EC Development Assistance

HC Deb 23 November 2000 vol 357 cc119-62WH

[Relevant documents: Ninth Report from the International Development Committee Session 1999–2000, HC 669 and the Government's response thereto, HC 949.]

Motion made, and Question proposed, That the sitting be now adjourned—[Mr. Touhig.]

2.30 pm

Mr. Bowen Wells (Hertford and Stortford)

It is an interesting coalition of circumstances that results in there being debates on the Floor of the House and in Westminster Hall on European issues this afternoon. However, we are more blessed than those on the Floor of the House because we are not restricted to speeches of 15 minutes or to the terrors, I trust, of not being called during the debate.

Dr. Jenny Tonge (Richmond Park)

I hope that the hon. Gentleman agrees that it is a rather sad arrangement whereby European affairs are discussed in one Chamber while European development aid is debated in another. Given that some of us would have liked to have attended both debates, perhaps they should have been timed differently.

Mr. Wells

Yes, I strongly agree. It is bad arrangement to have the same subject discussed in both Chambers at the same time. Such a situation should have been avoided. However, we will now have a greater opportunity to discuss development issues, which are usually pushed to one side in the main business when we discuss European matters.

This is the third time that the International Development Committee has examined the European Community's development assistance. We are doing so because it is the second largest programme in the world. It is a valuable resource that, if squandered, will waste the opportunity for assistance to go to the poor countries of the world, to enable them to work their way out of poverty, which we urgently desire. Our previous reports focused on the Lomé convention and the future of the European Community development budget. The main reason for our interest is that between 25 and 30 per cent. of the budget for the Department for International Development is spent by the European Community.

For the year 2000–01, the Department's best estimate of the expenditure is £728 million, or 25 per cent. of its budget, but the Department and the Committee know very well that there are serious slippages in the estimates and I am sure that that is an underestimate of what the European Community says that it will spend. I believe also that it will seriously underspend that figure, which will give DFID the opportunity of reallocating that money to other more important projects within its budget. None the less, it means that the European Community's development budget is not being disbursed as it should be.

In recent years, the European Community's development assistance has expanded. In our inquiry into the future of its development budget, we noted that category 4 on external action had increased from 1.9 billion euros in 1990 to 8.2 billion in 2000, a fourfold increase. The bulk of those additional resources has been directed towards the countries of central and eastern Europe, the former Soviet Union, the Mediterranean and the middle east. Inevitably, therefore, budgetised expenditure on poor countries in Africa, the Caribbean, the Pacific, Asia and Latin America has fallen as a proportion of external assistance. We were told that, in 1996, the European Community provided $0.7 per capita to low-income countries, $1.40 to middle-income developing countries and $4.50 to central and eastern European countries and the Soviet Union.

The proportion of European Community overseas development assistance that goes to low income countries has fallen from 75 per cent. in 1987 to 51 per cent. In 1997. In 1996, none of the top seven recipients of ODA were low-income countries, and the largest beneficiary of EC development assistance was Morocco. During his trip to Brussels, Chris Patten told the Commission that it spends twice as much in Poland on accession preparations as it spends in Latin America and Asia combined—which are home to nearly 70 per cent. of the world's poorest people—despite the fact that the Secretary of State told the Committee that India alone accounts for a third of the world's poor. We concluded in our last report that the current external action policy of the Community is to give more to the better off and less to the poor. We went on to recommend that the Commission improve the poverty focus of its development policy.

In addition to concerns about the poverty focus of European Community development assistance, we have received a great deal of evidence about other problems: delays, underspends, bureaucracy and conflicts between political and developmental priorities. We decided that it would be appropriate to consider the effectiveness of the European Community's development assistance, and to examine how it can be improved.

The prize for improving the effectiveness of European Community development assistance would be great. The European Community is the fifth largest donor of official development assistance and the second largest multilateral donor. When the ODA of the EC and its member states' bilateral programmes are taken together, they account for more than 40 per cent. of world ODA. The EC has a number of additional advantages, such as an extensive network of country delegations and a perception of neutrality and expertise in certain areas, such as trade and regional integration. Such advantages are totally dissipated and disappointed by the fact that there is an average of nearly four years between approval and disbursement of European aid. In the worst instances, the delay is up to 10 years.

It has been widely recognised for some time that the EC development programmes are below par. That was acknowledged in an Organisation for Economic Co-operation and Development peer review of European

Community development policies of individual member states and the Commission itself, which has admitted that its management performance has deteriorated over time to the point of undermining the credibility of its external programmes and the international image of the European Union. EC external assistance programmes have a reputation for slow and unresponsive delivery, poor quality and excessively centralised and rigid procedures. The balance of external aid spending is also heavily influenced by the political priorities of the European Parliament, Member States and events in the world that are beyond the Commission's control. There can be no doubt that we are all highly dissatisfied with the European development programme as it has been delivered in the recent past.

I want to examine briefly a number of areas that the Committee considered in its inquiry, starting with the reorganisation of the Commission. When the Committee last visited Brussels, in December 1998, four Commissioners were in charge of four directorates-general responsible for development co-operation as well as the European Community's Humanitarian Office, often known by the acronym ECHO, and the Common Service for External Relations. Following that visit, we noted that a management structure which is subject to no overall policy coordination cannot be conducive to a coherent approach to policy, budgetary allocations, or implementation. We recommended that the only way to ensure the development priorities received due attention in future discussions surrounding budgetary allocations is to create a separate Directorate-General for Development, with exclusive responsibility for official development assistance. Following the reorganisation of the Commission in mid-1999, which we welcomed, two Commissioners now oversee two directorates-general, both dealing with development. That was a great improvement, but although primary responsibility for implementing the Commission's policies has fallen to DG Development, headed by Poul Nielson, a former Minister in the Danish Government responsible for overseas development, responsibility for non-African, Caribbean and Pacific country desks, including those in Asia and Latin America, lies with the Directorate-General for External Relations, headed by Chris Patten, our own junior Commissioner. The relationship between those two Commissioners will determine the success or otherwise of European Community development policy.

The Committee did not understand how the Commission could arrive at such an unsatisfactory position. I am sure that it will be made to work by the Commissioners, but it is unsatisfactory bearing in mind the small budgets given to Asia and Latin America, which, in sharp contrast to the rest of the Commission budget, are normally fully spent—indeed, far more is needed—whereas the rest of the programme for the European Community lies unspent and unused, and is not called down in the budgets of the EU member states.

Mr. Andrew Rowe (Faversham and Mid-Kent)

My hon. Friend was present when one member of the Committee said that, on a recent visit to the European Commission, she was told by Commissioner Nielson that our report had contaminated the debate, yet when she pressed him further she discovered that he had not read it. Does he agree that to engender good relations between the Commissioners, and between the Commissioners and the member states, a rather better way of handling constructive criticism should be found?

Mr. Wells

I fully agree. That happened at a meeting of the chairmen of the committees for international development of the European Union member states that our Committee instigated—a meeting at which the chairman of the European Parliament's Committee was present.

Mr. Nielson admitted that he had not read the report but that he had relied on journalistic reports for his criticisms of it. As one would expect, those extracts were highly inaccurate. We stated in our report that none of the 250 million euros devoted to reconstruction after Hurricane Mitch three years ago had been disbursed; however, money for humanitarian purposes had been disbursed under the ECHO programme. Mr. Nielson thought that the report referred to the money that ECHO had disbursed and therefore disputed the system: if he had read the report he might have got it right. If that sort of sloppy behaviour is to continue, we shall not have much confidence in his implementing the reforms that he and Chris Patten initiated. However, because a number of those present at that meeting drew to Mr. Nielson's attention the fact that it was unsatisfactory, I hope that we shall not see a repeat of such behaviour.

A further problem is that the European Community's development policies are funded from category 4 of the European Community budget, which has two objectives: the near abroad and development. Near abroad, however, has a further two categories: applicant members and those from the southern coast of the Mediterranean and from Russia and eastern Europe. Those are major priorities, in terms not of development but of preserving the interests of the European Community. That is why the budget gets distorted. It is not hard to see where the priority in terms of funding has been. Expenditure on central and eastern Europe and on the Mediterranean has more than trebled in recent years. That money, which comes from our aid budget, is being used for development in countries that are by no means the poorest in the world.

The first paragraph of the first draft of the statement on development policy said that the EU's objective interests have led it to give priority to the stability and development of neighbouring countries and to aid for countries in crisis in the regions nearest to the European Union. That statement has now—I am pleased to say—been removed, but it provides us with an insight into the Commission's priorities. I do not quarrel with giving assistance to neighbouring countries or applicant members but it should not be done at the expense of the poorest countries in the world.

The Secretary of State for International Development was scathing about what she saw as the influence of gesture politics in the provision of external assistance. As particular evidence of that, she pointed to the fact that the Commission had proposed to allocate 5.5 billion ecu for reconstruction in the Balkans without even having costed the programme or knowing what the money was to be spent on. It is difficult to cost something when one does know what the money is to be spent on—and the Commission knew nothing about what it would do with that money in the Balkans. The Secretary of State told us that the skewing of the whole of the development programmes of the Commission against the poorest countries and the obsession with the near abroad remains, and the proportion of spending in middle income countries against developing countries is a disgrace. Evidence in both London and Brussels led the Committee to conclude that the European Community's external assistance policies are determined more by political priorities than by poverty alleviation. While we agree that pre-accession aid and the stability of the regions surrounding the EU are important political objectives, it is vital that they do not interfere with or detract from developmental objectives. At present, development funds are drawn from a budget that also covers external action—which all too often means no action—but funds originally set aside for development programmes are frequently raided by the Council of Ministers to fund political initiatives that it does not wish to fund bilaterally. Furthermore, the present geographical division cannot make for good development policy. The fact that responsibility for Asia—which contains half the world's poor—remains outside DG Development is truly inexplicable.

Our inquiry led us to conclude that effective EC development assistance policies require nothing less than the creation of a single directorate-general with a single budget responsible for all developing countries. The Department for International Development also argued, in its original institutional strategy paper on the EU, for a single directorate-general, but it has been got at. In its original response to the Committee, it sidestepped the issue by stating that further reorganisation of the Commission is not currently under discussion. Why did it change its mind? Its objectives would clearly be better served if there were a single directorate-general, as the Department itself said—before the rats got at it. I am surprised that such robust Ministers as the Secretary of State and the Minister of State allowed that to happen.

Dr. Tonge

Does the hon. Gentleman agree that the reason for that change of heart was perhaps that the Government needed to hive off money from DFID to build up the Balkan states and Poland in preparation for their joining the European Union?

Mr. Wells

I hope not, because that would be missing the point. I do not think that anybody believes that all the money that is now in the European Community's development budget would be allocated to ODA and poverty alleviation. If one divided the budgets, there should be an ODA budget devoted to poverty alleviation, which could not be raided by anyone else, a budget—or perhaps two—for the applicant states, and a development budget for the neighbouring eastern European countries, Russia and the north African countries. If that more logical division were adopted, the ODA would not be raided as it is at present.

Mrs. Cheryl Gillan (Chesham and Amersham)

I am following my hon. Friend's argument carefully, and it mirrors some of my personal views. Would it not be more honest, too, to divide the budget in the fashion that he has described? The impression gained by the general public is that our aid money should go to alleviate the poorest, rather than to restructure institutions, bringing them into political alignment with the rest of Europe so as to further integration and enlargement. Would it not be more honest to British and, indeed, European citizens if that money were allocated and dealt with separately? That would prevent the more complex administrative arrangements that are clearly beyond European Union aid development structures.

Mr. Wells

My hon. Friend's remarks are especially applicable in the case of Britain. All the money given by this country to the series of programmes under the development aid budget in the European Community comes out of the budget of the Department for International Development. The British public perceives that budget as being devoted to developing countries and does not understand the arrangement that has been made in Europe. I agree that that division would be more transparent and capable of better administration by the European Community. Whether the budget has to fall under one directorate-general is another issue.

The Parliamentary Under-Secretary of State for International Development (Mr. George Foulkes)

The hon. Gentleman is slightly mistaken. The Department's budget, as he said, covers all the work being carried out, for not only developing countries but countries in transition and overseas territories, which are also our responsibility. It is a strength of the system that one Department deals with all those matters, when, in other countries, they are dealt with by two or three Departments.

Mr. Wells

The Minister is absolutely right in saying that those areas are dealt with by DFID. That is how the Department's role has grown, although it has always been responsible for overseas territories. Those territories, unfortunately, often align themselves with the issues of developing countries, although Bermuda, the Bahamas or the Cayman Islands can hardly be described as developing countries and the Department does not devote much money to them. None the less, other issues for some of the poorer countries classified as overseas territories are administered by the Department.

In the public perception—which may be incorrect—the Department's budget should be spent on developing countries, enhancing the ability of poor people to find a way out of poverty. The situation is especially confusing in Britain. I am not convinced that the entire budget should be organised under one DG, but a single DG should certainly be responsible for overseas development. That is what the International Development Committee recommended.

The Department sidestepped the issue of the single DG in that pusillanimous phrase,

further re-organisation of the Commission is not currently under discussion. That is an example of the deplorable way in which civil servants respond to Select Committee reports. The Department went on to reject the proposal for a single development budget, stating that it would encourage upward pressure on the financial ceilings. That statement, too, involves a degree of bureaucratic circumlocution and imagination. Well, perhaps it does not involve imagination. Anyway, that was the way that the Department found to reject our proposal, although it should not put upward pressure on financial ceilings if the budget is divided as I have described. We are not spending the entire budget for development; it is a good budget, and there is no real cause to refer to upward pressure on financial ceilings.

The Committee does not recommend the proposals be implemented today, and we do not think that that is possible. We do not recommend the allocation of any additional resources to the European Community either. We did not do so, so I wish that the Department would read our reports more carefully before making such remarks. Our recommendations are principled proposals aimed at clearly delineating the developmental policies and expenditure from politically motivated expenditure on the near abroad. That is what we meant; that is what we said; that is what the Department should respond to. I hope that the Minister can confirm today that the Government are committed to the proposals in principle. I know that a phalanx of people will try to persuade him not to, but I tempt him to do so.

Let us consider the focus of community activity. A further concern raised by witnesses was the lack of an overarching strategy. At what is the European Union aiming? What will it do with its money? The problem is even recognised by the Commission. A draft statement on development policy was published in February and revised in April, and has recently been agreed by the Development Council. It does not make for riveting reading, but it is an improvement on what has gone before.

The Committee's report contained several criticisms of the original draft, and I am pleased to say that some of our concerns have been dealt with in the final declaration. I believe that the Committee's activity, in combination in many cases with the Department for International Development, with which we do not quarrel on many of the issues, has had an effect on the European Union's aid budget. I believe that our debate will be read and will influence the policy of the European Community.

The new declaration is unambiguous in setting poverty reduction as a principal objective of the European Community's development policy. That is an achievement for not only the Secretary of State for International Development, but the Committee. The Council has accepted the Commission's proposals to focus the European Community's development assistance on six core areas that contribute to poverty reduction. The European Community has added value to the issues, which are trade; regional integration; support for macro-economic policies; transport and communications; food security and rural development; and institutional capacity building. The declaration stresses the importance of streamlining and devolving responsibility to country delegations, with member states focusing on country programming and sectoral strategies. It also commits the Commission to the production of an annual report. Hurrah! We have been asking for one for many years, as has the Department. We welcome that and all the other moves. The priorities are beginning to be developed.

We did not get things all our own way, and several questions remain that I hope that the Minister can answer. Are there any proposals to phase out programmes inconsistent with the six core issues? How can we be sure that the European Parliament, which has the ability to add budget lines to the development budget, and presidencies of the EU will respect those six areas? How can we prevent the European Parliament from fuzzying the progress of the programmes? When will the Commission's commitment to poverty reduction be reflected in the allocation of resources? When will the Minister's representatives, who go to meetings in Brussels and boost the profits of Eurostar, be able to get the allocations made?

Next year, the Commission proposes to spend 961 million euros on Mediterranean and middle eastern countries, and 1.3 billion euros in eastern Europe and the Balkans. However, it has proposed to spend only 691 million euros—million, not billion—from the category 4 budget in Asia, Latin America and Southern Africa. Chris Patten has not done very well, has he? When can we make certain that he gets a bigger allocation for those countries?

Mr. Rowe

I would not want my hon. Friend to imply that the Department's officials should be discouraged from travelling by Eurostar. Eurostar promised the Select Committees that approved its application to build the line that it would carry a certain number of passengers, but has only just managed to arrive at less than half that number. It is 7 million or 8 million passengers short, and its profits are very small.

Mr. Wells

Well, perhaps people should use it more. However, I will not be tempted into such a line of discussion. I know that the matter affects my hon. Friend's constituency and that he feels strongly about it. He will note that when the Government are involved the figures are moved around so that they attain their initial objective. The dome is a similar example, with its 12 million visitors a year. That has also been typical of the World Bank. In the past, its employees have been forced to make a certain amount of disbursements per annum or lose their jobs. That also gave rise to some imaginative arithmetic.

We want to know when resources will be diverted from programmes in the middle-income countries to the low-income, least developed countries that are home to the vast majority of the world's poor. When will they get the money to match the rhetoric?

That brings me to another point. The new Mediterranean programme, known as MEDA, aims to establish a free-trade zone in the Mediterranean area by 2010. While that free-trade zone will open Mediterranean markets to the industrial products of the European Union, agricultural products, which are the main export of some of the countries in question, will not be given free access to the European Union. That is despite the fact that the Commission and the Council of Ministers have both stated that Preferential access to the markets of developed countries is a further contributory factor in the process of economic development. The new MEDA programme is a further example of the schizophrenia that weakens the impact of the European Union's policies on development. Declarations stress the importance of preferential access to European markets, but there is resistance from European Union member states to putting such declarations into practice. Political pressure from southern European Union member states and concerns about immigration and trafficking lead to commitment of vast sums, while other political pressures prevent developing countries from benefiting from trade with the EU.

At this point we should talk about EBA—everything but arms, an initiative recently announced by Pascal Lamy, the Commissioner for Trade, without any kind of consultation or discussion. There were no debates in the European Parliament or in the Parliaments of member states. An existing European instrument was amended, thereby avoiding the necessity for the approval of the European Parliament. That action was wholly undemocratic. Mr. Lamy has announced that he will admit, tariff and quota-free, all products from the least developed countries. The International Development Committee approved the Ruggiero proposals in its Loméreport to the House, and we agree with them, but at the time of that report the proposals essentially included all products. This proposal, if the General Affairs Council passes it on 5 December, as Pascal Lamy and the Commission have requested, will severely affect sugar, bananas, rice and rum.

Since responding the debate here on Tuesday, the Minister of State, Ministry of Agriculture, Fisheries and Food, has circulated a document to us all. It states that there will be a transitional period of three years and that she is requesting, and will receive, an impact study before the final decision is made. I know the official in the European Union who is drafting the impact study. He was a prominent member of the Commission when he also drafted the European Union's banana regime. He has been asked to provide the impact study in three weeks flat, ready for the meeting on 5 December.

Nobody can pretend that we could give credence to an impact study resulting from such a consultation, particularly when we bear in mind the serious disruption that the sugar regime will cause not only to Norfolk farmers but to any farmer who produces beet sugar. That should be taken in conjunction with the Agriculture, Rural Development and Fisheries Department's announcement that it will renegotiate the whole of the sugar regime over the next five years, which is another example of the incoherence of the European Community. That precipitate action will probably result in our forcing African, Caribbean and Pacific countries into poverty.

The Minister's enthusiasm is shared by the Committee, but we must allow the least developed countries' products into the UK free of quota and tariff. That must, however, be done carefully and with proper sensitivity to the serious needs of those countries who are modestly richer than the least developed countries in the world. Guyana is in the heavily indebted poor countries initiative, so it is not one of the least developed countries, but it happens to produce sugar, bananas for domestic consumption, rice and rum. If the proposal goes ahead, and has an effect on the pricing of those products within the European Union, Guyana will be reduced to a least developed country. What an irony. What a triumph of development planning that would be. The Minister should not ascribe this matter to any political party—the debate on Tuesday morning was an all-party affair—but after careful examination, arrangements must be made to avoid disruption to the trade of vulnerable, albeit not the least developed, countries.

We must examine the way in which the European Community interacts with its member states on the issue of development aid—something that the Committee has been asking for for a very long time. Not only do members of the EU contribute to the European Community's budget, but there is a bilateral budget, which in our case is significant.

A further vital ingredient to ensuring the effectiveness of EC development policies, is the need to ensure coherence and complementarity between Community policies, and between the development policies of the European Community and member states. There are many areas where EC policies can have an impact on development: trade, agriculture, environment, fisheries, immigration, asylum, conflict prevention, consumer protection, and humanitarian aid, to name but a few.

To what extent have the priorities and the commitments outlined in the Council declaration been adopted by the Commission as a whole? I have referred to the incoherence between the Agriculture Commissioner and the Trade Commissioner. What coherence can we expect from other Commissioners when implementing the policies outlined in the statement on development policy? Apparently, if they meet, they do not talk to each other, but if they do talk, it is not about relevant matters that would help to bring their policies into focus, to produce coherent European policies. Similarly, the declaration suggests that the European Community would be prepared to finance member states, and has accepted the principle of sectorwide approaches. The Committee has been advocating such co-operation and welcomes those proposals.

Such proposals, however, have been around for some time, and very little has been done. I asked the Minister how quickly the proposals will be implemented, or whether they will be left to wither on the vine, just as some of the best Bordeaux wine grapes are now mouldering in the fields of south-west France.

In the course of our inquiry, we heard about several examples of how delays affect people on the ground. Population Concern told us that it had experienced a delay of 13 months in payments for four projects in Bolivia and Peru. Elsewhere, in a project in Karachi, the funding situation became so dire that the director of a local non-governmental organisation was forced to take out a personal loan to pay staff salaries, using her residence as collateral. That is the sort of difficulty that such bureaucratic delays force on people trying to do their jobs in the countries in which they work. Unsurprisingly, that NGO has asked Population Concern not to request financing from the European Community in future. We were told by Poul Nielson, the Commissioner for Development and Humanitarian Aid, that not a single euro of the 250 million allocated for reconstruction in Nicaragua has been spent in the wake of Hurricane Mitch.

We accept that there are several reasons for such a huge backlog, not all of which are under the Commission's control. However, the level of existing backlogs is untenable. It damages the reputation of the European Community and has severe implications for NGOs on the ground. The Commission has already developed an analysis of the reasons behind such backlogs and begun to do something about it. One example is the use of 1 billion euros of unspent European development funds to support the heavily indebted poor countries initiative of the Secretary of State for International Development and the Chancellor of the Exchequer. The Committee welcomed and applauded the proposal when it was announced to us earlier this year.

The Commission also raised the possibility of simply closing dormant commitments, a proposal that the Committee welcomes. It is better to close dormant commitments and not draw down funds from member states than simply to have the money spent by the European Community quickly and badly.

It is equally important that the European Community should stop committing money that it has little prospect of spending. Two such examples are the 5.5 billion euros allocated to the Balkans without a costed programme even having been considered, and the 5.35 billion euros recently committed to the new MEDA programme despite the fact that it has spent only 26 per cent. of its commitments. What does the Minister believe is the likelihood of the European Community spending either of those programmes? Will he encourage it to close them as dormant accounts and start again?

Another serious problem with the European Community relates to staffing. The Commission was keen to point out that it has between half and a third as many staff per euro managed as other donors. Glenys Kinnock told us: The Commission as a whole has fewer staff than Clwyd County Borough or Leeds City Council. It was obvious to the Committee that member states were not willing to sanction expenditure on further staff until the quality of European Community assistance improved. The Secretary of State told us: I personally will fight to the death to not give them any more staff until they improve the quality of what they are doing, otherwise we are just throwing more and more resources away. She is right.

The Commission proposes to tackle staffing shortages by using funds that are currently spent on outside contractors, who are known as technical assistance offices—the source of most of the scandals reported by the Comptroller and Auditor General. It will recruit in-house staff, especially in European Community delegations.

I understand that the Council has accepted the conclusions of a Commission peer review on staffing that proposed a net increase of 400 posts, many of which will be in DG Development, and a wide-ranging redeployment of posts within the Commission. We hope that those modest increases in staff numbers, together with Commission proposals to close dormant commitments, focus EC development activities on six core areas and co-fund bilateral development programmes will result in desperately needed improvement in the quality of EC development programmes and increased staffing and competence of Commission embassies—that is what they are, although I believe that we do not call them embassies—in host countries. That is where extra staff are desperately needed if programmes are to be efficiently implemented and quickly disbursed.

Another problem is the fact that DFID staff are often tempted to try to micro-manage the European Union's development budget. The Committee examined the Commission's complaint that EU member states were part of the problem because of their insistence on micro-managing EU programmes through a range of approximately 50 management committees. That inevitably leads to delays. When the Secretary of State gave evidence to the Committee, she appeared reluctant to relinquish control over the management of European Community policies. She told us: If you have a completely malfunctioning bureaucracy I suppose you try to intervene at every point in which decisions are made to try and both get better quality decisions and more effectiveness. The Committee understands that temptation. I am pleased to note, however, that in response to our report the Government have agreed that member states should try to move towards a more strategic role in overseeing European Community programmes at a macro level as improvements and reforms are implemented. I am certain that if they carry that out, and do not keep trying to interfere, we will achieve quicker disbursement—provided, of course, that host countries have proper staffing and offices.

It gives me no pleasure to have to stand here every year criticising the European Community's development policies. At the beginning of my speech, I outlined the massive potential of the EC—if it can get it right—to contribute to the elimination of poverty. That is a prize well worth fighting for. We level these charges to try to make the EC's aid budget more efficient, effective and speedy, and I hope that all our comments are constructive.

I get the impression that things are at last changing and that improvements are being made. During the past year, many papers aimed at improving the effectiveness of EC development policy have been produced. The challenge now is to maintain the momentum of the reforms to ensure that those fine words are translated into practice.

If the Commission fails to do that, the credibility of the European Community as a development actor will be irreparably damaged, which will give great succour to those—not only in my party—who ask whether it would not be better to carry out these programmes bilaterally and take away from the European Community any development policy functions. That would be a tragic mistake and a terrible missed opportunity. We must enable the European Community to deliver, and to deliver efficiently.

Mr. Deputy Speaker (Mr. John McWilliam)

Before I call any other hon. Members, I remind them that they are constrained by the subject of the debate, which is the ninth report of the International Development Committee on the effectiveness of EC development assistance, and the associated reports. The debate should go no wider than that.

3.17 pm

Mr. Tony Colman (Putney)

I am honoured to follow the hon. Member for Hertford and Stortford (Mr. Wells). This is the first report of the International Development Committee in which I have been involved from the beginning, having recently returned, through joining the Committee, to Select Committee service. I pay tribute to all my hon. Friends—from whatever party—who served on the Committee on the excellent cross-party way in which we were able to approach such difficult subjects. We were united not only among ourselves, but with the Minister, in that we attempted to say things in the report that would be unpalatable and difficult for him or the Secretary of State to say. I believe that we co-operated in the true tradition of Select Committees.

I shall try not to repeat the excellent analysis with which the hon. Member for Hertford and Stortford introduced the debate. I want to focus on the action plan that the EU has developed since the publication of the report and pick up on six related aspects.

As was said, nearly one third of the DFID budget goes through EC mechanisms, which is crucial in terms of the Government's contribution to world poverty eradication. I should again mention the difficult area of the drag on spending, which is some four years in arrears. Recommendation (1), which congratulates the Commission on the imaginative use of underspend in the HIPC initiative, is tinged with irony. The underspend totalled 1 billion euros, which was money allocated to developing countries by the European Development Fund. It was not new money; it had been allocated, but not spent. Commissioner Nielson signed the cheque on the day of our visit. We would have preferred to extract new money from the EU Governments, rather than from the underspend of previous years.

We are concerned about the impact of the delay on payments to NGOs that have contractual arrangements with the EC. My NGO contacts say that the situation has improved since we wrote the report, so action has clearly been taken. However, the Government's response to our report should have picked up on our recommendation that there should be a payment code of conduct for the EC. Such a code would introduce penalty payments if the original contracted amount were not paid within the agreed period. However, the Government's response ignored that recommendation. If you apply that principle to large companies that deal with small companies in the UK, you should clearly apply it to NGOs. The hon. Member for Hertford and Stortford outlined the impact of late payment. You should not have to re-mortgage your residence to deal with a late payment from the Commission.

Although that situation has improved, my NGO contacts also told me that the 2001 programme, which covers work to be done in 2001, begins on 1 January and must be completed by 31 December. The earliest that one can apply for the money is 1 January, so the NGOs are waiting to post their letters to ensure that they arrive by that date. It is likely that the initial response will be in March, and the final agreement for the contracts for 2001 will be reached in June, so the work will have to be carried out over six months rather than 12. If the work is incomplete at the end of 12 months, that is too bad.

Extraordinarily, year-by-year cash flow accounting, rather than resource accounting, applies to the Commission, thereby carrying the grants over more than one year. The Minister may wish to comment on the fact that NGOs have to commit to a considerable amount of work. As I said, you cannot apply before the beginning of the year, so half the year has gone before you know whether it is possible to do the work. You could take a flier, but that could lead to difficulties if the contract did not go through. In such a circumstance, everyone wastes a lot of time and, of course, money.

Recommendation (t) concerns the technical assistance offices that were mentioned earlier. It would be a shame if the concept of using subcontractors or NGOs to review progress and carry out the work itself were to cease. The existing technical assistance offices— TAO—system has fallen into disrepute, but that should not be used as an excuse to take all the work back in-house to bolster the budget of the Development Commissioner's permanent staff, rather than using that expertise project by project. Career civil servants may know nothing about development policy, so they should not carry out work previously done by experts. Let us replace inefficient and inappropriate experts with more appropriate ones. There may be such people in the Commission, but they are much more likely to be found outside it. In terms of those changes, I would not like to lose the concept of outside contracts, which the technical assistance offices system reflects.

In keeping with what the hon. Member for Hertford and Stortford said, I am concerned about the muddle surrounding assistance to accession states and working with the poorest countries in the world. I heard what the Minister said, but the crucial role for DFID is in helping those poorer countries to eradicate poverty. A separate budget—potentially, a separate Ministry—should deal with the problems of accession states. More of the EC budget is spent on Poland than on the whole of Latin America and Asia. Such figures are quite extraordinary, given that, as was said, one third of the world's poor are in India. It is rather peculiar, to say the least, to discover that such countries receive 25 to 30 per cent. of what Poland receives. Nevertheless, matters are moving on and the new programme of action is part of that process.

Our report criticises the lack of an overarching strategy, and I echo the observation that the final document is much better than the draft strategy that was produced during our investigation. However, as the Secretary of State said, the real test will be in the implementation.

The hon. Member for Hertford and Stortford commented on the two overarching criteria for the six priority areas. I was pleased to note that the areas chosen must contribute to poverty eradication and sustainable development, and that European Community action must have added value. I shall discuss—briefly—the six priority areas and underscore some of the points that were made, along with my own concerns.

On trade and development, particular emphasis was placed on the World Trade Organisation and the need to work with developing countries in launching a new round. I shall try not to impinge on the territory of the International Development Committee's report on the state of the WTO one year later, which will be published in two weeks' time. However, on reading a speech by Pascal Lamy, the EU Trade Commissioner, which was published in an article in yesterday's Financial Times, I became extremely concerned. In discussing what should be included in a new trade round, he referred to "four magic elements", which the article describes as Further liberalisation of markets for goods and services…Updating and improving WTO rules, including those relating to investment, competition and trade facilitation…An over-arching development agenda, including fuller WTO participation by poorer countries…Measures to address issues of "general public concern" such as the environment and labour standards. I am extremely concerned about that last point. According to the article, Mr. Lamy said that a new round needed to address the links between trade rules and other policy concerns such as health, consumer safety and the environment, as well as core labour standards, otherwise public support for the trading system would be further eroded. I realise, Mr. Deputy Speaker, that one is not normally allowed to read out such statements, but I have taken the liberty of doing so because it is extremely important. Has Mr. Lamy learned nothing? He took on the role of insisting that labour conditions and environmental standards be incorporated in any new round last December, at the meeting of the WTO in Seattle. That negotiating position was not agreed by the 15 members of the EU and he had to return to discussions with Charlene Barshevsky, who led the negotiations for the USA, and withdraw his wish that they be part of it. It is clearly not the wish of the Group of 77 developing countries to include labour conditions and environmental standards in any new trade round. They see that as a protectionist measure that would make the new trade round meaningless because it would erect trade barriers. Instead of everything but arms, it would be everything if pay, labour and environmental conditions were the same as in the United Kingdom and Europe.

I am worried because the article quotes Mr. Lamy as being critical of Supachai Panitchpakdi, the Thai Trade Minister who will be the new director-general of the WTO. I am worried that we are getting off on the wrong foot in not understanding the position of developing countries in wanting a new trade round that is pro-growth and pro-developing countries.

During our investigation we interviewed the Secretary of State on 4 July and I asked what consultation would take place with developing countries before the final statement of development policy. I was told that there was no consultation and that the policy would go forward on the basis of the Cotinou agreements. Perhaps the Minister will tell his colleagues on the European Commission that, in my view, which is shared by others on the International Development Committee, Mr. Lamy and his colleagues should listen to voices from the developing countries in the south. We must not have covert protectionism.

I support what has been said by the hon. Member for Hertford and Stortford on how we should move forward on everything but the arms initiative. We all applaud the concept of improving market access for the least developed countries, but it must not be one in which some of the least developed countries lose out significantly.

Mr. Foulkes

indicated assent.

Mr. Colman

I see the Minister nodding, so I look forward to an assurance from him.

The second area is regional integration and co-operation. We all support that, and any way forward must be based on developing countries working together. We must listen to them, and the EC should not presume that it knows best. I strongly support the idea of working with the African, Caribbean, Pacific and Latin American countries in those sub-world groups.

The third area relates to macro-economic policies and health and education sectoral programmes. That picks up the work that has been done on HIPC and the need to ensure full implementation and that the available money is put into health and education. However, I want to ensure that whatever new money comes up for HIPC in the future does not simply deal with the backlog. It should be new money and not related to underspend four or five years earlier.

The fourth and fifth areas are linked—food security and sustainable rural development, and transport. I was lucky enough to attend an Inter-Parliamentary Union meeting following the world food summit at the Food and Agriculture Organisation in December 1998. Representative after representative from developing countries came to the rostrum to ask the European Union and north America to stop dumping food in their countries. Their message is that they can have food security and sustainable rural development if we stop doing that. It is important that we listen to them. The issue is linked to the Pascal Lamy discussions on the need to open up the EU agriculture policy to guard against subsidised over-production in the European Union which, because we cannot consume it, we dump on developing countries in the guise of aid. I strongly suggest that we attend to that.

The key to the transport issue is rural roads. We are concerned not with super-highways to speed politicians or multinational business men from one capital to another, but with enabling the products of sustainable activity in villages to be sold or traded with nearby villages. Products and foodstuffs need to be taken to the nearest market towns and perhaps to the capital city.

The development of institutional capacity, good governance and the rule of law remain to be considered. Good governance and corruption are the essence of the Select Committee's current investigation. A strong overarching principle is involved, relating to the effectiveness of EC activity. The UK does not have a strong role in this context at present, but I was interested to hear the other day that the Egmont group is sharing information across the world. At the moment, 53 countries are involved in that. The focus is on the movement of funds from and to developing and developed countries. I should like the EC to take a stronger role, using the skills of Europol, Interpol and the Egmont group for support in doing what is necessary for good governance and tackling corruption.

Two other matters are vital to this debate. First, we have heard much recently about European Union defence co-operation. I strongly commend to the House the intervention of my hon. Friend the Member for Clydebank and Milngavie (Mr. Worthington).

Mr. Deputy Speaker

Order. Where does that matter arise in the report that is being debated?

Mr. Colman

I accept your ruling, Mr. Deputy Speaker. I also intended to refer to the World Bank, but perhaps that, too, goes beyond the scope of the report.

It is important that the Government hang in there and reform the European Commission. As has been mentioned, 40 per cent. of overseas development assistance comes from the countries of the European Union, to which we hope 15 other countries will accede in the coming five years. It is an important force for good. If the programme of action that is before us is implemented properly, we have a chance of ensuring that poverty is eradicated.

Several hon .

Members rose—

Mr. Deputy Speaker

Order. As I made clear, we were dealing with the ninth report of the International Development Committee and the Government's response thereto, and that is all that we are dealing with.

The hon. Member for Putney (Mr. Colman) used the word "you" quite often. That applies to me, but I did none of the things that he accused me of.

3.39 pm

Dr. Jenny Tonge (Richmond Park)

I am rather surprised to be called. I was still dreaming about all the wine mouldering away in Bordeaux. What a sad thought.

I congratulate the hon. Member for Hertford and Stortford (Mr. Wells). He is constantly initiating discussions such as this in Westminster Hall.

We have received this afternoon an all-embracing explanation of the report and the Government's response to it. It is difficult to find anything that the hon. Gentleman left out of his speech, but I crave the indulgence of the House to emphasise a few of his points. I was trying this morning to put my finger on why I find such documents so difficult to grasp, and I concluded that it must be because of all the eurospeak. Their language never seems to be quite right and, try as I might, I can never become very interested in them. However, one of two matters did catch my eye.

Despite Mr. Nielson's irritation with the hon. Member for Cynon Valley (Ann Clwyd), he seems to be getting the message because there are signs that the European Commission is changing its stance and that things are improving. In the past few months, the Select Committee has done a great service to aid from the European Union. Let us consider the Government's response to the ninth report. Aid to the pre-accession countries is incredibly important. It is no good we in Britain whingeing away about local government having to supply money to aid asylum seekers and refugees, particularly from the eastern states. If we are not willing to help those states to alleviate their poverty and to make them better places to live, we shall have to expect that more people will want to live in western Europe. Aid to pre-accession states is crucial.

DFID's top priority is to aid the poorest countries in the world, but the problem is that such countries are not the poorest in the world. When I was a member of the Select Committee, I objected strongly to DFID's budget being used in such a way. We should look differently at the way in which the budget is organised for such matters. If Mr. Chris Patten is to be believed, 5.5 billion euro is going to the Balkans. I have no idea on what that money is being spent, nor do I know how much of that sum is derived from DFID's budget via the European Union. It is a great worry to me that there is no accountability or action plan. What about the Balkans stability pact? Much was said about the Marshall plan for the Balkans after the Kosovo war. From where will the money for the Balkans stability pact come? Will it come from DFID's budget? It should not. It should come from the Treasury, not from the money that has been earmarked by all of us for the poorest people in the world.

Much has been said about the reorganisation of the Commission to which paragraph (b) of the Government's response refers. I regard such matters as incomprehensible. Given that development concerns the African, Caribbean and Pacific countries, Mr. Nielson is apparently in charge of development and Mr. Patten is in charge of the rest of the world.

The hon. Member for Putney (Mr. Colman) referred to transport, which was described as important in the declaration from Europe. I was amused by Mr. Nielson's evidence to the Select Committee. It was one of the things that woke me up during all the eurospeak. He was challenged by Committee members in relation to a road for the Pitcairn islands, which he regarded as a priority. He was proud that 500 m of extremely expensive road was being built in the Pitcairn islands for 48 people who did not own cars. I would question Mr. Neilson's priorities in that regard.

I remind hon. Members that, when the Select Committee went to Montserrat during the crisis two or three years ago, there were just over 2,000 people on the island, mostly the sick and the elderly. The hon. Member for Hertford and Stortford will confirm that we were paying for 100 policeman to look after those people. The Government's top priority at the time was a prison. We could not understand that, and sympathised with the Secretary of State, who, in a fit of pique, referred to it with the phrase "golden elephants". How many examples are there in the European Union of ridiculous requests being made, granted and defended by Commissioners? I hope that the Minister will tell us about the 500 m of road, which I would love to go to see.

Mr. Foulkes

I had an interesting discussion recently with a representative of the Pitcairn islands in the consultative group of the overseas territories. You will not be surprised to learn, Mr. Deputy Speaker, that his name was Mr. Christian. It is a small road up the hill of difficulty, and will be jointly funded by the EC and ourselves. The representative made a strong plea for it being a top priority. If the hon. Lady would like to visit the island, we could make arrangements. It would take her away from the House for about six months, but I am happy to facilitate such an arrangement.

Dr. Tonge

I thank the Minister for his offer, but knowing what happened to the captain of the Bounty, I would hesitate to put myself in the clutches of Mr. Christian.

There is a muddle. It is difficult to understand why the Commissioners' briefs are divided as they are. The European Union consistently repeats its determination to reduce poverty—the declaration says that tackling poverty is its top priority. However, dual Commissioners are constantly subject to external political factors, which creep in and outweigh the poverty issue. As a result, I do not know how it will be sorted out. I therefore support the hon. Member for Hertford and Stortford in his request for a separate budget category, which is essential.

Before we move on from the issue of poverty, the Committee pointed out that, in one of the EU draft policy papers, there were three poverty focuses. One lovely sentence in the Committee's recommendations said: to have three poverty focuses is simply to be unfocused. We welcome the latest declaration, which mentions only one poverty focus, so, clearly, the focuses have been sorted out.

The hon. Member for Hertford and Stortford referred to a staffing problem in the European Commission. I can well believe that it does not have enough people to carry out everything requested of it. In that case, why are we making so little progress on giving member states responsibility for European Union programmes? As I have said before in this Chamber, a member state could surely take over a project, annually update us on it, get on with it and report back to the European Union. There is no point in having loads of people in Brussels implementing measures, when all member states have excellent international development departments that could do those jobs.

There was a hint of such a possibility on page 9 of the draft declaration, in the section on complementarity. That is a euroword for something or other—I hope for the very thing to which I refer. The document states that there should be a better division of labour between the Community and the member states, and that no donor should lay claim to excellence in every country and in every sector of co-operation. The declaration emphasised the importance of the experience gained by the Community and the member states being put to profitable use, and said that tasks should be allocated in keeping with the primary role that falls to the partner country.

I hope that the Minister will tell me that complementarity means what I think it means—giving projects to member states, so that they can get on with them. Some people in this Chamber have dictionaries.

Mr. Wells

I have often thought that there should be one European office in each host country. Perhaps the hon. Lady will join me in recommending that. It does not matter to me which member state runs the office.

Such a European office should include all member states and be responsible for implementing bilateral programmes as well as European Union programmes. Then we might get some complementarity.

Dr. Tonge

That suggestion is worth considering. However, as someone who was once an NHS manager, I am wary of setting up new offices. They spawn managers, who spawn secretaries and under-secretaries, who spawn administrative assistants, and the process goes on and on. I prefer to look for ways of working within existing structures—although the odd extra officer might be added—rather than inventing a whole new bureaucracy. That is my only reservation about the hon. Gentleman's suggestion.

Skating quickly over a few other issues, I agree with the hon. Member for Putney about late payment, which is especially outrageous when it involves NGOs that are trying to spend their money prudently. The Government have demanded that interest should be paid to small businesses on late payment of debt, so the European Union should do the honourable thing and pay that interest.

I hoped that the hon. Member for Clydebank and Milngavie (Mr. Worthington) would be here, as he is the expert on the European Community Humanitarian Office and has consistently called for moral accountability from that organisation. One can name several areas with which ECHO has been concerned—Mozambique, Honduras and so on. However, it has operated inefficiently, and some of us have been unhappy about how it has reacted and how money has been spent. If the hon. Gentleman were present, he would welcome the Government's commitment to persuading ECHO to report back on those issues and ensure that it is accountable.

I want to highlight two issues that come under the headings in the declaration. The Minister may not be able to respond this afternoon, but I hope that he can write to me on the subject. First, corruption is not often mentioned, but the document refers to institutional capacity building and the promotion of equitable access to social services, which all depends on a lack of corruption in the administration of the countries receiving aid.

Mr. Andrew Robathan (Blaby)

I was not present at the beginning of the debate, but I have listened carefully to the hon. Lady, and she should be aware that the International Development Committee is deep in an investigation into corruption. Members of the Committee see a clear link between corruption and effective distribution of aid and the end of poverty.

Dr. Tonge

I thank the hon. Gentleman for that intervention highlighting the Committee's next investigation, which will be interesting.

Has any progress been made on the European Union convention on bribery? Such a convention would enable us to prosecute United Kingdom companies using bribery overseas. Many companies in Britain would welcome such a measure, because they are sick of the competition in bribery. We need to clear that matter up, so I hope that the Minister provides some answers.

Mr. Rowe

The hon. Lady will be as shocked as we were to discover, at a recent evidence session, that the United Kingdom claimed that there was no need to amend its law on corruption, which it has regularly stated is far ahead of that of other countries. When our corruption law was reviewed by the OECD, it was shown to be so far behind both what is required and the law of most of our European colleagues as to be scandalous.

Dr. Tonge

I agree that the matter is scandalous and that we must do something about it.

In relation to the promotion of equitable access to social services, will the Minister comment on the general agreement on trade and services, which many of the NGOs are much exercised about at the moment? There is a concern that social and other local services in developing countries would be privatised if the GATS came into play. That could have a serious effect on standards of education, social services or health in those countries. People are beginning to worry about that matter. Will the Minister comment on the possible effect of GATS?

In conclusion, huge sums—8.2 billion euro—are devoted to European aid. About one half of the world's spending on aid comes from the European Union. There must be more streamlining. As the hon. Member for Hertford and Stortford said, we are getting there, but progress is slow. More projects must be devolved to member states, as a way of cutting through the bureaucracy. Proper implementation plans must be made, so that we can see what is intended and receive updates on how projects are progressing. Of course, we must also receive annual reports.

I return to the Court of Auditors' report into aid to South Africa, which interested me in the subject in the first instance. The report refers to an AIDS project for which money had been earmarked in 1994, but on which the Court of Auditors said no money had been spent by 1996. Heaven knows how many people died from AIDS as a consequence of that. We did not hear about the incident until either late last year or early this year. The money was earmarked by the European Union, but six years passed before we knew that nothing was happening. That is scandalous and must never happen again.

4 pm

Mr. Andrew Rowe (Faversham and Mid-Kent)

I could easily just repeat at considerable length what has been said with great authority by those who have contributed to the debate hitherto, but I want instead to tease out one or two small practical points that may help to resolve the problem, on the existence of which there is unanimous agreement.

Inscribed on Sir Christopher Wren's memorial in St. Paul's cathedral is the phrase si monumentum requiris, circumspice—if you seek a memorial, look around you. As a look around the Chamber will show, one of the problems with a coherent development policy is that the only people who are interested in development are members of the Select Committee and a handful of Front-Bench spokesmen. The entire Parliament must consider carefully how we can best broaden the interests of our colleagues in such an enormously important subject.

Will the Minister think hard about how, in this busy tortured place, we can increase the latent interest of people in such matters. Until more parliamentarians take a real interest in how we live alongside the poorer people in the world, we shall not make the progress that is needed to be made.

Mr. Foulkes

I ask the hon. Gentleman to reflect on the fact that three by-elections are taking place today and there is a one-line Whip in the House, so it is not the most felicitous day to have any sort of debate in the House. However, in my 21 years in Parliament, I have never known so many hon. Members to take such an interest in international development matters, as is evidenced by the number of questions tabled during International Development questions on Wednesdays in the House. There is still a long way to go but there has been a big improvement, particularly during the past three and a half years.

Mr. Rowe

As always, the Minister cheers me up. However, I still cling to the fact that there is a long way to go.

I cannot help being faintly amused by the fact that the European Union has as one of its main aims institutional capacity building. We all know that that is something about which the Department for International Development cares greatly and to which it devotes a good deal of resources. However, if ever an organisation required institutional capacity building, it is the European Community. The phrase relating to pots and kettles swims into my mind.

One of the real difficulties that our report highlighted is that, when a part of the world looks like becoming volatile, or some calamity occurs that hits the television screens, Members of the European Parliament—as we would in this place—leap to add a new budget line to the European Community's aid and development programme. They do not ask themselves how practical it is to deliver it, nor do they ask whether it relates coherently to other programmes, they simply add it to the programme, but then nothing happens. As we know, the money is not spent for anything up to between four and 10 years, but there is no saving to any budget in real terms. When it is known that the European Community has promised money, other donors often stand aside, confident that the problem will be picked up. When no solution is delivered, the last state of those unfortunate people is a great deal worse than the first.

In this aspect of the activity of the European Community, as in many others, we have been extraordinarily inept at developing the international cooperation which, as parliamentarians, we should have done. I enormously welcome the fact that the Chairman of our Committee instituted the bringing together, for the first time, of the chairmen and chairwomen of similar committees in other countries. They meet once every presidency, and I hope that that will continue.

The Minister and our parliamentary authorities could discuss other ways of strengthening the parliamentary aspect of development. Until we understand what others are playing at, many recommendations in our report or in the responses of the Government and the European Union will be hard to achieve. I passionately believe, as several hon. Members have said, that we should accept the European Community's desire to devolve authority and responsibility for some of its programmes to member states. However, there will not be great acceptance of that by the member states if it looks as though we are eroding their positions in the countries targeted for help.

For example, as I have said before, it would be helpful if EC aid to India were channelled through the UK presence there. That presence is large, long established. well respected and works fairly well. However, I can understand that other countries, jealous of our position in India, might like to rival it. They might take a dim view if the EC made such a decision. Unless we have better understanding between parliamentarians as well as Ministers, such sensible devolution, although it is the only way forward, will be difficult to secure.

I have told many hon. Members this story before, but it is worth putting on the record. When I was in India a couple of years ago, I went to the Delhi office of the European Community, where I found an experienced and hard-working Dutchman—I may be wrong; it might have been a German who was about to retire to Holland—who was extremely distressed because the EC had recently realised that a poultry project in Bihar, on which it had spent millions of ecu, had come to its end without a single chicken having ever appeared on the ground. Anyone who wants to do business in Bihar needs his head examined anyway. As awful was the fact that that man's Italian colleague, to whom I was introduced, was responsible for an astonishing number of projects—134, I think. The office was so small and the sums spent in India were relatively so big that the whole thing was nonsense. There was no way to keep control.

One of the characteristics of all bureaucracies—it is especially true of the European Community—is that when they discover that a weakness in their accounting system has enabled a coach and horses to be driven through the system, carrying off the loot, they respond to the fury of the auditors and the parliamentarians who take them to task rather as I do in my approach to do-it-yourself tasks at home. If I discover damp coming through the wallpaper and want to prevent it from happening again, I do a perfunctory patch-up and then put another layer of paper on top, hoping that that will be adequate. It never is, however, and the blooming stain comes back within six weeks. Doubling, trebling, or quadrupling the number of signatures required every time someone wants to get money out of the European Community is something that we have to take seriously. It is not the number of officials who sign a document that makes the accounting safe; it is the procedures and the audit trail. As we are often told, the accounting procedures within the European Community for even quite small sums of money are now so complex that they slow everything down, with the disastrous result that no single official takes responsibility for any particular expenditure.

That disastrous trend is also creeping into some British habits. I am the chairman of a voluntary organisation that has been awarded the princely sum of £10,000 by the Home Office. We were given it in two tranches, one of £8,000 and one of £2,000. When we had spent the £8,000, the bureaucracy attached to trying to obtaining the remaining £2,000 was absurd. Given that a full-time civil servant had been seconded to the organisation to run it, that showed a slight lack of trust between bureaucrats. Such a practical impediment leads to NGOs not being paid, and programmes not being delivered, on time. Our report is right to talk in large terms about what should happen at the top, but we should also he extremely careful not to lose sight of what needs to happen at the bottom.

I return to the point about the European Community having two priorities. One is development aid and the relief of poverty, and the other that of securing its present and future boundaries. I believe—a view that is not fashionable among the Opposition—that the European Union has on the whole been an extraordinary force for good. It has secured peace within its boundaries and is making tremendously positive efforts to try to secure peace beyond its boundaries.

Mr. Deputy Speaker

Order. I have already called hon. Members to order for straying from the report. The hon. Gentleman is also straying.

Mr. Rowe

I of course accept your ruling, Mr. Deputy Speaker, but I can defend myself against the accusation. As we have heard, in order to secure its future boundaries, the European Community is spending large sums of money under the title of development aid. My point is that, while it is entirely right for the Community to secure its present and future boundaries, it is grossly misleading to claim that to do so is development aid in the same way as the relief of poverty, and giving such a large part of DFID's budget to the EC for that purpose leads to much resentment. I share the view of the hon. Member for Hertford and Stortford that the budgets should have different names. If they did, the amount being spent in pursuit of what is a sensible political aim and the amount being spent on the poor would be transparent.

Mrs. Gillan

Is not my hon. Friend also worried that, following some of the investigations conducted by Commissioner Patten about the findings of an audit that was carried out on where the Commission seemed to have promised money—almost at random in some areas—it was discovered that, if the EU stopped approving new money today, it would take almost nine years to pay out the sums that it had already pledged?

Mr. Rowe

That is a scandal and it is terribly worrying. As I said, it has huge costs, because many people stop giving money to countries that they think will receive money from the EU, and it is a scandal if those countries will not receive their money for nine years. The report is entirely right to make that point and to try to find ways of dealing with the problem.

I want to stress how important it is to get parliamentarians together to talk about such matters. It would be a perfectly legitimate minor expenditure of the development budget, or some other budget, if money were used to enable us occasionally to do that in a structured and focused way. We could even do it on the internet. For goodness' sake, let us try to focus on what the EU is trying to do, and get more agreement about its goals.

Just before we came into this debate there was a business statement in the Chamber, during which, one of our colleagues—a Labour Member, as it happens—rose to his feet, perfectly properly, and expressed his outrage at the fact that a manufacturer in his constituency was dismantling his factory and taking to India. That is a constituency dilemma for a Member of Parliament, but if we are serious about trying to assist the poorest of the poor, we must recognise that sometimes we will lose business to those countries, and that in the long term that is a good thing. It is not easy for Members of Parliament to accept such events in their own constituency without making a fuss. Just as we saw on the streets of Seattle large numbers of American trade unionists effectively trying to wreck the WTO round, so there is always the sense that, in practical terms, we should not allow British business to be taken overseas. That is one reason why we must stay so far ahead technologically. If we do not allow the industries in which we no longer have a cost advantage to go overseas we are being hypocritical when we talk about development.

4.17 pm

Ms Tess Kingham (Gloucester)

As a member of the Select Committee on International Development, I welcome the opportunity to participate in the debate in the wake of our report entitled "The Effectiveness of EC Development Assistance". At the outset, I pay tribute to the Chairman of our Committee, who steered us effectively through the complex subject matter. I would like to thank also the Clerks, who worked hard to collate the views of the Committee into such a concise report. The subject matter will not have anyone rolling in the aisles, but it affects millions of people around the world, so we should take it seriously, and a debate of this length on the subject is welcome.

If one speaks towards the end of these debates, most of the points have already been made, so I shall try not to be too repetitive. As we have already heard, our report is heavily critical of EU aid structures and systems and the focus of EU development aid. We found the responsibility for strategy and implementation to be fragmented across various Directorates-General, resulting in a lack of cohesion. We were concerned to learn of lengthy delays—we have heard a lot about them—in fund dispersal, leaving aid recipients in financial difficulty and jeopardising the future of some successful aid projects.

Population Concern gave us evidence about two such delays. The first was of 13 months in the disbursement of funds for four mini-projects in Bolivia and Peru. The second took place in a community-based distribution programme in Karachi, where the funding situation became so dire that the director of a local NGO in Pakistan took out a personal loan to pay staff salaries, using her residence as collateral. As a result, partner NGOs have requested that Population Concern should not seek financing from the European Union in future.

We have also heard the case of Nicaragua, where funds were not disbursed in the wake of hurricane Mitch. I worked in aid agencies in a previous life, and I know full well that those are not isolated examples. I have found over the years that the ease with which EU funds can be applied for is weighted in favour of larger NGOs with greater cash flows and large pools of funding. When their partners overseas do not receive EU grants they can bail them out in the short term. That is of course not possible for smaller NGOs, sometimes with dire consequences, with some of those organisations going under. It seems ironic that, while there is talk in the EU about strengthening civil society and helping to strengthen indigenous NGOs, delays by the EU in distributing funds contribute to NGOs going out of business.

I am pleased to hear from the hon. Member for Faversham and Mid-Kent (Mr. Rowe) that things are improving for some NGOs, but I would also support a payment code of practice and penalty payments. That is only fair if organizations are on the brink of going under as a result of delays in payment.

In the light of the criticisms that have been made, I was pleased to receive the declaration on the European Community's development policy that was adopted in the Development Council on 10 November. For the first time, the new declaration gives the EC a clear framework within which to implement development policy. It also puts poverty reduction at the core of the EU aid policy, for which the Select Committee has been calling for some time. The Government have also been working towards that in their dealings with the EU.

The Development Commissioner, Poul Neilson, has presented a comprehensive action programme to implement the declaration. I hope that he will recognise the value of the Select Committee's report and its criticisms. From what I have heard so far, his reaction has been at best dismissive and at worst rather rude.

The declaration also commits the EU to refocusing some activities. We have heard a good deal about that from my hon. Friends. Community development activities should in future be focused in six areas. They include the link between trade and development; support for regional integration and co-operation; support for macro-economic policies; transport communications; food security and rural development and institutional capacity building.

The Community is also, crucially, committed to the mainstreaming of horizontal concerns such as human rights and gender into those six priority areas of work. I welcome that move, but, as always, the devil could be in the detail. I am particularly interested in how human rights will be integrated into trade and development and into support for regional integration and co-operation. There are many definitions of human rights. The term is often bandied around, because it is good to support human rights. However, their implementation and integration into projects is often left to the end and not very well evaluated or reported.

There has long been a worry that the EU is more concerned with its strategic interests and the building of new markets for its trade than with the needs of people in certain geographical areas. That is reflected in the way that aid has been prioritised and spent, as we have fully explained in the report. In view of the new areas and the mainstreaming of human rights, what will take precedence—human rights or trade development? What will happen in the event of a conflict between the two? How does the EU, in implementing aid programmes, define human rights?

In that context, Dr. Gordon Crawford, lecturer in development studies at the university of Leeds, in his evidence to the Committee, raised an issue of concern.

He suggests that the adoption of a broader human rights-based approach to development should, by definition, entail an increased focus on economic, social and cultural rights, with specific programmes for the promotion of those rights outlined in the UN International Covenant on Economic, Social and Cultural Rights.

That approach would make human rights part of a wider agenda, which is something that NGOs have been advocating for a number of years. Human rights, as interpreted by the EU and mainstreamed into its policies, should be about more than freedom of speech, freedom to organise, and so on. It should also deal with the right of people to a fair share of their country's wealth and development, and their right not to be socially excluded. I shall be interested to discover how the EU's new declaration interprets human rights.

This issue needs greater exploration within the EU, particularly in relation to the Mediterranean development assistance programme. For example, as the report and the accompanying documents and memoranda have shown, Morocco has received substantial EU aid in recent years. In 1998, the last year for which figures are available, Morocco received $528 million in overseas development aid, of which the Commission contributed $236 million. The EC and member states contributed some $456 million. That should be compared with deeply impoverished Angola, which received $335 million in total. It is difficult to see how Morocco's need can be deemed greater than many of the poorest countries. Given the mainstreaming of human rights, it is also difficult to justify giving such large sums of aid to a country that is still occupying western Sahara. How are the human rights of the Saharawi people weighed and defined? Cynics such as I would say that generosity towards Morocco reflects its strategic importance to the EU as a trading partner, rather than its need.

There are also concerns that the international community, including the UK Government, is shying away from supporting a referendum for people in western Sahara, and proposing instead some form of limited autonomy, which would contravene the Saharawi people's right to self-determination under the UN convention. I hope that that proposal, in tandem with the aid policy, does not reflect a concern for trade and our own interests that is greater than our concern for human rights.

In 2001, the MEDA programme proposes to give 961 million euro to MEDA countries in the Mediterranean, middle east and Balkans. However, only 691 million euro is set aside for the category 4 budget for Asia, Latin America and southern Africa—

Mr. Rowe

Does the hon. Lady agree that there are problems in addition to trade and immigration? The European Community has yet to work out where it stands in relation to minority populations. For example, there is considerable unease in the EU about pursuing policies that appear to give a moral boost to the Basques.Ms Kingham: Yes, that is an important point. The EU's aid policy commitment to post-conflict reconstruction and conflict prevention somewhat contradicts its trade and strategic interests. It is clear that, if there is no referendum in Morocco, it will go back to war. We should use every available opportunity to ensure that that referendum takes place and that aid policy is used for good means, rather than bumping up our own strategic interest.

Although I have mentioned the MEDA programme and the EU's focus on its own strategic interests, I do not argue that all development aid should go to the poorest countries. Sometimes, the poorest people are to be found in middle-income countries. In certain cases, good development aid can be used effectively in countries that are not necessarily the poorest. There are disparities in wealthier countries as well, where aid to help build a civil society and redress the balance can prove useful. There is also a strong case for giving aid to post-conflict countries, to help rebuild and strengthen civil society. There is a further case for giving aid to assist specific populations where conflict is looming as a part of conflict prevention work. Aid is well spent on such projects in MEDA countries such as Palestine, Kosovo and Bosnia. However, I am worried about whether that is where the programme's true priorities lie—if so, I am fully supportive—or whether our own trade interests dominate, as in Morocco.

To what extent does the allocation of EC resources to the MEDA programme accurately reflect the principles of the Council's and Commission's statement on EC development policies, which makes poverty the overriding objective? As we have heard, MEDA aims to establish a free-trade Mediterranean zone in 2010. Although that will open Mediterranean markets to EU industrial products, in the case of most countries agriculture will not be included. I hope that the MEDA programme will not sacrifice the social and economic rights of the people of the area purely for the EU's gain.

In conclusion, I welcome the declared direction that EU aid policy is now taking. The Government have had a positive influence on that in their dealings with the EU, and our report has added to the debate and to the prospects for the new declaration. I shall watch developments with interest. I am waiting to see concrete results that will prove to me, especially in relation to the MEDA programme, that the EU is truly committed to development rather than to its own strategic interests.

4.31 pm

Mrs. Cheryl Gillan (Chesham and Amersham)

We have had a good debate on the ninth report of the International Development Committee, and I congratulate all hon. Members who have taken part. The report is a significant milestone in the scrutiny of the work of the Department for International Development—which, we must never forget, is the Committee's purpose. We have the advantage of also being able to consider the Government response.

I congratulate my hon. Friend the Member for Hertford and Stortford (Mr. Wells), who has chaired the Committee so ably and has once again produced a report that is adding to the debate and helping to keep the Department on its toes.

The hon. Members for Putney (Mr. Colman) and for Gloucester (Ms Kingham) and my hon. Friend the Member for Faversham and Mid-Kent (Mr. Rowe) are members of the Committee, and I am delighted that they are here to speak. The hon. Member for Richmond Park (Dr. Tonge), who is not in her place, has the advantage of being a former member of the Committee—she was discharged only recently, at the end of last year—and speaks from the Front Bench for the Liberal Democrats on such matters. I have not had the advantage of serving on the Committee, but, having closely followed its work over the past couple of years, I have the highest praise for the contents of its reports and the contribution that it makes to an extremely serious subject.

The debate is partly summarised by the closing remark of the hon. Member for Gloucester: "I am waiting to see concrete results". She, like me, remains to be convinced that there has been any significant progress—although, without being too curmudgeonly, I appreciate the strenuous efforts that have been made to bring the European Union back to the straight and narrow, especially over the past three years.

Sadly, however, the position is summed up by the Committee's conclusion in paragraph 74 of the report: None of the issues raised in this Report are new. We are exasperated with the failure of the Commission to reform its development activity effectively. We have no doubt that were the development reforms we outline implemented, the EC could make a real difference to the elimination of poverty. We all agree with that. It continues: The EC is living on borrowed time—the Commission should give up its addiction to half-measures and have the courage to reform for the benefit of the world's poor. The Government's response—which I commend wholeheartedly, not least for its brevity—is: "The Government fully agrees." Well, I fully agree, but we have been using that language for the past three years and I cannot understand why we are still using it today. The Secretary of State could not have used plainer language when she said: Anyone who knows anything about development knows that the EU is the worst agency in the world, the most inefficient, the least poverty focused, the slowest, flinging money around for political gestures rather than promoting real development. The Secretary of State, in her usual forthright way, revealed that to a BBC Radio 4 interviewer. I agree with her, but it is useless constantly condemning the operation and taking a tough line vocally if there is an inordinate length of time between the criticism, the proposals to correct the mistakes and making a poor fist of remedying the faults with the organisation. It seems to be taking an inordinate length of time to achieve the necessary fundamental changes that must be made to create even a passable aid operation on behalf of the countries of the European Union.

The matter is serious, because between one quarter and one third of the entire budget of the Department for International Development is passed to the European Commission— the worst agency in the world— to spend on our behalf. The Minister will correct me if I am wrong, but the amount for 2000–01 is a staggering £728 million.

Mr. Foulkes

Does the hon. Lady recall which European summit committed us to making that contribution? It was in Edinburgh, and her Government were in power.

Mrs. Gillan

I have no problem with that and I do not know what point the Minister is making. During the past three or four years, the inadequacies of the way in which the aid distribution mechanisms have worked within the European Commission have been highlighted. No one objects to £728 million of taxpayers' money going into a pool with money from other member states if it is used decently and efficaciously. The problem is that it is being sent to what the Secretary of State admits is the worst agency in the world, which has a scandalous catalogue of incompetence and corruption, but still has a budget of more then £7.5 billion to spend. That is an extraordinary figure, and we have the right to question it and to demand action. The problem is that we seem to have words and no action.

Mr. Rowe

I wonder whether my hon. Friend thinks that a system might be devised whereby underspending in one year could be carried forward into subsequent years, so that if the inefficiency continued year on year, the EU's contribution from us and other member states would shrink, perhaps even to the point that it had no staff to run it.

Mrs. Gillan

My hon. Friend makes an interesting point. My skills do not extend to an accountancy qualification, but I am sure that the Minister and his officials will study the proposal and talk to my hon. Friend. Anything would help, because British taxpayers will provide £728 million over the next 12 months and, in the main, they expect their money to be spent wisely and effectively. In this area, they expect their money to be spent alleviating the plight of the poorest in the world. We shall see a repetition of the same faults and problems that we have discussed over the past three years.

On looking at some of the other reports that complement the two before us, I was alarmed to read that Commissioner Patten's investigations had revealed an embarrassing catalogue of events and problems, which stretched from central America to Tibet and the Gaza strip. The committee in the Gaza strip reported the story of a hospital that stood empty because no money was allocated for staff or equipment. That demonstrates the vanity of the ambitions of the world's largest aid donor. Such vanity is self-serving, but the Commission is not serving the world's poor as it should.

As far as I can see, there has been no assessment of the loss of life that has resulted from such incompetence. One can be sure that lives have been lost around the globe. It is tragic that the mismanagement of the European Union aid budget in such a sensitive area could result in some of the terrible stories that the Committee heard.

The Government's response to the report held out some hope of progress. Unfortunately, since that response, things—in the shape of the Development Council of 10 November—have moved on. I use the words "moved on" in relation to time rather than progress—as I am sure that the Minister will understand—because notwithstanding the Government's response, the action plan and the summary proposals have been placed on the record. The Secretary of State greeted those developments in an optimistic fashion, but I remain to be convinced that this is not a repeating pattern of optimistic promises and failures to deliver.

The European Union structures have caused difficulty over a considerable period. Commissioner Nielson, who has been mentioned several times, said that the machine was not constructed to deliver development assistance, but was designed to facilitate political relations between EU states by producing directives and regulations, and by conducting trade negotiations. If the structure was not designed to deliver aid, as is now the opinion of the Commission, why is it not acting more rapidly to reform its structures to enable aid to be delivered correctly? The truth is that the Commission's structure has become so constipated by inaction that it does not know how to react to the suggestions and events that influence it from many different directions.

Today, we have referred to Pascal Lamy's proposal—the everything but arms initiative—which will impact severely on the aid programmes.

Mr. Deputy Speaker

Order. The hon. Lady should not pursue that topic.

Mrs. Gillan

I understand, Mr. Deputy Speaker, but there is a linkage.

The report before us today concerns the structures of the European aid machine and their reform, and I should like to demonstrate that that is even more important because those structures are being attacked from unexpected directions. The inadequacies of those structures have been made apparent by a proposal that has come from another Commissioner. Such proposals will cause more confusion within the aid structures than was initially anticipated. There is confusion in our own Government at the moment. I hope that the Minister can provide clarification, as serious questions need to be addressed.

Yesterday, at Question Time, the Secretary of State told the House that she strongly supported the proposals. She gave the impression that the matter had been considered and would fit in with the aid programmes. The Prime Minister, a few minutes later, told the House that there were concerns about the proposals. Within half an hour, therefore, the Government's position had changed. The Secretary of State said that the Government were fully behind the proposals, whereas the Prime Minister said that there were concerns. On Tuesday, the Foreign Secretary told the Foreign Affairs Committee that although the proposals were extremely important, he was unsighted on the matter.

The confusion is not only about the European mechanism and machinery, but within our own ranks. I hope that the Minister will reassure me that although we are focusing on the inadequacies of the European machine, he will undertake to address the inadequacies of communication within our machine, because the compounding of problems will impact on his budget and certainly on the African and Caribbean countries, especially the Caribbean ones. As he well knows, those countries believe that they will be relegated to the least and less developed country status that the proposals sought to alleviate.

Mr. Wells

Is my hon. Friend aware that in the Lome report, which is tagged to this debate, the Committee is on record as having strongly supported the Ruggiero proposals, which led to the Lome proposals to admit all products of the least developed countries to the European Union, free of tariff and quota. The difference is that, at the time, the proposal was for substantially all products, specifically excluding sugar, rum, rice and bananas. That is the incoherence in the European Union's response to the proposals—the difference between the Development Council and the Agriculture Council.

Mrs. Gillan

I am grateful to my hon. Friend for that intervention, which stands alone. Questions remain to be addressed, and I hope that the Minister will take the opportunity to do so.

Turning to the Government's response, as many of the areas have been ably covered by Committee members, I almost hesitate to add a few more to the list. At the Government's response to paragraph 9, DFID was asked to explain how its and the European Commission's programmes in free accession countries contribute to the elimination of poverty. I was disappointed by the Department's response, although it said: A key element in these strategies is working with the Commission and Member States to ensure that EC aid is effective and addresses issues of inequality and poverty. I hope that the Minister will tell us what progress has been made. What steps has he taken to co-ordinate with the Commission and other member states? At paragraph 13, there is a plea for a single directorate-general headed by a single Commissioner, which the Minister supports. However, the Government's response says that

further re-organisation of the Commission is not currently under discussion. The Government is therefore urging the Commissioners with responsibility for development assistance to improve co-ordination. I understood that, against the background of enlargement, there would be discussions at Nice about the composition of the Commission. Will the Minister enlighten us on progress in that regard? What are the views of the other member states concerned?

The Council has now accepted a Commission proposal for a net increase of 400 posts, many of which would be in the external relations DG. So says the Minister's response to paragraph 69 of the document—the part that relates to the devolution of responsibilities to delegations in beneficiary countries. In some Commission proposals from October of this year, the delegations are destined to be given the necessary human resources, computer equipment systems and training needed to carry out additional responsibilities.

How many of the anticipated new members of staff will be used in the deconcentrated delegations, as outlined in the Commission's proposals? What happened to the Secretary of State's evidence to the Commission, when she said: I think staffing is a trap. They are inclined to say, "We can't improve without more staff …I personally will fight to the death to not give them any more staff until they improve the quality of what they are doing, otherwise we are just throwing more and more resources away? Will the Minister clarify exactly what happened? If I read the runes correctly, the fight to the death was obviously significantly unsuccessful in that case.

The Committee carried out a first-class job, but it must be particularly frustrating for its members because the main state of affairs has proved to be a failure over the past three years. Despite all their words of wisdom, nothing much seems to have happened. In fact, on 13 July when the matter was previously debated, my hon. Friend the Member for South-West Devon (Mr. Streeter) said that the Minister still had to achieve results, and that still holds true four months later. We have more proposals and an action plan. I am grateful to the Department's officials for letting me have sight of the follow-up documents, which I had some difficulty in obtaining from the Library. However, I have now obtained the draft plan and the action plan timetable.

In the implementation and follow-up to the report, I found it extraordinary to read a document that made no mention of the difficulties of the European aid budget. It seemed to start from scratch. It made no reference to other historical events that have been outlined many times in this place. It seemed to be starting afresh from a high base. The proposal states: The implementation of the new approach has to be seen as a process which brings long-term changes, requiring considerable political will and the maintenance of a climate of trust. I dispute that immediately, because I do not consider that there has been a climate of trust against which we can maintain that sort of faith. It continues: Regular follow-up will enable the Community to verify the results achieved and, if necessary, to proceed with the adjustments inherent in an ongoing process. Will the Minister enlighten me about what regular follow-up there will be on the matter?

Finally, the action plan is fairly obscure. It does not give a timetable that is meaningful in any way, shape or form. What sanctions will exist if that timetable is not met? The report has provided us with a further excellent expose of what is going on. On 13 July, the Minister was cautiously optimistic that the proposals would provide concrete improvements in the quality and efficiency of the programmes, but I do not share that optimism. I hope that he can reassure me that my lack of confidence in the performance of the Department is misplaced.

4.54 pm

The Parliamentary Under-Secretary of State for International Development (Mr. George Foulkes)

The Government welcome this further debate on the effectiveness of EC development assistance. I also wish to congratulate the hon. Member for Hertford and Stortford (Mr. Wells) on initiating it, and others who have participated so well this afternoon. We held debates in Westminster Hall on 2 February and 13 July, and in Standing Committee B on 1 March. The Government are fulfilling their pledge to scrutinise regularly the DFID's work on such matters. The work of the Department and its predecessors has never been subjected to such scrutiny.

At one point during the speech of the hon. Member for Chesham and Amersham (Mrs. Gillan), I thought of a friend of mine who said that everything on the subject has already been said, but not everyone has said it. She then proceeded to repeat much of what had been said. I shall try to answer all the points that have been made during our comprehensive debate this afternoon. We recognise that, among the multilateral agencies, the European Commission is probably the most important agency for the United Kingdom. As several hon. Members have said, including the hon. Member for Hertford and Stortford, about a third of British development assistance goes through the Community budget and the European Development Fund. We must not forget that the European Union is the world's largest single market. It is a vital export market to many developing countries.

The Select Committee report that was published in July is and has been very influential. It has had a substantial impact in both the United Kingdom and the European Commission. The Government welcome the report and share the Committee's disappointment at the past poor performance of EC development assistance. As we said in our response to the report, we agree with many of the conclusions about what needs to be done, as the hon. Member for Chesham and Amersham pointed out.

Today I want to report on the significant progress that has been achieved so far. Most members of the Committee, whatever their party, acknowledged that such progress had been made. Indeed, at one point I thought that the hon. Member for Chesham and Amersham was doing so, albeit grudgingly.

We are at a critical point for EC development assistance. Progress has been made, but there is still a long way to go, and the Government recognise that. It is therefore absolutely vital to maintain momentum. Debates such as this are important in maintaining continued high visibility on the issue.

When we last debated the matter, in July, I described the four key elements to improving the effectiveness of EC development assistance. The first is a clear policy framework focused on an overall objective of poverty eradication. Secondly, EC programmes need to be more strategic. The EC needs to do less if it is to be more effective. Thirdly, Commission procedures need to be radically modernised. Fourthly, more EC development assistance needs to be directed to poor countries. Since 13 July, some good progress has been made, as I shall outline.

As many hon. Members know, earlier this year the Commission published a policy statement on EC development assistance. That was a step in the right direction, and we welcomed it as such. The need for an overarching development policy was one of the main conclusions of the meeting in May 1999 of Ministers responsible for development following a global evaluation of EC aid. However, we had some problems with some of the language in the statement, which detracted substantially from its poverty focus, as the Select Committee did say in its report.

Since we last debated the matter in July, we have all been working extremely hard to ensure that the Council's declaration on development policy included a clear commitment to poverty eradication. I am delighted to confirm what others have acknowledged—an acknowledgment for which I am grateful—that my right hon. Friend the Secretary of State for International Development and other EU Ministers responsible for development have agreed a new poverty-focused development policy. That is a big step forward: indeed, their declaration was a milestone for the European Community, for several reasons.

The declaration established for the first time that poverty reduction and, ultimately, its elimination, is the principal objective of EC development policy in all developing countries. A commitment was also made to focus Community resources where they will have the most impact in poverty reduction—a commitment for which, as hon. Members know, the Government have long argued.

The policy also endorses proposals for a much sharper focus in the European Community programme, as hon. Members have already said. The Community will limit its activities to those six main areas and will take a lead role in dialogue with the Government in only a very few sectors in each country. In other areas, it will work collaboratively and co-operatively—all those "C" words—with other donors in the lead. That is the complementarity that we were talking about that was raised by the hon. Member for Richmond Park (Dr. Tonge). That covers my second point from July—the need for the Community to be much more strategic in its approach and to focus on the areas where it has a comparative advantage. We accept the need to keep monitoring the matter and to keep the pressure on, as hon. Members suggested. My right hon. Friend the Secretary of State and I will take that on board as well.

The hon. Member for Hertford and Stortford asked how we could stop the European Parliament creating new budget lines outside the six core areas. The development policy relies on Parliament, the Commission and the Council to adopt it. That was agreed between the Commission and the Council in consultation with the Parliament. The new policy should therefore have wide ownership, which includes the Parliament. The Commission has the right to initiate proposed new regulation if there were to be any outside the policy, but that is unlikely. However, I assure the hon. Gentleman that we will monitor that matter very closely indeed, and should there be any deviation, we will certainly take that up.

The improved co-ordination should be helped by a new framework for preparing EC country strategies, which was also agreed at the Development Council. The framework emphasises the need for the Community to collaborate closely with other donors and to focus on the poverty reduction strategies developed by the partner countries. The declaration also acknowledges that poverty must be addressed on a broad front, a point raised by a number of hon. Members. Macro-economic policies, governance and trade policy are as relevant as investments in health care, education, infrastructure and in enterprise, which, again, is a point raised by many hon. Members, including my hon. Friend the Member for Putney (Mr. Colman). That is a welcome big change, for which we have long argued.

Another vital aspect is that the new policy calls for greater coherence between development objectives and other EC policies that affect developing countries. We have been doing that in Britain in our work with the Department of Trade and Industry, the Ministry of Agriculture, Fisheries and Food and others, and that coherence is now also accepted in the European context. The Development Director-General in Brussels has set up a unit tasked specifically with monitoring that. There is not just acceptance of the principle, but a unit specifically to monitor it.

That clear policy declaration applies to all EC programmes in developing countries. It is vital, and it should begin to break down the regional divisions and raise overall standards. However, it is only a start, and I accept that on its own it will not achieve much. People living in poverty are not interested in fine words from European capitals; they need good governance supported by high-quality development programmes that are delivered effectively. Turning the now good development policy into effective programmes on the ground is essential. We have the policy, but we need to turn it into effect on the ground. My right hon. Friend the Secretary of State has called on the Commission to begin implementing the policy immediately, which I hope will please the hon. Member for Hertford and Stortford.

Mr. Wells

The Minister said that the EC needs to do less and be more effective. The six core areas identified by the Commission are very welcome, but will he make certain that projects and programmes that are not in line with the six core objectives are phased out and stopped quickly?

Mr. Foulkes

That is a good point, which I hope to cover in a moment. In evidence to the Select Committee in July, the Secretary of State said that we had called for an action plan. I am pleased to report that Commissioner Nielson presented an action plan that was discussed alongside the policy declaration at the Development Council earlier this month. The Government have welcomed that. It contains a number of important actions required to implement the new poverty-focused policy and other reforms recommended by the evaluations. It is a good first step. However, we accept that some further work is needed, especially in setting targets—success criteria by which we can judge results. Development Ministers agreed that the action plan would be regularly reviewed, as a way of monitoring progress in the reform of European Community development assistance. We should not simply accept that that reform has been made and put it on the shelf; it must be constantly monitored to ensure its implementation.

The third key area of reform that I mentioned when we debated European Community aid in July was the need radically to streamline Commission procedure, which, I am pleased to report, is being tackled on several fronts. Internal procedures are being streamlined. Hon. Members will be delighted to hear that the number of different contract types has been cut from more than 30 to four. The cumbersome system previously used for overseas aid tenders and contracts has also been improved, which should speed up aid contracts, payments and delivery on the ground. I shall specifically mention non-governmental organisations later.

The new Commission also has a reform agenda, much of which is centred on streamlining and improving systems. Britain's Commissioners are in the forefront of those reforms, which have the potential to improve the quality and effectiveness of European Community programmes.

The reforms come in two strands. First, in May, Chris Patten proposed much-needed reforms of the way in which the Commission manages the Community's external assistance. There are several elements to those reforms. One is the transformation of the common service—SCR—into a strengthened body called EuropeAid. The second is the devolution of responsibility for managing programmes to the European Community's delegations—which one hon. Member referred to as embassies—accompanied by a strengthening of their staff resources. We have all argued for that. Finally, an inter-service quality support group will benchmark best practice in the European Community's programmes—again, something for which we have argued.

The International Development Committee covered those areas of reform in detail in its inquiry into European Community aid, published in July, not long after the proposals had been circulated. Since then there has been some progress. From 1 January, EuropeAid will be fully responsible for implementing European Community development programmes, from identification, through design and implementation, to evaluation.

My hon. Friend the Member for Putney raised the question of technical assistance offices. Many TAOs—which are essentially unmonitored consultants used to implement programmes when there are insufficient Commission staff—have been disbanded. It is intended that the rest will be disbanded by the end of 2001. I urge my hon. Friend not to imagine that the staff in our Department are not experts. There are people in our Department, and an increasing number in the Commission, who are acknowledged experts in all those areas—better than the people in development agencies here or overseas. Some of them previously worked in non-governmental organisations and, having joined the Department, have given impetus to the Department's work.

Mr. Colman

I was not suggesting that there was not expertise within either the European Commission department, or the Department for International Development. My concern was that career civil servants without that expertise might be transferred across within the European Union, and that moving away from the system of TAOs would mean a loss of expertise.

Mr. Foulkes

We will certainly keep an eye on the situation, because we do not want a loss of expertise.

Mr. Rowe

I enormously welcome the idea that European delegations should be strengthened and used, but will the Minister keep a close eye on the cooperation between them and the bilateral countries? It would be disastrous if, for example, our office in India clashed with the European Community delegation in India.

Mr. Foulkes

I agree that that is important. We are keeping an eye on the situation and will continue to do so in the European Community, the United Nations Development Programme and other agencies. There must be much more co-operation on the ground; in fact, the Secretary of State is taking the lead on achieving that co-operation, with the Utstein group and others.

Mrs. Gillan

We have been told that the technical assistance offices will be dismantled and the Commission start to take over their role from the end of 2001. Why will the process take 12 months? Why can that not be achieved more rapidly?

Mr. Foulkes

New staff are moving into EuropeAid, which is due to grow from 700 to 1,500 people—of whom 1,000 will be placed in the delegation overseas after an interim period. About 100 staff are being transferred from the Development Directorate-General and the Relex Directorate-General, with the rest being deployed from elsewhere in the Commission or created as new posts. That is a monumental change and it will take some time.

I wish to answer all the questions that were asked during a very long debate. The hon. Member for Chesham and Amersham commented on the assertion by the Secretary of State about fighting to the death hon. Members, and not least myself, know that she is a fighter—before agreeing to any more staff without a corresponding increase in quality. The corresponding increase in quality is the key issue. The moves that I have described will result in better quality; that is why we have been happy to go along with them.

Structures in EuropeAid are being changed to try to end the culture of obstructive bureaucracy described by hon. Members. The first change is that teams will be regionally organised and will handle all aspects of implementation, which should greatly increase ownership and reduce transaction costs. As well as the reforms specific to the management of external assistance, Vice-President Kinnock is leading the charge on reform throughout the Commission. In April 2000, he published a White Paper on the reform of financial and staff management. Improving financial management and getting well-motivated, skilled staff into key positions is crucial in improving EC development programmes as well as other activities. The cornerstone of the Kinnock White Paper is the proposal to modernise the EC's financial management. That will give managers the greater financial responsibility for which hon. Members have been asking, and should improve accountability and the ownership of programmes. It is important that people running the programmes have that accountability and that feeling of ownership. There will also be a move to activity-based budgeting, which should better target administrative resources where they are needed. Negotiations in the EU on the new financial regulation are under way and a fast-track proposal, which will start to streamline procedures and make additional posts available, is close to agreement.

The hon. Member for Hertford and Stortford spoke about a single directorate-general. There is indeed a strong case for having a single directorate-general responsible for development. At present, we have a single Commissioner responsible for development policy, and a single implementing body—EuropeAid. Transferring responsibility for all aspects of implementation to one body and having better organisation within that body would reduce transaction costs and improve efficiency and effectiveness. That is a huge step forward and we should see how it works.

The hon. Members for Hertford and Stortford and for Richmond Park and my hon. Friend the Member for Putney raised the question of whether PHARE, TACIS and the assistance to transition countries should be included in our budget. We recognise the argument for relieving DFID of the UK share of the cost of MEDA, PHARE and TACIS. Our policy is to focus resources on the poorest rather than the better-off countries, but those programmes are part of the EC's external spending and include development activities.

To put a compelling argument that might influence hon. Members, having financial responsibility in those areas buys us a say in how MEDA, PHARE and TACIS are funded and managed. We have been heavily engaged in negotiating the new MEDA and TACIS regulations and have secured important improvements. We remain active in the implementation of all three programmes, pushing hard for better quality, a stronger anti-poverty focus and rigorous review and evaluation. As development specialists—as we in the DFID are—we are better placed than any other Whitehall Department to do that. I have heard no one suggest that other Whitehall Departments should do it, and I hope that no one is suggesting that. Paying the piper helps us call the tune, and I hope that the members of the International Development Committee will, in particular, support our calling that tune.

I shall turn to a question about payment to NGOs that I know has exercised the Committee, and it was raised today by my hon. Friends the Members for Putney and for Gloucester (Ms Kingham), and the hon. Member for Hertford and Stortford. I know that it has caused some grief. No one, including the Commission, disputes the fact that there is appalling record of handling project proposals and disbursing project funds from the Community's NGO co-financing budget line.

Hon. Members have suggested that the EC introduce a payment code of conduct. The introduction of penalty payments may be attractive in some ways to the NGOs, but we believe that it could exacerbate an already burdensome and difficult administrative system. The European Commission is already obliged to make payment within 60 days of the approval of a budget.

We consider that the British Government should work with the Commission, other Governments and NGOs to ensure that the commitment is consistently met. Why not ensure that the existing regulations are adhered to? That would be better for the NGOs, and it would mean improving the administration of grants, the project appraisal process and the payment system. The EC has commissioned an evaluation of the operation of the NGO co-financing budget line, which is due next month. We look forward to its recommendations, and the Committee may like to make some suggestions on it as well.

The hon. Member for Faversham and Mid-Kent (Mr. Rowe), in his usual philosophical and profound way, raised several questions that were different from those regularly asked. He asked about institutional capacity building in the European Commission. We have taken that on board, with our detached national experts. I have forgotten how many of them there are, but it is a significant number. We are helping to build the capacity, with our UK experts working in the Commission. The hon. Gentleman also asked about parliamentary co-operation on development. I welcomed the initiative taken by the Committee's Chairman, who assembled the chairmen and women of such committees throughout Europe. On behalf of the Department, I say that if the Committee can suggest a way in which we can help in terms of parliamentary cooperation, I am willing to consider it.

The hon. Gentleman also spoke about a specific development dilemma. During the past three and a half years, I have realised that development is full of dilemmas. My hon. Friend the Member for Gloucester spoke about inequality and poverty in middle-income countries. We are certainly taking account of that. In the nicest possible way, I have great affection for the hon. Member for Hertford and Stortford, as hon. Members know. I could see him almost being tortured by the dilemma of the proposal for least developed countries' market access. He must recognise that those countries are the poorest in the world, and have only 4 per cent. of world trade and a large number of poor people. They are the countries that we should help. Every time we come up with a proposal to do so, someone else will be less well off. The hon. Gentleman talked about the dilemma facing factories in our constituencies. There are many textile factories in my constituency, so I am conscious of the problem.

I remind the hon. Member for Chesham and Amersham that the Prime Minister, in his Mansion House speech, made a public commitment to duty-free and quota-free access for all LDC products on 22 November 1999. None of the LDCs is a significant exporter of sugar, rice or bananas, but there are some worries that they could take advantage of duty-free access to the last two of those products. Concern has been expressed about possible exports of sugar and the effect on African, Caribbean and Pacific countries, especially Caribbean ones. We continue to consider those views but, as has been said, there are transitional arrangements in proposals for consideration for the three products over three years. In fact, there would still be an 80 per cent. tariff on those products coming into the EU, so we are only improving it by 20 per cent. That gives middle-income countries that might be affected time to adjust. We have been giving them significant sums to help them to do so. The average per capita gross domestic product of the poorest countries in the world in 1998 was $287 less than a dollar a day. In the Caribbean, by contrast, it was $4,809. We must, of course, take specific problems into account, and that is what the transitional arrangements are there to do.

I hope that hon. Members understand that there is a dilemma, but realise that, if we are genuinely to help the poorest countries in the world, we must do so not just with aid, but with trade and investment. Once we start helping them with trade, other people will be affected. If there is opposition every time that happens, we will never help the poorest countries in the way that we are trying to do, and I hope that the hon. Member for Hertford and Stortford will recognise that.

Mr. Wells

I do indeed recognise that, and I am grateful to the Minister for giving way because I know that he does not have much time. I feel that I must spell out to him what is involved, particularly in the case of sugar. Tanzania, Zambia and Malawi are least developed countries. They do not export much at the moment, and they have a small quota into the European Union. However, they could increase it instantly. I have seen the sugar estates and I have no doubt that the Minister has seen them, many of them developed with DFID money. They could export into the European Union and upset the price structure, particularly in Britain, thereby immediately disadvantaging countries such as Guyana, as I emphasised. The Minister must take measures to help people, including those in this country, who will be badly affected. If he does not, he will have a revolt against the policy of offering trade to the least developed countries, a policy that I believe to be right. We must make certain that the benefits of that trade reach the poorest in those countries and are not just absorbed into the extra profits of sugar traders.

Mr. Foulkes

I understand that, and I thought that I had said that we take account of those particular factors, and that we should examine them in light of the proposals. I must say that I am astonished by the way in which this has been raised by a spokesperson for the Opposition on so many occasions. I hope that the hon. Gentleman understands that, if the proposal falls, potentially one of the greatest measures for helping the poorest countries of the world will fall because of such opposition. I hope that the hon. Gentleman agrees that he would not want to be the cause of that.

In relation to the speeding up of implementation, which several hon. Members have raised, there are two main elements. On existing commitments, the Commission has established teams to trawl through the huge backlog and wipe commitments off the books when they are more than five years old. I understand that the backlog has already been cut by 21 per cent. up to the end of July. For future commitments, the Commission proposes a three-year "sunset horizon" for implementation, which would prevent new backlogs from building up. Those proposals are part of the new MEDA regulation, and their global application will be discussed in the new financial regulation.

Internal procedures are also being streamlined. Cumbersome systems—I have mentioned all that before. I get very good briefing. [Laughter.] The only problem is that sometimes I get it twice.

The hon. Member for Putney also raised the question of dumping, and we accept the importance of ensuring a balance between food security and food aid. The relationship between the two can be made coherent with sustainable rural development. The Swedish presidency is planning to improve the policy of the EU on that area, and we are in close contact with our colleagues in Sweden, including our experts on food security. We are like-minded on that, and will be working together closely to improve EC policy on it.

The hon. Member for Richmond Park raised the question of member states implementing EC projects, in the context of complementarity of delegation. That has been agreed for the Cotonou implementation, which we in Britain think is good in principle, although it needs close monitoring. Not all member states share our principles and objectives. If the hon. Lady can do anything to persuade them to move in our direction, we would be pleased.

The hon. Lady also raised a question about the efficiency of ECHO—equipment for charity hospitals overseas—as a proxy for my hon. Friend the Member for Clydebank and Milngavie (Mr. Worthington), who is in Anniesland today. I hope that he is successful there. I am pleased to report some progress from the EC's humanitarian arm since the publication of the Select Committee report. In October, my right hon. Friend the Secretary of State and I met ECHO's new director, Mrs. Constanza Adinolfi. She recognises ECHO's current weaknesses, and we found her serious about correcting them. She is a powerful, strong-willed woman, and I think that she will achieve the necessary reforms.

Mr. Wells

She must improve it a lot.

Mr. Foulkes

I think that Mrs. Adinolfi had been appointed for only a few days when the hon. Gentleman and the Committee met her. When we saw her, she had been in the job for a few months, and was most impressive. We believe that the speed and transparency of reporting will be improved, helping to ensure that ECHO's funds are spent effectively on the right type of assistance in the right places at the right time.

There has been some good progress recently in changing the environment so that European Community development assistance will make a much improved impact. A good policy sets a clear objective of poverty reduction and, ultimately, elimination. We have a good action plan for implementing the policy. Improved contracting procedures should streamline operations.

There are also new regulations on the EC's programmes in the former Soviet Union and the Mediterranean. As we discussed in detail in February, the Community has this year concluded negotiations on the Cotonou agreement, covering trade, development and political relations with the African, Caribbean and Pacific countries. Cotonou has a clear objective of poverty eradication and a trade deal that aims to integrate developing countries to the global economy to benefit the poor. It is a significant improvement on its predecessor, the Lome convention. None of that would have been achieved if the Government had not been engaged constructively with the European Union, and we were tough where necessary. We do not hold back if we need to say what we think and press for what we believe in.

We recognise that much work remains. The greatest remaining concern is the fourth issue that I described in July, the allocation of EC resources. My hon. Friend the Member for Gloucester raised the subject dramatically today. I assure her that the Government will continue to push to turn round the shameful fall in the share of EC aid for the poorest countries. The acknowledgment in the new EC development policy of the importance of prioritising poor countries for resource allocation is a start.

The development policy agreed this month links resource allocation to the poverty objective. We successfully defended the Berlin budget ceilings in the recent negotiations on allocations. For example, we managed to hold the MEDA programme down to 5.35 billion euros, when some other countries wanted it as high as 7 billion euros or even 8 billion euros. That is a significant step forward. Cotonou allocations are based on poverty and population. The Government will continue to press hard for improved poverty focus in allocation and expenditure, starting with an orientation debate on EU external relations in January 2001.

I appreciated what my hon. Friend the Member for Gloucester said about Morocco. I remember my visit to see the plight of the Polisario front, so I understand that as well.

A better share of resources for the poorest, along with better policies in place and the much needed reforms that I have described being under way, will give greater hope for concrete improvement in quality and effectiveness on the ground. That improvement will take some time. The hon. Member for Chesham and Amersham and her colleagues had 18 years to achieve it. We have made significant progress in the past three and a half years. The EC has the potential to make a real and important impact on global poverty. We are determined to ensure that it realises that potential.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Five o'clock.