§ 6.17 p.m.
§ Lord Inglewood
My Lords, I beg to move that this Bill be now read a second time. The Bill before us, when it was considered in another place on 16th March, was unopposed at every stage. That showed the support that exists in all parties for the CDC and for the Bill. I am sure that the chairman, board and staff of the CDC, who are fully behind the Bill, were heartened by the expressions of support that they received on that occasion, I hope that our debate this evening will be equally supportive of CDC and of the Bill.
Praise for the CDC is well deserved. It has been a remarkable success story over what is now nearly a 50-year history; and particularly so over the past five to 10 years. The main purpose of the Bill is to build on that success and to continue for the future. It will put CDC in a position to grow up to and beyond the turn of the century.
In speaking of the success of CDC, I should like to refer to the service of the noble Lord, Lord Kindersley, who was chairman of the corporation from 1980 to 1989. I also want to pay tribute to the work of the current chairman, Sir Peter Leslie, and the board which directs CDC's activities and to the new chief executive, Dr. Roy Reynolds, and his predecessor, John Eccles.
As your Lordships will be aware, the corporation is charged under its Act with the task of assisting overseas countries—not exclusively Commonwealth countries—in the development of their economies. It provides equity and loan capital to private sector companies to enable them to develop profitable and efficient businesses which are environmentally and socially sound. It also promotes, controls and manages companies in certain sectors specified in the Act, and provides related services to them.
At the end of 1993 CDC had investments and commitments in 51 developing countries, 39 of them members of the Commonwealth. Total investments and commitments stood at more than £1.6 billion. Full details are in the annual report, which is available to the House.
Although the audited results for 1994 are not yet available the preliminary figures indicate a continuing strong performance. New investments were at record levels of £240 million. Some 80 per cent. of approvals were in the poorest countries; 90 per cent. were in the private sector, and 22 per cent. took the form of equity capital. The rate of return on investments over three years at 8.7 per cent. also exceeds the target set for CDC, of which the House was informed by my noble friend the Minister for Overseas Development on 3rd May last year, following the completion of a five-yearly review of the CDC.
CDC's task is to use the disciplines and practices of the private sector in order to promote sustainable development in third world countries. Its development report published in 1993 set out three key principles: to invest only when projects are expected to make a positive contribution to national development; to 1457 participate only when its involvement adds value; and to structure its investments according to commercial criteria. Its new management team is actively seeking to improve the links with British and other private sector overseas investors so that it can build on its traditional role as a catalyst for mobilising international finance alongside its own investment.
The new focus in developing countries on private sector-led development is opening up new opportunities for CDC, both in new and traditional areas. For example, in October last year CDC took a majority shareholding in Chilanga Cement Limited, the largest producer in Zambia and an essential component of the Zambian economy. CDC has management responsibility for a major programme of rehabilitating and enhancing the productive capacity of the company. Just as important, 30 per cent. of the company's shares are to be sold to local private investors, marking an important stage in the Zambian privatisation programme and the return of an active capital market in Lusaka. I could multiply examples. Noble Lords will no doubt add to them during the debate.
CDC thus continues to prove itself as an effective and essential arm of the British aid programme. We believe that in order to continue to carry out this role, it is right that CDC should remain in the public sector.
Unlike the Crown Agents, CDC is making long-term financial commitments in areas and activities which commercial lenders consider to be on the margin of acceptable risk. That is why my right honourable friend the Minister of State told the Foreign Affairs Committee of another place in April 1993 that the status of CDC should remain unchanged. It is this public sector status which enables CDC to focus its resources on the poorest countries and to work in the most effective manner.
CDC's capital has been provided through concessional loans from the British Government. The returns made on the proceeds of its investments, including equity realisations, are available to the corporation for further investment, subject to interest and the repayment of capital. Over the years this has produced an increasing level of internally-generated resources available for new investment.
Following the 1992 Public Expenditure Survey it was announced that CDC would no longer receive net new loans from government, but that it would also no longer be required to pay interest on new and existing loans. Although the interest rate was lowered to nominal levels in 1994, a full interest waiver requires an amendment to the existing Act. That is proposed as part of the Bill presently before the House.
The Bill also recognises that CDC will continue to draw on external borrowing. Last December it arranged borrowings for the first time from a source other than the British Government; in this case the European Investment Bank. A loan of £27 million will, we hope, be followed by further similar borrowings. CDC is also exploring potential borrowings from other lenders.
CDC total borrowings are already very close to the existing statutory limit of £850 million. The limit also covers the borrowings of CDC's overseas subsidiaries, which will increase roughly in line with the overall 1458 increase in its portfolio. An increase in the limit is essential to ensure the future financial health of the corporation. The level of increase which this Bill proposes is initially to £1,100 million, and then following the further agreement of Parliament through an affirmative resolution, to an overall ceiling of £1,500 million. This should be sufficient to provide a firm basis for CDC's future investment programmes for the next decade.
It is a reflection of CDC's success in managing its existing portfolio that the overwhelming majority of new investments will continue to be financed from the returns on existing investments. The year 1993 was exceptional, with equity realisations of £27 million allowing an overall increase of £48 million in CDC's net assets. It still remains the intention of CDC's management to unlock the very substantial value of some longstanding investments—particularly, but not only, in Asia—in order to secure resources for further expansion of the programme.
The challenge facing CDC in Africa is more difficult. Reflecting its economic and political problems, Africa's share of CDC's portfolio has declined in recent years. The CDC is now seeking to reverse that.
South Africa is obviously a key area and one which we very much have in mind following the very successful state visit by Her Majesty last week. During that visit, CDC announced an investment of £9 million in a new development capital fund which CDC will manage. It will act as a magnet for domestic and foreign private capital to finance small-scale business development in South Africa; precisely the kind of practical contribution to economic development which this Bill seeks to promote.
Last year in South Africa, my right honourable friend the President of the Board of Trade signed an operating conditions agreement with the Government. This year CDC plans to open offices in Mozambique and Uganda. Identifying viable business which meets its investment criteria in Africa is still hard. But let me give two further examples of what is possible. CDC helped to establish in 1993 a venture capital fund in Tanzania, which it also manages. It provides risk capital for local businesses, and complements efforts to establish a local equity market. Total funds at 8 million United States dollars sound small, but this is breaking new and untilled ground.
We are ready to consider with CDC whether there are other areas of the world where it could deploy its unique skills. Noble Lords will no doubt have their own views on particular areas. It will be clear from what I have said that CDC has a very full agenda, particularly in those countries on which our bilateral aid programme is concentrated. It would have to look carefully at the resources available before contemplating new areas of activity, such as eastern Europe and the former Soviet Union where there are other existing channels for providing help. In the short and medium term I do not detect any great desire by CDC to move into those areas.
I should finally briefly outline the provisions of the Bill. Clause 1 deals with the increase in borrowing limits which I have described. It also removes the separate limit on borrowing by CDC from government. We 1459 believe that a single limit for all borrowing is the most sensible way to proceed. Clause 2, allows for the full waiver of interest on past debt and provides for future interest free loans.
Clause 3 deals with the arrangements for board appointments. We have taken the opportunity of the Bill to align these more closely with those for other public corporations so as to allow key executives to join the board. This clause also places the responsibility for remuneration and similar matters wholly on the Secretary of State, thus removing the requirement for the Treasury to be involved in the detail of pay for individual members of the corporation. But the Secretary of State will, of course, take these decisions within the Government's approach to public sector pay as appropriate at the time. I hope the House will see this as a useful updating provision.
I hope that I have said enough to illustrate the valuable work which CDC is doing and should continue to do, for developing countries and for Britain. I hope that today this House, like the other place, will again agree to endorse the work of the corporation and to place it on a sound financial footing to carry it into the next century. I commend the Bill to the House.
§ Moved, That the Bill be now read a second time.—(Lord Inglewood.)
§ 6.28 p.m.
§ Lord Judd
My Lords, I thank the noble Lord for the very helpful way in which he spoke to the Bill. Many of us on this side of the House enjoy his refreshing and friendly style. When he took up his Front Bench responsibilities we recognised that he was an inherently decent and thoughtful person and also incredibly hard working, as today's business has made clear. But, as with the noble Baroness, Lady Chalker, with all his reasonableness we cannot help feeling that at times he must wonder whether he is on the right side of the House. I can assure him of a warm welcome whenever he wants to join us.
I must declare an interest. As a lover of Cumbria, where I am in the process of putting down roots, I cannot help relating to the noble Lord over his deep attachment to that glorious corner of the United Kingdom.
I assure the noble Lord that if the proceedings on this Bill in the other place are anything to go by, we shall have a thoroughly constructive and positive exchange. Reading the debate in the other place, I can hardly believe that it is the place that it seems to have become in recent years: it sounded quite civilised with Members positively splashing about in good will.
The noble Lord mentioned the Crown Agents. In that respect we cannot help but register the absence of the noble Baroness, Lady Chalker, this evening. Is she being coy? Does her absence for whatever apparently good reason not indicate what we all know; that her heart was not in all that nonsense last Thursday when she unconvincingly endeavoured to defend the patently ideological privatisation of the Crown Agents? We can see that it would have been acutely embarrassing for the noble Baroness a mere four days later to stand in the 1460 same place and speak to this eminently sensible Bill which is designed to give the Commonwealth Development Corporation more scope for expansion within the public sector, a common sense and practical approach which is exactly the kind of model that we on this side of the House advocate for the Crown Agents and, indeed, for the Post Office.
I turn, first, to the good things about the Commonwealth Development Corporation. As the noble Lord said, it has an outstanding record of achievement. After a slightly sticky start, it has proved to be the robust, grown-up child of a far-sighted Labour government and one therefore of which we on these Benches are particularly proud. It was good to see the Monopolies and Mergers Commission in 1992 evaluating it as an especially valuable form of assistance to economies in developing countries. Its high standard of management and sound decision-making have enabled it to ensure that its investment funding has been largely self-generating, supplemented by long-term, low interest loans—all that with relatively low operating costs. It has been encouraging to see the way in which CDC has provided badly needed inward investment in challenging areas where the external private sector hesitates to tread. I refer to areas such as sub-Saharan Africa, to which the noble Lord referred, and in particular to Uganda, which is a telling example.
As was said in the other place, by its pump-priming the Commonwealth Development Corporation sends out positive signals to the rest of the world. It has been playing a vital role in stimulating the local private sector in third world countries and achieving the genuinely local capital which is essential for sustained, dynamic, self-generating development. Chilanga Cement Limited, to which the noble Lord referred, is a pillar of the Zambian economy. It is a good example, with, as the noble Lord explained—the point needs to be underlined—30 per cent. of the shares going to the local private sector. I note that last year, of the £240 million that was invested overall 80 per cent. of the approvals were in the poorest countries. That is something for which all concerned should take a bow.
I understand that the Commonwealth Development Corporation is involved in more than 340 businesses, creating several hundred thousand jobs in projects which tend to last between 10 and 20 years, representing long-term investments of which the world could do with far more—not least, I sometimes think, in the United Kingdom.
All that is a powerful story and one which shows what imaginative professionalism and inspired leadership in the public sector, driven by a sense of social purpose and public service, can achieve where it is patently obvious that the private sector would not have responded in the same way. It is a fascinating model for effective social and economic development. I just hope that unwittingly the removal of Treasury guidance over salaries, pensions and allowances will not spoil all that by ushering in a more crude market culture. Sometimes I fear that the ideologues and captains of the market feel threatened by examples of good public service and set out to seduce or bully those involved into adopting their own soulless materialism. They simply cannot bring 1461 themselves to accept that excellent results can be achieved with service as the motivation and that the best results do not invariably flow from those who are motivated primarily by acquisitive ambitions—far from it, as recent events have amply demonstrated.
I turn now to the questions. Most were raised during the proceedings in another place but, with respect, I do not see much evidence that they were fully answered. Let us first consider the title, the Commonwealth Development Corporation. What new research has been done to see whether keeping that title is a help or a hindrance in expanding the organisation's work increasingly widely as this Bill is intended to make possible? How does the concept of "Commonwealth" go down outside the Commonwealth? What about Latin America or, at some future date, perhaps China? Or is it that virtually nobody uses the word "Commonwealth" when speaking about the corporation and that almost everybody talks about the "CDC"? Would more be gained or lost by a change of name? It would be good to hear the noble Lord's thoughts.
If the Commonwealth Development Corporation is as successful as we all argue, why has the ceiling for increases in resources (made possible by the Bill) been pegged at the new level? What was the rationale behind that? Is it enough? Will it be adequate in the long term? Why has the opportunity not been taken, as recommended by both the Monopolies and Mergers Commission and by the Select Committee on Foreign Affairs in the other place, to free CDC of corporation tax? If it were so freed, that would not only immediately make more funds available for CDC's programmes; it would also enhance CDC's ability to negotiate favourable tax status in host countries, thereby having a multiplier effect on investments by CDC.
After the Pergau Dam débâcle, the Government decided that the aid-trade provision would no longer be available for countries with a GNP of more than 700 US dollars. Will the same apply to CDC loans in future? If not, what is the rationale for a different approach? Is there a danger that repayments from poor developing countries could be used to finance loans to less poor countries in places such as east Europe?
That brings me to the question of CDC and east Europe. Are there to be safeguards for ensuring that Peter is not robbed to pay Paul; that CDC developments is east Europe are not at the expense of work in developing countries? What are the safeguards? That point, it seems to me, should be watched carefully at a time when the operating target for the percentage of CDC investments in the Commonwealth has been dropped.
By contrast, are there plans, as was asked in the other place, for CDC to move into poorer parts of the Middle East, including Gaza and the West Bank'? Following his reference to some of the tougher challenges, it was exciting to hear the noble Lord emphasise developments in South Africa. The key issue is that if CDC, with all its enviable experience and expertise, is to move increasingly into east Europe and perhaps Russia, can we be absolutely certain that it will be a matter of additionality and not at others' expense?
1462 Most importantly, there is the issue of preserving or enhancing human rights. Can the noble Lord tell us how CDC deals with that sensitive priority? What is happening, for example, in Nigeria? What does the CDC do about Indonesia in the light of the grim story of East Timor? I note that £13 million has recently gone into three new projects in Indonesia, a relatively high amount. Did CDC take human rights into account? What was the outcome of its deliberations if it did? How does CDC's human rights policy relate to the three new projects which it now envisages?
There is also the question of the composition of the board. That deserves some attention. Why so great a gender imbalance? Why is there no non-governmental organisation expertise? We keep hearing that the Government respect the operating effectiveness of non-governmental organisations. Would not their experience be relevant? How are the merchant banking representatives selected? I take it that Sir William Ryrie is there because of his distinguished Treasury, ODA and Bretton Woods service and experience rather than because of his role with Barings.
Finally, the Minister said that another place had deliberated upon other things CDC would like to do but could not do under the present statutory powers. He indicated that they were a matter for discussion between CDC and the Government. Whatever they are, they seem to have missed the Bill. Why? What exactly is going on? Our appetites are whetted. In the name of open government, we should like to know.
It would be helpful if in his reply the Minister could, in his usual cheerful, forthcoming and courteous way, deal with all those points. I am delighted to confirm that on the whole the Opposition are inclined to give a fair wind to this useful piece of legislation. If only the good sense and logic most of it enshrines were typical of the Government's legislative as a whole! Sadly they are not. The Bill stands like an oasis in an ideological desert. Long may CDC remain a development agency with social purpose, using appropriate market and business disciplines when necessary. May it never become primarily just another market-oriented business with an incidental economic and social development interest. Incidentally, pray God that the pass has not, in this context, already been sold on the Crown Agents.
§ 6.40 p.m.
§ Lord Redesdale
My Lords, I shall speak briefly, because the issue is not contentious. I also promised the Minister that I would not try to inveigle him onto the Liberal Democrat Benches.
One of the reasons why the Bill is not contentious is that the CDC's effectiveness is beyond dispute. It provides a service which few other agencies can provide at such a low cost. The service it provides does not meet with opposition. Promoting the private sector in third world countries is a laudable aim. It is only through the development of the private sector that jobs and wealth will be created in many third world countries. The importance to many countries of the private sector cannot be underestimated.
1463 I turn to the subject of Africa. The Minister said that in future a great deal of money will be spent on South Africa. I cannot object to that, because I lived in South Africa for some time. There are many areas in which money spent by the CDC would be well spent. But I hope that will not be to the detriment of other African countries. There seems to be an idea that money spent in Africa is often money thrown away. My experience in Africa is that that is wrong. The profitable business that British banks such as Standard Chartered provide in Africa shows that there is money to be made through the private sector.
I was especially encouraged to hear that the CDC will be moving into Mozambique, a country that has suffered a devastating civil war. I spoke last week to Mr. Dhlakama who said that the only hope of moving away from the threat of war is by creating jobs. Obviously, one way of doing that is by promoting the private sector in Mozambique. One question which should be addressed, which the noble Lord, Lord Judd, mentioned, is the CDC's area of operation. I have no penchant for removing the word "Commonwealth". I am proud of that word. It is a word which is used with great pride in Africa. Those countries which are now members of the Commonwealth are proud to be so. Although Mozambique does not qualify, it would very much like to be a Commonwealth member.
There are areas of operation into which the CDC could move. I am thinking of areas such as the West Bank and Gaza. I have to declare an interest in respect of eastern Europe as I am on the advisory board of the Know-How Fund. I hope that the Minister can reassure us that money will not be diverted from Africa, which has the majority of least developed countries, to eastern Europe.
I should like to finish on the subject of the Crown Agents versus the CDC. The Minister will have an ingenious reason for why the CDC is remaining in the public sector whereas the Crown Agents are being jettisoned into the private sector. I look forward to hearing his reply. I reiterate the invitation to the Minister to go to South Africa in May to play for the parliamentary rugby team. He would then see at first hand some of the issues involved in Africa.
§ 6.45 p.m.
§ Lord Thurlow
My Lords, I am grateful to the noble Lord, Lord Inglewood, for his clear exposition of the scope of the Bill. As he explained, it is narrow in scope, but, so far as it goes, all sides of the House have welcomed its provisions. We are especially glad that the ceiling on the CDC's operations is being expanded. I understand that the new ceiling will be set no lower than the CDC itself would wish.
We are glad to have, as other noble Lords have said, the opportunity to pay the warmest possible tribute to this extraordinary organisation. I have had the privilege 1464 of seeing it at work for nearly 50 years. The Minister in another place used what can be regarded as pretty extraordinary phraseology when he said:I know of no CDC scheme that has been the subject of public criticism, either in the country concerned or in this country".—[Official Report, Commons, 16/3/95; col. 1042.]That is an extraordinary record, especially having regard to its scale of operations.
I have experienced the strictness with which the corporation sticks to commercial principles. I have tried to obtain money from the CDC for good causes in Commonwealth countries and been shot down because it could not be sufficiently indicated that there was a prospect of enough profit being made. That is right and proper. I accept its refusal, but it illustrates that although the corporation is in the public sector it has successfully combined the principles of private sector work with its public sector status.
I shall refer to the problem that has been mentioned of whether the corporation has the powers to do what it wants to do. The Minister in the other place reaffirmed that the Government are anxious that it should have such powers. Discussions are going on because the corporation does not feel easy about the present legislative framework and the rules. If the result of that discussion should be that a change to the legislative framework is necessary, I hope that the Minister will be able to give us an assurance that time will be found within the reasonably foreseeable future for such necessary brief legislation.
Perhaps what is necessary can be achieved by rules and without legislation. However, if legislation proves to be necessary it would be a pity if the opportunity provided by this Bill were not taken. I do not believe that any of your Lordships would advocate amendment of the Bill to extend its scope by, for instance, redefining in the Long Title, or whatever. That would mean going back to the other place and we know the problems of the timetable. Nevertheless, we would like an assurance that whatever action is necessary to remove the uncertainties of the corporation it will be taken and facilitated by Ministers.
I wish to refer to the basis of the funding of the CDC. Under the announcement that the Government made last year, there are to be no new net loans from them. Such notional public funding as will continue will come from the recycling and ploughing back. Given the fact that in future the corporation will not get more new money from the Government, is it not a little disingenuous for the expenditure of the CDC to be recorded in ODA reports as part of our overseas aid contribution?
That is not merely a matter of semantics. We all know the pressures on overseas aid funds, but by introducing what appears to be a slight misrepresentations of the future nature of the corporation's funding the figures quoted publicly for our overseas aid, bilateral and multilateral, are inflated.
Finally, I turn to the semantics of whether it is right and proper to retain the title "Commonwealth". As all your Lordships know, the corporation's overseas work is referred to in common parlance always under its initials of CDC. I cannot believe that any additional foreign countries that may come within the scope of its 1465 good work will be inclined to question whether it is proper for the help that they receive to come in the name of the Commonwealth.
I conclude by repeating my warm tribute to the CDC for its work in the past and my admiration of its present staff. I express my good wishes that it will go from strength to strength and thereby enable taxpayers in this country to continue to take great satisfaction from the high rate of gearing under which, during the past 50 years, a relatively small amount of public money has resulted in four or five times as much assistance to valuable development projects.
§ 6.55 p.m.
§ Lord Trefgarne
My Lords, I know that at one time it was thought that we might take more than the Second Reading stage of the Bill today. I and perhaps other noble Lords indicated that we would prefer to have a slightly more formal timetable. Thus it is that we shall take the remaining stages after Easter. If, by causing that delay, I have inconvenienced any noble Lord, and in particular my noble friend, I apologise.
The Commonwealth Development Corporation is the very crown jewel of our overseas development policy, the Rolls-Royce vehicle by which so much of our overseas development funds are dispersed. It has performed in an admirable way since the day it was set up. I have a certain connection. My late father was the first chairman of the corporation. The noble Lord, Lord Thurlow, said that he had never heard of a single project being criticised. I am afraid that I must correct the noble Lord. In the early days one or two attracted a certain amount of attention. Modesty forbids that I mention them now.
Be that as it may, I strongly support the Bill as far as it goes. However, I am disappointed, as are the noble Lords, Lord Thurlow, Lord Judd and Lord Redesdale, that the Bill does not do more for the powers of the corporation, in particular by defining more widely the nature of the projects in which it is authorised to invest. Undeterred by the difficulties referred to by the noble Lord, Lord Thurlow, I inquired of the authorities in this House about the possibility of introducing amendments to deal with them. The amendments would not have been long or difficult to draft but I was firmly and properly told that they would be outside the scope of the Long Title. As your Lordships recognise, the House is always most reluctant to amend the Long Title. Indeed, I am told that our Procedure Committee has recently decided on a yet more stringent line. I concluded that amendments which did more than tinker with the problem were impracticable.
That is not to say that nothing can be done. It would be possible—and it may be the right course of action—to introduce a Private Member's Bill in this House or in the other place to deal with the issues that have been raised. I am attracted to that course of action. However, one must recognise that, although it would be perfectly practicable in a comparatively short time to persuade your Lordships of the merits of such a Bill, at this stage 1466 in the parliamentary year it would reach the statute book only if the Government were able to offer encouragement for it in the other place.
I noted with interest the words of my noble friend Lord Inglewood on the previous Bill with which we dealt tonight. He said that the Government would provide support for the measure in the other place. Therefore, I ask my noble friend in plain terms whether, if a Private Member's Bill is brought forward in this House which meets with your Lordships' approval, the Government will find time for it in the other place in order that the widening of the powers—which everyone, including Ministers, accept to be appropriate and desirable—can be achieved. I believe that that is the only course of action now open to us to deal with the difficulty. I hope that the Government will be persuaded of the merit of my proposal.
Perhaps I may just say again that I warmly support the Bill so far as it goes. I would have wished it to go further; sadly, it cannot. However, I hope that the Government can give me some encouragement along the lines I have proposed. I certainly hope that the Bill swiftly reaches the statute book.
§ 7 p.m.
§ Viscount Waverley
My Lords, from conception in 1948 to the completion of the strategic review in 1994 the Commonwealth Development Corporation can be rightly proud of its achievements. In broadly welcoming the Bill, I take the opportunity to draw attention to a number of points which have arisen during its passage to date.
However, before commenting on specifics, I should say that my interest in the corporation stems from CDC's commitment to the developing world, investing and managing in areas where there are many less fortunate than ourselves. Target areas stretch from South-East Asia at 21 per cent. of its portfolio to West Africa, with 9 per cent., and Central and South America at 8 per cent., and so on around the globe. It is hoped to stimulate other investments in sub-Saharan Africa as a result of a recently started operation in South Africa. There is also the possibility of ancillary offices, as has been mentioned, being opened in Uganda and Vietnam, in addition to the 21 already operating.
CDC, at 31st December last, had invested or committed £1.7 billion to projects ranging from primary production and processing and finance of commercial and industrial projects in areas such as hotels and tourism to general infrastructure projects in the power, water and telecommunications fields.
Current initiatives include developing a role in privatisation projects. As the noble Lord, Lord Inglewood, and other speakers mentioned, an example is the Chilanga cement factory in Zambia. Indeed, the shadow overseas development spokesperson in another place is visiting that project today. I look forward to hearing her observations.
In addition to promoting venture capital businesses, CDC is pro-active in infrastructure, food and beverages, forestry and general industry. Specifically, in South Africa, CDC has just announced two funds aimed at 1467 assisting black entrepreneurs. That is to be encouraged. It is easy to be impressed with the work of the Commonwealth Development Corporation. I note that it has been investing outside the Commonwealth since 1969.
I turn to the Bill itself. I thank the noble Lord for rendering a detailed account of it. However, the measure seemingly fails to act out in full the recommendations contained in the quinquennial review. I understood that the Government had endorsed its conclusions. Indeed, the Minister confirmed that in a reply on 3rd May 1994 in response to a Question tabled by the noble Lord, Lord Brabazon of Tara, who is not in his place today. The noble Lord, Lord Judd, also seems to have understood that during the Committee stage of the Crown Agents Bill.
I am bound to say that I have difficulty in seeing where all the recommendations have been included. For example, the review recommended that CDC's powers should he expanded so that it could play an even greater role in the development of emerging economies. Recommendation 10 clearly stated:In any future legislation agreed by Ministers to increase borrowing limits some changes could usefully be made to the CDC Acts to clarify CDC's powers, and extend these in ways consistent with its contribution to aid objectives".I am bound to say that we owe it to CDC to organise its future in as unfettered a manner as possible.
I have two questions for the Minister, of which I have given advance notice. First, why does the Bill not clarify and extend CDC's powers? Secondly, how will the Government ensure that those issues are properly addressed'? I also look forward to hearing the noble Lord's comments on the merits of the proposal put forward by the noble Lord, Lord Trefgarne, regarding any future passage of a Private Member's Bill. I am concerned that legislation could not be enhanced through lack of parliamentary time or that it falls outside the scope of what is known in parliamentary parlance as "The Long Title".
§ 7.5 p.m.
§ Lord Rea
My Lords, I should, first, apologise for not putting down my name to speak. However, I have a very brief intervention to make. My purpose is to press the noble Lord further on one or two points made by my noble friend, by other speakers and, indeed, by Members of another place.
The overriding question from our point of view is to ask why the Commonwealth Development Corporation is so suited to being a public sector body whereas the Crown Agents are not. In fact, as the role of the CDC is very largely with the private sector—to launch and support viable and profitable enterprises—on the face of it it would seem to be more suitable for privatisation than the Crown Agents who, more often than not, work on behalf of governments. To me it is really a revealing comment on how skin deep the Government's belief is in the reliability of a market economy that they believe that a publicly owned enterprise is necessary in order to get profitable enterprises off the ground in a developing world.
1468 If an enterprise is thought to be viable, it should be worth putting risk capital into it. But, of course, private finance is not available for the long-term projects which the CDC has so successfully initiated and run in many countries throughout the developing world, and, indeed, continues to do so. As the noble Lord put it, the capital required is on the margins of acceptable risk. I thought that a rather nice way of putting it. In fact, those who have money to invest want to gain profits much more quickly and reliably. That is why the Commonwealth Development Corporation is needed. The private sector is not really interested in development when quick profits are not available.
I mentioned that we are not talking just of the Commonwealth; indeed, the noble Lord said that 13 out of the 51 countries involved are outside of the Commonwealth. That fact was mentioned in another place as a reason perhaps for questioning whether the name "Commonwealth" is still appropriate. Of course, we all know what the CDC is, and it would probably be difficult to call it the BDC or the IDC instead. However, perhaps the Minister can answer the point and also amplify what he said about other countries being suitable places for investment of projects by the CDC, especially in eastern Europe. I hope that he will answer the point made by my noble friend as to whether that would be additional to the current capital projects being entered into or whether it would be subtracted from what is already available.
In conclusion, I believe that it is good that the Government are increasing the borrowing capacity of the CDC. But, like other noble Lords, I feel that the opportunity could have been used to do more for the CDC. I was most interested in the suggestion made by the noble Lord, Lord Trefgarne. Indeed, I look forward with interest to the introduction of his Private Member's Bill. I hope that we shall be able to support it on this side of the House. We support the Bill as far as it goes; it is useful. However, as my noble friend said, we are a little worried about the removal of Treasury guidance regarding staffing, salaries and pensions. Nevertheless, we feel that it is a useful little Bill. We certainly do not oppose it. We wish it well.
§ 7.10 p.m.
§ Lord Inglewood
My Lords, I do not want to detain the House longer than is necessary, but perhaps I may answer some of the points that have been raised by noble Lords in debate. I must begin, after the opening remarks of the noble Lord, Lord Judd, by emphasising that the reason I am here rather than Lynda Chalker—I am less visually attractive—on the Front Bench is not that she does not feel inclined or cannot answer the point that he put but that she just happens to be unavailable. Even though the noble Lord suggested that I might come across onto his Benches, I was delighted that on the principle of "If you can't beat 'em, join 'em", he has come to Cumbria.
A number of speakers referred to the title of the CDC. As I think is generally known, the Commonwealth Development Corporation is invariably known as the CDC where it operates. There seems no good reason to change the name. It is the name with which it has grown 1469 up and by which it is well known, and there is much good will attached to it. I was also asked by the noble Lord, Lord Judd, why we should not free the CDC from corporation tax. If one looks at it in the round, it seems to us that there are no special grounds for treating the CDC differently on taxation to other corporations in the public sector which are taxed on the same basis as private companies. We do not feel that the nature of the CDC's activities are such that they justify special tax treatment in themselves because, if one did that, there would then be all sorts of problems as regards distinguishing it from other bodies doing equally worthwhile work in the developing world.
A point was raised about the application of the aid and trade provision in respect of CDC investment. That is quite a separate part of the aid programme not connected with the CDC. A number of noble Lords have asked about investment in parts of the world where the CDC is not currently investing. The position is that if the CDC wishes to invest in a new country it must seek authorisation from the Government. As a general policy, we do not think it is appropriate for the CDC to develop in places where there are other organisations which may be doing the same kind of thing. That is not necessarily an invariable rule but it is the general approach we adopt. For example, if one looks at the former Soviet Union and eastern Europe, there are a number of agencies already at work there. We feel that if resources were to be devoted to that part of the world, to use those agencies would be the right way to do it rather than for the CDC to spread its empire. At the end of the day the reality is that the CDC has a finite budget. We must contain the amount of investment it undertakes within the scope of the resources at its disposal.
Mention was made about the composition of the board and, associated with that, whether the change in the way in which its remuneration was to be decided might have a deleterious effect on the operations of the CDC. I do not think that that will be the case. The reason for doing this is to free up the procedures to ensure that it attracts the best people for the job and that the packages that may be offered—whether they are full-time or part-time people—are appropriate in the wider world so that one can obtain the people one wants. The noble Lord, Lord Redesdale, made the point—
§ Lord Judd
My Lords, I am grateful to the Minister for giving way. This is an important point. Could he possibly explain in the context of all the positive comments being made about the record of the CDC what it is that has not been achieved with management and leadership based on the principle of public service rather than what normally motivates the private sector?
§ Lord Inglewood
My Lords, I thank the noble Lord for his intervention. That was the point I was going to come on to when talking to the point made by the noble Lord, Lord Redesdale. There is not necessarily any dichotomy between public service and the private sector in this regard. Clearly, those who work for the CDC are working in the best traditions of British public service. But just as that is not a grasping thing to do, neither should the employer be mean in the way in which he 1470 approaches them. What we are trying to do is to give flexibility to the system rather than to make any particular criticisms of what has occurred in the past.
The noble Lord, Lord Redesdale, talked about making money in Africa. Of course the private sector is the means for making money, but at the same time it is now deemed an essential tool for development since private sector investment is an appropriate—perhaps the best—way of stimulating economic development. It is for that reason, rather than the primary reason of maximising return, that the CDC is operating in this area.
I now come to the question that perhaps everyone in the Chamber has sought an answer to; namely, why is it that we wish to privatise the Crown Agents while we wish to retain the Commonwealth Development Corporation in the public sector? The answer is that the Crown Agents as a body do business for other people. In short, they might be described as a procurement agency. The Crown Agents can be operated most flexibly and most effectively in the private sector, while the Commonwealth Development Corporation, as I hope I made clear in my opening remarks, is about investment on the margins of acceptable risk. There are difficulties in doing that outside the public sector. Because of the security that the public sector provides, we felt on balance that that was the appropriate way of dealing with the matter.
A number of noble Lords have raised the question, in slightly different ways, of whether the powers that the CDC has are appropriate to enable it to do what it ought to be doing. As noble Lords may be aware, a statutory instrument was made in December 1993 to allow the CDC to invest in new areas of business. However, that does not deal with the slightly wider problem of the vires under the CDC Act which concerns the circumstances in which it can invest and carry out the activities it is permitted to undertake.
I listened with great interest to the proposal from my noble friend Lord Trefgarne about the possibility of a Private Member's Bill. Suffice it to say that we will undertake to look at this matter most carefully. We give no undertakings, but we thought it was important to proceed swiftly with this Bill because, as noble Lords may have noticed, the thresholds over which the CDC will want to borrow will shortly be exceeded. That is an important consideration bearing in mind that there is an overriding requirement from the CDC's perspective to get the extra borrowings permitted.
That covers the point made by the noble Viscount, Lord Waverley, and others on why the Bill does not go further. We decided on balance that the right thing to do in the circumstances was to proceed with the Bill as it is. As I have already described in responding to the comments of my noble friend Lord Trefgarne, we can consider further steps later if we conclude it is necessary. Finally, there was a point raised by the noble Lord, Lord Thurlow—
§ Lord Trefgarne
My Lords, my noble friend was saying that he would consider further steps if they were thought to be necessary. As I understand it, the 1471 Government have already said that they accept the need for wider powers for the Commonwealth Development Corporation; it is just a question of how we get there.
§ Lord Inglewood
My Lords, my noble friend is right to pick me up. I was perhaps slightly too lax in my phraseology. We will certainly look at the best way forward for the CDC in the way I described. Finally, the noble Lord, Lord Thurlow, made an important point about why the money of the CDC is included in the ODA' s budget and is contained in that part of the public sector accounts. The reason is that, while interest is not now being repaid to the Exchequer in respect of the loans, it is nonetheless public money which is being used by the CDC, even though it is allowed to retain the profits generated by it. Of course, that capital which is invested in the CDC is part of the overall Exchequer debt on which interest is paid in the wider context. I hope that I have covered all the main points that noble Lords have made. As there is widespread support for the CDC and for the Bill, I very much hope that the House will grant it a Second Reading.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.