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Dr. Jenny Tonge (Richmond Park): Does the Secretary of State agree that respect for human rights depends on how well educated a population is, and that that depends on the relief of poverty in the first place?

Clare Short: I recommend that hon. Members who have not recently read the universal declaration of human rights re-read that document. It is the most wonderful piece of work, in both its writing and its conception. It tries to encapsulate all the basic rights that every human being needs to enjoy to have the dignity of humanity. Those rights include, for example, the right to speak, to practise one's religion, to be consulted on politics, to have respect for one's culture, to see one's children educated and to receive health care. People have the right not to be oppressed and a positive right to the things that enable the enjoyment of a decent life.

The universal declaration imposes on everyone in the international system a duty to try to achieve those rights for all people as rapidly as possible. The duty is placed first on each country's Government, and a further duty is placed on us all to seek a form of world governance that maximises the chances of all those rights being realised by all people.

I therefore agree with the hon. Member for Richmond Park (Dr. Tonge) that education is the key factor in creating conditions in all countries that enable everyone to celebrate all those rights. Progress is always possible. If we are to make social and economic progress and to have a decent world, we should all be seeking to respect the rights of every human being, especially those of the poorest, the minorities and the marginalised.

Jim Knight (South Dorset): The events of 11 September have been mentioned. I have read that the World Bank's assessment is that the attacks are likely to have an adverse effect on economic growth in developing countries both this year and next, which will increase by 10 million the number of people living in poverty in the

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countries that my right hon. Friend mentioned. Does she agree with that assessment? If so, how will that affect the goal of reducing international poverty?

Clare Short: My hon. Friend is right—the World Bank has assessed the likely effects, and the statistics that he quoted are correct. Before 11 September, the world was heading into recession, and the world's two largest economies—those of Japan, which has long been doing poorly, and the United States—were experiencing a downturn. The danger is that the shock and the shaken confidence caused by 11 September will deepen that downturn. Although it will affect every country, the poorest countries can least afford to deal with it and with the resulting hurt.

That assessment is right. We must now try to create an upturn in the world economy—one that is equitable—and restore confidence. The successful launch this weekend of the Doha trade round would help that. An upturn in the economies of Europe and north America would help not only the people of those countries but the people of the developing world.

The world has, of course, changed. We used to talk about our own country's economy as though we could control it as a political issue. Now, not even the United Kingdom, let alone a poor country, can look after its own economy. Increasingly, we have the responsibility to try to manage the world economy in a manner that brings benefits to all, especially to the poor. Although we are experiencing a downturn, we must work to turn it round as rapidly as possible.

The current relevant legislation is the Overseas Development and Co-operation Act 1980—a consolidating Act that draws its provisions from 33 statutes. Much of it is outdated or obsolete. New legislation is required to update it to entrench the objective of poverty reduction, to provide new powers to support the building of civil society and a commitment to development in the poorest countries and in our own country, and to help the private sector in developing countries to build an economy that will grow and give people the chance of a better life and better public services.

The House will recall that, in the Pergau dam judgment, the courts found that the powers in the existing legislation were so widely drawn that—in the court's rather polite words—they caused the Minister to "mislead himself" into believing that he could use aid money to support economically unsound projects. Some political imperatives were connected to that misjudgment, which the courts held to be illegal. I am sure that all hon. Members will agree that we must ensure that that does not recur in any future Administration. We must also ensure that a future Administration do not reintroduce a policy of tying aid without having to change the law to do so.

The purpose of the work that we undertake—the reduction of poverty—will be enshrined in the Bill, which will not allow priority to be given to commercial or political interests. Of course, all Governments have legitimate commercial and political interests, but the aid budget should not be misused to serve them; the aid budget exists for another purpose. Development assistance

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should be focused on the reduction of poverty. Short-term considerations that do not contribute to a reduction in poverty are not permitted by the Bill. I am sure that the House will agree that that is a good discipline and that it should be imposed on all holders of my office.

Mr. Andrew Robathan (Blaby): The Secretary of State knows that not only do I generally agree with her on these issues, but I generally support the Bill. I should like to take her back to the difficult issue of poverty reduction, which is so critical. Is it not often the governance of many third-world, developing countries that leads to poverty? How much more can we do in our policy or in the Bill to stop poor governance and the Government corruption that lead to the poverty that we seek to alleviate by sending money?

Clare Short: The hon. Gentleman is right that, in the modern world, poor governance is increasingly a block on the economic growth and improvement in social provision that enable economies to grow and improve people's lives. That fact is truer now than ever before because of the increased availability of international investment and foreign direct investment. Such investment will go only where corruption is not rampant and where there is peace and proper enforcement of commercial contracts. Although poor governance was always undesirable, now it is an absolute block to economic development.

As the hon. Gentleman knows, more of the Department's efforts are being devoted to trying to improve the effectiveness of government. The quality of the management of the public finances is absolutely key. Better, more transparent management of public finances ensures that the available money is better used, and good systems ensure that corruption does not occur, although it may be a temptation.

We should all remind ourselves of one fact. In Ethiopia, for example, GDP per capita is $100 and 62 per cent., I think, of children who survive to five are chronically malnourished. It is very difficult to be a good Government in an extremely poor country, but Governments must strive to achieve that. We must all maintain the pressure, and we must all support and build better systems. Although efforts to provide for everyone and to maintain a democratic ethos must continue, it is difficult to do so in poor countries. We should therefore have some humility when considering these issues. Nevertheless, the hon. Gentleman was correct on his fundamental point: good governance is the key to economic growth and the provision of better services, which in turn enable people to improve their lives and make the reduction of poverty possible.

The House should be clear—sometimes there is muddle in the debate—that the overriding objective of poverty reduction does not mean that development efforts are restricted to the provision of social assistance or charitable handouts. The White Paper, "Making Globalisation Work for the Poor", sets out clearly the conditions needed to reduce poverty in developing countries. They include economic growth that brings benefits to all, not merely to a small elite, and the provision of appropriate quality Government services. So often in the past when we have said that the focus is on poverty, people have thought only of social policy. Securing a good macro-economic policy and a thriving private sector, however, is all part of bringing about enough economic growth to reduce poverty systematically.

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To achieve such conditions, Governments need to be able to run effective states. They need, for example—this is the point that the hon. Member for Blaby (Mrs Robathan) was making—the capacity to manage their public finances well, and to raise revenues properly and fairly. They also need effective regulatory systems to provide the framework for a thriving private sector that can attract both domestic and foreign investment.

One of the tragedies of Africa, for example, is that 40 per cent. of domestic savings leave the continent. If it is not possible to bring about conditions in which domestic savings stay at home, it will not be possible to bring about the conditions that attract foreign direct investments. All those are key considerations.

The creation of a properly accountable security sector is crucial to the stability and security that are needed for economic growth and poverty reduction. We need police who enforce the law, and courts that enforce contracts and the like without being corrupt. Armed forces that are over-large or not democratically accountable often lead to instability, mis-spending and even military coups, and thus to the diversion of resources. Equally, the existence of a free and effective press is important to secure the democratic accountability that is necessary for the functioning of a successful modern state.

The Bill will allow support in all those areas to continue, as long as such assistance is designed to contribute to the reduction of poverty. We are, for instance, engaging more in security sector reform. We want proper accountability for the armed forces, and more effective and law-abiding policing. Such conditions are also key to the reduction of poverty: the fact that the Bill identifies that as our objective does not mean that we cannot engage in all the other complex areas of policy. The Bill does not in any way restrict the sectors in which we work, but it requires the purpose of our effort to be to generate institutions and policies that will lead to the systematic reduction of poverty. That is the test.

As I said earlier, there are two exceptions to the Bill's overriding requirement that poverty reduction must be the purpose of international development assistance expenditure. The first concerns assistance given to the overseas territories. The Government's responsibility for those territories goes beyond a commitment to help them to reduce poverty, although of course any assistance that we provide should include that objective. The requirement that assistance to the overseas territories must be likely to contribute to a reduction of poverty is therefore replaced by a requirement that our assistance must be provided for the purpose of furthering sustainable development or improving the welfare of their population. It will allow the Government to go on providing the territories with all types of support, such as direct budgetary support or support for the construction of infrastructure when those meet reasonable needs.

The second exception relates to assistance provided in response to disasters or emergencies. That is because such assistance will not in all cases be likely to contribute to a reduction of poverty. Disasters, for example, do not always occur in the poorest parts of countries, or in the poorest countries. If the requirement to provide humanitarian assistance always had to serve the objective of poverty reduction, our ability to move rapidly whenever people were in trouble would be restricted. The

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United Kingdom has a very good record for speed and flexibility in its responses to humanitarian crises, and that capacity should not be put at risk.

The Bill also broadens the Secretary of State's powers to achieve the narrower poverty reduction focus. It provides a firmer legislative basis for the support of work that improves development awareness and advocacy. That includes what is done in our own country. I am pleased to note a growing cross-party consensus in the House that this is an imperative for the country, and that we should unite behind it. I think that the public care about these matters too, but need to be more informed about the way in which the reforms of trade rules and other arrangements can ensure that we make progress.

The United Kingdom could make an important contribution on the world stage in this regard, because of the kind of country we are. That is why we have increased our funding for development awareness in the UK: we want to secure that informed and deeply committed public support. Similarly, we want to help people in badly governed developing countries to understand their right to use democracy to demand better governance for themselves. We want to fund that kind of awareness among the poor, not just the provision of social services.

Under the existing law, we have had to fund such work under the annual Appropriation Acts rather than by means of mainstream legislation. We have been strengthening our work since 1997, but only with funds committed under those Acts. Henceforth, if the Bill is passed, it will be possible to fund it under the new powers that it conveys.

The second area in which the Bill extends existing powers is that of support for the private sector. Under current legislation, our powers are restricted to the provision of grants and loans, which are not always the best way in which to help enterprises become commercially viable.

The firm that makes Divine chocolate, for example, is a not-for-profit company involving Ghanaian cocoa producers and some of our non-governmental organisations. It wanted a guarantee from us, so that it could obtain a loan from the National Westminster bank to enable it to get its enterprise moving. We have no powers to give guarantees; we can only give grants. A grant, however, can undermine the discipline of a commercial purpose. We had to get special permission from the Treasury to give a guarantee. We are therefore taking the power to make such provision ourselves.

Similarly, micro-finance should not be funded only by overseas development assistance. We should be securing banking across the world to provide poor people with credit through mainstream commercial agencies, and we are doing more to encourage that. We need the capacity to widen the opportunities available to us, such as the taking of shares or the provision of convertible loans, options and guarantees. The Bill will enable us to support far more effectively the building of private sector capacity capable of contributing to the reduction of poverty.

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