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Aid and Trade

Volume 777: debated on Monday 28 November 2016


Asked by

To ask Her Majesty’s Government whether the recent statement in Kenya by the Secretary of State for International Development that she envisaged using the aid budget to promote the United Kingdom’s bilateral trade agreements following its departure from the European Union is consistent with the International Development Act 2002.

My Lords, the Department for International Development will continue to ensure that the assistance we provide complies with the requirements of the International Development Act 2002. An important focus of our work is developing countries’ economic development and prosperity, and their trade capacity. That is the clearest route out of poverty and it is in our national interest so to do. There is no doubt that the UK’s generosity strengthens our global standing as we wish to establish new trading relationships.

My Lords, I thank the noble Lord for that reply, which I interpret as meaning that it is not inconsistent with the 2002 Act to speak about the things that the Secretary of State spoke about in Kenya, but it would be to do them. Will the Minister say whether he and his ministerial colleagues understand the dismay that that statement in Kenya caused to those of us who have been supporting the Government through thick and thin on their commitment to 0.7%? Does he recognise that, if it became our policy to provide aid for countries that gave us good trade agreements, we would be laying ourselves open to blackmail straightaway?

Let me say to the noble Lord that that last thing was not, in fact, what the Secretary of State said. The noble Lord will know, as a distinguished former ambassador to the UN and to the EU, how important this 0.7% is for the UK on the world stage. It is also true to say that the UK’s ambition is not to keep countries in a position of aid dependency for ever. We want them to grow their economies and strengthen economic development. That is what the Secretary of State was saying and it is the general thrust of what the Department for International Development does, through the 0.7% commitment.

My Lords, as the Prime Minister’s trade envoy to Uganda and Rwanda, I recently had the privilege of meeting the leaders of those two countries, President Kagame of Rwanda and President Museveni of Uganda. During my discussions with them, what transpired is that they are keener on trade than aid; it is trade and investment that can create jobs and wealth and get people out of poverty. Does my noble friend agree that many east African countries are very eager for Britain to shift from aid to trade and that the Secretary of State’s remarks reflect this?

I can confirm that, and I pay tribute to my noble friend for his work as the Prime Minister’s trade envoy to Rwanda and Uganda, as I do to all our trade envoys who carry out that important task around the world. If you compare 1990 to 2010, the number of people in extreme poverty has reduced by 50%. That has not been achieved through aid flows; it has been achieved through aid flows directed at improving economic development, which then lifts people out of poverty. That remains our aim, and trade is an important element of that.

My Lords, can the Minister confirm reports that the Government are to quadruple, to £6 billion, funding for CDC, formerly the Commonwealth Development Corporation? If so, will this not completely contradict existing stated government policies on combating poverty, increasing accountability and fighting tax evasion and tax avoidance, given CDC’s proven record of investing through tax havens?

I can certainly say to the noble Lord that that is not the case in terms of tax havens. CDC is very clear that it does not use tax havens for investment, or to hide investments, but is a transparent international finance organisation that does tremendous work around the world. It invests in 1,200 companies, and safeguards and creates about 1 million new jobs. The CDC Bill, which has its Second Reading in the other place tomorrow, is simply to give the facility for that increased investment to take place, from £1.5 billion to £6 billion, because the former figure was put in place 17 years ago and we think it is time to look at it again. However, in order for that money to be drawn down, CDC will have to comply with the same rigorous business case requirements, on transparency of investments, that any other organisations would. I hope that that helps to reassure the noble Lord on that point.

My Lords, it beggars belief that, at the same that the Government were in Marrakech signing the COP 21 agreement, they were also announcing a huge oil and gas project in east Africa, using £25 million of the UK aid budget. Will the Minister point out to his colleagues that east Africa is facing famine due to desertification brought on by fossil fuel-induced climate change and that some policy coherence on the part of the Government would be welcome?

It is certainly true to say that we were a leading force in securing that agreement in Paris and building on it at the recent G20 summit in Hangzhou. We are very committed to that. We are addressing all the humanitarian issues that were talked about. The UK is one of the largest economies—in fact, it is the only major economy—to achieve its 0.7% commitment. We do that in humanitarian aid but, under the rules of the OECD and the DAC, we also allow certain amounts to be introduced and used to build capacity and to build business and economic development within those countries, and that is an example of one of those.

The Minister talked about economic development as the route out of poverty for people in the developing world, which is absolutely right, but will he accept that it is not only through trade that economic development happens? The investment that DfID has made over the years in health and education is absolutely a prerequisite to that economic development.

The noble Baroness, with her great experience, has put her finger on the point here—that it is placed in context. That is why it is very important that, in order for economic development to happen, we need to stop the conflict, we need to start getting people into school, we need to eliminate discrimination and we need to improve economic development. It is across the range, and that is what DfID’s policy tries to address.

Do the Government believe that more needs to be done to ensure that our aid actually reaches the people for whom it is intended?

Yes, and that is why we have initiated the multilateral and bilateral reviews and announced the review of engagement with civil society organisations. Notwithstanding the fact that we have reached 0.7%, it is important to ensure that every penny that is spent on that actually goes towards the aim for which it was given by the British taxpayer—namely, to eradicate extreme poverty in this world.