§ '.—(1) The Corporation shall at the end of each complete financial year after registration make a report to the Secretary of State on its investments during that twelve month period and on its policy on future investments.
§ (2) The Secretary of State shall as soon as practicable lay a report under subsection (1) before Parliament.'.—[Mr. Streeter.]
§ Brought up, and read the First time.
§ 6.4 pm
§ Mr. Gary Streeter (South-West Devon)I beg to move, That the clause be read a Second time.
§ Mr. Deputy Speaker (Mr. Michael J. Martin)With this, it will be convenient to discuss amendment No. 1, in clause 18, page 8, line 23, leave out from 'association' to 'unless' in line 24 and insert
', investment policy and statement of business principles'.
§ Mr. StreeterConservative Members wish the Commonwealth Development Corporation to succeed. We believe in the CDC and, for most of the past 50 years, the CDC has flourished under Conservative leadership. Our concern—which is reflected in the new clause—is that, after the Bill is passed by the House and the CDC becomes a partially privatised company, gradually, it will move away from its developmental objectives. We expressed that concern in Committee; it is our greatest concern about the Bill; and we now return to it.
It has been established that, after the company is privatised, it will have to increase its return on capital invested from the current 7 to 8 per cent. to about 18 per cent. per annum, so that investors will receive a return on their investment. The company will be under pressure to deliver after the Bill has been passed. Indeed, managers are already making changes—on the ground, in the field, in sub-Saharan Africa—looking for different types of investment to make.
We also know that the Secretary of State is keen for a switch from loan to equity-based investment—but that is not the only change; the type of company in which the CDC is investing is changing. The CDC is increasingly looking for more high-yielding, profitable companies, regardless of whether those companies employ large numbers of people in the developing world or particularly benefit local economies in sub-Saharan Africa or Asia. The CDC is looking for yield and return to shareholders.
Although that is a terrific incentive, which we support for companies around the world, the CDC is a different type of company. For 50 years, the CDC has received taxpayers' investment. The company was established to invest in pre-emerging markets—to go where no other investor would go. We simply do not want that important niche activity to be blown away by the Bill.
Therefore, the question that we ask—which is dealt with in the amendments—is whether the Government have adequately protected and safeguarded the new CDC's developmental objectives. New clause 1, and other 448 suggestions that I shall make later in my speech, are intended simply to build another line of defence to ensure that such important safeguarding is provided.
It would be sacrilege if all the careful foundations laid over the years by the many people who have worked for that excellent company were destroyed. It would be more than tragic if, in future, the CDC's high reputation for helping thousands of people in the developing world were to be wasted as the company moves away from its developmental objectives and all that it has held dear as shareholders apply pressure on the board of directors to increase returns.
I should make it clear that I am not talking about this Secretary of State, the current board of directors, or the board of directors that will be appointed after the Bill is passed—no one in their right mind would think that any of those people would deflect the CDC from its developmental objectives—but about a CDC that, at some point, after shareholder pressure builds and a board of directors accedes to it, goes in a direction that everyone concerned with the Bill does not want.
We want to ensure that the entrenchment about which the Secretary of State boasts so loudly is watertight.
In Committee, the Minister made some interesting comments on that matter, putting in a nutshell what the Government feel that they have done to safeguard and entrench the company's developmental objectives. He said:
It is important to have not just a belt and braces approach"—looking at him, I suspect that that applies to his personal life, too—but other safeguards.My remark was unkind, and I withdraw it instantly. He went on to say:We have the golden share, the 25 per cent. shareholding, the two directors, the statement of investment policy, the statement of business principles and the memorandum and articles of association. We therefore have six elements tying the CDC."—[Official Report, Standing Committee D,, 17 June 1999; c. 23.]The Minister has—fair enough—identified six safeguards; that could not be clearer. I should like briefly to examine each of them in turn, to ensure that the Government have done enough.We have been told that the first safeguard of the CDC's developmental objectives is the 25 per cent. shareholding. However, it is worthless as a safeguard. It does not prevent 75 per cent. of the shareholders passing the special resolution that is needed to change the memorandum and articles of association. It cannot prevent a change in the investment policy. The fact that the Government will retain 25 per cent. of the company is utterly worthless as a safeguard; that one did not come up to the mark.
Secondly, we were told that two of the directors would be appointed by the Department for International Development. However, at another time in Committee, we were told that the board would probably consist of 11 people, two of whom would be appointed by the DIFD. Of course, some of the investors would want their own representatives on the board, and those representatives will be the most susceptible to succumbing to pressure to shift the company away from its developmental objectives.
449 In the Secretary of State's terminology, two out of 11 may be a majority. I can imagine meetings in the Department for International Development. Ten or 11 people might be present, and all might oppose the motion except the Secretary of State, but the motion would be carried. I can understand that that might happen in the Department for International Development, but she must realise that two directors can easily be outvoted in a board of 11. Those two placed directors cannot protect or safeguard the developmental objectives on their own. Therefore, I am afraid that, as a safeguard, the presence of two such directors is utterly worthless.
Thirdly, we come to the statement of business principles, which we embrace and support. I quoted it extensively at Second Reading; I do not intend to do so again. It is a very worthy document. Who could disagree with the principles set forth in relation to business integrity, the environment, health and safety and social issues? However, that statement of business principles does not differ significantly from the business principles that any major multinational corporation would adopt. I have looked at business principles adopted by BP, Shell and Marks and Spencer, and they are all rather similar. There is nothing in those business principles that would cause the company to adhere to its investment policy or to its developmental objectives. That was the third safeguard that the Minister set out, and it also is a damp squib.
Fourthly, the Minister said that the memorandum and articles of association were part of the safeguard; but there is no general protection in the memorandum and articles as a whole. I assume that the Minister was referring to article 51, which relates to investment policy. I believe that it is worth reading. Article 51(A) says:
CDC will have an investment policy to cover the conduct of CDC's investment business. The policy must be designed to achieve CDC's objective of maximising the creation and long-term growth of viable businesses in developing countries and achieving attractive returns for shareholders.Those words are more or less now contained in the mission statement. However, that paragraph merely points us towards the investment policy.Article 51(B) says:
The policy must include a particular focus in the conduct of CDC's investment business on benefiting poorer countries. especially those in sub-Saharan Africa and South Asia.Who could disagree with that? However, it simply points us towards the investment policy; it does not add to it or buttress it.Article 51(C) says:
The directors will conduct the investment business of CDC in line with the investment policy. They will establish procedures which enable them to see whether the investment policy is being complied with by CDC and, to the extent relevant, its subsidiary undertakings.We already know that the company is to be run, according to this piece of paper, in line with the investment policy; but, as I shall show, that investment policy is not watertight. That policy, the only safeguard in relation to the conduct of the company, does not contain the necessary safeguards.Finally, article 51(D) says:
The directors will report each year in CDC's annual report on CDC's compliance with the investment policy. This report will contain sufficient information to allow a reader to make an informed assessment of the investment business of CDC and its subsidiary undertakings as against the requirements of the investment policy.450 That is a very welcome statement. No doubt, the company's annual report will contain information about the investment policy and whether the directors are complying with it. We welcome all that, but it merely points us towards the investment policy, which I shall consider in a moment.The report referred to in article 51(D) is simply a report by the directors, not to Members of Parliament or to some compliance committee, but to the shareholders—the very people who, in future, might put the directors under pressure not to comply with the investment policy.
Therefore, the memorandum and articles of association—the fourth safeguard—are not in themselves a safeguard. They simply point to the investment policy.
The fifth safeguard that we were assured of was the golden share. Article 51 says that there shall be no change in the investment policy without the consent of the special shareholder—that is the Secretary of State, the holder from time to time of the golden share. That is welcome. It means that the investment policy cannot be reduced or diluted without the Secretary of State's specific approval. We welcome that; we support that part of the memorandum and articles of association. However, it tells us nothing about the existing investment policy. It adds nothing to the safeguard, or otherwise, constituted by the existing investment policy, and, if the existing investment policy is flawed—as I say that it is—the fact that the Secretary of State must give her consent to any change to it does not help us at all.
We come to the sixth and final safeguard that the Minister told us about in Committee. The other five do not satisfy Opposition Members.
§ 5 pm
§ Mr. Tam Dalyell (Linlithgow)On the golden share, what additional powers is the hon. Gentleman seeking? What is he saying ought to be there that is not? The golden share operation is very complicated and can be subject to all sorts of interpretations—as we know from experience over the years—but what exactly is the hon. Gentleman asking for?
§ Mr. StreeterThat is a very fair question; the answer is this. I am asking, first, that we get the investment policy right in the first place, because that is the thing that is being entrenched; and secondly, that we incorporate into the Bill new clause 1, which at least will place on the company an obligation to report to the House, so that, annually, we who have superintended this company for 50 years might see the extent to which the investment policy is being complied with. Who knows, the Minister may spring to his feet in a second and agree.
We say that the first five safeguards are utterly irrelevant and worthless and have no value in themselves, so we turn to the investment policy. The question that we ask is, does that policy prevent a future CDC moving away from its developmental objectives? I accept that the Secretary of State and the Minister genuinely believe that they have entrenched the developmental objectives in this way, but I do not think that they have succeeded. I remind them that I am talking about a future CDC, under pressure to perform—to move from an 8 to an 18 per cent. return—whose shareholders put pressure on the board to invest in high-yielding, high-performance companies. That is the context in which such a change might happen.
451 I said in Committee that the investment policy, the text of which I now hold in my hand, would allow a future CDC to agree to invest in listed companies only—perhaps one, two or three of the top listed companies in one, two or three places, such as India, Zimbabwe, Kenya or sub-Saharan Africa. If the CDC invested in only one or two companies in one or two of those places—I accept that sub-Saharan Africa must feature—it would be complying with the wording of the investment policy.
The Secretary of State did not disagree with that proposition. She said that Zimbabwe, India and Kenya have problems. We know that, but in each of those countries there are blue-chip companiescopper-bottomed companies. Would the letter of the investment policy prevent a future CDC board investing in one or two listed companies in South Africa only, where some of the world's most successful and wealth-creating companies are based? It certainly would not. I stand to be corrected by the Minister or the Secretary of State, but I can see nothing in the investment policy that would prevent a new CDC from investing on the South African stock exchange only.
Nothing in the investment policy says how many companies the CDC must invest in, or what type of company it can invest in. Two or three minor provisions prohibit it from investing in certain types of company, but it can invest in any type of high-performance, high-yield company that it wishes, irrespective of the fact that it is not a spread or a mix or a portfolio mix that contains job-creating companies and is benefiting the local economy. We know that 70 per cent. of investment must be in the list of countries attached to the investment policy, but the list includes almost all the world. The list includes many poor countries, but it includes also many countries in which there are thriving businesses and stock exchanges.
There is also a provision that 50 per cent. of the investment must be in sub-Saharan Africa. As I say, South Africa, Zimbabwe and Kenya all have copper-bottomed companies that the CDC could invest in. I do not think that the investment policy is watertight. It does not do what the Secretary of State told us it would do, which is to entrench the developmental objectives. I do not take great pleasure in saying that—I just think that we could drive a coach and horses through the policy. The test is not the likelihood of a future board investing in the way in which I have suggested, but whether it has the legal ability to do so. It is clear to me that it does.
It is no good me bleating about this unless I make a specific suggestion as to what to do. The new clause suggests that the company should report to the Secretary of State on its investments and policy each year, and that that report should be tabled in the House of Commons. That does not close the loophole. It would be after the event, but it would at least give the House an opportunity, at an early stage, to debate such a breach of the investment policy and to do something about it.
In Committee, the Secretary of State referred to an obligation to produce an annual report, and the Department produces an annual report. However, the report is not debated as a matter of course in the House of Commons. The annual report deals with everything that the Department is doing in that year. How much space 452 will there be to analyse in detail the investment policy of the new CDC? We want a specific report, dealing with the extent to which the new CDC has complied with its investment policy. Let the House decide whether the 50 years of investment by the British taxpayer is being honoured and safeguarded by the new CDC.
In Committee, the Secretary of State said that the Select Committee could look into the matter from time to time. The distinguished Chairman of the Select Committee, my hon. Friend the Member for Hertford and Stortford (Mr. Wells), is here this evening. I wonder whether the Committee would have the right to investigate decisions made by a company in the private sector—a company with 75 per cent. of its shareholding owned by private investors. Would the Select Committee have the right to call for the directors to attend the Committee? Would it have the right to investigate as it needs to?
I do not think that the safeguards are adequate, and the Minister and the Secretary of State should consider agreeing to the new clause, saving us all the bother of a division. If they accept it, an annual report will be presented to Parliament, so that we can srcutinise what the company is up to. We must be in a position to monitor the company and to act quickly.
My second helpful suggestion is to change the investment strategy now, before the Bill goes through. We have five paragraphs on the first two pages of the investment policy which deal with general principles and provisions. However, the investment policy lacks a catch-all provision that is designed to express the spirit that lies behind the past 50 years of the CDC, as well as the future, in terms of the mixed portfolio and its investment in companies which generate jobs and benefit the local economy.
When those expressions are found in the policy statement, there is a caveat about the opinion of the directors or the profitability of the company. Let us have a clear statement in the investment policy, setting out the spirit of the developmental objectives pursued by the CDC prior to this Bill becoming law.
In future, the measure would give an aggrieved shareholder the right to go to law to claim that the company was breaching its investment policy. At the moment, we can drive a coach and horses through the policy. However, a paragraph setting out the spirit of the CDC past and future would give an ethical investor—who may be worried that the company is moving away from its developmental objectives—a chance to go to law and seek redress. There would be something for a court to hang an order on. At the moment, that is not there.
§ Mr. DalyellThe imputation is that the CDC has invested, if not improperly, at least in grey areas. Is there any evidence of investment that is unsatisfactory? The hon. Gentleman ought to produce it if he is saying that.
§ Mr. StreeterThe hon. Gentleman—whom I deeply respect—has missed the point. Previously, the CDC has not been under pressure to produce a financial return. Once the Bill goes through—when the hon. Gentleman will be voting for privatisation—the CDC will move from a return on capital invested of about 7 per cent. to one of 18 per cent.
My argument is that there will be shareholder pressure on the board of directors to deliver a new level of profit. Increasingly, the board will move away from investing in 453 the beneficial, long-term, job-creating local economies of which the company has been so proud in the past towards high-yield, fast-return, high-tech companies. There is nothing wrong with such companies, but the CDC was designed to open a new niche in development overseas, on behalf of the British taxpayer, in pre-emerging markets and countries. Our fear, that the CDC will move away from that special niche, caused us to table the new clause.
There are concerns that the Government are trying to do something that they cannot do—find a third way for the CDC. Of course, there is a case for the sale of the CDC, and we all want private sector investment. There is a case for fully privatising the company to attract a large sum of money which we can invest in the developing world. There is a case also for retaining the CDC in the public sector and for finding other ways of opening the windows and attracting private sector investment while the company remains publicly accountable and under public control.
Is there a case for burdening the company with regulations—and expecting it to fly in the private sector—so that the price on sale would be reduced, while setting up a creature that cannot live up the expectations of private investors and will be tugged, year after year, away from its developmental objectives?
The new clause reflects our belief that the Government are trying to find a third way for the CDC which simply does not exist. We very much hope that the Government will listen to our arguments, make sure that the developmental objectives are safeguarded and accept the amendment.
§ Mr. DalyellIt behoves those of us who were not on the Committee to be brief, and I simply wish to ask two questions.
First, the history of golden shares is rather unsatisfactory. I wonder whether my hon. Friend the Minister has any comment on the operation, or lack thereof, of the golden share. It is always given as a failsafe but, in fact, is seldom used. If there is a crisis or difficulty, the golden share is not quite a satisfactory fall-back, as is often made out.
Secondly, thanks to my hon. Friend the Minister's position with the Inter-Parliamentary Union, I had the good fortune three years ago to be a member of the IPU delegation to Nepal. It is in the context of Nepal that I ask whether the CDC's attitude to risk has been all that it might be. I have just come from a little ceremony at the Nepalese embassy. I was able to talk about those matters, knowing that this business was coming up.
Is risk sufficiently taken into account in the operations of the CDC when it comes to investment in countries the figures for which suggest that they are very poor? Nepal may seem very poor from the figures, but it is run in such a way that there is very little child malnutrition or illness; it is impressively run in many ways.
§ The Secretary of State for International Development (Clare Short)Nepal's gross domestic product per head is $200 and almost all the women are anaemic. There is great poverty and high infant mortality. The country is very 454 romantic and attractive, but the people's poverty is very great. We must work more effectively with Nepal on children's education and development.
§ Mr. DalyellI am glad that my right hon. Friend, whose visit to Nepal was extremely successful, takes the attitude that something must be done.
§ Dr. Jenny Tonge (Richmond Park)I am speaking in support of amendment No. 1, but I urge Ministers to consider the new clause seriously. There is little difference in it from what is already in page 25 of the articles of association. It requires more detail and would have to be presented formally, but it would not substantially alter the spirit of the Bill and would give more information and make everyone a lot happier.
Amendment No. 1 is not designed to slow down the Bill. The Liberal Democrats support getting more money into development and changing the way in which the Commonwealth Development Corporation is run, but we are concerned about the conflict between development and getting a good return for the shareholders, which the hon. Member for South-West Devon (Mr. Streeter) eloquently set out. As the Select Committee heard, the problem is trying to serve both God and mammon.
We want to strengthen the Bill and make it less ambiguous.
§ Clare ShortThis is an enormously important matter. Both opposition parties, in their misunderstanding, paint a depressing future for developing countries. If those countries cannot attract private sector investment that will get a reasonable rate of return, their prospects for economic development are disastrous. Both the hon. Member for South-West Devon (Mr. Streeter) and the hon. Lady are suggesting that sustained economic development in developing countries through the private sector is impossible. That is clearly not the case.
§ Dr. TongeI entirely agree that developing countries need investment and we all want them to have it, but to attract that investment they often have to cut corners on sustainable development and the good of their people and environment.
As the Bill is currently drafted, the Government will hold a golden share that gives the Secretary of State special rights under the articles of association. Clause 18(3) requires any alteration of those articles that require the Secretary of State's approval before they can be altered to be approved by both Houses of Parliament. That is worrying, as it implies that there is a choice as to which articles require the Secretary of State' s approval before they can be altered.
Under article 51(F) of the articles of association, any alteration to the investment policy would require the approval of 50 per cent. of shareholders and the special shareholder. Under article 52(E) any alteration to the statement of principles and policies may be made by the CDC board by a majority vote, including at least three members of the business principles committee.
The articles of association, the investment policy and the business principles appear to be in descending order of importance as to how far away from the Government and the Secretary of State they can be before any change is made, but the Bill's aims will be met only by adherence 455 to business principles and to the investment policy, which sets specific targets for the percentage of new investments made for the benefit of poorer countries: at least 70 per cent. of investment by the CDC, or improved investment vehicles, over any five consecutive periods, has to be, in the opinion of the directors, for the immediate or prospective benefit of poorer countries.
In the old CDC, an additionality test was applied. That will no longer happen and, according to the Library research paper, any investigation of potential investments will have to include an assessment of compatibility with the CDC's ethical values or business principles. That is clearly set out in the technical box in the research paper, and the potential mismatch between commercial viability and development value is also clearly summarised.
Under the previous legislation, the CDC was charged with the task of assisting overseas countries in the development of their economies. The term "development" is significantly missing from the Bill and there is only limited mention of it in the accompanying documentation. Instead, the CDC argues that its business principles will support and reinforce the development focus.
As the hon. Member for South-West Devon said, codes of conduct and business principles are wonderful things and come in very glossy brochures, but they are not always adhered to in practice. If we want proper development to occur through sustainable and ethical investment, the real control that the Secretary of State and the Government need is of the business principles. They are the key, because they direct the investment policy—a change for the CDC—that is controlled by the articles of association. Why then can the business principles be changed with only the lightest touch from Parliament via the Secretary of State's nominees on the business principles committee, with no direct reference to the Secretary of State or Parliament?
I beg the Secretary of State to accept our proposals and ensure that the business principles, and thus the investment policy, cannot be changed without the agreement of Parliament.
§ Mr. Edward Leigh (Gainsborough)I wonder why Ministers are opposed to the concept of an annual report. It may be because they are rather schizophrenic about what exactly the new company will be. They are trying to persuade the House that it can have all the virtues of a private company but meet the objectives of a publicly owned company. Article 51(A), which was referred to by the hon. Member for Richmond Park (Dr. Tonge), clearly states:
CDC will have an investment policy to cover the conduct of CDC's investment business. The policy must be designed to achieve CDC's objective of maximising the creation and long-term growth of viable businesses in developing countries and achieving attractive returns for shareholders.Paragraph (B) states:The policy must include a particular focus on the conduct of CDC's investment business on benefiting poorer countries, especially those in sub-Saharan Africa and South Asia.The Government will refer to that article in defence and say that it will ensure that CDC will help the poorer countries, but as my hon. Friend the Member for South-West Devon (Mr. Streeter) pointed out, there are 456 many successful large companies in those poorer countries which will inevitably have to attract the investment of the new CDC if it is to meet its obligations to its shareholders. If I know anything about company law, it will be required by law to act in the best interests of their shareholders.The Government have tried to convince the House that we will be able to meet the objectives because of the articles of association, but if one reads them one comes to the inevitable conclusion that the defensive mechanisms against preventing the company from becoming like any other investment company in the private sector are not as strong as they should be. Given that there is some doubt on the subject, surely it is not too much to ask for an annual report to Parliament so that we can be convinced that the company is meeting the objectives that we all share.
§ The Parliamentary Under-Secretary of State for International Development (Mr. George Foulkes)I can understand why the hon. Member for Gainsborough (Mr. Leigh) is concerned and I shall deal with his point later. He has not been involved in the Second Reading and Committee stage, so I understand why he may not fully appreciate the safeguards contained in the Bill. However, I despair of the Opposition Front Benchers. They sat through Second Reading and Committee and heard the Secretary of State's clear explanations—and mine—but they seem incapable of understanding, or they are unwilling to understand.
I do not know whether the problem is my inadequacy, but I shall try again—
§ Mr. Menzies Campbell (North-East Fife)It will be a waste of time.
§ Mr. FoulkesWell, as the right hon. and learned Gentleman knows, I am a helpful cove so I will try again. I must tell the hon. Member for Richmond Park (Dr. Tonge) that there was ample opportunity to table amendments in Committee. Indeed, she will recall that we did not use one of the sittings that we were allocated. We were willing to hold another sitting to deal with any amendments, but no one took up the opportunity. I assure her that all her concerns, which we share and understand, are adequately covered in the Bill. I hope that she will accept that assurance and not press her point.
An amendment containing provision for an annual report was tabled in Committee and my right hon. Friend Secretary of State dealt with it extremely well. She explained that the CDC will be required by the Bill to make an annual report to the Secretary of State, who is required to make an annual report to Parliament. That can, if the Opposition wish, be debated in Opposition time or the Government can make time to debate it. The hon. Member for South-West Devon said that it would not be debated as a matter of course, but there is no guarantee either that a CDC annual report would be debated as a matter of course because provision for that is not included in the amendment.
The Select Committee also has powers. It has an effective Chairman and its members know what they are talking about. The Committee can, if it wishes, call the Secretary of State, or myself, or officials before it to ask questions about the CDC and its investment policies.
§ Mr. Bowen Wells (Hertford and Stortford)I thank the Minister for his kind remarks. Can he confirm that as the Government will always hold the golden share unless Parliament decides otherwise, the Select Committee will always have the power to call Ministers and officials in front of it to explain the policy that the CDC is adopting?
§ Mr. FoulkesThe hon. Gentleman has, as usual, gone straight to the point and grasped it. The Select Committee will be able to do that.
The hon. Member for South-West Devon again gave the hypothetical example he gave in Committee that the CDC might invest only in the top three listed companies in Kenya, India and Zimbabwe. That is not likely, not only for developmental reasons but for good investment reasons. Any organisation in its right mind would not have such a portfolio and that is a totally unlikely scenario.
The Government have carefully considered what the CDC's development role should be and how it should be complementary to the role of others. The CDC's aim is to maximise the creation and long-term growth of viable businesses in developing countries, especially the poorest countries, to achieve attractive returns for shareholders and to implement ethical best practices. Practical measures to implement those are entrenched in the CDC constitution.
The hon. Member for South-West Devon referred to my contribution in Committee in which I desrcibed the relevant six elements. Then he took one and said that it was not enough. He took another and said that that one was not enough. He went through all six, but he failed to understand that it is the combination of all of them that will work. For example, the golden share will give the necessary rights over changes that a share of 25 per cent. might not be able to block. We are protected by the golden share, the investment policy and the business principles.
The hon. Member for South-West Devon also raised the question of whether the sectors in which the CDC invested would change over time. They are already changing to take account of the CDC's present obligations. For example, in India, the CDC has invested in the first private sector internet access provider. That will help business access information and generate new business opportunities related to the internet. In Africa, the CDC has invested in the expansion of cellular telecoms, which have a significant effect on business efficiency.
The CDC is investing in new areas, helping development and getting a good return, but it is not ignoring traditional sectors. For example, in Belize—a country that the Opposition know well, for reasons I will not go into—CDC Industries is in the process of completing a $40 million investment in the citrus industry. In Bolivia, the CDC has invested £3.8 million in Banco Sol, a micro-finance institution which finances 85,000 micro-enterprises in Bolivia. The CDC is helping development and getting a good return.
The hon. Member for South-West Devon also raised the question of the two directors and said, in a glib and superficial way, that two would not form a majority over 11. Even I can work that out. However, he did not say that the business principles committee will have four members and the Secretary of State's two nominees must be on it. The board of directors cannot change business 458 principles unless a majority of the business principles committee—at least three—agree. If the Secretary of State's nominees do not agree, a majority of three cannot be achieved. Even the hon. Gentleman can work that out.
I can tell my hon. Friend the Member for Linlithgow (Mr. Dalyell) that we do not envisage changing the role of the golden share or abandoning it. It gives power to stop change. The occasions that he mentioned happened under a Conservative Government. We are determined to use the golden share if the necessity arises, but we do not think that it will, because the CDC board that we envisage will want to operate on the investment and business principles that we have agreed with it.
Finally, on amendment No. 1, we can understand why it has been tabled, but it is not necessary. The mechanisms that we have set out will provide the proper protection. Parliament has a role. Unless Parliament agrees otherwise, the CDC is required to have an investment policy designed to achieve the objective of maximising both the creation of and the long-term growth of viable businesses in developing countries and of achieving attractive returns for shareholders. We have that power at the moment.
No change can be made to the investment policy, for example, without the approval of the majority of ordinary shareholders and the consent of the special shareholder, the Secretary of State. The investment policy therefore cannot be changed without her approval.
The method for changing the business principles is different, because the issues raised are different. Change to the business principles and policies can be made only by a majority of the board which, as I said earlier, is to include at least three of the four members of the business principles committee. The hon. Member for South-West Devon talked about belt and braces, and rather unkindly said that I am the sort of person who needs them. The Bill provides for two sets of both—or even three, given what I said to my hon. Friend the Member for Linlithgow. The matters that have been raised are adequately covered.
§ Dr. TongeI am still worried that the CDC's—and the Minister's—trousers will fall down. The business principles are key to the success of the whole operation, yet they are less controlled than the investment policy. My earlier point was that it should be the other way around.
§ Mr. FoulkesI should certainly be acutely embarrassed if my trousers fell down. The CDC would be embarrassed if anything went wrong with the links between its investment policy and business principles. However, I urge the hon. Lady to consider the matter again. The investment policy is far more important, in the context about which she is worried, than the business principles.
§ Dr. TongeThe Bill states clearly that the investment policy is determined by the business principles, whereas the old CDC adopted a process of additionality.
§ Mr. FoulkesThe matter has been explained, in Committee and again today. Of course all the elements are important in different ways, but they are deeply entrenched. We expect CDC's investments in all sectors to make a contribution to development and to achieve attractive returns. That will give us the best of both worlds, and I urge 459 the hon. Member for South-West Devon, in the light of my third—and I hope lucid—explanation to him, to withdraw the unnecessary new clause.
§ Mr. StreeterThe Minister is being uncharacteristically complacent. His belts do not fit and his braces are slack. The Bill contains a real risk that the developmental objectives of the company will be lost. The 50 years of careful and patient investment by the CDC and this country's taxpayers are being placed at risk by the Bill. The Minister is too complacent to accept that, and I urge the House to vote for the new clause.
§ Question put, That the clause be read a Second time:—
§ The House divided: Ayes 165, Noes 309.
462| Division No. 240] | [6.54 pm |
| AYES | |
| Ainsworth, Peter (E Surrey) | Foster, Don (Bath) |
| Allan, Richard | Fowler, Rt Hon Sir Norman |
| Amess, David | Fox, Dr Liam |
| Arbuthnot, Rt Hon James | Fraser, Christopher |
| Ashdown, Rt Hon Paddy | Gale, Roger |
| Atkinson, David (Bour'mth E) | Garnier, Edward |
| Atkinson, Peter (Hexham) | George, Andrew (St Ives) |
| Baldry, Tony | Gibb, Nick |
| Beith, Rt Hon A J | Gillan, Mrs Cheryl |
| Beresford, Sir Paul | Gorman, Mrs Teresa |
| Blunt, Crispin | Gorrie, Donald |
| Body, Sir Richard | Gray, James |
| Boswell, Tim | Green, Damian |
| Bottomley, Peter (Worthing W) | Greenway, John |
| Bottomley, Rt Hon Mrs Virginia | Grieve, Dominic |
| Brady, Graham | Hamilton, Rt Hon Sir Archie |
| Brake, Tom | Hammond, Philip |
| Brazier, Julian | Hancock, Mike |
| Breed, Colin | Harvey, Nick |
| Brooke, Rt Hon Peter | Hawkins, Nick |
| Browning, Mrs Angela | Heath, David (Somerton & Frome) |
| Bruce, Ian (S Dorset) | Heathcoat-Amory, Rt Hon David |
| Burnett, John | Hogg, Rt Hon Douglas |
| Burns, Simon | Howard, Rt Hon Michael |
| Burstow, Paul | Howarth, Gerald (Aldershot) |
| Butterfill, John | Hughes, Simon (Southwark N) |
| Campbell, Rt Hon Menzies (NE Fife) | Jack, Rt Hon Michael |
| Jackson, Robert (Wantage) | |
| Cash, William | Jenkin, Bernard |
| Chapman, Sir Sydney (Chipping Barnet) | Johnson Smith, |
| Rt Hon Sir Geoffrey | |
| Chidgey, David | Jones, Nigel (Cheltenham) |
| Chope, Christopher | Keetch, Paul |
| Clappison, James | King, Rt Hon Tom (Bridgwater) |
| Clifton-Brown, Geoffrey | Kirkbride, Miss Julie |
| Collins, Tim | Kirkwood, Archy |
| Colvin, Michael | Lait, Mrs Jacqui |
| Cormack, Sir Patrick | Lansley, Andrew |
| Cotter, Brian | Leigh, Edward |
| Davey, Edward (Kingston) | Letwin, Oliver |
| Davies, Quentin (Grantham) | Lewis, Dr Julian (New Forest E) |
| Davis, Rt Hon David (Haltemprice) | Lidington, David |
| Day, Stephen | Lilley, Rt Hon Peter |
| Dorrell, Rt Hon Stephen | Livsey, Richard |
| Duncan, Alan | Loughton, Tim |
| Duncan Smith, Iain | Luff, Peter |
| Emery, Rt Hon Sir Peter | Lyell, Rt Hon Sir Nicholas |
| Evans, Nigel | MacGregor, Rt Hon John |
| Fabricant, Michael | McIntosh, Miss Anne |
| Fallon, Michael | MacKay, Rt Hon Andrew |
| Fearn, Ronnie | Maclean, Rt Hon David |
| Flight, Howard | McLoughlin, Patrick |
| Forth, Rt Hon Eric | Madel, Sir David |
| Malins, Humfrey | Stunell, Andrew |
| Maples, John | Swayne, Desmond/ |
| Mates, Michael | Syms, Robert |
| Maude, Rt Hon Francis | Tapsell, Sir Peter |
| May, Mrs Theresa | Taylor, Ian (Esher & Walton) |
| Michie, Mrs Ray (Argyll & Bute) | Taylor, John M (Solihull) |
| Moore, Michael | Taylor, Matthew (Truro) |
| Nicholls, Patrick | Taylor, Sir Teddy |
| Norman, Archie | Tonge, Dr Jenny |
| Oaten, Mark | Tredinnick, David |
| Öpik, Lembit | Trend, Michael |
| Ottaway, Richard | Tyler, Paul |
| Page, Richard | Tyrie, Andrew |
| Paice, James | Viggers, Peter |
| Pickles, Eric | Wallace, James |
| Prior, David | Walter, Robert |
| Randall, John | Wardle, Charles |
| Redwood, Rt Hon John | Waterson, Nigel |
| Robathan, Andrew | Webb, Steve |
| Robertson, Laurence (Tewk'b'ry) | Wells, Bowen |
| Roe, Mrs Marion (Broxbourne) | Whitney, Sir Raymond |
| Ruffley, David | Whittingdale, John |
| St Aubyn, Nick | Widdecombe, Rt Hon Miss Ann |
| Sanders, Adrian | Wilkinson, John |
| Sayeed, Jonathan | Willetts, David |
| Shephard, Rt Hon Mrs Gillian | Willis, Phil |
| Shepherd, Richard | Wilshire, David |
| Smith, Sir Robert (W Ab'd'ns) | Woodward, Shaun |
| Spelman, Mrs Caroline | Yeo, Tim |
| Spicer, Sir Michael | |
| Spring, Richard | Tellers for the Ayes: |
| Stanley, Rt Hon Sir John | Mr. Keith Simpson and |
| Streeter, Gary | Mrs. Eleanor Iaing. |
| NOES | |
| Adams, Mrs Irene (Paisley N) | Caton, Martin |
| Ainger, Nick | Cawsey, Ian |
| Alexander, Douglas | Chapman, Ben (Wirral S) |
| Allen, Graham | Chaytor, David |
| Anderson, Donald (Swansea E) | Clapham, Michael |
| Ashton, Joe | Clark, Rt Hon Dr David (S Shields) |
| Atherton, Ms Candy | Clark, Dr Lynda (Edinburgh Pentlands) |
| Atkins, Charlotte | |
| Austin, John | |
| Banks, Tony | Clark, Paul (Gillingham) |
| Barnes, Harry | Clarke, Charles (Norwich S) |
| Barron, Kevin | Clarke, Tony (Northampton S) |
| Bayley, Hugh | Clelland, David |
| Beard, Nigel | Clwyd, Ann |
| Beckett, Rt Hon Mrs Margaret | Coaker, Vernon |
| Begg, Miss Anne | Coffey, Ms Ann |
| Bell, Martin (Tatton) | Cohen, Harry |
| Bell, Stuart (Middlesbrough) | Coleman, Iain |
| Benn, Rt Hon Tony (Chesterfield) | |
| Benton, Joe | Colman, Tony |
| Bermingham, Gerald | Connarty, Michael |
| Berry, Roger | Cook, Frank (Stockton N) |
| Best, Harold | Corbett, Robin |
| Blackman, Liz | Corston, Ms Jean |
| Boateng, Paul | Cousins, Jim |
| Bradley, Keith (Withington) | Cox, Tom |
| Bradley, Peter (The Wrekin) | Crausby, David |
| Brinton, Mrs Helen | Cryer, Mrs Ann (Keighley) |
| Brown, Russell (Dumfries) | Cryer, John (Hornchurch) |
| Browne, Desmond | Cummings, John |
| Buck, Ms Karen | Cunliffe, Lawrence |
| Burden, Richard | Cunningham, Jim (Cov'try S) |
| Burgon, Colin | |
| Butler, Mrs Christine | Dalyell, Tam |
| Caborn, Rt Hon Richard | Darling, Rt Hon Alistair |
| Campbell, Alan (Tynernouth) | Darvill, Keith |
| Campbell, Mrs Anne (C'bridge) | Davey, Valerie (Bristol W) |
| Campbell-Savours, Dale | Davidson, Ian |
| Cann, Jamie | Davies, Rt Hon Denzil (Llanelli) |
| Caplin, Ivor | Davis, Terry (B'ham Hodge H) |
| Casale, Roger | Dean, Mrs Janet |
| Dewar, Rt Hon Donald | Illsley, Eric |
| Dismore, Andrew | Ingram, Rt Hon Adam |
| Dobbin, Jim | Jackson, Ms Glenda (Hampstead) |
| Dobson, Rt Hon Frank | Jackson, Helen (Hillsborough) |
| Donohoe, Brian H | Jamieson, David |
| Doran, Frank | Jenkins, Brian |
| Dowd, Jim | Johnson, Miss Melanie (Welwyn Hatfield) |
| Drew, David | |
| Drown, Ms Julia | Jones, Rt Hon Barry (Alyn) |
| Eagle, Maria (L'pool Garston) | Jones, Mrs Fiona (Newark) |
| Edwards, Huw | Jones, Helen (Warrington N) |
| Efford, Clive | Jones, Ms Jenny (Wolverh'ton SW) |
| Ennis, Jeff | |
| Etherington, Bill | Jones, Dr Lynne (Selly Oak) |
| Field, Rt Hon Frank | Jones, Martyn (Clwyd S) |
| Fisher, Mark | Kaufman, Rt Hon Gerald |
| Fitzpatrick, Jim | Keeble, Ms Sally |
| Fitzsimons, Lorna | Keen, Alan (Feltham & Heston) |
| Flint, Caroline | Keen, Ann (Brentford & Isleworth) |
| Flynn, Paul | Kelly, Ms Ruth |
| Follett, Barbara | Kemp, Fraser |
| Foster, Rt Hon Derek | Kennedy, Jane (Wavertree) |
| Foster, Michael Jabez (Hastings) | Khabra, Piara S |
| Foster, Michael J (Worcester) | Kidney, David |
| Foulkes, George | Kilfoyle, Peter |
| Fyfe, Maria | King, Andy (Rugby & Kenilworth) |
| Gapes, Mike | Kumar, Dr Ashok |
| George, Bruce (Walsall S) | Ladyman, Dr Stephen |
| Gibson, Dr Ian | Lawrence, Ms Jackie |
| Gilroy, Mrs Linda | Laxton, Bob |
| Godman, Dr Norman A | Lepper, David |
| Godsiff, Roger | Leslie, Christopher |
| Goggins, Paul | Levitt, Tom |
| Gordon, Mrs Eileen | Liddell, Rt Hon Mrs Helen |
| Griffiths, Jane (Reading E) | Linton, Martin |
| Griffiths, Nigel (Edinburgh S) | Livingstone, Ken |
| Griffiths, Win (Bridgend) | Lloyd, Tony (Manchester C) |
| Grocott, Bruce | Lock, David |
| Grogan, John | Love, Andrew |
| Gunnell, John | McAvoy, Thomas |
| Hain, Peter | McCabe, Steve |
| Hall, Mike (Weaver Vale) | McCafferty, Ms Chris |
| Hall, Patrick (Bedford) | McDonagh, Siobhain |
| Hamilton, Fabian (Leeds NE) | Macdonald, Calum |
| Hanson, David | McDonnell, John |
| Heal, Mrs Sylvia | McFall, John |
| Healey, John | McIsaac, Shona |
| Hepburn, Stephen | McKenna, Mrs Rosemary |
| Heppell, John | Mackinlay, Andrew |
| Hesford, Stephen | Mactaggart, Fiona |
| Hewitt, Ms Patricia | Mahon, Mrs Alice |
| Hill, Keith | Mallaber, Judy |
| Hodge, Ms Margaret | Mandelson, Rt Hon Peter |
| Hoey, Kate | Marsden, Gordon (Blackpool S) |
| Hood, Jimmy | Marsden, Paul (Shrewsbury) |
| Hopkins, Kelvin | Marshall, David (Shettleston) |
| Howarth, Alan (Newport E) | Marshall, Jim (Leicester S) |
| Howarth, George (Knowsley N) | Marshall-Andrews, Robert |
| Hoyle, Lindsay | Martlew, Eric |
| Hughes, Ms Beverley (Stretford) | Meale, Alan |
| Humble, Mrs Joan | Merron, Gillian |
| Hurst, Alan | Michie, Bill (Shef'ld Heeley) |
| Hutton, John | Milburn, Rt Hon Alan |
| Iddon, Dr Brian | Mitchell, Austin |
| Moffatt, Laura | Smith, Miss Geraldine (Morecambe & Lunesdale) |
| Moonie, Dr Lewis | |
| Moran, Ms Margaret | Smith, Jacqui (Redditch) |
| Morgan, Ms Julie (Cardiff N) | Smith, John (Glamorgan) |
| Mullin, Chris | Smith, Llew (Blaenau Gwent) |
| Murphy, Denis (Wansbeck) | Snape, Peter |
| Murphy, Jim (Eastwood) | Soley, Clive |
| Murphy, Rt Hon Paul (Torfaen) | Southworth, Ms Helen |
| Naysmith, Dr Doug | Squire, Ms Rachel |
| Norris, Dan | Starkey, Dr Phyllis |
| O'Brien, Bill (Normanton) | Steinberg, Gerry |
| O'Hara, Eddie | Stevenson, George |
| Olner, Bill | Stewart, David (Inverness E) |
| Osborne, Ms Sandra | Stewart, Ian (Eccles) |
| Palmer, Dr Nick | Stoate, Dr Howard |
| Pearson, Ian | Stott, Roger |
| Pendry, Tom | Stringer, Graham |
| Perham, Ms Linda | Stuart, Ms Gisela |
| Pickthall, Colin | Sutcliffe, Gerry |
| Pike, Peter L | Taylor, Rt Hon Mrs Ann (Dewsbury) |
| Plaskitt, James | |
| Pollard, Kerry | Taylor, Ms Dari (Stockton S) |
| Pond, Chris | Taylor, David (NW Leics) |
| Pope, Greg | Thomas, Gareth (Clwyd W) |
| Powell, Sir Raymond | Thomas, Gareth R (Harrow W) |
| Prentice, Ms Bridget (Lewisham E) | Timms, Stephen |
| Prentice, Gordon (Pendle) | Tipping, Paddy |
| Prescott, Rt Hon John | Todd, Mark |
| Prosser, Gwyn | Touhig, Don |
| Purchase, Ken | Trickett, Jon |
| Quinn, Lawrie | Turner, Dennis (Wolverh'ton SE) |
| Rammell, Bill | Turner, Dr Desmond (Kemptown) |
| Rapson, Syd | Turner, Dr George (NW Norfolk) |
| Raynsford, Nick | Twigg, Derek (Halton) |
| Reed, Andrew (Loughborough) | Vaz, Keith |
| Reid, Rt Hon Dr John (Hamilton N) | Vis, Dr Rudi |
| Roche, Mrs Barbara | Walley, Ms Joan |
| Rooker, Jeff | Wareing, Robert N |
| Rooney, Terry | Watts, David |
| Rowlands, Ted | White, Brian |
| Roy, Frank | Wicks, Malcolm |
| Ruane, Chris | Williams, Rt Hon Alan (Swansea W) |
| Ruddock, Joan | |
| Salter, Martin | Williams, Alan W (E Carmarthen) |
| Sarwar, Mohammad | Williams, Mrs Betty (Conwy) |
| Savidge, Malcolm | Wilson, Brian |
| Sawford, Phil | Winnick, David |
| Sedgemore, Brian | Wise, Audrey |
| Shaw, Jonathan | Wood, Mike |
| Sheerman, Barry | Worthington, Tony |
| Sheldon, Rt Hon Robert | Wright, Dr Tony (Cannock) |
| Short, Rt Hon Clare | Wyatt, Derek |
| Simpson, Alan (Nottingham S) | |
| Singh, Marsha | Tellers for the Noes: |
| Skinner, Dennis | Mr. Clive Betts and |
| Smith, Angela (Basildon) | Mr. Kevin Hughes. |
§ Question accordingly negatived.
§ It being after Seven o'clock, and there being private business set down by direction of THE CHAIRMAN OF WAYS AND MEANS under Standing Order No. 20 (Time for taking private business), further proceedings stood postponed.