Caribbean Development Bank

HC Deb 27 July 1984 vol 64 cc1408-44 12.17 pm

The Minister for Overseas Development (Mr. Timothy Raison)

I beg to move, That the draft Caribbean Development Bank (Further Payments) Order 1984, which was laid before this House on 9th July, be approved. The purpose of the order is to provide for the payment of a further contribution of something over £6 million to the special development fund of the Caribbean Development bank which is the bank's concessional lending window. With your permission, Mr. Speaker, I propose to say a word or two about the bank and the way in which it works before describing the order in detail.

When the federation of West Indies broke up in the early 1960s and an attempt at forming a federation of the Little Eight — Barbados, Dominica, Grenada, St. Vincent, St. Lucia, Antigua, St. Kitts Nevis, Anguilla and Montserrat—failed, the United Kingdom, Canada and the United States of America set up a team of experts to make an economic survey of Barbados and the Windward and Leeward Islands with a view to formulating plans for the achievement of their economic viability. This was in January 1966. Among the recommendations of this team was the establishment of a regional development agency including a development bank division to serve the territories.

Later in that year, in November 1966, a conference of the sponsors of the survey and representatives of the Governments of Barbados and the Windward and Leeward Islands met in Antigua to consider the report. It was agreed that consideration should be given to the establishment of an institution to serve all the Commonwealth Caribbean countries and territories.

With the concurrence of all the Commonwealth countries in the region, the United Nations development programme appointed a team of experts to undertake a study. The UNDP report was submitted in 1967 and recommended the establishment of a Caribbean Development bank with an initial capital of US $50 million. The recommendation was accepted at a meeting of the heads of Government of the Commonwealth Caribbean countries held in Barbados in October 1967 and a Committee of officials was established to work out the details and prepare a draft agreement. That agreement was eventually signed at Kingston, Jamaica, on 18 October 1969 at a conference of 16 Commonwealth Caribbean regional countries and territories, Canada and the United Kingdom. Thus the Caribbean Development bank was founded, with the UK as one of its founder members.

The regional members of the bank are all member countries of the Commonwealth, as are the two major non-regional members, Canada and the UK. The bank's charter outlines clearly the main purpose of the institution, which is to contribute to the harmonious economic growth and development of the member countries in the Caribbean and to promote economic co-operation and integration among them, having special and urgent regard to the needs of the less developed members of the Region". To achieve that purpose, CDB's functions include assisting regional members in the co-ordination of their development programmes, mobilising financial resources, financing projects and programmes, providing technical assistance to its regional members, and promoting public and private investment in development projects.

The bank is in its 15th year of operations and is widely recognised as having served the region well. Since its inception, the bank has approved projects in borrowing member countries amounting to US $463.5 million. A total of 54.7 per cent. of the financing has gone to the less developed countries. Disbursements have averaged over US $47 million a year for the five years 1979–83. The bank has not only gained the confidence of its original membership. but has attracted new members and contributions both from within the region and outside.

The CDB's original membership included 16 English-speaking Caribbean countries as regional borrowing members and Canada and the United Kingdom as non-borrowing, non-regional members. Anguilla was accepted into membership in 1982 following formal separation from St. Kitts and Nevis. Venezuela, in 1973, Colombia, in 1974, and Mexico, in 1982, subsequently joined as non-borrowing regional members and France, in 1983, joined as a non-borrowing non-regional member. Italy's application for membership is currently under consideration. In addition, the United States, Sweden, Nigeria, New Zealand and Germany are all contributors to the bank's resources. Of total resources of US$479.9 million held by the bank at December 31 1983, some 75 per cent. was mobilised from outside the Commonwealth Caribbean.

The financial resources of the bank now consist of ordinary capital resources, comprising mainly subscribed capital, and borrowings from the international financial markets, and special fund resources, which are contributed by members and non-members and lent at very concessional rates of interest, mainly to the LDCs of the region. Britain holds 14 per cent. of the issued capital, an identical holding to Canada. That amounts to some US$34.7 million of which US$7.925 million is paid in and the rest is callable. We also contribute to the soft resources. The current United Kingdom commitment is £14.2 million, of which some £9 million has been disbursed.

As a member of the bank, we qualify for procurement under ordinary capital resources. Special funds can be used for the procurement of goods or services from those countries, which make substantial contributions to the fund — that is, over $5 million. United Kingdom procurement in recent years has been good. In 1981, it was 25 per cent. of OCR expenditure, although our share did fall in 1982 following completion of several large projects in Guyana, St. Kitts-Nevis and Montserrat, the supplies for which were obtained from the United Kingdom. Britain is also of course represented, by me, on the governing board of the bank and on the board of directors, where we control 13.8 per cent. of the directors' votes.

A recent feature of the economies of the countries of the Caribbean has been the wide variation in performance. For some there has been steady growth, for others sluggish growth, and for a few, decline.

The 1983 annual report of the CDB helps to illustrate some of the problems of the region: Reflecting low international demand, commodity prices remained depressed and currency market developments and the differential in economic growth rates between the US and Europe had some negative effects on domestic earnings in the Region. Demand for bauxite and petroleum continued to stagnate as a result of both the world recession and of longer term structural factors in the markets for these two commodities. As regards tourism, while there was a noticeable increase in stop-over visitor arrivals from the US, arrivals from Europe and Canada declined. While the size of the increase in arrivals from the US was sufficient in many cases to result in an overall increase in visitor arrivals, total visitor expenditure was affected by the shatter average length of stay of visitors. The situation was more serious with respect to exports of sugar, bananas, spices and other commodities to Europe. In spite of substantial output increases in some cases and upward movements in prices in others, earnings in domestic currencies tied to the dollar increased marginally or not at all. In this environment, 1983 was a bad year for those borrowing members which experienced declines in export volumes. Apart from the generally depressive effects on domestic output of the acute difficulties in the foreign exchange earnings sectors, poor overall economic performance also reflected the continuing strong external bias in regional consumption patterns, as well as inadequate development of local marketing and support structures for regional production, particularly in the area of food crops. The strategy of the bank is to seek projects that will increase output in the short term and promote productive sectors of the economy. We believe that that is right, and also that in the public sector, projects that can reduce the burden of recurrent expenditure and encourage the maintenance of existing assets should be given priority.

Britain recognises the valuable role played by the hank as financier of public and private sector investments that are particularly relevant to the development needs of the Commonwealth Caribbean. For the most part, those are outside the scope of commercial banking loans. The Caribbean Development bank, with its cadre of professional and technical expertise, can prepare development projects across a wide spectrum in countries where professional expertise is limited. That paves the way for financial assistance from either the bank or other lending agencies.

The bank also finances small projects that are essential to the island communities, but which are too small for major development banks, such as the World Bank group, to consider.

The bank varies both its lending criteria and the terms of its lending in accordance with the economic circumstances of the borrower.

In the case of the new SDF, it is proposed that those countries with relatively more developed economies, such as Trinidad and Tobago and the Bahamas, should be eligible for assistance for lines of credit to development finance corporations at 8 per cent. interest, 20 years' maturity and five years' grace. Countries with less developed economies, such as Dominica and St. Vincent, qualify for direct loans to Government as well as lines of credit to development finance corporations for on-lending to the private sector. SDF loans to those countries will be at 3 per cent. interest over 30 years, with 10 years' grace. The average term of SDF lending is currently 4 per cent. interest, 22years' maturity and five years' grace. Under the new proposals, with the large bulk of SDF lending going to the less developed countries, average repayments will be extended to 28 years, with an average grace period of nearly 10 years.

I have arranged for a copy of the bank's annual report for 1983 to be placed in the House of Commons Library.

The purpose of the order is to authorise paynment of a further contribution to the special development fund to accordance with the pledge made by Britain at a meeting of contributors held on 28 October 1983. Total pledges of US$76 million were received.

A major problem for CDB has been the myriad of special funds for soft resources due to a number of donors specifying terms and conditions under which their contributions may be spent. The 1983 board of governors meeting agreed to establish a unified special development fund with effect from 1 January 1984, and to encourage as many donors as possible to contribute to it. The unified fund includes as far as possible all outstanding commitments to soft resources — including some £5 million from the United Kingdom — and the new commitments pledged at a meeting in October 1983.

The special development fund provides loans of high development priority, with longer maturities, longer deferred commencement of repayment, and lower interest rates than those determined by the bank in its ordinary operations. The projects which might be eligible for SDF funding are those with low financial rates of return but which are of high developmental priority or which are not financially self-liquidating, except in the long term. Water and sewerage, road construction, and rural electrification are examples of those.

The special development fund, because it provides funds at such concessional rates, is not self-liquidating, and all contributions to the fund by donors are in the form of grants. Existing contributions to the SDF are expected to be fully committed in 1984. The current economic climate means that the poorer borrowing members of the bank are finding it increasingly difficult to secure and service loans at normal interest rates, but they still require financing for projects of high developmental priority. Replenishment is required to allow the bank to meet those needs in the Commonwealth Caribbean up to 1988. The bank proposes that not less than 70 per cent. of the special development fund resources should go to the less developed countries of the region.

To date, Britain has pledged US$30 million to the special development fund. At varying exchange rates, it equates to just under £14 ¼ million. We have now agreed to a further contribution of US$10 million. If Parliament accepts this, the United Kingdom will subscribe £6,640,300 to the special development fund—equivalent to US$10 million at a fixed rate of £0.66403.

Therefore, I commend the order to the House in the firm belief that the Caribbean Development bank will continue to promote economic and social progress in the Commonwealth Caribbean, and that the United Kingdom should play its part in this.

12.33 pm

Mr. Stuart Holland (Vauxhall)

We are grateful to the Minister for his introduction of the order and for the wide-ranging way in which he has analysed the context of the Caribbean Development bank and its lending.

It is clear from "British Overseas Aid", in its 1982 and 1983 versions — the same words are used on each occasion—that the main constraint on development in these countries is the narrow base of their small economies, coupled with the continuing effects of the world recession. It is also clear that regional and sub-regional development banks have a positive role to play in complementing other international lending agencies. As put by Jeremy Morse and others in "Towards a new Bretton Woods", they enjoy certain advantages over the World Bank. They have a greater knowledge of their respective areas and the developing countries themselves play a relatively larger role in their operations and decision making. Such sub-regional banks also are often active in the promotion of economic integration and co-operation. I think that the CARICOM context of the Caribbean Development bank's operations is relevant, and I may say something on that later.

In its 1983 report the bank stresses clearly the international crisis and the context of that crisis in handicapping its operations and lending. As it puts it, the OECD economies being deep in recession part of the reason for the slow recovery in Europe, despite improvement of the trading accounts, has been a fear of potentially inflationary consequences of fiscal reflation. It goes on: These restrictive fiscal and monetary policies in the OECD countries, together with high US interest rates and the reluctance of the international banking system to continue to lend to less developed countries at former levels, given recent payments difficulties and debt rescheduling crises in Eastern Europe, Africa, and Latin America, have continued to be reflected in poor performance in the economies of less developed countries. It then says that the economic performance of the bank's borrowing member countries therefore reflected a combination of external and internal factors, with generally negative influences leading to little or no overall growth in the region. Substantially because of that, the bank stresses in its report that Public sector finances in most of the Bank's borrowing members were seriously affected by the unfavourable economic situation. On the other hand the measures taken to restrain public expenditure had their inevitable consequence of increased unemployment. Slow revenue growth, as a result of insufficient foreign exchange for the purchase of dutiable imports, poor private sector profits"— showing that it is not simply a public sector matter— and low export earnings, together with continuing high current expenditure levels led to increased public sector deficits. In other words, the regional economy of the Caribbean is itself dependent on the activity and development of the global economy. It is not simply a matter of the Club Mediterranee or of the tourism industry from Europe to the region. It also affects the demand for bauxite or petroleum, as the Minister pointed out.

Where does this leave the bank in its operations? As it states in its report: The continuing difficult economic circumstances of the member States has resulted in endeavours to resolve crises rather than to formulate and implement larger-term development strategies. In other words, the bank is into crisis management rather than into development strategy. We see this reflected in the statement made on 16 May on the use of Commonwealth Development bank funds by the Prime Minister of Jamaica, Mr. Edward Seaga, who suggested that it should use some of its expected surplus resources from new donor members to refinance short-term commercial debts. At the opening of that meeting, Mr. Seaga noted that the debt burden faced by regional countries and their inability to attract new and significant commercial bank credits was serious He also said that at the same time, the International Monetary Fund, to which many countries"— indeed, his own — have turned for help, lacked adequate resources and could not be expected to provide lasting solutions to the region's ills. One would think that, relative to the overall needs of the Caribbean, the IMF might be able to help. However, it is on the terms and conditions on which the IMF is prepared to help that the problems arise. Highly relevant to the operations of the bank and the measures which we are considering was the statement by Mr. Seaga about the surplus resources that it would have. He said: Many of its Members would be either unable or unwilling to borrow because their debt servicing capabilities were at their maximum. He went on to say that one suggestion he would make was doubtless almost heretical; that the Commonwealth Development Bank use some of the resources which it may be able to lend to borrowing countries to finance projects, to refinance instead existing short-term commercial debt. Therefore, the Caribbean is in the same position as Latin America— the development banks are being forced to provide "Band-aid" in the short-term against the haemorrhage of debt in a global economic crisis with the most severe regional implications.

I do not know whether the Minister approves of the bank's funds being used to refinance short-term debt. However, it is clear that such a move cannot do more than ease difficulties in the very short term. A country with special responsibilities to the bank, and a Government with an Overseas Development Administration such as ours, must address the more fundamental problems of the region rather than simply reschedule renewals on so minor a scale as those in the order.

The governors of the bank concluded their meeting on 17 May by expressing agreement on the urgent need to implement measures of structural adjustment in the region. The economist Mr. William Demas, re-elected to a third five-year term as the bank's president, said that the Caribbean economies must undertake urgent reforms if the region is to confront the problems associated mainly with widening balance of payments and deficits. He said: But it will be a forced march towards development…let's face facts, structural adjustment lowers the living standard of everyone. What is structural adjustment? In practice, it is a euphemism for deflation and for cutting the very public expenditure which, in countries at that level of development, is crucial to the difference between development and depression. Such structural adjustment is not a remedy; it undermines the feasibility of effective recovery. Slow revenue growth as a result of insufficient foreign exchange for the purchase of dutiable imports, low private sector profits and low export earnings are in the litany of complaints made by those involved in the operation of the bank, who are clearly in a desparate position.

It is only three years ago since Mr. Seaga saw the International Monetary Fund as a fundamental part of the island's financial future, and the terms and conditions of the lending of that fund are reflected in the operations of the bank. During those three years he appears to have learnt a lesson about the consequences of monetarist policies. I hope that the Minister will be sympathetic towards the lesson, at least for a region as far away as the Caribbean.

When the conference asked the IMF to extend a loan facility at the beginning of this month, when it said that the indebtedness of Caribbean countries and those in other parts of the developing world is such that most debtor countries are unable to cope, the fund agreed in principle to proposals from the bank for structural measures that amount to a greater role for the private sector, changes in exchange rate—which is an euphemism for devaluation — moves to reduce import bills and cut domestic consumption and an increased focus on exports.

We have to ask where the exports will be sold. I am sure that the Minister is as worried about that as I am. What is the economic rationale, from what Nobel prize winner in economics did we hear that each individual country, by cutting its imports, can increase its export market? It is the economists' old adage, ceteris paribus, gone mad. The IMF's philosophy is based on pretending that the rest of the world is not there when cuts are imposed on an individual economy.

Deflation plus devaluation does two things. Since one country's imports are another's exports, import restraint cuts total world export trade. Cuts which a Government can undertake relate almost exclusively to public expenditure and public spending cuts hit those least advantaged rather than the more advantaged and privileged. If we want to shift resources towards the less developed countries in the region and to the least privileged within the least developed countries, the bank's policy will not work. The order is only a small part of that policy and it will not succeed.

How can CARICOM help on the export side? According to the Financial Times the Ministers concerned believe that the real difficulty is in long-term financing for trade. They considered a proposal for the region's central banks to make a joint approach to international financial institutions for $50 million and $100 million to provide trade credits.

Trade credits are excellent for less developed countries. We should support those credits to enable institutions which do not have the financial muscle and strength of those in the developed countries to assist indigenous enterprises in less developed countries to export. But an export credit alone is as useful for development as pushing on a piece of string if there is no demand for exports. Also there is no point in offering lower interest rates in themselves. Lower interest rates are important, indeed crucial, for the feasibility of the repayment of debt for many Latin American countries. All possible measures should be taken to ensure a limitation of overall interest rates, especially for the borrowers in the Caribbean region. However, neither trade credits nor lower interest rates of themselves will permit the recovery, which can come only from an improvement in overall export demand—and that goes wider than the region itself.

It is interesting that countries such as Mexico and Venezuela are non-borrowing donors. Since Mexico and Venezuela are in a subscribing position have the Governments involved considered whether it is meaningful to look at the bank's operations for the wider region as a whole? Have they considered involving central America as a whole since the bank cannot find takers for its loans under present conditions in the Caribbean? Some countries in the Caribbean and central American regions have demands for loans which cannot be satisfied by the World Bank or the IMF. One such country is Nicaragua. What moves and proposals have been made, and what would the Minister's response be to any moves, towards an application from a country such as Nicaragua which, after all, has a Caribbean seaboard?

Another question must be raised in the context of the points made by Morse and others on the relationship between the role of regional development banks and the wider funding of the IMF or the World Bank. Have the Government considered regionalising SDRs? If we cannot get an adequate global increase in special drawing rights and there is a recognised role for regional development operations and for such regional development banks—and hon. Members on both sides of the House appear to think that there is—why cannot there be the provision of a regionalised special drawing right? As with SDRs generally, the advantage lies not simply in the funds that are available from an SDR drawing but in the fact that the conditionality—as we have come to know it through the night visitors from the IMF—is not imposed on an SDR borrowing.

Therefore, countries with special development needs may undertake local expenditure on housing, health, education or other social development programmes, or allocate the money to a basic needs approach to development instead of assuming that in the long term, when many such countries will be bankrupt, there may be a future in which the generation of export earnings will have a trickle-down effect enabling people to afford private housing, health or education. That is the case for regional SDRs and it is a special case, related to development needs. There is a case, precisely because there would not be the same conditionality as we have seen with such negative consequences through the operations of the IMF.

The plain fact is that the IMF has now made a major contribution to the global slump. There is no point simply helping the small banks to help themselves if we do not confront the issue of global deflation which has been imposed by the bigger bank—the IMF.

But this must also be seen against the background of cuts in aid expenditure as a proportion of gross national product. I managed to obtain the current issue of "British Overseas Aid" from the Library. I am sure that the fact that I had not seen a copy of it was an oversight on the part of the ODA. It shows that about £1.5 million of gross bilateral aid for 1983 was unallocated in respect of the West Indies. We appreciate that there are specific reasons for unallocated aid, but the fact remains that overall aid is being cut.

I have raised that point before in the House, but the Minister was not present. Hon. Members on both sides of the House will thus be interested in the Minister's response to the now published figures on aid expenditure. The figure has fallen from 0.52 per cent. of 1 per cent. of GNP in 1979, to 0.35 per cent. in 1980, 0.44 per cent. in 1981, 0.37 per cent., on the revised figures, in f1982, and now to 0.35 per cent.

However much the Minister may say that he has the interests of development or of the region at heart, the fact remains that under his stewardship aid expenditure as a proportion of our GNP is half the recommended United Nations target, or half the target recommended by the Brandt Commission. Far from its downward fall bottoming out, as he has suggested, it has gone down consistently between 1981 and 1983. It appears to be about to sink ingloriously below the level it reached in 1980.

In the Caribbean the allocations of aid per caput show enormous variations. In 1982 the Turks and Caicos islands received £788 per head. The misbegotten Club Mediterranéee venture provides specific reasons for that. There are also special reasons in the case of Anguilla. But the distribution of aid within the regions becomes an important issue when one considers countries such as Dominica and St. Kitts-Nevis, where the aid per head is around £20 or more, and St. Lucia and St. Vincent where the aid per head is between £9 and £10, and compares those figures with the aid of only 71p per head for countries such as Grenada. It is important for the House to know to what extent the Caribbean Development bank is addressing itself to that question and what contribution it can make on such matters.

The response so far from the Government to the economic crisis in the region has been inadequate. There is a statutory obligation on the Minister to bring forward an order. Simply to describe the bank's background and its institutions without analysing the crisis, simply to stress and restate in the current edition of "British Overseas Aid" in exactly the same words as last year that the problems of the region are the result of too narrow a production base, without addressing oneself to the recovery argument is not good enough. They should be in the business of development rather than in the business of distributing cuts.

What can be done about it? The Government cannot offer an alternative in the region. Their approach amounts to the discredited IMF formula—"If at first you do not succeed, cut, cut and cut again." That is not a development response. I suggest a response, based on arguments recently endorsed by the party leaders of the Socialist International at its recent conference in Sheffield, which would offer some chance of a global development context within which the operations of the Caribbean Development bank and other regional banks could become meaningful. The reallocation of as little as one tenth of the world's annual arms expenditure, now running at $1 trillion a year, could create jobs in a recovery programme, allowing individual member countries to choose their spending priorities and to decide how to recover their import trade and thereby other countries' export trade. There should be a "better my neighbour" spending and trading programme as opposed to the "beggar my neighbour" deflation of current policies.

That approach could not only create millions of jobs in the north but could vastly improve the export and development project of the south. An example of the committed interests of trade unions in Third world development is that the Scandinavian trade union federation has estimated what would happen if OECD countries were to achieve the 0.7 per cent. of GNP United Nations target. It is an indictment of the Government's aid record that there are countries in northern Europe that give more than 0.7 per cent. of their GNP in aid. If there were a major increase in aid for the less developed countries, 2 million jobs could be created in the OECD countries, while fulfilling the United Nations target, and a massive new transfer of aid to the south could take place.

Ironically, that would also sustain the United States recovery, which at present is threatening to blow out, with negative consequences for the exports not only of less developed countries in general but of the Caribbean in particular. It would sustain the United States visible exports by up to 4 to 5 per cent. a year and possibly add 1 per cent. a year to United States GDP. Re-allocating one tenth of what the world spends each year on armaments could enable the less developed countries to add over 20 per cent. to their gross national product within five years. It could enable the less developed countries to increase their visible export trade by 4 to 5 per cent. a year, thereby making it possible through recovery for them to put the brunt of the debt crisis behind them not in 10 or 15 years but in five years.

The Government have a major responsibility. This matter concerns not only the Chancellor of the Exchequer but the Minister for Overseas Development. If he is interested in fighting for development aid and for trade, he will have to explain to the House how he is arguing for recovery within the Government. When recovery proposals came at the New Delhi summit in November last year, when they were made by the Commonwealth countries, it was this Government and this Prime Minister who blocked those plans.

Recovery proposals were made in the European context, which, as the Caribbean Development bank has stressed, is crucial to the exports of the Caribbean. They were made by Prime Minister Andreas Papandreou at the Athens summit, and it was again this Government and this Prime Minister who blocked the recovery. Throughout this spring, and again at the Fontainebleau summit, we have seen that when arguments for recovery are made, the Government block them. At the world industrial summit, the French Finance Minister, Mr. Jacques Delors, who I am now glad to see is now President of the European Commission, walked out because this Government, among others, would not seriously enter into the recovery arguments.

This country, on a global scale, by blocking the initiatives of the Commonwealth and the EEC, is imposing under-development on Third world and Caribbean countries. There are serious arguments, to which the Government are failing to address themselves. As long as they fail to do so, regrettably, increases represented by orders such as this will be "Band-aid" when the slump in the north as well as in the south amputates the regional economy of the Caribbean.

1.3 pm

Mr. Tom Clarke (Monklands, West)

I join my hon. Friend the Member for Vauxhall (Mr. Holland) in suggesting that the order has to be seen against the recent background in the Caribbean and overseas aid matters. As my hon. Friend said, we have seen the recent positive outcome from the CARICOM summit in Nassau. Against that, most hon. Members must have been profoundly disappointed by the publication this week of the glossy document, covering a multitude of lethargies, called "British Overseas Aid 1983". The Caribbean section of the document offers no more hope than the rest of it. It suggests that the Government's priorities lie much more with defence and armament expenditure than with the appalling problems of world poverty and deprivation, not least in the Caribbean.

The day when the Prime Minister assumed office she stood on the steps of 10 Downing street and recited from works by St. Francis of Assisi. All hon. Members know that within a few weeks the overseas aid programme was cut by £50 million. St. Francis of Assisi has certainly not become a particularly popular figure with the Prime Minister since then. I noticed the Minister shake his head in disagreement with my hon. Friend the Member for Vauxhall (Mr. Holland) — but we have seen a clear reduction in real terms of our overseas expenditure. If the Minister disagrees, he should have a word with the Library. It provided me, and no doubt other hon. Members, with figures based on the Government's own deflator which suggest that since 1978 the net development assistance figure has stood at £1,048 million. It has now decreased in real terms based on the Government's method of calculation to £839 million. For the House that is disappointing, but for many millions of people it would not be an exaggeration to say that it is a catastrophe. The Government are not attempting to achieve the United Nations' figure of 0.7 per cent. It is clear that the Government do not accept that figure. They owe it to the House and to the United Nations to admit that that is so.

Mr. Deputy Speaker (Mr. Ernest Armstrong)

Order. I hesitate to interrupt the hon. Member, but we are debating an order. His speech should concentrate on the desirability or otherwise of the further payments specified in the order. I hope that he will relate what he is saying directly to the order.

Mr. Clarke

I am grateful for your advice, Mr. Deputy Speaker. I shall do my best to adhere to it. I have been trying to do what I believe the British people would want the House to do, and that is to relate the order to the reality of poverty in the Caribbean.

The evidence, even in the order, is that the Government are being highly selective in a way which is unacceptable to us and to the people of the Caribbean. The figure of 71p per head for Grenada is outrageous. It is consistent with the Government's attitude in the European Community, where they delayed the aid contribution to Nicaragua, where, as my hon. Friend the Member for Vauxhall reminded us, there is a Caribbean seaboard.

We must ask the Minister why he is ignoring the lessons of the Caribbean and especially of Greanada. The aid that the Government are giving is largely for policing and not for development. The Government's policies have created a vacuum there. Maurice Bishop rushed to Cuba and the Soviet Union rather unwisely because of attitudes such as have influenced the Minister in his presentation of the order. Considering the invasion of Grenada—I invite the Minister to give the House his view on this—I was astonished to read in the press this week that the United States apparently believes that if Sir Eric Gairy were restored after the elections, it will consider whether to continue with overseas aid. That is deplorable, and the order that we are being asked to consider becomes almost meaningless in the light of those events. I am not in the least anti-American; I am merely pro-Commonwealth. As part of the British Commonwealth, we have responsibilities which are not reflected in the thinking of the Minister or of his Department, and it is right to remind him of those responsibilities during the debate.

The order covers Belize, and I ask the Minister to tell the House exactly how the Government envisage their role in Belize. I asked a similar question during the debate on Grenada of the Parliamentary Under-Secretary of State for the Foreign and Commonwealth Office, who did not have time to reply. However, I am grateful for the fact that he wrote to me later. One sentence of the letter read: I agree with the implication of your question that the British presence does make a contribution to the security of the region. Nevertheless, we naturally wish to see as soon as possible conditions in which it can safely be withdrawn. That is an ambivalent statement. There is little point in giving aid to Belize, much as I support it and would wish it to be increased, if there is doubt in the minds of Guatemala, Cuba and even the United States about what a British presence means. I invite the Minister to clarify what I regard as a serious matter.

The other day, The Guardian said this about development and aid in the Third world: If we have not yet managed to find a way to get some of our indefensible food surpluses to our own disadvantaged fellow citizens, it is hardly surprising that we have also failed to alleviate the hunger of the Third world. That is true. The order lacks any progressive inspirational thought and should be criticised on those grounds.

Mr. Raison

Is the hon. Gentleman saying that we should send massive food aid to the Caribbean? Does he believe that that would be in the interests of the Caribbean?.

Mr. Clarke

I thought that I had made it clear that there is a variety of demands in the Caribbean, as elsewhere, but the Government are not responding to those demands as they arise. The Minister should not try to put words into my mouth. I did not for a moment suggest what he said. However, I suggest that in the Caribbean, as elsewhere, the Government's response—I regret to have to say this to the Minister, who had a fairly progressive record in other Departments — to the needs as they arise is inadequate.

I fear that the Minister might take the view that he does because he, in common with the Prime Minister, believes that the British people are not worried about the problem. That is not the case. The House will recall that, when the Brandt report was published, 10,000 people lobbied Parliament—one of the biggest lobbies in the history of this assembly. Night after night, people see on their television screens the problems of poverty, deprivation and world health, and they expect a more positive response from the Government than we have had. The problems of world poverty, including those in the Caribbean and, in a wider sense, in central America, present a greater threat to world peace than does any other consideration.

For those reasons, I invite the Minister to reconsider the policies that he has supported, which represent a very weak aspect of the Government's current approach.

1.14 pm

Mr. Bowen Wells (Hertford and Stortford)

I welcome the order and the important support that it gives to the Caribbean Development bank. The hon. Member for Monklands, West (Mr. Clarke) made some global points about aid and how it should be increased.

The hon. Gentleman knows that my right hon. Friend and hon. Friends and I share his concern about the poverty, starvation and underdevelopment of our fellow human beings elsewhere in the world. However, I differ profoundly with him on how we should go about curing the problem. I shall make the theme of my contribution that the curing of the problem has both an internal or domestic element which is in the hands of the people of the Caribbean and an external element to which this order makes a valuable contribution.

Perhaps I might answer one of the points made by the hon. Member for Monklands, West. He said that Grenada was one of the casualties of this Government's aid policy. If we concentrate on the order as you have requested, Mr. Deputy Speaker, we must remember that one of the events that occurred during the rule of Maurice Bishop and his revolutionary Government was that aid from the British aid budget continued to Grenada, especially through the Caribbean Development bank. The bank continued to invest in Grenada, and in the bank's current report we see a picture of the port development in Grenada which was carried out under the auspices of the bank. What is more, the banana programme under our bilateral aid continued. The eradication of the banana diseases was continued throughout that period.

Mr. Jeremy Corbyn: (Islington, North)

Does not the hon. Gentleman accept that during the period in which the New Jewel movement formed the Government of Grenada there was a significant reduction in British aid and a great degree of hostility from the British Government towards the economic plans of the Government of Grenada?.

Mr. Wells

The problems in Grenada during the revolutionary Government's regime were considerable in terms of human rights and in terms of whether that Government would ever hold an election. An election was promised; it was never held. During that time more than 200 political prisoners were detained in very bad conditions without trial and not allowed to see their relatives or friends. It was not the kind of Government that the House would wish to see the funds of ordinary British citizens going to support. But we continued to try to help ordinary people in Grenada by providing fertilisers, pesticides and fungus eradication measures to the banana industry. We continued our investment in schools and investment through the Caribbean Development bank.

Mr. Russell Johnston (Inverness, Nairn and Lochaber)

Although I agree with the hon. Gentleman about the regime, and while there was some diminution in the British contribution, it was not all that considerable. However, the withdrawal of United States aid in 1979 and the withdrawal of aid from some other countries undoubtedly contributed to moving Bishop into a position where he had no alternative but to depend on support from the USSR and other countries.

Mr. Wells

The idea that we drove Maurice Bishop into the hands of the Cubans and the Russians is quite erroneous. The Government under Maurice Bishop were already under the sponsorship of the Cuban Government. Indeed, the Cubans trained Maurice Bishop to overthrow by force, although it was a bloodless coup, the elected Government of Grenada. Bishop went immediately to Cuba for assistance. He was not driven into the arms of Cuba. His arm was linked with Cuba's throughout that period. That myth should not be continued.

The British Government's position is that we did not put additional money into Grenada, but we continued the independence gift and its disbursement. American aid was not continued after the 1979 coup. That is hardly surprising in the light of the rhetoric of the revolutionary Government, who were not disposed to be friendly to the United States Government.

I have had some difficulty preparing notes for the debate. I asked the Department for some briefing material, which I did not receive, and I asked the Library for a copy of the report and some briefing. I obtained, with great difficulty, a copy of the report, but its return was demanded. You have already complained about our wandering into a discussion of overseas aid, Mr. Deputy Speaker, but if our debates are to be informed and properly strctured we should be told why the Government are introducing the order and be given the background information that is necessary to debate the issue properly.

I should like to raise a technical matter on the Estimates with the Minister. The Estimates are scrutinised carefully by the Select Committee on Foreign Affairs of which I have the honour to be a member. Our report has been published. We asked for evidence from the Department on what it thought it would have to disburse under the multilateral and capital assistance programme. It gave us the table which appears on page 10 of the report. The Department lists the United Kingdom commitment to the special development fund but fails to list additional cash that is to be distributed in 1984–85. It says that there is: No indication yet of need for supplementary provision in 1984–85. My right hon. Friend the Minister said this morning that the pledge to make another subscription at that level was entered into on 28 October 1983—before the Estimates for 1984–85 had been printed. In the light of the figures that have been presented to the Foreign Affairs Select Committee, it appears that the Department has not been as frank as it should have been with the House. I recognise that this is a small matter, but the Committee and the House should worry about the accuracy of the Estimates that are presented to us for approval. Technically, the Department does not have the authority to spend the money. It must rely on that good old friend the unallocated provision.

Mr. Raison

I am today asking the House for authority to spend the money.

Mr. Wells

I accept that. However, the projection should be included in the Estimates for multilateral aid. The note is specific. It says that there is no indication that there will be an additional aid requirement under that heading. My complaint arises from the fact that the budget will be kept within cash limits by using the unallocated reserve. The Department must reduce that reserve to the minimum. It could have forecast that the order would be presented and that the money would have to be found in the Overseas Development Administration budget. I do not wish to labour the point, but pledges that are known to the Department should be included in the Estimates. If good use is to be made of the special grant to the CDB, the West Indies must do some things for themselves and Britain must take some actions.

The annual report of the CDB reads: There were difficulties in turning proposals into bankable projects. Borrowers often were not able to provide the required equity and security, and were reluctant to bear the foreign exchange risk. On the other hand, projects being implemented were adversely affected by such factors as inadequate management capability, poor marketing strategies, depressed commodity prices, poor internal cash generation and incapacity to meet operational costs and service debts. Tourism projects faced difficulties mainly because of low occupancy. Efforts at alieviating the difficulties faced by the borrowing member countries included concessionary loans, increased amounts of technical assistance and training in areas of management, marketing and accounting. This is a soft loan through the soft window of the CDB Therefore, it does not have to go into productive resources. I fear that the bank will use the loan for balance of payments support. If that happens, we shall not get the developmental value that we ought to get from money given to the bank.

If the money runs into the sand of general funds for each country, we will not get development that will lead to reductions in unemployment and increased foreign exchange earnings, which would enable the West Indies countries to pull themselves up by their own efforts.

The CDB annual report reveals that the Trinidad and Tobago production of sugar is a derisory 75,000 tonnes— less than the 85,000 tonnes production of the tiny island of Barbados. The cost of sugar production in Trinidad and Tobago is reputed to be over £1,000 per tonne.

The hon. Member for Vauxhall (Mr. Holland) said that there was no place for exports of sugar and other Caribbean products to go. But Trinidad and Tobago has a quota for sugar exports to the European Community, which it is unable to meet in quantity. In addition, the price is between £250 and £260 a tonne.

Mr. Stuart Holland

I did not refer to sugar or quotas. I was making a general macroeconomic argument on overall exports. However, the annual report of the bank makes it clear that many commodities showed declining production because of the decline in export demand.

Mr. Wells

The international sugar market is seriously depressed and is attracting a price of below £90 per tonne on the open market and there is no international sugar agreement. However, Trinidad and Tobago and the other Caribbean countries have a market, but they are not meeting their quota. That is a self-inflicted wound.

Trinidad and Tobago should be able to produce sugar at a lower cost. The quotas are not being met and therefore the Caribbean countries are not getting the valuable foreign exchange that they could otherwise receive. Indeed, in Jamaica the position is so serious that it is buying sugar on the world market at the depressed price of below £90 per tonne and selling it to the European Community at over £250 a tonne to gain the foreign exchange. That is a fraud on the people because they are not getting the employment that is generated by the production of sugar. It is also a fraud on the British and on the EC in the sense of buying in sugar which is specially kept by this country to provide employment and to provide for our exchange in those countries.

Reforms in sugar are necessary within the Caribbean, but there is another aspect. Under the agreement with the EC it is not possible to reallocate sugar production, should there be a shortfall for unforeseen reasons, such as weather conditions, from one country to another. Under the Commonwealth sugar agreement the sugar shortfall in Trinidad and Tobago could be absorbed by Barbados and, of course, by Guyana, Jamaica and Belize. That is how the Commonwealth sugar agreement used to work. That is not how the EC works. There is reallocation of resources not to the poorest countries but to some which are already rich in many respects. I particularly resent the allocation of sugar through ACP to the Ivory Coast recently and to India.

I should like to have the Minister's support in trying to ensure that the EC changes its regime so that sugar can be reallocated. The production of Guyana and Barbados has been maintained, although Guyana's has been declining in the past few years because it cannot afford the foreign exchange to buy the necessary inputs to maintain production. None the less, with the reallocation that I have suggested, they would be able to sell the whole of their production to the European Community at the preferential prices.

There are many things which can be done by ourselves and by the Caribbean countries in regard to trade, business and employment generation if we view the problems in the proper way.

In Britain, our banana marketing arrangements are specifically related to the Caribbean. The Caribbean Development bank has been assisting the production and reformation of the production of bananas in Jamaica, in Belize and throughout the Windward Islands. The marketing of bananas from the Windward Islands and Jamaica is exclusively into Britain. Unfortunately, Jamaica has been letting itself down very seriously. Its production of bananas has declined from about 180,000 tonnes to a derisory amount of under 8,000 tonnes a year or so ago. That means that the quota for Jamaican bananas to be imported into Britain at preferential prices has not been met. It has meant that central American bananas—dollar bananas, as they are called—have been brought in to substitute for Jamaican bananas, to be sold on the British market. That is a fraud on the British who made the arrangement and on the EC which agreed to it. It is a denial of employment opportunities in Jamaica.

The reasons for the decline in Jamaican banana production are complicated. I shall not go into them now because it would take too long, but part of the money needs to go into the regeneration of the banana industry, which is also being supported by bilateral aid from my right hon. Friend's Department and from my good friends the Commonwealth Development Corporation. Jamaica must build up employment and get the foreign exchange that is necessary for it to develop and service its debts. Even if Jamaica gets some of the available money, it will have to be serviced at 3 per cent., as the Minister said. The loans will have to be serviced by the export of bananas.

This regime is now under threat by a review which has been conducted by the Ministry of Agriculture, Fisheries and Food and the Department of Trade and Industry, the report of which is imminent. The review was brought about by the failure of the Jamaica banana industry to fulfil the quota. If we want this type of loan to be helpful to the Caribbean and to produce development, it is essential that that banana marketing regime be maintained into Britain because it is a lifeline in that it provides the only opportunities for development in the Windward Islands.

It is extremely important to Jamaica, which is faced with a reduction in bauxite demand, especially with the recent sudden announcement of the withdrawal of one of the major aluminium and bauxite production companies in Jamaica.

I hope that the Minister will support me in making representations to the Department of Trade and Industry not to alter that regime, if we are serious about making this loan effective in developmental terms in the Caribbean.

Rice production in Guyana is also falling. It, too, is supported by loans from the Caribbean Development bank. The marketing of rice is done through a state-controlled board. Guyana is a perfect example of what the hon. Member for Vauxhall believes should be a pattern for development. Guyana's production and opportunities for employment are falling each year. One reason for that is the sort of regime which the hon. Member for Vauxhall supported, as did, I regret to say, the hon. Member for Monklands, West.

Rice production is decreasing because the Government will not give an adequate price for that commodity. Much of the country's rice production is being exported, not by the rice marketing board — and is not shown in the Guyana statistics — but is smuggled out. That is the degree to which agriculture is being penalised by a regime which has done nothing but impoverish the people of Guyana.

Moreover, because of the restrictions on imports and the high duty placed on imported food, rice producers are changing to the production of vegetables so as to give ordinary foodstuffs to people in the border market in Georgetown, who cannot obtain flour—for the basic necessities of life, for bread and so on—from external sources. That is happening because of some of the policies which, I am afraid, the hon. Member for Vauxhall supports.

Because of the shortness of time, I shall not refer, as I would otherwise have done, to agricultural diversification, but will instead deal with tourism and airways finance.

Mr. Stuart Holland

I am looking forward to the probably brief contribution which the hon. Gentleman will make on those subjects. He may have persuaded the rest of the House about the way in which my arguments related to rice production in Guyana, but he has not persuaded me. If, apart from anything else, those in a country lack the foreign exchange to purchase goods from abroad, that may be a reflection on the difficulties created by an old model of the international division of labour, rather than simply on the incentive price. I agree with the hon. Gentleman that there must be a price for agricultural products sufficient to call forth supply.

Mr. Wells

With the means of production, distribution and exchange being in the hands of the Government of Guyana, to the extent of 86 per cent. of the total assets of that country, I should be glad to discuss in another debate the way in which that kind of Socialism has reduced many countries to the impoverishment level that we see in Guyana. This is not the occasion to do that.

Airways are crucial to the development of tourism. The lack of control over planes coming into and leaving an island is a matter of major concern to islands which are becoming increasingly dependent on tourism.

Barbados, which 20 years ago was 10 per cent. reliant on tourism for its gross domestic product, is now 50 per cent. reliant and likely to become more so because of the decline of the sugar industry. There has not been a fair reciprocal arrangement between the access of British carriers to the Caribbean and the access of Caribbean carriers to London. The Caribbean Development bank is crucial in providing the capital for the internal airline, LIAT, which feeds BWIA and British Airways services to Europe. If British Airways decides, as it does from time to time, to cut out one flight, it means a major reduction in the number of tourists coming into the islands of Antigua, St. Lucia, Barbados and Trinidad. There is nothing that the islands can do about that, unless they have the ability to replace that flight with one originating in the Caribbean—Trinidad or Barbados—which can fly to London and back again.

I have pressed my right hon. Friend the Secretary of State for Transport to offer reciprocal rights. I hope that my right hon. Friend the Minister will join me in trying to ensure that we conclude reciprocal agreements that are seen to be fair in the West Indies and that safeguard tourist arrivals in the islands. As the report said, Europeans stay longer and spend more. Despite increased American arrivals last year, the islands took no more in tourist receipts because of the fall in European arrivals.

The proposals for finance are especially important for the Jamaican and Guyanese governments to service any loans or grants. Jamaica is not fully covered by ECGD, which is making it extremely difficult for British exporters to send goods to that country with any sure expectation of payment. Many companies are continuing without that cover, but it is a great inhibitor of investment in Jamaica. The Jamaicans are so short of foreign exchange that they cannot permit the servicing of capital either in dividend, interest or capital repayments, because they do not have the foreign exchange to do so.

The report and our bilateral aid to Jamiaca show that we are contributing considerable sums. So why do we not use that money to buy Jamaican dollars, thereby implementing our aid projects in Jamaica? Why do we not form a fund that would guarantee the repayment in sterling of loans, dividends and capital to British investors in that island? If we use money in that imaginative way, either through the Caribbean Development bank or through a bilateral fund, we could attract the necessary investment into Jamaica from the private and trading sectors. Whatever we say about aid, it will never be sufficient. The private sector and the engine of trade will provide the employment opportunities and the return of some prosperity for the West Indian islands.

I want to say a little about the Caribbean Development bank report, which I found disappointing. I could not tell from the report where the bank had been using the money. There is no list of projects, what the money has been invested in or the returns on the projects, either developmental or financial. There are lists in global terms which excite the imagination of the hon. Member for Vauxhall, but such dry statistics are indigestible to most of us. I urge the Minister, who is a member of the board of the Commonwealth Development bank, to insist on a more enlightening report.

Project identification expenditure is important. I have always rejected the idea that only Governments should suggest projects to the development bank. It is necessary for those expert in development to go to the countries concerned and to work out projects. Development projects do not grow on trees. They are not easily sold or found. They have to be worked out in detail.

It is also important to evaluate the way in which the CDB has been using money. It has been operating since 1970 and it should now be able to present to the public in the West Indies and the United Kingdom a list of projects in which it has invested and their developmental value and outturn. Perhaps lessons could be learnt from its mistakes and successes.

The CDB has a woeful dependence upon Government-to-Government lending. For that reason, I want it to examine the private sector which it supports to the extent of 26 per cent. I should like it to increase that percentage and to identify the projects which will produce employment, foreign exchange and other opportunities to enable West Indian Governments to get out of their difficulties.

I hope that the order will be approved, but I also hope that my hon. Friend the Minister will make it clear that we are making a real effort to help the Caribbean. When the Minister approved a further £1 million for development in Grenada, it was reported in only a column inch in the Barbados Advocate. That is an inadequate response in the Caribbean to the generosity of the Government, the House and the British public. We must project positively the way in which we support the Caribbean.

I hope that the Minister will also respond to the call in the Caribbean for more broadcasting, cultural visits from Britain and contacts of all kinds. Such contacts are yearned for in the Caribbean. We should respond, and be sympathetic and helpful. I hope that the Minister will ensure that we receive recognition in the Caribbean for the generosity and support that the order represents.

1.49 pm

Mr. Russell Johnston (Inverness, Nairn and Lochaber)

I shall not delay the House long. We have already heard a number of comprehensive speeches and I do not believe in tedious repetition—nor do I believe much in staying up all night, but that is beside the point.

It is always a pleasure to follow the hon. Member for Hertford and Stortford (Mr. Wells) who made a well-informed speech to add to the excellent speech that he made on 17 July about Grenada. I do not dissent from the criticisms that the hon. Gentleman made of the effects of ideological policies in some of the Caribbean countries. But nevertheless, I support broadly the remarks by the hon. Member for Vauxhall (Mr. Holland) and by the hon. Member for Monklands, West (Mr. Clarke), because we are not doing enough.

I support the order, but there is a considerable gap between what we should be doing, not only in the Caribbean—as the hon. Member for Monklands, West mentioned—but generally and what we are doing in reality. As hon. Members have said, we have considerable direct historic responsibilities in the Caribbean. I still believe that aid can be a bulwark against political breakdown, but I shall not argue further with the hon. Member for Hertford and Stortford about whether the withdrawal of aid by the United States made any difference to the Bishop regime. I did not approve of that regime any more than the hon. Gentleman did. But the general proposition that aid can be very important in preventing such developments stands in its own right.

It has always been the firm view of the Liberal Bench that aid given through multilateral institutions is much more effective than tied aid. We welcome the trend apparent in the past year, which shows that Britain is now increasingly giving money through multilateral agencies instead of being the country which, of all the OECD countries, gives the most tied aid. That was the position last year when we debated the Brandt report, but I welcome the change.

The hon. Member for Vauxhall most effectively developed the point that we are not giving enough and that, furthermore, the amount that we give is declining. I believe that under this Government, it has declined by 20 per cent. as a proportion of Government expenditure. The hon. Members for Vauxhall and, I believe, for Monklands, West pointed out that our expenditure is how half—at 0.35 per cent. instead of 0.7 per cent. — the United Nations target.

The Caribbean Development bank is a multilateral agency which spends more than half of its money on the less developed countries. As the hon. Member for Vauxhall said, it has a crucial role to play in seeking to stabilise the Caribbean's monetary system. I refer to the crisis management role that he mentioned. Thus, it is exactly the sort of organisation that Britain should encourage.

This Bench welcomes the order and obviously there will not be a Division. Nevertheless, I support the view expressed by the hon. Member for Vauxhall in criticising the Minister for failing—unlike the hon. Members for Vauxhall and for Hertford and Stortford—to address himself to the nature of the very pressing problems, and to how we can do more to help than we have done so far. Instead, at the beginning of his speech, the Minister gave a rather discursive, "Whitaker's Almanack" type outline of what the Caribbean Development bank does, and the meetings that took place before it was established.

1.53 pm

Mr. Nigel Spearing (Newham, South)

I am not sure that the House wholeheartedly welcomes the order. I am sure that it will not be opposed, but as the hon. Member for Inverness, Nairn and Lochaber (Mr. Johnston) said, it has received a qualified welcome. That is probably because, as the hon. Member for Hertford and Stortford (Mr. Wells) said, we are not quite clear about what the £6 million will be spent on. Indeed, as he said, we are not quite clear about what millions of pounds have been spent on in the past, despite the presence of one of the bank's governors. However, perhaps we shall hear a little more about that when the Minister replies to the debate.

The Overseas Development Committee has visited the Caribbean twice in the past two years. Members of the Committee, including myself, have twice had the benefit of talking to Mr. Demas, the chairman of the Caribbean Development bank, and have discussed the very real problems of development in the Caribbean. It may well be that some of those problems prevent the Caribbean Development bank from being as specific as some people would like.

I want to look at the context in which the bank has to operate within its charter and the territories to which it is assigned and at some of the problems that are endemic in the economic development of the Caribbean, which have not so far attracted the attention of the House. Before I do so, I emphasise and support the request of the hon. Member for Hertford and Stortford for a higher United Kingdom profile in the Caribbean. People who go to and from the Caribbean, not for holidays but to work—many constituencies in London and other parts of the country have people from the Caribbean—provide an important link. I do not sense the same degree of link between the Governments of those territories.

I want to concentrate on three dimensions within which the bank has to work. First, I want to deal with the process of development as a whole, with particular reference to Grenada. As the House will know, the Select Committee on Foreign Affairs, in House of Commons document 226, dealt with recent events in Grenada as well as with its economic development. Grenada is one of the territories in which the Caribbean Development bank operates.

The second important dimension within which the bank has to work is the rival political philosophies which are now on offer in the Caribbean and central America. Indeed, that was one of the themes of the Select Committee's report during the previous Parliament.

Thirdly, there are the lessons that might be learnt both by the Caribbean Development bank and by the Minister and his Department from what might briefly be called the Grenada affair. All those are relative to the objectives of the bank in raising the standard of living and increasing the security and prosperity of people in the Caribbean.

When we talk about development we sometimes think of different things. We may have ideas about great dams, irrigation works, or industrial development. But in the Caribbean—as I am sure that the bank is well aware—I suspect that most people have a general desire for four elements in their lives. The first is almost certainly a patch of land on which they can grow at least a proportion of their food, and, ideally, export or sell a surplus of marketable produce. The second is to have community services—education, health and skill training—of the requisite calibre. That must be provided by society itself.

Thirdly, people want a measure of physical and economic security. They want security from arbitrary violence and arrest and a physical security in terms of income, food and shelter. We cannot expect people in Britain to understand that in a Caribbean island such security is by no means assured. Typhoons and cyclones can be physically threatening. There can be takeovers of Governments, the incursion of ruffian elements in any one island or other pressures that we are fortunately free of in Britain.

Fourthly—this applies to everybody else in the world—the people hope to see some improvement for their children so that they can at least maintain the standards that they have and, if those standards are insufficient, can see prospects of them being improved.

I suggest that those are the four aspects that most people in the Caribbean regard as development. It is to those things that the Caribbean Development bank should be directing its attention. Immediately, there are large problems in the Caribbean that are not found in other parts of the world. First, there is isolation. Communities are relatively isolated — 100,000 people here and 50,000 people somewhere else, connected by sea, with all the transport costs that that involves. Secondly, the technology that is available almost on tap in most large countries is not there. Inevitably, it has to be imported. Thirdly, the skills are not necessarily there either.

Even in this country there are complaints at the higher end of the technological scale that we do not have the necessary skills. Throughout the world, the technological triangle is acquiring a narrower base. Fewer people are involved, but the height of the technological scale is ever growing upwards. If that is a problem for the United Kingdom, one can imagine the problems of technological training and competence that are found in some of the Caribbean islands.

In the Select Committee report, paragraph 90 emphasises the role of private enterprise in providing the needs of the development process. Unfortunately, I was absent in my constituency on an urgent engagement or I would have voted against paragraph 90 or one of its successors. At least for Grenada, I am not confident that private enterprise or private capital as such can provide the answers to the problems about which we know, still less provide a balance of the four objectives that I outlined earlier. However, it is the duty of the Caribbean Development bank to provide just those things.

Mr. Bowen Wells

Will the hon. Gentleman accept that in Grenada, 62 per cent. of the agricultural land has been acquired by the state under both the Gairy and Bishop regimes, and land is the basis from which Grenada's prosperity can proceed? Since that acquisition, the production of bananas and spices such as nutmeg and the production of food for the markets in Grenada and for export to Trinidad, the market for cocoa and its production, have all fallen dramatically. It is only with the return of that agricultural land to proper management in the private sector that Grenada can truly look forward to increased prosperity.

Mr. Spearing

If the hon. Gentleman had waited a little, he would have heard me come to some qualifications on private enterprise and capital. Perhaps I was wrong, but looking quickly at paragraph 90 it appeared that the Committee was more concerned with the non-agricultural type of private enterprise, the import capital in the broadest sense, rather than with the support of individual proprietors and cultivators.

It is no use just praising the merits of capital without making qualifications. The sloganising on this, either way, is not necessarily the way to produce the development that we all want to see. If one lets private capital run riot, uncontrolled and undirected, because of the circumstances that exist throughout the world, the powerful would become more powerful, the rich would become rich and the poor, poorer, and power and capital would be sucked in to the centre. That is a worldwide phenomenon. If a person gets richer, it is seen to be good because it is believed that the wealth he creates will trickle down to everyone in due course. That has been shown to be untrue.

There is a great defect in the Caribbean basin initiative—this has not yet been mentioned in the debate—promoted by President Reagan, and it is one about which the governors of the Caribbean Development bank must take a view. The evidence shows that that initiative falls on the negative side of what I have just said. It encourages some private enterprise in the Caribbean, but does it almost exclusively with a view to its being a satellite of the United States economy. It either provides outworkers where labour costs are low or it is highly selective, or it is arbitrary or it is for the convenience of capital within the United States.

I now come to the point raised by the hon. Member for Hertford and Stortford. Another way of promoting the development of private food production is with cooperatives of the right size with the right management, or with small peasant proprietors who have a collective marketing system, whether organised by the state or by relatively enlightened private enterprise under a firm such as Geest. The problem is that such people do not always have that sort of opportunity, and Grenada is a good example of that.

The hon. Gentleman will remember that during our visit there we visited a derelict factory that had been producing fruit juice. Grenada is overflowing—not with milk an honey — with beautiful vegetables and marvellous fruits and the seas surrounding it are filled with fish. It is not even necessary to take a boat out to catch fish. One need only walk off a beach into the sea with a net. Yet as far as we could gather it was not possible to get peasant proprietors or landowners—capitalists in a small way, but nevertheless modest people—to export some of that marvellous fruit juice. Nutmeg, which is another great export from that spice island, is piling up in warehouses.

A reason for that, especially regarding fruit, is that it is impossible to compete against the large scale plantation agriculture of Florida and Canada. In Caribbean hotels, instead of being served local produce, one can be given air-freighted fruit from Florida or California. That is an automatic result of capitalism, where the return on capital at its highest point is the be all and end all. If it is possible to get a 6 per cent. return on capital through method A, where method A involves air freighting in fruit from Florida, or a 3 per cent. return on capital from method B, using locally grown fruit, the 6 per cent. method will win. It is as simple as that, and it happens time and time again in the Caribbean.

There are other problems. The hon. Gentleman mentioned bananas, for which there is an insatiable market in the United Kingdom.

Mr. Stuart Holland

Only for the skins!

Mr. Spearing

Yes indeed. Many bananas are exported from Grenada to this country. A second aspect which has not yet been mentioned today involves currency systems. The currency system, as distinct from the independence or otherwise of the country', can be as important as the political system. Some years ago Barbados switched from linking the Barbadian dollar to sterling to linking it with the United States dollar, especially because of the tourist trade. The results of the change are clear throughout Barbados. I do not blame its government if they did so with their eyes open, but Barbados has become oriented towards the United States in a way that would not have happened had its dollar remained linked to sterling.

Although Grenada is part of the east Caribbean dollar currency system, it is very much linked to Trinidad which, fortunately for Grenada, buys a great deal of its fruit and vegetables. Trinidad relies on Grenada in that way, and under that economic system some things that might happen in the Caribbean do not happen between those two countries.

The linking of currencies in the Caribbean makes a great difference to the way in which a country is oriented; but it has a special effect upon exports, especially of bananas, from the Caribbean to Britain. If the sterling rate decreases, the returns to farmers in the Windward Islands for their crops also decreases. We know what has happened to sterling recently. There could be great problems if one part of the Caribbean is oriented towards the United States, in currency and philosophical terms, and another part is oriented towards the United Kingdom, athough perhaps to a decreasing extent.

There are some political problems with the currrency system. Many people, including me, would say that the United States undoubtedly has an ecomomic dollar empire—a maritime empire stretching into the Caribbean and a long way into central and south America. One need only consider the airline routes from Miami to see from how far away people visit Miami for all sorts of purposes and to understand the importance of the dollar exchange rate with local currency.

We discovered a natural resistance in the British Caribbean to those trends, although the British Government have done little to resist them. The status of trade unions in the British Caribbean in maintaining a proper and just minimum return for labour is an important factor. However, that factor does not commend itself to those who favour Reagonomics or, indeed, the Caribbean basin initiative. There was some resistance in Grenada to American dollar imperialism; to the forefront of such resistance, supported by many in Grenada, was the well-organised trade union movement.

We have heard that the Caribbean Development bank is ambivalent towards tourism and believes that it is a mixed blessing. The hon. Member for Hertford and Stortford mentioned the extent to which the economy of Barbados now depends upon tourism. I would not like the economy of Grenada to become dependent on tourism. The new airport will certainly open and big jets will land there. I understand that it may be opened by no less a person than President Reagan on 25 October—I wonder why that date was chosen? It may be called the Ronald Reagan airport. The airport's economic effects upon Grenada may not all be beneficial, because the juxtaposition of two sorts of economy which tourism brings can create social dangers, of which I am sure the governors of the Caribbean Development bank are well aware.

When the Select Committee was there I found to my consternation that the highest charge being made in an extremely luxurious beach hotel in Grenada was the equivalent of paying £500 a night for a room in Britain. In other words, if any hon. Member, a bus driver, a taxi driver or anyone else on average wages here was told that the overnight charge in some prestigious hotel in London was £500 he would adopt a certain attitude to the people paying that amount—or even if it was £100 a night, as I believe it is in some of them. We can absorb that because there are so few people able and willing to pay such a charge, but if on an island 10 per cent., 20 per cent. or 30 per cent. of the people walking around the place are paying such a proportion of the average man's take-home pay, such a place has a different economy and a different society, and I question how it is possible to maintain political stability in such a place. Therefore, I hope that in looking at tourism as a means of economic development— if it is development, and I have my doubts—our Governor will think twice about it.

The challenge to development in the Caribbean is a very complex, difficult and uphill task. That may be one of the reasons why the Caribbean Development bank's report is not very specific. But it has to meet the needs specifically, I suggest, of young people. I do not know whether there is a scheme providing loans to young people. I doubt whether that is possible. But the number of people who will be there in the future, especially on the island of Grenada, which is fecund in almost every respect, is very great. Therefore the calls on facilities for education, for health and above all for technical training are likely to be great.

When people see on videos what happens in the so-called developed world, they at once want to be part of it. They want to acquire the skills which apparently are necessary to enter this Eldorado of the screen. This is where the two rival systems on offer in the Caribbean immediately become apparent. Either one follows the United States dollar offer of which I hope the Caribbean Development bank is not too much a part, or one looks at the possibilities being offered by Havana and all stations east.

It is that dilemma which gave Maurice Bishop an almost impossible choice. He was a man who would be called an idealist. He had a very broad vision. We are told that he introduced very important reforms into Grenada. Above all, he gave young people some expectation and hope for the future. When he overcame the gangster style Government which existed there beforehand, he got a great deal of support from a wide spectrum of people in that country.

For some time the flexibility of the constitution of Grenada enabled it to be a Marxist or semi-Marxist monarchy. But it was the difficulty that Maurice Bishop had with political ideologues which caused problems. Ideologues are those who necessarily run their beliefs to an extent beyond that which the evidence will support them. I should be out of order if I went too far in developing that theme, but it is clear that it was the differences between ideology or ideals moving slowly in the direction of democracy and government by consent and the pressures and constraints from elsewhere and the ideologues with whom he was assocated at some time that caused the explosion in Grenada which blew the Caribbean apart.

The British Caribbean was blown apart and the work of all of the agencies, including CARICOM and the Caribbean Development Bank, was hindered and set back perhaps five or 10 years. It is almost as though there was a political vulcanism which spread its ashes and fire throughout the Caribbean. We were lucky to escape. If the explosion had occurred in a more vulnerable part of the world, there could have been an eruption and a maelstrom of almost unimaginable proportions. The assassination of Maurice Bishop and his associates at St. George's on 19 October 1983 could have been the Sarajevo that resulted not in the lights of Europe going out but in the lights of the world going out.

When considering the developmental possibilities, I put it to the Minister that some difficult choices must be faced by the governors of the Caribbean Development Bank. They must bear in mind the needs and aspirations of the people of the Caribbean. I have had the privilege of meeting them two or three times. If we want a test of the efficacy of the development process, of the work of the bank and of the work of the ODA, we need look no further than that island in the sun.

2.21 pm

Mr. Jeremy Corbyn (Islington, North)

I shall be brief as much of the ground that I wanted to cover has been dealt with. We are considering an extremely poor region, the poverty of which derives considerably from the way in which it has been exploited by Europe and the United States over the past 300 years. The problems that people of the Caribbean face are a legacy of the colonial period. They have distorted economies, cultural problems that the British and other colonial powers left behind and continuing poverty and trade problems. We must ask whether these proposals for the Caribbean Development Bank do anything to increase the Caribbean's independence and the living standards of its people or whether they are designed to increase the influence and power of European and American private enterprise.

My hon. Friend the Member for Newham, South (Mr. Spearing) spoke at length about the effect of tourism on the region and how it tends to distort its economy and cultural life. I substantially agree with him. Anyone who has visited or spent time in the Caribbean—I used to live there — sees the effect of building large and expensive luxury hotels. The effect is the same as on the north coast of Jamaica, on Barbados or on Trinidad—barefoot children who have inadequate schooling, little prospect of employment and little prospect of good skilled training running by the side of huge, shiny and expensive hotels which are owned for most part by European and American companies, serve mid-Atlantic food at best and do not in any way attempt to integrate into the culture of the region.

When I was last in the Caribbean I met an unemployed West Indian chef. He lived in one of the eastern Caribbean islands. I asked why he was unemployed when there were so many hotels around the Caribbean which were obviously crying out for chefs. He told me that he was not qualified in French cookery, so could not get a job in one of the big hotels because tourists want European and American-style food rather than Caribbean food. That exemplifies so much of what is wrong with the distorted developments in the Caribbean and with the Government's proposals and the attitude that they seek to impose on the Caribbean through the CDB.

The hon. Member for Hertford and Stortford (Mr. Wells) seeks to denigrate everything that the New Jewel Movement Government did in Grenada. I do not know why he takes that attitude, but he gives that Government no credit for achieving anything. The CDB annual report states: Economic activity in Grenada, as measured by growth in the export sector, was undoubtedly sluggish during 1983. Available figures indicate that banana exports fell by 5.0% below the 1982 level, from 9,303 tonnes to 8,839 tonnes. Earnings also followed the same pattern between 1982 and 1983: in 1982, total earnings from banana exports were estimated at $3.3 million, whereas in 1983 earnings were estimated at $3.2 million. On the other hand, the volume of nutmeg and mace exports rose by 16.1% from 2,377 tonnes in 1982 to 2,759 tonnes in 1983. However, nutmeg and mace export earnings increased marginally to $4.0 million as export prices fell by 13.3%. Cocoa exports rose from 2,096 tonnes in 1982 to 2,234 tonnes in 1983 but earnings decreased from $4.6 million to $4.1 million. That exemplifies the problem of trade in the Caribbean. Until October 1983, the Government in Grenada were attempting to develop the economy for the people of the island. They were trying to develop home-grown industries, to create employment in local agriculture and to build intra-community trade within the Caribbean—something which the CDB claims to support.

Because of the manipulation of commodity prices, although the Government were able to increase spice production by large amounts, they lost money as commodity prices fell and were forced into the terrible downward spiral of increasing productivity in key sectors of the economy, yet still receiving lower returns.

The CDB continues to emphasise the need for investment in tourism, rather than the more suitable investment in agricultural co-operatives and the developments that the NJM Government were undertaking.

Mr. Bowen Wells

The nutmeg price was controlled by the marketing agreement between Grenada and the Soviet Union. The inadequacy of the price offered by the Soviet Union produced the results that the hon. Gentleman has described. The bank's annual report makes it clear that tourism represents only 3.7 per cent. of its investment.

Mr. Corbyn

It is unlikely that the Soviet Union was able to control the nutmeg price before the New Jewel Movement came to power. The Soviet Union agreed to purchase a large proportion of the nutmeg crop precisely because the British Government and many others were demonstrating economic hostility to the NJM Government. Therefore, the NJM Government were forced to seek new markets for their products. That underlines my contention that poor countries in the Caribbean are deterred from developing independent economies and encouraged to develop economies that are subservient to the needs of Europe and the United States.

The CDB annual report also says: Of major economic importance was the political upheaval which occurred towards the end of 1983. Public finances, already weak during the first nine months of 1983, deteriorated much further after October, 1983 partly because of the inability to halt some of the basic public sector investment projects already begun and partly because of the high wage bill of the public sector. The current account surplus which stood at $7.7 million in 1982, declined by $4.0 million during 1983. That is a very strange way of saying that the CDB wants the Government of Grenada to cut their public expenditure significantly. But with what effect on the people of Grenada?

Since the invasion last October and since the Government of the NJM was thrown out of office and its leader assassinated, there has been an increase in unemployment, and, due to the public spending cuts, a cutting and a destruction of many of the social programmes instituted by the NJM Government during their period of office. [Interruption.] If Conservative Members want to see in Grenada the destruction of so many of the public services—that is what they wish to see in Britain—let them say so and not bury their views in the kinds of phrases used in the report to which I referred. That is the reality of what they are doing to the people of Grenada.

I should like to refer to the report in regard to the situation in Jamaica. Jamaica is a country that the Caribbean Development bank has applauded for its economic management. Indeed, the present Jamaican Government are frequently applauded by Conservative Members. It is monetarism in the sun. But if we go to Jamaica we can see what monetarism in the sun means in terms of unemployment, wasted opportunities for youth, and an economy that is developing for the benefit of the multinationals rather than the people of Jamaica.

The Caribbean Development bank order provides for a minimal amount of money compared with what is needed in the region. I hope that the Minister will tell us a little more about how the money is to be spent. Does he see the role of the Caribbean Development bank as financing and refinancing budget matters and loans, or is the bank seriously interested in development within the region? That is extremely unclear.

In the Caribbean we are seeing an attempt by the United States to increase its domination over the economies and the political life of the Caribbean. That is what is behind its contributions to the bank, because 27 per cent. of the bank's resources came initially from the United States. The figure may be higher in later years. We are seeing an attempt by the United States to increase its influence significantly in the region.

Should the Government of Nicaragua, as it has a Caribbean coast and a Caribbean population, wish to apply for membership of the CDB, what would be the attitude of the British Government? What would be the attitude of the United States Government? What would be the attitude of other Governments in the region?

In many senses, the achievements of the Government of Nicaragua represent a very good example of Third-world development — a significant decrease in unemployment, a significant increase in health care, and the lowest illiteracy rate in Latin America, apart from Cuba, That, surely, is an example of the kind of development that is needed.

Mr. Stuart Holland

The hon. Member for Hertford and Stortford (Mr. Wells), who has been the sole representative of his party on the Conservative Back Benches throughout most of the debate, is mumbling from a sedentary position. As he is so articulate in other matters, perhaps he would like to make plain his views on the matter to which my hon. Friend referred. Indeed, perhaps my hon. Friend would like to ask the hon. Gentleman whether he has been to Nicaragua, or whether the Minister intends to go to Nicaragua.

Mr. Corbyn

I do not know whether the hon. Member for Hertford and Stortford has been to Nicaragua. Several Labour Members have taken the trouble to go there. I am sure that, if the hon. Gentleman were to go, he would find a country seething with enthusiasm for its own achievements and developments.

Mr. Bowen Wells

What I have been saying is that the vast increase in public expenditure in Nicaragua and Grenada and the decrease in unemployment are primarily due to very much increased military expenditure.

Mr. Stuart Holland

Nonsense.

Mr. Bowen Wells

Indeed, I have been to Nicaragua, and I found it to be a frightening dictatorship.

Mr. Corbyn

The hon. Gentleman must have been in Nicaragua prior to 1979, when there was a frightening dictatorship.

Mr. Bowen Wells

rose—

Mr. Corbyn

I had better get on.

Mr. Deputy Speaker

Order. There have been a number of brief interventions. I suggest that we get back to the debate.

Mr. Corbyn

During the period in office of the New Jewel Movement in Grenada and since 1979, while the Sandanistas have been leading the Government of National Reconstruction in Nicaragua, there has been overt and covert economic hostility to both those countries. What plans does the Minister for Overseas Development have to reconsider the low credit rating that is deliberately given to Nicaragua under the export credits guarantee scheme?

What attitude would the Minister have to increased exports from this country to Nicaragua, for example, of railway, transport and road-building equipment, which is desperately needed there? Or is the hostility of the British Government to Nicaragua such that they would be prepared to allow unemployment to increase in companies in Britain which manufacture that equipment by a blatant and obdurate refusal to grant credit facilities or aid to the Government of Nicaragua to allow them to purchase equipment manufactured in this country?

There could be nothing more obscene than people making railway and other equipment in Britain being thrown out of work while there is a desperate need for those goods in Nicaragua. But the British Government will not grant the necessary credit facilities to allow Nicaragua to purchase them from us. Alternatively, does the Minister think that the bank would be prepared to facilitate such a loan should those countries apply to join the Caribbean Development bank?

I detect in the measure that we are discussing and in reports coming from Canute James, a journalist in the Caribbean, the strong hand of the United States operating in the Caribbean Development bank—a hand which is trying politically to redirect the region and to isolate those countries which had the temerity to oppose the invasion of Grenada, which are seeking peace in the Caribbean and which wish to follow an independent, non-aligned path. While I see the hand of the United States there, I see the British Government close behind, supporting everything that the Americans are trying to do.

The order should address itself to what the Caribbean Development bank claims to be in existence for— to improve agricultural self-sufficiency and intra-community trade in the Caribbean.

The overseas development statistics which are available from the Library show, among items of British aid in the region, that the construction of associated private sector development, of a large holiday village, is now progressing well and completion is expected before the end of 1984. That is taking place in the Turks and Caicos islands. Budgetary aid is provided to Anguilla and the Turks and Caicos islands, but the former will no longer require this type of aid beyond the end of 1983. Financial aid in all territories was devoted to the provision of infrastructure to help develop local economies and, to a lesser extent, social needs. I see an unfortunate obsession with the idea that the way to solve the economic problems of the Caribbean, as elsewhere, is to increase investment in the tourist industry—bearing in mind all the harm that that can do to the social and cultural life of a country—and to decrease investment in social programmes which provide for a more skilled population and greater development of the agricultural needs of the region.

The record of the British Government in overseas aid is nothing short of appalling and disastrous. While newpapers in this country—The Sun and other rags that support the Tory party — adopt their usual chauvinist role, there is tremendous concern about poverty in the Third world and the role that the British Government should be playing in assisting genuine independent development, rather than the sort of proposals that the Conservatives are putting forward.

I am sure that the House will be lenient with the Minister if he goes a little wider than his brief. I hope that he will make a clear statement that the levels of overseas aid should be dramatically increased. There would be tremendous support for that.

The Government appear to be more concerned with political domination of people's lives in the Caribbean, supporting the United States and spending money on the arms trade than putting money into useful matters such as social development programmes in the Caribbean. It is an extremely poor area of the world, but it has enormous potential for the development of agriculture and other natural resources. We should not even have to consider sending food aid. We should be promoting agricultural development and internal trade and supporting the Caribbean in its striving for independence rather than dependence upon the United States or Britain. I hope that the Government will recognise that—

Mr. Tom Clarke

My hon. Friend referred to food aid. The Government find it possible to give £2 million per family in aid to the Falklands, yet that is not food aid.

Mr. Corbyn

My hon. Friend has underlined the Government's attitude. The Government's expenditure on the Falklands is a bottomless and unnecessary pit, but they are not prepared to spend money on developing agriculture in many poor Third-world countries and they are not prepared to cut the arms bill. They are obsessed with the consequences of not continuing to pour money into the Falklands.

I hope that when the Minister replies he will take on board the points that I have made and recognise that the job of the Caribbean Development bank should be not budgetary manipulation or the refinancing of debt, in the way that the Jamaican Government want, but developing the internal economies of the Caribbean countries. I very much hope that the House will take that point later.

2.42 pm

Mr. Tam Dalyell (Linlithgow)

My hon. Friends the Members for Islington, North (Mr. Corbyn) and for Monklands, West (Mr. Clarke) have given me a cue in this debate by referring to the Falklands. We are discussing a figure of £42.272 million and an addition of more than £6 million. I recently asked the Minister of State, Ministry of Defence whether he would make a statement on the progress of the contract with ITM Offshore Ltd. for a port in the Falklands and at what cost would the work be carried out. The construction and assembly of the Falklands port and storage system has been completed satisfactorily at a cost of £25 million—and that is just an intermediate port.

I shall be succinct. My hon. Friend the Member for Vauxhall (Mr. Holland) and other hon. Members spoke about the costs of rearmaments and arms in relation to the aid that we give to the Caribbean Development bank. Not only do we give .3 million a day in the south Atlantic—and that is a Sunday Times figure—but some of us believe that there will be even greater expenditure in the immediate future.

I speak to the House with more earnestness and seriousness than I have done in 21 years. In the light of what has happened at Berne—and I speak quietly and gently to Ministers—we must carefully monitor exactly what is happening in the southern part of the western hemisphere. Do Ministers realise that the Condor missiles—

Mr. Deputy Speaker

Order. The hon. Gentleman knows that I am bound by the rules of the House. He must relate his remarks to the desirability or otherwise of increasing payments to the bank.

Mr. Stuart Holland

On a point of order, Mr. Deputy Speaker. Is not the Minister for Overseas Development responsible for certain expenditure in the Falkland Islands and therefore—

Mr. Deputy Speaker

Order. That is irrelevant. We are discussing an order. I know how strongly the hon. Member for Linlithgow (Mr. Dalyell) feels and how sincere he is. I am asking him to relate his remarks to the desirability or otherwise of making further payments to the Caribbean Development bank.

Mr. Holland

Further to the point of order, Mr. Deputy Speaker. Do you agree that in aid, as in economics, a concept of opportunity costs is involved? If one gives money to one project, one cannot—

Mr. Deputy Speaker

Order. That is not a point of order. I have given my advice to the hon. Member for Linlithgow. He must relate his remarks to the further payments dealt with in the order. I know that he will do that.

Mr. Dalyell

I take your advice, Mr. Deputy Speaker. I shall be brief.

We have to realise that expenditure on arms in the southern Atlantic will take away or reduce resources that we can give to the Caribbean. I shall confine my argument to three matters. Do the Government understand that amphibious night exercises by Argentina—

Mr. Deputy Speaker

Order. With respect to the hon. Gentleman, nothing in the order relates to amphibious exercises by Argentina. The hon. Gentleman must relate his remarks to the order.

Mr. Dalyell

My argument is related, in the sense that I am talking about extra expenditure which will be needed in the next two years because of what is happening. Other hon. Members have been allowed to make general statements about arms expenditure. I am making specific points about what has happened. The Minister may laugh but training activities are occurring at night at battalion strength.

Why are the West Germans and Italians supplying formidable naval weapons in trials in the Baltic? The TR 1700 submarines—

Mr. Deputy Speaker

Order. I do not want to instruct the hon. Member to resume his seat. I know how seriously he takes these matters. I also take them seriously, as does the House, but we must keep within the order. I have allowed generalisations, but the hon. Gentleman's specific remarks are out of order. I want to help the hon. Gentleman.

Mr. Corbyn

On a point of order, Mr. Deputy Speaker. Is it in order for my hon. Friend the Member for Linlithgow (Mr. Dalyell) to reflect upon comparative expenditure through the Caribbean Development bank and military—

Mr. Deputy Speaker

Order. I shall decide what is in order when I have heard the hon. Member for Linlithgow. I shall be as patient as I can, and I ask the House to be patient. It is for me to decide when the hon. Gentleman is in order.

Mr. Dalyell

I do not want to abuse the House. I do not think that I have ever abused it in that sense. I shall leave the matter at this— [Interruption.] Perhaps the Minister will make his remarks from a standing position.

Mr. Raison

It is not for me to usurp your role, Mr. Deputy Speaker, but by any standards the hon. Member for Linlithgow (Mr. Dalyell) is trying to drag irrelevant matters into the debate.

Mr. Dalyell

These matters are not irrelevant. The total of military expenditure has a considerable bearing on the amount that our country can spend on overseas aid. There is a direct correlation between the two. I am trying to warn colleagues about formidable and unpleasant weapons, bought from our European partners and which the Foreign Office says it is monitoring. Shakespeare had a phrase for what is happening—"Now thrive the armourers." That is exactly what is happening. The Italians are busily selling Ofamelara mines — [HON. MEMBERS: "Oh no."] Our forces will, of course, be overstretched. Incidentally, hon. Members will not hear a word of criticism of our forces from me. They are under considerable strain at the moment—

Mr. Deputy Speaker

Order. The hon. Gentleman must not be diverted by interventions from Conservative Members. I have tried to get the hon. Gentleman to understand that he must relate his remarks to the order.

Mr. Dalyell

The expenditure that I am talking about several times exceeds this country's total aid budget. A country such as ours cannot provide both forms of expenditure. If our French friends sell flight simulators for Super Etendards to Argentina, Britain has to react. It has to concentrate more forces on the Falklands and has to obtain more sophisticated weapons. If that happens, where will the money come from for the Caribbean Development bank, or any other aid project?

The forces in the south Atlantic are in ever greater danger. That danger may come not from President Alfonsin himself but from an Argentine military that has not gone away — [HON. MEMBERS: "Get on with it."] Hon. Members may say that, but in a year's time, I hope that no one will turn round and say, "We weren't warned—

Mr. Deputy Speaker

Order. The hon. Gentleman should address his remarks to the Chair and he might then stay within the rules of order.

Mr. Dalyell

I do not want to abuse this debate, so I shall leave it at this. The situation in the southern part of Argentina is such that the civilian Government are not fully in control. They are an infant Government and are in considerable danger. The military have not gone away. However, they have been humiliated, and those who are humiliated are dangerous. Gadgetry has been given to humour those involved. Many of the forces have been sent away from Buenos Aires to Patagonia because of the risk of a coup.

Unless some negotiation takes place and the careful Swiss do their best, more and more military expenditure will be poured into the south Atlantic. That means less and less money to implement the order. That is my only point.

Mr. Stuart Holland

rose—

Mr. Deputy Speaker

Order. The hon Gentleman has already addressed the House. He cannot make another speech.

Mr. Raison

rose—

2.52 pm

Mr. Laurie Pavitt (Brent, South)

I apologise to the Minister for rising to my feet so late, but I have one or two comments to make. I shall not pursue the remarks of my hon. Friend the Member for Linlithgow (Mr. Dalyell) too far, as otherwise I should be out of order. The problem that the House faces is that inevitably the amount spent in one direction has an impact in another.

The order enables an extension of rural development for credit and thrift co-operative societies in the Caribbean, particularly in Jamaica and Trinidad. The Minister knows of my long-held interest in the development of a cooperative, grassroots, village-level approach to our overseas aid programme. It is the villagers and those who often obtain their living from an agrarian subsistence economy who need such aid. Thus, the order is welcome because it will enable the Caribbean banks to make a much stronger input and will help the credit and thrift cooperative societies to develop. Incidentally, there are some such societies in my constituency, as an offshoot from Jamaica.

Unless overseas aid is applied at that level, much of the infrastructure will not be able to sustain the continuing technological development which occurs at the top. There is a tendency for the Overseas Development Administration in Britain and the specialised agencies of the United Nations to put their strength behind high, rather than intermediate, technology. Intermediate technology—the village level bicycle approach to mechanisation—is far more important.

I welcome the order and urge the Minister in the assessment of projects that he has to make from time to time, to give priority to aid at the village, rather than the urban, level.

2.55 pm

Mr. Raison

I want to concentrate on the points that have been made relating closely to the Caribbean Development bank. I hope that the House will understand if I do not pursue every aspect of this wide-ranging debate.

We support, through my Department, the intermediate technology development group. I fully realise that the appropriate scale is of great importance in development. The large scale has its role as well. One does not want to get too caught up in dogma, but I understand the point that the hon. Member for Brent, South (Mr. Pavitt) made.

The hon. Member for Vauxhall (Mr. Holland) ranged widely. It was a tour d'horizon. The horizons were not always close to the Caribbean. Therefore, I shall try to concentrate more specifically on those points which seem to me to relate to what we are talking about. He and other hon. Members were worried about whether the Caribbean Development bank would be diverted from the proper task of development by the economic problems that face the Caribbean and other parts of the world today.

The hon. Gentleman refered specifically to structural adjustment lending. That is not currently part of the bank's operation, nor is it proposed that it should be a major part. As he said, Mr. Seaga raised the point at the governors' meeting in May. The next stage will be for the CARICOM heads of Government to consider it and in due course it will have to be considered by the board of directors. I emphasise that it is not proposed that the SDF should be used for that purpose. After all, our debate today has been about SDF allocations. I stress that the money that I am asking the House to commit will be spent on development. I do not deny that there is a crisis management problem which has to be faced. My hon. Friend the Member for Hertford and Stortford (Mr. Wells) made that point.

If one looks at what the bank is doing in the region it can be seen that it is doing a development job. Twenty-two capital projects were approved for loan financing in 1983 compared with 25 in 1982. That is only a modest change. Notably, loan activity for pre-investment studies has increased. Hon. Members have talked about the importance of investment. The distribution of resources has moved from infrastructure towards productive activity. Those are signs of preparation for future development rather than simply of crisis managemant. Some of the other adjustments made in the bank's operations, such as increased technical co-operation, are to meet problems which are essentially internal to the recipient countries.

Let me give one or two examples of the kind of thing that the Caribbean Development bank finances. Like other aid donors, the bank is involved in both capital projects and technical co-operation. The main sectors in which financial assistance is provided are agriculture, which has been rightly stressed in this debate, industrial manufacture, support for developing finance corporations, infrastructure, including communications, water and power supplies, housing and student loan schemes. It also gives some support for tourism, as we know.

I understand the point about tourism that has been made in the debate by more than one hon. Member. One has to think hard about the role of tourism in development, but it would be palpably absurd not to contemplate the development of the tourist industry in the Caribbean. It is uniquely well equipped to provide for tourism. Many people derive their income from working in the tourist industry and many other people enjoy themselves through it by going on holiday to the Caribbean, and there is nothing wrong with that. To move from a sensible acceptance of the fact that there can be too much tourism and things can go wrong because of that industry to a priggish or ideological opposition to any development of tourism would be a grave mistake.

Mr. Corbyn

I do not think that anybody is saying that there should not be tourism in the Caribbean. However, people are concerned about the form of ownership of the hotel chains, the effects of foreign ownership of the tourist industry, and the distortion that that can cause to economic and cultural development.

Mr. Raison

There is substantial foreign ownership of the tourist industry, but the fact remains that the industry is giving jobs and work to the people, and by and large confers benefits. The more tourism and hotels that can be developed by indigenous people in the Caribbean, as anywhere else, the more that we would be delighted. The work of the Caribbean Development bank in this sector should give assistance to the natives of the Caribbean countries in trying to promote development in tourism. We must not write off tourism. It is bound to be of enormous importance in the Caribbean, although I accept that it can produce socisl problems if it is mishandled or gets out of control.

I can give one or two specific examples of what is approved by the bank's board of directors. A loan of about $500,000 is being provided from the ordinary capital resources to assist in the refurbishment, upgrading and expansion of tea room beach front property in Antigua, to convert it into a 40-bedroomed hotel of an internationally acceptabel standard. In St. Kitts and Nevis, the board has approved a loan of $65,000 to help with the construction of a 5,000 sq ft factory in a newly established industrial estate. As some hon. Members will know, in Nevis there is a clear tourist potential, because it is a very attractive place, but it is as well to have a balance in the economy, and this is an instance of the way that the CDB is trying to bring this about.

Another project, also in St. Kitts and Nevis, is a loan of $350,000 to be provided for relending to students wishing to pursue approved programmes of study at the post-secondary level. We can argue about student loans, but that is a contribution towards positive development and towards strengthening the educational opportunities that are available to young people in the Caribbean. In St. Vincent, there is a loan of about $1,500,000 for the expansion and upgrading of a distillery. Some might argue about that on other grounds, but again this is an example of how the bank is trying to improve ther productive capacity of the Caribbean region. These examples concern development. They are sensible things for the CDB to be involved in, and I therefore hope that the House will accept that in passing the order we shall be doing something that is manifestly useful.

My hon. Friend the Member for Hertford and Stortford made a speech that was full of his expert knowledge of the region. I shall not take up all his points now but will concentrate on one or two of them. One was about the working up and evaluation of projects. To a considerable extent, I understand that the bank already does this, but I am sure that it will take note of the proposals made by my hon. Friend. I shall ensure that our United Kingdom director does take note of that.

Another slightly different question was raised about Nicaragua by the hon. Members for Vauxhall and for Islington, North (Mr. Corbyn). The question of Nicaraguan membership has not arisen in bank circles, although it may have arisen in the House today. If it did arise, in current circumstances, Nicaragua would not be eligible. The regional members of the bank have decided that membership of CARICOM should be a pre-condition for membership of the bank. It is not the only development bank in the region. There is also the Inter-American Development bank, of which Nicaragua is a member.

Some points were raised about Grenada. As the House debated Grenada a few days ago, it would be wrong to get caught up in a general discussion about our aid programme for it. This is not the occasion to do that. However, there are other points I wish to touch on.

My hon. Friend the Member for Hertford and Stortford spoke about the Estimates, and I made a short intervention. The money to which he referred is a commitment. It is not expected to result in new disbursements until 1986 and beyond. That is the basic reason why it does not appear in the Estimates for the current financial year.

My hon. Friend also asked about the reallocation of sugar quotas. Under the European Community sugar protocol quotas which are not fully used can be reallocated in the year after the shortfall to other ACP countries or to India unless the country falling short of its quota can show force majeure. This reallocation is within the discretion of the European Commission, although member states may try to exert pressure in favour of their client producers. It is no secret that we try carefully to look after countries which have a long association with us as sugar producers.

The question of bananas was also raised. They are of real importance to the Caribbean economy. Britain has a firm commitment under Lomée to take all the Jamaican and Windward bananas of exportable quality. The quota of dollar area bananas to the United Kingdom is to make up the difference between the supply from ACP countries and total demand, as estimated by a committee, including representatives of Caribbean producers. The Government are reviewing their general banana policy. My hon. Friends wish to participate in it.

Mr. Corbyn

I wish to refer not to the problem of banana skins but to the problem of the fruit as whole. The Minister mentioned that the agreement was to take all crops of exportable quality. One of the problems of many of the Caribbean islands is that the exportable quality is decided by the exporting companies, that is, Geest, Elders and Fyffes. That causes immense problems for small growers when in some cases up to 30 per cent. of their crops are rejected because of size. That causes a serious glut of bananas or the local market which cannot be sold.

Mr. Raison

The trouble is that the question of what is exportable is decided not by companies but by the customers. Evidence shows that customers prefer to buy bigger bananas. Those islands tend to produce smaller bananas. If the eastern Caribbean countries and Jamaica are to take full advantage of the opportunities available, which are guaranteed, they must produce the sort of banana that the British housewife wishes to buy. Hon. Members may say that they do not care what sort of bananas they eat but, with respect, the market facts must be considered. The corollary of the sympathetic view we have taken towards banana producers is that they must produce bananas which will meet market needs.

I repeat that, although discussions are continuing, we have no intention of impairing out capacity to fulfil our Lomée obligations, and we are working closely with our Caribbean friends in this matter.

Mr. Stuart Holland

I can see that there is a case for unzipping smaller bananas, especially if, as in my case, one has small children who never finish bigger bananas anyway. But before we finish the debate on bananas, I trust that the Minister will address himself to my question whether he sees a case for extending soft loans into what amount to regional SDRs. Will he also address the arguments from the Opposition on the importance of economic recovery if the aid programme is to be effective?.

Mr. Raison

Am I meant to stand at the Dispatch Box and say that economic recovery is not important? I do not understand the hon. Gentleman's argument. Of course, we are trying to bring about economic recovery. I have tried to concentrate on the subject of the debate rather than have a general debate about every aspect of the aid programme. The Caribbean Development bank, to which I am asking the House to provide additional resources, is in the business of economic recovery. The function of the part of the bank that I have asked the House to support this afternoon relates especially to long-term development. Of course, there are crisis management jobs to be carried out, and we must also consider the IMF, but this is not the occasion for me to embark upon a long analysis of the IMF's activities. I believe that its work is of great value. The Government are sympathetic to what it is doing and have a good record of providing the resources that it needs to carry out its work. But that is not the subject of the debate. We are talking about development, and I hope that the House will recognise that the bank is a useful development activity by voting for the order.

I have covered what seem to me to be the most relevant points of this useful debate. It has continued for longer than some expected, but I do not cavil at that. The bank is doing a good job, and I hope that the House will support it.

Question put and agreed to.

Resolved, That the draft Caribbean Development Bank (Further Payments) Order 1984, which was laid before this House on 9th July, be approved.