HC Deb 17 February 1981 vol 999 cc251-6

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Thompson.]

11.42 pm
Mr. Bowen Weils (Hertford and Stevenage)

My first subject for debate having been usurped by the Opposition and extensively debated, I welcome the opportunity to raise another subject of equal importance.

The Government's policy on assistance to overseas countries has been attacked, as has the reabsorption of the Ministry of Overseas Development into the Foreign and Commonwealth Office. I wish to set the record straight and to lay the foundations for a distinctly Conservative policy on overseas investment, trade and aid which will be easily understood and which will attract the support of the entire electorate, including the Archbishop of Canterbury, Oxfam, the World Development Movement, the United Nations Association and Christian Aid, to mention but a few of our vociferous critics.

Any Conservative policy must start from the premise that overseas investment by private companies has generated and continues to generate the majority of employment and wealth overseas. Table 1 of the recently published British aid statistics from 1975 to 1979 amply demonstrates that. In 1979 private flows totalled £2,450 million. Total official flows were only £1,037 million. Clearly, the major contribution to developing countries overseas is through the private sector. The development of the Third world therefore depends on the private sector.

Table 33 of the same statistics shows Britain's very proud record in giving overses aid, both in the past and now. If one looks particularly at the percentages of the gross national products of countries that provide aid and compares them with the figures for our country, one finds that we are at the top of the league, at 2.26 in private flows, and that total net flows represent 2.83 per cent. of our GNP. Our nearest competitor in Europe is Belgium, at 2.03. Rich countries such as France and Germany are giving only 1.51 and 0.95 per cent. of their GNPs. Taking other Development Assistance Committee members, we find that the United States, for example, is giving only 0.8 per cent. of its GNP.

That is a demonstration to the world of the way in which this country is contributing par excellence to the development of the Third world, in both private and public flows. It is a denigration of this country for anyone to describe our aid programme as mean, or in any way as something of which we should not be abundantly proud. The present Government are carrying on in that proud tradition.

It is this investment that generates trade. It is this activity that generates internal taxes to pay for badly needed social provisions, such as schools and hospitals, in those countries. Only with that kind of development, which is profit-making, will the countries that we seek to help truly benefit.

It will be objected that this activity also denies British industry much-needed capital, exports and jobs, but perhaps I may refer to a recent paper, published in Business Investment in the United States, in which it is demonstrated convincingly that those countries that export most in terms of capital generate most jobs, both in the host country and in the country from which the money comes. It is undoubtedly untrue to suggest that because we export capital to invest overseas we deny jobs to our own people. The opposite is undoubtedly the case. Independent research is proving that.

There is little doubt that British private activity is the main engine for development in the Third world. It is the absence of adequate investment in productive agriculture of industry which creates the horrible visions retailed by the voluntary aid agencies. It is undoubtedly, therefore, trade and investment in Third world countries to which we should look for real and adequate creation of wealth.

It is this realisation that has led to calls by Third world countries for the new international economic order. The Third world, ironically, does not want paternalism and the implications of control that go with it. Third world countries want to grow through their own efforts. Their complaint is that the financial and trading terms of the world systems are stacked against them. I have a great deal of sympathy with this argument, to which I shall return.

Mr. Alex Pollock (Moray and Nairn)

Would my hon. Friend care to express his reaction to the fact that apparently the subject of British aid to the Commonwealth Development Corporation has attracted not the slighest interest from the Opposition Benches, be they Labour, Liberal or Scottish National? Will my hon. Friend comment on that marked absence?

Mr. Wells

That is a very good observation. The Opposition Benches are totally deserted. It is the opposition Members who profess to weep for the benefit of our overseas cousins and brothers, but when it comes to putting forward a positive programme of things that we can do, in our own financial difficulties, they do not want to take part in a debate. They want to go home.

I have a great deal of sympathy with the argument of those who wish to create a new international economic order. It is significant that the British Conservative Government and the Third world agree. The Conservative Government agree with people who are regarded as extreme in the Third world. That is the basis on which the Conservative Government can begin to develop a programme that will receive the approbation even of our absent friends.

If we proceed from the agreed basis in co-operation with the Third world, what do we have to do to encourage the growth of investment? First, we must remove artificial barriers, such as exchange control. We have already done that, although it has not been sufficiently appreciated either at home or overseas. Abolition of exchange control was a major act by the Government to assist overseas development. We have tried to reduce trade barriers against Third world products coming into Britain. In spite of the arguments for protection, we have valiantly resisted them. That is a major contribution to the continued development of Third world countries.

Such actions alone will not generate investment growth. The Third world is short of several vital ingredients—management skills and technical knowledge, human caring, human ability and human enterprise. Without them, nothing can be made to grow. Only the combination of finance, trading opportunity, management and administrative skill will produce development, private or public. Without that, little will result.

Britain lacks finance at present. It can help with trading opportunities, particularly with the large opportunities opened by our membership of the EEC. That has given our Third world trading partners a great opportunity, as we said in the last debate on sugar, provided that we do not become too greedy.

We have know-how and management skills, much of which was acquired overseas, so that management is particularly sensitive to overseas conditions. An enormous prize is to be won if Britain, by its diplomatic skills, brings together Arab money and European skills to invest in and manage profitable enterprises in the Third world. That probably means changing the world-wide financial institutions. I congratulate the Minister on beginning that process and on agreeing to the new International Development Association contribution, which is the major part of our overseas aid programme.

That brings me to the thrust of our aid budget. If we agree that effective development is brought about by the combination of finance, trading opportunity, management and technical knowledge, we should bend our efforts to that combination and change the emphasis of our aid programme.

The Commonwealth Development Corporation is an example that springs to mind. That organisation combines the four factors superbly. It has had a successful record since its inception in 1947 with, of course, a few hiccups, some of major proportions. It has overcome them. It is providing management, administrative and technical skills, with finance in partnership with overseas countries.

Multinational organisations fall down because they have only loans to give. The Commonwealth Development Corporation is now in a position, with the assistance of the ODA, to invest in equity participation in many enterprises overseas that are small and cannot bear loan interest charges and repayments, especialy in the initial years. They are essentially equity investments. Only if one has enough of the right kind of investment to offset any possible losses—because equity is high-risk—can one go in for it. The CDC has reached that position.

The CDC also manages to act as a catalyst of private investors overseas. Many private investors are not familiar with the countries in which they wish to invest, but others are. I pay tribute to the multinational organisations that have contributed a great deal to the prosperity of many countries in which they operate. Many of the newer countries are not known so well to the British overseas investor. The CDC knows them. It acts as a catalyst and provides additional financial investment.

The Commonwealth Development Corporation fits perfectly into the pattern of a Conservative overseas development programme. Articles in The Times over the past week give vivid examples of its effectiveness in the field. I do not want to embarrass the Minister on the question of the CDC's finances. I know that the negotiations are at a delicate stage.

I wish to emphasise that because it is such an effective arm of a directly Conservative development programme it should be expanded and should utilise its experience to inform the entire efforts of the ODA in these fields. This is not to decry other ODA programmes. In a period of financial stringency we must improve the quality of our assistance to make up for any shortfall that may be necessary. This is clearly the direction to take. I ask the Foreign and Commonwealth Office and the Treasury Ministers, when considering the size of the future of the CDC, to view it not in a narrow sense but in the context of a Conservative aid programme.

The Government were concerned by the reception they received over the Brandt report. I am certain, however, that the solution to these problems is not simply to chuck in money and thereby transfer enormous resources to developing countries. To assist that development one needs the elements of finance and administrative and managerial skills, in partnership with the country concerned. I hope that the Minister will bring forward a programme that will be supported by the entire British electorate, which is not the case at present.

11.57 pm
The Minister for Overseas Development (Mr. Neil Marten)

It is many years since this House has had an opportunity to discuss the affairs of the CDC. I share the views expressed by my hon. Friend the Member for Moray and Nairn (Mr. Pollock), in his brief intervention, when he drew attention to the serried empty ranks of Opposition Benches. It is a great pity that Opposition Members who complain very much about our cuts in the aid programme were not present to hear the excellent speech of my hon. Friend the Member for Hertford and Stevenage (Mr. Wells). My hon. Friend speaks from experience of CDC.

The debate is also well timed. As my hon. Friend will be aware, Ministers are currently considering a number of aspects of CDC's operations. The record of CDC over more than 30 years of its existence is one in which the corporation and the country can take justifiable pride. The majority of its investments are in projects aimed directly at increasing the productive capacity of the countries in which it operates, and it works in both the public and the private sectors.

Its large investments in renewable natural resources are of particular value, not simply because of the importance of that sector in developing countries but because many successful enterprises would not exist if the CDC had not formulated proposals and implemented them.

This is where the CDC's mode of operation, which is rare among development agencies, of providing management—as my hon. Friend said—from its own staff for a proportion of the projects in which it invests has contributed distinctively to its success. This approach has brought with it the invaluable benefit of a continuing interchange of the CDC's staff between those who plan, those who manage and those who operate. It gives the CDC a degree of realism and practicality which underlies its natural approach to development.

I have already seen on the ground a good deal of the work of the CDC during the journeys that I have made since becoming Minister for Overseas Development. I have a genuine admiration for the projects that I have visited and for the skill and devotion of its field officers. I recall, for example, that when I was in Malawi a year ago I visited the Smallholder Tea Authority—a long-standing CDC-supported project—and the more recently established National Seed Company. I believe that that also attracted your attention, Mr. Deputy Speaker, when you were in Malawi.

Next week I shall visit the Pacific and while I am in the Solomon Islands I look forward to seeing something of Solomon Islands Plantations Limited, which was set up 10 years ago and in which the CDC holds 70 per cent. of the shares, together with the Solomon Islands Government and local landowners. It has successfully pioneered the commercial development of oil palms on Guadalcanal.

Since the establishment of the CDC, representatives of the corporation have periodically joined representatives of the responsible Department to review general problems and future policies; this is, of course, in addition to continuous contact on day-to-day matters.

The 1980 review, whose report has just been submitted to Ministers, was on a wider scale and included representatives of the Treasury and the Department of Trade. It was charged to review the future role, financing and operations of the CDC in the light of current aid policies and of the wish of Her Majesty's Government to give greater weight to political and commercial considerations alongside basic developmental objectives. I stress "alongside". We continue to regard it as important for the majority of our bilateral funds to go to the poorest countries—those least able to generate an adequate volume of domestic savings for investment or to attract private investment from abroad.

We also regard it as important that the scarce funds that we provide should be spent on sound development projects—either in the revenue earning sectors of the economy or to help build up the necessary infrastructure. We have a good record for achieving these ends. The review concluded that the CDC had been an important and effective instrument of bilateral aid policy. It considered the priorities for the CDC's investment policies, both as to the sectors and the countries in which it operates. It looked at ways in which the CDC's work already supports British political and commercial objectives and at ways in which its contribution could be increased or improved upon.

Most important, and that is the particular subject of this debate, it examined in considerable depth the ways in which the CDC at present derives its funds, the scale of its operations—both in the past and which the CDC would like to aim at for the future—and the financing options which might be open to Ministers to consider for different levels of operation. These are questions which will have to be considered inter-departmentally by Ministers. As I told my hon. Friend yesterday at Question Time, I am not in a position tonight to say what our decisions will be. The Foreign Secretary and I had a very useful preliminary discussion last Tuesday with the chairman and general manager of the CDC, at which we undertook to consider sympathetically the needs of the CDC for finance from the Government.

We made it clear to Lord Kindersley that we continue to regard the CDC as an important element in the United Kingdom's aid programme. Its aims and methods are very much in line with the Government's aid policy. It invests in productive development which brings a return both to the CDC and to its partners in developing countries.

We are indeed willing to consider providing bilateral aid—whether capital aid or technical co-operation—alongside investment by the CDC. Indeed, my hon. Friend seemed to be driving at that point. We provided, for example, capital aid for infrastructure and housing, as well as technical co-operation, in connection with the Malawi Smallholder Tea Authority. In Mauritius we are financing a main canal for the irrigation authority while the CDC is providing technical services and a loan for irrigation for a smallholder sugar scheme.

There are, therefore, arguments for enabling the CDC to maintain something like its present level of activity. But, however valuable the CDC's work may be, we have to set that against the overriding need for this country, and the main objective of the Government—namely to reduce inflation and to reduce public expenditure. Against that background, the implications of commercial borrowing by the CDC are being considered.

In principle, there is much to be said for supplementing advances from the aid programme with commercial borrowing by the CDC. I do not believe that such borrowing, mixed as it would be with aid advances, would prejudice the CDC's developmental role. Under the Commonwealth Development Corporation Act 1978, the CDC is empowered, subject to Government consent, to borrow; and there is provision for its borrowing to be guaranteed by the Treasury. Therefore, there is no legal obstacle to its approaching commercial markets for loans. There are, however, implications for the public sector borrowing requirement which we need to examine carefully before we can reach a decision on commercial borrowing. That we are doing.

Mr. Michael Mates (Petersfield)

Does not my hon. Friend find it extraordinary that on a subject as important as this, a subject on which the Opposition's heart bleeds in public so often, not one member of the Opposition is here to hear what is being said by my hon. Friend about the difficult priorities that he is trying to sort out within the Government?

Mr. Marten

Yes, I find that extraordinary, and it is a point that my hon. Friend the Member for Moray and Nairn mentioned earlier, and on which I commented at the beginning of my speech. As my hon. Friend the Member for Petersfield (Mr. Mates) said, the Opposition's heart bleeds, but when we are discussing a serious matter they are not here.

The Foreign Secretary and I made it clear last week to the chairman of the CDC that we attach consdiderable importance to the part that the corporation plays in overseas development. As I have explained, there are problems in providing all the finance that is needed, but we fully appreciate the need for the earliest possible decision in order to give the corporation a firm basis for forward planning. We shall press on with the necessary discussions as quickly as we can.

Question put and agreed to.

Adjourned accordingly at seven minutes past Twelve o'clock.