HC Deb 11 December 1984 vol 69 cc1002-24

10 pm

The Minister for Overseas Development (Mr. Timothy Raison)

I beg to move, That the draft International Development Association (Seventh Replenishment) Order 1984, which was laid before this House on 7th November, be approved. I understand that, with the leave of the House, we can take with this the second motion— That the draft International Bank for Reconstruction and Development (1984 Selective Capital Increase) Order 1984, which was laid before this House on 7th November, be approved.

Mr. Speaker

Order. Does the Minister have the leave of the House?

Hon. Members

Yes.

Mr. Raison

The purpose of these orders is to authorise an increase in our subscription to the capital stock of the World Bank for the take-up of a further 529 shares, and a contribution to the seventh replenishment of the International Development Association.

The International Bank for Reconstruction and Development, which is known more popularly as the World Bank, owes its existence to the imagination of those concerned with the immediate financial needs of Europe after the second world war. The creation of the World Bank, along with the International Monetary Fund, was an act of faith. Her Majesty's Government's participation was agreed by this House almost 40 years ago, in December 1945. Since then, the bank has, of course, changed its emphasis to tackle the problem of the world's developing countries.

The IBRD' s basic aim, enshrined in its articles of association, is to promote economic progress in developing countries, other than the very poorest, by providing financial and technical assistance, mostly for specific projects, in the public and private sectors. Loans have been granted to Governments for projects in a variety of sectors—agriculture and rural development, education, energy, industry, population, health and nutrition, water supply and sewerage, transportation and telecommunications. There has also been some non-project lending, including structural adjustment loans. This recent form of lending is to provide financial assistance—foreign exchange—to a country which undertakes to make changes in its economic management. The bank's total lending in the year to June 1984 was $11.9 billion. The bank's goal is to bring its borrowers to a point at which they are fully able to turn to the world's financial markets to meet their needs. The bank has helped many countries graduate out of its lending programme. The most notable case is, perhaps, Korea.

The Bank has unparalleled first-hand knowledge of a wide range of developing countries' problems and an operating experience which is second to none. Moreover—we attach more importance to this—it has a first-class system of evaluating its lending operations.

The Government have consistently given the strongest possible support to the World Bank president and his staff. I welcome the opportunity provided by today's debate to reaffirm that support, and to pay tribute to Mr. Clausen and his team for their sheer professionalism and dedication to the formidable tasks in hand.

More directly, we support the bank's central aim of the alleviation of poverty and its concentration of resources in key areas, especially in agriculture, rural development and energy. We welcome particularly the Bank's very useful country macro-economic and sector analysis work, as well as its willingness to do more in donor co-ordination.

I shall now deal more specifically with the draft International Bank for Reconstruction and Development (1984 Selective Capital Increase) Order 1984. The purpose of this order is to enable the Government to make a further subscription to the capital stock of the bank of a sum equivalent to $63,815,915, of which only 8.75 per cent. - or $5.5 million—would be paid-in. The balance would be callable. A copy of the IBRD resolution No. 395 has been placed in the Library for the information of hon. Members, and the sum I have mentioned is the price of 529 shares as set by the terms of that resolution. The selective capital increase will add a further $8.4 billion to the IBRD's capital base. That will help the bank to maintain its lending programme at the current high level. The main purpose of the selective capital increase was not to provide additional capital, however, but to effect changes in shareholdings in the bank following the IMF eights quota review. The need for a long-term increase in the bank's capital base will have to be met by a general capital increase in about 1986.

As a result of the selective capital increase, and in the context of the negotiations on the seventh replenishment of the International Development Association, the ranking positions of the major shareholders in the IBRD have been re-aligned: the United States and the Federal Republic of Germany remaining respectively in first and third positions, Japan moving from fifth to second position, and the United Kingdom—formerly second—and France—formerly fourth—sharing joint fourth place. The United Kingdom has thus been given a lower allocation of shares, 529, under the Bank 1984 selective capital increase than would otherwise have been allocated to us. However, this does not mean that our support for the bank is in any way diminished. The World Bank shareholding is generally fixed in relation to members' economic and financial strength.

I turn to the International Development Association. As the House will know, the association is the soft loan affiliate of the World Bank. It was created to provide loans on highly concessional terms to developing countries which would have great difficulty in servicing borrowing from the World Bank itself. As the association is administered by the same staff as the World Bank, all that I have already said about that staff applies with equal force to the association's operations. With its concentration of resources on the world's poorest countries—some 60 per cent. to Commonwealth countries—the association's programme is almost a mirror image of the allocation of our own bilateral aid programme. Many in the House will be aware that negotiations on the IDA's seventh replenishment were tough, protracted and, in the end, disappointing. A total of only $9 billion was agreed, some 25 per cent. less than the nominal level of $12 billion approved for IDA 6.

Although at the final meeting of the IDA 7 Deputies in Washington last January donor representatives felt that the IDA was one of the most effective multilateral channels for transferring resources to the poorest countries, the United States' representative reiterated his country's earlier determination to contribute to the replentishment no more than $750 million in each of three years. The other countries represented were not prepared to meet the shortfall in the contribution of the major donor. and the size of the replenishment was predicated by the United States 25 per cent. share. The IDA management was given a mandate to try to raise additional resources to help close the gap between the $9 billion agreed and the level of $12 billion which most donors regarded as the minimum required by the association for its fiscal years 1985–87. As hon. Members will know, I was able to announce to the House on 27 January that Her Majesty's Government would be prepared to make a contribution to supplementary funding on the basis of the usual equitable burden-sharing among donors. Many other donors have expressed a willingness to contribute on a similar basis, but the IDA management has not pursued this question of supplementing IDA's general fund because of the declared non-participation of the United States and, in their absence, of Japan and the Federal Republic of Germany.

The draft International Development Association (Seventh Replenishment) Order 1984 will if approved by the House, give the Secretary of State authority to make a United Kingdom contribution of £401,520,000. Payment to the association would be effected by the deposit of three promissory notes, of equal amounts, over three years from 1985, to be encashed over a period of years, with the costs being met as they occur from sums voted for overseas aid.

I do not propose to go into the detailed arrangement of the workings of the replenishment. They are set out in the report of the Bank's executive directors, together with the IDA resolution, dated 24 May 1984. Both have been published as a White Paper—Cmnd 9402.

I should, however, draw the attention of the House to changes in the shares of contributions of several donor countries. Five countries—the United States, the United Kingdom, the Federal Republic of Germany, Kuwait and Sweden—have reduced their percentage shares; while 10 other countries have increased theirs—the most significant being Japan, France, Canada, Italy, Norway and Finland. In our own case, our percentage share has come down from a very high 10.1 per cent. contribution under the previous replenishment to 6.7 per cent. I make no apologies for that. Our reduced share is not a reflection of any weakening of the Government's resolve to support the association. We have determined the level of our contribution in relation to the United Kingdom's relative economic strength among donors.

I am glad to say, however, that we were able to negotiate a package with our Japanese friends whereby their share of IDA 7 funding was substantially increased as par of the arrangement for the realignment of shareholding positions in the World Bank, to which I referred earlier.

Mr. Russell Johnston (Inverness, Nairn and Lochaber)

Will the Minister explain more clearly what he means by his statement that we have determined the level of our contribution in relation to the United Kingdom's relative strength among donors? What sort of calculation did that involve?

Mr. Raison

It is based on the gross national products of the different donor countries. The 10.1 per cent. share that we had in the previous replenishment was far above our proportionate share of the world's economy. We have reduced it to a more realistic level.

During negotiations, we made sure that the combined share of the United Kingdom, France, West Germany and Japan was no less than it was under the previous replenishment. In fact, it turned out to be slightly higher than last time.

The IBRD and the IDA are the world's leading development institutions. They constitute the cutting edge for change and for improvement in the social and economic conditions in developing countries. Successive British Governments have supported them, and our commitment now is as firm as ever. I commend both orders to the House.

10.12 pm
Mr. Stuart Holland (Vauxhall)

We deplore the failure of the United States Administration to contribute to the supplementing of the international development association funds. We regard that as critical for the role of IDA. I shall develop that argument and its relevance to Government policy shortly.

We also deplore the fact that the Government's IDA contribution will fall from 10.1 per cent. to 6.7 per cent. We do not accept the Minister's argument that that reflects Britain's economic strength among donors, because we do not accept that the Government are fulfilling their potential in the international arena, nor that they are participating with other countries in the sorts of project for joint international recovery which the World Bank report for 1984 stresses as critical to the future prospects of less developed countries. The report states that the world's economy is now: balanced on a knife edge. Students of economics will be familiar with what is known as knife-edge theory. It is that an economy, such as the international economy, can either hit the ceiling or the floor. The hon. Member for Hertford and Stortford (Mr. Wells) is amused. I trust that during the debate he will argue for a recovery of the world economy rather than a continued collapse of trade among less developed countries, which has devastating effects on sub-Saharan Africa.

Mr. Bowen Wells (Hertford and Srortford)

I shall not argue on the merits or demerits of knife-edge economic theory. I shall argue about the effect of the amount of money and help that we give to ordinary people in extremely poor countries.

Mr. Holland

I would be impressed by the hon. Gentleman's intervention if we were to have a significant increase in the amount of money given, but the Minister has just said that we cannot have such an increase because of the position of the United Kingdom economy. Although he claims that this is an outdated economic theory—by which I presume he means a Keynesian economic theory—it is very much to the credit of the World Bank that it has not fallen for the manic monetarism of some other institutions and is arguing the case for global recovery. The bank stresses that, without that recovery, the prospects for some areas of the world economy, especially sub-Saharan Africa, are extremely dire.

As the bank stresses, after three years of almost uniterrupted decline in growth in trade, the improvement in the world economy during the past year was due almost entirely to the United States recovery. That recovery is no longer in question, but it will be deflated by the American Administration's cuts in expenditure, including social expenditure. If, as expected, that reduces American exports to the level where they were about two and a half or three years ago, that will take about $100 billion worth of demand out of the world economy. Although Third world countries are not in as strong a position as they should be, in terms of the United States importing from them, that in itself will damage Third world prospects.

It is a double blow for Third world countries that the United States Administration can neither contribute to the replenishment of IDA funds, nor can it sustain its recovery, which we were told was secure, in such a way that world trade and payments can increase. The figure of $100 billion in total demand from the North is the equivalent of 4 per cent. to 5 per cent. of Third world export trade. The collapse of that trade will be damaging and will certainly dwarf the replenishment levels in IDA funds at present.

As the bank stresses, strains persist in the international structure of trade and payments, and faced with the need to reduce imports, the developing countries have been forced to reduce the level and alter the composition of their investments. Capital formation has been shifted towards the energy sector and economic infrastructure at the expense of the social sector.

The position of sub-Saharan Africa will be dire. The list of human miseries in the African continent has been well highlighted by UNICEF in its report on the impact of recession on children, which showed how children have been the victims of economic decline. Much attention has been focused, and will be—with good reason—in this debate, on the drought in Ethiopia and the relevance of the World Bank's proposals to the African Continent. However, in a country such as Zambia, the height-for-age ratios have fallen in all age categories of children under 15. Child mortality in sub-Saharan Africa was 50 per cent. higher than the average in developing countries in the 1950s; it is now almost double that average. The bank claims that there must be improvements in countries' internal economic management. We do not claim that internal economic management cannot be improved. The bank also claims that additional external assistance will not by itself solve Africa's problems.

Net capital flows to sub-Saharan Africa are expected to fall from $11 billion to $5 billion. We are talking about a difference of $6 billion, which is double what the replenishment of the IDA from $9 billion to $12 billion would have been. It shows how devastating will be the effect of not achieving the aimed-for increase in the IDA replenishment. Some of the figures illustrate how serious the position is. Against gross capital flows in 1980–82 of about $13.1 billion, the projections for 1985–87 for sub-Saharan Africa are a total of $13 billion. But amortisation, or the paying off of debt, will increase from $2.3 billion to $8 billion, so that the net capital flow into the area will be halved—instead of being $10.8 billion it will be $5 billion.

The World Bank, under pressure from the Reagan Administration, has felt obliged to endorse the role of market forces, but, because of the increased amortisation payments, net private capital flows, which, for 1980–82 were $2.5 billion, will now be minus $1 million. In other words, not only is the United States Administration failing to increase IDA, but the private sector lauded by that Administration is taking resources out of the region.

Mr. Dennis Skinner (Bolsover)

Does my hon. Friend accept that, in the past decade or more, extremely high interest rates, for the most part led by the United States, have meant that when it comes to a crisis, rather than poor little kids in Ethiopia and elsewhere in the Third world being saved, the entrepreneurs in the casino economy—the bankers—are being bailed out? This results in the poor countries having to pay more and more to save their necks, when all that the Western economy is doing is bailing out bankers who should have had their fingers burnt. In other words, the bankers are all right when they are making a profit, but, when they look as if they will die, the so-called market forces do not operate and the bankers are saved by those who should be looking after the starving millions.

Mr. Holland

My hon. Friend has made a typically forceful and relevant point. It is apparent from the World Bank's recent statement that it is especially concerned about the impact of IMF policies on the countries that it helps through the development programme. In other words, the World Bank is concerned with long-term development prospects, issues and projects, but the IMF is concerned with short-term balance of payment adjustments. This has meant—I am glad to see that the World Bank has endorsed this in the case of Latin America—that the IMF has imposed a further deflation of some $30 billion in trade by imposing cuts packages on some of the leading Latin American countries. Therefore, while the World Bank is trying seriously to make a contribution to world development prospects, the IMF is making contributions to the global slump. My hon. Friend's point about the role of the banks is important. The banks have lost confidence in several less developed countries, and in so doing over the past few years have started for the first time in decades to draw resources out of the Third world.

If imagination and political willingness were shown by leading Governments, and this Government must still be considered one of the leaders among the official development donors, we would see a public institutional response to offset that decline in the private capital flow and in private capital lending to the Third world. That would mean a World Bank and IDA replenishment that was several times what we are being offered by the Minister tonight.

The bank is cautious about market forces in its annual report. I am glad that it does not simply want to let the market rip, and it is not waging a war against the mixed economy as the IMF is. It stresses the importance of other programmes such as health and education, as well as improved financial control. It stresses smallholders and co-operative agriculture as well as the promotion of private investment. That is right, as private investment will not come unless it is co-ordinated and promoted through public institutions and by public policy. But the bank is not being allowed to play the kind of role it should be able to play in the promotion of investment and world trade. Also, inasmuch as the bank is affected by the kind of monetarist market reasoning coming out of the United States, market forces alone, whether through smallholders or cooperatives, will not be sufficient to ensure the long-term development aids with which the bank is concerned.

It is relevant to compare the analysis of trade by the bank and that by UNCTAD. The UNCTAD statistical handbook lists the commodities on which the Third world depends. It refers to wheat, sugar, coffee, corn, rice, agricultural raw materials such as cotton, natural rubber and tobacco, and minerals and other materials. Between 65 per cent. and 95 per cent. of trade in those commodities is controlled by multinational companies. The donor countries in the development assistance programme, the funding countries in the World Bank programme and the funding countries on the IDA programme must face the fact that only a fraction of the value added from those exports goes to the less-developed countries. Typically, less than 20 per cent. goes to those countries and frequently less than 10 per cent.

If the bank is to fulfil its aim of long-term development, it needs to take a leaf from UNCTAD' s book and confront the question of why so little of the value added in key commodities goes to the less developed countries. Countries such as Britain with a high share of multinational company activity in Third world countries should seek to ensure that a higher share of that value added goes to the Third world. If they do not those countries will not be able to offset their grave domestic economic problems in the current economic climate.

The World Bank report stresses the role of the aid donor. It deals with the longer-term agricultural development programme and the relationship between the bank, the British Government and other World Bank board members. The bank is not concerned with short-term issues. The bank is not the most appropriate agency to deal with the drought problem.

In the debate on 22 November I welcomed the possibility of the funds which the Government are not now to make to the IDA replenishment programme, because of the non-co-operation of the United States, being rescheduled to the World Bank's programme for Africa. However, there was nothing in the Minister's statement to confirm that. What is to happen to the £200 million which would have gone to IDA? Will it be allocated to the World Bank programme? What will happen in Bangladesh, for example? The Minister did not reply to my earlier question about that.

It appears that the 6,500 tonnes of food aid for Ethiopia was to have gone to Bangladesh. That is giving with one hand and taking with the other. The problem in Bangladesh is severe. The floods between May and September affected 20 million people and caused $800 million worth of damage. There is a 2.8 million tonnes shortfall in foodstuffs compared with a normal shortfall of 1.5 million tonnes. What is the Government planning to do about that? If they are not planning to reschedule the funds what will they do for Bangladesh and the food need there?

Any sure foundation for the World Bank's longer-term development programme in Ethiopia and Africa must be based upon an adequate response to the drought problems.

The Prime Minister has said that not only are the Government doing their bit, but that they are doing more than other countries. That claim is contradicted by the facts. The United Kingdom's contribution to Ethiopia before October this year was £1.2 million and £2.5 million worth of cereals. Since 1 October, the contribution has been £6.2 million plus two Hercules aircraft. Italy has given £16 million as well as two Hercules. West Germany has committed more than £7.5 million, excluding the EEC contribution. Australia has contributed £7.5 million, Canada £16.5 million and Bulgaria £10.5 million.

Italy's contribution is critical, not only in quantity but in quality. It sent 150 trucks plus spares to Ethiopia. The trucks could double the aid distribution capacity of the Eritrean Relief Association and make a direct contribution because of which the World Bank's longer-term programme would be based upon the survival of agriculture in the critical drought areas in Ethiopia.

Mr. Keith Best (Ynys Môn)

The tenor of the hon. Gentleman's argument is probably that the problems in Bangladesh and Ethiopia are not for solution by individual countries but—especially in the latter case—can be solved only by the international community. Does he accept that when I was in Bangladesh some years ago there was no prospect that it would ever be able to feed itself in the foreseeable future? Surely these are matters for the international community as a whole and cannot be laid at the door of any one nation.

Mr. Holland

I am glad that the hon. Gentleman raised that point. Bangladesh illustrates the problem to which he referred. When I was in Japan not long ago I spoke with members of its development institute, which had sent a team to Bangladesh for two years to study areas of potential comparative advantage that that country might have in the world economy. After two years, they decided that there were precisely none. In textbook theory that should not be possible—in the real world, it is possible. One reason is not only the technological change, which means that jute is not the export commodity that it once was, but that we now have a multinational division of capital and labour world wide. Thus reliance on low-cost wages alone with intermediate technology is not sufficient to guarantee Bangladesh an international future.

I would have agreed with the hon. Gentleman had he said that it was not for national governments alone to seek to solve the problems of a country such as Bangladesh. That must be supplemented by multilateral and international action. But it appears that the food aid allocated to Ethiopia has been diverted from Bangladesh—and it was a small contribution in the first place, some 6.5 million tonnes. Yet there is an 800-million tonne gap in the needs of Bangladesh.

Mr. Robert Parry (Liverpool, Riverside)

Does my hon. Friend agree that one of the real problems for Ethiopia is that of the Eritrean people, and that assistance from the Government should be given through the Eritrean Relief Association to ensure that it goes to those in greatest need? I have tabled a question on that matter.

Mr. Holland

I agree with my hon. Friend. That is one reason why Ethiopia and Eritrea cannot wait for the World Bank's long-term development programme for sub-Saharan Africa. It is a point that the Minister seems unwilling to admit. The fact is that 85 per cent. of the drought areas in Eritrea and Tigre are outside the Government's control because they are in the hands of the Liberation Front, and 50 per cent. of Wollo is similarly outside the Government's control.

The Minister has chosen to react to the points that we have made several times by claiming that he has no desire to hype-up the political confrontation with the Ethiopian Government, and I appreciate that. However, he assumes that that would happen by dealing wih the Liberation Front. If so—as we have said before, and now stress again—there is every reason to allocate a far higher share of food aid to the relief associations such as those in Tigré and Eritrea. I know that the Minister is doing that, but it is on a small scale. The caring British public, which responded so overwhelmingly to the drought crisis in Ethiopia, is beginning to understand that a far higher share of food aid is going to the Addis Ababa Government that to the liberated areas—30 times more.

Mr. Andrew F. Bennett (Denton and Reddish)

Would not my hon. Friend accept that a large proportion of the food aid which is going in through the good offices of the Addis Ababa Government and the relief agencies is finding its way into parts of Tigre and Wollo which are not necessarily under the control of the Government and that the practical logistics of moving grain mean that the grain must go that way?

Mr. Holland

I appreciate my hon. Friend's point and I respect it, not least because he has been to the areas concerned and seen what the problems are. But the fact at the moment is that no long-term development programme such as the World Bank is proposing for sub-Saharan Africa will start at rather than behind the post unless the current drought can be tackled. If millions of people leave their farms because of the current drought and have to go to the main towns of the area for food aid distribution, there will be no chance of a harvest next year. It is totally different case from Bangladesh where floods this year left deposits and sediments which may mean a good harvest next year. That is not the position in sub-Saharan Africa.

I put this point to the Minister because it is directly relevant not only to laying the foundations for a longer-term World Bank programme but also to the concern shown by the British public. If he cannot call for a ceasefire and cannot persuade the Council of Ministers of the EEC to call for a cease-fire in Ethopia, is he so timid that he cannot at least call for no attacks upon properly marked food convoys and for an assurance that airstrips for flying in food aid which the liberation fronts have offered to construct should not be bombed?

Mr. Deputy Speaker (Mr. Ernest Armstrong)

Order. We are discussing the operations of the World Bank and the association and the levels of contributions thereto. We must not stray too far into the unilateral contributions of the British Government.

Mr. Holland

I am grateful for your guidance on that, Mr. Deputy Speaker, but we are talking not simply about the bilateral contribution of the British Government but about the role played by the EEC and the relationship between short term food assistance or drought aid and longer term development assistance.

Mr. Deputy Speaker

Order. With great respect, we are talking about two orders which relate to the operation of the World Bank and the International Development Association and the level of contributions which are set out in the order.

Mr. Holland

I appreciate that point, Mr. Deputy Speaker, but my argument, simply, is that the kinds of costs which are likely to be incurred by failure now to distribute food aid effectively in sub-Saharan Africa will pre-empt the kind of resources which the World Bank wants to put towards development. It will simply be remedying a drought crisis after hundreds of thousands or millions of people have died rather than being able to build on a sure foundation. We are not an insignificant power.

Although our share of the World Bank has diminished, we are still represented on the board of the Bank and this Minister is directly responsible for Government policy on the Bank.

I would stress a further point on the relationship between the current economic crisis and the Bank's lending policy and the role of IDA. The bank is seriously addressing itself to the longer-term development issue. It is not receiving adequate support from the leading countries and from its board members on this point. It is not simply a matter of United States policy. It is, firstly whether alternative ways can be found for like-minded members of the bank's board to undertake activities which fulfil the spirit of the bank's objective without necessarily undertaking them through bank agencies.

Secondly, on such individual projects as the bank's programme for sub-Saharan Africa, where the analysis has been published in detail and where the prospectuses have been published in detail, what will the Government's response be? Thirdly, what role will the Government play in relation to the longer-term issue of global economic recovery which the Bank stresses is so crucial for its own activities? It is very notable that, because of its concern about the recession in the United States economy, the bank in its report makes the case for a European economic recovery which would have a very significant impact on the export performance of less developed countries.

This week's issue of The Economist asks why, with a recession now under way in the United States as a result of Government policy, Europe cannot take up the recovery and face its responsibility for a recovery programme. I was glad to see this and it is rare for me to say that of something in The Economist. If Europe does not do so, not only shall we have had a cut in the IDA contribution which could cripple the IDA' s activities, but we shall have a deepening of the global slump.

It is possible for the Government to take action. The longer term development prospects depend upon a real recovery in world trade. For example, a real recovery of $100 billion a year spent would not only sustain Third world exports by 4 to 5 per cent. a year but would, over a 10-year period, add more than a half to the Third world's GNP. That would make it possible not only to offset the debt crisis in some respects through repayment. And the World bank stresses the imminent risks to the Third world countries from that debt crisis. It would thereby enable less developed countries to put the brunt of the debt crisis behind them within not 10 but five years.

The Government are making no contribution to such a recovery. They are reacting to the depression of world spending and trade. They claim that they are justified in reducing contributions to the bank because of the reduced circumstances of the United Kingdom's economy. call upon the Minister to say what he is doing in the international arena to encourage not only the bank's policies but, for example, Commonwealth countries and their New Delhi summit proposals and those of the recent meeting of the Commonwealth countries for economic recovery. If we do not do so, not only the World Bank and its programmes will suffer but the Third world too.

10.41 pm
Mr. Bowen Wells (Hertford and Stortford)

I congratulate my right hon. Friend the Minister rather than criticise him, as the hon. Member for Vauxhall (Mr. Holland) did, on the way in which he led the group in the World bank to try to effect a special fund for the support of the IDA to replenish the figure of £9.5 billion. That is what the total IDA replenishment has been reduced to by the American's failure to contribute to it. My hon. Friend maintained the amount of money allocated in the ODA budget in order to continue to make that contribution.

Those countries which failed to support my right hon. Friend were Germany and Japan. We in the House should say straightforwardly that we resent that. The Third world should resent the fact that Japan in particular, with its responsibility for aid and trade relationships with the Third world in which it is very much the winner, has failed in its responsibilities to the Third world far more than has the Government, who were led by my right hon. Friend to replenish that shortfall in the IDA replenishment led by the United States.

Let me deal with the United States and the reasons why it did not support the replenishment of the IDA at its current level — £12 billion. Clearly, in view of rising overseas costs and inflation, that would have been below what had been agreed to previously. When one bears in mind that in the meantime China, an extremely large country with many poor people, has come into the IDA, the failure not only to renew at the same level of £12 billion, but to reduce it by 25 per cent. to £9.5 billion, is something that the developed world should be ashamed of.

I much admire my right hon. Friend's work and determination in trying to bring that about. The reason why the Americans failed to do that was that they resent the fact that 40 per cent. of the IDA fund goes to India. It was felt that with the addition of China, an even greater percentage would have gone to India and to China. That is because the allocation of funds under the IDA is to those countries which have a low per capita income. India and China can therefore command a large percentage of the IDA budget.

India is a powerful economy. It is a nuclear power with a major defence capacity. It has also a major industrial capacity. The Americans are right to criticise the IDA's distribution of money to India. In fact, India could devote a large amount of its funds—it has large reserves—to the support of the poorest in its own country. I believe firmly that development begins at home, and help must start at home. Developing countries must put their own houses in order and direct their money to the poorest in the communities before they can expect the international community to respond. I have some sympathy with the American view of the IDA and I understand why they chose not to replenish its funds. On the other hand, I criticise it because IDA grant funds are needed desperately, especially in Africa, as the hon. Member for Vauxhall has said and as my right hon. Friend would undoubtedly agree. Aid is necessary in Africa to prevent widespread starvation of the sort which we have seen on our television screens and which has accorded a major response from the British people.

Mr. Parry

Is it not deplorable that our assistance to the African continent is so small compared with that which is made available by some of our European partners? We are making available only half of the target which has been set by the United Nations.

Mr. Wells

I believe that the hon. Gentleman is talking about the United Nations target of 0.75 per cent. of GDP, which we have agreed to and at which we should be aiming. That is the target for total aid contributions. But we should not talk in meaningless monetary economic terms. We should be directing ourselves to sending aid to where it is most needed. I am not interested in global figures. My interest lies in directing aid to the poorest, to the starving people of Africa and elsewhere. The issue is directing money, people, materials, compassion, management and administration to those places and not 0.75 per cent. targets. The hon. Gentleman may agree that that aid should be directed to Africa and the poorest parts of the world.

My right hon. Friend has been trying to promote that policy. He has been supporting the World Bank's fund for Africa, which is designed to absorb the moneys which were available in the ODA budget and to support the IDA. Having failed to secure replenishment for the IDA, we are supporting a special fund for Africa.

What is my right hon. Friend forced to say to the World Bank and other organisations which come to him for money? What I am about to say may lead to cross-party agreement. He is forced to say that he does not have the money now. I should like him to tell me that that is not true, but I understand that the Government are saying that they cannot now lend money to Africa for a special Africa fund. There will be opposition from West Germany and Japan to the formation of a World Bank special fund for Africa, and Britain may be included in that category because the Government say that they do not have the money.

Why do we not have the money? Let us return to the debate on aid and take up the leader that appeared in The Times on the Saturday after the debate. It seems that many in the House did not understand what was happening; neither did the leader writer of The Times. The aid budget has not been compensated at all for overseas risen costs and adverse changes in the exchange rate, whereas the diplomatic budget has been compensated in part for those risen costs.

The Times leader said that the Foreign Secretary had given way to the aid lobby and had not cut the aid budget in favour of cutting the diplomatic budget. The reverse is true, and my right hon. Friend the Minister for Overseas Development has had to deal with the consequences. We have learned from a strange admission to the Public Account Committee that my right hon. Friend's budget for dealing with the Ethiopian crisis by emergency relief and food aid was £50 million. Anyone budgeting in the ODA hopes that he will not have to use all that money and that he will be able to use money in other directions through the unallocated funds within the ODA's budget. That aid money has been used up almost entirely in providing drought relief in Africa. My right hon. Friend the Minister gave generously to Ethiopia to try to relieve the drought and political problems. The hon. Member for Vauxhall paid tribute to my right hon. Friend in trying to deal with those problems — perhaps not enough was done; there can never be enough done in such cases — that lie beneath the Administration of the Addis Ababa Government, whom I deplore.

I can see that you are becoming agitated, Mr. Deputy Speaker, because I am not dealing with IDA, but these budgets are related.

Mr. Deputy Speaker

This is a general debate on overseas aid. The debate is concerned with the two funds and our contribution to them. Any hon. Member taking part in the debate must address himself to the orders before the House.

Mr. Wells

I fully accept your ruling, Mr. Deputy Speaker. I am trying to say that these two budgets are intimately related; that is why my right hon. Friend the Minister has not been able to make the contribution to IDA which he would otherwise ask the House to approve. We have reduced, as we should do in the light of our economic circumstances, the amount we give to the IDA. The figure has been reduced by 25 per cent. because of the failure of the American and British Governments to contribute at the level at which they would have contributed if the aid contribution had been renewed at the previous level. I contend that it should have been renewed at a higher level. You have given me the opportunity, Mr. Deputy Speaker, to make a point on the IDA.

The House has decided to take together the issues of the IDA and the IBRD, and I shall try to be quick in dealing with the World Bank. I am concerned about the way in which the British Government control the votes of the World Bank. Contrary to what the hon. Member for Vauxhall said, the way in which the alternative director on the IBRD executive board and the IDA executive board votes is controlled not by the Overseas Development Adminstration and my right hon. Friend for Overseas Development but by my right hon. Friend the Chancellor of the Exchequer. How is the alternate director told how to vote?

Mr. Stuart Holland

When my right hon. Friend the Member for Clydesdale (Dame J. Hart) and others were in government, that was the responsibility of the Ministry of Overseas Development. It is simply a reflection of the downgrading of that Ministry that that is no longer the case.

Mr. Wells

I am asking for information. Perhaps my right hon. Friend the Minister for Overseas Development will be able to correct us and put us on line. As I understand it, that aspect is not under the control of the Overseas Development Administration.

The IBRD needs not only more money—in case you think that I am getting out of order, Mr. Deputy Speaker, I point out that is a reason why I welcome the order—but greater conditionality. Conditionality is required to ensure that the money that goes through the World Bank is directed towards the development of those countries which need it.

Why has the alternate director of the World Bank executive board voted against Guyana and denied that country more funds from the IBRD to which the order contributes? A policy decision must lie behind that, which has not been revealed to the House. I ask my right hon. Friend to clarify how and why that director is authorised to vote. We should not penalise or turn our back on Guyana. We need to help Guyana's economy through the World Bank with the money which will be voted through this order.

I believe that the special adjustment loan is on offer, and I call upon my right hon. Friend to ensure that the World Bank conducts itself properly in relation to special adjustment loans to aid development of the poorer countries. That must be combined with the conditionality of the IMF so that we achieve a longer-term programme through the two institutions than is available through the IMF alone to resolve the difficult development problems faced by the poorer countries.

I shall give an example of how some of the money from the IBRD and the IDA is used badly, in the development of one country. Let us take St. Kitts. Sanctions against sugar going to the United States and the EEC have caused St. Kitts to lose $5 million, but the World Bank and the IDA have just given it $5 million for additional development projects. That shows that there is insufficient co-ordination of policy not just domestically and bilaterally but also internationally, with other countries and multilateral agencies, and through trade relationships, to support the development of the poorest countries. The IBRD and the IDA have the greatest opportunity to bring about that co-ordination. That is why I ask the House wholeheartedly to support the orders. I hope that my right hon. Friend can bring about the necessary improvements to meet the points that I have made.

Several Hon. Members

rose—

Mr. Deputy Speaker

Order. I am sure that the House wants to hear the Minister's reply. He would like to begin at 11.22 or 11.23 pm. I appeal for brevity.

10.57 pm
Mr. Eric Deakins (Walthamstow)

I cannot altogether follow the hon. Member for Hertford and Stortford (Mr. Wells) in the sympathy that he expressed for the United States over the seventh IDA replenishment. The Minister, perhaps inadvertently, gave some, but not all, of the figures on this issue. It is worth summarising them briefly, because they are stark.

The sixth IDA replenishment amounted to $12 billion. The World Bank, which operates the IDA scheme throughout the world to the poorest countries, wanted $16 billion for the seventh replenishment. That would have been an increase of one third. There is to be $9 billion. That is a decrease of 25 per cent. on the sixth replenishment, but what is more important is that it is a decrease of 43 per cent. on what the World Bank considered to be essential for multilateral aid from rich countries to help poor countries over the next three years.

That is not the final figure, because the figures that I have been quoting are all in cash terms. As my hon. Friend the Member for Vauxhall (Mr. Holland) said, there is inflation throughout the world and the 25 per cent. cut is probably even bigger if one takes account of expected inflation over the next three years.

The prime mover in making this cut has been the United States, as the Minister very fairly pointed out. I think that the whole House accepts that. The hon. Member for Hertford and Stortford suggested that there were reasons for this. No doubt there were—there are reasons for bad policies, just as there are reasons for good policies. In other words, there are good reasons and bad reasons. In making that cut, the United States has forced all the other rich countries to follow suit because of the way in which the IDA contributions are calculated. Once a major donor has taken the lead, the process cannot be stopped but spreads like the ripples in a pond when a stone is thrown in, and the poor countries of the world will suffer substantially as a result.

The United States took that action for bad reasons. I know a great about political opinion in the United States in relation to the Third world. There is a great deal of myopia and sheer ignorance, not merely among the American people, but among their legislators, about the facts of life in the poor countries which the IDA replenishment is designed to aid. If ever there was a case of spoiling the ship for a ha'porth of tar, it is the penny-pinching attitude of the United States in this regard.

In terms of the United States defence budget, let alone its total budget, the cut in contribution from $1 billion to $750 million, rather than an increase to $1,250 million, is penny pinching indeed. For the world's richest country to adopt such an attitude to the major issue of the next few years, which will affect the future of all of us — not even improving life in the poor countries, but just stopping things getting worse—will inevitably make it far more difficult for the World Bank and other international institutions to stop the rot getting worse.

The United States, aided and abetted — as the Minister again quite fairly said, although he did not use those words—by the Federal Republic of Germany and by Japan, has taken a very bad decision indeed. It is probably one of the most significant decisions that it has taken in relation to the Third world since the second world war, and possibly in its history. Those three countries, with the rest of us who are carried along willy-nilly due to the system of proportionality in contributions, will live to regret that decision.

As my hon. Friend the Member for Vauxhall explained in such clear detail, the situation in the Third world is getting worse. Let those who doubt that read the World Bank's annual reports, including the latest report. The problems are not just poverty, unemployment, disease and malnutrition, but heavy debt burdens, population increases and, above all, the fact that in real terms commodity prices are at their lowest for about 30 years so that Third world countries cannot earn the money to pay for the extra cost of their imports or even to finance their debt burdens properly.

I do not suggest that the whole system is about to collapse like a house of cards, because I believe that the rich countries have sufficient nous and self-interest to recognise that they must allow debt rescheduling rather than let the world banking system collapse. But that does not improve life in the poor countries. It merely staves off disaster for all of us, and that is what the IDA replenishment would have done if we had had the $16 billion to which I believe the British Government would have been willing to contribute. Certainly there would have been pressure from the House for them to do so.

We have to accept the order, because it is better than nothing, but symbolically it is a disaster for the Third world. Those countries need more multilateral assistance, but they will get less as a result of the ignorant and myopic policies of the politicians and leadership of the United States. My only regret is that the United Kingdom, as a close friend and ally of that great country, did not have sufficient influence to change opinion on Capitol Hill and in the White House and ensure that the United States, as the world's richest country, undertook its true responsibilities to the poor countries of the world.

I am ashamed of the action of the United States. We must accept the order, because by doing so we shall preserve something at least for the poor countries. However, I am afraid that the position will deteriorate. When, in three years' time—under a Government of whatever colour—we debate the eighth replenishment of IDA, I am afraid that the global situation will be much worse, and that will be partly because of what the United States, Germany and Japan have done.

Mr. Deputy Speaker

I am grateful to the hon. Member for Walthamstow (Mr. Deakins) for the brevity of his speech.

11.06 pm
Mrs. Edwina Currie (Derbyshire, South)

This is the first time that I have taken part in a foreign affairs debate. I do so because two weeks ago, as a member of an all-party delegation that included six other hon. Members, I visited the United Nations. I should like to thank all those, especially in the Foreign Office, who so excellently put to use some very scarce funds. Whether anyone apart from the participants benefited from the exercise, I leave the House to judge, but I hope that it will be possible to continue to send such delegations.

We had 24 meetings at the United Nations in three and a half days. One might have thought that in that time we would have run the gamut of the United Nations agencies. We saw politics, and we saw the aid agencies. We had lunch with Brad Morse, the director of the United Nations Development Programme, which was an experience that I would recommend to anyone. But we did not see the General Agreement on Tariffs and Trade or the United Nations Conference on Trade and Development, and we did not see the transfer and banking of funds. We did not meet anyone from IBRD or from the IDA. That was a serious omission, because without trade and without industrial development — without the hard-headed commercialism especially noticeable in the IBRD—we must be talking in a very limited way. For if trade and commercial enterprises are successful and mutually beneficial, as I believe that they are, much aid becomes less necessary. The political input that the Western world would like to see into the Third world will follow both more subtly and more effectively in that way than if it is simply fuelled through the political and soft aid agencies.

I have had some contact with IBRD in the recent past. I believe that is is easily the most hard-headed and commercially minded of all the agencies operating in that field. My husband's company has been involved in much of the supervision of its activities in parts of the Third world.

The rules of the IBRD could be commended to one or two other organisations, including, perhaps, some of our own companies. I quote from the guide to the United Nations: Under its charter, the Bank must lend only for productive purposes— in other words, not direct to Governments— and pay due regard to the prospects of repayment … loans must be for specific projects … The bank must assure itself that the necessary funds are unavailable from other sources on reasonable terms. The use of loans cannot be restricted to purchases in any particular member country or countries, and the bank's decisions to lend must be based only on economic considerations. Most of the money comes from private investors—from the bank's own borrowing — and the disbursement is done entirely against invoices, most of which are for contracts based on international competitive bidding. After that, an extensive audit is required.

That is not a bad collection of commercial rules on which this and other Governments could allocate funds to the developing countries.

In 1974–75, my husband was involved in supervising some IBRD projects in Turkey. I went with him. This week, I checked on what has happened to some of the projects in the decade since then. The experience was salutary. The IBRD projects have continued to be profitable, despite all the political vicissitudes of that sad country. I found it hard to believe, but one particular project was in fact set up to break a government monopoly in one industry, and it has had a dramatic effect on that part of the economy.

The IBRD has encouraged and made possible an input in kind—not just cash—from other donor countries, so that, for example, the link between West Germany and Turkey has been emphasised. We should recognise and value such links. We would be far more worried if such links were forged between Turkey and East Germany or some other Eastern bloc country.

My hon. Friend the Member for Hertford and Stortford (Mr. Wells) says that funds should go to the countries where they are most needed, but there are occasions when funds should go where they are most ably used. If we concentrate on a country that is rising and that has potential for development, and if we can transform it from a poor to a moderately well-off country, we will have helped the world economy more rapidly and more effectively than by simply pouring money into the countries with the greatest difficulties.

There has recently been much criticism of attitudes to aid of various types. Some of the most telling appeared in a leader article in The Times of 27 November, which came out while we were sitting at the United Nations. It sent a shiver of fear through representatives of all of the countries sitting there, so much so that several agency leaders came up to us waving a copy saying, "You do not all believe this, do you?" The article's comments were based on a debate in the House on Overseas aid on 22 November. Two comments were especially apposite. First: MPs showed an obsession with volume. It went on to say that aid should be subjected to more critical cost benefit analysis for donor and recipient together. I do not think that I could be described as an aid freak because, perhaps more than any other hon. Member present, I am aware that the funds which we are voting are competing with my pet activities such as pensions and the National Health Service. We should try and we should admit that we are obsessed with inputs at the expense of outputs. If I might say so with the greatest respect, the speech of the hon. Member for Walthamstow (Mr. Deakins) was a classic example of an obsession with inputs without any consideration of the results. That, of course, is a British failing. We do it all the time. We do it with the National Health Service and with the Department of Health and Social Security, and we have just done it with the Common Market. I suspect that much of the funds that we have just voted for the EEC might have been better devoted to filling the grain silos of the rest of the world rather than those of Europe.

I suspect that much of the grumbling about inputs that we get from newspapers such as The Times is an excuse for not examining the results. Those who have doubts cannot be smug. We must ask three questions about where the money is going to and what we get out of it. First, what do we as donors get out of it?

Mr. Parry

rose—

Mrs. Currie

Secondly, what do the recipients get out of it; and, thirdly, what is the result for both of us? We must ask what we donors get. It is a selfish and cruel question, but in this world the best things are often clone for the wrong reasons and we should remind ourselves and our constituents that, through the IBRD and IDA, about 80 per cent. of what we give comes back to us in direct procurement. One or two agencies provide even more. The United Nations development programme, for example. brought back twice as much to the United Kingdom in terms of dollars in 1983—we gave $28 million and got $63 million back. We are on to a good thing in some of these programmes and we should not let our constituents forget it. I commend to my right hon. Friend the practice of the Ministry of Defence which, when there is any argument about what we should do about that programme, circulates to all hon. Members a list of companies in our constituencies which benefit from the programme so that we can be assured how employment prospects in our constituencies are affected.

We must ask what developing countries get. For IBRD it is easier to say what they do not get. They do not get weapons from IBRD. They do not get political infiltration. We are not talking about CIA or KGB funding of tin-pot dictators. They do not get unrepayable debts. They do not get grandiose white elephants and triumphal arches. They do not get schemes which break down for lack of infrastructure, parts or skills. The Third world is littered with past mistakes and especially the neglect of agriculture. It is significant that all those things that I have listed are the result of bilateral aid programmes, especially of Government-to-Government direct bilateral aid. We in the United Kingdom give about two-thirds of our total aid through bilateral aid and about one-third in multilateral aid of this type. I cannot tell whether that proportion is right but I know that if we go on—

Mr. Deputy Speaker (Mr. Ernest Armstrong)

Order. The hon. Lady must relate what she is saying to the orders.

Mrs. Currie

I am referring directly to the orders., or at least I am trying to. I know, however, that if we head entirely away from programmes such as we are dealing with, we are probably going in the wrong direction.

We must ask what we get together. IBRD and IDF have shown the success of programmes which have a hard-headed and commercial element, for many of the nations that were once the recipients of IDA are now donors to IBRD. They work. Sentimentalitly alone is not enough. Long after the starving have disappeared from the television screens and long after the urgency of the immediate aid programmes has faded, the money that we vote tonight will contribute far more to a prosperous world from which we shall all benefit.

11.14 pm
Mr. Russell Johnston (Inverness, Nairn and Lochaber)

Time is short and I want to make only one simple point. The Liberal party entirely agrees with the criticisms of the hon. Members for Vauxhall (Mr. Holland) and for Walthamstow (Mr. Deakins) of the United States for its failure to respond to the World Bank's request for replenishment to IDA. I wish to put that firmly on the record.

Did the Government make representations to the Reagan Administration about this, and if so, what response did they receive? Did they receive a response in the terms referred to by the hon. Member for Hertford and Stortford (Mr. Wells)

11.15 pm
Mr. Keith Best (Ynys Môn)

I, too, congratulate my right hon. Friend on what he has done and on his personal commitment to this matter. I welcome these orders because they are directly relevant to what is happening to the poorest countries—something on which a number of hon. Members have rightly concentrated.

Of course we must increase the viability of developing countries as partners with industrialised nations in a mutually rewarding expansion of international trade. Every developing country, in addition to needing financial resources, also needs human resources. My hon. Friend the Member for Derbyshire, South (Mrs. Currie) mentioned Mr. Bradford Morse, the administrator of the UNDP. I was in New York two weeks ago and had more than one meeting with Bradford Morse. I endorse what my hon. Friend said. It is quite an experience, which unfortunately too few people have. I am indebted to him for reminding me that development is all about human beings. That is an axiom, but it is often forgotten when one gets bogged down in figures and percentages.

Mr. Morse reminded me that for far too long we have suffered from a Marshall plan mentality on aid. After the second world war in Europe all that was needed was a transfer of capital, but development in the Third world is still too concerned with investment and the transfer of capital, without concentrating on developing human resources.

In Europe that was not necessary, because the human resources were already fully developed after the second world war. We must do far more to improve skills, human resources and capacity. Only 10 per cent. of improvement in development comes from capital—the rest is in the development of human resources. The latter has been neglected, and in the last five years the World Bank has tried to fill that gap. That is why I am pleased about the orders.

I do not entirely follow the doom and gloom that is sometimes spread by Labour Members, although I share many of their criticisms and much of their concern. However, it is right to put on record that in the 30 years between 1950 and 1980 there has been a greater improvement in the less-developed countries than in any other 30-year period for any nation at any time, including Japan. Literacy in the poorest countries increased from 22 to 48 per cent. Life expectancy rose from 41 to 57 years. Child mortality decreased from 28 per 1,000 to 12 per 1,000. There has been a dramatic and worthwhile benefit over that 30-year period.

These orders are directly related to what we can do for the poorest countries. I am concerned about the fact that for the poorest 50 countries our percentage of gross bilateral aid was 63 per cent. in 1983, the lowest since 1979, with the exception of 1982. Our total overseas aid expenditure in 1983 was only 0.35 per cent. of GNP, the lowest for the last 20 years, except for 1980.

I appreciate that technical factors—for example, the timing of our contributions to IDA—have been largely responsible for those lower percentages, but that percentage of GNP is exactly half that suggested by the Brandt Commission. Indeed, it is necessary to remind the Government that in the Foreign and Commonwealth Office memorandum to the Brandt Commission in July 1980 there was a commitment to work towards the 0.7 per cent. of GNP for official aid, although without a target date. The percentage in 1979 was 0.52 per cent.

The poorest countries need international institutions because they are unattractive donees for bilateral aid as they have little to offer in return. I urge my right hon. Friend, when considering the orders, especially that relating to the IDA, to ensure in future that there is no flight of capital from Third-world countries, and to review the terms for loans because many of them are no longer applicable to the problems of Third-world countries. Finally, there is a need to fix interest rates for the future. Third world debtor countries cannot plan their next year's budget when they do not know what interest rates will be.

I commend the orders to the House.

11.20 pm
Mr. Tam Dalyell (Linlithgow)

I was told tonight by Mr. George Galloway, who is to give evidence to the Foreign Affairs Select Committee tomorrow and who has just returned from Ethiopia, that he has evidence from aerial photographs that about 500,000 people are making their way towards the southern Sudan. The position in sub-Saharan Africa, as the Minister knows, is beyond description.

In those circumstances, should this oil-rich country make this cut? About every eight hours a tanker leaves my constituency at Hound Point for Japan, Korea or heaven knows where, loaded with North sea oil. We are rich in oil. Even in our own national interests, should we not do something more to help the Third world?

My hon. Friend the Member for Liverpool, Riverside (Mr. Parry) has been waiting patiently to speak, as I did, so I shall end on a point which will not surprise the House. The Sunday Times estimates—it is an underestimate—that £3 million a day is spent on those islands in the south Atlantic, yet the Government propose this international penny-pinching. That is not the way that the United Kingdom should conduct its affairs in 1984.

11.22 pm
Mr. Robert Parry (Liverpool, Riverside)

When the Minister replies, I hope that he will deal with how aid is distributed. He may have seen the admirable article in this week's New Statesman by James Firebrace about large donors, such as the United States, Canada, and European countries. There is no examination of where their aid goes, but aid given by voluntary organisations is monitored.

My hon. Friend the Member for Vauxhall (Mr. Holland) rightly said that 85 per cent. of people in Eritrea can be reached only by the Eritrean Relief Association. I hope that the Minister will say that the Government recognise the ERA and will give it full support to ensure that vital supplies are given to the people there, who need them desperately.

11.23 pm
Mr. Raison

I shall deal with the last point immediately, although it is perhaps a little outside the scope of the debate. We believe that the best way to get help to the rebel-held areas of Ethiopia is by working discreetly through voluntary agencies. I believe that to be a better way than to recognise all sorts of bodies and to hype the matter up politically.

There was great unanimity in the debate, in that we all respect the World Bank and what it does. No hon. Member seriously dissented from that, and I echo that shared respect. I was glad to hear from a newcomer to our debates, my hon. Friend the Member for Derbyshire, South (Mrs. Currie). It is always nice to have fresh blood in these debates. Her stress on outputs as opposed to inputs is right. It occasionally worries me that we spend all our time during the Lomé negotiations talking about how large the next one will be, and little time talking about how large in terms of effect the existing one has been, or, indeed, why it has not been possible to spend much of the money that was allocated to Lomé 2. We should talk about the consequences of our aid programmes, rather than only about their size.

The debate was wide-ranging and not especially disciplined, but nevertheless it was valuable. All that I can do in the time available is pick out a few points, and one in particular. We all share the regret that the next IDA replenishment will be as low as $9 billion. I should tell the hon. Member for Inverness, Nairn and Lochaber (Mr. Johnston) that Britain and the EC made clear to the United States their views on the size of the replenishment.

My hon. Friend the Member for Hertford and Stortford (Mr. Wells), the hon. Member for Vauxhall (Mr. Holland) and others mentioned the World Bank's proposal for a special facility for Africa. The matter has been mentioned directly in relation to the orders and to the possibility of an IDA supplementary fund. The proposal was discussed by the World Bank's executive board earlier today. The facility will take the form of a voluntary fund with a target of $1 billion to be committed over three years. The fund would be outside the IDA and the normal burden-sharing arrangements among donors would not apply. The precise purposes for which it would be used will be agreed by donors at a meeting in January or February. The United Kingdom would expect to attend that meeting. Until then, we shall continue to discuss with the bank how best we can play our part not only in relation to the facility, but in the wider context of the bank's joint programme action for sub-Saharan Africa, of which the special facility will be only a part.

The bank's purpose—this is in line with what we have heard in the debate — is to support reform and adjustment undertaken in African countries that have structural problems. That is precisely the underlying aim of our bilateral aid programme in Africa. During the past year alone, we have committed programme or sector aid worth nearly £33 million to eight countries in pursuit of that policy, and we shall need to bear in mind the strength of our bilateral programme when considering how to respond to the bank's latest initiative. We must ask ourselves whether a United Kingdom contribution to the bank's proposed special facility would be likely to yield greater value to African countries than would our programmes, and whether, in consequence, it represents a higher priority claim on our resources. Hon. Members must understand that, in the final analysis, there are limits to what we can do.

In the wider global context, there is a general decrease in official development assistance available to developing countries. Therefore, it is more important than ever that aid flows are used to maximum effect. We know that aid alone is not sufficient to bring about change; the right climate and policies must also be there. We must ensure that we have an effective policy dialogue such as we have been seeking in the Lomé negotiations.

As the House probably agrees, the World Bank and IDA staff are taking a positive lead in those directions, especially in the creation of more consultative groups in which policy dialogue with recipient countries can take place, and donors can exchange information. The bank intends to strengthen its staff in that area. We can take encouragement from that. I say firmly that my Department will work closely with the bank and IDA staff wherever and whenever we can. That is the real thrust of the joint programme of action for sub-Saharan Africa.

I cannot say now exactly what will happen in the discussions on the special facility, but I can say categorically that we believe that nothing is more important in tackling the problems of the world, especially Africa, than that we should work together as closely as possible with the World Bank and the other multi-lateral and bilateral donors. That must by the keystone of our approach to Africa in the difficult period that lies ahead. The House recognises those difficulties. and it recognises that, in the short term, we have the desperate problem of dealing with the immediate famine. which I have seen so vividly, and which everyone has seen on television. That is the immediate problem, but beyond that is the crucial problem of finding out how best we can begin to get the long-term development that Africa has so far not seen, in spite of the great resources that have been poured into it.

When the House passes these orders, as I believe it will, it will be making a significant and important contribution to this enormously challenging and worthwhile task.

Question put and agreed to.

Resolved, That the draft International Development Association (Seventh Replenishment) Order 1984, which was laid before this House on 7th November, be approved.