Developing Countries: Poverty

HL Deb 12 June 2003 vol 649 cc450-72

7.30 p.m.

Baroness Whitaker

rose to ask Her Majesty's Government how they can help the developing countries in poverty which lack strong funding relationships with donor countries or international institutions.

The noble Baroness said: My Lords, when I went to Niger, it was the second poorest country in the world. Its per capita income was 200 dollars. The adult female literacy rate, a strong indicator of the basis of development, was just over 8 per cent. Yet it receives only 25 dollars in development aid per person per year. France, the main donor, dropped its aid to Niger from over 115 million dollars in 1997 to under 40 million dollars in 2001.

Mali's income is 360 dollars and its aid 36 dollars per person per year—a bit better, but that is mainly in aid tied to French products, and Mali is democratic and pretty low on corruption. As Paul Collier and David Dollar say in a very interesting book on aid allocation, which I shall refer to again, Mali's ability to save and invest, evident from its reasonable standard of governance, which I also saw personally, may be undermined by its poverty, which is so great that foreign investment is deterred. Surely that is a good case for aid to encourage economic growth.

Last autumn I went with UNICEF to Laos, not quite so far down the aid agenda, but with a particular problem in that there are unexploded American bombs and landmines throughout. US ordnance-clearing aid, I was told, equates in about a year only to what was spent in one day on aerial bombardment. Total development aid went down by a quarter over the years 1999 to 2001 and, as I saw. the paucity of any kind of paid work meant that hundreds of its young people were sucked into exploited labour and prostitution in neighbouring Thailand. UNICEF, which took me there, does a magnificent job in helping to recover and train these children, but the inability of the Laos Government on its own to create economic growth and employment means that trafficking happens over and over again, often to the same children.

Should we bother about gaps in aid? After all, economic growth is what lifts countries out of poverty and foreign direct investment and remittances from migrants both do more for economic growth than aid does. But it is of course aid which helps ensure the basis to attract that investment, a healthy and literate population with a modicum of good governance and a minimum of corruption. The findings of Collier and Dollar show that poor countries are held back by a governance gap rather than a financing gap. DfID has produced a very interesting booklet called Promoting Institutional and Organisational Growth to disseminate just that expertise.

I do not need to rehearse the links often described in your Lordships' House between extreme poverty, armed conflict with its preponderance of civilian casualties, unmanageable large movements of refugees, mainly to other poor countries, destabilising them, as in Cote d'Ivoire, people smuggling and trafficking, and organised crime. It is in the interest of the most narrowly conceived external policy to reduce extreme poverty.

There seem to be three major reasons why some needy countries miss out disproportionately. I am most grateful to Peter Grant of DfID for his illuminating discussion of these. First, proportionate assistance to a large, poor country could skew the budget of any donor. Bangladesh receives only nine dollars per head per year in development aid as a result. One must ask: is the World Bank's cap on absolute sums right?

Secondly. one of the world's big multilateral players, the European Commission, does not target poverty. Less than 50 per cent of its development assistance goes to low income countries. The EC favours its own back door, East and Central Europe and North Africa. Thus it does not take a global view even of the situation of Europe. I congratulate my noble friend on the Government's pressure for the Convention on the Future of Europe to make poverty eradication the principal objective of EU development policy. Can she say what progress is being made?

The third reason is history. For instance, the UK aids the Commonwealth; the French do most in their former empire. There is a point in that. If there are links and networks, donors have a better chance of' making aid well-informed and making it work. But of course it is partial.

Indeed, some bilateral donors who do not act from a post-imperial sense of responsibility appear to take the eradication of poverty less seriously than other objectives. The USA still goes in for tied aid which hugely benefits its own producers at the expense of best value and local procurement for the recipients; or it furthers political objectives, as in the Middle East and, indeed, in central and eastern Europe. Let us hope that President Bush's most welcome commitment to the relief of HIV/AIDS in Africa is a new departure.

In any case, history can do little for countries with no conqueror, such as Ethiopia; or for those whose conqueror was impoverished by its own imperial efforts, such as Angola. It is all a bit of a lottery. And that lottery is also compounded, for when countries have sclerotic or corrupt governments it is hard to know how to make aid work. Or when their intellectual and professional resource leaves or is driven out or annihilated, as in parts of south-east Asia, their capacity for nation building is weak.

Riches in the form of natural resources can actually be a curse in that the greed they inspire can destabilise an immature polity. Poor countries are prone to war and rich countries do not like to pour money into arsenal economies. The strategic importance of a country may make its "aidability" strangely fluid. There was quite an increase in US aid to Guinea when a seat on the Security Council came its way.

NGOs do wonderful work in these areas but their resources are tiny compared to governments.

Do the UN, the World Bank, the IMF, regional development banks, the EC and donor governments need to work together more to share out aid better? That would be better done on a rights basis in any case, but that is for another debate. Would it not be better to have more representatives of developing countries in the multilateral organisations? The Government—DfID—have appreciated that there should be a proper means of funding the attendance and advocacy capacity at the WTO of countries too poor to do it themselves. Should this be extended to G8, the IMF, the World Bank and other decision-making bodies?

My right honourable friend the Chancellor proposed a doubling of aid to developing countries, innovatively financed by an international financing facility. This gained ground at Evian. How should it be distributed?

Finally, a few other things that the international and regional institutions might focus on: the striking results from concentrated aid in poor countries with good management; the enormous importance of trade for growth and the consequent message that multilateral organisations might link-in aid more with efforts on macro and sectoral policies to improve market access; their firmer independence from big power political influence, following Joseph Stiglitz's interesting account of the need to reform.

I have not offered developed solutions. My purpose is to air a problem so that more expert heads can do a bit of brainstorming over the best way forward. I therefore look forward very much to hearing the distinguished speakers to follow and to the response of my noble friend the Secretary of State.

7.39 p.m.

The Earl of Sandwich

My Lords, the noble Baroness has certainly aired the problem. My congratulations to her for asking one of the most fundamental, almost unanswerable, questions: why can we not help the very poor? I expect the Government to admit that they cannot, because plainly we will not meet the millennium development goals. Many of the poorest—the figure used to be as high as 40 per cent—are out of reach of government services. So the simplest answer is: we cannot help those we cannot reach if we are using a government structure. But there is another version of this argument which I heard, perhaps surprisingly, through the organisation CARE International—that is, we cannot help the helpless. Unless there is a sustainable project, aid will be useless. It will he like pouring money into sand.

I know CARE International has successfully planted trees in Niger in very difficult conditions, but only because local people look after the trees and keep the goats off. This is now the fashionable concept of sustainability, which of course requires a process of evaluation. It guides governments and NGOs alike; it pleases auditors, trustees and donors. Yet it can also be a useful means of avoiding our obligations to reach the very poorest. Can one imagine poverty reduction today without rapid rural appraisals, household surveys, livelihood monitoring or coping mechanisms?

There is a complex apparatus of aid which, while suiting donors and some governments, encumbers the poorest countries most.

We donors meet in various disguises, as the G8, the EU, the DAC/Paris Club, World Bank, IMF, or via one of the UN agencies. When the host countries admit that they cannot cope with the jargon, let alone the policies, we send out technical experts and call it capacity-building. They are the new aid bureaucracy. They are expert in transparency, debt relief, good governance, conflict resolution, and so the list goes on—laudable ambitions, trumpeted by the international financial institutions on our behalf.

At the same time, these countries are being saddled with poverty reduction strategy papers—the new form of structural adjustment which is the latest straitjacket of development because governments have little choice if they are to receive aid such as IDA lending or, still more, budgetary support. The influence of donors through this process cannot be exaggerated. Some 26 countries have already published the PRSPs and another 20 have published interim papers. Over half the countries regarded as the poorest are benefiting from IDA lending.

In the past, donors have been frustrated by host government departments, especially the red tape involved. In the end, such departments were bypassed. The more powerful aid agencies like UNICEF set up their own separate projects with their own identity, infrastructure, even territory. Any new funding—we have the example of HIV/AIDS today—risks introducing such an empire of aid-giving, sometimes regardless of, and even in competition with, the existing, usually rather fragile primary healthcare structure.

I admire the commitment of many individuals in the UN and the larger NGOs. I count friends among them. But I have come to recognise how well our own society is served by these well paid aid workers, consultants and experts, not to mention the drug companies and the manufacturers, while the local communities they were assisting have often, in the end, been left to fend for themselves.

This is where aid funding has gone wrong. And DfID, to its credit, has recognised the limitations of such assistance. In countries where it has developed a strong aid partnership, it has moved towards programme aid and budgetary support so as to reinforce government services. Where possible, it has strengthened the capacity of the local NGOs and the more rigorous areas of civil society, such as the judicial system in countries like Rwanda and Uganda. Yet it cannot extend this support to the poorest countries or those communities in conflict, as in Nepal, Sudan, or even parts of India, which still contain some of the world's very poorest. Using NGOs will not be enough to reach the very poor, except for limited operations, and in some areas where they are well integrated in local civil society.

One main advantage of the PRSP process, which I readily accept, is that it requires the participation of civil society. Preliminary research by the Overseas Development Institute shows how intricate the detail of the process has become. It is difficult to monitor the extent and degree of public participation, but that is a task that has to be done.

One way of reaching the very poorest, which has been explored by Christian Aid in an internal discussion paper, may be through decentralisation and devolution using the PRSP process. Much could be achieved through a discussion about effective participation of civil society in local decision-making alongside elected representatives. As I frequently do, I am thinking of African countries in that context. Some research has been done into participation in countries such as Bolivia, Uganda and Malawi. It would be interesting to know from the noble Baroness whether the Government have explored the issue in the context of aid funding within the PRSPs.

One country with a light touch, where I believe that these ideas could be explored, is Mozambique, where the department is working at various levels. With donor encouragement, Mozambique has embarked very confidently on its own PRSP, know as the PARPA. It is designed to ensure that civil society is fully involved, that local NGOs are supported, and that an emerging democracy ensures accountability, transparency and improved fiscal arrangements as well as good governance—whatever that word means precisely.

So far, so good. However, there are strong vested interests in those countries. One is the presence of foreign companies, notably the shareholders in Mozambique in MOZAL and the South Africa rail link through the Maputo corridor. That will inevitably reinforce power in Maputo at the expense of the north, which is a classic divide in many countries. Human rights NGOs, rural development agencies and a few opposition politicians will have a hard time representing minorities and communities, some of which will run counter to government doctrine.

Mozambique is a country crying out for a stronger media and civil society to protect the new constitution and the interests of ordinary people and prevent a return to conflict. The building of an aid bureaucracy, unless it can reinforce local civil society and local government in parallel, outside the capital, may be identified with the centre and so prevent a new society from emerging.

Finally, I fully agree with objective le, which the noble Baroness mentioned, that EU aid to the low income countries should increase to 70 per cent by 2006. However, we are still a very long way from that. I congratulate the noble Baroness on her new departmental report, which is readable and gives an honest account of such objectives, thereby helping parliamentarians.

7.48 p.m.

Lord Hannay of Chiswick

My Lords, the Question on the Order Paper draws attention to a very real, but not much noticed or remedied problem—the plight of the considerable number of developing countries, many of them small in size or population, which simply slip through the net of support for lack of strong funding relationships with donor counties or international institutions. Some of those countries have found themselves neglected because they do not fit into the pattern of post-colonial relationships with former metropolitan powers, which are still quite influential; others because of the lack of a strong, purposeful regional grouping to which they can belong and from which they can draw help and advice; and others—but here the attribution of cause and effect is not easy or uncontroversial—because their poverty has led to a breakdown of civil society, of law and order and, in some cases, of any vestige of central government at all. In those cases, the international community has despaired of being able to pursue any development policies beyond simple humanitarian relief. I know that there is an argument that says that some of these countries have got there because of conflict. I do not wish to attribute precisely the cause and the effect. The outcome is, alas, all too clear.

Examples of those phenomena are not hard to find, particularly, but not exclusively, in Africa. Afghanistan, before Al'Qaeda and the Taliban put them back on the development community's map, was one of them. Somalia was, and remains, another—as does Liberia. Rwanda and Burundi before their experience with genocidal strife were precisely in that situation. All these were countries where the main donors had largely given up or had never been that much interested in the first place. But look at the consequences, not just in terms of human suffering and loss of life, but also of regional destabilisation—in Central Asia, in the Great Lakes region of Africa, in West Africa and in the Horn of Africa, for example; and look too at the cost to aid programmes of redressing this neglect when eventually we all got round to doing something about it; and look too at the havens that have been and still are being provided for terrorism. That is surely enough to show that the cost of failure and neglect is very real and that it falls not only on the countries concerned but also on the wider international community.

0f course I am not suggesting that nothing has been done, or at least attempted, to deal with the problems of these countries. The United Nations, with the various initiatives directed at the LLDCs—the least less developed counties—has tried; so has the Commonwealth with the focus on its smaller, less viable members; and NePAD—the new African initiative which was debated in this House a couple of weeks ago—is also trying to address the same problem. But what I fear we do have to accept, if we are being honest with ourselves, is that none of these initiatives and efforts has been particularly effective; and none has even begun to get to grips and to eliminate the problem. So we do, surely, need to think again; to analyse carefully why efforts so far have failed in these sorts of countries; and to consider whether we cannot find new remedies.

One problem, I fear. is the tendency of all aid administrations, and many development economists too, to concentrate their attention and efforts on the larger problems and the larger countries. There are perfectly respectable arguments for doing so. It is not difficult to demonstrate that concentration of really substantial resources on a limited number of recipients brings better results than what would be pejoratively described as a scattergun approach. But such concentration comes at a cost, as we have seen, and a cost that can be very heavy. I would welcome some comment from the Secretary of State, whose presence to reply to this debate I warmly welcome, on this unavoidable tension and on how DfID sees ways of resolving it.

Where should we be looking for remedies? Clearly in the trade field, where the World Trade Organisation's Doha development round is in full but not altogether promising swing already. It may seem a hit quixotic to think of some of these neglected countries benefiting from international trade at all; but, if we take that view, they will be condemned to eternal dependence on aid, and that will be a disaster. So we must help them build capacity in the trade field and devise even more ways of ensuring that what they do produce reaches our markets and that they do receive a fair return for it.

Secondly, we must act on debt, where we are often—and we need to recognise this—dealing with countries whose ability to undertake sustained programmes of structural adjustment is very slight. Thirdly, we must do what we can to strengthen regional and sub-regional organisations which can often provide more politically acceptable assistance than can the main donors and the major global institutions. Fourthly, we must work to make the European Union's aid effort—which continues to grow steadily, and will now increasingly do so with the enlargement of the new members which have not hitherto been much involved in the aid business—more effective and more sensitive to the problems that this short debate has highlighted.

7.55 p.m.

The Earl of Listowel

My Lords, I, too, thank the noble Baroness, Lady Whitaker, for providing us with the opportunity to debate this important issue.

I shall concentrate my remarks on the situation in Angola and on the case for reviewing our donor relationship with that country, particularly in regard to the urgent and immediate need to prevent the spread there of HIV/AIDS. At the same time I recognise the need to avoid colluding with a government who historically have not attended to the needs of their people.

I am informed in correspondence with the Minister that the rate of HIV/AIDS infection in Angola is in the region of 5.5 per cent. That is an approximate figure as statistics are very hard to glean in that country. That contrasts with an incidence of over 20 per cent in several neighbouring southern African countries. According to the Children on the Brink report published in 2002, a joint USAID/UNICEF/UNAIDS publication, there were 84,000 AIDS orphans in Angola; in other words, children who have lost either one or both parents to AIDS. The figure could double by 2005 and jump to almost half a million by 2010 if no action is taken to reduce HIV infection. There is a brief window—which I shall describe later in more detail—to minimise the impact of HIV/AIDS on Angola.

Angola is endowed with large resources of oil and diamonds. It has had a thriving agricultural economy in the past and is well watered. Its revenues from oil are set to double over the next five years. At the same time Angola is recovering from over 25 years of civil war. About 500,000 UNITA soldiers and their families are being resettled. Hundreds of thousands of refugees are returning. More than a million people driven from the land by war are returning to their homes. Last year's cease-fire precipitated a further humanitarian crisis as areas that were previously inaccessible were opened up. Last year two million Angolans were dependent for survival on food from the World Food Programme.

As the noble Baroness, Lady Whitaker, mentioned, it appears that Angola's mineral wealth has had a negative impact on the prosperity of the general population. Lacking strong rule of law, oil prospers only those powerful enough to command its revenues. The UK and the international community are loath to assist Angola financially as Angola has the means to meet her own needs. Should one provide financial assistance to a wealthy nation whose people suffer from poverty? The UK's answer has been a gentle affirmative. We are Angola's largest bilateral donor, providing support for the Luanda Urban Poverty Project. We meet the poorest people's need for clean water and food security in such a way as also to promote grassroots co-operation and grassroots political awareness. Recently I visited a co-operative which the Luanda Urban Poverty Project supports. It comprises a group of women who buy food together and, therefore, obtain it at a reduced price. There is a gradual building of political awareness in such deprived communities.

At the same time Her Majesty's Government urge the Government of Angola to be more transparent in their financial dealings. International partners and international institutions sustain that pressure. Her Majesty's Government have emphasised the key role that they see for Angola in supporting the development of Africa. The noble Baroness demonstrated the importance she attaches to Angola by making two recent visits to that country. However, for all the reasons I have given, Her Majesty's Government are reluctant to accede to Angola's wish for an early donor conference, perhaps in September of this year, to support projects to consolidate Angola's peace.

HIV/AIDS is set to sweep through Angola as it has through its neighbours. Some 200,000 refugees are set to return from Zambia, a country with a seroprevalence rate of about 30 per cent. Long-distance lorry routes are opening up as mines are cleared from the roads in the country. They convey lorry drivers from Namibia and southern Africa, where there are very high rates of HIV/AIDS infection.

More than 75 per cent of Angolans are under 25. It is a very youthful nation, and it is the young who are most likely to contract and transmit the disease.

The president of Angola has put his personal authority behind the fight against HIV/AIDS. In that, he has shown leadership that, sadly, many of his peers across sub-Saharan Africa have lacked. The media in Angola are alive with hard-hitting campaigns on HIV/ AIDS. Although the response of the Angolan Government has been disappointing in the past, I warmly welcome the recent news that the first phase of the new national strategic plan has just been completed. I am also pleased to learn that the government of Angola have submitted an application to the global fund for AIDS, TB and malaria for 58 million dollars. The government of Angola have committed their own funding in the action against AIDS. Sadly, that is rather an exceptional case, but it is to be welcomed.

The current situation could not be more critical. Put very simply, there are large population movements across and within Angola, and there is little awareness of HIV/AIDS outside Luanda. Condoms are scarcely available in the rural areas. Unless immediate action is taken, Angola may shortly engage in a second civil war, a war against AIDS that may negate any peace dividend and that may keep Angolans in extreme poverty for years to come. Will the Secretary of State assure the House that Her Majesty's Government recognise the current brief window of opportunity to minimise the impact of HIV/AIDS in Angola?

What more financial assistance might Her Majesty's Government consider providing to Angola to minimise the inevitable rise in HIV/AIDS infection? Evidently, there is the need to inform the population and increase access to condoms. That must he the first priority. However, HIV/AIDS is also a reflection of poverty, the inadequate health systems. the social injustice that obliges women to provide sexual services to men on a large scale, and the lack of a rudimentary education.

Children need adequate health systems so that their infected parents can endure long enough to see them into adulthood. Infants need to be protected from mother-to-child transmission by effective drugs, advice and healthcare. The extended families and communities in which orphans are raised need to be supported. AIDS sufferers need access to counselling, drugs and healthcare. It is very sad to visit such sufferers in Angola and see what little support there is for them.

Will the Secretary of State use every opportunity for discussion with the government of Angola to encourage their work in that area? Will she ensure that HIV/AIDS permeates all our responses and support in Angola? Furthermore, will she use dialogue with the government of Angola to ensure that implementation takes place of the strategy that they have now produced?

My time is at an end. I look forward to the Secretary of State's response.

8.4 p.m.

Lord Desai

My Lords, I thank my noble friend Lady Whitaker for having proposed a fairly precise subject. It is not a general question about development aid or rural poverty, but is specifically about countries that lack a funding relationship with donor countries or international institutions.

In a way, it is like the problem that we often face; namely, of helping poor people within our own country. We try to do it through tax credits, or through other benefits. But if someone is not in the labour market and cannot qualify for benefit under one grant or another, or will not submit himself to be means-tested for benefit, he cannot be helped. We must devise new ways outside the conventional picture of how poverty is removed in order to help these people.

One of the most helpful aspects of this evening's debate—indeed, I almost felt the ghost of Lord Bauer hovering over us one year after his death—is the fact that we have all become so much more aware that aid is not a simple nor very often an effective way to tackle poverty. We cannot tackle it by just saying that money should be made available.

If we set criteria for the giving of aid, as regards applying for it and qualifying for it—criteria which, I am afraid, have become more elaborate—that requires a degree of sophistication at the receiving end that the poorest may not often have. In a sense, we now seem to overlay the agenda. We impose so many conditions on those countries that receive money: they have to be gender sensitive; poor people must participate directly; they must have sustainability; they must have environmental friendliness; and they must have transparency, accountability, and so on. Civil society must also participate. We take it for granted that every country has a civil society. I do not see why we should do that, just because we have text books with diagrams and statements on society.

When aid is given, it should be given by one government to another or by one corporate organisation to another. Very often, problems arise at both ends. They arise at the giver's end because the motives of a giving government are bound to be mixed. They do not just want to help the poor; they want to receive some credit for doing so. There might be a diplomatic or international relations angle involved, or they might want to sell arms or other products. You cannot fault a democratic government for wanting to get a bang for its buck, which can distort aid. As for the receiving end, not all countries or states necessarily rule in the interests of their people. That is a shocking comment to make, but that is the way it is.

I have long argued that, as far as possible, aid should not be given directly to governments; it should be given to NGOs at home, or in the receiving country. I know that there are problems in that respect, because there may not be NGOs in the country concerned. Very often, only very well directed aid, administered by people on the ground who know the facts, will work. The same applies at the giving end. If somehow we could remove governments from the scene and make it an arm's length operation whereby money would be put into some big account and then distributed on criteria that are simple but—it is to be hoped—objective, we might improve our ability to control the usefulness of aid.

The problem remains that the poorest of the poor countries may still not benefit. What we probably need is an expanded funding facility—something that my right honourable friend the Chancellor of the Exchequer has proposed. We ought to issue what I would call "human development bonds", which should, if possible, be cancelled on the principle that recipient countries would never have to pay back the money. We should be able to give these countries money—not expertise, capacity or building, just straight money. We ought to say to them: "Here is money. You do not have to pay it back. We will service your debt. We will take the debt as ours, not yours, and give you this money". The proviso could be a simple efficacy criterion, such as a 1 per cent improvement on the human development index in five years—just one simple device.

We make the problem of receiving or administering aid very difficult. Some years ago, the LSE Centre for the Study of Global Governance, of which I happen to be the director, issued a research report based on the findings of Dr Lily Nicholls. She visited UNDP offices and headquarters in Africa asking people what the difficulty was. It was that people in New York went on adding new desirable objectives that had to be achieved. The recipients could not understand how to cope with the multiple objectives and targets set.

If we think of our own historical development process, or that of any developed country, none of the criteria was fulfilled: we were not transparent; we were not accountable; we did not always participate; we were not ecologically friendly; we were not gender sensitive; we were not democratic; and we were not non-corrupt. Why, just because we give a pittance to other people, do we expect such bossy behaviour to be received properly? I do not understand why we think that it will be effective in removing poverty, whatever desire we have to show that we are virtuous.

I would love to think that if we could give money—perhaps not to governments but directly to the citizens of poor countries—it could somehow enable them to make their own effort to get out of poverty. We are not giving enough attention to how poor people get themselves out of poverty. We always assume that we must do it for them. So we have policies that restrict labour migration, whereas it has been one of the most effective ways by which people have got themselves out of poverty. People living in a poor region have got out of poverty by leaving that region and going somewhere else where there are better job opportunities. We think, "No, the poor can stay where they are and we will give them resources"—and, of course, we do not give them resources. We do not let them move and we do not let them trade. We have to re-examine this policy.

In specific answer to the Question put by the noble Baroness I still say that if we could find a simple device—let us say, of giving each citizen in the poorest countries of the world one dollar a week, not even a day, no questions asked, and making quite sure that it goes to the citizen, I think we could do more than by doing anything else.

People often say, "These problems are not solved by throwing money at them". I say, "Just try".

The Earl of Sandwich

My Lords, does that mean that we must do away with economists and accountants?

Lord Desai

Absolutely, my Lords, and experts—and, it is to be hoped, statistics, which I have made my living from teaching and compiling. The noble Earl complained about bureaucracy. Let us get rid of all the intermediaries and give money directly to the people and see what they do with it. It might benefit them. I would benefit if someone gave me money!

8.14 p.m.

Lord Elton

My Lords, I think the speech of the noble Lord, Lord Desai, peaked in about the seventh minute. I commend the seventh minute to your Lordships' attention. After that, it became slightly haphazard. But the Lord loveth a cheerful giver, and I am sure that he loves the noble Lord, Lord Desai.

The world has shrunk astonishingly since I was born into it—and even more astonishingly since the Secretary of State was born into it. I join other noble Lords in welcoming her presence in marking the importance of this debate, which is far greater than the number of noble Lords present signifies or the attention that the subject is likely to receive outside.

When I was a child and a young man, the world was a solid rock platform from which one occasionally looked up to see an interesting collection of tiny scintillating lights and then got on with one's own local affairs. Since then, we have seen the world from space and we realise that we are surrounded not my tiny moats of dust but by millions of suns, all bigger than ours. We are not on a solid rock platform but on something more like a fragile raft in a perilous and lonely sea. We share that raft with the rest of the human race, which puts the debate into perspective. We were once able to see only those countries on our own side of the sphere, which meant that every country on the other side was reduced to merely a shape on a map and every condition to a statistic on a table.

The statistics have become frightening. I recently picked up a couple which shook me. I discovered that the average GDP per capita in a country such as Sierra Leone is one forty-ninth of what it is in this country and that the life expectancy of its children is less than half that in this country.

We can now see those statistics; they are faces on our television screens. Suddenly, those impersonal statistics have become as much our neighbours as did the man who fell among thieves become a neighbour to the man on the road to Damascus. We cannot therefore ignore them.

Today we are discussing the way in which we help those countries. I welcome what the noble Lord, Lord Desai, said about throwing money at the problem. While I confess that I know less about economics or aid than anyone else taking part in the debate, I believe that the focus of the debate is on the structures by which we can help these countries. That is not necessarily by giving them aid but by giving them a fair chance to take part in world trade.

That is currently achieved by representation at the World Trade Organisation. I recently picked up the report of the Economic Affairs Committee on globalisation. I read that Mike Moore, the Director-General of the WTO, indicated that 28 or 29 of its members were not represented in Geneva. He also indicated that the WTO attempted to respond to that uneven representation by funding poorer countries to attend meetings in Geneva twice a year.

Large countries have permanent representation on the WTO. I understand that the United States has about 40 representatives, half of whom are diplomats and trade delegates. The same applies to Europe. The United Kingdom has 15 to 20, of whom 10 are trade delegates. Bangladesh has only one representative and many countries have none. Merely to pop someone in twice a year and expect that to produce dividends for the country is ludicrous.

During debate on the G8 Statement, I suggested that we ought to consider something like Short money for countries which cannot be present in Geneva. That would enable them to be there on a permanent basis. Perhaps they should appear collectively—perhaps there should be a commonality, a group of these countries. They would then be able to have some influence. We already give a proportion of our aid to structural assistance, but I understand that that is given to the home countries, giving the basis on which they can obtain the information and administer grants. As I said, I am ignorant in this field but the Secretary of State will put me right. I am talking about addressing the problem at the WTO end, which is complementary, but the two together should make for effective representation.

Achieving change will be a slow process, considering the weight that is pitched against such countries and the fact that Europe is one of the most expensive places to produce sugar. Yet Europe produces 40 per cent of all world sugar exports. As a result of subsidy, we dump against the people in poor countries trying to produce it. That will take a long time to change.

There is, however, a still different picture. I speak of the moral position: I think it is unacceptable that we do nothing about this issue. We have to do something, for reasons obvious to anyone with a moral outlook, let alone a religious one. For those not concerned with that kind of issue, the stark fact is that a world which has such really repellent levels of wealth difference is a very unstable and unsafe world; but it is a very good world in which to recruit people to fly Jumbos into skyscrapers and claim that this somehow will redress the balance of wealth and power. So we have a purely material self-interest in addressing this problem.

That is a challenge to any government of any party because doing anything substantial about it will mean that we are less well off than we are now. It will cost us. Electorates do not like that. So, first, this requires courage in a government; secondly, there should be discussions between parties so that the matter is taken out of the electoral equation—I know I am talking about something almost impossible. Therefore, electors will know that voting for one party or another will not suddenly make them worse off because that party has a conscience about these matters and understands the threat to this country. Elections are fought on short-term issues and this is a very longterm issue.

Thirdly, the issue must be made more appealing in some way. I was caught by the idea of my noble friend Lord Saatchi of having a national holiday to mark the day on which one finishes working for the Chancellor of the Exchequer and starts working for oneself. I think that our party—and I commend other parties to do so also—should set a target in the next Parliament to bring that date back at least three days and to give the yield of one of those days to the kind of initiative I talked about—paying to help the less fortunate countries become more fortunate.

I thank the noble Baroness for bringing the matter forward. It is one of increasing and very great importance.

8.22 p.m.

Baroness Northover

My Lords, I, too, thank the noble Baroness, Lady Whitaker, for introducing this important and wide-ranging debate. As the noble Earl, Lord Sandwich, has said, how we reach the poorest is indeed a fundamental question; and it is surely useful to return to such fundamental questions. Once again the expertise in your Lordships' House has been very evident in the wide-ranging brainstorming that has occurred.

The need for over-arching international organisations is borne out by the debate today. Such organisations may need reform and improvement; but if they were not there, we would need to invent them; and we should always be wary of undermining and circumventing them.

The very existence of the Millennium Development Goals reflect international concern about this area and helps us focus on how aid is targeted, even if we know that many of those goals will not be met by 2015. Progress can be seen, and these important targets must have helped us achieve what has been secured so far.

I share the enormous concern of the noble Earl, Lord Listowel, about the way in which the tragedy of HIV/AIDS is plunging Africa, in particular, into worse problems.

The giving of aid has been a relatively recent historical development. Of course there are many factors in play. Those with an imperial past may well have stronger ties with their old colonies and seek to assist them first. But there are also many other political factors. Too often aid is tied to the interests of the donor countries. The EU's record in that area, as the noble Baroness, Lady Whitaker, and the noble Lord, Lord Hannay, have said, has been highly unsatisfactory. There are a few welcome signs of that changing, arid I look forward to hearing from the Secretary of State how that is progressing. I should also like to know what proposals for reform of the CAP we might see coming down the track. As the noble Lords, Lord Hannay and Lord Elton, rightly said, trade rather than aid must be the key to development.

The United States has been quite blatant in its political use of aid. Thus an analysis of the £2.4 billion increase in aid announced by the Bush Administration earlier this year shows, for example, that one third of the total will go, not to health services or schools, but to supply foreign countries with US arms and training. So much for a budget that professed to "promote compassion".

We saw the use of the US aid budget in the run-up to the war in Iraq. Note the African Growth and Opportunity Act 2000, which allows eligible sub-Saharan countries duty-free and quota-free access to the American market. But a country can become eligible only if it, does not engage in activities that undermine United States national security or foreign policy interests". That came into play as the US arm-twisted for support at the UN. I trust and believe that we did not do the same. Are we taking any action to encourage the United States to move away from such political approaches to aid?

However, as others have said, the relief of poverty may often depend a great deal on the nature of governance in particular countries or areas. Thus the people of Iraq were impoverished by sanctions imposed by Western powers. The greatest challenge for the international community is surely to help poor people living under oppressive regimes without assisting the governments that oppress them. That can clearly be seen in the cases of Burma or Zimbabwe. In Somalia, there is no formally recognised government, and the United Kingdom Government have made further aid contingent on the peace process making concrete advances and there being subsequent political progress. It is an understandable position, but one that leaves the Somali people in poverty.

Is it important to have links to donor countries? I shall take the example of Burundi, which does not have such links. Burundi is currently the third lowest ranked country on the human development index. Life expectancy dropped from 54 years in 1992 to just over 40 years by December 2002. It lacks attention from donor countries, and the funds pledged to it are pegged to the resolution of conflict; therefore, so far, less than a quarter of funds pledged have been released. Yet, clearly, aid could help to reduce the conflict in Burundi, so it is in a catch-22 situation. Certainly it might be argued that a donor country with a strong interest in Burundi would have worked out the areas in which a limited release of development aid could play a real role in bringing peace.

On the other hand, there can also be a danger that links may be too close. In the Great Lakes region, the issue is not that the states lack strong links to major donor countries so much as that there has been no consistency or co-ordination between major donors. For instance, the UK has been the largest bilateral donor to Rwanda and Uganda for some years but has had a very limited relationship with the DRC. France, on the other hand, has supported the DRC but not Rwanda and Uganda. Given that those three states have been in conflict with each other over the past few years, better co-ordination between the UK and France might have applied more effective pressure to end the conflict. But, due to historical reasons, the agendas of France and the UK have remained opposed and regional conflict has continued.

From a UK perspective, some argue that the close nature of the UK relationship with Rwanda and Uganda made the UK less sensitive about its engagement in the regional conflict than perhaps we should have been. So even close relationships, then, may not be the answer. Consistent interest—but a truly effective international perspective—is surely important. That is why in so many respects the decision by the United Nations Security Council to send peacekeeping forces to the DRC, to be carried out under EU auspices—the first time that that has been done outside Europe—is to be welcomed.

Again, if we consider HIPC countries, we find that they have a fairly strong relationship with the major donors, because they are required to work in partnership with creditors. However, the World Bank itself, in a recent report, admits that donors need to take a more active role. Consistent attention is not necessarily given. The World Bank is itself considering what it defines as low-income countries under stress to address the particular problems of the poorest and least developed countries which suffer from conflict and poor governance. It proposes to facilitate change, but not necessarily through increasing lending. Various transitional measures are proposed to try to advance that, and I should like to hear from the UK Government their views on the proposals.

As we have heard, so many factors complicate whether aid is reaching those who most sorely need it. A lack of links with donor countries or international institutions may be one, but here the argument must be for strengthening and reforming international institutions so that the needs of the poorest can be best identified and addressed.

However, in many respects, that is probably not the greatest problem. Perhaps the most important issue that we need to address is that of governance—how, in countries with appalling and oppressive governments, the international community gets aid to the poorest people, so that their economies can develop and they can trade internationally. That must be the real challenge, and international co-operation to achieve that must surely be the way forward.

8.32 p.m.

Baroness Rawlings

My Lords, I, too, thank the noble Baroness, Lady Whitaker, for initiating this critical debate. It is timely following the recent G8 talks at Evian and covers a wide range of related topics, including HIPC and the Doha trade talks.

In the short time available, I shall explore in more depth one issue mentioned by the noble Baroness, Lady Whitaker: armed conflict in relation to poverty, because trade and all other solutions discussed by your Lordships in the debate become meaningless without peace.

One of the main stumbling blocks is the Government's lack of openness about exactly what criteria are used to make decisions on our involvement with a country. It is as simple as rewarding success and penalising failure, in terms of meeting set conditions: for example, economic growth policy; trade liberalisation; political freedoms; and good governance. As the noble Lord, Lord Hannay, said so clearly: why have so many of those initiatives failed?

Do DfID and the FCO use the same criteria? Will the Secretary of State make those criteria available to the House? It is difficult to insist that there is transparency and accountability in developing countries and their governments unless we are transparent and accountable. That is particularly obvious with regard to the problem of conflict countries, a problem that many noble Lords have woven through their speeches this evening. Countries with civil wars are more common today than they were 40 years ago. That is mainly because most of the countries fighting then were colonies, so it was possible for powerful outside forces to impose stability. Today, counting wars with more than 1,000 violent deaths, one country in eight is involved in civil war. Alas, we cannot separate conflict from development. A century ago, most conflicts were between nations, and 90 per cent of the casualties were soldiers. Today, almost all wars are civil wars, and 90 per cent of the victims are civilians.

Most conflicts today are in Africa, most notably at the moment the ongoing tragedy in the Democratic Republic of Congo, Burundi and Sudan. Those are the countries that find it most difficult to establish funding relationships with donors. The best predictors for conflict are low average income, low growth and high dependence on exports of primary products such as oil and diamonds. Poverty fosters war, and war impoverishes. A typical civil war leaves a country 15 per cent poorer than it would otherwise have been and with about 30 per cent more people living in absolute poverty. Having a neighbour at war reduces economic growth by about 0.5 per cent a year.

There are also non-monetary costs. For each 1,000 refugees who flee from one tropical country to another, the host country suffers an extra 1,406 cases of malaria, not to mention the transmission of HIV/AIDS by men in combat. That works against the achievement of the millennium development goals by 2015.

A recent World Bank study by Paul Collier shows that, when income per person doubles, the risk of civil war halves and that, for each percentage point by which the growth rate rises, the risk of conflict falls by a point. Another study shows that halving military manpower correlates to a reduction of a quarter in HIV among low-risk adults.

We are stuck with a paradox, aptly demonstrated by the situation in Burundi: peace will not be possible without international financial support, and that international support will not be forthcoming until peace is achieved. I ask the Secretary of State to tell us what plans there are to break the cycle with the injection of carefully targeted and monitored aid. We recognise the danger of providing moneys to countries at war, and we recognise that there are many issues about aid effectiveness. Could it not be properly managed through independent NGOs, thus providing alternative livelihood strategies to generations who would otherwise, perhaps, pick up a gun? Spending money on education and health seems to provide immediate boosts to the economy of conflict nations. It shows that those Governments are serious about peace, buoying confidence and encouraging private investment .

The many developing countries involved in civil conflict need to be reassured that this country and this Parliament, as we heard this evening, take an intense interest in what is going on. We must be proactive and reactive. We must be critical in our assessment of what occurs and take what steps we can to encourage peace. We must try as best we can to help such countries to meet the millennium development goals. I look forward to hearing the Secretary of State's response to many of the questions that have been posed.

8.40 p.m.

The Secretary of State for International Development (Baroness Amos)

My Lords, I thank my noble friend Lady Whitaker for raising what I think is a very important issue. That has been demonstrated by the speeches of all noble Lords today. The effective and fair allocation of aid to poor countries is essential to the task of achieving the millennium development goals. We have worked hard to ensure that United Kingdom assistance is targeted to those who need it most, in settings where it will have the greatest impact.

Challenges remain to ensure that donors, including the European Commission, deliver aid effectively to those countries where poverty is most acute. Even greater challenges face us in delivering aid to countries where joint working is difficult due to conflict, state failure or extremely poor governance. The Department for International Development is supporting the development of new strategies to engage with these so-called "poorly performing" countries. We are focused on getting the international system to work together more effectively, but much remains to he done.

The noble Earl, Lord Sandwich, is right when he says that we need to ensure that donor assistance is coordinated so that it does not become a burden on developing country governments. Mozambique is a very good example of where donor co-ordination works effectively. That is why we have sought to align donor strategies and have moved to long-term aid partnerships. My noble friend Lord Desai raised the problems associated with criteria for giving aid. The noble Baroness, Lady Northover, raised the issue of tied aid. Perhaps I may remind the House that we have untied all our aid, but we want to support countries which are committed to reform. It is important to remember that our citizens expect no less.

There is strong evidence that aid works to promote growth and it works to reduce poverty. Aid is most effective where good governance and sound economic management are in place. But we also know that the impact of aid is greatest where poverty is most acute. DfID's allocation of aid is targeted largely on the poorest countries. We also have smaller aid programmes in middle-income countries, such as the Ukraine and South Africa, where our targeted assistance can help with policies to promote growth and address poverty.

Although we provide assistance to a large number of countries, we do not try to cover all countries that are poor. It makes sense to have a focus on those poor countries where we have developed experience over the years. But we have also engaged with other countries where there are pressing problems and we think that we have particular knowledge or expertise to offer. Examples include Rwanda and the Democratic Republic of Congo.

We have made a commitment that by April 2006, the share of our country programmes going to low income countries will rise from 78 per cent to 90 per cent. Even where we do not give aid bilaterally, we still make significant contributions through international organisations, such as the World Bank and the UN agencies. I assure the noble Baroness, Lady Northover, who raised in particular questions about US aid policies, that we strongly advocate a greater poverty focus by other donors. We have a number of bilateral discussions, as well as discussions in the context of the World Bank and the IMF, on these matters.

It is important that donors do not ignore poor countries. It is even more important that we do not ignore poor people. My noble friend Lord Desai suggested that we needed to get rid of statistics. So I apologise to him as I am going to quote some now, but I think that they are relevant. One of the most telling statistics is the total aid divided by the number of poor people in a country. The people of Niger do not fare well, having received only £21 per poor person in 2000. Mali comes out somewhat better at £30, while Laos is £133 and Moldova is £153 per poor person. However, these figures are sobering when one considers the enormous poverty that these countries face.

Yet they must be seen in comparison with other countries—particularly the large population countries—where need is also great. The comparable figure for Nigeria was only £1 per poor person in 2000. That is because Nigeria is the country in Africa with the greatest population. For India, the figure was £2, China, £5 and Bangladesh, £20 per poor person. If there is discrimination, it is against those countries with large populations. That is why our strategy in the Department for International Development focuses a great deal of effort in sub-Saharan Africa because that is where we are least likely to meet the millennium development goals, but we are very conscious that we have significant aid programmes in Pakistan, India and Bangladesh because those are the countries that have the greatest proportion of poor people.

However, we and other donors could not justify giving most of our aid to a handful of very large countries. We need to consider the balance of countries and where aid will make the most impact for every pound spent. We must also remember that our development programme is not only about funding, it is also about building capacity, transferring knowledge and skills and securing fair global policies on trade and investment.

The noble Lord, Lord Elton, raised the issue of building capacity, in particular as regards trade negotiations, and my noble friend Lady Whitaker referred to the need for developing countries to have an equal voice. The WTO is a membership organisation, which is why it is so important that developing countries have a voice. We have been building the capacity of developing countries. For example, we fund a regional negotiating machinery mechanism for the whole Caribbean region to enable those nations to engage more effectively in trade negotiations. We have also supported developments in the World Bank and the IMF in respect of giving developing countries a stronger voice.

With respect to the European Commission, the latest figures show that only 44 per cent of EC assistance goes to low-income countries, and we contribute up to £1 billion annually to the EC's external activities. That is why we have focused on reforming EC aid. Increasing the Commission's poverty focus is one of our priorities and I can assure my noble friend Lady Whitaker that we have worked to ensure that these issues are considered in relation to the discussions on the Convention on the Future of Europe.

My noble friend also raised the question of aid to governments that are weak, corrupt or undemocratic. On the whole, countries with weak governments, institutions and policies tend to receive less aid and it is usually the people in poverty who suffer, not those in power. The noble Lord, Lord Hannay, was quite right to say that the long-term cost of ignoring these countries is significant, and I agree with the noble Lord, Lord Elton, that part of that cost could be increased global instability. Many of these countries are in situations of conflict, such as Somalia, DRC and Sudan, and our first task must be to lend support to end the conflicts and provide humanitarian assistance. Other countries such as Afghanistan are just emerging from conflict and need targeted assistance to rebuild their institutions.

Countries that have undemocratic and repressive regimes such as Zimbabwe and Burma are unable to attract much aid from donors. In any event, they would not be able to absorb aid effectively until democracy and sound governance are restored. There are also states where the capacity of the government is weak, where corruption is endemic or where the breakdown of law and order threatens both growth and human security. In those states, too, our traditional systems for delivering aid are not likely to work.

We cannot abandon the poor in such circumstances. To neglect these countries would not only perpetuate poverty, it could well contribute to the collapse of the state, with adverse consequences for both neighbouring states and the global community. The noble Lord, Lord Hannay, spoke very powerfully about that. The answer is not to disengage, but to engage differently.

It is difficult to provide aid effectively to poorly performing states. We have to find ways of delivering assistance to poor people without stimulating dysfunctional politics or inadvertently aiding repression. I can assure the noble Lord, Lord Hannay, that we are examining the policy options in this area so that we can make our own programming more effective.

The noble Baroness, Lady Northover, spoke about the work of the World Bank and the unit it has established, called the low income countries under stress unit. The unit receives its main bilateral support from DfID and is promoting new ways for the World Bank to provide strategic assistance to poorly performing countries, even when those countries do not qualify for bank funds through the usual channels.

We are also working with other bilateral donors through the Development Assistance Committee of the OECD and we are taking the lead in supporting and co-chairing a learning and advisory process on difficult partnerships. The aim is to ensure that bilateral donors do not ignore the poorly performing states.

Let me deal with specific questions raised during the debate. The noble Earl, Lord Listowel, referred to Angola. Of course Angola is in a post-conflict situation and we need to work with its government to ensure that they put reform processes in place to release resources which can then be spent in areas such as health and education.

The Government of Angola have to put the needs of their people first. We have discouraged the Government of Angola from holding a donor conference until such time as they have clearly instituted an internationally acceptable political and economic reform programme. I stated to the Government of Angola when I visited that country that we are willing to play our full part in such a conference when the time is right.

The noble Earl also referred to Angola's application to the Global Health Fund for help in tackling HIV/AIDS, TB and malaria. We have recently increased our funding to the Global Health Fund to 280 million US dollars. I hope that Angola's application to the fund is successful but I agree with the noble Earl that we cannot look at the issue of HIV/AIDS in isolation. That is why we have focused a great deal of our attention on strengthening health systems in the developing countries in which we work. I shall of course communicate with the Government of Angola and encourage them to continue to work on their HIV/AIDS strategy, and in particular on the implementation of the strategies referred to by the noble Earl.

The noble Earl, Lord Sandwich, referred to the departmental report and gave it a positive response. I cannot take any credit for that report. It was launched on the day after I became Secretary of State for International Development. The department and my right honourable friend Clare Short should take the credit.

As to the noble Earl's question on decentralisation and devolution, we support the decentralisation efforts of many countries. It is an effective means of enhancing responsiveness to the poor and, in the PRSP context, we support decentralisation only if it is government policy; we do not impose it.

The noble Baroness, Lady Northover, raised the question of greater co-ordination between the United Kingdom and France in the Great Lakes region. She may recall that my right honourable friend the Foreign Secretary visited the Great Lakes with his French counterpart last year. Britain and France have not always agreed on policy for the Great Lakes—I agree with the noble Baroness that this has been to the detriment of policy for that region—but we are now working much more closely together. Our contribution to the French-led international force in the DRC is a good example of that.

The noble Baroness, Lady Rawlings, raised the issue of the criteria we use in regard to funding and stated that she felt that the Government lacked openness and transparency. I am surprised. We have long-term partnerships, which are negotiated with the governments of developing countries and include consultations with key stakeholders; we publish a country assistance plan setting out our analysis and the areas we will support; and those plans are evaluated. It is probably the most open process there is.

Noble Lords will find on our website a wealth of information about the issues we take into account when considering our support for developing countries. The Foreign and Commonwealth Office is developing criteria for its own global opportunities fund and I have no doubt that that criteria will be open.

The noble Baroness also raised the issue of Burundi. I agree that peace and security are absolutely critical, and we are giving direct support to the people of Mozambique who, with South Africa and Angola, are contributing to the African peacekeeping force in Burundi. Until that happens, we cannot move to any kind of wider development programme.

I have run over time, but perhaps noble Lords will let me answer the last two points and conclude. My noble friend Lord Desai suggested the development of a human development bond. I would like to discuss that with him. As he knows, my right honourable friend the Chancellor has suggested an international financing facility which would double the amount of aid available and enable us to meet the millennium development goals by 2015. The noble Lord, Lord Elton, also came up with a creative solution which perhaps I should discuss with him outside the Chamber.

We are committed to building strong donor partnerships, particularly with the poorest countries. It is important that states are not overlooked due to historical accident or donor fashion, and that subjective aid allocation systems are put in place to help ensure fairness.

The noble Lord, Lord Hannay, suggested four areas in which he thought we should take action and which would assist. The first was reform of the European Union. We are working hard to find ways of reforming the Commission's aid policy. The second was with respect to debt. The noble Lord will know that we have pushed very hard to ensure that countries do not leave the HIPC process with unsustainable levels of debt. We will continue to do that.

The third area the noble Lord mentioned was working through regional and sub-regional organisations. We continue to do that, not just in the area of building peacekeeping capacity and dealing with conflict but with respect to trade and other areas. This is a key mechanism with respect to the New Partnership for Africa's Development.

The fourth area was trade, which was also mentioned by the noble Lord, Lord Elton, and others. We are pushing very hard for reform of the common agricultural policy; we want to see a decoupling of subsidies for production. Noble Lords will know that my right honourable friend Margaret Beckett has been arguing our case very strongly in the EU Agriculture Council. We will continue to press for reform because we want these reforms now, ahead of the discussions at the WTO meeting in Cancun in September. We continue to work hard to find new ways to engage with poorly performing countries to ensure that neither multilateral nor bilateral donors neglect them.

These are some of the challenges that must be met. I believe they can be met, and the Government will continue to work towards that end.

House adjourned at two minutes before nine o'clock.