Overseas Development Aid

HL Deb 02 March 1994 vol 552 cc1034-71

6.13 p.m.

Lord Redesdale

rose to call attention to the case for aid from the Overseas Development Administration budget being directed to "where it is most needed" as set out in the administration's annual review 1993; and to move for Papers.

The noble Lord said: My Lords, I should like to start the debate today by thanking all noble Lords who, at such short notice, have put down their names to speak, and by thanking the Minister in advance for her reply. I realise that she will be facing the questions of the Foreign Affairs Select Committee tomorrow morning.

The reason for calling the debate is to look at the use of Overseas Development Administration funds in the wider context. My noble friends will be looking at particular issues. My noble friend Lord Avebury will be speaking on East Timor and my noble friend Lord Mackie of Benshie will be looking at overpopulation. I, however, should like to focus my speech on the particular questions that the Pergau dam project have raised.

Perhaps at this point, considering the almost inevitable charges that will be levelled by the Minister, it is worth stating that we on these Benches are very concerned about exports and jobs. We are not hostile to the sale of arms to countries that need the arms for defence and which have no policy of repression against their own populations. Also, having close connections myself with the North-East, I am only too well aware how important the defence industry is to British jobs and exports.

However, I strongly believe that the present diplomatic difficulties that exist between Britain and Malaysia are due to fundamental problems that arose when in 1988 aid and arms became entangled, and the present questions arise due to the cavalier fashion in which the budget of the ODA was raided while the noble Baroness, Lady Thatcher, was Prime Minister, allegedly to secure a large arms contract.

The noble Lord, Lord Younger of Prestwick, is reported in the Economist, while discussing the Malaysian arms deal, as saying, a verbal undertaking was given by somebody—not myself—to link the aid to the defence contract". Is it possible for the Minister to say who gave the verbal undertaking and by what authority?

In the Foreign Affairs Select Committee this morning, the Foreign Secretary gave details of the "brief entanglement" between aid and arms which took place in 1988. On 23rd March 1988, the then Defence Secretary, the noble Lord, Lord Younger of Prestwick, signed a protocol with the Malaysian Government which contained an explicit link between aid and arms. The Foreign Secretary admitted that a figure of 20 per cent. was quoted, implying that aid would constitute 20 per cent. of the value of defence contracts, estimated at around £ 1 billion. The Foreign Secretary admitted that this was an MoD initiative and that the wording of the final protocol was not agreed with the FCO. When the noble Lord, Lord Younger, returned to Britain, the Government evidently realised the significance of this entanglement and sought to untie the linkage.

The way they did this was to write two letters on the same day,28th June 1988, which were delivered by the British High Commissioner to the Malaysian Finance Minister. The first letter said that the terms of the original protocol involving linkage contravened international guidelines and could not be pursued. The second letter, also delivered by the British High Commissioner, reconfirmed Britain's willingness to fund ATP projects up to the value of £ 200 million. While the Foreign Secretary claims that the effect of those two letters was to "de-link" aid and. arms, it is difficult to see how that is the case, given that both letters were delivered on the same day, and the £ 200 million mentioned in the second letter equates with an uncanny resemblance to the 20 per cent. figure in the original protocol, and indeed with the £ 234 million eventually spent on the Pergau dam. The close link in correspondence is further highlighted when, on 8th August 1988, the noble Baroness, Lady Thatcher, wrote to the Malaysian Prime Minister and mentioned defence contracts and the aid package in consecutive paragraphs.

The Foreign Secretary claims that after the June exchange of letters, both policies were pursued independently and says that both were completely defensible. But in the case of the aid package which relates to the Pergau dam, is that really so? In aid terms, the ODA did not think it was defensible and the then Permanent Secretary, Sir Tim Lankester, described the project as "a bad one in economic terms" and "an abuse of the aid programme". I wish to return to that point.

A final point raised in the Select Committee this morning was that the Foreign Secretary admitted that the ODA, including the noble Baroness, Lady Chalker, was overruled in February 1991 when he and the Prime Minister decided to go ahead with the Pergau project. While acknowledging Sir Timothy Lankester's opinion, the Foreign Secretary said that there were wider considerations at stake—political considerations.

The budget of the ODA was raided to finance the most expensive ATP project ever undertaken, a project that is costing the British taxpayer at least £ 234 million and will still be being paid for into the next millennium. That would not cause so many problems if this was a project that fulfilled the ODA's stated aims. However, Pergau dam was a bad buy.

If this was just an aid project, why did the Government support a project that was clearly so problematical, and back it so vehemently that the then Permanent Secretary to the ODA, Sir Timothy Lankester, had to be given special direction by the Foreign Secretary, to sign the cheques, so freeing himself from responsibility for this wasted money.

The National Audit Office reports do not normally grip me; but the report on the Pergau project is breathtaking stuff. It shows quite clearly that the aid budget has been abused, as Sir Timothy Lankester implied. This hydro-electric project is significantly more expensive than gas turbine generators, which the World Bank study of 1987, and other studies, favour. It is probable that if gas turbine plants were constructed, British companies would have won the contract for the plants. That would have created jobs in Britain that the dam failed to do, but not to the same extent.

As the Minister no doubt knows, the ODA study shows that the dam will cost the Malaysians £ 100 million more over its 35-year life than gas would. I realise that there is some debate whether a dam can have a 35-year life. It will probably even raise the price of electricity in Malaysia. The ODA further concluded that it would not be economic to commission the dam until 2005.

It seems extraordinary that this huge ODA grant is being paid not to the recipient government, as is normal, but rather to a private company, Tenaga Nasional Berhad—which is the Malaysian electricity company. That is a highly unusual arrangement, although I realise that it was a government body at the time. Apart from any other odious elements in this deal, is the Minister satisfied that the environmental dangers which the dam poses are being addressed in a satisfactory way? Many of the Green groups seem to have real anxieties.

I now look at the Aid and Trade Provision (ATP), which makes up about 6 per cent. of the aid budget. The ATP was established in 1977 with the aim of giving developing countries preferential deals if they bought British goods. It was intended as an aid for the poorest countries in buying the goods which they really needed to buy. It was not the intention that business should decide the direction of the aid budget.

The ATP is administered by the ODA and the DTI; but one should remember that it is part of the aid budget as a whole. The rules governing the ATP have been reviewed and revised in the light of the Pergau dam scandal. I understand that all ATP projects will undergo the same assessment which other ODA projects undergo. That is no doubt a good thing. However, having followed how the ODA was swept aside and ignored in the Malaysian case, I wonder if these safeguards are enough to protect the aid budget from interference? My anxiety has been heightened by hearing a recently retired Minister expressing disdain for the worth of guidelines.

Much has beer, said about the links which the companies who benefited most from the ATP have with the Conservative Party. I understand that because what has been called "constraints of the time-scale" in ATP operations, those companies who know the ropes benefited from the provision. I hope that the ATP will be administered in such a way in future that any bias in the allocation of contracts will be clear for all to see.

The revelations about British policy towards Malaysia have raised many questions. Perhaps the Minister could answer some further questions. Did the Government act as one would hope in the trial of Mr. Osman, former head in Hong Kong of the Malaysian state-owned bank? There have been allegations that the documents the Foreign Office refused to supply in that case—using Public Immunity Certificates as in the Matrix Churchill case—would have implicated Malaysian Ministers. Is it true that this was done to avoid jeopardising relations with Malaysia?

Perhaps the Minister would like to comment on allegations that in September 1988, as part of the aid and arms deal, the Malaysians demanded another landing slot at Heathrow and that the British Government paid British Airways £ 2.1 million out of public funds to relinquish a slot. If this is untrue I am sure that the Minister will want to make it quite clear in her speech.

That the ATP is not working well is shown by the list of projects that have been criticised by the National Audit office: the Karachi water scheme (£ 8 million from OD. A); the Malaysia rural water supply scheme (£ 62 million from ODA); Victoria dam (£ 117 million from ODA); a dam in Sri Lanka (£ 19 million from ODA); mini hydro-power stations in the Philippines (£ 5 million from the ODA). Three of these five were built by Balfour Beatty and on one other of these they were the consultants.

Speaking about the ATP, the Minister said: it should not be seen as a subsidy to industry; it should be there to get economic regeneration in developing countries started as well. That is always something that we must have in the forefront of our minds".—[Official Report, 11/11/92; col.313.] I sincerely hope that the new guidelines allow those al. the DTI to at least do that much, for there seems little doubt that the ATP, by its nature, is driven by the interest of British companies rather than the needs of the poorest nations. It is surely sensible to work towards a multilateral ban on ATP.

Turning away from the ATP to the ODA in general, I should like to propose further reforms which would introduce greater transparency and accountability to the workings of the ODA. Perhaps in future pipeline projects should be published; project documents, once approved, should be made available; and preparatory reports should be circulated.

The ODA' s aid framework paper, which is at present a secret document, should be made available when issues concerning aid are to be debated in Parliament so that the debates can take place in an informed manner. I realise that there will be difficulties in undertaking what I have proposed. However, it is only through greater transparency that the spectre of apparent shady deals will be banished. My Lords, I beg to move for Papers.

6.28 p.m.

Lord Prior

My Lords, perhaps I may declare an interest at once. I am chairman of GEC; we hold a 30 per cent. share in the holding of GEC Malaysia and I believe that in 1987 we gave £ 50,000 to the Conservative Party. We did not contribute in 1992 and on a previous occasion we have also supported the Liberal Party. I do not know what one can make of that.

I wish to examine how we have got ourselves into this dreadful mess which is having such an effect on jobs, investment and political influence in South-East Asia. However, first I have something to say about the press. In the 1980s some sections of the press were extraordinarily sycophantic towards the Conservative Government. Frankly, on a number of occasions the press allowed the Thatcher Government to get away with murder. In the 1990s the worm has turned with a vengeance and now no innuendo, no rumour and no suggestion is too far fetched for the press to turn against the Government. It is little short of catastrophic that the jobs of many thousands have been lost as insult and injury designed to inflict damage on the British Government have drawn in the government and Ministers of a very important and friendly customer; namely, Malaysia.

On a visit to Japan last September with the Prime Minister I watched the reaction of the Japanese press as our Prime Minister was pilloried in Tokyo by our own press correspondents. The Japanese press simply stood there with their mouths open with amazement at the lack of respect and courtesy that was shown to a Prime Minister operating in a foreign country. I sometimes reflect on what a pity it is that everyone can understand, speak and read English. If all the talk had been in German, French or Spanish, no one would have been any the wiser. As everyone can understand English, perhaps our press should be more responsible than ever.

What are the facts? I shall try to give them as I see and know them. First, Malaysia indicated that it wished to place large defence orders with Britain of about £ 1 billion, which it would pay in cash. In fact, the orders have amounted to about £ 1.5 billion and the Malaysians have paid in cash. Quite understandably, Malaysia said at the same time,"If we place this order with you, will you aid us in a major project that we badly need?" It is not surprising that the Malaysians asked for that and it is not surprising that the British Government said,"Yes, we'll give you some aid". If there was a "tangle", to use the Foreign Secretary's word, about whether the two issues were contingent upon each other, it is a perfectly legitimate and reasonable cause for inquiry by the press and Opposition. I do not doubt that for one moment even though it was quickly sorted out, as the Government made clear in the House of Commons on 13th June 1989, reported in volume 154 of the Official Report at cols.397 and 398. They had earlier made it clear that the Secretary of State for Defence at the time had made a mistake, but had put it right in June 1988, as the noble Lord said.

So aid was granted to the Pergau hydro-electric scheme. Quite rightly, the Malaysians regarded the project as a means to increase power generation and to diversify their energy sources. Frankly, a great deal of nonsense is being talked about such a scheme being expensive. We all know that when one builds a dam which has a hydro-electric scheme, a lot of capital is involved, but over a long period of time the running costs are very low and the two things balance each other out. That is why, where they can, most countries opt for a mixed source of power, whether hydro-electric, nuclear, coal, gas, or whatever.

I am not certain that in this case the ODA made what was for it more than a cursory examination. I have seen reports—I am not certain about them—that the ODA had people out there for a couple of days. I am not certain whether that was long enough for them even to get to the site. They concluded that they did not like the scheme. They were overruled. It is quite clear why they were overruled. It was because we had already given our word as a nation that we would honour an aid programme to Malaysia.

I have to point out that the aid and trade provision is an aid and trade provision with emphasis on the "trade". It is about 5 per cent. of the aid budget—£ 100 million a year. In the latest report that we are considering tonight I think that the figure is £ 92 million. If it is going to lead to the sort of accusations that have been made in the past few days, I think that it would be much better to take ATP away from the ODA and to put it with the DTI. That would be resisted hotly by the ODA, but it seems to me that if we are to get into this sort of problem, it would be far better to do so.

Under OECD rules, one has to give 35 per cent. of the cost of a project. One cannot give less. Two recent grants by Germany (one to the Shanghai metro and one to the Guandjhou metro) have accounted respectively for 51 per cent. and 68 per cent. of the cost. Germany has only done that because it thinks that it will get further orders. On the whole, that is why British industry needs to have this help in large capital projects in which we have to compete with a great many other countries. The aid and trade provisions resulted in Britain being chosen for the new airport at Kuala Lumpur, for gas turbines providing more power, for hospitals and for universities. In fact, the Malaysians now say that we have lost between £ 3.5 billion and £ 4 billion of business.

There is another reason why this has been so disturbing. It is arrogant of people here to believe that they know better what the Malaysians require. It smacks of the colonialism of a bygone age and is deeply offensive to a very successful nation that is very proud of its achievements—and rightly so. We must respect Malaysia's sensitivities and culture if we wish to do business with that country. I applaud the way in which Malaysia has managed its community of mixed races, different religions, emergence from colonialism and internal conflict to become one of the leading countries of the Commonwealth and the so-called "developing world". The growth in its economy and standard of living will shortly take Malaysia above the limits of aid policy. Britain has played an honourable part in helping, including by ATP, one of the world's great success stories: a democracy with political stability and strong leadership, and growing prosperity for all the people.

To end, I ask: what next? We must now stop criticising each other, honour our friendships and get back to sensible trading relations in which the Government here have a major part to play. We must hope that our sense of national interest will enable the press, the Opposition, industry and government to recognise all the issues: the freedom of the press, the importance of industry and jobs here, and our friendship with Malaysia and other South-East Asian countries. We must recognise that all those issues are at stake and deal with them in a responsible manner.

6.26 p.m.

Lord Ennals

My Lords, I start by thanking the noble Lord, Lord Redesdale, for raising this issue. He could not have chosen a better time, or perhaps the time was chosen after his choice of subject. I do not know how it worked out, but it is good that the debate produced such a frank statement from the noble Lord, Lord Prior. I was interested in the various parties to which GEC has contributed. The noble Lord missed out the Labour Party for some reason or another and did not say whether he gave a contribution to the Conservative Party in 1993, but one cannot intervene to ask in debates such as this.

The only interest that I can declare is that I have been interested in overseas aid ever since the end of the war. I looked up the first little pamphlet that I produced on overseas aid, which was in 1947. It was published by the Council for Education in World Citizenship more recently than that—and the first time that I ever came close to power in this area—was when I became Parliamentary Private Secretary to Barbara Castle when in 1964 she became the first Minister of Overseas Development. I was very proud of that. I discussed this matter with my noble friend yesterday and have been looking through her White Paper. A number of phrases in it warmed me. One may well hear them from the Minister, but they are not apparent when one looks at the "dreadful mess" to quote the words of the noble Lord, Lord Prior, that we are now in.

Paragraph 8 of the introduction to that White Paper states: `We give aid because in the widest sense we believe it to be in our interest to do so as a member of the world community. We recognise that it is in. he nature of aid that we should accept an economic sacrifice when giving it". Your Lordships should take note of that. The paragraph continues: To describe as aid transactions which do not entail such sacrifices would incur risk of frustration and ill will". The first sentence of paragraph 2 reads: The basis of the aid programme is … a moral one". I suppose that most Ministers today and some former Ministers would say that that is a load of old nonsense. That is just what Alan Clark has been saying. We now seem to take it for granted that the aid programme has a real task to promote not just trade in the best sense of the word, but military trade and the arms trade. I find that quite disgusting. I feel that we are living in a very squalid time in politics. Putting the aid-arms picture within the framework of the Scott Inquiry, this is a sad time for British politics. There are a few clean people around, and one of them is sitting on the Government Front Bench and will have to answer this sad debate. It is sad in many different ways.

It is interesting that the public actually believe in aid. Politicians have always thought that aid really was not popular. Opinion polls show that over 70 per cent. of the public support the concept of aid. They also show that the public want British aid spent on basic needs: emergency relief, primary education and health, help in growing food and digging wells. I believe that to be true. The Government argue that Britain has one of the world's biggest aid programmes and that UK aid is well focused on the poor. That was absolutely true at one time. Critics respond that Britain is one of the meanest donors and that little help reaches those who need it most. What are the facts?

At £ 1.8 billion in 1992, Britain's aid to developing countries was the world's sixth largest, but it is going down. As a percentage of our gross national product we gave less than most, coming 15th out of 22 donors. Whether this makes Britain generous or mean depends on one's view. What is clear is that Britain is less generous than it was 15 years ago, and each year that goes by it becomes less generous still. The simple argument which is often used by the noble Baroness, Lady Chalker,"But don't worry, it is so well administered" is beginning to crack at the seams.

Some real challenges must be made from this side of the House. The Government broke their own rules on aid and trade provisions by going ahead with the Pergau dam project when they knew that it failed to fulfil the requirements to be economically and financially viable and technically sound. Of course they knew because they were told by their experts. I have to say to the noble Lord, Lord Prior, that I find it difficult to believe that the ODA's examination which led to the conclusions by the Permanent Under-Secretary was based on a two-day visit. That is difficult to accept. If it is so, it is an absolute criticism of the ODA to which the Minister must respond. Secondly, she must also respond to the criticism that the Government linked the provision of aid for the Pergau project with commercial orders in other areas, specifically for defence equipment, in breach of their own declared policy that there should be no aid-arms link.

The Minister has always taken a very honest and principled position on this. She said on 20th December 1991: United Kingdom aid is provided in support of sustainable development and to alleviate poverty in developing countries. There is no question of linking aid and arms ' deals".—[Official Report, Commons,20/12/91; col.331.] Then, on 24th November 1993, she said: Aid funds cannot be used for the purchase of arms. Of course, that is right. All bilateral project proposals are subject to careful appraisal of economic, financial, institutional, social and environmental aspects before they can be approved".—[Official Report, 24/11/93; col.258.] I was horrified to see, just reading the newspaper coverage of the inquiry today by the Select Committee, that the Foreign Secretary had to admit that the Foreign Office was not even informed at the time, in 1988, when the then Secretary of State for Defence, now Lord Younger, actually signed the agreement. That means that the ODA did not know what was being done in its name. I find that quite horrific, and the Minister must explain the position of the Foreign Office and the ODA at that time. The Minister is on the spot. Many of us here have great sympathy for her, but I have no sympathy for the argument that she is going to have to defend.

6.45 p.m.

Viscount Craigavon

My Lords, I hope the House will allow me to divert from the bashing of the ODA to a slightly different subject. I am grateful to the noble Lord, Lord Redesdale, for encouraging me and perhaps others to read this year's ODA annual report rather more closely than we otherwise would have done. found the report highly readable, and it shows some of the excellent aspects of the ODA's work.

I should like to focus on one particular and most needed part of ODA work; namely, health and population. In terms of the Motion before us, population assistance is one of the most vital aspects of fostering sustainable and lasting development. I was very glad to hear from the noble Lord, Lord Redesdale, that the noble Lord, Lord Mackie, was going to say something on this subject.

Perhaps I may first draw attention to one self-contained page of the ODA report, page 5, headed "CARE and ODA: a lasting partnership", CARE here being the name of the international development organisation which is the second largest recipient of ODA funds. An account is given here of an NGO making very effective use of both emergency and development aid supported by donations from the public. Organisations such as CARE are able to be particularly flexible and to be responsive to local needs as expressed from the ground up.

Among NGOs which do not solely concentrate on population matters, CARE realises the full importance of integrated population programmes and is now placing an increasing amount of emphasis on population as part of its development programmes. The ODA could encourage further such trends more generally by increasing the amount of 100 per cent. funding for population projects. As the Minister may be aware, it is relatively difficult for NGOs to provide matching funds for such programmes.

I would not expect the Minister to give detailed answers now to my comments on this area of population, but I hope that she can give general positive indications, especially as the record of the ODA, and in particular the Minister herself on this subject, if I may say so, is so far so good.

I should say at this stage that I am not asking for new money for the ODA, but that within the department a greater proportion of the existing level of funds should be allocated to population activities. The Minister may not be surprised if I mention a figure of 4 per cent. which is basically becoming the target aim—as it is in other countries—for the element of population activities as a proportion of the overseas aid budget. In this country the relevant figure is currently below 2 per cent.

In assessing the global unmet need for family planning services, the figure of 300 million couples is now generally accepted as those who would like to use family planning but lack access to services. That need, even though it is dealing with longer-term issues, very much qualifies as the need referred to in the question before us.

The part of the ODA report, in the section on health and population, rightly recounts welcome success stories even in countries such as Bangladesh and Kenya. It is encouraging to read on page 10 of the report: So family planning, successful as it has been in helping to slow population growth, is a service which needs to be extended much further. Providing this form of aid has therefore been central to ODA's programme". There is a momentum building up which has clearly been boosted by the change of administration in the United States and of policies in this field. There is a good prospect that the 10-yearly conference organised by the United Nations on population and development in Cairo this year will continue not only to increase global awareness of the connection of population and development, but will also provide some significant impetus to action. This will not happen automatically, and I know that the noble Baroness will be playing a leading part, as she tried to do in Rio.

Some noble Lords may have received a copy of a report on aid which was entitled "Population Summit of the World's Scientific Academies". That was a joint statement by 58 of the world's scientific academies following a conference in India last year. It was promoted partly by our own Royal Society. That was done as a message to the Cairo conference. It is encouraging that the scientific community—not just in this country—is being made aware of the population dimension of some of its activities.

I have been told by one distinguished, scientifically-inclined Member of the Cross Benches that it was his impression that, partly as a result of that conference, awareness, talk and scientific work on the population dimension had increased. Perhaps I may quote one conclusion agreed on behalf of the world's 58 scientific academies: The academies believe that ultimate success in dealing with global, social, economic and environmental problems cannot be achieved without a stable world population". That is obviously long-term thinking, but they also accept the immediacy of the problem in their final sentences addressed to the Cairo conference which say: With each year's delay the problems become more acute. Let 1994 be remembered as the year when the people of the world decide to act together for the benefit of future generations". Even though it may not be directly responsible for it, I hope that the ODA will encourage that awareness in the scientific community of this country.

Finally, I draw attention to the remarkable speech of Mrs. Brundtland, the Prime Minister of Norway, who was the chairman and author of the Brundtland Report in last year's lectures sponsored by the United Nations population fund in New York. I hope that the noble Baroness may find time to read that report if she has not already done so. In the past Mrs. Brundtland has always put her thoughts on population in the wider context, and she still does so. However, her voice has become much more urgent and committed and I know that she, like the Minister, intends to play a very full part in the Cairo conference.

In the printed introduction to the Salas lecture, the director of the UNFPA, Nafis Sadik, summarises what she calls the powerful message of the lecture delivered by Mrs. Brundtland: Unless we accept that rapid population growth is the most serious, predictable and intractable crisis facing us today, she warns, 'we shall not be able to avoid … the ultimate collapse of [the earth's] vital resource bases". The Norwegian Government are almost alone in reaching the target of 4 per cent. of overseas aid being directed to population activities. I hope that the Minister can encourage the ODA in that direction.

6.52 p.m.

Lord Avebury

My Lords, the Foreign Secretary has laid down three principles which should be considered in determining our aid programme: respect for human rights and the rule of law; movement towards democratic and accountable government and the rooting out of corruption; and the pursuit of sound social and economic policies. The annual review adds a fourth: Concern for the environment runs through the whole of Britain's aid activities, and each project … is assessed for its environmental impact". In the case of Indonesia, the noble Baroness, Lady Chalker, has claimed that as a result of our aid there has been a reduction in absolute poverty levels; that we have retained our influence over Indonesia; and that by giving aid to projects which help British firms, we are influencing the government to improve the human rights of the Indonesian people dramatically.

The per capita income of Indonesians has been rising gradually, and they are now just below the threshold of 700 dollars, as the noble Lord, Lord Prior, reminded us, where they would cease to quality for ATP aid. That is not due to aid but to commercial exploitation of natural resources, including the Achehnese gas fields, which are the largest in the world. The people of Acheh are not enjoying respect for human rights and the rule of law, however. Amnesty says that, the pattern of gross human rights violations reported from Acheh since 1989 continues to warrant urgent international concern", and that the fate of thousands of victims remained unresolved. The UN rapporteur on extrajudicial executions says that the pattern of killings and disappearances in Acheh was similar to that in East Timor, and there was no fundamental change in the conditions which allowed those phenomena to occur.

The rapporteur wrote to the Government of Indonesia asking to visit East Timor in accordance with the UN Human Rights Commission's resolution passed in Geneva last year. The Indonesians replied that having voted against the resolution, they did not feel compelled to abide by its provisions; but they now say he could visit East Timor in 1994. Will the Minister confirm that, and will she say whether the Government will press Jakarta to allow him to visit Acheh and West Papua as well?

The UN rapporteur on torture says he received information indicating that torture, has been used routinely in Acheh by military and police authorities since mid-1989". He too has been denied admission either to Acheh or East Timor, as have the UN working groups on disappearances and unlawful detentions.

Amnesty's overall view is that the Indonesian Government, with minor exceptions, has failed to comply with the spirit or the substance of the Commission's recommendations". The US State Department, says that, extra judicial arrests and detention, [and] torture of those in custody … continued in many areas of Indonesia. Legal safeguards against arbitrary arrest and detention are frequently ignored. The armed forces continued to be responsible for the most serious human rights abuses". Asia Watch has details of cases of harassment of union members in late 1993 and early 1994. Indonesia has eroded but not removed the law on military intervention in labour disputes because it wanted the US to continue the generalised system of preferences benefits for Indonesian exports. The review of the programme was postponed for six months in February while freedom of association is still restricted. Military oversight of labour negotiations, dismissals of workers and interference in strikes are still within the law and the Jakarta military commander has implied that the repeal of Decree 342 will make no practical difference. Reports of bonded labour continue.

In John Pilger's programme on East Timor last week, evidence was given of secondary killings after the Santa Cruz massacre. Two hundred and seven persons were listed as missing by UN agencies of whom eight have been accounted for by Jakarta. According to survivors, the wounded were stabbed and clubbed to death by the soldiers, and some were killed by poisoning.

Indonesia has been responsible for the deaths of a quarter of a million East Timorese since the illegal occupation of the territory began in December 1975. Yet it receives lavish aid from Britain. The World Development Movement says that over the decade 1980 to 1990, UK bilateral aid to Indonesia rose by 111 per cent. It is the ninth largest recipient of UK aid, and the largest outside the Commonwealth. Indonesia has been second only to Malaysia as a beneficiary of ATP funding since 1989, and that money has gone largely to infrastructure projects which have very little impact on poverty.

One of the largest of our Indonesian ATP projects is the £ 65 million Samarinda power plant, the contract for which is about to be awarded to GEC Alsthom. The electricity from Samarinda will be used to expand mining and logging in the area; for example, at the huge Kelian gold mine. The environmental hazards of the operation were demonstrated when heavy rain swept 617 drums of poisonous waste into the river, allegedly causing toxic burns to 13 people.

The company is also in dispute with 440 families displaced by their operations. Those families; lost their homes and livelihoods and were paid 100 to 500 dollars in compensation. Some, who got nothing at all, are still camping on the sequestrated land. Now the company plans to alter the course of the river, thus harming the Dayak forest dwellers. Britain is not demonstrating much concern for the environment in East Kalimantan.

If Indonesia fails to qualify for British aid as a country which is not among the poorest and which has easy access to market capital; which shows little respect for its own environment; which fails to respect human rights and the rule of law; which is not tending towards pluralism but has a dictator now in his sixth unopposed term; and which persists with repressive policies, why should we, in the Foreign Secretary's words, support their folly with scarce aid resources which could be better used elsewhere".

Lord Rea

My Lords, before the noble Lord sits down perhaps he can answer an extremely brief question. He referred to the John Pilger programme "Death of a Nation". The programme gave eye-witness evidence of British Hawk aircraft being used to bomb villages in East Timor. Can the noble Lord confirm—

Baroness Trumpington

Order, my Lords; this is a timed debate. The last two speakers went the full length of their time. We cannot have such interruptions.

7 p.m.

Viscount Weir

My Lords, I must first declare an interest as deputy chairman of BICC, whose subsidiary, Balfour Beatty is the lead contractor for the Pergau Dam. No doubt, therefore, noble Lords, with their customary good sense, will discount heavily most of what I am going to say.

However, in my turn I might perhaps start by discounting some of the things that the noble Lord, Lord Redesdale, conveyed about the costs of power from Pergau. First, dams of that kind are built for a life of over 100 years and not 35 years. Their hydro-electric machinery is often rebuilt to "as new" condition after 30 years or more. Their costs should, therefore, be evaluated accordingly on a very long-term basis. As for cost comparisons with gas turbines, I am only delighted that either the noble Lord or the ODA can apparently predict gas prices so long ahead.

Having said that, I must also confess to a certain unease about the wording of the Motion. The whole idea of directing aid, where it is most needed", sounds admirable enough as a general concept, but there is, perhaps, just something about it which is a little reminiscent of the trustees of some well-endowed charity meeting to pick a list of the most deserving causes. That task always brings with it the inescapable pleasure of handing out other people's money and the difficulty of avoiding any small touch of condescension. As recent events have shown, even a suspicion of condescension understandably rankles in Malaysia.

I hope that noble Lords will not take those remarks as being either critical or unkind. They are certainly not so intended. It is impossible however to be as kindly disposed to some of the press. The editor of the Sunday Times was quoted as proudly taking criticism of the innuendo-laden article in his paper about an aluminium smelter that was, incidentally, never built as a "badge of courage". It was almost certainly that article which precipitated the fierce reaction of the Malaysian Government. Self-congratulation stinks and to congratulate yourself on an article where the transitory titillation of your readers results in massive economic losses for your country only shows how much lower the already low standards of press responsibility can sink if they are in the right hands.

The Observer of course—particularly now that it has escaped from the clutches of Mr. Rowland into the warm liberal bosom of the Guardian—is altogether a more up-market journal. It merely wrote about aid money being spent on a "luxury airport" in Malaysia. I suppose those concerned would have been happier if it had not been a luxury airport but just a normal uncomfortable one. At any rate, the Observer and its little band of readers can presumably now rest well contented and satisfied as British companies will apparently play no further part in building that highly prestigious £ 3 billion project.

Finally, there is one significant point that the press seems to have completely missed. Why was Malaysia chosen in the first place as a priority recipient for so much aid? Surely, that was only sensible in order to re-build and recover Britain's trading position in such an important market where our position had been so seriously eroded by the original trade boycott in the early 1980s. The Government were quite right to do it, even if their detailed implementation of the policy has, perhaps, left something to be desired.

The question we need to ask is how the present arrangements for aid can be improved. The starting point ought to be some simple economic considerations. I suggest the following four as being relevant. Our aid budget is puny compared to the problems of the less-developed world, and there is little chance of it being increased; our balance of trade is horrible; our unemployment is high and much of industry is working below capacity; and, finally, the competition for international business is fierce. Incidentally, noble Lords can see for themselves how fierce that competition is and its direct connection with government aid from the two examples of the Shanghai and the Guandjhou metros to which my noble friend Lord Prior referred.

Frankly, our economic circumstances today are such that, sadly, I believe we can only really afford such forms of economic aid as give our industry some measure of benefit in return. I would, therefore, make two suggestions. First, that a lot of our politicians and press give up the luxuries that they are currently enjoying so much of humbug and the public washing of dirty linen, and instead make a conscious effort to grasp the sometimes unattractive realities of competitive international business in which some of us have to trade. Secondly, that a much larger proportion of our overall aid budget is allocated to the aid and trade provision and that the whole responsibility for ATP is transferred to the Department of Trade and Industry, where it seems sensibly to belong.

7.7 p.m.

Lord Desai

My Lords, I had not intended to speak on the Pergau Dam at all but on the subject set out on the Order Paper. However, having listened to the noble Viscount who has just spoken, I must say that I have not yet heard a more stringent critique of government policy. The noble Viscount seemed to be saying that the Government have reduced the British economy to such dire straits—for example, high unemployment and industries without orders—that, unless our foreign aid is used to give our industry orders, there is no other way that it can compete. I did not say it; but thank God it is there and we can use it some other time.

I should like, first, to speak in defence of economists. Various people have said that the kind of project evaluation that the ODA no doubt obtained was either ignorant of the situation in the long run or ignorant of the balance between initial fixed costs, running costs and so on. Economists have been doing such things for at least 50 years, if not longer. If people do not have the technical expertise to evaluate such reports, it is bad form to criticise those who cannot defend themselves. I imagine that the ODA received very good professional advice on the matter. It is an economically well-established subject, especially as regards cost-benefit analysis. I am sure that what was said initially—namely, that the project did not have a good cost-benefit ratio—was entirely correct. I would not expect anything less from the ODA. Just because the project has been mentioned, people have chosen to malign economists. I do not like that.

There is another rather curious aspect to the project. We are told that the initial evaluation by an Australian agency was £ 150 million. However, the project finally ended up costing £ 471 million. Indeed, aid is going where it is most needed—to British corporations. I do not know how anyone could inflate the value of the project three times in the course of two years. No doubt sound reasons were given. Nevertheless, I am sure that there was a lot of cost inflation going on.

I turn now to the topic at issue. The problem is not the Pergau Dam or anything like it. I believe that much of the aid given by the United Kingdom and many other countries is not going where it is most needed. If it is going to poor countries at all, it is not going to the poorest people within those countries. If it is going to those countries, it is not being used to further what I would call the human development of the poorest people. It is not being used to meet basic needs or in sufficient quantity in areas such as health, education or women's development. Less than 10 per cent. of all OECD aid is used to meet the basic needs of people. Far too much aid is given not to help the recipients but to help secure business for the country which is giving the aid. The noble Viscount said that the purpose of giving aid is to subsidise our industry. I believe it is wrong that 65 per cent. or more of British aid is tied.

If all that we achieve by giving aid is to help our own business community, why not just do that direct and call it something else? We should not call it aid and declare that the receiving countries are gaining from it. Such aid is a form of tariff. We are giving subsidies to our own businesses because without it they are too weak to go out and get orders. I believe that the aid system, not just of the UK Government but also of the OECD, must be radically re-thought. It is not a case of there not being sufficient money but rather of such money as there is not doing enough good. People have the impression that we are giving a lot of money away when we are giving very little. Perhaps more of our aid should be multilateral rather than bilateral and funnelled through NGOs whose staff know where the poor are to be found and who can carry out the kind of projects which help the poor.

We should ask ourselves the question: why do many people give money from their own pockets to NGOs? They do so because NGOs can demonstrate that the money that is given reaches the poor people and helps them. Few governments can show that happening with aid. That is my indictment of the aid system. I would prefer the British Government to shut down the ODA more or less and give all the aid money to NGOs. Let us have this purchaser/provider split. Let the ODA purchase development aid but not provide it. Let Oxfam and Save the Children provide the aid because they are much better at it. So much money is wasted in the provision of government-to-government aid. I am not merely criticising the UK Government in this regard; it is a general malaise. Aid is given for extremely dubious purposes, some of which concern defence contracts. It is also given for diplomatic reasons and such phenomena as, formerly, the cold war. I believe it is fraudulent to pretend that such aid is helping the poor.

Countries should state clearly that they are giving aid because that is part of their foreign policy and diplomacy and their policy of setting their friends against their enemies. The problem is that we say things we do not mean. If we want our businesses to secure overseas contracts we should leave that in the hands of the DTI and at least in that case any money that is spent in the process will not be called aid but something else. I am sure that eventually we will have to find a more radical way of giving aid that is much more effective and economical than the present system. At present there is not enough aid money available and what is available is not doing any good.

7.14 p.m.

Baroness Flather

My Lords, this Motion gives me an opportunity to share my views on a matter of great concern to me. I passionately believe that the greatest single problem facing the world today is an unchecked growth in population. Since 1950 the world population has doubled and it will increase by another billion during this decade. In the next century it could double or triple, and about 95 per cent. of that increase will occur in developing countries.

This Motion calls attention to aid being directed to, where it is most needed". I would submit that it is most needed for family planning and in the connected area of the health of mothers and children.

My noble friend the Minister launched several new initiatives in 1991 to strengthen Britain's contribution to family planning and health in developing countries. These included strengthening health services, providing easier access to contraceptives and establishing health and development projects. On the occasion of the launch my noble friend said: British aid for population activities in developing countries must enable more women and men to decide the number of children they have by choice not chance". She added: There are three guiding principles for population assistance. First, individuals, particularly women, must be able to choose when to have children. Second, clear family planning advice must be made available to all to exercise their decision freely and without coercion. Third, the quality and availability of family planning services must be improved if men and women are to feel confident that modern family planning is for them". I have quoted the words of my noble friend the Minister because I could not have expressed them so clearly and concisely myself, and also because to me they make up the guiding principles which should never be lost sight of.

However, while the principles are right, the picture is not as rosy as I would wish. First, only 1.5 per cent. of UK aid is devoted to population activities. Secondly, there are still many charities which shy away from being involved in a concerted effort in this field. ODA and my noble friend have recognised that there is a great unmet need. One has to ask oneself whether this need can be met with the small amount of aid money which is being spent on it.

I am a woman whose roots lie in a developing country, a country which has continuously struggled with its population problem, sometimes quite disa-strously. I was visiting India when Mrs. Gandhi's son, Sanjay, tried to achieve quick results through enforcement. That step set India's family planning programme back by at least a decade. I believe that coercion is the grossest violation of human rights. The key lies in educating and helping women to take decisions about their own lives. By education I do not mean literacy—as some organisations have chosen to emphasise—I mean helping women to understand the choices which are open to them and helping them to take responsibility for making those choices.

I used to subscribe to the view that education in a more literal sense is the key. There is absolutely no doubt that that is so. In India the lowest birth rate and the highest standard of living are found in Kerala where the literacy rate is 87 per cent. The worst situation is found in Uttar Pradesh which has the lowest literacy rate. However, I now believe that we just cannot wait for there to be a dramatic increase in literacy. There are other successful ways of helping women who may not have access to education in a literal sense.

Women in rural areas are much more receptive to advice from women with whom they can identify. There has to be a cascade system of training for health workers reaching right down to training a village woman herself to give advice on family planning and health issues. Perhaps the biggest battle has to be fought with the men who often feel their traditional role is being threatened. On my recent visit to Calcutta I was encouraged to learn that 30 per cent. of places on village councils in West Bengal have been reserved for women and that one woman has been elected head of a council.

It is my firm belief that no outsider can come in and change things. Outside aid can only provide the means by which people can take charge of their own lives, set their own priorities and make their own choices. But I must say to my noble friend the Minister, money is of vital importance.

7.20 p.m.

Lord Mackie of Benshie

My Lords, the whole House is grateful to the noble Baroness, Lady Flather, who has just spoken, because she has cut my speech at least by half. She made the point so much better than I could ever hope to. It is an enormously important subject. I have spoken about it before. I cited the Scandinavian countries, which give more money. The noble Baroness has replied that we do our best. It is a matter of vital importance. I shall say no more. It has all been said by the noble Baroness.

I shall move on to the particular. However, before doing so perhaps I may say that I think that my countryman, the noble Viscount, was a little hard on the press. We have a free press and if it makes a mistake we have to put up with it. One cannot moan about the press. I always thought that the great, competent industrialists of this country so organised their affairs that they produced goods which were of a quality and cheapness with which other lesser breeds were unable to compete. I thought that that was the basis for success rather than help from government in various ways, although government must not hinder.

Having said that, I shall move on to the point that I wish to make about deserving countries. The noble Baroness the Minister has been in Albania, which I visited in the autumn. It is a country in Europe of extreme poverty. Albania suffered for 40 years under a regime which made Russia, Poland and Hungary seem a liberal heaven in comparison. I was fascinated to see developments in my own field of agriculture. About 80 per cent. of the people live on the land. Such was the people's hatred of the previous regime that they seized the state farms, broke up the irrigation systems and tore out the vines to pasture their cows. The government had to back them.

The agricultural area was split into small farms. In this country after the First World War it was said that every returning soldier should have three acres of land and a cow. A farmer in Aberdeenshire said that he would take the three acres in front of his house and keep a bull. The Albanian families settled on their few acres, averaging just under two hectares. They are feeding themselves. It is uneconomic, but the families exist on their few acres. That holds them together.

Until Albania can encourage tourism and build up its horticulture to provide exports, and until some industry gets going again, those families will have to live in that way. I believe that help, mainly of a technical nature, to train those people—who were, in effect, serfs living on state farms—how to run a profitable small unit to feed their families would be of great value.

There are agricultural scientists in Albania and any help that we could provide to allow those scientists to spread their knowledge would be extremely useful. That would help a country inside Europe which is probably as poor as many of the developing countries in other parts of the world. It would also do us in Britain a great deal of good, perhaps not in terms of industry but certainly in terms of prestige and gratitude.

While Albania is building up means of employing her people in other ways she will depend on family farms in the countryside. Any money that we spend on education, on agriculture and generally helping to improve the fabric of the country would be very well spent. I hope that the Minister, who is good, kindly, and a proper person to do that, will help them.

7.25 p.m.

The Earl of Clanwilliam

My Lords, I thought that the noble Lord, Lord Mackie of Benshie, was going to propose organic farming for those farms.

I had not intended to talk about the Pergau dam, but the noble Lord, Lord Redesdale—whom we must thank for introducing the debate—concentrated his speech upon it. It seemed to me that he was making great political advantage from that simple aid for trade activity. That is what it is, what it has been and what it will be. It may be a bad deal, and its value is disputed, but not by my noble friend Lord Prior and the noble Viscount, Lord Weir, whose words on that subject I accept in advance of those of anyone else in this House.

The noble Lord, Lord Redesdale, also raised the question of the arms industry. We have an arms industry in this country. We need one. How could we do anything in Bosnia if we did not have one? If one has an arms industry one has to export arms. Some people may not like it and find it objectionable, but it is head in the sand nonsense to imagine that that is not done and should not be done. It is done, it has been done for centuries and will continue to be done. We need to do it and I thoroughly support all the work that is done for it.

I, too, have read the overseas aid review and support entirely the Government's work with Horizon 2000 in its excellent work worldwide in health, education, poverty and distress. I should also like to point out in particular that I am grateful that we are now giving aid to South Africa, which is a great advance.

I recently participated in an IPU visit to the Czech and Slovak republics. We met representatives of the British Council in some 13 different establishments where they were running much welcomed and very successful English language teaching schools. They made a plea that the ODA should develop that work, especially in Slovakia where it is greatly appreciated and extremely successful.

The Royal Botanic Gardens at Kew runs a programme funding sustainable development in tropical ecosystems in St. Helena. That is supported by the Government and is very welcome. I have spoken to Professor Prance at the Royal Botanic Gardens who mentioned that Kew has for a long time been running a large project in the arid deserts in north east Brazil. He is anxious for mere funding for that project. It is a long-standing project and is of enormous value. It is in the arid north east region rather than in the tropical forests.

I have one further point concerning small villages in Africa and Asia which need a means of treatment for a combination of animal and human waste. It is possible for such treatment plants to be scaled down with an existing system, which I mentioned in the previous debate, to a size to accommodate some 50 households, which can be constructed, operated and maintained largely by local labour. It is called the Biotechna Graesser system. The Biotechna system is operating in this country at present.

Perhaps I may be technical. The simple anaerobic pits will not only destroy toxic bacteria and viruses but also parasitic ova. The consequent liquefied slurry from those pits can be used as a feedstock for the photosynthetic biocoils which will transform the slurry to high protein algae which is suitable for feed to cattle, pigs, poultry or fish. It also generates methane, which can be extracted. The extracted methane can then be used for heat and can help to drive the system. Perhaps I may ask my noble friend whether the Biotechna Graesser system is considered a suitable item for promotion by the ODA in African and other third world countries. It seems to be an extremely successful and self-supporting system. Single units of £ 100,000 for small villages are quite feasible.

7.31 p.m.

Lord Alport

My Lords, if I feel some diffidence in addressing your Lordships tonight, it is because I do not have available the official papers upon which the points I wish to make are based. I therefore have to rely on my memory.

About 1960, those of us who were serving in the Commonwealth Relations Office became increasingly concerned that our programme of overseas aid might become regarded by the countries of the New Commonwealth, not as a contribution to their social and economic well being, but as an attempt by Great Britain to maintain its political influence and to continue some form of economic hegemony.

We were well aware that the governments of those countries so recently emerged from being colonies to full independence, while needing Great Britain's help, were acutely sensitive to anything which seemed to be an attempt to continue their pre-independent status. That was, of course, at a time when our relations with the Commonwealth countries, great and small, were the subject of a certain amount of idealism; and before that ghastly phrase "value for money" became the overriding principle of government policy.

We were determined that the British taxpayers' money should not be wasted on grandiose and uneconomic projects, but we believed that aid should not be used primarily to grease the wheels of Foreign Office policy or as a sort of hidden export subsidy. Of course the goodwill which we believed the provision of aid would produce meant that the bread that we cast on the waters would bring a reward in due course.

At the same time we believed that aid administered without taking into account the sensitivities and suspicions of governments of the New Commonwealth might do more harm than good. Above all, we believed that the Commonwealth was of major importance to Britain's standing in the world and that the material help that we gave to strengthen their economies, to support social progress and consequently to maintain political stability in newly independent countries, was the real value we achieved from the money which our aid programme provided.

I happened to learn that the Canadian Government had set up a department independent of the Ministry of External Affairs to administer its aid. I therefore proposed to the Secretary of State, the late Lord Duncan Sandys, that we should do the same. He put the proposal to the Prime Minister, the late Lord Stockton, and to the Cabinet, who immediately agreed. Thus an independent Ministry of Overseas Aid and Development came into being, able to establish its own criteria for the granting of aid and without arousing in the minds of the governments of the New Commonwealth any suspicion of there being some sinister or ulterior motive.

Not long after that, the Commonwealth Relations Office was absorbed into the Foreign Office and soon after the administration of overseas aid went the same way. The present controversy over the Pergau Dam is exactly what we feared would happen and what we wished to prevent. The provision of a large slice of aid to a prosperous country for a utility which is uneconomic and a danger to the environment, and which is associated with an arms deal, is exactly what aid to the Commonwealth should not represent. That this should be accompanied by allegations of corruption and accusation of neo-colonialism is exactly the situation we were determined to avoid. Not only will it sour our relations with Malaysia, but it will sow suspicion in the minds of the Commonwealth governments and damage Britain's reputation in the world.

I am quite certain that if the Department of Overseas Aid had been independent, its Minister, with the strong advice of his or her permanent secretary, and despite pressure from other government departments and the misguided interference of a Prime Minister, would have had no hesitation in turning the Pergau Dam project down. Thus £ 234 million would have been available for countries where it was desperately needed and where British help would be appreciated, instead of, as in the case of Malaysia, ending in a quarrel which damages both British reputation and our overseas trade.

The answer is quite simple. It is to take the Department of Overseas Aid out of the Foreign Office and to restore its independence as a department of state. My noble friend Lord Prior said,"Hand over aid to the Department of Trade and Industry". By all means allow the Department of Trade and Industry to give export subsidies for British exports to foreign markets, whether Commonwealth or others; but do not call that aid because it is a total misuse of the term and something which I believe does damage to our aid programme.

If your Lordships believe, as I do passionately, that our relations with Commonwealth countries great and small are vital to our nation's standing in the world, then it is high time that we recaptured some of the idealism of earlier days and measured the value for the money we give in aid to Commonwealth countries in their greater political stability, the improvements in standards of living and in continuing goodwill for Britain. That surely is better than using it to promote traffic in arms, which is already far too great for the security and peace of the world today.

7.39 p.m.

The Viscount of Oxfuird

My Lords, we should be grateful to the noble Lord, Lord Redesdale, for directing our thoughts to the difficult subject of overseas aid and to where this important expenditure goes in order to benefit the most needy.

Overseas aid must be viewed in the context of the cultures of the countries to which it is given. The family of the noble Lord, Lord Redesdale, have exhibited much talent in being able to set in context and illuminate some of those foreign cultures. His noble ancestor the first Lord Redesdale even witnessed ritual hari-kiri following an uprising in Japan. I hope that the noble Lord is spared similar performances.

My own interest in the subject of overseas aid stems from the fact that I have spent the past 30 years of my life promoting the export of British manufactured goods all over the world and from the fact that I lived for 17 years in one of the furthest flung corners of the British Commonwealth—New Zealand. I hasten to add that New Zealand has not needed to be the beneficiary of United Kingdom aid at any time in my lifetime.

Many noble Lords have dwelt on what I might describe as some of the more topical issues concerning the recent spending of some parts of the ODA budget. Perhaps I may be allowed to underline the main thrust of the Motion which is concerned with applying the United Kingdom's overseas aid budget where it is most needed. As the wording of the Motion acknowledges, that objective was well spelt out in the 1993 annual report of the ODA. This is not a sad debate; it is one in which we can take pride.

It is possible to put some of the earlier contributions in context if one focuses on the ODA budget as a whole and sees just how it has been spent. The ODA is responsible to Parliament; an NGO is not. As we have heard, the ODA's budget represents just over 0.3 per cent. of our GNP and has grown in real terms by 10 per cent. since 1987–88. Perhaps 0.3 per cent. or just over £ 2 billion of taxpayers' money does not sound much to some noble Lords. However, as with spending on health care or other worthy social benefits, we must temper our enthusiasm with some sense of reality.

It is only realistic that our overseas aid budget should reflect our local economic circumstances and be balanced with the other pressing claims on our scarce national resources. Indeed, I suggest that my noble friend Lady Chalker, who has given a major slice of her career to the cause of overseas aid, should be congratulated on having maintained such a significant overseas aid budget in the face of so many other pressures on our overall public expenditure budget.

It is important to highlight not just the quantity but the quality of our overseas aid. It is pleasing to note that the OECD has singled out the United Kingdom for particular praise for the effectiveness of our aid, for its poverty focus and for the emphasis that we place on encouraging the private sector enterprises of the economies within which our aid is applied.

It is a cornerstone of British aid to promote good government, sound economic policies, democratic accountability and a respect for human rights. As the ODA 1993 annual report highlighted, in 1992–93 just over 55 per cent. of our aid was bilateral, with the balance of just under 45 per cent. being multilateral. That was channelled through the European Community. About 80 per cent. of our bilateral aid goes to the poorest countries, all new aid being in the form of grants rather than loans and increasing amounts being spent on the direct reduction of poverty.

An increasing percentage of our aid is committed for humanitarian purposes. Sixty six million pounds has been given directly to Iraqi civilians since 1991, deliberately bypassing the Iraqi Government, and £ 157 million of humanitarian aid has gone to the former Yugoslavia. The United Kingdom is a major contributor to the multinational aid agencies, not just via the EC. It is the fifth largest contributor to the International Development Agency and is a major contributor to the interest subsidy account of the IMF's enhanced structural adjustment facility.

The UK, via the ODA, has a strong record in helping to relieve the poorest and most indebted countries of the burden of debt. It has strongly supported the Paris Club in implementing modified Trinidad terms, based on proposals made by our present Prime Minister back in 1990.

Overall, the ODA has relieved developing countries of £ 1.1 billion of debt. Part of our overseas aid budget is rightly being spent also on environmental projects: 200 forestry projects costing £ 150 million; and energy efficiency and pollution control in India amounting to £ 60 million. The ODA is active too in health and population-related programmes, as we have heard, and is supplying economic assistance to Eastern Europe and the former Soviet Union.

Sustainable development requires that the conditions exist to attract a healthy flow of private investment to build up local infrastructures. In that area, the UK record in developing countries is particularly good. British private investment in developing countries was estimated in 1992 at £ 1.7 billion, which represented half of the EC total, exceeded only by the investments of the United States and Japan.

We have heard much about the aid and trade provision. There is no doubt that it is an essential part of our organised overseas negotiating relief. It is a means whereby we can compete with our partners in the EC. There was a time in this country when aid was spread to many areas without any consideration of what was purchased. Today, our aid is directed. No longer do people in Africa buy Chinese railways with British money.

My time has gone, but if we continue to suffer the problems with the press which have been highlighted in this debate, we need to remember the words which Lord Braclwell (Tom Driberg) attributed to Hannen Swaffer in his biography: Freedom of the press in Britain means freedom to print such of the proprietor's prejudices as the advertisers don't object to".

7.46 p.m.

Lord Rea

My Lords, I congratulate the noble Lord, Lord Redesdale, on bringing forward this topic and also on his expertise in putting such topical Questions on the Order Paper. He seems to be acquiring quite a knack with it. Like the noble Viscount, Lord Craigavon, I have examined and read the ODA report with interest. It is admirable. Sadly, there is no time to go into many of the projects that it describes, but there is no doubt that in this country we have a great number of dedicated people, both in the ODA and in the country as a whole. They are experts in the real problems of development.

In a recent statement, an OECD spokesman said that the UK had a unique concentration of talent and experience in development. It is a pity that that interest and expertise is not matched by funding on a suitably generous scale. On too many occasions in your Lordships' House we have debated the budget of the ODA and lamented that not only is it static overall, but the demands on funds for multilateral organisations are diminishing what i; left for bilateral aid, which is what we do best and which is our most effectively targeted aid.

Other noble Lords have focused on the dam problem so I shall not labour the point, except to say that it appears that in the end it is a case of the biter bit. But sadly. it looks as though British workers will be the ones to suffer rather than those who committed the misdemeanour. I am rather worried that £ 90 million a year will still be spent on ATP, though I am somewhat reassured that the rules will now be rather more strictly adhered to. I am glad that it will stay within the ODA and not go to the DTI. At least, if we listen to our officials, it will be spent on aid in the future.

The Pergau payments will represent an average of approximately £ 17 million a year over 14 years. It is worth comparing that with the £ 28 million which we spend on the much praised joint funding scheme which funds about 100 non-governmental organisations. As my noble friend Lord Desai and other noble Lords, including the noble Viscount, Lord Craigavon, said, the money spent on overseas NGOs is particularly cost effective. If the Government had taken Sir Timothy Lankester's advice and not funded Pergau, the JFS budget could have been augmented by 60 per cent. every year for 14 years.

The annual review that was mentioned focuses on Uganda. In fact, it puts that country centre stage as a good example of effective aid. What it does not mention is that Uganda is effectively bankrupt and has no hope of becoming solvent for many years, even if it now has three judges, a rural water supply and other valuable institutions funded by the ODA. That country, which is one of the poorest in the world after emerging from 20 years of war-torn misery, has a debt of £ 2.5 billion. That is a very large sum compared to its small population. Fully servicing that debt will require 25 per cent. more foreign exchange than Uganda earns from all its exports—coffee prices having collapsed recently. That has led to an acute shortage of foreign exchange. All development, and even its structural adjustment programme, is in danger of collapsing. Uganda has derived little benefit from debt rescheduling efforts made under the enhanced Toronto terms, which do not include debts incurred after 1981, nor those to the World Bank or the IMF. As a result, the Ugandan economy will be drained of £ 2 billion annually for the next 20 years.

Many other countries in Africa face the same problem, as the noble Baroness knows well. Is it not more important to get Africa back into the world economy so that it can pay for its own imports—those which it needs for development—rather than patching up the worse deficiencies piecemeal? United Kingdom aid to Uganda was worth £ 35 million last year. But the Government of Uganda will have to pay £ 2 billion out in servicing its debt. That is more than 50 times as much as the United Kingdom aid is worth.

If one multiplies that figure over all the countries in Africa, one sees that the situation requires a major international shift in financial policy and a change in the nature of the Bretton Woods institutions, as was suggested by my right honourable friend John Smith in Geneva last week. The debt of most countries in Africa needs to be written off, just as the debts of an individual citizen are written off when he is declared insolvent. I would have no objection to all the assets found in Swiss banks belonging to citizens of bankrupt developing countries being tracked down and taken back in part payment.

Finance to kick-start the recovery could be provided by the issue of special drawing rights, as was recently suggested by the managing director of the International Monetary Fund. That is not a new idea. With world inflationary pressures at a low level this is an appropriate moment for that kind of action. It could bring the 400 million people of Africa, arid others in heavily indebted poor countries, back into the world economy, to both their and our lasting benefit.

7.53 p.m.

Baroness Elles

My Lords, first I owe an apology to the noble Lord, Lord Redesdale, and to other speakers in that unfortunately I had a longstanding engagement at 6.30 which I had to attend. I was not therefore able to hear the whole speech of the noble Lord, Lord Redesdale. Perhaps in my political inexperience I had assumed that the debate that the noble Lord had opened was to be on the subject as expressed in the Motion on the Order Paper. I am afraid that I must address my remarks to what I thought the debate was to be about. I understand that some noble Lords have addressed those problems.

The first point that struck me when I saw the Order Paper was whether ODA policy was directed to those areas which are most in need. That is a fundamental part of development aid. Just by chance I saw the UNICEF report The State of the World's Children 1993. Interestingly, Table 6 (on page 78), which deals with economic indicators, gives a long list of some 64 countries and their average GNP per capita. For the first group of 35 countries the figure of 355 US dollars for 1990 is shown. For the second group of countries the figure is 525 US dollars. It may interest noble Lords to know that, checking the statistical appendix produced by the ODA in its report, every single African country mentioned in that list is covered by the statistical appendix of the ODA. I believe that that shows both the intentions, the intelligence information and the determination of the ODA to fulfil its obligation to deal with those particular poor areas of the world. It is to be congratulated on that.

Interestingly also, on page 3 of the same report a table shows aid given for basic needs. Noble Lords will know the definition of "basic needs"; I do not have to go into that. The table shows the net bilateral ODA figures, together with the percentage allocated to basic needs. The United Kingdom comes seventh in that list. There are six north European countries above the United Kingdom, but the percentage allocated to basic needs of its net bilateral aid is 8.8 per cent. Below that figure comes every other country. If it is an indication of how the proportions change, the figure for Germany is 1.9 per cent. in the percentage allocated to basic needs. Again, that is evidence of the determination of the ODA to fulfil its obligations to those areas of the world which certainly suffer most.

Very little has so far been said about appreciation on the part of those countries which receive aid from the ODA. It is very easy to criticise; to say that not enough has been given, that more should be given, or that more should be done. But I have just arrived back today from an international conference which was attended by representatives from many parts of the world. The conference was not on the ODA. I can give three specific examples of people who came up to me and said,"How grateful we are for what Britain does for us". One was a young man who was in charge of an institute of human rights in Nepal. He praised the new highway that has been built there using British aid. He said that it is the best highway in the whole area and that it had brought considerable help to his country. The second was someone from Zimbabwe who praised the development by British NGOs in the whole area, including of course Mozambique, and said how grateful people were for the work that NGOs do on the ground.

As we know from the report—which I should say in parenthesis is clear, comprehensible, well presented and, above all, brief—about £ 33 million has been given to NGOs; they are the people on the ground who can contribute so much to improving the life of the poorest people in the world. I should like to take this opportunity to pay tribute to all those members of NGOs who work in the most appalling conditions, and who are very often in danger of losing their own life. We cannot over-estimate the work that NGOs contribute and the ODA and other member states support them throughout the world.

I personally welcome the concentration on the four Commonwealth countries which have received sums of money. I appreciate what was said by the noble Lord who spoke before me on Uganda. The situation there is appalling. Having had to study the reports of what happened 20 years ago in Uganda, reading of the absolute outrages that were committed day after day upon vast numbers of innocent people among the population, I can but welcome that at least there is some improvement in the quality of living in that country. I accept the financial difficulties with which that country is faced; and I personally very much welcome, as I am sure did other noble Lords, the proposal of my right honourable friend the Prime Minister with regard to the Trinidad terms. I particularly welcome the fact that the report before us tonight stresses that money is being given in the form of grants. For so long we have seen the effect of loans burdening these countries with debt for longstanding outgoings. I noted specifically the mention that grants were now the policy of the Government in helping these countries. That is also to be welcomed.

Other aspects of the report are also to be welcomed. For instance, there is the new approach of giving and encouraging investment in small businesses, in India for example. That would have been unimaginable 10 or 20 years ago. It already shows a vast improvement. We want to see countries which will eventually move into a position in which they are economically independent. They do not want to be dependent. Regrettably there will be some which will remain dependent for all sorts of reasons. As we see countries moving towards economic independence, we should welcome it with the aid policy of this Government.

I should like to stress that the conference that I attended today related to international observer groups at democratic elections. Again, the support of the ODA for that activity was warmly welcomed. We all know that without a democratic system many of those countries will not reach a quality of life that we should like to see sustained throughout the world.

In conclusion, I thank my noble friend the Minister for all that she does. It is perhaps invidious for her to have to listen, but wherever I go I am always told that she is the only aid Minister who is any good anywhere. I say that off the cuff. That is what I heard in Tenerife this morning.

8 p.m.

Lord Thomson of Monifieth

My Lords, I join with other noble Lords who have spoken in congratulating my noble friend Lord Redesdale on initiating the debate and giving us an excellent speech. As the noble Baroness, Lady Elles, pointed out, there have been two interlinked debates this evening—I hesitate to use the description "entangled debates". One has been on the ODA's annual report and various aspects of its operations, including interesting and important issues such as population control; the other related to the extraordinary story of this Government's behaviour over the Pergau Dam, the arms programme and the Malaysian Government's reaction to those events.

The noble Baroness, Lady Elles, paid tribute to the Minister who has the slightly difficult task of winding up the debate. The noble Viscount, Lord Oxfuird, also remarked on her experience and we all know of her concern about the issues of overseas aid. But to make some remarks on tie more general point of the ODA's report, I do not feel that any of us in this country can take much satisfaction in the scale of our aid budget over the years. For the Government to go on, as they did at the last general election, setting the famous figure of 0.7 per cent. as their target for overseas aid at a time when year by year that percentage appears to come down, is becoming almost an abuse of language. Perhaps the United Nations' target ought to be looked at and tackled. It makes no sense having that figure as a target when it comes down year on year.

It is sometimes said that one of the reasons for that is that there is a kind of aid fatigue around and the general body of voters are not very keen on taxpayers' money being spent in large sums on giving help to the poorer societies of our world. I believe that that is mistaken. One of the most hopeful pictures of the world in which we live is the number of voluntary organisations that have proliferated over recent years with dynamic and idealistic young people engaging in giving help to the poorest societies it the world.

If I were asked about my own priority in these matters, I would join with the noble Baroness, Lady Flather, in citing not only the very big issue of population control, which was also mentioned by my noble friend Lord Mackie of Benshie, but also the importance of education. I am not sure that we devote a big enough part of our aid budget to education and within that budget that we devote a big enough part of our educational aid budget to basic primary education, which is extremely important in creating decent societies in the poorer parts of the world.

Incidentally, perhaps I may say to the Minister that it is quite difficult, amidst all the pretty pictures, to extract from her report the figures for the separate expenditure on education. It occurs to me that if we had given a greater priority to an educational aid policy and interpreted it imaginatively we should not have put up the fees for foreign students coming for an education to this country in the early 1980s, which has caused so much of the trouble in Malaysia. In fact, the Government might have been able to avoid all the difficulties that we have been debating tonight.

I turn from those general matters to the aid and trade provision of the ODA. There was a fascinating brief exchange across the Floor of the House between the noble Viscount, Lord Weir, and the noble Lord, Lord Desai. So far as I could make out they agreed on one point: they both seemed to want to abolish the ODA. The noble Viscount wanted to hand over its funds to the DT'I for an export subsidy campaign, for which I think there is very little to be said; the noble Lord, Lord Desai, urged that the aid should go principally to the various multilateral agencies, for which in general principle there is a good deal to be said, provided the multilateral aid is well managed and well used. I know that the noble Baroness is vigilant on that point.

I turn to the Malaysian situation. Malaysia is a fellow Commonwealth country and a democracy. It is a country with which we ought to have friendly relations and give help to. There is no reason at all why we should not seek to sell arms to Malaysia. It is a much better recipient of our arms exports than, for example, Indonesia, which was described by my noble friend Lord Avebury. So that is not an issue between us. But the scale of aid involved for Malaysia in this particular affair is disproportionate to Malaysia's place in the totality of the need for aid.

The noble Lord, Lord Alport, made a very powerful speech. I well remember the part that he played in setting up the original Department of Technical Co-operation many years ago. He made the point extremely well. I must tell noble Lords that in your Lordships' committees Malaysia is not talked about as one of the poorer countries of the world. That does not mean that Malaysia does not deserve aid arid help. But Malaysia is spoken of as one of the new tigers of the Pacific Rim with which we will have to compete before very long in the higher technologies.

In the time available to me I do not wish to go into detail on the Pergau affair, as my noble friend Lord Redesdale did so extremely well. I say very seriously to your Lordships' House that in all my many years in Parliament and in my time as a Minister I cannot recall a case of a permanent secretary, as accounting officer for his department, telling his Secretary of State that a ministerial decision was "an abuse of the system" and refusing to sign the cheque without a written order from his Secretary of State.

Mr. Douglas Hurd, as Foreign Secretary, issued that instruction. One understands that he did it because not to have done so would have been, as he said,"a breach of faith" of a secret understanding between his Prime Minister (who is now the noble Baroness, Lady Thatcher) and the Prime Minister of Malaysia. But there was indeed a worse situation. Mr. Hurd has since explained—he did so this morning in the other place with what I believe is praiseworthy frankness—that at an earlier stage the aid for the dam had been allowed to become "entangled" wholly improperly with a major sale of arms to Malaysia. Mr. Hurd, who is an upright and loyal person, not for the first time was loyally disentangling Mrs. Thatcher from the problems created by her imperious style of personal international diplomacy.

The trouble is that although the arms deal and the dam deal were then formally separated, as major deals they have each continued to be implemented. The strange tale of the two letters recounted by my noble friend means that the link, although formally abolished, is still casting a long shadow. It raises suspicions that in other cases, without any formal link, aid may be going to countries which would not receive it if they were not already buying British arms.

The noble Earl, Lord Clanwilliam, spoke of the arms trade as being a legitimate trade. I have already made it clear from these Benches that we recognise that, with appropriate safeguards. But the aid and trade provision must in no sense become an aid and arms provision. There is a good deal of sense in the Daily Telegraph editorial today which says that we should be working to define other things to sell than arms now that the Cold War has ended.

Now that the truth is out in regard to the Government's breaches of their own policies, we are paying a high price in the overreaction of the Malaysians to what happened. It is childish—if I can say this seriously to the noble Viscount, Lord Weir—to blame the damage to British business and British workers' jobs on the press and the Opposition. That is about as sensible as complaining about the British climate. I know that time prevents me from saying much more. But we live in a democracy with a free press. It is the Government's blunders which created this situation. The Opposition in Parliament are simply doing their duty to expose those blunders and the noble Viscount's ire should be directed to the proper quarter.

My time is up and I end simply by saying that I hope some good may still come out of the Pergau Dam saga. It will serve a useful purpose if it induces a little more humility on the part of some Members of this Government when they come up against inconvenient constitutional conventions; when they feel that the law and the constitutional arrangements are only for little people. It will have done a great deal of good if it brings a proper end to any linkage between arms and aid and trade provision. In those circumstances the noble Baroness may, with a sigh of relief, get on with what I know she would like to do; that is, implement fully and properly, without that kind of interference, the philosophy set out in her annual report.

8.13 p.m.

Lord Judd

My Lords, I fully endorse the sentiments of the noble Lord, Lord Thomson. This was an important and timely debate and we are indebted to the noble Lord, Lord Redesdale, for making it possible.

At Chatham House last October the Minister underlined the central aims of the aid programme as being to reduce poverty and to improve opportunities in the countries that we assist. However, what seemed sadly to be lacking in that message was the same degree of commitment to the conviction which she had previously expressed so strongly, again at Chatham House, in June 1991. She then heavily emphasised that in the cause of sustained human development, open government and a free press [were] vital safeguards to ensure that bad policies and failures are exposed and that governments respond to the needs of their citizens"— something which I hope is taken seriously both here and overseas. Indeed, I trust that the noble Lord, Lord Prior, agrees with her.

For all engaged in the front line of the fight against poverty and the struggle to enable people to take control of their own lives, the Minister's earlier words were encouraging and desperately pertinent. Why then the muted call last autumn? What pressures had intervened? I hope that the Minister will reassert her wider vision when she replies tonight.

This debate is about the quality of aid. It is sobering to note that as recently as the end of the last decade UNICEF recorded that only 9.1 per cent. of Britain's bilateral aid programme was spent on basic needs such as primary health care, safe water and similar fundamental human requirements. In that context the noble Baroness, Lady Flather, and the noble Viscount, Lord Craigavon, were right to emphasise the population crisis. We all wait to hear the Minister's response to those points this evening.

Quality cannot be separated from quantity. There comes a point at which lack of quantity inevitably damages quality, and I believe that that point has come. For, while paying lip service to the United Nations target of 0.7 per cent. of gross national product, the Conservative Government consistently refused to set a timetable for achieving that. By contrast they have literally presided over the halving of the commitment. In 1979, when they came to office, aid had reached 0.51 per cent. of GNP and was one of the most steadily rising areas of public expenditure. By 1992 it was down to 0.32 per cent. and, based on their own figures, it is set to reach an all time low of 0.26 per cent. of gross national product in 1995. The latest OECD report underlined that sorry story.

What is more, in the 1993 budget round, for the first time the Government merged the budget lines for developing countries and for Eastern Europe and the former Soviet Union. I know that many noble Lords share my anxiety that combining the two budget lines is a way of disguising an increasing diversion of aid funds to Eastern Europe and the former Soviet Union to the detriment of the third world. That is a far cry from the firm assurances of the past that aid to Eastern Europe and the former Soviet Union would on no account be at the expense of the third world; that it would be covered by additionality of funds.

The noble Lord, Lord Prior, powerfully spoke of the retaliatory measures of the Malaysian Government, upset as they have been at the implications of media reports about the Pergau Dam. Britain must not succumb to crude pressure of that sort. To do so would really make a mockery of expressed commitments—not least those of the Minister herself—to good government, freedom of the press and human rights. The Minister, like the noble Lord, may be tempted to blame those who spoke out about the deal. But if anybody is to blame it is surely those responsible for that shoddy backroom deal which, whatever its real purpose, had absolutely nothing to do with helping poor people and which has brought the whole ATP into disrepute. If it were not so grave, the story of two letters delivered on the same day by the same ambassador would have made a stunning scene for a Gilbert and Sullivan opera and is certainly a humiliating episode for Britain.

Nobody on these Benches is against British firms and workers benefiting from the aid programme. Such an attitude would be ludicrous. Indeed, I was a Minister in the Labour Government which introduced the aid and trade provision. However, the fundamental governing principle then and the one which should invariably remain was and is that any direct or indirect assistance to British firms must be economically, technically and developmentally sound. Without that firm condition the aid and trade provision would not only waste taxpayers' money, but also cynically undermine sound and effective self-generating development in the countries concerned. It is in that respect that the operation of ATP by the Government and their friends in industry has gone so badly wrong.

Responding to the Foreign Affairs Select Committee's criticism of ATP back in 1987, the Government then said that, in each case there must be a reasonable assurance of economic, financial and technical soundness. ATP funds represent a transfer of resources to the country concerned in the same way as other aid funds do". That was an undertaking which is scarcely borne out by the grim realities as revealed by the National Audit Office, no less.

And ATP is not all. Quite apart from its specific endorsements of British firms, a large proportion of British bilateral aid remains tied. Yet in 1991 an OECD study concluded that, it is improbable that aid tying provides significant macroeconomic benefits to any donor's domestic employment or balance of payments aggregates". As the noble Lord, Lord Redesdale, rammed home tonight, there is another sinister dimension to what appears to be influencing the Government's distribution of aid; that is, its relationship to the arms sales. Even if there is no explicit link, there appears to be, as they used to say about smoking and lung cancer, a direct correlation. Why the almost doubled aid to Oman between 1980 and 1992–93? Why aid at all to such a relatively prosperous country? Were the 367 million dollars worth of arms sales by Britain between 1988 and 1992 purely coincidental?

Indonesia, to which the noble Lord, Lord Avebury, referred, which was the subject of ITV's harrowing documentary last week detailing human rights abuses and cruel oppression in East Timor, saw virtually a trebling of British aid between 1980 and 1992–93. What of the arms sales by Britain amounting to 201 million dollars between 1988 and 1992? How were those arms used? What cast iron guarantees do we have that they were not directly or indirectly used for repression in East Timor? Are we really to believe that there is no relation at all between the additional aid and the sale of military aircraft? I know the Minister always says that aid has not been linked to arms sales. But loosely to quote the immortal words of Mandy Rice Davies,"She would say that, wouldn't she?"

Whatever the legalities of trading aid for arms, it is obviously, as the noble Lord, Lord Alport, in his forthright contribution, put it, quite simply wrong. One of the greatest obstacles to development—one of the greatest causes of human suffering—is conflict. How can it begin to be right to associate the aid programme of all programmes, with spending on the fuel of conflict and oppression?

The UK Government are determined to hold on to the permanent seat in the UN Security Council. Credibility in this intent is inevitably severely damaged when at the same time the UK is opportunistically profiteering out of the arms trade. Furthermore, to feather-bed the traditional arms trade is to work against the economic and industrial restructuring and substitution which are essential if Britain is to be geared to meet the world trading challenges of the century ahead and to secure high levels of employment for the British people.

In conclusion, I must respond to what I regarded as the moving intervention of my noble friend Lord Ennals. I do so by returning to the Pergau dam in a development context. The former Permanent Secretary at ODA, Sir Tim Lankester, was right to say that it was "an abuse of the aid programme". The £ 234 million of taxpayers' money wasted on Pergau would have been better spent on saving lives than on destroying the environment and subverting sound economic management. The 1993 UNDP report estimated that. in sub-Saharan Africa life expectancy was only 51.8 years; infant mortality was 103 per 1,000 lives; 59 per cent. of people had no access to safe water; and 53 per cent. were illiterate. In the face of such suffering, what on earth were the Government doing spending aid money on building an uneconomic hydro-electric plant in Malaysia?

I leave your Lordships with this reflection. At 1991 prices the £ 234 million wasted on Pergau would have been enough to finance the whole of Oxfam's programme in Africa for the next 10 years.

8.23 p.m.

The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey)

My Lords, I shall not waste a moment; but I cannot sum up this debate in the eight minutes which are left to me.

Noble Lords

Oh!

Baroness Chalker of Wallasey

My Lords, I was informed that the debate would finish at thirty-three minutes past the hour of eight o'clock. If your Lordships will bear with me for a little longer, I shall say a little more. I am very happy, after this interesting debate which I welcome, to do that. It is a good opportunity to look at where our aid should be targeted. I am very grateful to a number of noble Lords who have sought to follow the wording of the Motion.

Some noble Lords, including the noble Lord, Lord Redesdale, to whom we are grateful for initiating the debate, seemed to be under some misconceptions. Perhaps they have been carried away by the tide of press attention on certain issues in recent weeks. There has been a notable degree of consistency in many of the comments made which are in support of the Government's commitment to maintain a substantial aid programme and in support of the direction in which it should be spent, concentrating on the poorest and helping people to help themselves. I believe all parties in the House are agreed on that.

The Government have consistently made clear the main purpose of the aid programme. To quote from the departmental report, to which so many noble. Lords have paid compliments (for which I am grateful): the purpose of our overseas aid for developing countries is to promote sustainable economic and social development and good government in order to reduce poverty, suffering and deprivation and to improve the quality of life for poor people". My duty—both to the recipients of our aid and to British taxpayers—is to ensure that our aid is directed to where it is needed, as the Motion says, and where it can be effectively used.

Development therefore is the main aim. To draw a distinction, as some of your Lordships have tried to do, between the promotion of development and the reduction of poverty can be misleading. The reduction of poverty requires sustainable economic and social development. Aid has to be seen in the wider picture. It helps to create stability; and by helping countries individually it contributes to the global economy. That is in British interests and those of the countries we assist. I see no difference between the aims of my department and those of the department which my noble friend Lord Alport helped to set up so many years ago. Those were his aims then, and those are still our aims today.

Aid is not a static instrument. The way we give aid—the forms it takes, the channels we use, even the countries to which we give it—reflects the constantly changing international scene. I want to highlight two or three major changes of recent years. In our bilateral aid programme we now place greater emphasis on technical co-operation, institution building and policy reform advice, with less emphasis on that project aid of a traditional infrastructure kind. In short, we are helping poor countries with sound policies to help themselves. We are involving a large number of UK citizens and institutions, both public and private, to ensure that our aid programme meets its objectives. In the past six years the amount of official aid which we have channelled through British NGOs has increased from £ 30 million to £ 150 million. I am sure that the noble Lord, Lord Desai, and the many other noble Lords who spoke on NGOs, are glad to hear that. We believe that it is exceptionally well used by the NGOs. I shall return to that point in a moment.

The third aspect is that we have to respond to what are tragically the most obvious needs of all. We have had to increase our humanitarian aid in recent years—the money which helps people to stay alive, to obtain basic shelter and food, without which there can be no reconstruction or rehabilitation—in a way few would have envisaged even five years ago. The guiding principle which we maintain, whatever the changing circumstances of the recipients, is that our aid must be closely geared to their particular individual needs. To do this we maintain a constant dialogue with the countries to which we give aid. We encourage them to develop their own strategies to combat poverty and to draw from the experiences of other developing countries.

So where should we—and do we—give our aid? We deliberately focus our aid to developing countries on the poorest of those countries. We seek to target on the poor people in those poor countries. We have frequently been congratulated on this by other donors in the OECD Development Assistance Committee. Poverty reduction lies at the heart of our development effort. Most poor people live in low income countries, and the number of the poor is continuing to rise. We cannot ignore the fact that empowering them and assisting them to greater growth will make them consumers of the future. Only when they are consumers of the future will they as countries be able to develop the trade on which they would like to rely rather than being so dependent on aid.

These countries have the least domestic resources to invest for growth and higher living standards. Most of them also have difficulties in attracting foreign investment. It will still take many years of successful development with aid and investment and trade before the numbers of the absolutely poor will start to fall consistently. That is why our focus on the poorest countries is right. But we do not and should not ignore the benefits of using smaller amounts of assistance, the provision of technical advice, know-how and training of better-off countries, especially where these have reached a crux in their economic fortunes and social development, as the countries in transition so clearly have.

What is encouraging is the clear evidence that development efforts can succeed; that developing countries can secure self-sustaining growth. Over the 25 years to 1990, GDP growth in low and middle income countries was nearly 5 per cent. per year. The growth in per capita incomes was nearly 2.5 per cent.

But income is not the whole story, as so many of your Lordships have reminded us tonight. Adult literacy has increased from 42 per cent. to 65 per cent. The rate of infant mortality has nearly halved, and life expectancy has risen from 51 to 64 years. All those statistics need to improve still further and that I do not deny. But the most important thing is that they are going in the right direction. The most important factors in this are the actions and policies of the developing countries' governments themselves and a commitment to setting a framework in which individuals and communities can help themselves.

Aid has played a vital part in helping this process. We have given substantial British aid to support economic reform; to help improve countries' infrastructure; to assist in the provision of better education and health and the many other essential areas such as water and sanitation and access to good quality family planning services which the noble Viscount, Lord Craigavon, the noble Lord, Lord Mackie of Benshie, and my noble friend Lady Flather spoke about so warmly. We are after real improvement in the quality of life for hundreds of millions of people.

The noble Lord, Lord Judd, said that the speech I made in 1991 on open government, a free press and good governance, had somehow changed. I can assure him that whatever he is trying to read into any subsequent speeches—I may not have used identical words—but those words of 26th June 1991 have not changed and they will not change. There is no muting of my call in the October speech.

A small part of our aid programme is ATP. It is an important part; it is 5 per cent. It is covered by the same good governance criteria as we apply to the programme as a whole. That can be seen when your Lordships investigate the restrictions on our aid that we made, including ATP, to countries like Malawi and China because of human rights anxieties. It is certainly wrong (as some try) to portray ATP as operating outside those criteria. It does not.

The noble Lord, Lord Redesdale, put me in some difficulty tonight because I shall be giving evidence to the Select Committee on Foreign Affairs tomorrow. I may not say in your Lordships' House those things which have not already been said. Yet it would be ridiculous to repeat everything which my right honourable friend the Foreign Secretary said this morning. I urge all noble Lords to read what he said because it is certainly true that there is still some muddled thinking around.

In winding up, the noble Lord, Lord Thomson of Monifieth, talked about aid for the dam being entangled with arms. This morning my right honourable friend made it absolutely clear that, yes, there were three months of an attempted linkage, but that was all long before the Pergau project was even considered. Before that project even came to Ministers it had been disentangled. I ask the noble Lord to look at the dates on which that happened. I can assure him that the Pergau dam was in no way linked to the temporary entanglement that occurred between March and June 1988. In fact, it was my noble friend Lord Howe of Aberavon who carried through the disentanglement and not my right honourable friend the current Foreign Secretary.

We shall not use ATP to boost defence sales or to promote such sales. ATP has been designed to help recipient countries develop their economies in ways that are also of commercial and industrial importance to Britain. It is good for us and for them that ATP has helped British companies in a wide range of industries to win contracts.

As my noble friends Lord Weir and Lord Prior said, we are in a very difficult position at the present time. There are very good British companies which have done good work throughout the world and whose future may indeed be imperilled by the comments of some. It would take too long to put down the inaccuracies. I have eight pages of inaccuracies from the British press on this subject gathered in the past couple of weeks or so.

Above all, ATP is a longstanding provision of the aid programme, as the noble Lord, Lord Judd, accepts. It is successful; and as [told noble Lords the other week, we have to date about £ 3.9 billion worth of British exports for a cost of £ 1.4 billion won with ATP since the scheme's inception. That represents over 270 projects in 50 countries worldwide. We have already amended our ATP rules as a result of the review which I undertook in 1992 and announced last year. That is that we shall concentrate our ATP in future on countries with a per capita income of under 700 dollars per annum at 1989 figures. That brings us into line with the focus of the wider aid programme.

One of the reasons why we have ATP and for which it was designed in the first place, was so that we could have a scheme like most other aid-giving countries so our firms could compete on equal terms. I have heard many comments tonight on the ATP programme which I do not propose to go into until after I have spoken and answered questions of the FAC tomorrow.

However, one comment which my noble friend Lord Prior made was that he felt that ATP should be handed over to the DTI. We have examined that extremely carefully in the past; but because ATP meets a developmental need, and because we have the systems of assessment, monitoring and evaluation in the ODA, my noble friend is not right in that. I shall look at all aspects of this matter in a calmer time after this review. We are in a far better position to run ATP, however difficult it may sometimes be for the Minister in charge of the ODA, as it was for my right honourable friend Chris Patten when he was there, and now for me.

In these words I hope that I have said where we stand. I cannot answer all the questions; but I say to the noble Lord, Lord Mackie of Benshie, who wants us to do more in Albania, that we are gradually building up our programme. Last year it reached nearly £ 400,000 in that country. Given our two-man show on the ground in Albania, we are not doing too badly in assisting them with the help of Britain's NGOs.

My noble friend Lord Clanwilliam commented about South Africa. He seemed to think that we had only just started giving assistance there. In fact, we have been giving that assistance for about eight years now and the programme is really building up, particularly in education, health and in the townships.

The noble Lord, Lord Rea, spoke about Uganda. I can certainly agree with him that the multilateral debt situation is difficult for that country because it is so large. But that is being helped both by ESAF and IDA. Britain has forgiven all the bilateral debt with Uganda. We are encouraging our partners to do likewise. Uganda is also one of our largest aid recipients. It was the sixth largest last year and it received a total of £ 32 million. Uganda is not only trying very hard, but beginning to succeed in many areas where other countries are not.

My noble friend Lord Alport asked about the Commonwealth. It may interest him to know that we keep aid to those countries as a priority. That is why two-thirds of our bilateral aid goes to Commonwealth countries.

The noble Lord, Lord Ennals, spoke a lot about the Pergau dam and defence. He made a number of comments, including one on aid volume which I shall take up now. We are still the sixth largest aid programme. Indeed, we are getting small increases in our budget at a time when a number of countries have cut or frozen their programmes. I am determined that we shall let ours grow sensibly. I very much hope that those people who are critical of the real term decline in our aid programme will examine the detail of what we are doing with it because they will find that so much more of our aid is targeted on those areas which are critical to the welfare of people as they grow and develop whereas many other donors' projects are less clearly targeted in that way.

I urge the noble Lord, Lord Desai, to realise that bilateral aid is a much more controllable animal than multilateral aid. However, I advise the noble Lord, Lord Thomson of Monifieth, that, with my partners in the European Union, I have plans to try to make our multilateral aid through the European Union more effective and better targeted. It forms about half of our multilateral aid, not the percentage that he said, and it is growing all the time.

Deciding where our aid should be spent and for what purposes is complex. We have to weigh up a number of critical decisions, but we want to ensure that aid is not unidimensional, not conditional on just one objective. We want it to achieve sustainable development. I shall not shy away from difficult decisions. I shall stop aid where aid needs to be stopped for the very reasons that many of your Lordships have mentioned. But I shall always make sure that we encourage recipient governments to give poverty alleviation a high priority because the only way in which they will make the programmes effective is if they have some ownership of them, through partnership with us. We shall continue to ensure that we help to improve the standards of good government. We want the governments concerned to respond to the real needs of their populations.

The yardstick for our aid programme is the improvement that it brings to the basic quality of life of the poorest communities. That means access to opportunity, family planning, education, health and clean water. It also means having the chance to be able to get one's goods to market, which is why, in certain circumstances, infrastructure projects are necessary. It also means having the power to run the embryo factories and developments about which my noble friend Lord Prior and the noble Earl spoke earlier. These things are all part of a whole. We cannot pick and choose how countries will decide to develop. We can back good projects and we can refuse to back projects which we do not find developmentally sound. I am glad that at least the Development Assistance Committee of the OECD recognises that our record in delivering aid is one of the best. I intend to keep it that way.

8.42 p.m.

Lord Redesdale

My Lords, I thank all noble Lords who have taken part in the debate. The title of the debate was set on such a broad basis as to enable all those noble Lords who wished to speak on certain matters to find a means of doing so. I am glad that we have had such a wide-ranging debate covering many subjects of importance.

I also thank the Minister for answering the debate. The fact that I focused my speech on the Pergau Dam project—and I believe that there is a problem there—does not mean that I do not have the highest regard for the work of the ODA and the Minister. I beg leave to withdraw my Motion for Papers.

Motion for Papers, by leave, withdrawn.