanced country will progressively increase its official development assistance to the developing countries and will exert its best efforts to reach a minimum net amount of 0.7 per cent of its gross national product at market prices by the middle of the Decade”.
That would have been in 1975, so we are some 40 years behind that deadline. I point out that the target was 0.7% of “gross national product”, but the Bill before us sets a target for a percentage of gross national income. That is not the same thing.
No, but I will do so at length—I keep being interrupted—when we get to Amendment 2. I am simply making the point that the target set in the Bill is not the target set by the UN. On a later amendment, we can discuss the implications of that.
My second point is that if we are to put “a” duty on the Secretary of State or whether the Secretary of State has “the” duty in respect of “a” target or “the” target—
I apologise, but just point out that the second “the” would make it the duty of “a” Secretary of State.
If ever I am on a charge, I will make sure my noble and learned friend is there to defend me. If we are to look at the operation of a target and what its effect would be, I draw the House’s attention to the report of the National Audit Office published on 15 January this year. I do not know how many noble Lords have read the report but I very much hope that those who feel that they wish to support the Bill in the present form will take the opportunity to do so. The report, Managing the Official Development Assistance Target, is about how practical it is to have a target and what the management problems relating to it are. I hope that the noble Countess will accept that I am speaking very closely to the amendment.
I should apologise that I did not speak at Second Reading. I was here for it, but we were limited to five minutes at Second Reading to discuss this important Bill, and I felt that I should make way to let others have a little more time.
Come on, Michael.
I am sorry that the noble Lord does not seem to accept my word on that.
Anyway, to the findings reached by the National Audit Office. It said:
“Assessing whether the Department has met the target is made more difficult by changes in the calculation of gross national income”.
“the Department published 4 values for the ratio of ODA spending to gross national income, ranging from 0.67% to 0.72% depending on how gross national income is calculated”.
We need to be very careful about what we mean by a target, because even the department found itself wrestling with four different numbers.
The NAO also found:
“The government’s specification of its aid target and international reporting rules present the Department with challenges for managing its budget and spending. The requirement to hit, but not significantly exceed, aid spending equal to 0.7% of gross national income every calendar year means the Department has to hit a fairly narrow target against a background of considerable uncertainty. In addition, it has to manage its finances around a December and a March year end; use latest economic forecasts to predict the level of ODA required to meet 0.7%; monitor and forecast other departments’ ODA; and adjust its spending to reflect changing forecasts”.
In other words, the effect of “a” target or “the” target is to present the department with, in effect, having two financial years: one the calendar year and the other the financial year. That means that it would be half way through the calendar year at the start of a new financial year, trying to work out how it will meet the target.
The NAO also said:
“The Department’s spending forecasts for 2013 had weaknesses, making it more difficult for the Department to manage delivery of the ODA target”.
In addition, it said:
“To achieve the target and manage its budget the Department had to quickly add some activities to its 2013 plans but delay others set for 2014, making it more difficult to achieve value for money”.
That is an independent view of the effect of having a target. It has nothing whatever to do with whether or not you think that the Government should spend roughly 0.7% of our gross national income on development aid; it is about the effect of specifying a target.
The NAO states:
“The Department added activities at short notice in 2013 which constrained choice”.
I could go through the whole of the report—
The noble Countess says no. I could go through the whole of the report strengthening the point about targets. I am picking up only headline points. For example:
“The Department added activities at short notice in 2013 which constrained choice … The activities the Department added in 2013 reduced its available budget at the start of 2014, and contributed to the delay of some of its planned activities”.
What that means is that the fact that it had been given a statutory target meant that some people in desperate need around the world had their projects cancelled because of the financial management difficulties imposed by having a target.
The NAO also found:
“The limited flexibility in the target led to the Department rescheduling payments in 2013, first to increase outturn, and then to reduce it … The Department phased its contributions to 2 key multilateral organisations to increase 2013 ODA”.
My Lords, I am now puzzled. Usually, I can follow the logic of the noble Lord, Lord Forsyth. The obvious logic, the House may feel, would have been to group together a whole lot of amendments, because that would have led to clarity about what we were discussing.
However, in my experience over the years, all departments and all Governments have set a financial limit for the year. I do not recognise the world that the noble Lord is speaking of, in which projects are not deferred because the department is coming to the end of the financial year without money. I well remember the noble Lord, Lord Heseltine, as Secretary of State, allowing youth services to spend money providing that they committed to it within a week. An officer in Lancashire had to follow me down the railway station platform so that I could sign the application. This is managing budgets. The noble Lord must accept that all budgets are fixed and that there are management difficulties at the end of the year with that. I wish that noble Lords who are confusing the issue of how the budget is set—
No, she has not, because if she had read the report she would not have made that intervention. The problem arises because the target of 0.7% is over a calendar year, so from January to December it is necessary to reach 0.7%, but the department’s budget period runs from April. Therefore, it is trying to manage programmes in respect of one financial year against a target set over a different financial year. The reason for that is because the Government are trying to set an example to other countries by meeting what they believe to be the UN target, which is measured over the calendar year in order to get equivalence.
The effect of that is that the unfortunate civil servants in DfID find themselves having to organise the budget with those two financial years. Even then, it is further complicated by the fact that only 82% of that budget is within the control of the department, because another bit of the budget is spent on environmental measures and another is spent by the Foreign Office, over which it has no control, so the civil servants have to find out what is happening in those other departments. The effect is that they end up shuffling money or writing cheques to multilateral organisations to meet the target when they should be concentrating on using the available resources efficiently and effectively to do the best for people in abject poverty around the world.
I know that the noble Baroness and others think that this is some kind of exercise to try to stop the Bill. I do not wish to stop the Bill, but I wish it to operate in a way that ensures value for money for the taxpayer and that projects around the globe are properly supported, not subject to some last-minute financial juggling in order to meet a ridiculous, but no doubt well intentioned, target in the Bill.
The amendment which my noble friend Lord Lawson was trying to move—the House was very discourteous to him over that—draws attention to that. The very same point was made two years ago by the Economic Affairs Committee unanimously, with all-party support—
I defer to the noble Lord, who is the absolute expert, as acknowledged by everyone in the House, on tedious repetition.
That is why I believe that the House and my noble and learned friend and the noble Lord, Lord Purvis of Tweed, need to consider the amendment seriously, because I do not believe that what they intend to happen will be achieved.
My Lords, I make a very brief intervention in support of the word used by my noble friend Lord Butler and the noble Viscount, Lord Eccles: flexibility. I came to support the amendment to substitute “a” for “the” because it introduces flexibility. I cite two examples. One was in the Select Committee on Soft Power, chaired so expertly by the noble Lord, Lord Howell. One of our recommendations was that consideration should be given to the lack of tie-up between DfID, the Foreign Office and the Ministry of Defence in Afghanistan, and the need to pool cross-government contributions to aid. Secondly, to pick up a point made by the noble Lord, Lord MacGregor, in relation to the Armed Forces, something that always worried me is the overcharging of overseas cadets coming to places such as Sandhurst, which forces them to go elsewhere. If we allowed some aid to subsidise their attendance here, it might encourage them on to our side in future, with future benefits for this country.
My Lords, before we go any further, can I just get something clear? Are we talking about “a” duty of “a” Secretary of State for “a” target, because we seem to be debating all three at the moment, or just one of those “a”s, and if so, which one? Can we have that made absolutely clear?
My Lords, I recognise that it is unusual for the Chair to make an intervention in Committee like this, but I understand that clarification is needed. The advice that I have received is that the amendment before us should read:
“Page 1, line 2, leave out the third “the” and insert “a””.
I hope that is of help to the Committee.
My Lords, perhaps I may make a short intervention arising from the comments of my noble friend Lord Forsyth and that of the noble Lord, Lord Lawson, when he said that we are not talking in this debate about humanitarian aid. It is of course true that only part of the budget goes to humanitarian aid, but it is a vital part and we cannot just turn our backs upon it. My noble friend Lord Forsyth talked about the National Audit Office report, which I have read, and last-minute financial juggling, but I think that is entirely unfair where DfID is concerned, and I will tell him why.
The majority of that money went to the Global Fund to Fight AIDS, Tuberculosis and Malaria. It was entirely vital that it went to that fund, because around the world there are 3.5 million deaths a year, so I hope at any rate that all those who have spoken today, including those in favour of this amendment, would agree that that was worthwhile expenditure. The idea that—
Let me go on, if I may, because we have just heard the noble Lord. If he will just be patient, then I will let him in. The noble Lord said that this was rushed out in March. To my knowledge, and as far as the Global Fund contribution was concerned, it was anything but rushed out in March. It was in fact previewed and promised by the previous Secretary of State. It has been on the books now for the last two years. The fact that it came out in March does not mean that the Secretary of State had a sudden rush of blood to the head and said, “Right, I’m going to give half a billion pounds to the Global Fund”; it meant that there was a process of careful consideration. It concerns me that that position should have been misstated. That is the reality of much of the aid money that we are talking about. Apart from development, which my noble friend Lord Howell spoke about, we are also talking about these issues.
I am most grateful to my noble friend. When I used the phrase “the money had been rushed out”, I was not quoting directly. My source was Margaret Hodge, who is chairman of the Public Accounts Committee. She concluded that it appeared that cash has been “rushed out” to meet the 0.7% target, and added:
“This raises questions about value for money which Parliament will be keen to look into”.
I am grateful, but not for the first time I think that Margaret Hodge is wrong. When my noble friend talks about last-minute financial juggling, he is overstating the case very substantially indeed. The reality that lies below what we have heard at the moment is that we are also talking about underresourced hospitals where drugs run out and patients die, and around the world where births are taking place on concrete floors. I know that my noble friend agrees with the point that I have just made.
No, I do not think it does and for the reasons I have just stated. Untypically, I do not think that my noble friend is listening to my argument, because this has been in preparation for at least two years, to my knowledge. That cannot be denied. My noble friend talked about people not reading the reports, but he should read some of the statements made by previous Secretaries of State. It is totally unfair to talk about DfID financially juggling the figures. That is not right; it is responding to a need from around the world because there is a need for consistency. If you are going to develop a vaccine, for example, you need consistency in the money and support that come forward.
I will make one last point. My noble friend started his speech by saying disparagingly that this is a Liberal Democrat measure. It is a Liberal Democrat measure but it is one that is, and has been, supported by all three parties. We have a bipartisan position here. I say to my noble friends who have spoken in favour of this amendment that while that is obviously their view, which I respect—I respect my noble friend Lord MacGregor, for example, and my other colleagues—they are the minority in this debate. The majority in the other place overwhelmingly supported this provision. It would be my guess and estimate that if this ever came to a vote in this House on the principle, it would be supported here overwhelmingly in just the same way.
Can my noble friend comment on the point made by the noble Lord, Lord Butler, about hypothecation? Is he quite comfortable about slabs of government expenditure being hypothecated so that there is no flexibility at all on behalf of the Treasury?
I am, in fact, comfortable in this position, because I think that we have a particular duty as far as the developing world is concerned. I would not be happy to have hypothecation in every government measure, but here we have a particular responsibility. There is a lack of imagination about what is happening out there in Africa and in the rest of the world. That is the point. If we have a duty, it is a duty in this respect. I am therefore entirely happy with hypothecation in this respect.
My Lords, as the sponsor, I will attempt to sum up this short debate. Perhaps the House will offer me a degree of forbearance as I find myself in the rather difficult position of having to respond to almost a second Second Reading debate, as well as to an amendment that was not moved by the mover but proposed by another noble Lord, an amendment which was then changed by the Chairman of Committees as we were debating it. To respond directly to my noble friend Lord MacGregor, his contribution, I think, got to the core of what this short debate is about. If this is about the essence of the Bill, let us consider whether a “the” should be replaced by an “a” and get to the core of it. The noble Lord, Lord Butler, and others may have been more accurately covering other amendments in other groups, but I will try to address them briefly with this point.
The United Kingdom has an international obligation which it has undertaken to meet over many decades; that is, the 1970 target. I do not consider it a ridiculous target, as my noble friend Lord Forsyth described it; I consider it a target that has been undertaken by the United Kingdom for many decades and under many previous Governments.
The noble Lord referred to me but he has misrepresented what I said. I did not say that the UN target was ridiculous. I said that the target in the Bill is not the UN target because the UN target is related to GDP and not to gross national income. If that sounds like a ridiculous point—which we can deal with later in our consideration of the Bill—I would offer an example. Luxembourg might be held to have met the target on the basis of GNI, but on the basis of GDP it would have met 50% of the target.
Yes; and indeed that seems a very tempting preview of the debate on the next amendment. My noble friend Lord Forsyth will no doubt make that point then.
The United Kingdom has given an undertaking to meet the 0.7% target. In 1970, that related to gross national product; now, it relates to gross national income. The target has been further developed by the OECD Development Assistance Committee, which recognises that this is indeed the international standard to meet. It is therefore a mature, settled and respected target in an undertaking which the United Kingdom has given over many decades to meet. It is with considerable pride that we have met it.
I will give way to my noble friend in just a moment. The questions about the undertaking we have given are, first, whether it is appropriate to have an annual target; and, secondly, how we can best monitor whether the spend within that budget is being delivered appropriately. These were thoroughly rehearsed in the Second Reading debate. They have been, and continue to be, analysed by the Commons International Development Committee. They have been reviewed by the OECD Development Assistance Committee in its peer review report in 2014, which I quoted at Second Reading. Furthermore, as my noble friend Lord Fowler has indicated, the National Audit Office report has been thoroughly investigating this. I will come to my noble friend Lord MacGregor’s point in a moment after giving way to my noble friend Lord Trimble.
I am not going to quibble with 0.7%, nor with the idea of the target. However, will the noble Lord address the question about putting a statutory target down and the problems that then arise from the inflexibility of that? The target itself, if you just think of the concept of a target, contains the notion of flexibility. That is the issue that is at stake here: putting down a target that is inflexible and the consequences that follow from that.
I not only respect my noble friend but acknowledge the point that he makes. However, I will refer him to the Hansard of the Second Reading debate; I feel that I covered his point in detail there. I refer him not only to my speech but to that of his noble friend Lady Chalker of Wallasey. She said that,
“it is critical that people know from year to year how they are going to be able to finance projects. One of our great nightmares was that we never knew how much we were going to have”.—[Official Report, 23/1/15; col. 1523.]
Not only does the UK’s acceptance of the obligation mean that we have continual year planning; now that we have met the target, the question is its effective delivery, not concern about the level of support for the international aid budget in future. Because we have this international obligation and undertaking as a proportion of GNI, we have worked in recent years to ensure that our processes can be as robust as possible and that meeting the target can also be done in a sustainable way, with predictability for those who we need to provide support for, and with proper public and parliamentary scrutiny. Since my noble friend’s report in 2012, a considerable level of work has been done, not only on parliamentary scrutiny but on the functioning of the Independent Commission for Aid Impact, now with over 40 reports, some of them critical of the department but many of them constructive. That is how we would expect an independent commission to carry out this role.
I do not think that anyone who supports the Bill would query at any stage that it is a complex budget in a circumstance where many areas of its delivery are the worst scenarios that you could possibly imagine for delivering a budget—war zones, areas where Governments are not functioning and so on. However, the NAO report, the OECD peer review, the Commons committee and the Independent Commission for Aid Impact all now have a serious body of work, done since 2012, that I genuinely think addresses the main considerations of my noble friends’ reports.
The question of whether it should be “a” or “the” in the first element is for the mover of the amended amendment to address. However, the substantive points made by my noble friends Lord Howell and Lord MacGregor have been addressed since the report. That is why, while of course we would value his contributions later in the debate, if we take him at his word that these assurances and the work that has been done since his report have been taken into consideration, I respectfully ask him not to press his amendments, and I ask my noble friend Lord Lawson not to press his.
My Lords, we have had an interesting debate so far. I would like to reply to some of the points that have been made, not least by my noble friend Lord Purvis, who has just sat down. First, though, I thank the noble Lord the Lord Chairman of Committees for his very helpful clarification of precisely what it is that we are debating in this amendment. The question of the amendment goes deeper, though, because what it is about—some of the later amendments are also about this—is introducing a degree of flexibility into the Bill. The reasons why that is necessary have been set out very well by the noble Lord, Lord Butler, and my noble friend Lord MacGregor.
It is quite impossible to debate this amendment without explaining why it is that, for a good Government, a degree of flexibility is necessary. The fact is that the 0.7% target is an anachronism. As my noble friend Lord Purvis mentioned, it was set in 1970, but the world has changed dramatically since then. What has changed it most is, in a word, globalisation: that is to say, the huge increase in both trade flows, which are the most important aspects for the developing world—I am strongly in favour of reducing barriers to imports from the developing world; that is what it needs and that is what we should do for it—and the huge increase in private capital flows, which my noble friend Lord Howell mentioned, and which are vital. Today, totally unlike the case in 1970, ODA is only 1/10th of the total amount of capital flows to the developing world. As the distinguished development economist Paul Collier said in evidence to us, aid is now “almost a sideshow”, although as my noble friend Lord Forsyth and others, and indeed our report, have pointed out, it has a much bigger effect on the extent of corruption in the developing world, for which the evidence is incontrovertible. One noble Lord has already mentioned the report by the House of Commons Public Accounts Committee on the so-called Private Infrastructure Development Group, which was produced this week in only the latest example.
There is a more fundamental problem about the 0.7% target, and it is development aid. I should respond to the very impassioned contribution from my noble friend Lord Fowler: this is not about humanitarian aid. As I said in my opening remarks, I believe that the case for increasing humanitarian aid is strong. This is about so-called development aid, aid for economic development, which is 90% of the DfID budget while humanitarian aid is a tiny part. Humanitarian aid needs the support of Governments; it is not exclusively for them, as charities and churches do good work in this area, but it is still a very strong responsibility of government, whereas capital flows, as my noble friend Lord Howell said, are now overwhelmingly private capital flows. The 0.7% target is therefore completely obsolete. That is no doubt why no other major country has the slightest intention of observing it. The G7, which consists of the major economies of the world—
This is the necessary background to the amendment. I repeat what my noble friend Lord MacGregor said: it is not my intention to go over this in the course of subsequent amendments. If it is felt better to take more time in subsequent amendments—if that is the will of the House—I will do so, but that is not my intention. I think it is more coherent, a more efficient use of time and more helpful to the House if the argument is made on this, the first amendment that we are discussing today.
As I say, I know that the noble Countess obviously does not want to hear this, but I am afraid that it is a fact that in the G7 countries, the amount of aid that the other six give ranges from 0.4% in the case of France and Germany to 0.2% in the case of Italy and the United States. None of them has the slightest intention of increasing that, and certainly they have no intention of making it legally binding.
Another reason why there is a problem with development aid was well set out in a book, Why Nations Fail, which some noble Lords may have read and which is well worth reading, by a couple of American economists, Daron Acemoglu and James Robinson, who in American terms are on the liberal side of the aisle. In that book they say:
“The idea that rich Western countries should provide large amounts of ‘developmental aid’ in order to solve the problem of poverty in sub-Saharan Africa, the Caribbean, Central America, and South Asia is based on an incorrect understanding of what causes poverty. Countries such as Afghanistan are poor because of their extractive institutions—which result in lack of property rights, law and order, or well-functioning legal systems and the stifling dominance of national and, more often, local elites over political and economic life … If sustained economic growth depends on inclusive institutions, giving aid to regimes presiding over extractive institutions cannot be the solution”.
That is a very important point—and again, it is a reason why we need the flexibility that is embodied in this amendment.
Incidentally, it may well be that the best thing we can do to create this significant political institutional change in these countries is, instead of spending all this money on so-called development aid, spending rather more money on educating the future leaders of these countries in our best schools and universities in the hope that they will then be able to bring about the political and institutional changes that are required in their countries. That would certainly be of far better use than development aid.
The fact is that no form of public spending should have a guaranteed percentage of GDP or of GNI—not just aid but, as we have said, not even defence.
Will the noble Lord accept that the noble Lord who is proposing the Bill showed some respect to the House in summing up the debate very briefly and not repeating arguments that had been made at an earlier stage—instead referring noble Lords to read those arguments from the report of the Second Reading and other debates. Will he please show the same respect?
I was not repeating myself in the slightest. I was making a number of additional points which are highly relevant to the Bill, to this amendment and to subsequent amendments. However, I will draw to a conclusion to allow other noble Lords to take part, if they wish to, in the debate.
The question is, which is more important: good intentions or good outcomes? I know that those who are keen on the Bill as it stands have the best intentions—I do not deny that for a moment. I know that people who support it are certainly well intentioned. Alas, however, as Members of one of the two Houses of Parliament, we have to consider not what the intentions are—I think we are all well intentioned; most of us have good intentions, whatever side of the House we are on—but what are the likely outcomes. If the outcomes are damaging—which they are in the Bill as it stands—the fact that they are well intentioned is no help at all.
In conclusion, we are very privileged to have the noble and right reverend Lord, the former Archbishop of Canterbury, among us. He knows what the road to hell is paved with.
It is the custom in this House for there to be few Divisions on amendments—they can come at a later stage, when we come to Report. At this stage, I beg leave to withdraw the amendment.
Amendment 1 withdrawn.
2: Clause 1, page 1, line 4, leave out “national income” and insert “domestic product”
My Lords, this amendment stands in my name and in the names of my noble friend Lord Forsyth and the noble Lord, Lord Lipsey. It would replace the words “national income” with the words “domestic product” on page 1, line 4 of the Bill. I hope that, in view of the exchanges in the previous debate, we can all agree that that is what we are debating on this occasion.
Before coming to the substance of the amendment, I want to make it absolutely clear that, as I said in the Second Reading debate, I support the British aid budget, I am quite prepared to see it increased further in the light of economic circumstances, and I admire the achievements of DfID, which, as the result of our examination in the Economic Affairs Committee, I recognise is held in high esteem across the world. I hope that there is no misunderstanding on that point and that noble Lords do not mistake criticisms of the Bill as it stands as being criticisms of the aid project. It is very important to clarify that.
My objection is to a legally enforceable annual expenditure target and my views on that subject are very close to those enunciated by the noble Lord, Lord Butler of Brockwell, speaking from his great experience. I not only oppose a legally enforceable limit in respect of the aid budget but would do so in respect of any budget, because I believe that it will lead to the misallocation of resources and distortions of various kinds. If it is adopted in its present form for the aid budget, that will in due course bring the aid budget into disrepute.
However, as the Government want to go down this road, and as the development community very much supports that, it is our task in this House, as far as possible, to save them from the consequences of that folly by improving the Bill. This amendment would go a small way—not more than that—towards doing that. I say that because the Bill confers on the aid budget, as others have pointed out, a unique privilege: it gives it a guaranteed share of national wealth, something that is denied to the National Health Service, education, defence, and other very important programmes. Therefore we must be sure, both for that reason and because of the legal obligation of the expenditure target, that the expenditure can be measured in the most precise and accurate way. I hope that no one would disagree with that.
The Bill defines the 0.7% in terms of a percentage of GNI and defines the period as a calendar year. Of course, as the House very well knows, the vast bulk of UK public expenditures are recorded as a percentage of GDP and on the basis of the financial year. This amendment would have the effect of enabling aid expenditure to be measured and recorded on the same basis as the overwhelming bulk of the budget. This is not a question of quantity—I am advised that the change from GNI to GDP would make virtually no difference on that score—but it would greatly increase transparency, which is something that in general the House approves of, and it might also avoid problems in future. Although there is not very much difference, as I understand it, between GNI and GDP at present, one has only to look at what happens with cost of living indices, whereby the differences between RPI and CPI can fluctuate quite markedly and lead to a great deal of misunderstanding. In that sphere, pensions, index-linked bonds and so on are measured by RPI, while other things are measured by CPI—and distortions arise. I suspect that distortions would also arise in relation to the difference between GNI and GDP.
If, as I suspect, this amendment is rejected, I think that the proposer of the Bill and the Minister—I emphasise “and the Minister”—should answer three questions. First, why use GNI? Presumably, it is being used for international reasons, but can we have an explanation as to precisely why it is GNI? Secondly, how will the aid expenditure figures and those relating to other programmes be reconciled? It is very important that the Government answer that question at the Committee stage. Thirdly, have the Government sought advice from the OBR or the NAO on this matter, and what did they say?
Let me just repeat the point about the Minister. Noble Lords will remember that about a year ago we debated the European Union (Referendum) Bill. I found myself at that time closer to the Liberal Democrat party and the Labour Party than to my own party. My noble friend Lord Dobbs, who proposed the Private Member’s Bill, summed up at the end of each amendment debate but the Minister on the Front Bench also intervened because of the implications for government policy. I have asked three absolutely relevant and explicit questions, which lie not in the province of my noble friend who proposes the Bill but in the province of the Government. I very much hope that the Minister will be able to answer the questions that I have put forward. I beg to move.
My Lords, I rise to support my noble friend’s amendment. It may seem a nitpicking point to distinguish between GDP and GNI—the noble Baroness on the Front Bench says, “Yes, it is”. But I suspect that that is because she does not know the difference between them, because if she did know the difference she would know that it was not a nitpicking point.
Well, I have been on the receiving end of a certain amount of abuse, and this is a very important point. As my noble friend has indicated, the difference between GDP and GNI for the United Kingdom is limited. But in support of the United Kingdom being in the van and being ahead of virtually every other OECD country in committing itself to a target of 0.7% of GNI, the proponents of that policy have argued that other countries—I think that there are five—have set an example. One of those countries is Luxembourg. The difference between GDP and GNI is that, for a country such as Luxembourg, which appears to meet the target very generously, the GNI is considerably higher than the GDP, because the GNI includes revenues that are repatriated from the country to outside. So if you set a target that is based on GNI, it gives anywhere that is a tax haven a huge advantage in meeting the target as opposed to countries that are not—and I thought that Members opposite were rather against tax havens and making life easier for tax havens. I cannot give the exact figure, but I would estimate that, if we take into account the moneys going through Luxembourg through multinational companies and going back to the United States and elsewhere, instead of more than meeting the target, I suspect that it is less than halfway towards it. This is not a nitpicking point. It is an important point. It is important because, as I said earlier—I am not going to repeat the argument—when the target was originally set by the UN, it was for GDP.
My second point in support of my noble friend is to ask why, for this one thing, we are choosing GNI. For example, our commitment to NATO is to try to meet at least 2% of GDP, not GNI. So why are we choosing a different measure when all our other international treaty commitments, as far as I am aware, are based on GDP and all our discussions in terms of our commitments to the health service and other services are based on GDP and not on GNI?
My noble friend’s amendment is an eminently sensible one. I would have thought that the Minister would have no difficulty in accepting it. I suspect that she will say in reply, “Ah, you do not understand. The Government want to make a commitment on GNI because that is the established standard by which other countries will commit themselves in terms of ODA”. I just point out that that established standard is actually cheating people in the developing countries of the support that they would otherwise get when those countries are countries such as Luxembourg where a large part of the receipts is not retained within the country itself. It seems rather extraordinary that we should give credence to that. Indeed, those who are committed to this policy of 0.7%, on the basis that the resources that should be made available for poverty alleviation around the globe, even at 0.7%, are not going to be sufficient, and resources should be maximised as much as possible, which I suspect is the feeling of this House, would do well to argue that it should be GDP not GNI that is assessed for the purposes of that target. However, that is not to say that I in any way agree with making that target a statutory target that has to be met, for the reasons that I explained earlier and which I shall not repeat—because, although we have lost our stand-in Speaker, I dare say it would irritate the House.
I very much support the amendment, which it seems to me is one that the noble Lord ought to be able to accept and which I would have thought that the Government, as the keeper of consistency, transparency and accountability in our national statistics, would find it helpful to have included in the Bill.
This is a sensible change proposed by my noble friend Lord Tugendhat. It would obviously put the Bill, which we want to improve and strengthen, on to a less wobbly basis. There is an enormous debate going on in the economic world and, indeed, in the international scene generally about the nature of GNI. Colleagues will recall, certainly in the last year, or less than a year ago, that the British suddenly found that their budget contribution to the EU budget jumped by the most enormous amount. That was related directly back to redefinitions of our national wealth, product and income. The ONS redefined our national GNI as including various illegal activities and grey and black market activities—and I think, although I may be corrected, on prostitution as well. It made some assessments, which vastly increased our national figure. Instantly we were charged an extra several hundred million—was it even a billion?—for the EU budget. This is dangerous ground. It would be enormously sensible for those who want to see this Bill in place and have an effect to get a better, less shaky basis for it.
There is of course the additional point that if the 0.7% figure rose as a result of GNI rising by these slightly controversial means—I do not think this point has found favour in the House but I beg your Lordships to try to look at it—it would take resources away and put them into ODA, which, as we recognise, is a decreasingly relevant part of the development driver process. That would deprive areas where we want to see development, such as the technology to reduce energy costs, which are crucifying developing countries. We want money to be spent there and on all sorts of technological improvements, which will bring development. We want money to go into defining the law on property ownership, which Hernando de Soto has said is the key consideration in enabling developing societies to develop.
These are the things for which we feel quite passionate. To see money diverted into areas that are not promoting development, even if they add to the aid budget, is not good for this country, our pride and our development power, and it is taking the wrong turning. This is a small but sensible amendment, which I hope will be accepted without demur.
My Lords, I sat through virtually the whole of the Second Reading debate, as my noble friend Lord Purvis knows. He also knows why I was not able to take part in that debate. It was a very good-humoured debate, which saw this House very much at its best. I regret that the hallmarks of our debates—courteous good humour and willingness to listen to the other point of view—have not been the defining characteristic of this morning’s debate. That is a great pity.
The fact that we can all accept a principle as being wholly desirable and good does not mean that we all have to accept that every particular is also wholly desirable and good. My noble friend Lord Tugendhat moved this amendment with precision and brevity, clarity and force. He made an extremely powerful argument. I hope it is an argument that will be recognised as such by my noble friend Lord Purvis and that he will feel that an amendment of this sort—although I sincerely hope there will be no pressing to a Division today—would not in any sense invalidate or undermine his admirable Bill, but would strengthen it in the ways that have been indicated. I hope that the rest of today’s debate can be conducted in a way that is more reflective of the good humour and good temperament of your Lordships’ House than the debate on the first amendment was.
I very much support my noble friend Lord Tugendhat’s amendment. In the spirit of my noble friend Lord Cormack, I certainly do not intend to speak for very long.
The first point that my noble friend Lord Tugendhat made was one of transparency. He made the point, quite rightly, that we measure everything else in terms of GDP rather than GNI. If we want to take the public with us it seems to me to be very sensible to use GDP rather than GNI. Let us be honest: the reason why people support this Bill with the enthusiasm they do is because they want to be seen to be generous with other people’s money. We all like people to be generous with their own money; it is slightly different when they are being generous with other people’s money. As that is the purpose of the Bill, we might as well make it as clear as we possibly can by using GDP rather than GNI.
My noble friend Lord Tugendhat also made the point that the difference between GNI and GDP is very small at the moment. In that case, this is a unique and wonderful opportunity to use GDP instead of GNI before the two indices start to part from each other. We have no idea what might happen in the future; the economy of this country may change and it may well be that we start getting less money if GNI starts to increase above GDP.
If we really want to nail this down, I say to my noble friend the Minister that this is a wonderful opportunity to embrace the amendment and get it on GDP, which everybody understands. That also means that we then guarantee that the 0.7% figure means something in the future, if that is what the Bill and the House desire.
My Lords, I intervene briefly at the invitation of my noble friend Lord Forsyth. Amendment 2, proposed by the noble Lords, Lord Tugendhat, Lord Lipsey and Lord Forsyth, seeks to change the 0.7% target from GNI to GDP. If my noble friend Lord Forsyth was addressing me in seeking a reaction from the Front Bench—he did say “she”—he must have misheard. I made no comment. I would not have dreamt of doing so as a comment on what he was saying, even though I have found that reading economics textbooks to my dyslexic son has helped to inform me.
Being somewhat short, I could not see who was over there and who my noble friend might have been addressing.
Obviously I take very seriously what my noble friends have put forward. I emphasise that the commitment to invest 0.7% of GNI in ODA is an international commitment that is reported to and monitored by the Development Assistance Committee of the OECD. The UK reports on this basis to the DAC, allowing comparison across donors. To aim at an alternative ODA target for the United Kingdom based on GDP would not only lead to multiple definitions, but create confusion. It would also undermine our intention to fulfil our international commitments. This is an international target; it would reduce our credibility and moral weight that our commitment to the 0.7% target carries with our international partners—I have encountered widespread support for the move to the 0.7% target that we have taken—which would limit our ability to press other donors to meet their obligations, for example, to the Global Fund, which my noble friend Lord Fowler mentioned. This would not be helpful or in the spirit of our commitment to the world’s poorest. Gross national income became the preferred measure of measuring a country’s wealth in 1993.
I think my noble friend would acknowledge that the target originally set by the UN was GDP. This is a genuine question: could she explain to the House when and why it was changed from GDP to GNI on an international basis and why it is necessary for us to adopt GNI, given the implications that that would have in future, as my noble friend pointed out, of possibly less money being available and less certainty?
My Lords, I regret that I cannot accept my noble friend Lord Tugendhat’s amendment. Let me explain why. In doing so, perhaps I may correct my noble friend Lord Forsyth and address specifically the point from my noble friend Lord Cormack.
Paragraph 43 of UN Resolution 2626 from 1970 is the target that we have been debating consistently in this country. Indeed, it is the foundation of the Bill. I shall quote from it and perhaps that will answer the question. It states that each economically advanced country,
“will exert its best efforts to reach a minimum net amount of 0.7 per cent of its gross national product at market prices by the middle of the Decade”.
It does not say “gross domestic product”. As the Minister clarified, the UN system of national accounts adopted by the United Kingdom in 1993, during which I think my noble friend Lord Forsyth was a Minister in the Government, had GNI as the successor of GNP as the accepted international comparator of national economic activity. He will know, as he indicated to the Opposition Front Bench, the difference between GDP, which includes foreign economic activity within the territorial area of Britain but excludes those operations owned by Britain externally, and GNI, which includes those and has therefore been considered to be the standard economic comparator. To address the point raised by the noble Lord, Lord Tugendhat, that was adopted by the United Kingdom in 1995—I think that my noble friend was in the Cabinet at that point—for European Union payments and as a standard for European Union classifications. I think that he may well have been commenting on that late last year.
As that is now the adopted framework within the OECD and a successor to the obligation that we made in 1970, any change to the Bill would be a retrograde step, as the Minister explained, because under our obligations in the OECD we would still have to report on GNI anyway.
With that explanation, and having answered the noble Lord’s specific point, I hope that he will withdraw his amendment.
What are we doing here? Are we passing law that affects what the United Kingdom will do in terms of its contribution to overseas aid, making that as stable a target as possible, or are we using legislation to make some declaratory statement about what we are doing internationally? It is very important to recognise the difference between the two. As the mover of this Bill, is my noble friend really saying that he prefers a measure that enables countries such as Luxembourg to appear to meet the target, whereas if they were subject to GDP they would have to contribute almost twice as much? Is he really saying that he is happy with that situation?
We are making law and debating an amendment that proposes a change to the Bill. I have explained why that would not be appropriate and why we operate under our system of national accounts, which we adopted 20 years ago when my noble friend was a Cabinet Minister. On that basis, I invite my noble friend to withdraw his amendment.
My Lords, I thank those noble Lords who have participated in the debate. I also thank the proposer, who, in so far as he is responsible for the Bill, sought to meet the points that I raised. However, I have to confess that I am slightly disappointed with the Minister’s reply, and I hope very much that the Government will be able to put up a better performance on Report.
First, the noble Baroness explained, as did my noble friend who introduced the Bill, the external considerations that have led to the adoption of GNI, and I understand those. However, I raised—I think talking about British budgetary procedures is quite legitimate in the British Parliament—the difficulties that will be caused by measuring this expenditure against other public expenditure programmes. That is something that the Government ought to be very much concerned with. Of course, they ought to be concerned with international considerations, but they ought also to be concerned with domestic budgetary considerations. I raised specific questions in relation to those, which the Minister simply did not answer. She did not address the points at all. I also asked whether the Office for Budget Responsibility and the NAO had been asked for their opinions and what they had said. Again, answer came there none.
As I made quite clear when I introduced the amendment, I support the aid programme and its objectives. I have no problem with its increase in relation to national circumstances. However, it will be very dangerous if the aid budget is put into a uniquely privileged position. It is already having privileges lavished on it by a guaranteed share of the national income. That is one big privilege that I think will lead to it coming into disrepute. Now, the Minister compounds the problem by completely failing to take any account of the questions that I raised about the interaction between this budget and the domestic budget.
I very much hope that the Government will be able to put on a better show on Report and, for the sake of clarity, answer the specific questions that I have raised. First, what steps are they taking to reconcile these different measurements in terms of the domestic and international considerations? Secondly, have they consulted the NAO and the OBR, which they certainly should have done? If they have, what did the NAO and the OBR say? If they have not, why not?
In the—I hope not forlorn—hope that the Government will come back with a better answer on Report, I currently beg leave to withdraw the amendment.
Amendment 2 withdrawn.
3: Clause 1, page 1, line 5, leave out from “kingdom” to end of line and insert “over the period 2015/16 to 2019/20 and each subsequent five year period”
My Lords, the amendment seeks to leave out the provision for meeting the aid target annually and replace it with “five year period”. Its purpose is to try to get over some of the difficulties caused by having a fixed target that has to be met within a calendar year with, as I explained earlier, a Government who are budgeting on the basis of a financial year, and to allow some flexibility. I am sorry that my noble friend Lord Fowler, who I know feels passionately about these matters, is not in his place—he has arrived. In his excellent speech he made a number of points that relate directly to this issue and which I shall try to deal with.
The amendment seeks to change the timeframe within which the 0.7% target applies. The Bill currently places a duty on the Secretary of State to ensure that public spending reaches 0.7% of GNI every year. I should just like to point out that the UN resolution did not actually require 0.7% to be achieved each and every year, so my amendment is not in conflict with the original UN resolution. For some reason, “every year” has been added in the nature of this Bill, and I believe that that greatly adds to the impracticalities and difficulties that the Bill presents. The amendment would mean that public spending on international aid would be required to reach 0.7% of GNI across a five-year period, and that would avoid the need to rush or defer spending on aid programmes.
I shall resist the temptation to take the Committee through the whole NAO report, which was published on 15 January and which I referred to earlier, but it deals with the real concerns and difficulties that the department has had in managing what it is being asked to do by government.
At the risk of provoking the noble Lord to read out the whole of the NAO report, I hope that he will accept that during the Second Reading debate, which he listened to very carefully, a number of alternative versions and impressions of that report were described by noble Lords, including the very positive comments made in the report about the way the department was preparing for this eventuality. It was not a one-sided report and the version that the noble Lord gave earlier was not the only version described during Second Reading.
I am not seeking to take sides with anyone. If the National Audit Office and the Chairman of the Public Accounts Committee draw our attention to the very serious difficulties which the department has had to meet, and to the serious implications for getting the best value for money in the aid programme, we need to take account of that.
And rightly so. The department is absolutely heroic. It has been given an impossible task. If the noble Lord has read the report, he will see that it had to juggle its budgets and go to the Treasury for extra cash. My noble friend on the Front Bench is shaking her head. If she wants to intervene and contradict me, I would be happy to give way, because it is clear from the report that it has had to do so because of the Government’s policy.
By the way, the Government do not need this Bill to decide to spend 0.7%, 0.8%, 0.9% or 2% of GDP on development aid. This is not a sine qua non as far as the Government’s policy is concerned. Indeed, without the Bill the UK’s international aid budget has grown exponentially over the past few years. In absolute terms, the UK ODA spending increased from £3.8 billion in 2003 to £11.4 billion in 2013. That is an increase of £8 billion over a 10-year period. The most recent rise in spending is particularly striking; it increased by £2.67 billion between 2012 and 2013. That is a 33% increase in spending, which is a lot to take account of in one year.
The National Audit Office report, which I shall paraphrase and summarise—I hope the noble Lord will accept that it is a fair assessment—said that DfID spent an extra £1 billion in international aid in just eight weeks towards the end of 2013 to satisfy the 0.7% target. Spending an extra £1 billion in eight weeks before the year end reminds me of the bad old days of local government when all the roads started getting dug up in March because the local authorities were trying to spend their budgets. All kinds of projects that would not have made the cut if considered on a priority basis and a sensible basis suddenly got done. This is the very situation that we are creating by having this inflexible target over a limited period of time, and it is what the amendment seeks to address.
My noble friend Lord Fowler chided me for using words such as “rush”. He is absolutely right; one of the beneficiaries of the rush to spend was indeed the AIDS programme—and a very worthwhile programme that is. I do not know which programmes lost out the following year when they had to be throttled back in order for the target to be met, but of DfID’s spending in 2013, around 40% occurred in November and December. If that does not say that this is a department trying to spend the money and struggling to meet a target, I do not know what it says. Why did it take until the last two months of the calendar year, the year in which the target is assessed, to spend 40% of the budget? The National Audit Office outlined a number of concerns relating to the 0.7% target and its impact on efficiency of aid spending. These include DfID having to,
“quickly add some activities to its 2013 plans but delay others set for 2014, making it more difficult to achieve value for money”.
One of the arguments that we have heard this morning was used by the noble Lord, Lord McConnell, as I recall, in his Second Reading speech. He said, “If we have this target, we can stop talking about the quantity of aid and start thinking about the quality of aid”. I paraphrase him and am relying on memory; I hope I have not misrepresented him.
The noble Lord’s argument is no good if we stick with the provisions in the Bill, because, as he said himself, the National Audit Office report says that the target resulted in some activities having to be rushed in. They had to be ready to be implemented and other activities had to be delayed. That is not providing certainty or long-term planning; it is substituting for long-term planning the shifting of particular programmes, such as the AIDS programme that my noble friend Lord Fowler referred to. “What can we do? What can we spend this money on? Right, let’s do the AIDS thing because that is ready to fly, and we will defer this other one because we will not then be able to afford it”. Everything is geared towards meeting the 0.7% target.
My Lords, I am grateful to the noble Lord for giving way, but I want to introduce a degree of realism that is somewhat missing. The comparisons that he is making, and where they are being made, bear no relation to the suffering and needs of people in other parts of the world. No matter how we dress these words up, outside this House it will be read as an intention to deny and delay the very projects and needs which the poorest of the world are calling out for. Think only of this: not of the child that needs to go to bed with food in its stomach but of the woman who loses her life and her child in childbirth because not enough money is going into that maternity service. Think of that and then choose your words.
I will, if I may, reply to the noble Lord’s noble friend first. This is the National Audit Office. It has no partisan view. Its report says that rescheduling had to take place, leading to,
“£250 million … of planned activity”—
meaning the very people the noble Lord is talking about—being moved from the first three months of 2014 into 2014-15. It was delayed. The NAO claims that the rescheduling,
“is likely to have delayed some of the benefits those activities were designed to provide”.
If the noble Lord is sincere in what he is saying, as I am sure he is, he is on my side of this argument.
I am again grateful to the noble Lord, and this, I promise your Lordships, will be my last intervention, but with all due respect he cannot represent my argument and I do not believe that he ever could. Audits are there to look at something through a particular lens. The economic arguments that we have heard have been dressed up as an exact science. If that is so, I would be interested to hear why economists and certain Treasuries have got it wrong for so long. At the heart of the debate is making sure that commitments that we have made globally are met and that we imagine that we are the poorest, not that we sit in this noble House and go home and afford ourselves the services that we do. I will not intervene again but, with all due respect to the noble Lord, he does not and could not make my arguments.
I agree that I could not make the noble Lord’s arguments because they are confused. He is confusing two things: the desire to ensure that we have effective programmes to deal with poverty and the desire to meet a particular target and implement it in a legislative form that will have the effect of programmes being delayed and of money being spent unwisely because of the constraints that are being put on the very excellent people in DfID. We are very lucky; in DfID, we have one of the best organisations in the world. Why on earth are we shackling it in a way that prevents it from setting priorities, doing its job effectively and getting the long-term certainty and commitment which the noble Lord, Lord McConnell, who I see is about to intervene again, has talked of so eloquently in his speech.
I thank the noble Lord for allowing me to respond to his reference to my Second Reading speech. I wish to make two points. First—I hope that the noble Lord accepts this—the National Audit Office report makes clear that it does not believe, and has no evidence to suggest, that any of the money that was spent on projects in that financial year was wrongly spent or that the projects were not worth while. That is very clear in the National Audit Office report. Secondly, that report was specifically commissioned because this was the first year of meeting the new target and clearly there were going to be timescale issues in meeting the target in the first year. The point that noble Lords are making—including the noble Lord, Lord Purvis, in bringing forward this Bill—is that bringing consistency and predictability to meeting this target year after year will help deal with those timescale issues, not exacerbate them.
My Lords, before my noble friend replies to the noble Lord, will he confirm that he is speaking to all the amendments in the group as it is a large group? I say to the noble Lord, Lord McConnell, that it is normal in Committee to allow the mover of the amendment to make his speech. There is plenty of opportunity to respond afterwards. Indeed, the mover of the amendment can then respond at the end of the debate.
It is true that there are a lot of amendments in the group but they are consequential on the concept of creating a five-year period. The noble Lord, Lord McConnell, and I are old sparring partners and old habits die hard for him. In response to his intervention, and at the risk of being accused of repetition—I note that the noble Countess, Lady Mar, is not present—I stress that the National Audit Office report said that DfID was having to,
“quickly add some activities to its 2013 plans but delay others set for 2014, making it more difficult to achieve value for money”.
What does that mean if not that it was not getting the best bang for the buck? The noble Lord said that 2013 was the first year for meeting the relevant target. He is absolutely right about that. However, the report goes on to say:
“The Department’s plans for delivering the 2015 ODA target require it to rapidly increase its investments, which could be difficult for it to achieve”.
If that is not saying loud and clear that we are unnecessarily putting the department in a straitjacket, I do not know what is. My amendment would prevent that and I hope that the noble Lord, Lord Purvis, will accept it.
The noble Lord opposite is clearly not persuaded by the National Audit Office report. My noble friend Lord Fowler was very unkind to Margaret Hodge, the chairman of the Public Accounts Committee, who I think in many respects has done a great job in chairing that committee. Indeed, she has said that it appeared that the cash has been “rushed out” to “meet the 0.7% target”.
“This raises questions about value for money which Parliament will be keen to look into”.
I do not think we can ignore that. Just to show that I am being balanced and fair, Sir Peter Luff, a very distinguished colleague, who many of us in this House remember with great affection, said:
“The committee must grill Dfid very carefully to make sure this money was spent wisely and well. This proves the folly of binding targets which set out how much you have to spend irrespective of need”.
Neither of these parliamentarians is noted for holding extreme views.
However, as the noble Lord is not happy with National Audit Office’s view, I turn to the International Development Committee, which was also concerned about the impact of the 0.7% target on the effectiveness of aid. It stated in its annual report of May 2014:
“2013 was an exceptional year. DFID’s expenditure increased rapidly as UK ODA rose from 0.56% to 0.7% of GNI. Nevertheless, it does seem surprising that DFID should spend over a quarter of its budget in December and almost 40% of its budget in November and December. DFID should provide the reassurance that its expenditure is rational and costeffective and not rushed out at the end of the year, which is the impression that can be given by its spending profile in 2013. We recommend that DFID carefully monitor its ability to meet the 0.7% target given uncertainties about both its own spending and that of other Departments and the GNI figure, which is itself subject to regular revision”.
As regards that latter point on regular revision, to which my noble friend Lord Howell referred, suddenly, it is decided that we need to take account of illegal drugs activity and prostitution and, as a result of that, we have to find an extra several hundred million pounds to spend on the aid budget. Does that make sense? It may be a bonus for the department, but it will certainly not be part of a planned approach.
I feel strongly about this issue as I was a member of the Economic Affairs Committee, under the splendid chairmanship of my noble friend Lord MacGregor, which took evidence on this issue. The evidence is there for people to see. It highlighted the problems, including that of wrongly prioritising the amount that is spent rather than the results that are achieved. Throughout the morning we have talked about how much is spent rather than how to get the best value for money from what is spent, as I said when we discussed the earlier amendment of my noble friend Lord MacGregor. We thought that a single-year target,
“makes the achievement of the spending target more important than the overall effectiveness of the programme”.
That was one of the conclusions of this House’s distinguished committee. We also said that,
“the speed of the planned increase risks reducing the quality, value for money and accountability of the aid programme”.
That is what we concluded a few years ago and that view is supported by the NAO and the International Development Committee.
A further point that has not been touched on this morning is that reaching the target increases the risk that aid will have a corrosive effect on other political systems by creating aid dependency. That, again, points to what DfID is doing very successfully—that is, looking at more targeted and sophisticated ways of providing aid and support and involving the private sector. I sense that the House has probably heard enough of this argument. I beg to move.
My Lords, unfortunately, I was not able to speak in the Second Reading debate, even though I was present, as I could not be certain that I could attend the whole debate. However, I assure the Committee that I intend to speak briefly and only to the amendment.
I write a football column each week for the Times, and have done for more than a decade. The column is concerned with the quality of football teams and helps readers to distinguish between noise and signal. A team that wins 50% of its games will not do so by regularly winning, then losing, winning then losing; it will do it in clusters. When statisticians assessed those clusters, they discovered that they are randomly distributed. In other words, a team will win a cluster but that may be just because it has a run of random results and then it will win, win, win, draw, draw, lose, lose in that cluster. There is a trophy that is awarded entirely for randomness: it is called the Barclays Manager of the Month. When a team’s cluster of wins coincides with a calendar month, its manager becomes Barclays Manager of the Month. In the following month, when that team loses its games, something occurs that is called regression to the mean, and the manager gets fired. This is a perfectly simple statistical concept that ought to be applied to the Bill.
It is not a very good idea to try to set a target in law, on which Parliament must report, that is attached to a single year’s variable data. It is much better to try to find a period that might represent some sort of significance over a long period of time. A single year cannot do that and five years can attempt to do that. Even five years is quite a short period but it is certainly a great deal better than a single year.
This is a technical objection to the Bill, even though others may think it goes to the heart of the argument for it, but the Bill would certainly be greatly improved if a simple concept of randomness was agreed so that we do not have a law for randomness in the same way that we have a cup for it.
My Lords, I had not intended to speak a second time, but I feel that I cannot allow the words of the noble Lord, Lord Cashman, to go unanswered. I and a number of other noble Lords have made it clear that we support the British aid programme and its objectives and we understand that DfID is a very good administrator in these fields. The suggestion that in trying to improve the Bill one is in some way trying to deny the needy or trying to take food from the hungry is quite unjustified. I very much hope that he was not uttering those words in a personal sense.
Let me continue, because there has been a certain amount of moral indignation, which I find very difficult to take. Noble Lords, including two former Chancellors of the Exchequer and a former Chief Secretary to the Treasury—I am a former Budget Commissioner in the EU and have had a lot to do with large expenditure programmes in the private sector and the public sector—owe it to the House to draw on our experience to seek to improve the legislation that comes before us. I recognise that, as my noble friend Lord Fowler says, we are in a minority. I also recognise that although the Economic Affairs Committee, which is made up of members from all parties, reached a unanimous conclusion, its view is in a minority in this House.
However, the fact that one is in a minority does not mean that one should be constrained from drawing on one’s experience in trying to improve legislation. I believe that this Bill is flawed and that the amendments will improve the Bill. If the Bill can be improved, it will be more effective. However, if the Bill falls, that will in no way interrupt the flow of British aid or inhibit the Government’s ability to spend 0.7% or 0.8%. I hope that noble Lords, such as the noble Lord, Lord Cashman, and others who think like him, will accept that we are speaking with good intentions.
My Lords, I have always believed that we must speak in defence of our principles without hesitation and bring to that our wisdom. However, one must also be aware of the weight of one’s words and how those words will be represented. In terms of one’s experience, I also said that economics is being viewed as a science. If it is such a science, how come economists and Chancellors have got it so wrong for so long?
I am afraid that the way in which human beings are constructed means that error is endemic in all our assessments, but that should not be an inhibition in drawing on our experience to try to improve the proposals before us. I quite accept the point made by the noble Lord about how statements may be viewed and reviewed. I would also say to him that there is a danger of them being misrepresented and that what he has said will encourage that.
My Lords, I have very few qualifications for speaking in these debates, although I had the extreme privilege, thanks to my noble friend Lord Lawson of Blaby, of serving as the British Minister on the Budget Council of the European Union for the four years when I was in the Treasury—I suspect that that is about as long as anyone has ever done that job. During that time, we had to deal with problems that were, effectively, intractable. The Budget Council is a body with which the noble Lord, Lord Cashman, will be familiar. I am delighted to say that it was this Government who found solutions that meant that we did not have a continuous repetition of the failure of the process at the end of the year in arriving at a budget, which, in the final analysis, was determined by the European Parliament. It was a rich and pleasurable responsibility to hold and we earned the respect of our confrères on the Budget Council—rather as DfID is earning respect—for our concentration on solutions rather than on argument.
The second thing that I wish to say—there is an enormous amount to read on this subject, particularly in the short space of time between Second Reading and Committee stage—relates to the extreme utility, on the subject that we are discussing, of the footnotes in small print in the NAO report. It propounds issues that the International Development Committee might wish to consider. At least 11 out of 15 such issues apply directly to this as a way of making what may also be relatively intractable problems easier to solve.
My Lords, I listened almost with amusement to the last forceful intervention of the noble Lord, Lord Cashman. He summed up in an excellent, succinct phrase exactly the content of my maiden speech in this House in 1997—namely, that economics is not a science, as many of its proponents insist, but an art, and a very ambiguous art at that, which is full of subjective views. To look back, frankly, at the development activities of the past 40 and 50 years, post the Second World War, the economists have not done a very good job. They have applied all kinds of economic rulings to the proposed triggers for development and have found that they have not worked. Of course, far more than economics is involved. There is a whole range of psychological and particularly local factors in all the countries that all of us have visited over the years—I have visited dozens of them—which are operating not to the laws of economics. I say “Well done” to the noble Lord, Lord Cashman. That is exactly the truth of the matter. We do not want to be guided too much by economists.
What we want is flexibility and room in which we can look to the future for once rather than the past and see the ways in which development can be triggered and promoted in the future. As my noble friend Lord Lawson said, the world has changed totally in the last 40 years. The developing countries are looking for new priorities and new ways of assistance. They are looking for ways in which they can graduate away from official development systems à la 20th century into new forms of support and development in the 21st century.
All sorts of distinguished reports from the other place and your Lordships’ House emphasise that. The latest report from the excellent House of Commons International Development Committee on the future—not the past—of UK development co-operation states:
“The impact of DFID’s support … depends less on the volume of financial support and more on its ability to act as a purveyor of development excellence, helping its partner countries to identify innovative solutions”.
Your Lordships’ House should be thinking about innovative solutions and not the past. The committee also states:
“As grants of aid become less appropriate in some countries, so new forms of development co-operation are necessary”.
It goes on to identify the evidence that it had gathered in the various countries that it had visited. That is the reality of the moment. New forms are required to promote development. If we glue ourselves into the old ways of thinking, we will deny ourselves the flexibility of this kind of goal, which our superb staffs in DfID, the Foreign and Commonwealth Office and other areas will seek to be guided by, and we will do a disservice to development on a massive scale.
I follow my noble friend Lord Howell on the remarks of the noble Lord, Lord Cashman. He is absolutely right that economists indulge themselves in a form of science that is not exactly reputable. Some noble Lords may remember the letter written to the Times by, I think, in excess of 360 economists, who said that the Thatcher economic policies were absolutely doomed to pitch this country into constant recession. That was the turning point for the economy in the United Kingdom, and things really took off from there. We are very much at home with him on that.
The noble Lord also spoke about how we should feel enormous compassion for those in great need in places in Africa and so forth. We all very much sympathise with where he comes from there, but the point has already been made in this debate that only 10% of what goes to these countries comes from development aid programmes. The rest comes from investments made in these countries. Let us face it: what is really going to make a difference in a desperately backward country such as the Democratic Republic of Congo is the fact that the Chinese are prepared to put in extensive railway and road networks in return for copper and cobalt concessions in that country. These are the things that will really make a dramatic difference in a country such as the DRC. In terms of relativity, development aid programmes are merely a pinprick compared with what is being invested in return for mineral resources.
To return to the amendment, the noble Lord, Lord Cashman, is right that this is not about economics. This is much more about accountancy. Some people will argue that accountancy is one of these other rather faulty arts, rather than a science, but I think it comes nearer to being a science than an art. What we are talking about here is how you manage money effectively. It must surely be right that you can take somewhat longer to meet a programme, rather than restricting yourself to 12 months. People who support this Bill have not really answered my noble friend Lord Forsyth’s point about 40% of the budget being spent in November and December of a year because it is bumping up against the end of the financial year. This should strike an enormous amount of disquiet in people’s minds, because it suggests to anybody that the expenditure of this money is being rushed. No control is being put in—we are just trying to meet targets to show that we spent all this money, and where the money goes is of much less concern.
I spent a certain amount of my youth in the army in Kenya. After independence, one of the famous elements of Kenyan politics was the Wabenzi, people in government who drove around in Mercedes-Benzes, many of which had been paid for of course by development aid money. One has to recognise that, in these sub-Saharan African countries, the elements of corruption are very great indeed and there is no respect for development aid programmes. People do not say, “This is being brought into my country to aid the poor, therefore I will not put my hands on it”. The fact is that those in charge manage to get hold of an awful lot of that money, which is why so many of them are driving around in Mercedes-Benzes today.
My Lords, in considering this group of amendments, I hear what my noble friends are saying about seeking to help the Government to manage our spending on official development assistance in a more flexible and predictable manner. However, these amendments, if carried, would have significant disadvantages, in our view, not least in terms of the flexibility and predictability noble Lords are seeking to promote.
First, as has been made clear previously, there is a need for an internationally consistent approach. The OECD DAC is made up of 29 members, and to ensure that monitoring and reporting of DAC members’ budgets is consistent and can be reported transparently, the DAC has decided to monitor ODA on the basis of single calendar years. If the UK moved to a five-year average, the UK would still have to submit annual ODA information to the OECD DAC. The need for consistency and clarity is essential. Importantly, using an alternative definition would also undermine the weight that our commitment to 0.7% carries with our international partners, as I mentioned before.
It is also important to note that the department already manages to an annual target, as does any other government department—as the noble Baroness, Lady Farrington, mentioned—in order to deliver within annual budgets. Therefore—
I think I had better continue. I am sure the noble Lord will wish to come in later. Therefore, a five-year target would not add additional flexibility. We have had reference to spending at the end of the 2013. I underline what my noble friend Lord Fowler said about the commitment to the Global Fund. I know how long it took to get that decision made and out, and the importance of that decision and the commitment that we made. I would also add, as I did at Second Reading, that it seems, perhaps, to have been set aside.
I am not going to give way. I will carry on in the interests of time. We also faced Typhoon Haiyan and an unexpectedly high increase in the number of refugees fleeing violence in Syria and facing the winter in the open. I have read the NAO report. The NAO, in its scrutiny, found no evidence that the department failed to follow its normal business processes—and it looked very carefully indeed at those. For example, the report says:
“The Department took positive steps to prepare for the 33% increase in its budget in 2013-14”.
It also says:
“The Department’s decision to issue more notes to”,
the Global Fund and the World Bank,
“in 2013 did not alter the total value of notes it planned to provide them and did not affect the content and timing of the programmes”.
I am most grateful to my noble friend for giving way. I think that her argument is that, if the department spent, say, 0.8% one year, 0.6% another year and 0.9% the year after that but it met the 0.7% target over the five years, that would not be acceptable because it would look odd in the OECD statistics. As the vast majority of OECD members are nowhere near 0.7%, why is that a problem?
My noble friend has made his case very clear and others have, too, but we are managing the budget over a longer period in a way that it can hit those targets in those specific years. We have mechanisms to ensure that we spend our money in a strategic and long-term way. Noble Lords are very familiar with that—not least my noble friend Lord Fowler—and it does not require that kind of potential splurging at the end of the year in order to hit the target. We make annual contributions to a number of multilateral bodies and those are organised using the notes system that I have just mentioned, which allows a note to be counted as aid when issued but it is not cashed until the money has been properly spent in the fullness of time. This means that the department has the flexibility that it needs, as other government departments do, to arrange its accounting to fulfil its obligation to spend at the 0.7% target.
My noble friend Lord Tugendhat, in withdrawing the previous amendment, clearly did not feel that I had adequately answered his question about the OBR. I apologise if I did not answer adequately, and I will look very carefully at what he said and write to him if I need to clarify anything further. However, I hope that I answered his question on whether GNI is an international standard, as I went into that in some depth. Clearly, the target does not change the way that departmental budgets are reconciled with each other—that is not a challenge that we encounter. The ODA GNI figure is a national statistic and the methodology has been agreed by the Office for National Statistics. We are bound by that methodology, which is agreed and overseen by the ONS, which is the appropriate body to deal with that.
I remind noble Lords that the International Development (Reporting and Transparency) Act 2006 established a duty on the Secretary of State to lay before each House of Parliament an annual report about the UK’s development efforts and spending, including reporting on progress towards meeting the 0.7% GNI target for ODA. Therefore, there is such an annual accounting in law anyway. Maintaining DfID’s accountability for tracking and reporting on its own spending to Parliament is more appropriate, both from a governance and a practical point of view, than putting such a responsibility on the Office for Budget Responsibility. If we were to do that, this would seem to be outside the current mandate of the OBR and might require revision of the 2006 Act.
Clearly, spending needs to be fully scrutinised, as the right honourable Margaret Hodge and the honourable Peter Luff said, and my noble friend Lord Purvis has outlined the very thorough and independent way in which that happens. I thank my noble friends Lord Howell, Lord Brooke and others for their wonderful tributes to DfID on the way that it manages this. Indeed, DfID is at the forefront of how best to assist in developing countries, which will undoubtedly change, and needs to change, over time.
Although I understand the intentions behind these amendments, I urge noble Lords to reject them.
Before my noble friend sits down, one point on which it would be helpful if she could come back—possibly we could discuss this on Report—is the question of what is “ODA-able”, to use an ugly phrase. The Development Assistance Committee of the OECD is in constant debate, even now as we are debating this Bill, about the new definitions that are required of what is “ODA-able”, or acceptable within the targets, and what is not. How does that link in with the concept in this Bill of the one-year, annual discipline? How will we enable the Bill to be effective in the light of the debates on changing the rules on “ODA-ability” that are raging on in the Development Assistance Committee—and, I suppose, in Whitehall—as she very well knows?
I do not need to come back on Report, because I hope that I can answer my noble friend now. I find it immensely helpful that there is a definition of ODA. My noble friend is right that there is discussion of whether the definition needs to be updated, but the definition as drawn at the moment, which is what we answer to, is a very useful device because it makes clear that you cannot spend money on, for example, tanks or whatever someone might feel would be a useful way of spending the money. Therefore, from my perspective, it is a very useful discipline. There are certain things you can do within ODA, and it has to support the poorest and development. The noble Lord has probably seen the definition of what is excluded, as have I, and I frequently look at it. That serves as a useful discipline because, should DfID be asked to pass money to some department to do something which it feels is not appropriate, it is easy to point out that that does not fit within ODA and it would therefore mean that we would not meet the 0.7% target.
It is true that the OECD is at the moment giving consideration to whether we need to update this given the involvement, not in military offensives and so on but in what is now done internationally in terms of peacekeeping. However, that has not yet been decided. I am glad that the OECD is looking at what might be appropriate but I do not believe that any conclusion that the OECD comes to will be at variance with the basic commitment to support development in the poorest countries and of the poorest people.
As I understand the Bill, it places a duty on the Secretary of State to meet the target. If the target is not met, there has to be a report to Parliament. Clause 3 states:
“The only means of securing accountability in relation to the duty in section 1 is that established by the provision in section 2 for the laying of a statement before Parliament … Accordingly, the fact that the duty in section 1 has not been, or will or may not be, complied with does not affect the lawfulness of anything done, or omitted to be done, by any person”.
Does that mean that the impact of the Bill is that, if the target is not met, all the Secretary of State has to do is lay a Statement before Parliament and then there is no further sanction against the Government? Or am I missing something?
I hope very much that my noble friend Lord Purvis will give a full and complete answer to the important question which my noble friend Lord Forsyth has just put. As to what the Minister said, I find myself wholly unconvinced. She did not seem to understand the purpose of these amendments.
Before I comment on that, I must respond to the impassioned interventions of the noble Lord, Lord Cashman. He was concerned about how the reluctance to pass the Bill, almost sight unseen, will be considered outside the House. He made an emotional speech. It is true, as I said, that the Bill is a triumph of gesture politics over good government. How it is seen outside the House I do not know, but I am not aware of overwhelming popular support in the country for the Bill. Indeed, my impression is that it has minority support. However, leaving aside the question of whether you believe gesture politics is more important than good government, our responsibility as a House is with good government and we should not be diverted from that. Whatever misleading remarks the noble Lord, Lord Cashman, may care to make, it is our responsibility to promote good government, and that is the purpose of these amendments.
That is disgraceful. No doubt the noble Lord, Lord Cashman, will want to withdraw his tweet. I am not sure how you “untweet” or “detweet”, but I am sure he will wish to do so. I am afraid I am not sufficiently technologically proficient to advise him on this matter, but I am sure he knows all about it.
Turning now to the remarks of the Minister, I wish to deal with three points in particular. First, she made a great defence of her department, DfID. I have to say that she has half a point here. If one looks at the various aid agencies around the world, DfID is probably one of the best. However, part of the problem is that a large proportion of British overseas aid is handled not by DfID but by multinational institutions, in particular the United Nations and the European Union—and all the evidence we have indicates that neither of those institutions has anything like the robust high standards to which DfID aspires. That is a major problem, and of course the more ODA is increased, the greater the problem becomes.
On the question of the effectiveness of even DfID, noble Lords would do well to read a very recent report of the House of Commons Public Accounts Committee—not the one we have been talking about; there have been so many problems with aid that there has been rather a number of things that the NAO has had to look into. I refer to Oversight of the Private Infrastructure Development Group. It is a strange enterprise. Four national aid agencies, of which DfID is one, have banded together with each having 25% of the votes. DfID is therefore outvoted and in a minority, and yet virtually all the money has been put up by DfID on behalf of the British taxpayer.
This Private Infrastructure Development Group has been doing a number of odd things, of which I shall mention just one:
“We questioned the Department and the Private Infrastructure Development Group on alleged links between investments funded by PIDG with UK taxpayers’ money and companies associated with known criminal fraudsters”.
That is what is going on. The Public Accounts Committee refers explicitly to the department’s “weak oversight” of the PIDG. The highly respected Centre for Global Development has pointed out in a working paper that as far as the target is concerned, it is,
“fundamentally flawed as there is little empirical evidence showing a relationship between aid, investment and growth”.
Of course, growth is needed to raise living standards, and that is what we are all concerned about.
As I said when I moved Amendment 1, the amendments in this group are about increasing flexibility. This is perhaps the most important group of amendments for doing that. It beggars belief that my noble friend the Minister can say with a straight face that being able to average out the aid over a five-year period does not give more flexibility than having a strict one-year limit. I could not believe my ears, but that is what she said. She tried to support the statement by saying that the Government do their accounts annually. Of course the Government do their accounts annually for all their income and all their expenditure, and that is quite right. However, that has nothing to do with the fact that when you are going to spend a certain amount of money, if you are able to do so over a five-year period, that provides greater flexibility than having to spend it in one year, particularly because it is important to examine not merely what the outcomes are in terms of money, but in terms of avoiding corruption, contact with fraudsters and all the rest. This does not add up.
The Minister’s final argument was that the rest of the world has an annual target, so we should, too. The rest of the world does not have the slightest intention of observing the 0.7% target. As I pointed out earlier—but will repeat for the benefit of my noble friend the Minister—not one of the other six countries in the G7 is anywhere near the 0.7% target, and nor do they have the slightest intention of reaching it. France and Germany are running at 0.4%, while at the other end of the scale, Italy and the United States are running at 0.2%. They have no intention of setting a 0.7% target and they have no intention of having a target that is legally binding.
I hope that nothing alarming has occurred in the Chamber. I had better pause for a moment.
My Lords, I am very sorry for the cause of the disturbance. I hope the noble Baroness who had the slight accident is making a full recovery.
I will close by saying that I cannot accept for a moment what my noble friend the Minister said about how, if we had a five-year flexibility, that would put us at odds with the rest of the world, which accepts a one-year thing. The rest of the world is not doing 0.7%, as I pointed out. It is doing very much less. It does not want to make it legally binding. I have to say of my noble friend’s final remark—that we have to do this to influence and persuade the rest of the world to follow our example—that this is a post-imperial spasm of the worst kind. There is no way that the United States, to take one country at random, will say, “My goodness me, look at this wonderful Bill that the British Parliament has enacted. Therefore, we will do the same”. It has not the slightest intention to do that. Our leadership must be based on a number of factors—rather, our influence; alas, it is not as much leadership as it once was. But one thing our influence must not be based on is other countries saying that because we have passed this Bill they will do the same. That is nonsense. It is as well that we live in a world of reality and not the pipe dreams which evidently are the world in which DfID lives.
My Lords, I also reinforce the concern for the noble Baroness. We have had an hour on this group and even after that hour I am not any clearer as to what the movers of these amendments mean by “spread” or “average” over that five-year period. Indeed, after the very detailed explanation by the Minister, it is perfectly clear that these amendments would inhibit our ability to have better annual budgeting and programming, not only as part of the OECD DAC mechanisms but also with the relationship between DfID, the Treasury and those that, on our behalf, scrutinise their work in the NAO and publish data in the ONS.
Indeed, the long contribution on the NAO report—it seemed that this was a debate on that report rather than the amendment—fundamentally conflated two aspects of it. Paragraph 7 of the NAO report clearly indicated that the report is in two parts. One is the ODA target and the second is the large increase in its budget for us to meet our historic obligation to satisfy that. What stretched from that was a false conclusion that diluting the Bill would somehow enhance that ability.
Two points were specifically raised in the debate, so let me address them. One was: do we have an annual obligation and is that appropriate? As noble Lords who may not have been here for Second Reading but who have had the opportunity to read the debate will know, I was perfectly clear in citing the Pearson commission more than five decades ago, which analysed the benefit of both the concessional and direct flows of aid which was then replicated in an annual obligation.
I have just one very small point. I simply do not understand why my noble friend cannot grasp that a five-year target must allow more flexibility than one for one year. Does he think that if we have a six-month target, that would not mean less flexibility, or would it mean more, by his argument?
My noble friend again conflates two aspects. One is that we are not dealing with annual programmes or annual work. Much of our work with multilateral partners is long term. Long-term programmes require long-term funding. Secondly, we operate within parliamentary budgets, so we have to have annual reporting in the Budget to Parliament to scrutinise it. Having the two together is not easy. Michael Moore and I accept that that is not easy. I cannot do any better than refer back to the speeches of my noble friend Lord Fowler and the Minister.
The final technical point made by my noble friend Lord Forsyth concerned the legal duty on Ministers. I think that the Bill is perfectly clear. It was outlined in the Commons scrutiny of the Bill. It is perfectly clear what the duties on Ministers are. It is also clear in Clause 3, entitled “Accountability to Parliament”, what are the duties on Ministers of accountability to Parliament.
I am rather alarmed by that, because I thought that I must be misreading the Bill, because I asked: am I right that all the Bill does is require the Secretary of State to reach a particular target, and if he does not reach the target, to come to Parliament to say, “I have not reached it because actually, the economy is in a bad way”, but then there is no redress for those outside? If you had a Government who did not wish to meet the 0.7% target, all that the Minister has to do is to come along and say, “I am not going to meet the target, because I think that the economy is in great difficulty”. If that is what the Bill says, I do not think that that is what the noble Lord has put on the tin.
It is not just what is on the tin but what is in the Bill. I am a proud parliamentarian. I take very seriously my role of scrutinising and holding government to account. It is the duty of Ministers and DfID to bring information to Parliament and for Parliament to do its job. Parliament is perfectly capable of calling Ministers to account; it has in the past, and I am proud to be part of the process to do that in future. On that basis, I hope that the noble Lord will not press his amendment.
My Lords, we have had a very interesting debate, particularly that last confirmation from the proposer of the Bill. Many people outside—indeed, many people in both Houses—believed that the Bill guaranteed that 0.7% of GDP would be spent on overseas development aid. Many of those who spoke on Second Reading appeared to believe that that was the case. This is a public relations exercise to tell us that that is what the Bill does. If, as many of us do, we want considerable resources to be made available for development aid, it seems to me perverse as part of that exercise to put in place a system of targets which need to be met in one year rather than five years which, as we have argued at great length this morning, would result in damage to ensuring value for money and proper accountability.
In his response the noble Lord, Lord Purvis, pointed out that much of the development aid goes into multilateral programmes. That is true; a minority of the aid goes on emergency relief and disaster—less than 10%, I believe. It is a small proportion. Many people believe that that is what we are discussing when we talk about £11 billion being spent, when only just more than £1 billion is actually going on that purpose. We are talking about development aid here, and a large part of that goes to other agencies such as the European Union.
The noble Baroness, for whom I have the highest regard, says, “Good”. I have to say that the European Union does not have a terribly good record in accountability for public money. Indeed, one of DfID’s objectives is to improve accountability and be less dependent on multilateral programmes.
However, as has been pointed out by the noble Lord, Lord Purvis, and indeed the Minister, in her short intervention in the debate, the way in which you solve the problem of not being able to reach the target is to put money into multilateral programmes. For accounting purposes—I am sure that the Minister will intervene if I am wrong about this—if the department writes a cheque to a multilateral organisation, it counts as expenditure in year, whereas if it actually supports a bilateral programme, the expenditure accrues as the programme continues. So the perverse incentives will be to put more and more into multilateral programmes or those run by other agencies such as the EU and the UN, where the degree of accountability which I think all of us in the Committee believe we should have would not be delivered.
It was some years ago now that I went to visit my noble friend Lord Patten of Barnes when he was commissioner for overseas aid in the European Union. He spent quite some time complaining about how few staff he had in comparison with the number that he had when doing the same job in London. I do not know whether that situation has improved but I suspect that it probably has not—and my noble friend was saying quite clearly that he did not have the resources to manage the programmes under his control.
Indeed, and while I do not particularly wish to detain the House, that is also an issue for DfID. When we took evidence from the body set up to monitor the spending, it had four commissioners and a very small staff to deal with a programme which was being increased in size by more than a third. Similarly, DfID itself—although it is common ground that it has done a great job—is having a huge increase in its budget and, at the same time, a 40% reduction in the size of the department.
I do not know whether the noble Baroness shares my concern, but she is quite right that it was a government decision—and I think it is a foolish government decision to say that we are going to hugely increase the money and the programmes being provided while greatly reducing the people who are going to be responsible for seeing that the money is well spent. Perhaps we might come on to that at a later stage.
The noble Lord, Lord Cashman, made an impassioned plea and told the House that he was very concerned that the discussions which we are having about accountability and value for money would be misrepresented outside this House. I have to say that for him to have tweeted that,
“Lord Forsyth clearly enjoys fillibustering and denying with weasel words the needs of the poorest”,
is really unworthy of him. I think that I have raised nearly £100,000 for women in India. The noble Lord should not question our motives. It should be obvious from the speeches made and the amendments which are being considered that the intention here is to provide flexibility for the department to use scarce resources wisely.
In a second. Indeed, the promoter of the Bill at Second Reading in the other place, Michael Moore, said that it was a duty to all constituents, who he pointed out were struggling in the current economic climate, to advocate what is in the best interests of our country—and I agree with that.
I remind people, when they are talking about spending 0.7% of GDP, that this is not money that we have—it is money that we are borrowing. The proposition here is that we borrow money in order to make a commitment. If you are borrowing money in order to spend it, at the very least you should be absolutely certain that you are getting a sensible return on it, and recognise that you are passing on the burden to the next generation—because borrowing is simply taxation deferred. I beg leave to withdraw my amendment.
Amendment 3 withdrawn.
Amendments 4 and 5 not moved.
My Lords, in view of the fact that we have two Second Readings on the Order Paper, I beg to move that the House be now resumed to enable them to take place, and that the Committee stage of the Bill resume at the conclusion of the two Second Reading debates.