Developing Countries: UK Aid (Hansard, 6 November 1997)

§ The Earl of Sandwich
asked Her Majesty's Government:
Whether the United Kingdom's commitments to the European Union and to eastern Europe are diverting funds from the bilateral aid programme to developing countries.

§ Lord Whitty
My Lords, development funds are not being diverted. There is no trade-off. For this year and the next my right honourable friend the Chancellor of the Exchequer has agreed that if total expenditure on development through the EC and certain other multilateral institutions exceeds the planned forecasts, the Government will meet the additional costs from the central reserve. Consequently, the UK's multilateral commitments to the EC and others will not impact on the UK's bilateral aid programme and our objective to eliminate poverty in the poorest countries of the world.

§ The Earl of Sandwich
My Lords, I thank the Minister for a very reassuring reply. But does the noble Lord recognise that there has been widespread concern among aid agencies about the growing proportion of aid that has gone on central and eastern Europe from our bilateral aid programme, while the EU co-operation programme has increased dramatically at the same time? Given that the White Paper refers specifically to a finite commitment to those countries in transition, can the Government give the agencies reassurance that this trend has now decreased?

§ Lord Whitty
My Lords, I can. So far as concerns bilateral country programmes, the amount to be spent on eastern and central Europe and the countries of the former Soviet Union will decline from this year onwards. For example, the amount that has been spent on Africa has increased over the past three or four years and will continue to increase over the planning period. I do not believe that the noble Lord's anxiety is justified or that eastern and central Europe are squeezing money out of the poorest countries from our bilateral programmes.

§ Baroness Williams of Crosby
My Lords, is the Minister aware that both the current report of the World Bank and the recently published transition report of the European Bank for Reconstruction and Development aver that the rule of law, the creation of a civic society and the tackling of extreme inequities in wealth and income are crucial to the economic success of these countries? Can the noble Lord assure the House that the British aid programme will reflect the importance of the political and civic dimension of transition as well as the importance of the creation of fresh and free markets?

§ Lord Whitty
My Lords, very much so. The direct British contribution to eastern and central Europe has 1477 been built substantially around the know-how fund which is designed for public administration and private business development and professionalism. It is very important that those cadres are developed and that the understanding of democratic and judicial procedures in those countries matches up with that of western Europe as part of the preparation for accession to the European Union. Certainly, that, together with the development of market economies, is central to our relationship with those countries.

§ Baroness Chalker of Wallasey
My Lords, I welcome the Government's response to the noble Earl, Lord Sandwich, that they will ensure that the agreement that I gained from the previous Chancellor of the Exchequer will continue under this Government. Can the Minister inform the House whether the Government plan to continue the most successful use of British development funds for small business development? This has benefited eastern and central Europe and it is wanted in Africa, Asia, the Caribbean and the rest of the world, but I do not see even a reference to it in the White Paper.

§ Lord Whitty
My Lords, we shall continue some of those programmes. As the noble Baroness will be aware from reading the White Paper, there has been a review of all the programmes. The objective is to assess the degree to which they contribute to the elimination of poverty in those countries. The importance of creating effective indigenous business remains part of our development strategy.

The Earl of Carlisle
My Lords, does the noble Lord agree that the know-how fund's contribution to eastern Europe has not been overgenerous? I refer in particular to the Baltic states of Estonia, Latvia and Lithuania. Further, does the noble Lord agree that any further decline may lead to a loss of confidence in those developing nations and send the wrong signal to Moscow?

§ Lord Whitty
My Lords, I do not agree that the Government have been ungenerous. One of our major contributions has been that to eastern and central Europe. There is always a possibility that if help from western Europe and other aid organisations to eastern Europe begins to falter or is seen to falter, confidence in the process of democratisation and access to the European Union may itself falter. However, we and our European partners are committed to ensuring that that does not happen. A major feature of the British presidency of the EU is that all countries of eastern and central Europe, whether or not they are in the first wave of accession, should benefit from continued help to develop both their economies and their democracies.

§ Lord Bridges
My Lords, is there not a case for re-examining the accounting convention by which our payments to the European Development Fund are debited to the Overseas Aid Department? Should this 1478 sum of money not be regarded more in the nature of a subscription to the European Community as we are not able to monitor it as effectively as we would like?

§ Lord Whitty
My Lords, there are monitoring procedures within the European Union and we are concerned to improve them. Approximately half of our development expenditure takes place through various forms of bilateral agencies. In the case of the EU, the World Bank and others, the expenditures are mandatory and in that sense the noble Lord is correct. However, they are and will increasingly be subject to scrutiny and audit to ensure that they achieve the objectives that we set out in the White Paper, which we hope apply to EU funds as much as to national funds.

Lord Lucas
My Lords, the noble Lord's right honourable friend said in another place yesterday that she recognised the manifest inefficiency of the European aid effort and intended that this country should do something about it when it has the presidency next year. Will he name one practical, specific improvement that this country intends to make to the European aid effort which will have such an effect, or has he just hand-waving and pious hopes to offer?

§ Lord Whitty
My Lords, there are, rightly, some anxieties about parts of the European aid programme. As I said, we intend to improve the audit of its effectiveness. We are working for the greater involvement of British expertise in the management committees and working groups which oversee those programmes. We want more effective contact between UK and Commission experts, and secondment of expert UK staff to the Commission, and collaboration with recipient countries than has sometimes been the case under the European programme. However, that does not justify the claim that EU aid in general is inefficient. There are some concerns, and those will be addressed, as my right honourable friend said.