International Development Association

HC Deb 12 July 1993 vol 228 cc785-802 11.10 pm

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Mark Lennox-Boyd)

I beg to move,

That the draft International Development Association (Tenth Replenishment) Order 1993, which was laid before this House on 21 June, be approved.

The International Development Association—IDA—is part of the World bank. Its aim is to help improve living standards for the world's poorest people. It provides loans on highly concessional terms to the poorest countries. IDA's central objectives are poverty reduction, economic reform and sustainable development. Those aims complement, and are mutually supportive of, the priority objectives of the United Kingdom aid programme. The World bank has an important leadership role in policy dialogue with developing countries and in promoting sound economic management. It also plays an important role in co-ordinating the efforts of other donors, especially in Africa under the umbrella of the special programme of assistance for sub-Saharan Africa.

The United Kingdom, therefore, has always been a strong supporter of IDA from its inception in 1960. In concert with other donors, we have played an influential part in shaping IDA's evolving role in response to the changing needs and priorities in the poorest countries. MA's resources are replenished periodically, and the negotiations provide an opportunity for donors to agree the policy priorities which should guide IDA's operations, to supplement the day-to-day policy guidance offered by the bank's board of directors.

The purpose of today's order is to authorise a contribution of £620 million to the tenth replenishment of IDA. Negotiations were concluded last December and donors pledged a total of 13 billion special drawing rights—about $18 billion. That maintains the value of IDA-9 in real terms and will cover commitments over the three years beginning this July. Taking account of the recycling of loans repaid by IDA's borrowers, the total amount available over that period will be about $22 billion.

IDA has received a mandate to continue and to increase its efforts in the key areas of poverty reduction, economic adjustment and environmental protection and improvement. I welcome the attention being paid to those important areas. Development will not happen if people are uneducated and unhealthy and have insufficient access to resources. Development will not be sustainable if we do not take steps to protect our environment. I am particularly pleased that more attention is to be devoted to bringing down the rate of population growth—a better life for all is not possible if economic growth is outstripped by population growth. Nor can prospects for sustainable development be enhanced when over-population leads, as it so often does, to environmental degradation.

The central objective of the World bank is to reduce poverty in developing countries. The bank is following a two-prong strategy, combining economic growth with the development of human resources through expanded social services. IDA is currently undertaking poverty assessments for all active borrowers. The assessments provide the basis for IDA's lending operations and help to determine a country's commitment to poverty reduction. An increasing feature of IDA's country assistance programmes is that a Government commitment to poverty reduction warrants increased lending, while the absence of such a commitment leads to a lower level of activity. We have given strong support to IDA's bias in favour of support for those countries that are genuinely attempting to raise the standard of living of their poorest citizens.

In recent years, there has been an increased awareness among the donor community of the need to promote environmentally sustainable development. IDA has promoted and will continue to promote environmental protection and improvement throughout its operations. A key component of its strategy is the production of national environmental action plans for borrowers. The plans provide the basis for IDA's dialogue with borrowers on the means of securing sustainable development based on actions that have no adverse effects on the environment.

In addition, IDA produces environmental assessments for all projects when there might be cause for concern. The assessments made available to affected groups locally contain a full analysis of any significant social and environmental impacts. There are many examples of the increasing attention being given by the bank to environmental issues, not least the work being undertaken in such important areas as energy efficiency, water resources management and involuntary resettlement.

We have pressed successfully for good government—including respect for human rights—to be an important part of the development agenda in both bilateral and multilateral discussions. By good government, I mean competence in pursuing sound development and economic policies, legitimacy and accountability of public institutions and respect for human rights and the rule of law.

We have welcomed the attention to be given under IDA-10 to the economic aspects of good government—essentially, features that have long-term implications for a country's capacity to initiate and sustain programmes for effective poverty relief and environmental sustainability.

Another important area covered in the deputies' report is the need to strengthen the bank's project performance. Last year, the president of the World bank set up an internal task force to examine why the proportion of successful projects—although still high—was decreasing. The bank has prepared an action plan based on its recommendations: the plan was endorsed by the bank's board of directors last week. The bank will also publish a booklet outlining the steps that it is taking to improve performance.

I am confident that, with the active support of its members and borrowers, the bank's performance will improve in the areas under its control. It will be especially important for borrowers to commit themselves to the ownership of the projects in their portfolios.

In IDA-9, it was agreed that up to 50 per cent. of lending should go to Africa. This allocation will be maintained under IDA-10. We welcome that, as well as the recognition given to the needs of Asia, where more than half of the world's poor live; but it is in Africa that some of the greatest challenges in tackling poverty lie. IDA has played a leading role in supporting the efforts of countries in the region to put in place measures that will lead to a resumption in growth.

We have been strong supporters of the structural adjustment programmes, and have provided funds from bilateral aid programmes to supplement the efforts of the World bank. The special programme for Africa, to which we have committed £550 million, is intended to ensure that reform programmes in low-income African countries do not fail for lack of finance. The programme has also increasingly devoted attention to protecting expenditure on the social services, and more generally to addressing the needs of the poorest. However, donors have recognised that more needs to be done to protect the poor during the implementation of adjustment programmes. Increasingly, IDA-supported adjustment programmes incorporate measures to protect public expenditure in such areas as primary health care and education.

IDA faces many new challenges. The association will need to address the requirements of new members, particularly countries that have emerged from the former Soviet Union and other countries that have rejoined the association. It will need to give increased attention to such areas as poverty reduction and environmentally sustainable development and it will need to implement measures that will improve its performance. IDA will therefore need the full support of its donors. In commending this order to the House, I can give an assurance that we shall be monitoring the activities of the World bank closely to ensure that the objectives set out in the deputies' report are met.

In summary, we are glad to support IDA's central aim of alleviating poverty and its concentration of resources in key areas, including environmentally sustainable development. We welcome its action to tackle the problems of the poorest, and particularly the poorer indebted countries in Africa. We support its attempts to help those countries improve their co-ordination of aid from all sources. We play a vigorous part in such co-ordination.

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

11.20 pm

Mr. Michael Meacher (Oldham, West)

We have just listened to a typically anodyne canter round the course from the Minister, who did not seem even to notice that all his worthy and wordy platitudes, such as environmentally sound projects, the international rule of law and priority for poverty alleviation, are all belied by events and by the evidence that is before us. He did not appear even to notice that all these issues have been the subject of profound criticism, none of which he answered—not least, I might add, the British Government's monitoring, if one can use that word, of World bank activities. As I shall go on to show, that is ostentatious by its absence.

When an ODA resolution seeking support for several hundred million pounds for development projects comes before this House, one normally gives it a strong welcome. In this case, however, the tenth IDA replenishment, the criticism of IDA procedures runs so deep that, contrary to the whole tenor and content of the Minister's speech, with breaches of World bank policy so flagrant and results so often counterproductive, it is doubtful whether this order should be approved at all. On balance, I believe that the order should be approved, but only on the basis of far stricter accountability than the lax and complicit record of ODA Ministers in handling World bank projects would suggest so far.

At the heart of this debate, which the Minister did not even mention, is accountability, according to financial, environmental and developmental criteria, for the huge sums devoted to IDA and the World bank by donor countries, including Britain which will be contributing £620 million under the order. A significant proportion of IDA funds is directed towards big top-down projects that forcibly displace local populations, forestry projects that contribute to deforestation, large-scale energy projects that are highly pollutant and do not improve conservation, and structural adjustment programmes that worsen poverty and degrade the environment. They favour export promotion and unregulated business activity.

As I listened to the Minister, I wondered whether he existed on the same planet where all these things are taking place. There is no record of resistance by British Ministers or British representatives to these anti-social and anti-development policies of the World bank—not in every case, but in so many cases. On several occasions, the voting record shows that the Government colluded in and actively encouraged such policies.

As everyone knows, the Government have gone on and on about value for money in the case of the health service, ambulance workers, teachers, local authorities and, most recently, the police. However, in the face of overwhelming evidence that IDA lending can have damaging social and environmental effects, that project quality is deteriorating and that World bank policy and loan agreement conditions are ignored, Ministers have made no public protest. If I am wrong, let the Minister correct me.

Why did the Government not make known, for example, their intense dissatisfaction when the recent Wapenhans report revealed that 37 per cent. of World bank funded projects failed to meet the bank's own criteria? That compares with only 15 per cent. in 1981, and deterioration has accelerated in the past three years. The Wapenhans report states that pressure inside the bank to lend money and promote projects overwhelms all other considerations. As a result, poor project design, poor appraisal practices and a failure to enforce loan agreements are widespread in the bank's operations. If that is so, why do the Government continue to lend hundreds of millions of pounds without insisting and without checking that such major defects are rooted out? The Minister's speech was a travesty; some serious questions, involving large sums of taxpayers' money, need an answer, but we have not remotely begun to hear one. I should be glad to give way if the Minister could tear himself away from writing or reading his latest brief and perhaps deal with some of the problems.

How does the Minister justify the huge programmes of forced resettlement which World bank projects have often caused? In the 1980s, about 95 World bank supported projects caused the forcible displacement of more than 2 million people. The World bank policy objective is that those people are afterwards afforded opportunities to become established and economically self-sustaining in the shortest possible period, at living standards that at least match and if possible improve on those before resettlement". That is a quotation from page 19 of World bank technical paper No. 80. However, the bank has not documented one single case anywhere in the world where a large number of people displaced by one of its projects have improved, let alone regained, their standard of living. These projects have often resulted in hundreds of thousands of poor people being made homeless and destitute.

Perhaps the most notorious case is that of the Narmada dam. I hope that the Minister has heard of it—it is in India. The World bank approved $450 million for that power and irrigation project in northern India at the expense of forcibly displacing more than 200,000 of the rural poor. After years of controversy, the World bank was obliged to set up an independent review team, whose conclusion is highly relevant to the debate. Its conclusion was that the the projects were flawed, that resettlement and rehabilitation of all those displaced … is not possible under prevailing circumstances and that environmental impacts … have not been properly considered or properly addressed. That is a pretty damning indictment. The team argued that the bank should consider the projects "afresh".

In fact, the World bank's management decided to ignore the independent review's advice. However, at the crucial meeting of the bank's executive directors in October 1992, an unprecedentedly high 44 per cent. of directors, including representatives of the United States, Japan, Canada, Scandinavia, Germany and Australia, voted to suspend funding, despite the management's advice.

Britain held a decisive vote at the meeting, which it used to support the project and to recommend the loan of more money. I submit to the House that that was a shameful decision by the British representative, who must have been acting on instructions from the British Government.

Perhaps the Minister will now tell the House how he justifies that decision. I would be glad if the Minister would take time from my speech to answer that point. I would prefer that to the glib platitudes that a civil servant has written for the Minister. I would like the Minister to answer a few relevant points about accountability—[Interruption.] May I have the Minister's attention? I am very concerned to have an answer to this point. I hope that we shall not hear the same kind of ridiculous travesties that we heard in the Minister's opening speech.

Mr. Lennox-Boyd

I understood that the hon. Gentleman was making a speech. With the leave of the House, I shall have an opportunity to respond in the usual way to any points that the hon. Gentleman or any other hon. Members wish to make. I think that the hon. Gentleman should leave the matter there.

Mr. Meacher

I am certainly not going to leave the matter there as I am sure that in the last five minutes of this extremely short debate we shall hear a few more platitudes which make no attempt to answer any detailed questions.

The point that I have raised is probably the most serious event in the past year in terms of World bank policies in so far as they affect Britain. How does the Minister justify the decision that was taken in respect of the Narmada dam when all the other major countries voted to suspend funding and Britain alone tipped the balance? That project produces the forcible displacement of 200,000 people. How can the British Government possibly justify that?

Will the Minister confirm that he will answer that specific point when he replies to the debate? I am prepared to continue if I am assured that I will receive an answer later. I am not prepared to leave the point so that it is just swept aside in the last minute of this debate. Will the Minister assure me that he will answer the point about the British Government's culpable responsibility for the continuation of the Narmada dam project?

It is a particularly disreputable episode when the Overseas Development Agency's press release, which was issued at the same time, admitted: there has been no effective consultation with those affected by the project, and there is insufficient baseline data to measure the impact of the project. The press release continued: The World Bank's own guidelines on resettlement have been repeatedly ignored. In that case, the House will want to know why ODA Ministers gave their support to continuing that project. We want an answer to that tonight.

Nor is that saga an isolated case. The independent review team report states: Problems besetting the Narmada project are more the rule than the exception to resettlement operations supported by the bank. Similar results in fact happened elsewhere in India, Rwanda, Brazil, Indonesia, Argentina and Malawi.

Because forced resettlement on a mass scale is resisted on the ground, the policies that the Government are supporting have led to human rights violations and widespread disregard of international law. It is astonishing that the Minister can stand before the House and parrot words about respect for the international rule of law. Has he looked at any evidence of what is actually happening with the money that we provide to the World bank?

Since 1990 in the Narmada valley, for example, there has been a dramatic increase in beatings, arbitrary arrests and illegal detentions of the people to be displaced and their supporters. Does it not give the Minister just a little cause for thought that that is supposed to be in the cause of development? To take another example of human rights, in June 1992, when other donors world wide were refusing funding to Malawi because of recent human rights violations, why did the British Government support a highly questionable $55 million IDA loan for Malawi's power sector? Will the Minister, in his five minutes at the end of the debate, explain that?

How can the ODA piously say, as it does, that it is cutting off aid to Malawi because of human rights violations when at the same time it instructs its representative in Washington to support a major capital project for Malawi? How do the Government justify increasing IDA forestry lending when so much of the expenditure leads to deforestation? Again, the Minister uses the simple words "environmentally sound projects". I should like to know the evidence. A $23 million forestry and fisheries management IDA project in Guinea, for example, was supposed to protect the country's remaining primary forests, but by supporting the construction of 45 miles of road around two rainforest reserves it opens up 100,000 hectares in that area to logging. Why did the British Government support that? There are many examples, especially in India, but IDA's social forestry programmes in Peru, west Africa, Colombia and the Philippines have all benefited commercial interests rather than the poor.

I come to the point of the debate. As the World bank is now asking donor Governments for $18 billion replenishment and $5 billion for the so-called earth increment, which the bank would use for increased environmental lending, how can the British Government trust the bank to use that much more taxpayers' money for environmental projects when the bank's current portfolio is so highly destructive to the environment?

My final main charge against the Government's lax and, to put it very politely, over-ready support for World bank policies, even when they are patently damaging in some cases, is that although one of the principal objectives of IDA is stated as poverty alleviation—I give full credit to the bank and to IDA that they have made that their primary objective—nevertheless a substantial proportion of IDA credits underwrite products that actually harm the poor. In particular, IDA-funded structural adjustment programmes, which absorb 30 per cent. of IDA lending, have worsened conditions for women, children, poor workers and small producers, have increased environmental degradation, and have led to austerity programmes that cut public expenditure on health and education. Why do the Government—again, I should like an answer and I do not see why I cannot have one now, although no doubt it will not be forthcoming from the Minister—continue to ram Thatchente economics down the throats of developing countries when they have abandoned the medicine here because it is too painful and too damaging and because it leads to spectacular failure?

Mr. Michael Fabricant(Mid-Staffordshire)

I have been listening to the debate on the Floor of the House and in the Strangers Gallery. If the hon. Gentleman is so opposed to the order, because he considers it to be flawed, why did he say at the outset that he supports it?

Mr. Meacher

If the hon. Gentleman had been listening, he would have heard me say that I supported it on balance and with great reluctance. I still think it right that £600 million should be given to the World bank—but I made it clear that it was only on condition of tighter and more rigorous accountability than anything seen so far. If nothing has changed by next year and we hear the same travesty of an opening speech from the Minister, the result on this side of the House will be very different.

Why do the Government insist that a condition for debt relief and for aid is the fulfilment of structural adjustment programmes even to their destructive limit, yet when countries fulfil such programmes even with the destructive consequences that I mentioned they are still not offered a crumb of debt relief—as the G7 summit in Tokyo last week revealed only too clearly?

The expansion of cocoa production and the revival of the timber industry in Ghana are both conditions for structural adjustment loans to that country, yet they cause massive destruction of Ghana's last remaining forests. [Interruption.] If the hon. Member for Somerton and Frome (Mr. Robinson) disagrees, I shall be glad to hear his detailed comments.

Mr. Lennox-Boyd

I do become exasperated by the hon. Gentleman. He said that if I come to the House next year and make a speech of the kind that I made tonight he will not be able to approve the order. The hon. Gentleman does not know what he is talking about. This replenishment is for a three-year period.

Mr. Meacher

I am perfectly aware that it will last a long time, but if the Minister will only wait to hear the end of my speech he will hear me say that we should have annual debates on this issue, and not confine discussion to one and a half hours after 10 o'clock.

What is the point of the Government boasting of any particular increase in bilateral aid programmes—when that occasionally happens—if the conditions of the multilateral aid programme have such devastating consequences for the same recipients? There is no consistency between the bilateral and multilateral aid programmes.

For all those reasons, we are deeply sceptical about the Government's willingness, let alone determination, to ensure full accountability for the £600 million replenishment. A new framework is needed that will allow much greater public scrutiny of both the World bank and the regional multilateral development bank, so that taxpayers' money is spent and is seen to be spent in ways that genuinely benefit developing countries.

I make three specific proposals to achieve that, and I pay warm tribute to the excellent pioneering work done by my hon. Friend the Member for Southampton, Itchen (Mr. Denham) in this regard.

First, a report should be submitted by the World bank to Parliament each year and the Government should offer a day's debate on it so that issues of overriding importance involving billions of pounds can be properly debated. It is not acceptable that discussion of issues of such magnitude, affecting one-third of the world's population, should be confined to a debate such as this, attended by a handful of hon. Members on either side—most of them giggling and talking at the side.

Secondly, we want mandatory publication—and I hope that the Minister will respond to this point, too, and that he will make a long winding-up speech because he has so many comments to make—of the United Kingdom's voting position at the level of board decisions within the bank. That is important if another Narmada is to be avoided. At present, shameful decisions such as that taken by the British Government over the Narmada dam are taken in a complete vacuum without any reference to Parliament before or after. That is a major loophole in what is supposed to be a democratic system of government and one that must be remedied.

Thirdly, we believe that technical documents which have a bearing on board decisions, such as the environmental impact statements, should be released in advance of board meetings that take the decisions. Again, one would have thought that that was an obvious matter. NGOs have sometimes had some success in winkling out specific details on particular projects and exposing them to the public and to the media, but that is an arbitrary hit-and-miss affair. Surely such technical documents are the kind of material for which there is a public entitlement to know on a systematic basis.

Sir David Steel (Tweeddale, Ettrick and Lauderdale)

I have been following the hon. Gentleman's criticism. Does he accept that the bank seems to have responded to such criticisms? In April, it made a number of procedural changes, including the one to which he has just referred. The bank will make the environmental assessments more widely available to member states and on the bank's premises.

Mr. Meacher

I accept that point. I also accept that there were references in the papers today, especially in the Financial Times, to various improved procedures. I strongly welcome them. I do not think that they take us very far, but I believe that they are in the right direction. I should like the whole critique of the Wapenhans report to be addressed.

Mr. Lennox-Boyd

It is being addressed.

Mr. Meacher

The Minister says that it is being addressed. Where is the hard evidence? Where is the beef?

Mr. Lennox-Boyd

It would be better to respond to the hon. Gentleman at the end of the debate, which is what I am anxious to do.

Mr. Meacher

Why not do that?

Mr. Lennox-Boyd

The hon. Gentleman provoked me on at least six occasions. I am jolly well going to intervene now. As the hon. Gentleman knows, the board considered the recommendations of the Wapenhans report last week. I said that in my opening speech, of which he took not a blind bit of notice. A booklet has been published about the Wapenhans report and about the recommendations to address those matters. The hon. Gentleman will be able to read it if he bothers to look at any of the sensible facts.

Mr. Meacher

I am glad to know that the Wapenhans report will be addressed. There is a great deal of difference—[HON. MEMBERS: "Why not listen?"] I listened carefully to platitude on cliche on boring phrase from the Minister at the beginning. He appeared not to be aware of any of my criticisms tonight. He did not address a single one.

I am pleased that we shall have a response to the Wapenhans report. What I want to know is how far it addresses those comments. There is a 37 per cent. failure by the bank to meet its own criteria. What changes in management will bring that figure below 5 per cent. or 10 per cent.? Perhaps there should be no failure at all. Until we have seen the response, I shall suspend my judgment. However, I am glad to know that there is at least some readiness to address these issues.

I attach great importance to the three demands that I have made to improve the bank's acountability. We are still deeply sceptical about the accountability of IDA and of the World bank. I give the Minister notice that we shall campaign to put all three proposals into effect. Without them, the role of Parliament in sanctioning £620 million of extra expenditure is wholly unsatisfactory. The Opposition will certainly not accept such an unsatisfactory basis again for any future debates on IDA replenishments.

11.47 pm

Mr. John Denham:(Southampton, lichen)

As has already been mentioned, last week the World bank discussed the document on increasing openness and access to information. As a Member of Parliament who tries to follow World bank affairs, I thought that it would be interesting before last week's board meeting to obtain a copy of that document. I approached the Washington office of the United Kingdom's executive director of the World bank by letter and said that I understood that the document was to be discussed at the board meeting, and that it was about freedom of information and access to World bank information. I received a reply from the United Kingdom's executive director saying that I could not be shown a copy of the document because it was confidential. That travesty of openness and accountability surrounds the Government's approach to the World bank. Even when openness and accountability are being discussed, hon. Members cannot get a sight of the documents through official Government sources.

I did the obvious thing, which was to ring up an American non-governmental organisation, and I was sent a copy, by immediate courier, from the US. Not all Governments work on the basis of such secrecy and lack of accountability.

It is interesting to learn from the press that discussions are taking place in the World bank about the response to the Wapenhans report, and the next steps document produced by the World bank management. The House knows from the press that the first version of the next steps report was informally rejected by board members, and a board meeting set up to discuss it was cancelled and turned into a seminar. To my knowledge, no Back-Bench Member has any idea of what input the United Kingdom Government made in the discussions about the Wapenhans report.

The issues are not simply that the report shows than an ever-increasing number of World bank projects are failing to make an economic rate of return. Those who wrote the Wapenhans report decided to assess World bank projects, and projects alone, on the basis of the economic return on the investment in those projects. As the development and environmental organisations have repeatedly said. and not just in this country, that is a narrow set of criteria by which to judge the effectiveness of World bank projects. My belief, and that of many of those organisations, is that if World bank projects and loans were assessed not purely on an economic rate of return, but by their effectiveness in poverty eradication and in promoting sustainable development, a much larger proportion of the World hank portfolio of loans would be shown to have failed.

I do not believe that any hon. Member knows whether the United Kingdom Government have pressed, in the discussions on the Wapenhans report, for a broadening of the criteria by which the success of World bank loans is to be judged, or what specific management measures in the World bank our Government has pressed for. I cannot see any reason why hon. Members, and the much wider development and environmental community, should not have access to that information. Why is the conduct of our executive director, who will be responsible for spending the £620 million that we are debating tonight. shrouded in such secrecy?

The problem is that the secrecy and lack of accountability that have surrounded the World bank go to the heart of its many failures as a development institution. We should be aware that many NGOs in the north, and far more in the south, would like us to vote against the replenishment of the IDA. That would be an enormous step, and not one that I am prepared to contemplate, but we must all be aware of the power and significance of the money under discussion.

Bank lending determines the economic and social policies of recipient countries. For example, for the more than 20 African countries covered by the special programme of assistance for Africa, access not only to the IDA but to bilateral funding is effectively dependent on the implementation of bank-designed structural adjustment policy. Those policies—not the policies of the recipient Governments—determine the relative priority of social spending and environmental protection, trade and fiscal policy, agricultural and industrial policy. As my hon. Friend the Member for Oldham, West (Mr. Meacher) said, they set the context that determines the success or failure of every bilateral trade programme, every NGO project, every indigenous development initiative and every local business venture. By replenishing the IDA, we are strengthening the awesome power of the World bank to determine the policy of Government after Government and country after country.

There is not time to detail the many failures of World bank policy—many have already been referred to. The Wapenhans report, the task force on portfolio management, has recognised the unacceptable and rising rate of project failure. It looked only at projects, but many were failing because the structural adjustment loans promoted by the World bank were also failing, and creating an economic situation in which individual development projects were bound to fail. We should bear in mind that every failure of World bank lending rebounds not on the bank, as it would with a commerical bank, but on the borrowing country in the form of an increasingly unserviceable debt burden. By and large, these projects were conceived outside the countries concerned, and designed and implemented outside those countrie too.

The criticisms levelled at the World bank are not new. The bank's belated response owes much to the growing threat to the bank from northern taxpayers, who ask why they should continually fork out for an organisation with such a poor record—

Mr. Fabricant

Does the hon. Gentleman accept that the World bank lends to third-world countries and undertakes risky ventures? If they were not risky ventures, commercial banks would make the loans. Surely, by definition, the failure rate of loans by the World bank will be higher than that of the commercial banks.

Mr. Denham

It is true that some development lending is bound to fail. The problem with the World bank is that it conceives the loans in the first place; it designs the projects, makes the loans—and then offloads the failures on to developing countries and their peoples. That problem has yet to he overcome.

The bank is a strange organisation. It is a creation of Governments, particularly the powerful Governments of the industrialised countries. Yet in almost every industrialised country there is weak scrutiny of the bank by Governments and elected Parliaments, or similar institutions. The bank has a high degree of autonomy. Although it is staffed by intelligent people from all over the world, almost all of them share a narrow set of economic ideas, were trained in a small number of the same northern universities, and share almost identical ideological outlooks. The bureaucracy of the bank is not accountable enough to those whose lives it touches.

This is why the bank's recent commitment to poverty reduction, the promotion of education for women, environmental assessment and sustainable development has been greeted all around the world with scepticism. Although we all applaud the intention, we have yet to see significant improvements on the ground. We have yet to see a willingness to examine whether structural adjustment policies work, or just meet a politically correct test of free market ideology.

The Washington office of the United Kingdom Government does not have enough staff independently to assess the bank's work; nor does the ODA. One critical new policy has been consultation with local non-Governmental organisations on implementation of the bank's policies, but the ODA is incapable of answering parliamentary questions about which NGOs have been consulted, and in which countries. We just have to trust the bank to get it right.

The World bank's first report on environmental impact assessments reveals that local consultation with NGOs is at best patchy, so the Government cannot even monitor our role in the bank, or learn whether it is fulfilling its objectives.

Apart from debates such as this, every three years, the House has scarcely any opportunities to discuss how the bank is performing. Given the large sums under discussion, that is not adequate. The House should be given an annual report on the World bank's activities, and a debate on them. The ODA should produce its own independent assessment of the impact of the bank's policies in countries where we have bilateral aid programmes, and assess the impact of those policies according to the objectives set by the ODA for development.

There is no reason why the House should not be given a report, at least after the event, on the voting record of and policy stances adopted by the United Kingdom executive director.

I believe that the House should ensure that the relevant Select Committees regularly scrutinise this country's policies towards the bank. The National Audit Office should also, on occasion, examine whether we get value for money, judged by sustainable development criteria, for the large sums of money at stake.

New and increased transfers of money to the poorest developing countries are needed. By agreeing the proposed increase, however, the House will pass new powers to the bank's staff in Washington to determine the lives of hundreds of millions of people. If we do that, we should make it clear that, in future, sharp questions are asked continually about how that money is used and the real impact it has on people's lives and the environment.

12 midnight

Mr. Tony Worthington (Clydebank and Milngavie)

We have heard two good contributions from my colleagues on the Opposition Benches.

It is difficult to overestimate the importance of the debate. As my hon. Friend the Member for Southampton, Itchen (Mr. Denham) has said, the World bank and the International Monetary Fund of Washington are the governments, in an economic sense, of innumerable countries. How do we scrutinise what is done by the World bank? We have this kind of debate, late at night, once every three years. That simply is not good enough as a means of holding accountable some of the most powerful people in the world. It is through the World bank and the IMF that the private sector decides whether to invest in certain countries. Access to the resources of the world depends on the imprimatur of the World bank.

My hon. Friend the Member for Oldham, West (Mr. Meacher) was perhaps a little harsh on the Minister for being complacent. He is not the only Minister to display such an attitude. The Minister for Overseas Development, Baroness Chalker, said about the additions to IDA resources: I have a high regard for the effectiveness of IDA in promoting development in the poorest countries. It is incredible that the British Government are less critical of the IDA than the IDA itself. Following the Wapenhans report, I find that very depressing. That report found that a declining proportion of good projects was being undertaken. It revealed alarming problems with the bank's follow-through on loans and found that most of the bank's expertise was devoted to coming up with projects of which it approved and spending large amounts of money. Hardly any of its expertise was devoted to determining whether a project was doing any good. It found that, on average, projects took two and a half years longer to complete than estimated.

One would never know from the Minister's opening speech that more than 40 non-governmental organisations had asked that the replenishment should not go ahead. They were speaking on behalf of the poor of the world because of the damage done by the IDA. Of course I demand that resources should be given to the poor, but I want them to be used properly and appropriately. That expenditure should be subject to critical scrutiny. It should not be applied simply in a manner that is more in the interests of the donors than of the poor.

It is worth considering what the IDA has said about itself in its 32-page document. It contains just one sentence about debt being a matter of concern for the developing world. The World bank displays absurd complacency about the debt crisis being over when everyone in the poorest parts of the world would say that it is easily the most important problem to be faced.

The entire document contains no mention of the mega-projects, the energy projects for which the IDA has been famous. It gives the impression that all the IDA does is to promote women's health, family planning and the like, but the IDA and the World bank are bywords for building large dams that displace many people. As my hon. Friend the Member for Oldham, West said, those centralised, top-down, ill-conceived projects are more to the benefit of the donors, their construction companies and the elite of poor countries than to poor people. In the 1980s, the World bank sponsored some 90 energy projects involving 90 dams and the displacement of some 2 million people. It has not come back with a single report showing that those people's lives were improved.

The IDA's document mentions new concern for women's education, reproductive health and general welfare. The IDA and World bank projects show new concern for the need for safety nets, but they do not mention that those safety nets are needed because of the activities of the World bank and the IDA. A huge part of the loans is for structural adjustments that put the needs of the first world first and damage the third world's capacity to feed itself.

The IDA and the World bank do not act first on behalf of the developing world as they claim. The inside front cover of the IDA document says: The central challenge for IDA is…to mobilise the will and the resources of the affluent and afflicted alike in the global battle against poverty. One would never gather from that statement that, during the 1980s, the external debt of sub-Saharan Africa rose from 28.2 per cent. of gross domestic product in 1980 to 109 per cent. of gross domestic product in 1990. No mention was made of the fact that, in 1991, the World bank's transfers to developing countries were minus $1.7 billion. The World bank took out of Africa $1.7 billion more than it put in, and the Government say that it is an effective way to invest in the developing world! The IDA document does not mention the lack of representation of the interests of the poor in the GATT talks. It does not criticise protectionism, such as the common agricultural policy and its devastating impact on the third world.

The Minister must deal with those issues in his response. What will he do—not just say that he will do—to increase the accountability and transparency of the World bank and the IDA? Why should not we know how we vote, as the Americans do? We are being asked to approve the expenditure of £620 million, which an unknown civil servant spends in an unknown way. How did we vote last week—according to the Financial Times, it was today—on public information policy at the bank? How did we vote on the issue that the world should know what happens on the board of the World bank? What was our director instructed to do? Did he say, "Open the doors" or "Keep the doors shut"?

How did we vote on the right of appeal on complaints against the bank's activities, which was before the board today? Is there to be a right of appeal for poor people affected by the decisions of the bank which parachute projects on people? How is our policy at the World bank decided? Does the ODA, the Foreign Office, the DTI or the Treasury decide how we vote? What ministerial meetings take place? What is our policy? When will the Government reveal their policy on the huge amount of money that we vote to be spent there? Will the Minister give us an honest evaluation of the World bank and the IDA? What side does he take on the Wapenhans report? What is he going to do about the World bank culture that puts lending first and the consequences and planning second?

It is well known that Africa is our special area of influence and concern at the bank and the International Monetary Fund. It is well known that nobody goes ahead with projects at the World bank without the say-so of the British director. It is recognised that Africa is our special sphere of expertise. The Americans might have special expertise in Latin America, but our specialist area is Africa. Other directors look to the British director for advice on projects in Africa. Where is the world's biggest disaster area? It is Africa—the place where the Minister, his colleagues and the Departments of State have most influence. When will we receive a re-evaluation of the world's Africa policy?

What are we going to do about forestry policies which exploit, rather than safeguard, the world's resources? My hon. Friend the Member for Oldham, West said that we praise Ghana for its structural adjustment policies; but there is not simply increasing poverty but the pillage of the rain forests in Ghana.

The World bank and the IMF are peddled as the wealthy helping the poor, but the poor are becoming more numerous all the time, and the gap between rich and poor is widening. We are approaching the 50th anniversary of the Bretton Woods institutions and there could not be a better time for re-evaluating. When the Minister says that he now backs the World bank, and the IDA, which does he mean—the old World bank or the new one?

The World bank vice-president for Africa spoke of how the capacity in Africa has been undermined. Earlier, the Minister gave his approval to the old World bank but now the vice-president for Africa, Mr Edward Jaycox, whose speech I have, says: In sum the donors have done a disservice to Africa. After 30 years of technical assistance and so much money spent, Africa's weak institutions, lack of expertise and current need for more and not less assistance tell us that we have failed badly in our efforts. That is what the World bank is saying now, but that is not the World bank that the Minister was backing earlier. Jaycox talks of 100,000 foreign experts working in sub-Saharan Africa and consuming a major chunk of all foreign aid moneys to the continent. Does the Minister agree with the World bank's assessment or does he agree with the earlier assessment of Baroness Chalker that the IDA's contribution was effective in developing countries? The Minister must tell us what changes he proposes because even the World bank and the IDA are more critical of themselves now than the Government.

12.12 am

Mr. Lennox-Boyd

We have had a great debate with the most characteristic exaggeration from the hon. Member for Oldham, West (Mr. Meacher), supported by his hon. Friend the Member for Clydebank and Milngavie (Mr. Worthington). We heard a much more balanced criticism from the hon. Member for Southampton, Itchen (Mr Denham). The right hon. Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel) also made a much more balanced and composed contribution, and placed the World bank's problems in a far more sensible context than that described by the hon. Member for Oldham, West. The hon. Gentleman did not even seem to know that we were discussing a three-year funding mechanism. He hid his confusion by saying that he was speaking about a debate next year, not that there should be another funding mechanism next year but that there should be such a debate every year. That covering of tracks was not lost on me.

If the hon. Gentleman had listened to my speech he would have heard me remind the House of the three-year funding mechanism. If he pulled his finger out and asked for a few more Opposition Supply days, one of which is to be held on Wednesday, he could have any number of debates on the subject. We should be delighted to debate these matters because we are confident of our assertions.

The hon. Gentleman spoke about the Wapenhans report. He did not listen to a word of my speech because I said that an action plan by the bank based on the recommendations of that report had been cleared last week. There is a booklet describing the steps that the World bank intends to take to improve performance. The hon. Gentleman was not interested in such significant facts but, for reasons that are best known to himself, he contented himself with a sustained attack on the World bank. I shall deal with some of the criticisms of the hon. Gentleman and his hon. Friends, but I shall first deal with some of the other contributions in the debate.

The hon. Member for Clydebank and Milngavie said that the document before the House did not contain a report on the world's debt problems. I hope that he is aware that, following a comprehensive study, the World bank issued a separate report on the important subject of debt repayments. Everybody realises that that subject is at the heart of the world's development problems.

The hon. Gentleman made another point with which I am familiar about the fact that some countries in sub-Saharan Africa are repaying the IMF more than they are currently receiving by way of loans. I shall deal with what the World bank is seeking to do to address that problem, but I shall first put the matter in context. It must be remembered that IMF flows are only a part of total assistance provided to Africa. The countries of sub-Saharan Africa have consistently received more than they have paid out when aid, foreign direct investment and other sources are included. The amount received in 1991 was about £7 billion.

As I have said, the World bank is aware of the problem that the hon. Gentleman mentioned and it is anxious to help those countries to meet their technical and financial needs with a 0.5 per cent. interest rate and a 10-year repayment period. The IMF's ESAF provides concession-al support for medium-term reform and it seeks to address the problem.

The hon. Member for Itchen spoke about access to information about the World bank. The United Kingdom director's reply is correct: there is a need to preserve a balance between openness and confidentiality about the board's proceedings and its relationship of trust with borrowers. One of the reasons for that balance is to enable our representative to make clear and firm criticisms when the occasion demands it. We must be able to say what we think without our remarks being the subject of press comment which gets back to the country whose conduct is being criticised. There is a need for confidentiality, and any sensible person would realise that a proper balance must be struck in that area.

I have mentioned the Wapenhans report. Action has been taken on that report, which was instituted by the bank to address some of the problems.

The World bank lends money for complex and difficult projects. Over recent years, some of the projects have been made even more difficult by the complicated economic background, the world recession and the fact that those projects have not always materialised in the way that over-optimism suggested they would.

Mr. Lewis Preston, during his relatively short time as president of the bank, has made it his priority to deal with the problems of environmental degradation. That is the reason for the Wapenhans report, which was initiated by the World bank. The bank's directors have made decisions in response to criticisms, as was explained to the House last week.

Mr. Worthington

Does the Minister agree that the Wapenhans report is a major step forward? If so, why did we hear about it only because it was leaked?

Mr. Lennox-Boyd

I cannot believe that that is the case. I cannot comment on the allegation of a leak as I have not heard it previously. The fact is that we received the resolution of the directors only last week. It is not appropriate to discuss the Wapenhans report before the bank's directors have had the opportunity to say what action they are taking on the report and what they intend to do to deal with the matters that it identifies.

Mr. Denham

The Minister referred to some problems with World bank openness and decision making in relation to developing countries. Can he explain why we should not know what policy position the UK executive director took in the discussions on the Wapenhans report, which is about the management of World bank projects, not about specific policies in a particular developing country?

Mr. Lennox-Boyd

We support the bank's intention to make publicly available more information about its projects and programmes. That is the British position. As the hon. Gentleman knows, other members of the board have differing perceptions about the degree to which the bank's operations should be open to further public scrutiny. No decision has been reached on the bank's proposals, but it will be preparing revised proposals for further consideration by the board.

Sir David Steel

Does the Minister accept that there is a difference between public scrutiny and public accountability? I think that the House is more concerned about public accountability. Is not there a case for persuading our colleagues on the Treasury Select Committee to take a closer interest in the affairs of the IDA and the World bank?

Mr. Lennox-Boyd

I have no objection to that suggestion, but it is also a matter for this Chamber. Every opportunity is afforded to Opposition parties to have Supply day debates on these important issues. Indeed, some of the subjects that the Opposition choose for debate are so uninteresting that I should have thought that occasionally they would want to choose the subject of aid, which is so close to the heart of the Labour party.

I want to make a few comments about environmental protection and sustainability. The hon. Member for Oldham, West—[Interruption.] He is not listening to me again. I do not care if he does not listen to me, but if he does not listen he should not criticise me. He should give credit to the fact that over recent years environmental concerns and the whole question of environmental impact assessments have increasingly played an enormous part in the World bank's activities. The implementation of IDA-10 will help developing countries to meet the priorities of Agenda 21 that were agreed at the earth summit a year ago.

The World bank's performance on environmental issues has been mixed in the past, but it has improved in recent years as lessons have been learned. Understanding the complex economic and social pressures over the past few years has been of benefit to the bank, and there has been significant progress in the way in which the bank has approached such problems. For example, it has set up a new vice-presidency for environmentally sustainable development. The decision to establish the vice-presidency constituted an explicit recognition of the significant shift in development thinking which has taken place in the bank and elsewhere, and which recognises the enormous importance of environmentally sustainable development—in particular, in regard to the bank's responsibilities.

The bank and the new vice-presidency are assisting the bank's operational departments in the delivery of quality assistance to member countries. The bank has also been reviewing its policies in sensitive environmental areas; recent studies, for example, have concerned the electric power sector—to which the hon. Member for Clydebank and Milngavie referred—and energy efficiency, conservation and water resources. Currently under review is the bank's policy on resettlement; the executive board will consider a report on that at the end of the year.

Mr. Meacher

If the Minister is so concerned about increasing sensitivity in regard to environmental projects, how does he explain the fact that, a year ago, the World bank's management wanted to continue with the Narmada valley project? How does he explain that it went through the executive board only because the British vote permitted that decision to be made?

Does the Minister accept World bank-funded projects that lead to the forcible resettlement of 2 million people? If not, what are the British Government doing to stop it?

Mr. Lennox-Boyd

I was about to turn to the Narmada valley project; I anticipated the hon. Gentleman's remarks. As he knows, at the end of March the Indian Government announced that they had asked the bank to cancel the undisbursed portion—some $170 million—of World bank loans, and had decided to complete the dam themselves.

Throughout the difficulties that the World bank had over the Narmada valley project, the Government—and our representative, on instructions from the Government—were extremely critical of the bank's performance in this regard, and whatever assertions the hon. Gentleman has made otherwise are simply untrue. As for the voting arrangements and the allegations that the hon. Gentleman has made, no vote was taken in October 1992, when the board considered the way ahead on the project. As I have said to the hon. Gentleman before, the board often works by consensus. A majority of directors supported the continuation of World bank funding, subject to the meeting of certain benchmarks by the Indians over a six-month period.

We were concerned with the welfare of those affected by the project to which the hon. Gentleman has referred, but we judged that the best chances of a successful resolution of the resettlement and environmental projects associated with the programme depended on the World bank's continuing involvement with the project. That has not happened. That is why we decided to give the project one last chance—but there was no vote.

I have touched upon some of the important points that have been made by Opposition Members. I welcome these debates. I should be happy to have further debates about World bank projects that are causing concern. The World bank has had difficulties over many large projects for a number of years. Those difficulties are due to the world recession and concern about their impact on the environment. The concern has grown in recent years. It was not so great when these projects were put in hand.

The World bank is aware of the criticism. It is taking action and has set up inquiries to examine it. The World bank is also responding to the criticism, a point that was made by the right hon. Member for Tweeddale, Ettrick and Lauderdale.

I ask the House to support the motion.

Question put and agreed to.

Resolved, That the draft International Development Association (Tenth Replenishment) Order 1993, which was laid before this House on 21st June, be approved.