EC Development Aid: ECC Reports

HL Deb 13 December 1993 vol 550 cc1143-78

4.31 p.m.

Debate resumed.

Lord Rea

My Lords, as a compensation to the noble Earl, Lord Onslow, perhaps I may say that the debate which was interrupted for the Statement also concerns Europe. He may care to listen; in fact I was expecting him to speak in the debate because overseas aid is one of his interests.

As a member of neither sub-committee I speak with some diffidence. Both reports are full of interest and make sense of complex issues. Personally, I found both of them to be of great educational value, for which I wish to thank members of both sub-committees and the chairman, the noble Lord, Lord Hunt.

I believe that I now know the difference between an MFN (a most favoured nation) and the MFA (the Multi-Fibre Arrangement). I know the difference between the CAP (the common agricultural policy) and the ACP (the African, Caribbean and Pacific states covered by the Lomé conventions). Another layer of fog has been lifted from my mind to help my understanding of the inner workings of the EC and its many directors-general. However, visibility is still not too good in that department.

I should have liked to read all the evidence, much of it fascinating, but some is heavy going and time did not allow me to read it all. However, reading the verbatim accounts of witnesses brings the subject to life, sometimes quite sharply. I feel that the evidence given by the NGOs and academics makes for much better reading than that given by civil servants, who have to watch over their shoulders and of course are past masters of "officialese".

To sift the evidence, we are reliant on and indebted to the Select Committee and its specialist advisers, and it is their summary and conclusions to which we need to pay attention. I shall try to refer to each report in turn, but as there is considerable overlap, it is possible to cover both, I hope logically, in the same speech.

In the debate on the Queen's Speech, I quoted the second conclusion of the committee on paragraph 65(b) of the first report: We are concerned about the potential serious effect on the United Kingdom's own bilateral programme of the decision to increase EC aid without knowing whether there will be a corresponding increase in the ODA's budget which finances both our share of the EC's programme and also our own bilateral programme. There is a risk of an unacceptable squeeze on our bilateral programme". The noble Lord, Lord Hunt, has already emphasised that conclusion.

I am not against the European Community being involved in overseas aid. There may be types of aid to which it is particularly suited. Here I think of emergency relief, provided it is not used as a way to get rid of food mountains. But if our own carefully built up value-for-money programmes are to be damaged in the process, the EC commitment will do more harm than good. To expand EC aid to less developed countries would be much easier to justify if it were in the context of an overall expansion of aid. When the total is static, however, we are in a difficult situation. Here I should like to quote from the evidence given to the committee by Simon Maxwell from the Institute of Development Studies of Sussex University, on page 57 of the first report, Britain already devotes close to twice as great a share of its aid programme to EC aid as other major donors; around 23 per cent.", of the British aid budget goes to EC aid, as compared to an average of 13.5 per cent. for other European countries. The reason for this is the stagnation of our total aid budget, in circumstances in which we are committed to contributing a standard share (around 17 per cent.) of a growing EC programme. Given other multilateral demands on the British programme, notably the UN and the World Bank, the result of the growth of the EC programme has been a major squeeze on the British bilateral programme. This has shrunk by 30 per cent. in real terms since 1979, compared to a reduction of only (!) 15 per cent. for the aid programme as a whole. There is beginning to be a serious question about the critical mass of the bilateral programme, which any further expansion of the EC programme could make acute—unless, of course, total British aid were increased more than proportionately". That section of his evidence is entitled, Fattypuffs and Thinifers in the debate about European aid". I should be surprised if any member of the Select Committee, or any Member of your Lordships' House for that matter, is not deeply concerned about the effect on our own overseas aid programme of this diversion to the European Community, Quite apart from the bilateral aid which the ODA carries out in co-operation with the governments of developing countries, there is the question of support for the non-governmental organisations, both United Kingdom and overseas-based. Under the noble Baroness's guidance, that support has greatly increased over the past few years because of their ability to do such a good, well-targeted job at field level.

Looking at the evidence, it was suggested that non-governmental organisations should perhaps be encouraged to apply to the European Community instead of to the UK for support. Perhaps I may quote from the noble Baroness's evidence at page 39 of the first report: One of the most valuable things that we get from British NGOs is their relationship sometimes with local NGOs in the recipient country. Where there is that sort of twinning and the relationship in the delivery of aid is also sound, I can say that the Commission would do well to allow the NGOs to be the implementer of the Commission funds in that country". Is that perhaps a hint that NGOs should look to Europe for their money?

Evidence from the non-governmental organisations themselves —for instance, Save the Children Fund—is that obtaining funds from the EC is a long drawn out and tedious process. However good are the sentiments that they should work with NGOs, in fact the money often comes so late that it is inappropriate by the time it arrives, if it comes at all. The good working relationships which many non-governmental organisations have built up, as I quoted earlier, and which were mentioned by the noble Baroness, are not to be brushed aside. They should be developed further. Will the cut in funding for bilateral aid include cuts in the joint funding schemes for non-governmental organisations? That is not quite clear. That is the only area of the overseas budget —the one to NGOs—which has been expanding.

On the subject of joint funding, the noble Baroness is aware that she agreed to fund at 100 per cent. those NGOs engaged in direct family planning activities. Will NGOs which now do not carry out family planning activities per se but which agree to start to do so, and thus qualify for 100 per cent. funding for that part of their programme, lose funding from other parts of their programme? Those other parts of their programme may include areas of community development which in the long term are equally if not more important in stabilising population. It would be a pity to rob Peter to pay Paul—or in this case to rob Petra to pay Paula.

Continuing the subject of family planning, in her evidence the noble Baroness said that, although a resolution on family planning was passed by the Council of Ministers last November, the exact position of who does what is more fluid than the policy setting". I quote her own words. Has any further progress been made? I suggest that there is a good case for the EC to support the work of the established international organisations such as the United Nations Fund for Population Activities—although I am not sure whether the EC can support a United Nations organisation directly—or the non-governmental organisations which are co-ordinated by the IPPIF.

Finally, as the report suggests, all overseas aid should be handled by one DG. That point was emphasised by the noble Lord, Lord Hunt. I am still baffled by the way in which the system of directorates-general was set up. It does not seem to be parallel with the ministerial pattern of any country. Despite my scepticism, I remain basically a pro-European (I see the noble Lord, Lord Bruce, leaving the Chamber having heard that remark).

I have spent more time talking about aid than trade because aid is closer to my area of knowledge. But I fully realise that in the long term trade is more important. Aid must be regarded as assisting countries to join the world economic community in a self-sustaining role. As the table on page 17 of the second report shows, even the 25 largest recipients of aid, which are quite poor countries and received 3.2 billion dollars of EC aid, earned by exports to the EC 40 billion dollars. That is a rough calculation that I have made—the total is not given on the table—that is, 12½ times as much as they received in aid. Even nations in abject poverty or in the midst of civil war earned almost as much as they received in aid.

Money earned by exports does not always result in the relief of poverty or in building up the social and material infrastructure needed for developing countries to become self-sustaining. Too high a proportion, especially in Africa, goes on the servicing of international debt. Also, some of it lands up in Swiss Banks or is spent on quite inappropriate imports of consumer goods. That is an aspect which will not be improved by GATT, if the agreement is ever concluded. Let me here point to India as an example. India has managed to avoid building up an international debt because it has been quite tough on what it allows to be imported. When GATT is concluded it will have to import consumer goods which will compete with its own industries and which it probably does not need.

The committee rightly felt that debt was outside its remit. The point was made by the noble Lord, Lord Hunt. Nevertheless, it recognised its importance and recommended that it should be considered by a Select Committee. I fully support that recommendation. Lifting the burden of debt would do more lasting good than most overseas aid. But even then there would still be a need for aid but the aid could be much more appropriately targeted. It could be targeted to help countries' economic progress and not so much directed to the relief of distress and abject poverty.

Much of the report on aid and trade concentrates on the effect of trade barriers and partial relief from them through a variety of mechanisms. Those are quite complex and numerous. But the imminent conclusion of the Uruguay Round—the noble Lord, Lord Jenkins, said that we might have that for a Christmas present—will in fact overlie all those mechanisms and supersede them. However, the committee estimated that the Lomé countries stand to lose from 90 million to 120 million ecus if the GATT is concluded. The World Bank estimated that there are likely to be losses of 7 billion dollars for the poorest countries because of the changes in GATT.

It is no wonder that the poorer countries do not join in the general euphoria about GATT and the increase in world trade that will result from it. As the noble Lord, Lord Hunt, said, compensation for those losses should surely be available in the form of new preferences, appropriately targeted.

In conclusion, I am very much concerned about the possible effects on poor farmers in the third world as a result of the free availability of low priced and subsidised food products from efficient farms in the developed world. I gather that the CAP will still be able, even under GATT, to operate to some extent and undercut the products of developing countries. I quote from the second report: The CAP is holding back the development of agriculture in the LDCs, and without that development no other development is possible". Here I echo the words of Sir Edward Boyle, quoted by the noble Lord, Lord Carr. I suggest that a more radical overhaul of the CAP is urgently necessary so as to stop its harmful effects on some of the poorest people in developing countries.

4.49 p.m.

Lord Boardman

My Lords, let me start by paying two tributes. My first is to the noble Lord, Lord Hunt, who chaired the two committees and managed to pull together the difficult subjects of aid and trade and to focus the committee on producing the report in a way which, I hope, we can understand and sensibly debate. My second is to all those many hundreds of dedicated people who work in what I call the aid business and who devote their time and a great deal of their own resources to helping people in poor areas. They do great work. Any criticisms made of the overseas aid are not meant to be a reflection on them. Many gave evidence to us and many of us met others from time to time in various capacities.

There must be some anxiety in regard to the number of institutions that exist in what one might call the aid field. Quite apart from the 12 national organisations within the Community—it is there where our attention was mainly focused; in our case it is the ODA—and apart from the EC itself, a large number of non-governmental organisations exist. Outside Europe we have the World Bank, the IMF and so forth. It is a great credit to them that they do not end up tripping over themselves the whole time. Often, because one of the aid bodies happens to be sited with an office and staff in a specific country, it manages to create an organisation locally to face an emergency or build up an infrastructure. However, it is a chancy business. I find it hard to understand why we do not see more duplication or omission—for instance, thousands of blankets arriving but no tents—but somehow—perhaps by the "old boy" network—with a certain amount of co-ordination from the nations concerned, and particularly the ODA, those problems do not arise as often as one may imagine.

An attempt has been made to pull some of those together in Europe by the office of ECHO—European Communities and Humanitarian Office—to which my noble friend Lord Hunt referred. I was fortunate enough to be one of those who visited Brussels and met representatives from ECHO. It is obvious that it is at a fairly early stage and those involved are perhaps a little green in what they are doing. I felt that there was a certain resentment about its role—it is neither one thing nor the other.

The Community is described as the 13th donor. There is confusion among the directorates—again referred to by my noble friend Lord Hunt. It is slow to make decisions; it tends to be bureaucratic. On my visit I was impressed by the trouble both it and the Court of Auditors took to see us and explain what they were doing; what the aims and difficulties were. It is sad to contrast that keenness with the reluctance of the MEPs to present themselves or make any sensible case at all, with certain exceptions. I felt that the lack of enthusiasm showed by the MEPs in what is an important subject was disappointing. Their enthusiasm appeared merely to be to recount the visits that they had made to various countries in the course of their duties. But perhaps that is an unfair criticism and no doubt my noble friend will know better than I how hard they work.

Many NGOs appeared unhappy about some projects led by the EC. They complained that there was difficulty in obtaining decisions and funds. They felt much happier and progressed much better when the projects came under the ODA. That was encouraging in one way—one likes to hear support for the ODA—but it was disappointing to know that the EC is presenting a number of difficulties.

That is emphasised by what is happening with the increase in the Community funds allocated to aid. Within a given figure the more that is hived off into the Community central organisation the less there is left for the ODA. If that is carried too far it can result in the ODA ceasing to be economically viable or being able effectively to perform the tasks which it has been doing efficiently for many years.

I shall not rehearse the arguments on the question of bilateral aid. They appear in the reports. There is a tendency by many people to downgrade bilateral aid. However, it provides substantial benefits, often due to the historical connection. A country may have a colonial background but the historic connection plays a part in obtaining mutual understanding and thus speedier decisions are reached. There is a great deal to commend bilateral aid, though I recognise, as the report makes clear, that there are disadvantages. Having said that, we should take care not to sweep too many of the resources which are available for aid into the central organisation, either in Europe or elsewhere.

I was somewhat intrigued to hear from the NGOs that their main interest was not the treatment of emergencies but the building up of long-term development, such as in agriculture, to try to prevent the emergencies with which they had had to deal from recurring. Of course, it is the emergencies which strike the headlines. It is the banners about thousands of starving women and children which hit the headlines that also refill the coffers of many charities. But, quite rightly, their main effort and work is to the longer term; to deal with the problems that they foresee if agriculture and so forth is not generated within those countries.

Perhaps I can deal briefly with trade—I say "briefly" because a great deal must depend on the outcome of GATT. At present massive anomalies arise in relation to trade preferences. Some are largely historic and bear little relation to anything that currently should be applied. Then we have terms like "most favoured nation" which often means the least favoured nation. Often those nations that receive little trade preference of any kind, by virtue of that, struggle through and make a success of their economies while those which receive most aid do not make the same kind of progress.

A feature which appears from time to time in the trade aspect is protectionism; for example, the rules of origin. They were introduced so that a country which was growing a raw material could obtain a tariff preference when importing those materials into the developed world. But if that same country started to manufacture, whether utilising material it was growing itself, material from the next state or a combination of the two, then those tariff preferences were lost. The country was penalised. It must be in our interests that those countries we wish to help and bring on are encouraged to develop and process the materials that they grow rather than being penalised when that is done.

Apart from the technical preferences, there are quotas, voluntary agreements, non-tariff barriers and so forth, many of which vastly exceed the impact of tariffs on what happens. There are also elements of self-interest by developed countries which appear seriously to damage some of the lesser developed countries. Reference was made to that this afternoon in relation to agriculture and the so-called "Brussels beef carve-up" to which the noble Lord, Lord Hunt, referred. It is worth briefly recalling what happened. The main exporting CAP countries—France and the Netherlands —managed to export large quantities of low grade beef to West Africa. However, they received the same subsidy for exporting that low grade—what is called "side beef' with up to 50 per cent. fat—as though it were prime rump steak. The result was that the poor West African farmers who had been struggling to rear and sell their own stock were unable to face competition—poor though the beef may have been—coming in at a price that made beef production quite uneconomic for them. We, the members of the Community, are paying funds not to help the West Africans but to enable, in this case, the French, the Dutch and others to export their low grade beef to West Africa and to put out of business West African farmers. That cannot be right. I know that it is one of the matters that is being considered and perhaps will be dealt with in the Uruguay Round. It is a feature of something that has been there. I hope that it is an exceptional one and that there are not too many more of them. But I rather fear that there may be.

Finally, the more I hear of trade policies designed to help those in need the more I become convinced that most of them should be scrapped and that we should start again. There is a certain amount of historic nonsense in so many of them. Perhaps the GATT agreement, if we get it through in the next few days, will provide the answer and a satisfactory solution. I certainly hope so.

5.1 p.m.

Lord Bruce of Donington

My Lords, noble Lords have dealt with this matter very thoroughly indeed. I find myself in agreement with much of what they said. That enables me, except in one or two small instances, to forgo going over the same ground.

I cannot let the occasion pass without paying tribute to the noble Lord, Lord Hunt of Tanworth, and the committee's permanent staff for the way these questions have been dealt with. Based on my professional experience I calculate that the noble Lord spent at least 35 hours in the committee cross-examining—or should I say examining—witnesses. On the basis that every hour of examination takes at least two hours' preparation by the chairman of the committee concerned he must have spent a further 15 hours on the deliberations. And reading all the papers must have taken at least another 175 hours of his time, including thinking time. On the basis of a conventional calculation of professional fees for a senior qualified clerk in a firm of chartered accountants, that should have netted him some £22,500, instead of which he has had to be content, like the rest of us, with a daily attendance allowance. I pay tribute, as a Eurosceptic, to the structure of the reports and their contents.

There has been general agreement that aid from the United Kingdom in one form or another, either through the EEC or through direct aid, probably typifies more than anything the aim of "back to basics" which is so often mooted these days. Going back to basics means going back to justice, honour, decency and compassion. That is what back to basics means. It has nothing to do with free market forces. The aid that we provide, in whatever form it is provided, typifies a return to those basic values which I believe most noble Lords share and which at any rate all political parties profess to share. That is against the background of a United Nations obligation to devote 0.7 per cent. of GDP to aiding developing countries—a course of action advocated most vehemently from time to time and with great eloquence by my noble friend Lord Judd, who is to speak in the debate. At present we are devoting around 0.35 per cent. of GDP.

The noble Baroness, Lady Chalker, is extremely clever: I do not mean "clever" in the nasty sense. She has said something that is probably true but quite unprovable. As the noble Baroness emphasises always—and very properly—it is the quality and not the quantity that matters. No one in your Lordships' House can challenge that assertion. No one would query in the slightest the noble Baroness's sincerity and purpose in carrying out the duties of her office in that respect. I pay my tribute to her on that account alone.

Mind you, there are certain difficulties. Not all the aid classified under the aid and trade provisions is sent out with the same purpose. The committee had the opportunity to consider a slight deviation from the procedure evidently adopted by Her Majesty's Government. I do not seek to introduce a note of undue controversy or to detract from anything the noble Baroness has done when I refer in particular to a Written Answer of 28th October. It appeared on a Thursday and therefore would not have been read, if at all, until the Friday. The Question asked the Secretary of State for Foreign Affairs to list each individual scheme which received financial assistance under aid and trade provisions since the programme began. I have to inform the House that there was a project amounting to some £306 million in Malaysia which went to Balfour Beatty. It was a considerable electrification scheme. It did not meet with the approval of the Foreign Office. In fact it was specifically said that it did not have the approval of the Foreign Office. Indeed, the Foreign Office recommended that it should not be done—more particularly since it accounted for more than half the aid contributed during that year, 1991. The answer was that the approval came from a higher authority.

It might be wise to have the matter cleared up quickly. I know that the noble Baroness was not responsible, but as we did not have time to touch upon it in the committee, noble Lords will perhaps forgive me for raising the question today. We would like to know who overruled what the ODA thought was the right thing to do. I have no doubt that I shall receive a reply and I trust that the question will be answered in the same spirit in which it is asked. It is not sought to bring any kind of blame, directly or indirectly, upon the noble Baroness. But we would like to know who authorised no less than £306 million. It is no small matter when we are supposed to be suffering a very considerable degree of financial stringency. My noble friend Lord Judd would certainly not object if that amount had been put in the correct perspective as regards overseas aid and trade so that we could bring up our contribution more towards the level which we undertake to give. But it was not that at all. It was devoted to one project, the usefulness of which, from the aid and trade standpoint, could not be officially endorsed by the Foreign Office itself.

Much has been said with which I entirely agree; namely, the apparent conflict between our contribution to the European Community budget which in turn is passed on to the various projects directly and the aid provided by the Government themselves directly and in collaboration with non-governmental agencies. On the basis of the evidence submitted to us, I do not think that any member of the committee could fail to agree that direct government ODA aid from ourselves, working with non-governmental organisations operating in the field, was the most effective and that aid channelled through the Community did not ultimately achieve quite the same result.

Some may be tempted to ask the question: how did the Commission become involved at all? It started before Maastricht. We were not blessed or cursed, as the case may be, with concepts of ever-closer European union and all that kind of bureaucratic nonsense. It was at a time when we were seeking to co-operate in establishing the single market, the free trade area and so on. There was no obvious reason, other than the wish to get their infernal bureaucratic feet into the picture, for the Commission to become active in this matter at all.

I would not dissent from the fact that some members of the committee advocated the amalgamation of DG VIII and DG I within the Commission structure. That might have some result. In all, the committee felt—I would not wish to misrepresent it in any way—that the Government's attitude towards the whole question was on very sound lines. I say that with some regret because coalitions between myself and Her Majesty's Government are a little unusual. But certainly we believe that that was right.

There can be no doubt that the efforts made by all the countries involved, and by the Commission, have resulted in very significant benefits being conferred on developing countries. I want to leave noble Lords with a contrast. There are people on all sides of the House who are still in the first degrees of innocence. They really believe that bankers are the benefactors of mankind. So much so that they even want bankers to determine the parameters within which our economic destinies may progressively unfold.

Let us contrast the aid provided out of taxpayers' pockets —including those who pay VAT, and not only those who pay income tax—with what has happened with the banks. Let us consider the massive loans that were advertised and almost forced on the various South American states and many other developing countries at exorbitant rates of interest which they are now struggling to repay. They are events so daft as to disentitle the banking community at large from any effective say over the economic destinies of the United Kingdom, let alone Europe. There are actions still being taken against individual depositors and account holders in the United Kingdom by way of charges in recoupment of the colossal losses which the banks have made.

There is a moral in this. I am pleased to support the noble Baroness. It shows the political purpose enshrined in a policy in which one believes, delivered by people who do not necessarily have an interest in the market results of what they are doing, but only in its goodness. Ultimately that is far more effective than the free market forces which have led the banking community into imperilling almost the financial structure of the civilised world.

5.16 p.m.

Lord Butterworth

My Lords, as a member of the sub-committee I too would like to thank and add my gratitude to the noble Lord, Lord Hunt, for guiding us through this most interesting but sometimes impracticable material. It became clear that secretaryship of the Cabinet must be an excellent training for the chairman of Sub-Committee A and we are all grateful to him.

I would like to make a few comments on essentially the first report. I should like to hang what I have to say on two events. The first is the Budget, and then, secondly, the report of the Comptroller and Auditor General referred to by the noble Lord, Lord Bruce of Donington, on the Pergau hydro-electric project in Malaysia, which came out in the course of our work and which I believe has important lessons about capital aid.

First, the Budget. Our aid policy has undergone a major strategic change which has been continued in this year's expenditure round. Although there is a 4 per cent. rise in cash terms until 1996–97, that will mean a real cut in total aid. But the problem is that it is impossible to say what the actual level of aid to developing countries will be because the ODA is discontinuing the practice of having separate lines for development aid stricto sensu on the one hand and, on the other, aid to central and eastern Europe and the former Soviet Union. However, the ODA itself forecasts an absolute cut in aid between 1995–96 and 1996–97, and, if the recent trend is continued, it suggests that it might fall on developing countries.

I would like to say something briefly about a matter which we commented on in our report; that is, the squeeze on bilateral aid because of the rising amount of our aid which is channelled through multinational agencies such as the European Community when our total aid is not increasing. British aid channelled through multinational agencies has risen from 27 per cent. of the total aid budget in 1980 to 45 per cent. now. It is forecast that in the mid-1990s it will pass 50 per cent.

As we pointed out, the consequences for our bilateral aid become more and more serious. Our bilateral aid is judged to be good. In July 1993, the report of the Select Committee on Foreign Affairs on ODA expenditure considered that Community programmes are not as well managed as bilateral aid". That underlines the conclusions which our committee reached in paragraphs 47 and 48 of the first report about the high standards achieved by our bilateral aid. If your Lordships were to talk to our directors in the field—for example, to members of the British Council—I am sure that they would tell you that the Community delivery machine lacks quality compared to our bilateral aid and that it is less well designed and generally inferior.

The noble Lord, Lord Bruce of Donington, quoted the aphorism that we heard earlier that it is quality rather than quantity which is important. I would quarrel with him. I should like to put before your Lordships a different thesis in view of the figures in the Budget and that is that it is impossible to maintain quality on a shrinking performance. That is about the most important thing that I shall say tonight so I shall say it again: it is impossible to maintain quality on a shrinking performance. That is especially true of the increasing vulnerability of the British Council. Denied sufficient core funding, the council increasingly finds it necessary to bid for project work, for instance, against the Crown Agents, consortia of universities and consultants. Such bidding is a good thing, provided that it is kept in moderation.

In passing, however, I invite your Lordships to notice that when the British Council bids (as it does frequently) for Community projects, further problems arise. The Community lays it down that to be successful a project will be supported only if at least two sponsors come from different European countries. It is now commonly alleged that the British Council has embraced a completely new concept—"a contract with an uncommitted Greek"—to fulfil that condition. It seems sad that the Community should lay down such conditions because that suggests that Brussels is putting the advancement of the Community before the efficiency of its aid. That is a criterion which the committee heard in evidence in connection with the creation of ECHO.

A not dissimilar criticism has also been levelled about the selection of the countries to which the Community supplies aid. Largely I suppose because of the early date of the first Lomé Convention, there is no doubt that a disproportionate amount of European aid has been channelled to the, former overseas French possessions.

We should welcome the recent decision to increase the aid that is given to Asia. If we are seriously interested in the poorest people, we should never forget India, where the British Council has done such excellent work. There are more poor people in India than in the whole of Africa.

I turn now to my second event, the report by the Comptroller and Auditor General upon the Pergau project. It has for some time been well known that all over the developing world hundreds and hundreds of dams have been built, absorbing colossal amounts of aid and wreaking all kinds of damage, human, ecological and economic. Sometimes the damage has been so severe as to counteract any benefits that the dams may have contributed. An early lesson could have been learnt from the Akosombo dam on the Volta River in Ghana in the 1950s and 1960s, but identical mistakes have been repeated time and time again: large numbers of people displaced from their homes, lands and livelihood; local people too poor to pay for the electricity that is eventually generated; the enormous spread of parasitic water-borne diseases, river blindness and the like; half the world's irrigated land so salinated that yields are affected and finally sedimentation—the reservoir ultimately fills up with silt and other detritus and has to be decommissioned, becoming a useless block of concrete.

As those of us who have spent years seeking sustainable development know, what is needed is a better understanding of technology in development. Aid programmes should be designed to make use of local available resources. Too often unsuitable Western hardware is chosen or installed by foreign "experts". Participation by the end user in project design and technology selection is vital. In the Arun hydro-electric project in Nepal, the only technology which was considered was a large high technology dam, in spite of the fact that there was in Nepal the technical ability to design, construct and install smaller scale schemes capable of supplying the same amount of power more quickly, more cheaply and with less risk.

Then came the report of the Comptroller and Auditor General on the Malaysian Pergau hydro-electric project. It would seem that because of an earlier undertaking to the Malaysian Government, £234 million was sanctioned towards the biggest single project in British aid history. The money came from the aid and trade provision referred to in our report which can only be used in credit-worthy but poor countries for projects which are "financially and environmentally sound". I repeat the words "environmentally sound". The consultants reported their concern about the depletion of forest resources, encroachments into ecologically sensitive areas and the risks of disease transmission which might result from the project. As has already been mentioned, the Overseas Development Administration concluded that the project was "a very bad buy" and would cost Malaysian consumers over its 35-year life about £100 million more in electricity costs compared with locally gas-fired electricity generation.

I shall not go on further. However, I wonder whether I may be allowed to adopt the principle which was put before your Lordships earlier by my noble friend Lord Carr that as a general rule in this area technical aid is much more effective than capital aid.

My noble friend the Minister has of course been at the forefront in enhancing the reputation of British aid in its concentration upon sustainable and successful development. The ODA, the British Council and others have a deservedly high reputation in the field, but many of us tonight are concerned about a system which gives constantly increasing funds to the Community when our own bilateral aid is being shrunk considerably to provide it.

5.30 p.m.

Lord Thurlow

My Lords, it is difficult to sustain a kind of dialectical vitality in a debate when we all agree so much with one another. That reflects the quality of the report, for which we are indebted to the noble Lord, Lord Hunt. As his contribution was quantified in notional terms by the noble Lord, Lord Bruce, perhaps I, in passing, may say what an enormous sum his predecessor, the noble Lord, Lord Aldington, would have chalked up had he been able to benefit in the same way. As I have now retired from the sub-committee, I should like warmly to endorse the tributes paid to the noble Lord, Lord Hunt, and, previously, to his predecessor.

I cannot disagree with most of what the noble Lord, Lord Butterworth, said. In the early part of his remarks, he took as his text the aphorism that quality cannot be sustained on a shrinking budget. How true! We are deeply indebted to the Minister for the way that she fights her corner and her grasp of the whole subject. But in real, budgetary terms British aid is declining and will decline. Quality cannot be sustained on a shrinking budget however splendid the exertions of the ODA, to which I pay tribute. I worked with it in the field for many years. I have been involved with it at times in Whitehall. I have the utmost respect for it.

What lies behind the problem of the shrinking budget? I suggest that it reflects a certain disenchantment in public opinion. Over the years, the problems of bad government, in Africa in particular, and the stories of corruption which, alas, remains rife in many countries, are served up to us by the media in colourful terms, and, inevitably, the voting public has begun to question whether the whole apparatus of aid is directed properly and gives value for money.

I have to confess that, many years ago when I first became involved, I saw myself to some extent as a disciple of our colleague the noble Lord, Lord Bauer, who pioneered the criticism of the general concepts of intergovernmental aid. If the noble Earl, Lord Onslow, were still in his place, he would probably be glad to stand up now for the principles of the noble Lord, Lord Bauer. What has been said about a certain capital aid project, of course, is grist to the mill of those who question the whole field of overseas aid. But we have to go on slogging away. We need to increase our contribution.

Some of your Lordships may have noticed an OECD report that I saw yesterday which gave the figure of the net contribution by the so-called developing countries to the economies of the developed countries in the years 1982–1990. The figure that the OECD identified as that contribution to our economies (the economy of this country and of others of the better-off industrialised countries) is equivalent to 418 billion dollars. I find it difficult to struggle with that magnitude of figure. But it means that, if total annual international aid for the same period—I am afraid that I do not carry these figures in my head, but I give them in rough and ready terms—is about 30 billion dollars a year, multiplied by eight years, that gives a figure vastly below what the developing countries are contributing to us.

On those grounds alone, there seems to be an unanswerable case for doing everything that we can, within our acknowledged budgetary stringencies, to prevent our aid contribution from being reduced in real terms. Reference has been made to the squeeze on our contributions to our bilateral programme resulting directly from the inexorable increase of the central Community programme. I say "inexorable" because pressures from the European Parliament and elsewhere for a continued increase in Community aid to developing countries will continue. We must accept that. If we did not maintain proportionately the amount we contribute to our own bilateral programme, eventually it would vanish. I do not suggest that that is a practical likelihood, but we must accept the fact of the squeeze, and that, however good the quality of our aid programme, it cannot be maintained against a continual squeeze.

The centralised Brussels administration has been criticised this afternoon. Certain criticisms were made in our report. We do not wish to be purely negative about Brussels' administration and programmes. As has been said, much in the formulation of programmes is excellent, imaginative and innovative. However, there remain notable flaws in the administration of the programmes. The evaluation, the monitoring and the follow-up do not exist. There is in Brussels a lack of professional staff of the right calibre and with sufficient experience. We in this country used to have a Colonial Office manned by home civil servants and a colonial service working in the field. It produced the most wonderful professionals. Brussels maintains such a split and it is not healthy. One cannot have good professional administration at the centre unless one can draw on the experience of competent professionals in the field. I hope that such problems will be corrected in time, but let the time not be too long.

There is need for a stronger central policy unit in Brussels. We referred to that in our report. The Council should have a more effective set of arrangements for keeping track of what the Commission is proposing and doing. I understand that the Government do not entirely share the views which the committee expressed on that matter but I wish to commend them to the noble Baroness.

Furthermore, the Court of Auditors needs to be strengthened. Indeed, the staffing of the Commission in the aid sphere generally needs strengthening. I see the noble Baroness shaking her head and I know that she does not agree. However, I wish to commend the point to her. We know that as regards the Commission's staffing there may be a certain amount of fat in certain areas. That is inevitable in an international organisation which is staffed on an international basis. But we believe that increases require to be made.

Reference has been made to the prospect of a GATT settlement. It has been suggested that, while in the long run that may be of general benefit to the poorer countries, there are strong grounds for thinking that the immediate effect of the projected lines of the GATT settlement will positively damage the trading interests of a number of the poorer developing countries. That is a serious prospect for them and it raises the question of whether more should not be proposed as regards compensation to offset that prospective damage.

If we achieve the GATT settlement to which we all look forward, one problem that will arise is that, in order to meet the considerable reduction in tariffs, we can expect the powerful industrial lobbies throughout the world effectively to lobby for a further increase in non-tariff barriers. Our second report traversed that subject a little. I believe that, because of the strength of the lobbies, there is no means in sight of preventing the Commission and member state governments accepting such a proliferation of non—tariff barriers. The consumer interest does not have the same kind of voice; certainly not a voice that can be brought to bear quickly. There is an international organisation of so-called consumer unions, which I commend to your Lordships. It brings together organisations such as the Consumers' Association in this country and its equivalents in other countries. They try to raise their voice and did so yesterday with Sir Leon Brittan at the final stage of GATT. I suggest that such an international consumer effort needs strengthening if only as a counter to the prospective increase in the efforts of the industrial lobbies.

Earlier I gave the frightening figure of the net inflow of resources from the developing countries to the developed countries. That is a challenge to all the member state governments and to the Community generally to maintain their efforts. I extend to the noble Baroness every good wish that in fighting her corner in budget terms she will have as much success in the future as she had in the past and will go even further.

5.48 p.m.

Baroness Flather

My Lords, I too greatly welcome the two reports and express my admiration and appreciation for the hard work of the chairman and the committee. The result is two reports which are clear and informative even to a newcomer to the subject. I hope that they will be widely used. After all, as the chairman said, it is our money which goes to fund the aid programme under Lomé.

I should like to take this opportunity to express a concern which was probably not strictly within the terms of reference of the inquiry. The noble Lord, Lord Hunt of Tanworth, told my noble friend the Minister that the committee was not primarily concerned with objectives but more with who does what. Before coming to your Lordships' House in 1990 I was a delegate to the Economic and Social Committee, the Consultative Assembly of the European Community. During my three years I was closely involved in the ACP/EC economic and social interest groups. As one of the three members of the contact group I had the good fortune of attending five joint assemblies. We were commonly known as the social partners group and our main function was to put forward the views of the trade unions, farmers, NGOs and other representatives of the people of the ACP states at those joint assemblies. Therefore, it is the objectives of aid on which I wish to concentrate.

Let us for a moment picture ourselves as living in an average African country at around subsistence level in 1980; that is, we should be able to look forward to two reasonable meals a day. Thirteen years later, with a convention which has provided for an increase in real terms, the chances are that we can look forward to only one meal a day.

Since the signing of the first Lomé Convention, most of the ACP countries' economies have not developed and that applies to every sector of the economy. Roads, schools and hospitals have all deteriorated and poverty has gained ground. Clearly that does not mean that the aid money has not been spent on development programmes. It simply means that no sector of the economy seems to have taken off, whether it be agriculture or industrialisation, so as to improve the lives of the ordinary people.

Paradoxically, while there is an increase of qualified people from the ACP states in Western Europe, they still have to look for technical assistance from outside. Would the Marshall Plan ever have produced any results if the people in charge had not had the clearest objective; that is, the economic and social reconstruction of Europe? Can one blame the members of the farmers group for wondering why the price of chocolate climbs higher every year in Brussels when the bottom has dropped out of the cocoa-bean market? It is not surprising that they feel that they are locked into a system in which they cannot bargain for what they grow but in which they must pay greatly enhanced prices for what they need to buy.

At joint assemblies I have always felt uneasy about the unrealistic expectations of the ACP states as regards aid. Perhaps it will always be so, but it is the filtering of aid through to the lowest level which is most important and which concerns me most. I am extremely pleased that my noble friend Lord Can has already put that matter so firmly on the agenda. Under Lomé IV opportunities have opened up for all kinds of initiatives specifically designed to help those in the lowest strata. It is extremely heartening to see Article 153 on women in development, but if that is to be more than just an article in the convention it is necessary first to see what programmes are in place and then to evaluate their impact. It is not much use starting training programmes for rural women if they are not fixed at a time at which the women can attend those programmes.

I know the interest which the Minister has in population issues. I am sure that she was as encouraged as the rest of us by the inclusion of Article 155 on population. However, I should like to draw attention to Article 230 on eligibility for financing, which in paragraph (g) makes it possible for aid to be given directly to community groups, NGOs, trade unions, co-operatives and teaching and research institutions to undertake economic, cultural, social and educational programmes in the ACP states.

One may wonder why that should be surprising in any way whatever, but your Lordships may not be aware of the opposition to that clause by many of the ACP states. The social partners group from the economic and social committee had lobbied for direct project aid for many years. We should have liked it to be totally independent of the ACP governments but that was not acceptable and their approval is still required. Nevertheless, I believe that that is an important advance and is an opportunity to put money where it is most likely to reach down or, as my noble friend Lord Carr said, bottom up rather than top down. That is so in particular because all the categories mentioned can be from either the EC or ACP countries or both together, jointly.

The Minister spoke of value for money in her evidence and many of your Lordships have dealt with that matter. I believe that that is the way to achieve value-for-money projects which would help to improve the conditions for the poorest. Those projects could be run by the local people with help, if necessary, from our own experienced NGOs.

However, I am deeply anxious about the possible complexity of making that clause work. I have seen Commission representatives behave in ways which reminded me of the British residents in preindependence India. It is interesting that the noble Lord, Lord Thurlow, mentioned the British officials in those colonies. However, I am referring to remoteness and I am sure that he was not. I have found the Commission representatives to be extremely remote from the people about whom they should be most concerned. Many of the groups do not even know where the Commission offices are situated.

There may also be problems as regards obtaining approval from ACP governments. Some ACP governments have stopped their representatives from attending the social partners' meetings because the social partners have failed to praise those governments to their satisfaction.

I am also extremely concerned about all the paperwork which goes with any help from the EC. I am extremely pleased that my noble friend Lord Boardman mentioned that. I hope that the Minister may be able to discover for us whether that clause has been used much or at all. It is too early for evaluation but it will be good to know whether all the efforts used in order to get that through are bearing fruit.

Finally, perhaps I may say that quality and quantity must go together. They are both essential. Neither would suffice without the other.

5.58 p.m.

Lord Bonham-Carter

My Lords, I join with other noble Lords in paying tribute to the chairmanship of the noble Lord, Lord Hunt of Tanworth. I thank also our specialist adviser, Clerks and those who gave evidence before the committee.

Throughout the debate there has been a great degree of unanimity among those of your Lordships who sat on the committee as regards the report that has been produced. I suppose that that is not altogether surprising. I join in with that unanimity. I believe that it is an extremely good report and I thank the noble Lord, Lord Hunt. He has been very clever in producing this report from the contributions of all of us who sit around on these Benches.

I propose to comment briefly on four issues: aid, trade and debt; the effect of GATT; multilateral and bilateral aid; and, finally, the focus of our own bilateral aid programme. As the noble Lord, Lord Hunt, suggested, when we started on our report on aid, we were told that trade was much more important than aid. Therefore, we produced a report on aid. When we started our report on trade, we were told that debt was far more important than trade or aid. We decided that we could not do a report on debt because it was really outwith our terms of reference and involved discussions with international financial institutions of countries that are not members of the Community and so on. However, we recommended—and I hope that the recommendation is accepted—that an ad hoc committee be set up to look at debt because, until debt is looked at alongside aid and trade, it is not possible to survey properly the total effort which is made by the developed world, its effectiveness and the way in which it is helping the poorest countries in the developing world. That is all I have to say about trade, aid and debt.

I should like to say a few words about GATT. Other noble Lords have mentioned that there is a downside, as it were, to GATT. A successful conclusion—and we hope it will be successful—to the GATT negotiations will be justifiably greeted with euphoria. However, we should not forget that, for the poorest countries, GATT is not altogether good news. The figures from the report given by the noble Lord, Lord Rea, show the extent to which they will suffer.

Whereas OECD calculates that there will be a gain in the income of developing countries of 195 billion dollars, the poorest countries will be losing 7 billion dollars a year. We must not avert our eyes from that very important fact. We must turn our minds to deciding how we can compensate them and what compensatory measures are appropriate. In the report, we suggested tariff preferences. In the course of today's debate, the noble Lords, Lord Carr and Lord Boardman, and others, quite rightly pointed out that tariff preferences are not a very effective way of helping. Therefore, let us consider urgently how those poorer countries—and the whole idea is that we should help them —can be compensated in the circumstances of a successful GATT negotiation.

Nearly every speaker who has spoken has talked about the consequences of the decision of the Edinburgh Council of 1992 that the EC's aid should be increased by 60 per cent. in 1999 and the effect that that will have on British bilateral aid. Unless the latter is increased, it will automatically be squeezed; and, as it is automatically squeezed, so our programmes will also be squeezed. Moreover. whether EC programmes are good or bad, it is certain that if such programmes are squeezed further, their quality will suffer, as the noble Lord, Lord Butterworth, admirably pointed out in dealing with what is known in chess as the Chalker defence of British aid policy; namely, that quality is more important than quantity. At a certain point quantity starts to affect quality. I suggest that that point has come and has come very sharply at this time, not least because human and financial resources have been diverted since 1989 from aid to the developing world to aid to Central and Eastern Europe. That presents a very real problem and one which must be confronted.

I am the last person to complain about aid to those Central and Eastern European countries. I believe that their political future depends on economic reforms which are visible to the inhabitants of those countries. Unless those economic reforms are delivered, the political reforms will not materialise.

However, that being said, we must recognise that that diversion of resources is a diversion to purposes which are rather different from their original objectives. For example, the standard of living in Poland cannot be compared with that in sub-Saharan Africa. The aid that we were giving to the latter was of a different nature and for a different purpose from that applicable to Poland. It is my simple view that new demands require new resources and that different demands, such as essentially political demands—which are what the Central and Eastern European aid programme was designed to meet—should not diminish the resources which are devoted to the fight against poverty.

As has already been mentioned, because the budget lines have been amalgamated, it has become much more difficult to assess what has been happening. That means that we cannot tell what is going to Central or Eastern Europe and what is going elsewhere. Can the Minister say why that has been done? Why should we be deprived of that information? It makes one suspicious. If we are properly to asses what is being done, we need such information. Further, if we are to help the Minister fight her "corner", as it has been called on many occasions, we should like to have as much information as possible in order to defeat her enemies.

If, as, regrettably, I have to say I fear, the Government cannot bring themselves to increase the British budget for bilateral aid, it will be necessary urgently to reconsider the focus of our aid programme both geographically and in terms of projects. We cannot spread it thinly over the same area for all those projects. Here we come to an important question which neither of the two reports addressed and to which the noble Baroness, Lady Flather, referred. What is the most effective use of aid? I asked most of our witnesses that question in one form or another. The answers were, shall we say, not very precise. Yet the effectiveness of aid is at the heart of the matter. I should have thought that it was high time that some kind of systematic study comparing and contrasting different types of aid was undertaken.

The noble Lord, Lord Carr, pointed out that technical aid is much better than capital investment and the noble Lord, Lord Butterworth, pointed out that dams were disastrous. If I may say so, those are broad-brush statements. We need rather more precise information. For example, why is it that south-east Asian countries have taken off and, on the whole, African countries have not? Was it due to aid? I do not know, and I do not know if anyone knows the answer. Was it due to culture, whatever that may mean? Was it due to political stability, though not democracy? Was it due to market economies? Well, perhaps not altogether. Well, what was the reason? We should surely know. Why have we failed in Southern Africa to the extent that we have? I believe that a more coherent study would be very useful.

However, if one looks at south-east Asia and compares it with Africa, one factor stands out; namely, literacy. The figure runs to the order of 80 per cent. there and to the order of 40 per cent., very broadly, in Africa. Therefore, one can almost say that literacy has a direct connection with success. I must, therefore, return to my hobby-horse. If we have to refocus our aid by narrowing and concentrating it as regards both projects and geographical areas, I suggest that we should put literacy very high on the agenda. Moreover, I believe that we should put literacy of women high on that particular agenda. I say that because, on the whole, literate women are more interested in literacy in others than appears to be the case with literate men. They seem to use their literacy to help in population control, or whatever one may like to call it. They carry out most of the agricultural work. Therefore, if one wants to improve standards of agriculture in many developing third world countries, the women, if they are literate, will do more than the men sitting around on their haunches. For all those reasons, if we have to concentrate our programmes, I hope that we shall concentrate on education and that, within education, we shall focus on literacy and, in turn, within that focus, on literacy for women.

6.8 p.m.

Lord Judd

My Lords, like the noble Lord, Lord Bonham-Carter, I am sure that we are all deeply grateful to the noble Lord, Lord Hunt of Tanworth, and his fellow committee members, together with their advisers and their Clerks, for the two very clear and closely related reports. We are also grateful to those who spared the time and the resources to give evidence. The noble Lord, Lord Hunt, brought to the task not only his outstanding experience in Whitehall but also a considerable personal commitment to third-world issues as evidenced in his past patient but deft chairmanship of the Disasters Emergency Committee made up of some of the key humanitarian voluntary agencies in the United Kingdom.

We are also glad that the Minister is back from her important visit to South Africa to share in our deliberations. Looking ahead, South Africa will be an immense challenge to the European Union. The political settlement will be the beginning, not the end. Expectations and aspirations will be unlimited in health, education, employment, housing, land, agriculture and industry. The test of our real European Union commitment to a democratic, non-racist, post-apartheid South Africa will be the resources and support that we make available for that great country's future. For the European Union to fail the people of South Africa in their hour of emancipation and hope would be the ultimate betrayal, playing into the hands of chaos, disorder and extremism.

To do these reports justice it is essential to measure them against the needs. As we approach the new millennium the realities are stark. Somewhere every 2.4 seconds of every day a young child dies unnecessarily of poverty. Average life expectancy is still 12 years shorter in the south than in the north. Some 1.5 thousand million people are deprived of even primary health care. Some 1.75 thousand million people have no access to safe water. Some 3,000 million people still live without adequate sanitation. The south's maternal mortality rate is still 12 times higher than that of the north. It is estimated that by the year 2000 there may well be 2,000 million people living in absolute poverty and 100 million refugees and displaced people in the world. That is a grim prospect as we approach the Christmas season and hardly the basis for a stable, peaceful global community.

I have no shred of doubt that the European Union will ultimately be judged not by its selfish social and economic indices and its introspective materialist preoccupations but by the dynamic part it plays in building a fairer, more just and altogether more viable world community. And what of our own Government's record, which the noble Lord, Lord Carr, so rightly stressed? The Minister may well seize on the reports before us to argue that an increasing proportion of our aid budget is pre-empted by inescapable commitments to the European Union. But the truth is that, while to its credit the European Union has been expanding its total aid budget, the UK aid budget has by contrast remained frozen. The obvious way to reduce the proportion of our aid going to the European Union is to expand our own aid budget. Indeed against the challenges I have described the record of the present Government is deplorable. The noble Lord, Lord Thurlow, with others, has gently but firmly made that point

As in so many spheres with this Government, the rhetoric comes cheaply but it contrasts with the action. Despite the Conservative Party manifesto commitment to the United Nations target of 0.7 per cent. of gross national product for official aid, under present stewardship the percentage continues to plummet. Even before the recent Budget the Foreign Affairs Select Committee in another place projected that as things stood the percentage would be down to 0.26 per cent. of gross national product by 1995–96 as compared with 0.51 per cent. when the Conservatives originally came to office. That figure is virtually halved as a percentage of our national wealth. The Budget has made things worse. It really was disingenuous of the noble Baroness to issue a press release, which I have before me, which states: Britain's total external assistance programmes are to be maintained at their previously agreed levels". That is "Yes Minister"-speak for a continued freeze which represents a cut in real terms of almost 10 per cent. over the next three years.

It is that cash freeze, as my noble friend Lord Rea has argued, which reduces the funds available for our bilateral aid programme every bit as much as the expanding European Union budget. But that is not all. The reports before us have drawn attention to the demands of Eastern Europe and the former Soviet Union and express anxiety about diversion of staff and resources. We must see this in the light of our own bilateral programme. Speaking to the Commonwealth Heads of Government in Harare in October 1991, the Prime Minister emphatically stated: UK assistance to Eastern Europe and the Soviet Union is additional to, and not at the expense of, our aid to developing countries". But we now learn that in future the Government are to combine aid to developing countries and aid to Eastern Europe in an integrated budget. The noble Baroness has tried to reassure us that there is no threat to developing countries, but while aid in the current year to developing countries has gone up by 3.5 per cent. in cash terms, hardly matching inflation, aid to Eastern Europe has shot up by 23.4 per cent. While a freeze has been imposed on third world aid for the next two years, aid to Eastern Europe will go up by more than 19 per cent. What is this in real terms but a significant shift to Eastern Europe at the expense of the third world?

There is also emergency aid. In 1992–93 the Government spent £92 million in Bosnia alone. That is three times the amount available for Mozambique. I am frankly saddened to see the noble Baroness caught up in this juggling with figures. This is a Treasury game and certainly not one for the ODA. As I have repeatedly said in this House, and as my noble friend Lord Bruce has so well said today, the Minister's personal, humanitarian commitment is real, as all who have worked with her know well. I greatly enjoyed working with her during my time as director of Oxfam. But the tragedy is that she is repeatedly deserted by her colleagues, who do not begin to share in her commitment. How long, I ask myself, can she stay as this feeble administration's humanitarian fig leaf. I care for her reputation for integrity at the bar of history.

What lessons do we learn from these reports and from other relevant research? There is obviously a balance sheet in the European Union aid performance. On the one hand, between 1988 and 1991 a high proportion—48 per cent.—of European Community aid went to the least developed countries and a further 40 per cent. to low income countries. A high proportion—95 per cent. in 1991—of European Community aid is provided as grants. Some 14 per cent., as compared with the Development Assistance Committee average of 4.2 per cent., was dispersed in 1990 through non-governmental organisations, which are frequently one of the most effective channels. Much of the aid is targeted to rural areas, where the poorest people predominantly still live, but it has to be said that there is room for more evidence that it reaches the poor in these areas. On the other hand, the most populous poor countries receive small amounts of aid per capita. For example, between 1988 and 1991 India received one-tenth of a dollar and Bangladesh six-tenths of a dollar per capita compared with 19 dollars for Guyana—a middle income country—and 12.5 dollars for the Ivory Coast.

Much European Union aid is still tied, with African, Caribbean and Pacific countries awarded only 17.4 per cent. of contracts for supplies and a mere 7.2 per cent. of technical assistance contracts. Too much aid is arguably still provided to countries which on poverty criteria should be ineligible, for example, Turkey, Jordan and Tunisia. The proportion of aid going to support basic needs such as education—to which the noble Lord, Lord Bonham-Carter, so well referred—and health is still too low, with 2.9 per cent. allocated to education, as compared with a Development Assistance Committee average of 10.2 per cent., and with only 4.1 per cent. allocated to health.

Management of aid leaves a great deal to be desired, with a grave lack of delegation to field staff, sparse evaluation and far too little involvement of the local population in identifying and designing projects. That problem was tellingly described by the noble Baroness, Lady Flather, this afternoon. There is a lack of accountability and transparency and this is aggravated by the complexity of administration, with the fragmentation of management between Directorate-General VIII and Directorate-General I which makes it difficult to make comparisons between programmes.

There is a need for more expertise in some areas and for a more rational deployment of staff. I find it worrying that there are only 10 dedicated and overworked members of staff to deal with the food aid which accounts for 25 per cent. of all European Union aid. In this respect it is significant that the ODA has been paying out of its own budget for experts to work in Brussels to strengthen European Union capacity. It is clear that any supposed co-ordination of member states' programmes is a myth. There is as far as I can see no co-ordination of responsibility according to predetermined criteria. Developing countries outside the African, Caribbean and Pacific regions receive a smaller share of European Union aid and less favourable trade terms.

What are the priorities therefore for the future? A number of NGOs throughout Europe have been working together—I believe this is a good indication of what can happen in the European Community—including Oxfam and Action Aid from the United Kingdom. They have given a great deal of thought to these issues and I have been impressed by what they have argued. Some of it was well reflected in the evidence submitted to the Select Committee by the British NGOs.

Clearer policy objectives than those outlined in the Maastricht Treaty are essential. The focus on poverty should be sharpened by increasing access to health care, education, water and sanitation. There must be far greater availability of credit, coupled with improved access to markets. Those two together are an unrivalled investment in the earning capacity of the poor. Genuine priority must be given to sustainable economic and social development, with an emphasis on labour-intensive methods. Europe, not least the United Kingdom, should put its resources where its words were at Rio last year. How right the noble Lord, Lord Butterworth, was in what he said on that subject and in so much else of what he said today.

The first step in a campaign against poverty must be to enter into policy dialogue with individual recipient governments with the aim of designing poverty-reduction blueprints for each country. The objective should surely be to target 50 per cent. of European Union aid on poverty-related programmes. That should be co-ordinated with the World Bank, the IMF and regional banks. Conditionality should insist that the disadvantaged are targeted—the elderly, the handicapped, women and children. At least 20 per cent. of European Union aid should be focused on the social sector and social infrastructure. Indeed, the Inter-American Development Bank has already shown the way. It has reached 18 per cent. and aims to reach 35 per cent.

Integration of administration is essential. The European Community Humanitarian Office should on no account be seen as a separate division or institution. It has to be inherently part of the relief, rehabilitation and development operations. At the same time dialogue and co-operation with the NGOs should generally be improved.

In all of the Commission's projects the impact on poverty must be rigorously and consistently measured. Apart from the Commission's own programme, it is high time that member states got their act together in ensuring cohesion and greater effectiveness of their aggregated bilateral programmes. Above all, policy coherence between trade, foreign and aid policies needs to be improved. Trade and foreign policies can too easily be in conflict with poverty alleviation when there is insufficient co-ordination. The effect of non-aid foreign policy ought to be kept regularly under review.

The World Development Movement regularly reminds us—and rightly—that while aid accounts for 5 per cent. of the income of third world countries trade accounts for more than 80 per cent. The European Union market is particularly important. For many of the least developed countries it accounts for 50 per cent. or more of their exports. It is interesting that the Select Committee concluded that import tax relief would be one of the most important ways of generating trade with developing countries. However, the committee was also right to point out, first, that the tariff preference tool is very imprecise and, secondly, that with any future global trade liberalisation it would anyway decrease in significance.

In this debate many noble Lords, including the noble Lord, Lord Boardman, have stressed the significance of GATT. Whatever the theoretical commitment in the GATT negotiations to multilateralism, the Uruguay Round has been dominated by the United States, the European Union and Japan. The failure to address the third world's agenda has illustrated the undemocratic nature of the GATT structure and the subordination of genuine multilateralism to the strategic, not to say selfish, interests of the North. So far as I can see, the newly-proposed multilateral trade organisation as planned will do nothing to correct that.

UNCTAD has calculated that 83 per cent. of manufactured exports from the third world to the European Union currently encounter trade barriers, reducing their earnings by 3 per cent. a year. The 1992 World Bank Report Global Economic Prospects and Developing Countries estimated that a 50 per cent. reduction in the trade barriers of Europe, Japan and the United States would increase developing countries' exports by 50 billion US dollars a year, just less than the 57 billion US dollars aid which they receive.

However, as the noble Lord, Lord Hunt, stressed, it is also true that the figures produced by both OECD and GATT indicate that, if international income were to increase by 215 billion US dollars following a so-called successful conclusion to the Uruguay Round, some three-quarters of that would accrue directly to the northern economies and many developing countries would be net losers, with African countries standing to lose 2,600 million dollars a year by the year 2002. In any case, the proposed GATT does not, I fear, deal adequately with the problem of escalating tariff barriers. By the same token, while it includes the phasing out of the Multi-Fibre Arrangement, it does so only over a period of 10 years, with the benefits stacked at the end of the period. God knows what the human cost will be in that decade.

I conclude by saying that, while in theory the extension of GATT to cover agricultural projects should be of benefit to developing countries, where agriculture typically accounts for two-thirds of employment and 25 per cent. of gross domestic product, in practice the agricultural agenda has been dictated by the narrow interests of the European Union and the United States, where farming accounts for less than 5 per cent. of GDP and employment. The proposed Final Act and Blair House accord fail to tackle the issue of central concern to developing countries, the ending of subsidised export dumping by the European Union and the United States. If the GATT makes it more difficult for developing countries to foster food sufficiency by protecting their agricultural sectors from cheap imports, that will seriously undermine their food security.

These reports of the Select Committee are crucial. They, and the debate today, have illustrated the wisdom of the committee's recommendation that we must find more parliamentary opportunities and time to monitor the European Community's aid and trade policies. It is high time that what the Commission does in our name was open to detailed scrutiny. It would be beneficial if for its next report the Select Committee were able to make visits in the field to take evidence from the supposed beneficiaries on how they see it all. A special report on debt is certainly urgently required. Meanwhile, we look forward to the Minister's reply.

It is clear that the Government's influence on improving the European Union's aid and related trade performance will be dependent upon the demonstrable commitment of the Government themselves to the battle against poverty and to the building of a dynamic, outward-looking European Union. Frankly, I fear that, whatever the personal inclinations of the Minister, the Government's response collectively to both those challenges can, sadly, only be described as repeatedly lamentable.

6.27 p.m.

Baroness Chalker of Wallasey

My Lords, I begin by congratulating the noble Lord, Lord Hunt of Tanworth, and his committee on two outstanding reports which have led to this very interesting debate. The noble Lord, Lord Rea, rightly said that they are good, informative reading, and even educational.

I thank many of your Lordships for kind remarks about the ODA and about me personally. I appreciate the tease from the noble Lord, Lord Bruce of Donington, about quality and quantity, which was picked up in the speeches of a number of other noble Lords. I shall always say that quality must be maintained. I may have my battles over quantity, as your Lordships' House will know, and I want to increase quantity as soon as the British economy will allow that, but I will not give up battling for quality. That applies not only to quality in our bilateral programmes but also to quality in the programmes carried out in the EC, to which the two reports refer, or in the international financial institutions, the UN or any other body to which we contribute.

It would be fair to say that the probing of your Lordships' committee over the last year has acted as a spur to the Commission. I have to report a better attitude on the part of many in the Commission to the ideas which are contained in your Lordships' first report on EC development aid. I see some change coming about, and I shall deal with that in my reply.

I well recall giving evidence at the start of your Lordships' inquiry last February. On that day we focused on the need for an effective EC development programme, not least because 23 per cent. of the UK's aid budget is channelled through the Community. The first report has some useful suggestions in areas such as pre-project planning and the use of evaluations. There is also a large degree of consensus now within the Community about the importance of ensuring that aid is used as effectively as possible in achieving its development objectives. Those objectives are now formalized in Title XVII of the Maastricht Treaty: to combat poverty, promote sustainable development and assist the integration of developing countries into the world economy. Our partners share our concern that aid should be targeted towards the poorest of the poor and directed where it can make a real impact. Your Lordships' report on development aid recognises the importance of that.

The first report also led the committee into the second major inquiry on EC aid and trade policy, which raised further fundamental questions of whether trade policies are a useful means of promoting development. Perhaps I may say how much I welcome this thoughtful and serious contribution, in particular at a time when the Community's trade policies are in the focus of world attention. I shall turn later to the Uruguay Round which we all hope will he rewarded with success in a couple of days' time.

What is absolutely clear is that the right trade policies are vital. However, they are only part, but an important part, of the story because trade is three-quarters of the income of developing countries and aid is only one-quarter. In some parts of the world such as Asia, as the noble Lord, Lord Rea, remarked, trade becomes eleven-twelfths of the income of those countries. Sadly, that is not so in Africa. We have always known that aid needs buttressing by trade and agriculture. But by far the most important element in development is the correct pursuance of policies by governments of the developing countries themselves.

At various times during the debate I was asked about our approach to a number of issues in terms of budgeting. In a moment I shall come to that very issue. However, first, I should like to touch on four slightly separate issues which are not directly part of the reports but on which the reports reflect by their comments. I could not agree more with the noble Lord, Lord Judd, when he spoke of the importance of the future European Union/South Africa relationship. I can tell the noble Lord that we signalled that point at the November meeting of the Foreign Affairs Council. It is perfectly true that imaginative thinking will be required. I am delighted to say that the establishment of a British Development Division in Pretoria is really in the vanguard of the work that will need to be done in South Africa; and of course we have been active in South Africa for most of the past eight years working through non-governmental organisations, which was all that was possible until now. In addition, we agreed at the Anglo-German summit in November that the UK and Germany would work closely together on the tasks in South Africa.

Perhaps I may now turn to the vexed question of ATP and I Pergau. I well understand noble Lords' interest in the issue. However, I should refer your Lordships to the answer that I gave to the noble Lord, Lord Taylor of Gryfe, on 24th November at col. 258 of the Official Report. I have a difficulty. I understand that the PAC will be inquiring about this. It is our convention that we do not refer to those matters publicly until that hearing has taken place. However, I note carefully the comments of all noble Lords on the matter.

The third matter to which I wish to refer—it is not really a separate issue—is the subject of debt to which the noble Lords, Lord Hunt, Lord Bonham-Carter and many others referred. Debt is truly a matter of deep concern. It certainly is a problem of great importance for developing countries. But it remains an area in which the European Community has no powers to act. It remains a matter of national policy on which member states, rightly in my opinion, combine to work through the International Monetary Fund, the World Bank, and with other partners to seek to produce a better relief of debt programme. Your Lordships will be well aware of the initiative of my right honourable friend the Prime Minister in the Trinidad Terms. That is an example of the way in which we believe debts should be handled on the international stage. However, perhaps I may say, because of my deep interest in the matter, that should your Lordships have a Select Committee looking into the issue it will run very wide because every donor nation is deeply concerned. In several fora we have managed to persuade better language, even from our Japanese partners.

The noble Lord, Lord Thurlow, asked me about OECD net transfers and gave some rather worrying figures. I shall look at what the noble Lord said. However, the flow of funds between developed and developing countries is always large and the concepts complex. The net flows of financial resources to developing countries in 1992 were put by OECD at 165 billion dollars, which was a 23 per cent. increase over 1991, accounted for by a sharp rise in private investment and other private flows. Those figures I know for certain. I shall look at the figures which the noble Lord quoted and write to him.

The noble Lord, Lord Bonham-Carter, and others made comment about the combining together of all our aid resources in one budget. I have always believed that we should learn the lessons in different parts of the world which are applicable to other parts of the world. Managing everything separately does not always mean that that occurs. However, I can assure your Lordships that when we allocate the funds available we take into account the balance of expenditure between the regions. I can further assure noble Lords that Asia and Africa have long been our major priorities and that they will continue to be so. I was interested in the Africa/Asia comparison which the noble Lord, Lord Bonharn-Carter, gave. Like him, I believe that the advanced literacy of many Asian people is the reason that they have progressed so much more quickly. It was interesting that that issue was raised at the Tokyo International Conference on African Development, with real acceptance from the African countries that they needed to be a little more like the Asians in that specific respect.

Poverty focus is central not only to the UK bilateral programme but multilaterally too. It is an issue being adopted by the European Community. It is certainly central to the European Development Fund which deals with the ACP countries. In future it will be perfectly possible to see expenditure country by country and region by region because that will be published in the annual British aid statistics. There is no question of hiding that. Over the coming weeks we are reviewing the aid given to all nations. However, Africa undoubtedly will continue to be a main focus of our bilateral aid. As your Lordships know, support will go to the countries with good government and those pursuing economic reform. I hope that we shall be in a position to make a substantial pledge to SPA III.

In the light of that combined budget, fears were raised about the money spent in Eastern Europe and the former Soviet Union. Let me assure the noble Lord, Lord Bonham-Carter, that we shall regularly look at the balance between Eastern Europe and the former Soviet Union. No one is more sure than me that we have to transfer the lessons learned from one programme to another. I do not wish to end up in the situation so well underlined in the report of the noble Lord, Lord Hunt, of the separateness within the Commission of the management of aid. I do not intend to let that happen in the British bilateral programme or, if I have influence on it, in the European or any other programme to which we contribute.

My noble friend Lord Carr in, to me, a moving speech, talked about the need to maintain the critical mass of UK bilateral aid. So did the noble Lord, Lord Rea. I strongly agree that we must maintain a critical mass of bilateral aid. I am seeking to do just that by keeping up the overall level of our aid and by critically reviewing all new multilateral commitments. That is certainly among my highest priorities at the moment.

Our increased contribution to the EC aid budget will affect our bilateral aid programme, but it may be that the smaller bilateral programme can be buttressed by the amount we do within the EC programme overall. It is perfectly clear that the Community has looked to British experts and British know-how in the development of its programme. When it comes to evaluation, we find the Community going through the manner in which we do things, to adapt it for its own purposes. So I believe that we are having an influence, by our own progress, on many of the issues of which the noble Lord, Lord Hunt, and his committee spoke.

Perhaps I may turn now to evaluation. Having shared our ODA evaluation experience with the European Commission, it is reviewing the matter. It has not been popular, but the Commission seeks to bring the experience together. At present, evaluation and monitoring of projects during their performance takes place at a number of different levels. We believe that the work carried out by the Court of Auditors is an important tool in ensuring that the principles of sound financial management are applied to all Community funds.

In the past, the court has rightly expressed concern as to the value for money, as does the committee in its report. There is already an active evaluation in DG VIII, but it is now taking over responsibility for evaluation in Asia, Latin America and the Mediterranean countries as well. We must see how it goes, but we will not be slow in giving advice if we think that we have appropriate advice to offer the Commission in this all-important matter.

In due course, I hope that the full implementation of DG VIII's project cycle management, an integrated approach and logical framework policy, will lead the Commission to feed the lessons of its evaluation back into the planning process. That is what we have sought to do in Britain and it has served us well. We already provide summaries of our own evaluations both to the Commission and to other member states on a regular basis. I strongly support the exchange of evaluation results between donors. Where I think the committee was wise in its advice was in suggesting that the Development Council should take an even more active role in setting the overall policy framework.

There is already some monitoring of implementation of the programme through the various working groups. But I believe that in addition to representation on management committees, there needs to be a greater opportunity to scrutinise certain areas of policy from time to time. That may take a new form of co-ordination and it is something to which at present I am giving thought.

We are making efforts to improve co-ordination between the Commission and the bilateral donors. A part of the so-called Horizon 2000 initiative is to improve co-ordination. There is a link here between that and the debate on complementarity to which I shall move in a moment. Last May we had a debate on policy co-ordination with a good resolution and we have asked for reports from the Commission on the implementation of that policy co-ordination. In the 2nd December Development Council meeting we agreed on a co-ordinated approach towards measures to fight poverty. We have a future timetable to include other areas of key interests such as health and education. I hope that will all serve to make the programme more effective, because what we are after is an increase in operational co-ordination, not only in Brussels but particularly in the field. Next May, the Development Council will specifically address the question of co-ordination in the field and we have said that we are ready to take the lead in at least one country and to give ideas about how better co-ordination can be achieved in the field. Frankly, I see that as one of the most serious problems. I have asked all my high commissioners and ambassadors to gather their colleagues together and let me know when it does not work. That way, I hope practically to get the issue right.

In addition to those matters, we have also in recent council meetings adopted resolutions on poverty alleviation and family planning. In each of those areas we are drawing up a framework for the Community and member states so that we act in a co-ordinated manner. I look forward to seeing the results of the work. We have already done work on social indicators such as life expectancy, infant mortality rates, literacy and access to drinking water, and have seen improvements over the past 30 years. But while some developing countries have developed economic growth, they have not had the right domestic policies; therefore, their social indicators have not improved. But without the right domestic policies for their economies, there will be no external aid programme, apart from humanitarian aid. So there is a great deal to be done. I hope that that answers my noble friend Lady Flather's question.

On the population issue, we have made some good progress in the councils, particularly under our own presidency last year. That is one of the other areas of policy co-ordination which seems to be moving ahead quite fast. However, we need to see operational implementation by the Commission. In particular, I wish to see a real increase in Commission spending on family planning in the Lomé Convention to mirror the large increases that we are making bilaterally.

The noble Lord, Lord Rea, asked whether by giving 100 per cent. joint funding on population issues to the bilateral programme I would be cutting back on other Joint Funding Scheme funding. The answer is no; the 100 per cent. funding was as a spur to get population programmes moving. I am very much in favour of persuading the Community to do something similar because I believe that, along with education, family planning is one of the most basic and critical elements of any development programme.

Horizon 2000 has been the kind of change which I believe your Lordships' committee wished to see. The committee wished to see an integrated policy, a clearer policy approach, improvement of monitoring, evaluation and more delegation to the field. Bit by bit, we are working through all those recommendations to make them part of the EC aid programme, just as they are part of our bilateral programme. But the key issue will always be to make sure that good policies, worked out by the member states and the Commission in Brussels, are translated into good policies in the field. That is where the non-governmental organisations can be of immense help to us. I know that they have been very critical at times in the relations they have had with the EC. I am determined that those will improve. They are already better and one good sign is the co-ordination between the non-governmental organisations them-selves.

Your Lordships' committee made many comments, as has happened in the debate, on the diversity among directorates-general in the Commission. Like your Lordships' committee, I believe that it is unsatisfactory. We have long held that DG VIII and the DG I north-south division should be re-united and at least it was a step forward last year that there is now a single commissioner for both, who also happens to be responsible for ECHO. I know that the commissioner shares my views on the need for a more unified approach and already there are some services in DG I and DG VIII which are being brought together: structural adjustment as well as evaluation. But with the agreement of the European Council last week and enlargement to 21 commissioners, it is too soon to say what the outcome will be for development co-operation. I can assure your Lordships that it is something that I am carefully watching.

The noble Lord, Lord Thurlow, my noble friend Lord Carr and other noble Lords spoke about the need for specialist staff. The inquiry on EC aid raised such questions about staffing. After investigation I am inclined to believe that the problem is not with overall numbers, as I explained to the inquiry. DG I, DG VIII and ECHO have over 1,500 people in Brussels and the field. Although the responsibilities are not directly comparable, it is worth noting that we have a total of 1,200 staff. I believe that the Commission has to address the issue because it is quite clear to me that it is weak in an all-important area of expert advice. In many areas the Commission relies on recruiting consultants on three-year contracts or staff seconded from member states. I have currently four members of my staff seconded to the Commission and the new secondment of a social development adviser to DG VIII is particularly important because the Commission had not previously had the benefit of any professional advice in that all important area. We shall examine further possibilities. Certainly a statistician will go in the new year to work on improving the statistics for Africa and we are discussing several other opportunities, particularly in the health field.

I believe that such secondments may be one of the better ways to improve the quality of the EC aid programme. Member states have a lot of experience in these matters. I know from my Danish, German and Dutch colleagues that they believe that it is a very valuable way in which to improve the effectiveness of the programme.

With regard to complementarity, it is quite clear that the debate in the Community is only just getting under way. It is certainly not clear where it will lead in terms of responsibilities. I believe that the key question is whether complementarity contributes to making aid more effective. It must not start to become an end in itself. In our December Development Council meeting we agreed to establish a high level group of officials to study the scope for greater complementarity between the Community and bilateral aid. The United Kingdom will participate fully.

The noble Lord, Lord Hunt, asked me about the Lomé mid-term review. We agreed Lomé IV for 10 years in 1990, but the EDF finances it for only five years. That is why we have a mid-term review which will take us until early 1995. Currently the ACP as well as the EC are identifying the items that each side wishes to reopen. We shall not know the ACP concerns until next March, but we shall work very hard on this matter.

My noble friend Lord Carr and a number of other noble Lords spoke about food surpluses and food aid as being, frankly, one of the worst ways of helping the developing world. I believe that we are right to emphasise the need to avoid distortions caused by exporting EC surpluses as did the committee. Certainly one of our achievements in the UK presidency in 1986 was the food aid regulation which effectively changed the basis of EC food aid from being supply-led to being demand-led. It is still far from perfect, I know, but we hope that we can concentrate on the longer-term rather than emergencies. As the NGOs so clearly said to the committee, and as your Lordships are aware, if there is better supply for the long-term, fewer emergencies will arise. But at least we now have the food aid regulation, which is no longer a creature of the shortcomings of the CAP.

Like your Lordships, I deplore the well-known cases in which subsidised EC exports have harmed local agriculture in a number of developing countries. While the CAP is still far from perfect, at least the reforms of 1992 bring some welcome changes in the right direction. Surplus production is being cut and export subsidies are to be phased out. I can certainly show a reduction in the subsidies and an improvement over the past two years.

In the specific case of beef, the total for refunds will fall from 1,333 million ecus in 1992 to 902 million ecus in 1994. That is certainly an improvement. We have worked on the problems of subsidised beef exports which were causing such awful problems to local producers in West Africa. It is good to note that in July the Commission cut the subsidy on beef exports to West Africa by 15 per cent. I understand that the Commission has reduced the amount sent there by 25 per cent. It is still not enough but I believe that we have to press for the effects of exports on local markets to be monitored and take action case by case until we have a better system on preferences and a better overall trade situation. As I said, it is three-quarters of the income of developing countries.

Let me turn briefly to the situation that we have now. I was asked about prospects for the Generalised System of Preferences review.

Lord Bruce of Donington

My Lords, I am grateful to the noble Baroness for giving way. She has given some undertakings in regard to specific commodities such as beef. Will she give an unequivocal undertaking that the situation in regard to tobacco will be looked at and that the whole wretched fiasco will be scrapped as soon as possible?

Baroness Chalker

The noble Lord knows very well that I thoroughly share his view on the fiasco of tobacco. But the problem is not quite so easy to resolve as our fury might indicate. There are many countries which have not diversified. This may be a good moment to say that I believe that it is undesirable to let a preference mentality build up among developing countries because they are then dissuaded from diversifying out of tobacco, which they might well do.

Certainly the private sector is the key to diversification. I believe that the donors in the European Community can help build up the private sector to a certain extent. But it is the policies of the developing countries themselves which will bear the largest responsibility for it. Certainly we acknowledge that diversification is not an easy solution, particularly when countries are heavily dependent on a single product. Structural adjustment is often needed to help a country move from making yesterday's goods to making tomorrow's. If it is done too quickly, sometimes severe strains come upon the economy. We need to look at structural adjustment in line with diversification, which will help countries to get away from their dependency on preferences, whatever the rogue element of preference may be.

The whole question of preferences is very complex. I am most grateful to the noble Lord, Lord Hunt, and his committee for the way in which they tackled all those issues in the report. Certainly the European Community trade preferences are not worked out for an ideal world. It is true that it would be much better if they were related to the poverty of the trade partner. But I hope that the European Community's response will enable us to make sure that we move away from preferences as far as is possible. The GSP review will begin fairly soon and I hope that we will make sure that the scheme that we have been rolling over on an annual basis since 1990 pending the resolution of the GATT round will enable us now to embark on a proper review in the light of the GATT round.

Your Lordships asked a number of questions about the GATT round itself. I believe that the recent OECD/World Bank study on the round, which concluded that the proposed liberalisation of trade in manufactured and agricultural products would raise incomes in non-OECD countries by some 78 billion dollars per year, will be an under-estimate. I say that because it ignores the immediate boost to worldwide business confidence which a successful conclusion to the round will bring. That study concluded that the developing countries stand to suffer most from a continuation, or even intensification, of protectionism, which is what we wish to get away from.

I was asked also about the effects on individual countries. It is difficult to predict. Some countries will lose out in the short term, particularly those who are agricultural importers, because world prices are likely to rise as subsidised exports are cut. But in the longer term they will benefit from the boost to their own agricultural production. In the meantime the GATT Final Act specifically includes special measures such as additional financing from the international financial institutions for any such disadvantaged countries. I believe that that is the right way to go to help them through this difficult period of transfer.

It is also worth noting that despite the anxieties expressed by some noble Lords, the developing countries themselves strongly favour a successful conclusion to the Uruguay Round. They realise that it is not a zero sum game; all will benefit from a boost to the world economy. The real threat to the developing countries is without doubt the increased protectionism which would result from a failure in the talks.

The most information that I have been able to gather on the talks this afternoon is that some problems are still outstanding. I hope that your Lordships realise that in the GATT round we are aiming for an agreement of unparalleled complexity. We always knew that we would be going right down to the wire on this. I was grateful for what the noble Lord, Lord Bonham-Carter, said in regard to Sir Leon Brittan. I remain optimistic that there are overwhelming benefits for all from a successful round that will encourage the necessary flexibility on all sides.

In closing perhaps I may say that this has been one of the best debates that we have had in your Lordships' House since I was privileged to join it. I can assure the noble Lord, Lord Hunt, and his committee that we will endeavour to direct EC aid towards those countries that can make the best use of it. They too must show the donor community that they are following sound economic policies and that they have the institutional framework to provide the conditions for all individuals, however local, to make their maximum contribution to the programmes; in short, countries which strive toward the principles of good government and respect for human rights.

We are contributing as much as we can to the sort of reorganisation which the noble Lord, Lord Hunt, indicated would serve the developing countries well. I believe that whereas we can show that British money is used through the bilateral programme most effectively, we could do better in the case of the EC. As a member state we intend to play our full part with the Commission in attaining development objectives just as good as those in the bilateral programme.

The committee served us all extremely well. I am grateful to all its members and all noble Lords who spoke in the debate. We will work on the reports and continue our work with the Commission in a firm effort to obtain a much more effective EC development programme.

7.3 p.m.

Lord Hunt of Tanworth

My Lords, I thank the Minister for that full and informative reply. I thank also all other noble Lords who took part in the debate for their constructive comments and, in some cases, their kind remarks. At this stage I wish to make just two brief points.

As I said at the beginning, we started by accepting the EC aid programme as a fact of life. We did not consider the justification for its existence. Had we done so we would certainly have had two—possibly three or four—different views on it in the committee. However, one aspect was not touched on in the debate. The noble Baroness, Lady Flather, talked of the ACP states and the noble Lord, Lord Judd, suggested that next time we should get away from London and Brussels and go to the field. We did not do that. However, we took evidence from Dr. Berhane, the Secretary-General of the ACP group, and saw the ACP ambassadors in Brussels. A point that they all made forcefully to us was the advantages of multilateral as distinct from bilateral aid. In a debate where all the emphasis was on arguments for bilateral aid, it is worth remembering that there are arguments on the other side relating to a guaranteed minimum contribution; obtaining contributions from countries which might not otherwise be making them; and also, according to some recipients, being more free of political strings or connections. Therefore, there are arguments both ways. But if there is to be an EC aid programme, which clearly there will continue to be, it is vital that the money is well spent. The debate has shown a general feeling among your Lordships that there are grounds for improvement and obtaining value for money.

My second point concerns the general feeling, about which almost every noble Lord spoke, relating to the squeeze on our bilateral programme. It is extremely difficult to define what is a critical mass—the point at which the squeeze results in consequences which are intolerable. I do not believe that any member of the committee wanted to give the impression that that had yet occurred or that we were anything but impressed by the way the ODA carried out its functions. However, we felt that we were getting near to that precipice, and every noble Lord who spoke endorsed that. I hope that the House will continue to be vigilant and ensure that that precipice is not crossed—where the critical mass of our own bilateral programme deteriorates to the extent where quality is lost.

On Question, Motion agreed to.