Overseas Aid Policy

HL Deb 28 March 1985 vol 461 cc1234-74

9.5 p.m.

Lord Thomas of Swynnerton rose to ask Her Majesty's Government whether they are satisfied with the consequences of their aid to foreign governments for the purpose of economic development since 1950; and, if not, whether they will reconsider the basis of their policies on this matter.

The noble Lord said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. The most important point I have to make is my first one, although that is the one which some noble Lords may feel to be the most irrelevant: that is that the wish of people in the richer parts of the world to help those whom Kipling called, rather over-simply, "those without the law" is a most ancient desire. The desire to help the poorer parts of the world was one of the main motives, indeed, behind the expansion of Europe in the first place to bring about Christianity, civilisation and commerce—David Livingstone's three Cs; it was at least as important a motive in empire as the desire to enrich oneself or the desire for strategic advantage. That was so with all the European empire builders, and probably even with the Russians in Central Asia in the middle of the last century. To attribute base motives to empire is to begin consideration of all these matters relating to our policies towards the new ex-imperial countries on the wrong foot—that of historic guilt from which no good can come.

Secondly, though of course there were many dark sides to European expansion, one must in fairness always note the vast benefits. It may be fashionable, understandably, to recall, for example, the destruction of many of the original peoples of the American continent, or the slave trade from Africa to America. But just consider the vast upheaval which this expansion caused in the world economy. Consider the maize and the cocoa which Europeans brought from the Americas even to Africa. Consider the potatoes which the Europeans carried from South America to North America; the tea from China to India; the sheep, chickens, horses and cattle which the Europeans took to the Americas; the rubber from Brazil to Malaya, and indeed the turkeys which the Europeans similarly carried to Turkey. Those fundamental shifts of agriculture made the modern world what it is. Was it aid? It was certainly development.

Europeans also carried abroad the concepts which, like it or no, enabled the world as a whole to embark on the adventure of modern statehood. Nor should culture be forgotten. Gilberto Freyre, in his great social history of Brazil, recalls how the Europeans—the Portugese in this case—brought to Brazil the trumpet, the violin and the art of writing down music, to the immense profit of all.

As we know, almost all the European empires mostly collapsed, leaving the infrastructure which enabled Europeans in the past to contribute easily to the improvement of the poorer parts of the world. The administrative infrastructure also collapsed. In some places, of course, that did not matter at all. The old Commonwealth, the United States, North America, had already by that time become richer than Europe. In other places, as in central Asia, a tradition of despotism and geographical proximity has enabled the Russians to preserve their empire. No doubt it was to that empire that the Brandt Report was referring, when it spoke of "the urgent need to end colonisation".

But what about those wider areas where the imperial powers had withdrawn, for political reasons at home, before what many believe to be the philanthropic side of the imperial mission was over? Plainly, the spirit of generous philanthropy survives among all advanced peoples. That is why we are here tonight. Equally plainly, the needs of many peoples in the poorer parts of the world survive, too. In many cases, their plight is worse because of the colossal pressure of population, itself the product of improved health consequent on innovations in medicine.

The question before us tonight is essentially: can the desire and the need be well matched? During our discussion tonight, we shall no doubt hear many accounts of successful aid—and, of course, there has been such—and also of wasteful aid; an unwanted dam in Africa, an ineffective steel mill in Brazil, an expensive agricultural experiment in some other country, whose effect none can really judge because of the vast corruption which has finally sunk it.

Before suggesting recommendations about these matters, I should like to make five contingent points. First, and there is no point in denying it, there is still or there was until the death of Mr. Chernenko—perhaps the benign Mr. Gorbachev will have changed that—the Soviet interest in destabilizing so many of the poorer parts of the world for the benefit of Soviet strategic designs. I really think that that must not be forgotten. Thus we are dealing with countries which are, many of them, at the heart of power politics at the present time.

Secondly, we should look at the figures in, for example, the tables of relative prosperity printed in the annual world development reports published by the World Bank. We need not go very far into these excellent tables to see that, leaving aside all oil exporters, most economically free countries are better off than those which are unfree, and indeed that the freer the country politically the higher up the table it comes. This correlation between liberty and development and economic success is not always realised, perhaps because it is a relatively new development. Noble Lords may recall a famous paragraph in the late Lord Acton's essay on the History of Liberty, where he contrasts a Switzerland poor but free, with an Austria-Hungary enslaved but rich. This is a most unusual development.

The new correlation is worthwhile recalling at an early stage when considering aid, since it allows us to notice that countries whose governments which have a liberal policy towards the export of earnings and towards the free movement of capital; which have a respect for contracts and which at least know of the case for free trade, even if they do not always put it into practice, are not only happier places in which to live but are likely to leave their country more prosperous. The link between free markets and development is direct. Should we not deliberately seek to encourage the first in all our considerations of aid?

My third point—and here I may, I realise, be anticipating some of the genial arguments of my noble friend Lord Bauer—is that it does not seem that many of the countries which in recent years have broken across the threshold between relative misery and relative or increasing prosperity—not just Singapore, Hong Kong, South Korea and Taiwan but also Kenya and, increasingly, India—have owed much to external aid for the fact that they have embarked upon that essential crossing. That should not surprise us.

It was not after all external aid which in this century made, say, Sweden move from being primarily a pastoral people to a rich one; nor, of course, in the last century was it external aid which helped any of us to make the same enriching journey, although I think it is fair to say that none of us would be here today had it not been for the Marshall Aid programme in the 1940s—but, noble Lords will be quickly pointing out, that was recovery aid rather than development aid.

Fourthly, it is useful to consider before getting down to the nub of the problem the terms of trade in the last two generations. Before 1939 one could rely on the easy reckoning that the poorer countries were largely agricultural, and so wanted to export their products in return for manufactured goods, which were produced in those days by advanced countries which wanted agricultural products in exchange. This state of affairs no longer applies. On the contrary, it is the rich industrial countries which have become also the exporters of food, sometimes, admittedly, accompanied by agricultural politics or policies which can only be described as surreal. It is about 20 years since I heard the late Sir Peter Runge, at that time the chairman of Tate and Lyle, rightly say that, if the rich countries really wanted to help the poorer ones, then they would cease production of sugar beet at a subsidy and buy their sugar cheaply from the Caribbean, and would avoid all similar sorts of competition. Instead of that, the European Community has in the past few years begun to export sugar made from beet while paying Caribbean producers not to produce it from cane.

Fifthly, and before I make some suggestions as to what our policy should be, we are, when talking about these developing countries, dealing with a vast number of different places. It is still fashionable, regrettably, to link them altogether as the "third world". The phrase is apparently irresistable but it is utterly misleading. To suggest that Brazil and Bangladesh, Sri Lanka and Jamaica have anything in common is an insult to them and a foolish denial of historical diversity at the very least; a diversity which they treasure, in my experience, even if Western opinion does not do so.

Now I come to the Question which is on the Order Paper, to which perhaps I should have come before, which essentially concerns the criteria by which we decide on how to administer the aid we give, to whom we give it and what we give. What a vast number of questions are raised—even if we exclude all questions of emergency aid including food aid, which had such an ample hearing yesterday in this House. Do we act through the European Community or other internal international bodies, for greater effect; or alone, for greater accountability? Do we give priority to the Commonwealth? Even if we do so, the Commonwealth is large. The contribution of the entire British GNP to Commonwealth aid, much less than 1 per cent. of it, would not make a great difference if spread throughout all those countries. So one must choose types of aid and countries.

Further, there are many countries which were or are in some respects part of what might be called, and was called, the "informal empire". This included for a time even the Argentine, which, noble Lords will recall, at one stage in our history was referred to as the sixth dominion. Perhaps we should ask what if anything, other than sentiment, which is not always a good guide, is the intellectual underpinning for giving now the Commonwealth a special claim on our philanthropy. This is a question which perhaps we should ask. What about the countries of Latin America which, who knows, may turn out in the end to be better democracies and better customers than some of the old members of the Empire, even if those Spanish American countries are the equivalent of a Commonwealth for our new ally and, I hope, future European Community partner, Spain?

Then we might ask: should we concentrate aid on countries which, like, say, Nicaragua or Mozambique, seem now to be of political importance and just might turn to us politically if we were to play our philanthropic cards intelligently? Can we perhaps bribe countries out of totalitarism into becoming democracies? Here, I believe at long last I am in sight of a principle. I doubt if it can ever be beneficial to us, or in the long-term interests of the people concerned, to aid countries whose leaders have explicitly turned away from freedom as we know it, and subscribed to totalitarian Marxism and Leninism. But I am as aware as anyone in this House of the frequent difficulty of deciding when and whether a country has specifically turned away from free habits. Still, the principle remains, surely.

My Lords, aid should be given as a rule to countries in accordance with our own world view. We should help countries whose leaders know the essential binding of a prosperous and open world which I previously noted, and we should allow that prejudice which we have to be known. The further success of such free market-minded countries will be a magnet for others.

I should also like to see a really radical look at the European trade policies to avoid the follies pointed out vividly to me by Sir Peter Runge. Consideration must be given to the idea of environmental aid. If the world as such benefits from, for example, the survival of the Brazilian rain forest, but the Brazilians wish to chop part of it down for building furniture or for firewood, we might see whether we cannot help the country concerned to make a globally strategic, not a nationally tactical, decision. Unfortunately, the concept of global strategic significance is not one which any two people are likely to agree on. My own inclinination in the search for criteria in this great and fascinating maze is, I must say, to suggest that the Government should work towards concentrating all permanent development aid on one element—namely, education, including vocational and technical education.

Given the significance of the spoken word because of transistors, and recalling the role in the recent Iranian revolution of the cassette, the opportunities for expansion of an educational side to the British external services could be enormous. I am sure, too, that wherever possible aid should be channelled through individuals on the spot, not through large international bodies which rarely exchange information even among themselves, and when they do so, do so in incomprehensible jargon.

When speaking of education, I should say that I personally regret the recent cuts in the budget of the British Council to which a letter from its director in The Times on Tuesday made reference. All the same, the British Council should not be shy, as it too often seems to be, of giving, through its agencies a specifically British message such as that lasting prosperity can, except in exceptional cases, only come about when people acquire a sense of personal responsibility in the great tradition which the British were the first to foster.

Some noble Lords may well argue that any such emphasis on education misses the point in a world in which many are starving and will quote the words of the Russian polemicist Chernyshevsky at a time when the Russians were developing in the 1860s. He said: A pair of boots is more important than all the plays of Shakespeare. To that, I would only note that no one can make boots without vocational training. I recall that at a time when we in Britain might be said to have been embarking on our first epoch of self-sustained economic growth, Dr. Johnson found a boy who answered correctly for more poor boys all over the world than some would expect. In reply to Johnson's question, "Boy, what wouldst thou give to know about the Argonauts?" the boy replied, "Sir, I would give all I had".

9.25 p.m.

Lord Harris of High Cross

My Lords, I am sorry to start with an apology, but owing to the unexpected lateness of the hour of starting this debate I shall have to leave to catch my last train on the right side of midnight. If all speakers, except the opening speaker and closing speaker, address your Lordships for only as long as I intend to do, I will be able to remain here to the bitter end.

I will start by congratulating the noble Lord, Lord Thomas, on asking what I interpret as being a rhetorical question for debate and answer. He asked whether the Government are satisfied with the results of decades of foreign aid to governments for the purpose of economic development. How can anyone be satisfied when aid to the former colonial terroritories in Africa to which he referred has mocked their independence by making them abjectly dependent on continuing handouts?

Instead of well-based development in this part of the world, we hear from the United Nations that most countries between the Sahara and South Africa will continue to need food aid even when the rains return. I dare say that before the end of this debate we will hear from the apologists for ever more aid of particular examples of development projects which have flourished with our help. But none of these examples begins to prove that foreign aid was necessary in the first place. Indeed, there is far more extensive evidence throughout Asia and Latin America of large-scale economic development that owes nothing whatsoever to aid and everything to commercial investment.

As 200 years of European and American history demonstrate, projects which can use capital productively are able to borrow at home and abroad so long as governments do not undermine confidence, as African governments have so frequently done. It follows that the most aid can do for development is to cut the cost of borrowing, which is often a minor magnitude. Indeed, the claims made for aid here and elswhere have been massively exaggerated by its obsessive advocates—and expectations are still being absurdly inflated. Despite its multimillion dollar total, aid must always remain a very small percentage addition to the aggregate national incomes of the recipient countries. But aid is not given to individuals; it is given to governments, and it represents a much larger proportionate increase in the revenues and foreign exchange available to the ruling politicians, whose power for mischief is thus massively magnified.

In this way the necessarily marginal help that aid might give to development is more often than not offset by the adverse repercussions of illogical, irrational and perverse government policies. Since many of the defenders of aid are not much interested in economic analysis or theory, I propose to offer two practical examples of self-inflicted damage to development by governments in Africa who receive foreign aid. I should emphasise for the benefit of the noble Lord, Lord Hatch, that my criticism is of collectivist intervention, whether by governments described as socialist or, more neutrally, as paternalistic.

My first example is from Tanzania, where in 1951 the colonial government had given a large tract of land on the Kilimanjaro uplands to eight farmers who had to clear 10-feet high bush and spend £20,000 on initial development. Over a period of 25 years a thriving community was built up with houses, shops and well-maintained modern equipment. In addition to wheat, various crops were produced as well as sheep, dairy and beef herds. Yields were well above world averages and by the mid-1970s the farms were supplying nearly half the local wheat of the country, despite periodic droughts, disease, and other crises. The farms paid wages above the average and contributed a rising share of taxation.

Such outstanding success was too much for President Julius Nyerere and his socialist advisers. They decided to buy out the farmers with money shamefully provided, I think, by the British Government of the time. The flourishing enterprises were handed over in prime condition to the somewhat grandly-named National Agriculture and Food Cooperative. The new managers were considerably lacking in experience and competence but were, of course, members of the ruling TANU party. Five years later the co-operative was cultivating one-third of the previous acreage, yields had fallen by three-quarters, and it was £1 million in debt. Can anyone doubt that such ideological nonsense has retarded development and contributed to the crisis of food supplies, which is then laid at the door of the West?

With impartiality I move away from the former British colony and offer my second potted case study from Ethiopia, which reveals a similar socialist, or worse, government destroying development whilst receiving aid from the West. In 1960, Mitchell Cotts agreed with the Emperor Haile Selassie to attempt to grow cotton on desert land near Tandaho in the Awash Valley, north-east of Addis Ababa. Advised initially by Arthur Gaitskell from the Gezira scheme in the Sudan, the company overcame every kind of obstacle to start planting within one year and developed a cotton plantation extending to 25,000 acres, increasing by several thousand acres a year. In 1974 Mitchell Cotts negotiated a visionary plan to irrigate 2.5 million acres of virgin land, with IDA backing, to sustain new townships and supporting services, including hydro-electricity. Then came the Marxist coup d'état, followed by nationalisation and a gradual rundown through lack of fertiliser, lack of pest and weed control, and lack of commercial management. As in Tanzania, yields have fallen dramatically towards the point where the cotton may no longer be worth picking.

Tanzania and Ethiopia are only two examples of countries whose governments receive foreign aid, not to finance development but to aid and abet in the process of destruction. Droughts may be acts of God, but famine and avoidable suffering are acts of government. The crowning tragedy is that Her Majesty's Government are accessories to these crimes against the people of the countries they wish to help.

In the absence abroad of my noble friend Lord Seebohm, I urgently draw the Minister's attention to his speech on the Lomé Convention on 6th June last year (at column 656) when he called for a code of practice to which recipients of aid would be required to conform. I would go rather further than my modest noble friend Lord Seebohm and once again ask Her Majesty's Government to consider serving notice that, after a stipulated period, future aid will be confined to countries whose rulers refrain from ideological policies that have destroyed productive enterprise, disrupted internal markets, distorted foreign trade and, in multifarious other ways, damaged the welfare and best interests of their own people.

9.34 p.m.

Lord Walston

My Lords, I am, as I am sure are all of your Lordships who are still here, most grateful to the noble Lord, Lord Thomas of Swynnerton, for giving us the chance to discuss this very important subject. We are also grateful for his introduction of it. I should like to have the time and temerity to disagree with him on some of his professorial pronouncements of a historical kind. I shall not attempt to do that, but I am in agreement with a great deal of what he said.

As regards the speech of the noble Lord, Lord Harris of High Cross, I would not dispute either of the two examples he gave. I think that they are irrefutable, but I suggest to your Lordships that they do not represent an overall fair picture of the results of aid. Undoubtedly some aid has been squandered; nobody would deny that. But equally undoubtedly a great deal of aid has been wisely spent and has given good results. I am convinced that, although there can be improvements in the methods by which we allocate aid and in the methods used to dispense that aid within countries, any diminution of the overall amount of aid would be disastrous not only on humanitarian grounds but also on political grounds.

I have spent the past four weeks in Africa, and a good deal of that time in Zimbabwe. I hope that your Lordships will forgive me if I refer solely in my speech to Zimbabwe. I do so not only because I think that it is a most interesting and, incidentally, encouraging country, but also because I think it gives a good overall picture of what happens when generous aid is given and in the main is wisely applied. It is better, I believe, in a debate of this sort to stick to one country in this way, because time and knowledge do not enable many, if any, of us to give a really wide and balanced view of the whole third world, whether or not that is the right description of it.

I would say also in regard to Zimbabwe that it is in many ways typical of African countries. It is typical in certain respects at least. It has over the past few years suffered, as have all third world countries, from world recession, it has suffered from high interest rates, it has suffered from the rise in oil prices and it has suffered from drought. It has also suffered from special difficulties of its own as a result of the 15 years of savage civil war to which it has been subjected. It has had the particular problem of trying to absorb into civilian life tens of thousands of young men and women who for the past 10 years at least of their lives have known nothing but guerrilla warfare and have been taught to live oil their wits and by their guns. It is not an easy job to absorb those people into a peaceful economy and it certainly is an additional handicap from which so far Zimbabwe has suffered.

In the second place it has suffered from the loss of many senior civil servants—white civil servants who decided that they preferred not to live under the new regime when Mr. Ian Smith eventually departed from the government of his country. It has suffered at the same time from the loss of a good many large and extremely efficient farmers. It has also suffered from the absence of experience among the members of the Government themselves who have been denied the chance of any form of experience, not only in government but also in opposition. Zimbabwe has had these other disadvantages in addition to the normal disadvantages from which most African countries have suffered.

How has it fared? I believe that it has done well; it has done remarkably well. In the first place it is perfectly true, one has to say quite frankly, that law and order is still a problem, but that is a problem which is grossly exaggerated by the press in this country. If one looks at the statistics, one finds that the number of crimes of violence in Zimbabwe is very considerably less than is the case in this town of London, or in New York or many other big cities, all of approximately the same population. Therefore, despite its crimes of violence, which nobody can and should deny, Zimbabwe is coping reasonably well with that. But, far more important, it has achieved an amazing degree of reconciliation between blacks and whites. In spite of those 15 years of savage war you now have the black and the white population living in Zimbabwe in peace and in trust, and working together for the good of what they all consider to be their own country.

Thirdly, it has succeeded—and I have already touched on this—in absorbing a very large number of those freedom fighters into civilian life, and they have now become productive and useful citizens. Fourthly, it has maintained the very high standard of farming expertise which characterised what used to be entirely the white farms, the commercial farmers, in the pre-independence period—a very high standard. That has been maintained, so that today Zimbabwe can boast that its average yield of maize is the highest in Africa and the price that the farmers receive for their product—which satisfies them—is the lowest in Africa.

However, it does not stop with the large commercial farmers. The production of peasant farmers has been increased in the most remarkable way, so that their deliveries last year, in place of being 18,000 tonnes as they were in the years previously, have now risen to 80,000 tonnes, which is a truly remarkable achievement. Much of this is due to the excellence in agricultural research which has been built up over many years but which has been maintained by the new regime, and to the maintenance and the extension of advisory services formerly available, virtually one can say only to the large farmers but now extended into the much smaller peasant type of farming on the tribal land.

Perhaps I may digress for a moment to give your Lordships an example of what this has meant. The 80-year-old mother of one of the Ministers of the present Government lives on her own small patch of land in a tribal area. Her son was coming to visit her, and she asked him to bring a certain type of fertiliser which was necessary for her maize crop. He, being a Minister, did not know a great deal about fertiliser or about agriculture. He passed the message on to his secretary and a bag of fertiliser was duly put into his car. He drove up to see his mother. The first thing she said to him was, "Have you brought the fertiliser?" He said, "Yes, it is in the back of the car", and opened the boot. She looked at it and said, "This is the wrong kind. I asked for No. 4 and you have brought me No. 1".

It is a remarkable achievement, is it not, that an 80-year-old peasant woman (as one can only describe her) living in a remote part of that vast country should now know precisely what kind of fertiliser she should use in order to get the maximum yield from her crop? Great credit must be due to the extension services which have made that possible, not only in this case but throughout the whole of the small farmers' sphere.

As a result of all this, Zimbabwe has been given a clean bill of health by the International Monetary Fund, and for the first time since independence it has now achieved a favourable balance of payments both on visibles and on invisibles, inflation is still high, but it is now within sight of reaching its initial target of 10 per cent. It is coming down quite steadily and quite steeply.

The improvements are not only economic, though they are very important. They are the basis, as I am sure many noble Lords will say in the course of this debate, of other improvements. But one wants social improvements as well as economic, and Zimbabwe has not lagged behind in this. Roads have always been good in that country, in the days when it was Rhodesia. They have been maintained in a very high state of excellence. There is no question of their running down, and the roads into the tribal areas have been extended widely. That, obviously, is of enormous importance in opening up the potential of a country.

Here, I would point out to the noble Lord, Lord Hams of High Cross, that while it is perfectly true that many types of investment should only be undertaken if there is a clear commercial return, and that when there is a clear commercial return it may be, but does not automatically follow, that private capital will find its way there, in the matter of roads, transport and various forms of infrastructure, there is no immediate commercial return but without them it is impossible to develop the full potential of the country. That is one of the greatest things that aid can and should be doing.

In addition to roads, there has been a great improvement in public health. Formerly, there were scarcely more than a dozen clinics throughout the whole of the countryside. Today, there are over 600 of them. Rural schools have been increased vastly. In 1980, 22,000 students entered secondary school. Last year there were nearly seven times that number—140,000. In addition—I shall stop my list here—Zimbabwe embarked last year on an extensive campaign of family planning and birth control, one of the things, I am sure most noble Lords will agree, that is of vital importance if there is to be enough food of a proper sort for the population.

Zimbabwe could not have done these things without aid from outside. It could not have done it alone especially after the ravages of civil war. This country has rightly been the main contributor to that outside aid. Since independence five years ago, I think that I am right in saying—the noble Baroness will correct me if I am wrong—we have disbursed something of the order of £100 million, a substantial amount, and other countries have also contributed. I do not for a moment say that every penny of that money has been wisely spent and that none of it has been squandered. I do maintain, however, that the great majority of it has been wisely spent and that it is getting productive results. Without it, it would have been impossible for Zimbabwe to achieve the advances that it has.

In other words, there is an example here not of the ideal form of aid-giving and not of the ideal form of expenditure on projects, but a very practical and very real success story of a collaboration between aid donors and aid recipients. This has led not only to a stable country and a country of increasing prosperity but to a prosperous and a stable country within central Africa, a vital area. It is a country that today is in a position to export substantial quantities of grain to its neighbours some of which have suffered more from drought, some of which are not so efficient, and some of which have less good land. In Zimbabwe at least, and I believe in other third world countries, aid has been put to a use that has done a great deal of good to the inhabitants of those countries and a great deal of good also to ourselves and the western world as a whole.

9.49 p.m.

Viscount Montgomery of Alamein

My Lords, it is a pleasure to follow the noble Lord, Lord Walston. Many years ago I accompanied him on two trade missions overseas from which we undoubtedly learned a good many useful things, and, I hope, achieved some useful objectives. The noble Lord confined his remarks to his experiences in Africa. By the same token my illustrations will have to do with Latin America, a continent with which I have had some experience.

We are all grateful to the noble Lord, Lord Thomas, for introducing this subject. As one would expect, my noble friend gave a fascinating tour d'horizon, which, for a distinguished historian and academic, is quite right and proper. I was particularly interested in two points that he made. One concerned the link between free markets and economic success, which I am sure is totally correct. The other had to do with trade being more important than aid; and that ultimately must be right. It is on this latter aspect that I propose to concentrate most of my remaining remarks.

As I understand it, United Kingdom Government aid policy has been intended to obtain bilateral objectives through multilateral means—a difficult but not impossible task. Obviously, in the last few years there has been some attempt to raise the ratio of bilateral aid as against multilateral aid, but I believe that in our aid philosphy a balance will always be required. These are two aspects of the subject which in fact came up in the short debate on trade with developing countries which took place here on 23rd May last year. It was introduced by the noble Lord, Lord Hatch, who is to follow me tonight.

It seems to me that in certain ways this debate is actually parallel to that and follows on quite logically. It is important that when we have aid it must clearly operate to the benefit of the recipient countries. But it is essential to balance development needs of the third world and the consequential development criteria of ODA with the commercial needs of British industry, because the two things run in parallel. It therefore follows that the aid and trade provision, which is an important part of our aid policy, plays a role in the implementation of British aid, however philosophically undesirable that may be. I accept that there are people such as the noble Lord, Lord Harris, who feel that this is not correct. But ATP has the advantage that it can be brought into play so as to avoid handouts over which we have no control, and it thus ensures that the British participation takes place effectively and efficiently.

As a sideline, this clearly has domestic advantage in terms of employment. But, more importantly, it also increases United Kingdom visible trade, which must be a major goal of our total industrial and commercial strategy. At the same time, it is not unrelated and it is extremely important that the activities of ECGD should be included in this revision and analysis of our affairs, since the provision of credit at OECD consensus rates—that is, at rates which are below the market—constitutes aid, whichever way you like to define it. In this case the ATP component of a major infrastructure project will have the effect of reducing real interest rates, and this clearly is important at a time of high debt and high debt servicing obligations in the recipient countries.

What perhaps is more important in these instances is to concentrate on the quality rather than the quantity. Here I think that I am at one with the noble Lord, Lord Harris, because far too often aid statistics are bedevilled with numbers and the quality of the project tends to get ignored. After all, it is the quality of the project which will produce the most effective aid contribution in the recipient country.

I should now briefly like to turn to the subject of multilateral aid, which it is intended to reduce a little in the next few years, and perhaps indicate Why this is not necessarily the best thing to happen. As an example I should like to cite British participation in the World Bank projects. It is a fact that projects that have been financed by the World Bank have shown considerable advantage to British industry. British participation in these projects has been greater in relation to supply contracts than our share of the world trade and our share in the World Bank as an institution. That is very creditable, much to be encouraged, and reflects well on British industry for having participated in offers for the procurement element of those projects.

I am not sure whether the same situation applies on the procurement side of the Inter-American Development Bank, but I suspect that the position is not so good, since the Inter-American Development Bank applies only to Latin America and the Caribbean region, where British trade has declined over the last few years.

Turning from aid to trade, what Latin America needs above all is investment in wealth-creating industry. For many years a major catalyst in stimulating investment has been provided by the World Bank through the International Finance Corporation. This corporation exists to provide equity and loan finance to private enterprise, from which the United Kingdom has benefited.

In the debate on trade last year, to which I have already drawn attention, the question of the creation of the Inter-American Investment Corporation arose. The Inter-American Investment Corporation has been formed by the IADB to mirror the International Finance Corporation, but it will specialise only in Latin America and the Caribbean and will handle smaller projects. Unfortunately, the United Kingdom rejected the opportunity, and it is now too late to participate in the initial capital formation. However, it is not too late to participate, and the opportunity will occur again next year.

Therefore, I wish to remind Her Majesty's Government that the objective of IIC is to channel capital investment and to transfer technology from the industrialised world to the small and medium-sized private enterprises in the region. Surely this is an activity which is wholly in line with Her Majesty's Government's policy. Therefore, I hope that there will be some reassurance that this will be pursued in the future.

Earlier this week I attended the Inter-American Development Bank meeting in Austria and, among other things, I was privileged to hear the speech by the head of the United Kindom delegation, Sir Crispin Tickell. It was balanced, interesting and constructive. It was very well received, particularly as Sir Crispin Tickell delivered his general remarks at the beginning in Spanish, the natural language of well over half the delegates at the conference. However, what was more relevant was that in his closing remarks Sir Crispin said: The British Government will approach discussions about the role of the Inter-American Development Bank, and its future resource requirements, in a spirit of respect, of openness, and of co-operation". Those are very encouraging remarks with which I wholly concur. I therefore hope that this will also include participation in the Inter-American Investment Corporation at an early date.

10 p.m.

Lord Hatch of Lusby

My Lords, we are all grateful to the noble Lord, Lord Thomas of Swynnerton, for introducing this debate. I was somewhat disappointed in the way in which he introduced it. There is nobody so vehemently ideological as a convert, but it seemed to me to be a little strange for a former Socialist to be talking about our urge to provide aid as being based on guilt. Surely any Socialist has been brought up in a humanitarian philosophy. We do not need guilt to seek to help our fellow men.

I was also, as a convert, struck by the peculiarity of his new enthusiasm for the free market and its success. Is this free market to be seen in the common agricultural policy, in the commodity markets or in the protectionism of the textile industry, the multi-fibre agreement and such like? I thought that he strained our credulity rather far in slipping over the question of Marshall Aid. Surely that is a valid comparison with the provision of aid today. He says that it was aid for recovery not development. What is the difference? The third world is at war against poverty, against drought, against disease, against illiteracy. Surely the aid that the wealthy world is providing for the third world can be compared with Marshall Aid, which set Europe on its feet again after the war.

Finally, in his speech, I wondered just how he would identify and characterise the authoritarian régimes to which he would deny aid. He appeared to identify authoritarian régimes with something that he called Marxist-Leninism, although I have never understood what that meant because in the so-called Marxist-Leninist countries that I have visited I have not come across anybody who had ever read either Marx or Lenin substantially. Why should one identify Marxist-Leninism with authoritarianism? Chile is not Marxist-Leninist: is it not authoritarian? South Africa is not Marxist-Leninist: is it not authoritarian? Turkey is not Marxist-Leninist: is it not authoritarian? On the other hand, I can tell the noble Lord that I agree with him, perhaps surprisingly, that criteria are needed before aid is provided.

Lord Thomas of Swynnerton

My Lords, I think the noble Lord, Lord Hatch of Lusby, will find that I used the word "totalitarian" rather than "authoritarian" in the sense to which he is referring. The distinction between the two is surely evident to him.

Lord Hatch of Lusby

My Lords, I would not say that it is very evident to me. I bow to the noble Lord's superior knowledge of what he said, but I took it down as he said it. I rather think that Hansard tomorrow will show that he used the word "authoritarian". Whether he did or not is a quibble because we are really talking about authoritarianism, whether it is under a totalitarian régime or any other kind of authoritarian régime. It is not a question of whether it is a single person who is in control, surely. However, many Marxist-Leninist régimes are certainly not totalitarian. They may very well be authoritarian, and indeed are authoritarian and totalitarian, in the sense of the totality of power held within a few hands. But does that not apply to Turkey, Chile or South Africa?

However, I was trying to be conciliatory to the noble Lord in saying that I do agree with him that criteria are needed for the provision of aid. Those of us who have been in the aid field for a long time and who have had close relations with the third world would none of us assert that since 1950, which this Motion refers to, aid has been provided on a perfect basis. There have indeed been many shifts in the manner in which aid has been provided and the objects for which it has been provided. We have been experimenting and we have made many mistakes. So have the recipients: nobody in this field would ever deny that. I referred yesterday in the debate to that most seminal book of Professor Dumont's, published in 1962 in this country, False Start in Africa, which shows that those of us who were right in the field and who were the greatest supporters of an increase in aid from the developed world were still very critical and had the right to be so, because we were trusted; we were the friends of the people who were receiving this aid, and we were very critical of what was done with much of it. I do not withdraw any of that criticism at all, but I should like to give just a little insight into the way in which many of these mistakes by donor countries have come about, because there is a great deal of misunderstanding of the subject.

For instance, it is often said—I have seen this said recently and had to reply to it on television—that President Kaunda is a dictator. Sometimes one wishes that President Kaunda was a dictator. I have sat in his study scores and scores of times, discussing issues of economic development with him—discussing, for example, quite recently whether it would not be more economically advantageous to Zambia to transfer back to the steam engine and cut down its oil bill. Time after time I have seen President Kaunda agree, after a long discussion, make a note and pick up the telephone and ring. And nothing happens. And another six or 12 months afterwards it still has not happened. Why?—not because the President does not want it to happen but, first of all, because there is a bureaucracy and we know how a bureaucracy can frustrate the desires of a political leader. Secondly, there are constituents. People do not seem to realise this, but there are elections in Zambia and there are constituents to be considered. And among those constituents in a country like Zambia there are some very important ones like Anglo-American, who are the biggest farmers in the country.

So when I look, as I did way back in 1968, at the draft five-year economic plan and see the pious hopes about increasing agricultural production expressed in the preface and then point to the figures and show that they do not bear out the forecasts which are contained in the preface, then I am told: "Ah yes, but along the line of rail, where most of the white settlers live and where Anglo-American has its farm, these are the people who really govern the economy". Therefore, although it might be the aim to develop the peasant economy, in practice those who have the greatest influence with the bureaucrats and with the politicians are all frustrating the desire of the President. I have seen it happen with President Nyerere.

Talking about President Nyerere, he has two big advantages over President Kaunda. First, he does not have so much wealth in his country so there is not so much corruption. But, if we are talking about corruption, anybody who has lived in the United States will not believe that corruption in Africa can go anywhere near the type of corruption that one sees in the commercial world of the United States. You may talk about corruption, but in Tanzania corruption has been reduced to a minimum.

The noble Lord, Lord Harris of High Cross, gave us his story about the misuse of aid, and I do not doubt it for a moment. But we misused a great deal of our own taxpayers' money on the Tanganyika groundnuts scheme in 1951, which was conducted by the British. Yes, of course we made mistakes. But President Nyerere, despite the rising oil costs, despite the falling commodity prices, despite the increase in import costs, despite drought, despite the world depression, has still spread literacy until it is virtually universal throughout his country. That was not the case under colonial rule. He has spread health care until it extends right across Tanzania. That was not the case under colonial rule.

There have been achievements and there have been mistakes. I should say that the best example of a world leader who is self-critical is President Nyerere himself. If you want to see what is wrong with Tanzania, you have only to read or listen to President Nyerere. He is the greatest self-critic of any politician that I know. But when you come down to the difference between Tanzania and Zambia, you see some of the complexities of the work of economically developing countries like these. President Nyerere has the great advantage of not having as much wealth in his country as President Kaunda, so there is not as much temptation or urge to élitism and corruption.

President Nyerere also has the great advantage that there has been a national movement in that country right from the beginning of the anti-colonial movement and right through independence. He has not had to balance tribal factors and he has kept around him a group of people, and brought into that group younger and younger people constantly, so that he has been able to have a team. President Kaunda has never been able to do that. Nevertheless, the single issue remains that what many of these African leaders, who are so ignorantly termed "dictators" in this country, have wanted to do, they have not been able to do because of a whole variety of factors which we in our political history should know about.

What I should like to do in my last few minutes is to repeat the plea that I made to the noble Baroness yesterday. I am not going through again the whole issue of the importance of the work of the International Fund for Agricultural Development, because we covered it fully yesterday. I hope that she has taken note of it and will get her department to think more deeply about it, and to see whether there can be greater funding of that international fund, rather than the declining funds that have been reported to us.

What I should like to do is to make three quick quotations. The first is from Tom Clausen, the president of the World Bank, when he was interviewed in this country last year. He is a very conservative banker, who said: I would like the seven strongest nations to realise that the developed countries cannot pull themselves out of the economic mess that we find ourselves in within their own strength. I think there is a growing awareness that the developed countries need the developing countries. Secondly, there is a quotation from the evidence given to the Select Committee, of which I am a member, but which is published in the examination of the officials of the Overseas Development Administration of 16th January of this year. One short paragraph from their memorandum states: There is at least a detectable pattern which suggests that where the United Kingdom do a significant aid programme, manufactured exports are greater than would be suggested by world trade; and the larger these aid allocations are, then on the whole the larger these export totals". Thirdly, from the noble Lewd, Lord Belstead, speaking in the debate to which the noble Viscount has already referred at col. 292 of the Official Report of 23rd May 1984: In 1983 some 75 per cent. of our bilateral aid of £643 million was tied to the procurement of British goods and services. In addition, we reckon that we are winning export business in multilateral aid programmes broadly equivalent to our contribution of some £417 million". Aid is in our interest. It has already been said that we get orders from both multilateral and bilateral aid. It is in our interest. It is in the interest of the manufacturing industry of this country and the employment of this country. I would say this to the noble Baroness. I know that she cannot change the Government I believe that she is a compassionate woman and would wish to change the Government if she could, but she is not able to change the Government; she is not able to change Government policy. But what she is able to do, I hope, is to bring her influence to bear—I believe she will—within her department, and particularly within the aid section of her department, to recognise that if we are going to make a serious effort to change the direction in which the world is going, and to change the direction from the cutting of aid—which I have shown from my quotations is cutting our own economy and cutting our own employment—into an activity of Government which can seriously affect the world economy, along with those like the Scandinavians, the Canadians, the Dutch, and the Australasians, who will ally themselves with us, as I said yesterday, then some restructuring is needed within our own institutions.

We do need to recreate the Ministry of Overseas Development. We do need that Minister to be in the Cabinet. We do need to separate the Overseas Development Select Committee of the other House from the Foreign Affairs Select Committee. We do need to give that Overseas Development Ministry representation on our missions to the World Bank and the IMF and other such international economic organisations. We do need to take what the noble Viscount has described as the important provision of aid and trade provision away from the Foreign Office and the ODA and put it with the DTI, where it belongs.

We do need to take food aid and agricultural development away from that Ministry and put it with the Ministry of Agriculture. And we do need the Ministry of Overseas Development to oversee and coordinate and insist on co-operation between the different Ministries so that the thrust of our overseas aid policy does bring benefit both to the recipient countries and—and this is where I agree the noble Lord who put down this Question—the people of this country. Because, unlike some of my colleagues, I do believe that two basic criteria are needed in aid policy; the first is that there is genuine rural development, agricultural development, for the poorest of the people in the poorest countries of the world. This may very well need a reduction in the number of countries to which we give aid. Secondly—I believe this in quite a Machiavellian way—I believe that a great many people in this country—it is now estimated to be 76 per cent.—think that there should be the present level of aid or more. But if we are going to keep that, I believe that we ought to recreate that Development Education Committee.

I also believe that we have to convince the people of this country, like the people of Bathgate, who lost their jobs because the Nigerians could not buy the trucks they needed to distribute food, that their interests and the interests of those to whom we are giving aid are mutual, and that in giving aid we are also providing employment and economic activity in this country. I believe that this is the way for a government to mobilise the support of the people of Britain behind the dual function of humanitarianism and economic self-interest.

10.20 p.m.

Lord Blake

My Lords, I will be very brief. I really want to raise only one point, for the hour is late and the House probably will not wish to listen to me or to anyone else for very long at this stage in the evening. I should like first to express gratitude to my noble friend Lord Thomas of Swynnerton for introducing this subject this evening. I only want to refer to a point that was dwelt upon by my noble friend Lord Montgomery of Alamein; the question of multilateral and bilateral aid.

In 1979, when fighting the general election, one of the planks of the Conservative Party platform—a minor one, perhaps, and possibly not one that would have commanded an enormous amount of attention by the public at large—was that aid should be channelled more as bilateral aid, and less as multilateral aid, than it had been in the past. The expressions "bilateral" and "multilateral" are not very satisfactory but I am sure everybody knows what one means by them. By bilateral aid, I mean aid to specific countries—to specific governments. By multilateral aid, I mean aid channelled through international organisations of one sort or another such as UNO, UNESCO or the EEC.

Since this is an Unstarred Question, I should like to ask my noble friend the Minister, whether it is the case that the emphasis has now shifted the other way, because there are many figures to suggest that the emphasis now is more towards multilateral aid and less towards bilateral aid. Perhaps my noble friend will be able to say whether that has happened over the past five or six years. If it has happened, I hope she may see fit to tell us precisely why. If it has happened, no particular explanation has been given, so far as I am aware.

I believe there is a widespread view that the emphasis on multilateral aid through international bodies has some defects. One of these is the lack of control which the Government have over the way their money is spent, their aid is used, if it goes through the medium of an international organisation. By their very nature international bodies tend to be slow and cumbrous in operation. A government giving economic aid to a particular country can simply switch it off, if it finds—or is convinced—that the money is being squandered or not being spent for the purposes for which it was intended.

But to get an agreement among an international body to do that is extremely difficult and very slow. An example was the way in which the EEC went on giving aid to the Ugandan Government for a long while after it was perfectly obvious that President Amin's régime was one of revolting tyranny. Another case—which was almost grotesque—was the continuance of aid to the Argentine, to which the United Kingdom was contributing through United Nations, when we were still actually at war with that country over the Falklands.

Whatever the British taxpayers wanted, it certainly was not aid to a country using highly expensive and sophisticated weapons against the British fleet.

This raises another point because there is to some extent, I believe, a constitutional question involved. Aid given by the Government, whether to an international body, to another government, or to an institution within another country, is taxpayers' money. It is not money contributed voluntarily or privately. It is the taxpayers' money, and the Government are accountable for it. Therefore, the more the Government can control and influence the way in which it is being spent and can ensure that it is used for the purposes it is intended, the better for public accountability. That, I think, is a very important constitutional principle which will be generally agreed in your Lordships' House. This point was undoubtedly what those who drafted the Conservative manifesto of 1979 had in mind. As I said, the promise was made to move from multinational aid towards bilateral aid where one at least has a chance, or a better chance— although there is no complete certainty—of ensuring that aid is properly used.

So I end as I began and ask the noble Baroness to try to answer these questions when she replies to the debate.

10.27 p.m.

Lord McFadzean of Kelvinside

My Lords, the distinction, in many ways an artificial one, between developed and underdeveloped countries had its origin in President Truman's address to Congress at the beginning of 1949. The nomenclature has changed. "Underdeveloped" became "less developed", then "the third world", then "the south" and then "the group of 77"; but the basic distinction remains to this day. Yet there is no simple dividing line.

Admitting this difficulty, the Pearson Committee in the late 1960s nevertheless stated that, Few would disagree that countries with per capita incomes of less than 500 United States dollars fall unambiguously in the role of underdeveloped". Thus were over 100 countries and two-thirds of mankind classified as underdeveloped. However, whatever dividing line is taken, whether it be 500 United States dollars or its up-dated equivalent, it cannot have universal applicability. Indeed, translating national income statistics, themselves very suspect, into the common denominator of the United States dollar gives a false impression. True, one dollar buys little in the way of food in New York. Translated into its equivalent in the village shops in Malaysia and Indonesia it buys substantially more.

Moreover, people's needs can vary widely. In the tropics heating is not a problem, while the wood and atap houses which are well known in the South-East Asian scheme are well adapted for a tropical climate. They would, of course, be intolerable during a Scandanavian winter.

But the main point to be stressed about the developing countries, and some which have graduated from that category, is their great diversity in political systems, religion, language, customs, population densities and natural resources. Thailand has a long history of political independence, while others were occupied for substantial periods by imperial powers. Political systems vary from western style democracy through one-party states and dictatorships to continuing colonial rule. Some, the most prosperous, have relatively free market economies, while in others massive state involvement and so-called government planning are the order of the day. Some, such as Jordan, are homogenous, while others, such as Nigeria, have different tribes, languages and religions. Mauritania has 1.5 people per square kilometre, while Hong Kong has just short of 5,000. The urban population of Uganda is of the order of 10 per cent. while in Singapore it is virtually 100 per cent. Some, such as Indonesia and Malaysia, are rich in resources, while others, such as some of the sub-Saharan countries, are devoid of them.

The list could be expanded almost indefinitely, but sufficient has probably been said to highlight the fact that the dissimilarities among the countries are so wide-ranging that it is unlikely that any simple, single solution to their varying development problems will provide the key to success. Indeed, if there were simple answers, they would have been found long ago.

The second point I should like to stress is that economic development is a positive and not a zero sum game. The prosperous countries have not obtained their high standards of living at the expense of the poorer countries. Economic progress is founded on the effective use of existing capital assets, on the relatively intangible factors of the attitudes, aptitudes and managerial skills of the peoples concerned and on the flow of inventions, adaptations and technological advances—from the stage coach through the era of steam to the diesel and electric locomotives, from the piston engine to the jet-propelled aeroplane, from the candle to the electric light bulb, from the crystal wireless set to television, from the lathe of the Industrial Revolution to the numerically controlled machine tool. All these ideas, and many more, were produced by the industrialised countries, and it is on this foundation that their prosperity rests. In no way can it be claimed that these achievements were at the expense of the poorer countries.

The exploitation myth, however, dies hard. The backward state of some former colonies, particularly in Africa, is regularly paraded as evidence of exploitation, with the explicit or implicit assumption that if they had been left alone they would have achieved standards of living comparable to the industrialised countries. I am afraid that this strains credulity to the breaking point. Moreover, if the colonial powers had exploited these countries they would have been poorer at the end of the colonial regime than they were at the beginning. But this is manifestly untrue.

Malaysia, for example, is a relatively prosperous country. It owes much of this to three crops—rubber, palm oil and cocoa—none of which is indigenous to the country. Rubber came from Brazil via Kew and Singapore botanical gardens, the oil palms came from West Africa and the cocoa from both West Africa and Trinidad. Their transposition to Malaysia and other countries in South-East Asia was the result of investment decisions by companies and smallholders of many nationalities. Clearing the jungle and planting cash crops of this nature, suitable to the soil and climate, can only be viewed as creating an additional source of wealth and not as exploiting the countries in which they are located. The thriving, dynamic economy of Hong Kong—one of the few remaining colonies—seems to carry the load of imperial exploitation extremely lightly.

Moreover, if one looks at the really poor of this world—the bushmen of the Kalahari Desert or the Sakai in the Malaysian jungle—they have never owned anything that any developed country would want to take away from them. I think that the exploitation theory affords a good alibi for those who have failed to improve the lot of their peoples; it does not stand up to objective examination.

The last point I should like to make is the respective roles of private enterprise and the state in the development process. The Brandt Report, supported strongly by a former Prime Minister who is still a member of the other House, states that: In the world, as in nations, economic forces left entirely to themselves tend to produce growing inequality". Now leaving aside people who, for one reason or another, are unable to look after themselves and have therefore to be rescued by a safety net, the statement again is not correct. Let me give a simple example.

In Malaya and Singapore after the war it was quite normal for a middle-class household, or even a lower middle-class household, to have three servants, plus a gardener, plus a driver. Now it is lucky if it can afford one. This is due to the fact that economic expansion in these territories has produced alternative opportunities at higher wages. The standard of living of servants has increased to such an extent that the middle-class households can no longer afford to meet the costs of employing them on the scale that was previously the norm. Moreover, does anyone really believe that migrant labour from Turkey and from North Africa went to Germany because the poor in Germany were becoming poorer? The fact is that the poor associated with the rich are richer than the poor associated with the poorer. This is the result of the pulling or suction effect of economic development, and has nothing at all to do with Government intervention.

What is true of individuals is true of countries. Before World War II Germany was a poor country relative to the United Kingdom, Sweden, France and Switzerland. East Germany remains in that state today but West Germany did not become poorer. It is now in, the front rank. Pre-war southern Europe was poor relative to the north, but Spain, Italy, Portugal and Greece have, in recent years, shown higher per capita and aggregate growth rates than the rest of western Europe, as to Hong Kong, Brazil, South Korea and Taiwan. The relative positions of various economies can change appreciably in a decade or so. It is not a one way movement upward or downward.

The call for massive resource transfers is a phenomenon of relatively recent origin. It is part of a post-war trend which too readily assumes that what are sometimes deep-rooted social problems and attitudes can be changed for the better by having money thrown at them. Yet aid is not a prerequisite for economic growth. Except for the short period immediately after the war, all advanced nations in Europe, America. Japan, Australia and New Zealand reached their successive stages of growth without the aid of grants, and the same is broadly true of the more advanced of the developing countries such as Malaysia, Hong Kong and Singapore.

Nor is the receipt of substantial aid a guarantee or economic progress; indeed, by assisting in postponing the day when distasteful decisions have to be made it can actually be an impediment. Although it is impossible to prove or disprove in any absolute sense, there is a great deal of evidence to show that if the aid given by both super powers to President Sukarno had not been forthcoming, the régime in Indonesia would have been changed sooner and the substantial task of reconstruction that confronted his successor would have been of smaller dimensions. Thee is no prima facie evidence to suggest that mainstream aid can create the personal characteristics which are the mainspring of economic development.

Moreover the habit—very marked in the past—of linking foreign aid to balance-of-payments deficits contains a built-in incouragement of the pursuit of fiscal and monetary policies which are basically inflationary. The self-help and self-reliance that are essential requirements of unassisted economic development are thereby undermined.

Again, foreign aid has in practice resulted in the recipient governments extending their control over the economy as a whole. The assessment of economic objectives has only too often been linked to the production of comprehensive development plans. Yet this type of planning was not used in the development phases of the more advanced countries, nor is it used to-day in the more rapidly developing areas such as Singapore and Hong Kong. Indeed, no one has yet proved how the substitution of a set of monolithic decisions by politicians and civil servants is likely to prove more advantageous to economic growth than the enormous range of decisions made by individual consumers, producers and merchants in a market economy. This is true of advanced countries with a developed civil service; it applies a fortiori to developing countries where the civil service is often very hard pressed to maintain the traditional functions of Government.

From all this it seems to me that in placing the emphasis they do on the volume of aid both Pearson and Brandt exaggerate the part played by such aid in the development process and they under-estimate the constructive role that has been, and still can be, played by private enterprise in transferring technology and, just as important, the managerial skills necessary to handle scarce resources effectively. Although generalisations covering such widely different peoples are difficult, it seems to me that we should seek to build on what the inhabitants of each country are doing at present rather than seek dramatic change.

May I conclude by quoting from an African writer? I am indebted to the noble Lord, Lord Bauer, for this quotation. This was from a Ugandan girl who studied development in her own country. At the conclusion of her inquiries she stated that she was more convinced than ever that it was impossible to introduce to other people, in other circumstances, those things in life that one considers desirable; such other people do best to be left alone to find out for themselves what suits them. They then adapt what they know and want to what they gradually discover, by trial and error, that they want in their new setting. Little is achieved by those who "have" being soft-hearted and solicitous to those who seem to "have not". The best things in life are learned the hard way. And need there be unanimity about what everyone means by best?

10.40 p.m.

The Earl of Dundee

My Lords, I should like to join with other noble Lords in congratulating my noble friend Lord Thomas of Swynnerton on introducing this debate. Whatever may be the need to revise the basis of British assistance, to which my noble friend's Unstarred Question refers, or that of Western aid in general, a great deal of credit should certainly be given to the donor countries concerned for their persistent resolve and effort over the years to relieve poverty and to improve living standards in developing countries. Although the present level of official contributions falls short of that recommended by the United Nations, it is no small achievement that the 17 member countries of the Development Assistance Committee of the OECD are now contributing an annual world total of roughly £25 billion at an average of 0.36 per cent. of their respective gross national products.

Given that the distribution of aid is on the global scale that it is, it would be very surprising if there were no examples of inconsistencies or even of widespread and recurring anomalies connected with the administration of the aid. At the same time, conversely, just because the task has to be carried out on several continents, it would be no excuse for glossing over its problems on the sort of grounds that they are inevitably larger and perhaps less capable of immediate solution than those that might concern several pygmies. Nor can the size of the task as an excuse absolve national governments or international organisations from the challenge and the responsibility to introduce new corrective measures where necessary or equally to re-establish premises, if desirable, on which the programme of assistance is to be based.

One of the main premises accepted by both donors and recipients has been the idea that the conduct of recipients should not be examined to any great extent, since it is alleged that to do so would infringe national sovereignties. But adherence to this principle has revealed two types of disadvantage. First, it is pointed out, as my noble friend Lord Blake has already done, how Western aid is sometimes used to contribute to purposes directly opposed, or even dramatically opposed, to what donors intend. Examples of this are the persecution of subjects and military aggression against other countries. Less dramatically, but no less inconsistent with donors' intentions, there is the second disadvantage that recipient governments simply may not bother to use aid constructively for the relief of poverty. The noble Lord, Lord Harris of High Cross, has already illustrated this point. And since a low level of capital is a criterion for assistance in the first place, there is arguably a disincentive to recipient governments to encourage the inflow and deployment of private capital.

Recently there perhaps have been signs that through structural lending agreements and similar measures more control is being exercised by the West. But I wonder whether my noble friend the Minister, when she winds up, can indicate what plans the Government may have to improve the system so that the contributions of British taxpayers and those of other countries are not diverted from the purposes for which they are intended.

Then there is the question of the balance between multilateral and bilateral, the two types of official aid, to which my noble friends Lord Montgomery and Lord Blake have referred, and the question of the balance between voluntary aid and official aid itself. Regarding official aid, there is, of course, the separate usefulness of having a national agency and that of having an international one. It is generally agreed that while certain functions of scale or negotiations through anonymity are better performed multilaterally, others will succeed better through more direct contacts between donors and recipients bilaterally. But clearly it does not follow that there needs to be rigid balance between bilateral and multilateral disbursement. Still less does it follow that donors should not be able to build up in practice and with efficiency an increasing proportion of direct disbursement. Similarly, on the grounds that results from voluntary aid are better proportionally than those from official aid and arguably more susceptible to measurement in the first place, there is a strong case to alter the balance, where practical, in its favour.

In view of these considerations can my noble friend the Minister reveal what plans and forecasts the Government may have to increase the proportion of British bilateral aid, which is at present in the region of 60 per cent? Secondly, what particular forms of incentives are they prepared to give to increase further the involvement of voluntary aid?

Turning to the connection betwen this debate tonight and the Motion yesterday by the noble Lord, Lord Hatch of Lusby, there is the question of longterm measures to eliminate or minimise famine and food shortage and the separate question of contingency plans to deal with famines when they do arise. Regarding the former, and with current advances in agricultural methods, there is good reason to believe that countries will overcome their present lack of subsistence production and reduce their present problems of crop failures. The difficulty is in persuading them to take proper action, and to do so soon enough. But that process can be greatly eased by consultative group meetings between donors and recipients, bilaterally and multilaterally, in the capitals of the countries concerned.

Regarding contingency plans for famine, while the recent Ethiopian crisis, once evident, has produced a very efficient response from donors, at the same time it has reflected insufficient contingency plans in the first place. Nor are there now many signs that these are being formed for future disasters. Does my noble friend the Minister agree that this course of action should be advocated to a far greater extent within the Development Assistance Committee and within the EEC to ensure that there is relevant and strategic stockpiling of food supplies among other practical expedients which may be called for in advance?

Another aspect affecting the basis of British and international assistance is that of trade with the third world, to which noble Lords have already referred. Regarding access to Western markets by the third world, there are of course in existence preferential agreements, and there has been recently, at the Lomé Convention, the attempt to improve the position. But to date not enough changes have occurred to enable third world countries to earn sufficient foreign currency from their own exports in order that they can pay for their own foreign imports and in order that they can thus help maintain proper price structures internally.

Can my noble friend the Minister affirm that the Government are pressing for such changes in trading arrangements, along with other countries which are also members of the DAC and of the EEC? In relation to the aid trade provision and British and other Western exports to the third world, it should be asked whether current arrangements are benefiting both the West and the third world as much as can be expected. It is contended that disproportionate attention has been given by the ATP to the larger and more prosperous areas of the third world. Equally, it is objected that since contracts tend to go to large British firms instead of being distributed more widely among smaller ones, British employment and new business prospects have therefore not benefited as much as they could have done from the arrangements. Does my noble friend the Minister agree that such imbalances do in fact exist, and, if so, what corrective measures are the Government prepared to take to effect a wider distribution through ATP to the third world, and equally to effect a wider and more judicious distribution of contracts at home?

Finally, in connection with British interests overseas, would my noble friend the Minister agree that, in view of the particularly high regard in which the efforts of the BBC World Service, the British Council and other related facilities are held internationally, these ventures should be considered as vital components of British initiatives in the third world and not as lesser priorities of Foreign Office spending, to be thus subject to Government cuts?

In summary, my Lords, while the efforts of Her Majesty's Government since 1950, as well as those made elsewhere, to improve economic conditions in developing countries are to be highly commended, there is a strong case to reconsider the basis of their policies, to which my noble friend Lord Thomas of Swynnerton's Question is directed. In order to protect human rights and promote proper internal economic development there should be greater scrutiny of the conduct of aid recipient governments. Direct contacts between donors and recipients should be advanced through an increase in the proportions of both bilateral and voluntary aid. And direct contacts and dialogues between donors and recipients should be emphasised so that recipients adopt the necessary long-term preventive measures against famine and to relieve poverty. Trade barriers against the third world should be reduced and British exports through the ATP and other national exports should be more widely distributed.

These measures of revision, if adopted would—since, as indicated by experience, they would be soundly based—earn the respect of Western taxpayers and of third world recipients alike, both of whom are far less interested in theories of national sovereignty and of economic and administrative procedure than in tangible results and concrete achievements. And, in reducing the causes of some harmful anomalies, they would give a far greater chance to the aid programme, so that through time its effects can really match properly its intentions, which are to help conquer human deprivation and poverty and to promote world harmony and peace.

10.50 p.m.

Baroness Robson of Kiddington

My Lords, I, too, should like to add my thanks to the noble Lord, Lord Thomas of Swynnerton, for having introduced this debate and for so ably having set the historical background to it. Many noble Lords have spoken and have given examples of success stories, as, for instance, did my noble friend Lord Walston as regards Zimbabwe. Other noble Lords, like the noble Lord, Lord Hams of High Cross, have given us examples of calamities where aid has gone wrong.

I think we must ask ourselves what we are hoping to achieve. In the words of Adlai Stevenson, the only thing that is worthwhile achieving is: to help a man to help himself". That is the most important background to aid, and I should like to question whether the aid that we have been giving to the third world has always been directed at the right priorities. As I understood him, the noble Lord, Lord Thomas of Swynnerton, concluded his remarks by saying that in his view education was the most important aspect of aid. Like the noble Earl, Lord Dundee, the noble Lord deplores the fact that the BBC's External Services and Overseas Services are being cut, because they are one of the most effective aids at our disposal that we can give to the rest of the world. I agree with that.

However, I also want to question another aspect of aid on which I believe we have not spent enough money. It is an aspect which, if not supported, might wreck any other kind of aid that we are prepared to give to the third world. I refer to the rapid population growth in the world. The aid that has been given over the last 40 years, since the end of the war, has always assumed that an increase in the standard of living through economic development would automatically reduce the fertility rate in the developing world, just as it has done in the industrialised world over the last 50 years. This has not proved to be the case, and time is now running out.

If we take India as an example, with a fertility rate of 4.8 per cent. today, resulting in a population of 1.5 billion in the year 2050, we must despair. This is a country which many noble Lords have referred to as being an industrial miracle in the third world, and it could have been. But it is being threatened by the growth of its population. India had 350 million people at the time of independence. It now has 750 million, and it is still increasing by 22 million per annum.

This population growth is taking place in most of South-East Asia, Central Africa and large parts of South America, and according to the World Bank Development Report 1984, is resulting in an increase in the world's population from today's figure of 4.8 billion to 10 billion by the year 2050.

Of that total, only 1.4 billion would be the population of the developed world, with the remaining 8.4 billion being the population of the developing world. As a group, sub-Sahara and South-East Asia would account for 50 per cent. of the world's population as against 30 per cent. today. The frightening factor is that even today 40 per cent. of the population in developing countries is under the age of 50.

This population growth will inevitably, and does already, militate against the economic growth of the developing countries. It militates against an increase in income and investment per capita of the people of these regions. It will put enormous pressure on the agricultural resources of these countries, reducing the fertility of the land and forcing populations into ever-growing conurbations. An outstanding example of this today is Calcutta. As a result mortality will rise to check further population growth. Surely that is not what we want to see happen.

However, family and fertility are areas of life in which the most fundamental human values are at stake. We must, therefore, analyse the reasons behind the desire for large families in the developing world. There are many. First, there is the desire for support in old age in the absence of public support and the fear of high infant mortality; secondly, for the women who are poor child-bearing is the only means of securing status and security; thirdly, there is the high cost of obtaining contraceptives, both financial and social, as well as the lack of information on the subject. However the attempts by the poor to look after themselves by having large families create enormous social problems for these countries, reducing the investable resources available for the improvement of living standards. In most of these countries school quality is poor and the present population growth in a country such as Malawi will result in a tripling of their school age population by the end of the century. With a rapid fertility decline there could be savings in the region of 50 per cent. in this expenditure by the year 2000.

In my view, better education and employment opportunities for women to improve their status is essential. Here I believe that the remarks of the noble Lord, Lord Thomas of Swynnerton, about education are particularly apt. They are a key to a reduction in the birth rate. They have to be coupled with access to, information about, and cheap family planning services. Despite what I consider is an obvious need, the developed world devotes only 1 per cent. of its aid to the underdeveloped world towards population control policies. Most of this money is spent in government-to-government programmes which can run the risk of being interpreted by the underdeveloped countries as big brother telling them what to do.

I believe that voluntary organisations, on the other hand, working in collaboration with national governments and at their request—this is very important—on the whole avoid this problem. In its second report on population activity in 1984 the Overseas Development Administration stated that much of the pioneering work in the provision of family planning services has been carried out by nongovernmental organisations. The Government recognise the effectiveness of the work of the voluntary agencies at community level. Despite this, the voluntary agencies working in the field received only £137,000 under the joint funding schemes in 1983, which is less than 1 per cent. of the money spent on the population aid programme.

I ask the Government drastically to increase their contribution to the voluntary agencies in future years. If you look at the results of voluntary agencies in the field of family planning in countries like India, Kenya, Sri Lanka and Bangladesh, the Government will have to admit that the contribution of the voluntary agencies has been enormous and that they need more aid to fulfil their programmes from the Government's Overseas Aid programme. Unless we concentrate a much larger proportion of our aid on population control measures, all other aid will be poured into a bottomless pit and will fail in its aim of raising the living standards of the third world.

Lord Bauer

My Lords, there will be wide gratitude to my noble friend Lord Thomas of Swynnerton for launching this debate on the value of foreign aid, which is all too often taken for granted. For at least 10 years the primary declared purpose of British aid has been to relieve the worst poverty in the third world. I do not think that official aid is suitable for this purpose.

Official aid does not go to the pitiable figures projected by the aid lobbies. It goes to and through governments. These governments are often themselves responsible for the gruesome conditions. And quite generally to support rulers on the basis of the poverty of their subjects rewards policies of impoverishment. This was noted en passant by my noble friend Lord Dundee.

Poverty as measured by income per head is a primary criterion of United Kindom and IDA aid. Consider the resulting bizarre anomalies. Poverty is caused or aggravated by governments who maltreat and expel their most productive people—as with Asians in East Africa, or Chinese in South East Asia—or which, in the name of Islamic orthodoxy, further restrict employment opportunities of women.

Poverty has been exacerbated by governments who pursue harmful, even destructive, policies. Some of these were mentioned by several noble Lords in the debate last night: suppression of trade in farm produce, creation of state monopoly for imports and exports, gross under-payment of farmers, restriction of the inflow of badly needed skills, enterprise and capital, and, of course, persecution of productive groups, especially ethnic minorities.

Similarly, poverty is prolonged by governments which neglect their basic tasks, most obviously by failure to ensure security of person and property. Western aid enables the rulers to pursue such damaging policies. It relieves immediate shortages, and thereby conceals for a while the worst effects. It also suggests external endorsement of these policies. Aid, therefore, keeps these governments afloat and enables them to continue in their course.

The poorest are worst hit. They are forced to remain in subsistence production, or are pushed back into it, with all the accompanying hazards. The appalling conditions in Ethiopia, in the Sahel, in Uganda and elsewhere in Africa, are not simply the outcome of drought, but of destructive policies accompanied by neglect of basic governmental tasks. On the basis of poverty, the governments qualify for more aid.

In the five years 1978 to 1982, the Ethiopian Government received about 1 billion dollars of official western aid—mostly multilateral aid, with a substantial British component, and also direct United Kingdom aid. Has it helped the poor or has it helped to finance several civil wars and to pay for the grotesquely named Organisation of African Unity with headquarters in Addis?

Improvement of the lot of the poorest is not a priority for most aid recipient governments. They spend lavishly on show projects, including brand new capitals—Brasilia, Islamabad Abuja, Lilongwe or Dodoma. How do the poorest benefit from this or from the proliferation of national airlines which they do not use? The poor are not beneficiaries but, more likely, victims of the expenditure on arms by third world governments which account for about one-fifth of total world spending on arms.

In most of the third world, especially Asia and Africa, state relief of poverty does not accord with local mores. Indeed, there is no machinery for this purpose. This neglect is reinforced by ethnic, cultural and tribal diversity or cleavages. Can we imagine an Arab-Moslem dominated Sudanese Government helping the poorest among the blacks in the southern Sudan, hundreds of miles away, with whom it is indeed in armed conflict; or a Hausa or Yoruba dominated government in Nigeria assisting the Ibo and the Tiv; or the Singhalese rulers of Sri Lanka helping the Tamils?

Although aid may be a modest addition to the recipient country's national income, it is a substantial addition to government revenues and export earnings. It sometimes exceeds these revenues or earnings. It therefore aggrandises the role of government in society. The resulting politicisation of life provokes or intensifies anxiety, tension and conflict, particularly in multi-racial and multi-cultural societies. This, in turn, diverts people's energies and resources from economic activity to political life, which retards economic advance and aggravates poverty, especially that of the rural poor.

What should be done about the aid programme? Official government to government aid will never do much for the third world poor, either directly or by promoting development. I believe it will continue to harm most ordinary people in the third world. Yet the vested interests behind it and the momentum of existing commitments preclude its early termination. However, substantial improvement might perhaps be possible. I suggest the following reforms.

First, I join other speakers in suggesting that the Government should help to nourish and revitalise non-politicised voluntary charitable agencies and activities in the third world. More generous tax treatment for charitable donations and, occasionally, matching grants could powerfully reinforce voluntary non-politicised agencies. Voluntary aid activities do not politicise life in LDCs. They arouse much less suspicion than do official transfers. They are far more effective in relieving poverty and suffering. Indeed, in much of the third world they are the only way to reach the poorest. The substantial sums raised by voluntary charities in Britain and elsewhere would be much increased, if relief of need were understood to rest primarily on voluntary charitable effort.

Secondly, official aid to third world governments should take the form of cash grants direct to the recipient governments and not be tied to promoting our exports. Unlike some other noble Lords, on either side of the House, I should like to see aid to third world governments distinguished from subsidies to exporters or bankers, to make quite clear what we are doing. It should take the form of grants, to distinguish it from the familiar, heavily subsidised, loans, which confuse investment with handouts, and are often seen by the donors as gifts, while resented by the recipients as requiring some servicing.

I favour bilateral aid rather than multilateral aid. Bilateral aid is less ineffective for its declared purposes. It permits at least a modicum of control by the elected representatives of the taxpayers. This point has been developed admirably by my noble friend Lord Blake. I much hope that the Minister in replying to this debate will deal with the question of why the Government have departed from their declared undertaking to favour bilateral aid against multilateral aid.

But the key requirement in the distribution of official aid is that it should be concentrated on Governments whose domestic and external policies are most likely to promote the general welfare of their people, especially the poorest. The performance of the recipients could be readily monitored by a handful of qualified people within the Foreign and Commonwealth Office.

Observers will often differ in judging the performance of the recipients. But there are many cases where there can be no legitimate grounds for disagreement. Ethiopia is only the most conspicious and topical instance. And in other instances the grounds for differences could at least be debated in Parliament and elsewhere. Such reforms would greatly simplify the administration of aid and reduce the mystique surrounding it.

There is one form of multinational aid I would increase rather than reduce—aid to the UN High Commission for Refugees. But I would finance such aid by reducing or eliminating aid to governments whose conduct has forced refugees to flee their countries.

I do not want to sit down without making one more point, even if it is a familiar one and has already been made in this debate. I join others across the political spectrum in advocating a reduction of trade harriers against imports from the third world. It was R. A. Butler who some thirty years ago coined a phrase that I would strongly commend. We should help victims of famine, but for the rest our watchword should be trade not aid.

11.13 p.m.

The Viscount of Falkland

My Lords, it is always a disadvantage to speak at this stage in a debate in that one is so fascinated by the points which have been raised by other noble Lords that one is distracted from the theme which one had prepared. I should like to thank the noble Lord, Lord Thomas of Swynnerton, for giving us the opportunity to talk about this subject.

I should like to pick up some points from the most interesting exposition which we have just heard from the noble Lord, Lord Bauer. I agree with almost everything he said in his scenario of Africa, in which he painted the results of several decades of aid in the conventional way. Whether it he multilateral aid, bilateral aid or whatever, the results as we see them in Africa are of countries with indescribable levels of poverty. We have the famine which we discussed in all its tragedy yesterday; we have corrupt Governments; we have an apathy and a disenchantment among the great majority of the people. How has this happened?

The noble Lord, Lord Thomas of Swynnerton, invited us to look back to 1950. Surely, in 1950 or thereabouts, we in this country had an incredible chance to show the world what could be done in countries which had been recently freed from colonial-lism. Indeed, I think that we have disappointed a great many of the countries in central Africa which, before their independence, had our presence there with the very heavy emphasis on British goods and the British way of life. Over these decades we have become disenchanted with the countries which we freed—and I mentioned this in a debate last year. This is to some large extent the cause of our disenchantment and confusion about aid, and the part we should play in the administration of aid in these countries.

Many noble Lords have spoken about the difference between multilateral and bilateral aid. Certainly in the early days it seemed that we favoured multilateral aid. We probably thought, in our idealism, that countries would join us in a philanthropic outlook towards the developing countries. I believe it was the noble Baroness, Lady Robson of Kiddington, who mentioned the words of Adlai Stevenson: that the basic aim is to help others help themselves.

I fear that that ideal, whether it be through multilateral aid or bilateral aid, has become very much twisted. I would say that the aim now (and I do not blame our country for this because we have become disconnected from it) in most of the other countries of Europe, unhappily, is to help others so that they may help themselves. This is very evident in countries such as France, Germany, Belgium, Italy and Holland. Who can blame them? These countries have problems similar to the problems we have, except that it may be that their problems are the creation of wealth and the export of their own manufactured goods. It may be that this is one of the reasons why we have now become slightly out of step with those other countries in Europe in our attitude to aid. It may also be that the fact of our oil and of our lessening dependence on manufacturers—which will obviously be debated elsewhere—has meant that there has been less urgency for us to pursue a rapacious, positive and very single-minded attitude towards exporting high technology to the developing world.

I fear that whether we have our attitude, which is rather an arm's length attitude whereby we would much rather make the gesture of helping the developed world through multilateral aid, or whether it be the more single-minded, directly politically-motivated aid of France, Germany and the other countries I have mentioned, and which is aimed almost exclusively at developing the export of their industrial products, it has not made much difference to the disastrous state in which we find these countries.

We do not benefit from the contracts we miss out on, and we miss out on an awful lot of business in Africa. I have recently spoken to many Africans in prominent positions in their various governments. I recently spoke to the Minister of Development in Uganda, and he asked, "Where are the British?". He said, "In my country, we have been torn apart by wars, revolutions, military dictatorships, and so on—and all we want is for the British to come back and help us develop". But what has happened in Uganda and in many other countries in that part of the world is that there has been a race by other countries in Europe to compete, in a way, to give their own money away.

Their attitude to aid is to become involved in as many projects as possible. These projects are financed by what is generally called in France crédit mixte—which is, as it sounds, mixed credit. That is something which does not happen so much in this country, although we have the mechanism for it. We have the aid-trade provision which was set up in 1978 to implement this kind of government-to-government project aid. We have been very slow in that respect. I critise that because in a way we have lost impetus and appear to have lost our competitive drive in relation to the rest of Europe and the other industrialised countries.

On the other side of the coin I am relieved, because anyone who travels to these various countries will see the kind of situation so admirably sketched out by the noble Lord, Lord Bauer We see projects which are financed by governments and which have absolutely no relation whatever to the basic problem of the countries. The basic problem of most of the countries with agricultural economies is a poverty level which is indescribable. We talk about unemployment levels. In this country we expect employment; it is something which is demanded and required. In most African countries it is not expected at all. The average African is born into this world and he expects to find a piece of land to be able to live off it. Even that basic requirement is very hard to achieve. The kind of aid going to these countries is not helping to solve that problem.

What we have is a picture of the extension of enormously wasteful and cosmetic projects, such as airports. There is an airport in Tanzania which is quite astonishing; an airport also in a capital which is going to be moved to the centre of that country. If your Lordships were to see the modern airport in Dar es Salaam you would ask, "What kind of lunacy is this?" If your Lordships saw the cost of that airport, you would scratch your heads and turn away. There are projects of that kind in every country in central Africa.

During the fashionable period of turning molasses into petrol there were projects which now stand idle. There are power stations and similar projects which are totally unsuited and far too sophisticated. But pressure and expertise were brought to bear on the countries to accept these projects, with a mixture of taxpayers' money and mixed banking credits, as well as, let us make no bones about it, the corruption which goes on under the surface with the development of the "fat cats" of the African political scene, the people who fill Swiss bank accounts with millions of pounds. Some of the richest people in the world are in Africa. We have seen that in the fall of a country in West Africa. I do not know West Africa, but we have seen the results of that in recent years.

I do not wish to bore your Lordships at this late hour, but I would say that it is a pity that we have lost our initiative in regard to the developing world as a humanitarian influence. We have lost our influence perhaps because we have become disenchanted with the cynical competition of other industrialised countries. Moreover, we have perhaps become disenchanted with what we have seen in Africa.

I was disappointed to hear a country like Tanzania taken by the noble Lord, Lord Harris of High Cross, as an example of a country where aid has failed. I agree very much with the noble Lord, Lord Hatch, on this subject because I have spent a great deal of time in Tanzania. I have spent much time in Kenya and Zambia. Tanzania is slightly on the periphery of this terrible aid rat race. Although, in the conventional sense, the economy is in tatters there is, as the noble Lord, Lord Hatch, told us, a standard of medical care and a standard of general education and literacy which is unparalleled in Africa. After all—the noble Lord, Lord Hatch, who is a greater expert than I am will contradict me if I am wrong—I think that at the time of independence Uganda had a higher standard of literacy than Tanzania. But as a result of the terrifying events which we have seen over the past 15 to 20 years that position has changed.

Briefly to sum up—and I hope that the noble Baroness will carry this thought in her deliberations with her colleagues—whether we argue about multilateral or bilateral aid, or whether we talk about voluntary contributions, although we may be criticised for not being in the mainstream of giving sophisticated aid to these countries, if only we can find a way to get a unity of purpose so that we better understand these countries and the basic needs of the people who live there, we can probably devise a method whereby we can influence our friends in the world—in Europe and in the United States.

Perhaps the countries which have been the most effective in giving the kind of aid which springs from the words of Adlai Stevenson have been the Scandinavian countries, which have gone about it on a smaller scale but almost exclusively to improve the living standards of the poorer people—water, basic health, basic education, and so forth. We in common with the other larger industrialised countries have been tempted to develop Africa in a way which is totally unsuitable and can only result in the creation of the terrible scenario which the noble Lord, Lord Bauer, painted for us this evening.

I should like to end on that note, and urge the noble Baroness to persuade her colleagues to try to get to a policy which is a British policy, unique to us, and which re-establishes our reputation with these countries, where we had a huge and marvellous influence and not an exploiter's influence. I am sure that we can repeat that; we can go out into the world and produce influences which may, if one is optimistic, have some effect on these terrible cycles of famine and starvation which are the scourge of Africa today.

11.27 p.m.

Lord Oram

My Lords, the Question which has been asked by the noble Lord, Lord Thomas of Swynnerton, refers to policies relating to development aid since 1950, with, I think, the implication that the basis of those policies has been the same whether the Government in power have been that of the Conservative Party or of the Labour Party. I believe that that is perhaps basically true, but I would remind your Lordships that there are, nevertheless, between the two parties important differences of which we need to remind ourselves but which we certainly need not detail at this hour this evening.

It is, I think, true, as I have said, that there is a large measure of consensus between the two major parties on these questions. Over the years both parties have allocated resources on a large scale for both project and programme aid to developing countries, particularly those countries which were formerly British dependencies; and of course both parties when in government have maintained an important variety of channels whereby technical expertise has been made available to those countries.

The noble Lord quite rightly asked us to look with a critical eye at the results of what has been done over the last 20 or 30 years. I certainly welcome this opportunity, as others have. We congratulate the noble Lord, Lord Thomas, on his choice of topic, even though I, together with the noble Lord, Lord Hatch, and others, do not necessarily go very far with him in his analysis or his conclusions.

Many of the results, as we look at the third world, are indeed gloomy, though I certainly agree with my noble friend Lord Walston, in the example that he gave of Zimbabwe, and with the noble Viscount, Lord Falkland, and my noble friend Lord Hatch, that there are many examples where aid has been of great benefit to the third world countries which have received it. But we should not turn a blind eye—we cannot turn a blind eye—to the gloomy results, particularly in Africa, which are there for all to see.

The World Bank was quoted by the noble Lord, Lord Thomas. It has recently described much of the gloom, particularly in Africa, partly by a statement by its president, Mr. Tom Clauson, and partly through its reports. I should like to quote quire briefly from one summary of a World Bank report which I found in the Observer in September last year. It says: in the past three years Africa south of the Sahara has fallen back 15 years in development. Per capita income and output are both lower than they were in 1970. Transport is breaking down … In some parts of the continent industry is operating at only a quarter of its capacity. One in every five Africans is wasting away through hunger". So one can go on with these gloomy pieces of evidence. Therefore, we would surely be unwise not to face up to the fact that the outcome of many of our development policies has not been as we would wish it to have been and completely justifies the noble Lord in asking us to rethink policies.

I believe that over the years we have all been guilty of a basic error. We thought that the poor countries should be developed in the image of the West, where living standards over the years have risen pari passu with industrialisation. Therefore, we said we should help the poor nations to industrialise. That was seized upon. Every developing country had to have its steelworks; almost every Caribbean island had to have its international airport. If it was a question of roads, they should be international highways with all too little regard for the feeder roads for the villages. If it was education with which we were concerned, then we were to build universities which could rival the Oxbridge pattern of universities. That was what we were all, in error, pursuing.

Moreover, that thesis was approved by the governments of the developing countries themselves. Many of their leaders had been educated in the West and they wanted their countries as quickly as possible to be like those in the West. It was for that reason, both from the donor side and from the recipient side, that aid was provided for modernisation. Large-scale capital-intensive projects were the hope for the future. Of course, that policy suited us: our architects and our engineers would be employed on projects with which they were familiar; the plant and the materials would come from the West, and not from local resources.

Uganda has been quoted by a number of speakers. I remember, when I was the junior Minister in the Ministry of Overseas Development, I visited Uganda. It was before the dreadful Amin days. I remember talking to the Minister of Agriculture there. He was being offered a major and expensive agricultural institute—tied, of course, to British contracts. He said to me that what he really wanted instead was a whole network of small veterinary units throughout the country. But neither he nor I could do anything about it. British aid was for big projects tied to British industry. It was a case of take it or leave it.

On that theme, I also remember a much more recent exchange when Mr. MacGregor, at that time not concerned with coal but head of the steel industry, came as a witness to a Select Committee of your Lordships' House of which I was a member. I asked him whether it was not folly for us to be financing steel works in developing countries such as Mexico, to which the Prime Minister with due publicity had presented an aid agreement, when he, Mr. MacGregor, was wrestling here with surplus capacity and fierce competition for foreign markets. I asked him if that was not a folly, and he agreed that it was.

That kind of mistaken development surely points to the fact that a radical reappraisal is called for. We must get away from the concept of rapid, large scale, capital intensive industrialisation of developing countries and help them along a more appropriate path of industrialization, one that is based on sound rural development, that uses labour intensive methods, the local skills of villagers, local materials, and creates local markets to meet local needs. That is the philosophy expounded 20 years ago by that eminent socialist economist Dr. Fritz Schumacher. Last Monday The Times, in its leading article, endorsed much of Dr. Schumacher's thinking about intermediate technology, although as the noble Lord, Lord Grenfell, pointed out in yesterday's debate, in his view—and it is also my view—The Times got it wrong about the role that governments should play.

But the essential message in The Times was the same as that which Schumacher advocated 20 years ago. I can picture the wry smile that would now be on Dr. Schumacher's face if he were still alive, and can almost hear the acid words with which he would have welcomed that leading article in The Times. He would have appreciated an accolade from the mouthpiece of orthodoxy because he was never greatly approved by orthodox circles while he was alive.

I had the great privilege of working closely with Dr. Schumacher for a time in the organisation that he established, the Intermediate Technology Development Group. I am honoured to be one of its vice-presidents. In those days we were indeed small if not particularly beautiful! But it is very much to the credit of the Overseas Development Administration that in recent years it has been supporting the ITDG and helping it to devise the small technical equipment of which villagers throughout the third world stand in such great need. They are not helping with massive airports such as the noble Viscount, Lord Falkland, referred to. They are tackling such problems as village water supplies, small-scale irrigation methods, simple food storage, wind power, inexpensive transport equipment, new building methods suited to the villages, improved small agricultural tools and many other things, including small-scale local intstitutions to manufacture and distribute those small machines.

In my view, the whole aid strategy of donor countries should be changed in order to encourage the kind of development to which I have referred. I believe that Monsieur Pisani, who was until recently the commissioner in Brussels responsible for these matters, put forward a most important proposition when he advocated that the donors and the recipients should join together in what he called policy dialogues to work out jointly schemes of development along the lines that I have been indicating in my remarks. I believe that if we entered into that kind of policy dialogue we could reach, with the recipient countries, mutually agreed development policies in many countries, in welcome contrast to the policies that have proved defective in the past.

That would not mean less aid, but it would mean different aid. As the noble Lord, Lord Bauer, was advocating—I do not often agree with him, but on this point I do—it would be aid which is untied and which the developing countries would be able to spend on the kind of project which is most suited to their development. That is the way in which we should provide aid for proper rural development of the developing countries, to eschewing industrialisation but moving towards industrialisation by those methods which are most appropriate to the economies of the third world countries.

11.41 p.m.

Baroness Young

My Lords, I think we should all want to thank my noble friend Lord Thomas of Swynnerton for giving us the opportunity for such a wide-ranging debate this evening on his Unstarred Question. My noble friend has placed our discussion of aid in a broader historical and political context, and I think we have listened to most thoughtful speeches from all parts of the House.

In the broadest sense, aid must be seen in the context of our overall foreign policy objectives, in which I include the promotion of peace and prosperity among the poorer countries of the world and the encouragement of the sort of freedom which we in Britain enjoy through our pluralist and democratic society. Aid must also be set in the context of Britain's economic policies. The future prosperity of both the developed and the developing world depends upon a sustained recovery of the world economy and an expansion of international trade, as has taken place over the last two years. This is essential if developing countries are to succeed in restoring their economic growth and managing their debts. We must all resist protectionist pressures and maintain an open trading system—a point that my noble friend Lord Montgomery was making.

The London summit last year made a number of proposals as to how the international community could assist this process—including multi-year debt rescheduling and a greater role for the World Bank. It also emphasised the role of direct private investment. This not only brings risk capital but is a vehicle for transferring technology and managerial skills. Britain is playing its part internationally and by pursuing policies to beat inflation and control public expenditure which will lead to sustained recovery of our own economy. We have also lifted exchange controls to facilitate British direct foreign investment overseas.

I am also grateful to my noble friend Lord Thomas for reminding us of the origins of the phrase, "third world". As he said, it is a phrase rather than a concept. As the noble Lord, Lord McFadzean said, the so-called third world has never been a homogenous group of countries and is certainly not so today. Some—such as the oil producers—are very rich; others are poor. Some of the middle income countries of Asia and Latin America have, despite the debt problems some of them now face, made rapid progress over the last 20 years; and many have established themselves as important and competitive exporters of industrial goods in world markets. Some, such as Korea, used to be major recipients of aid, but are not today.

Development results from the interaction of a variety of factors: natural resource endowment, geographical location, historical background, the educational attainments and skills of the workforce, entrepreneurships, and the policies pursued by governments of developing countries.

What then is the role of aid? It is clearly only one factor in the development process. Despite some of the criticism voiced here tonight, used wisely and effectively it can make an important contribution. It has an important role to play in helping the poorest countries which have only a limited ability to attract and service commercial capital. It is in the poorer countries that British aid is concentrated.

The low income countries of Asia have also made considerable progress over the last decade. In the last 15 years India has achieved self-sufficiency in cereals, while Bangladesh is now much closer to that goal. Aid has played an important part in the process.

In contrast to the progress made elsewhere, we have the appalling problems facing Africa: famine of major proportions; sparked off by an act of God, but in large measure the result of failures by man. The underlying causes have their roots in the events of the last decade and more: continued rapid population growth, increasing pressure on marginal lands, and failure to adapt agricultural practices. The fact is that the recent overall economic performance in sub-Saharan Africa has been bad. Food production has not kept pace with population growth: imports of food are required on a large scale even in normal times.

All this has happened despite the fact that large amounts of aid have been put in. Against this background, we cannot be fully satisfied with the consequences of our aid. The causes of this poor performance are complex—oil price increases and the world recession that followed the 1979 oil price rise have made conditions very difficult. But we must also recognise, and say so frankly as the House did last night, and as many of your Lordships have said again tonight, that many governments in Africa have pursued policies, not least with regard to agriculture, that have failed them.

The fundamental objective of the British aid programme remains what it has always been: to promote sustainable economic and social progress. Our aid programme has, over the years, many achievements to its credit. It has financed a large number of successful investments in agriculture and infrastructure. It has provided large numbers of British experts who have individually done an excellent job. It has provided training opportunities for many thousands of overseas students who have returned to benefit their countries. Each activity is carefully appraised before funds are committed and each activity is monitored to see that it achieves its aims.

My noble friend's Question asks whether the Government will reconsider the basis of their aid policy. Aid policies have been reassessed extensively over the last two or three years—perhaps not as far back as 1950, but the experience of the last 15 years or so has been instructive.

First, aid is part of public expenditure: it is important that it is used, and seen to be used, to good effect. Secondly, the poorer developing countries face enormous problems in achieving long term development, and, as we see in Africa today, there is much poverty and deprivation to overcome. We have a duty both to the taxpayer here and to the people of developing countries to see that aid is used effectively.

However, aid can only be effective in the long term if there is a better understanding between the donor and the recipient. We are partners in a common enterprise. We can supply finance and expertise. But within Africa in particular major changes are needed in policies and management if prospects for growth in these countries are to improve. The changes required include a new deal for farmers by paying them higher prices for their crops, improvements in public sector management and the re-ordering of public expenditure plans to give emphasis to the maintenance and better use of existing assets. Too much attention has been given in the past to building new infrastructure and buying new equipment and too little has been provided for its maintenance.

Another aspect of the policy changes that developing countries are being urged to make is a greater role for the private sector. Again this is not new and it is not correct to say that aid in recent years has encouraged developing country governments to extend their role in the economic life of the country, though a considerable proportion of British aid is directed at sectors for which governments are responsible—social and physical infrastructure. This is important if private sector activity is to be encouraged. Other aid goes directly to promoting the private sector—namely, smallholder agriculture.

Donors have also encouraged governments to adopt more favourable attitudes towards the private sector and to allow the market to work. These issues are often central to IMF and IBRD-led structural adjustment programmes. A particular area of concern has been to limit the role of often inefficient state monopolies for agricultural marketing and to give the private sector a greater role.

Thus the main elements in our aid policy now must be, first, to engage in a more effective dialogue with recipient governments about their objectives and their policies. This involves co-ordination between all the main donors and the recipient. We are already providing substantial assistance in Africa in support of economic adjustment programmes led by the IMF and the World Bank and designed to achieve basic economic policy reforms.

Secondly, we will concentrate more on rehabilitating key sectors of the economy, with the emphasis on better maintenance and management, rather than undertaking isolated projects.

Thirdly, there will be greater emphasis on manpower assistance and on help to countries to develop their human resources. One of the most disappointing aspects in Africa is that many of the institutions involved in development are probably weaker today than even before.

Substantial aid is provided for education. In the current financial year (1984–85) we expect to spend about £46 million on training under our bilateral country aid programmes. This will support some 9,700 students and trainees, including over 5,000 new awards. We plan at least to maintain the current level of support in 1985–86.

The hour is late and before concluding I should like to try to answer some of the specific questions that I have been asked. First, my noble friend Lord Bauer asked about grants as opposed to loans. Last year my right honourable friend the Minister for Overseas Development announced that in future the policy of providing financial aid on grant terms would be extended to countries with an income per head of about 800 dollars. The previous threshold for grants was an income per head of 400 dollars. This means that well over 90 per cent. of all British aid is provided in the form of grants.

My noble friend Lord Dundee asked about voluntary agencies and, as I told your Lordships during yesterday's debate on aid, we have substantially increased aid allocations for the joint funding schemes by which we help to finance, on a 50/50 basis, development projects undertaken by the voluntary agancies. The allocation for 1985–86 will be £4.8 million; almost double the level of 1983–84. The aid programme also finances the work of over 1,100 British volunteers in developing countries.

My noble friend Lord Dundee and the noble Viscount, Lord Falkland, asked about the aid-trade provision. The aid-trade provision was introduced to match the mixed credit practices of our competitors such as France. It finances sound development projects of particular commercial importance to Britain, but the Government's policy is to seek international agreement to eliminating these practices which are potentially both trade distorting and aid distorting. Meanwhile we shall maintain the ATP scheme. Some limited progress has recently been made on this within the OECD, but we look towards making further significant progress in the future.

A number of noble Lords, including my noble friends Lord Blake and Lord Dundee referred to the question of multilateral as opposed to bilateral aid. We attach particular importance to maintaining our substantial bilateral aid programmes as part of our wider relationship with friendly developing countries. Our policy, therefore, is to look critically at the effectiveness of each multilateral agency and generally to bring our share of new multilateral replenishments more into line with Britain's relative economic strength. Nevertheless we will continue to play a constructive role internationally and to ensure that agencies such as the World Bank have adequate resources.

As my noble friend Lord Montgomery of Alamein pointed out, our membership of these agencies does give British industry access to substantial business opportunities. But most multilateral commitments are only spent over many years: thus, the effect of our policies will only bear fruit in future years. Meanwhile, largely because of previous commitments, the proportion of multilateral expenditure within the total aid programme has risen, as my noble friends Lord Blake and Lord Dundee have pointed out.

It must also be remembered that we are a member of the European Community and, as such, our aid programme contributes Britain's share of the European Development Fund and our share of the Communities' budgetised aid programmes. These have grown substantially in recent years.

My Lords, I have no doubts as to the value of aid and the contribution it has made to date, but we have also learned from experience. So, I believe, have a number of developing-country governments. There are encouraging signs that they are prepared to rethink their policies and to engage in a franker dialogue with all the donors as to how the fundamental objectives we all share can be achieved. The Government are committed to maintaining a substantial aid programme. I hope I have shown that we are equally committed to finding ways of making it more effective and of ensuring that it achieves the fundamental purposes for which it is provided.