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Clare Short: I find it extraordinary that the Conservative party has adopted a posture of supporting

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sub-optimal public sector-led investment that gets a rate of return to which the private sector would never respond. If the hon. Lady is saying that Africa and other regions in which the CDC operates can get investment only at that level, she is suggesting that the private sector will never invest in those countries and they will be marginalised from the globalising economy for ever. [Interruption.] I am not missing the point. If the CDC goes for a lower rate of return than the market would accept because it is not possible to make better investments in such countries, those countries will be marginalised for ever.

We have not wrecked anything. I suggest that the hon. Lady looks at the CDC's annual report, published a short time ago. Perhaps the Select Committee will decide to reconsider the issue. We obviously need to ensure that we get things right, but the hon. Lady seems to be making a Communist argument.

Mrs. Spelman: It is not just the Conservative party that is raising serious concerns about the CDC. If the right hon. Lady consults the Under-Secretary of State for International Development, who responded to the Adjournment debate, she will discover that not one Labour Member spoke in defence of the Government's actions. Indeed, the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) crossed the Floor to speak with the Opposition. The lack of support for the Government from any part of the House on that occasion should at the very least be cause for concern.

Hugh Bayley (City of York) rose

Mr. Barker rose

Mrs. Spelman: I will give way first to my hon. Friend the Member for Bexhill and Battle and secondly to the hon. Member for City of York (Hugh Bayley).

Mr. Barker: Does my hon. Friend accept that it may be right, as the Secretary of State says, to modernise the CDC, but that the right hon. Lady does not appreciate the huge leap implicit in going from a rate of return of 8 per cent. to one of 25 per cent? That cannot glibly be regarded as modernisation. It is a massive step change to get a return on equity of 25 per cent. Surely a much better model for Africa would be in the form of the old 3i corporation, which was seen as seed-corn development, pump priming where other equity will follow, with returns on capital of perhaps 15 to 18 per cent. either as equity or mezzanine debt. I speak as someone with venture capital experience, and I do not think that the Secretary of State grasps the nature of a 25 per cent. return on capital.

Mrs. Spelman: I thank my hon. Friend for that intervention. It shows the benefit of having the opportunity to debate what can be done to improve the present situation. My hon. Friend's expertise in venture capital was valuable when we debated these matters in an Adjournment debate.

The great difficulty is that the sort of returns that it is now the strategy of the CDC to secure are extremely difficult to achieve from agriculture. Agriculture is the

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bedrock of civil society in many developing countries. The loss of investment through the CDC in agriculture is extremely serious for many developing nations.

Hugh Bayley: I shall defend the Government's policy on the CDC. For the hon. Lady's argument—that it is a bad thing that the CDC is beginning to move away from its agricultural investments—to be convincing she would need to make the case that the CDC is a better source of finance for agricultural development than the Department for International Development.

The Department is increasing its investment in agricultural projects. As the hon. Lady has said, that is because they would not necessarily generate a commercial rate of return. Surely it is right to get each part of the development operation addressing the problems that it is best attuned to addressing.

Mrs. Spelman: The hon. Gentleman makes a revealing point about what may be at the back of the Government's mind in connection with the CDC's change of strategy. During the passage of the Commonwealth Development Corporation Act 1999, the former Member for Hertford and Stortford, Mr. Bowen Wells, made exactly the point that the root cause of one of the problems was innate competition between what the CDC could do and the work of the Department. At the time, that was strenuously denied by the Government spokesman. Perhaps the hon. Gentleman has brought out an underlying truth that needs to be addressed. There is still a fundamental problem, as many United Kingdom farmers know too well, which is that with a low rate of return in agriculture, it is difficult to secure the necessary investment for the essential modernisation of agriculture. Our deep concern is that opportunities are moving away.

Clare Short: I would welcome a debate. I hope that the usual channels are listening

Mrs. Spelman: I have had a hint from the Secretary of State that she might be prepared to allow another debate on the CDC in Government time. There may be an important reason for doing that. Is it not better, when something is going wrong, that we admit that honestly together and try collectively to work out how to put things right? Perhaps all hon. Members whose hearts are in this matter could contribute to a subsequent debate.

Clare Short: For the sake of clarity, I must point out that I do not have the power to allocate time. I would welcome the chance to debate the CDC; we need more informed debate. Some of the allegations are misinformed, but I am sure that they are well meant. We should find a way, either through the Select Committee, on the Floor of the House or elsewhere, to pursue the issues properly. I give that undertaking—but unfortunately, I cannot allocate time.

Mrs. Spelman: I am well aware that the usual channels have major control of how parliamentary time is allocated. However, the right hon. Lady has made a welcome suggestion. I am sure that, with the presence of the Chairman of the International Development Select Committee, my hon. Friend the Member for Banbury (Tony Baldry), a number of us can bring pressure to bear.

Tony Baldry (Banbury): It may be for the convenience of the House to know that the Select Committee has a

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firm date in the diary to take evidence from the chairman and senior members of the CDC. I hope that that will enable the Committee to ask the sort of questions that the House would like it to ask.

Mrs. Spelman: I hope that the usual channels are listening to the calls on both sides of the Chamber for the opportunity to be given to us.

Dr. Tonge: My intervention has already been answered. I heartily concur with what the hon. Lady is saying. I know that many Members have reservations, as I did when the Commonwealth Development Corporation Act 1999 was passing through the House, and as did the previous Member for Hertford and Stortford, Mr. Bowen Wells. The Chairman of the International Development Select Committee has said that he will take the matter on board and have a thorough investigation. I am sure that the Secretary of State would welcome that, too.

Mrs. Spelman: I thank the hon. Lady for her support in our endeavours to secure an opportunity to rework things together. We shall all contribute to try to make that possible.

Without turning these proceedings into a mini-debate on the CDC, I wish to defend the individual who sought to give me his perspective of what is really happening in the organisation for which he worked for most of his professional life. The letter from the former employee was thoughtful, and should not be too quickly dismissed as having no relevance to this discussion about where the CDC is heading.

The ex-employee pointed out in a measured way that

He asks, and I join him in asking, whether it

That is a constructive suggestion, to which the Government might like to give time. Together, we need to see what can be done to retrieve the situation.

An issue that is significantly underplayed in the report, but to which the Secretary of State rightly gave great attention, is the question of our overseas aid given through the European Union. There is a fairly bald statement on page 83 of the report that the

That is in direct opposition to our national aim of helping the poorest. As the Secretary of State said, this situation cannot be allowed to continue.

There is not much in the report about how to improve on such a disastrous situation. By coincidence, this week the Select Committee published the results of its inquiry into EU overseas aid, which amount to a discerning critique of the failures. It is worth highlighting a few points from the report, and I am sure that members of the Committee will raise these matters today.

For example, the aid budget is vulnerable to being raided for political purposes. There is a weakness, compared with our capacity, in focusing on where aid is

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given. There is a lack of transparency as to which funds are intended for poverty reduction. There is too much of a focus on middle-income countries at the expense of developing countries. It seems that wherever we go in the world, no one has a good word to say for the EU assistance development programme.

While I was in India, the European Commission representative in Delhi came up with one constructive idea for tackling the lamentable delays and inefficiencies of the EU aid programme. He suggested that a member state such as ours might contribute manpower and expertise at grass-roots level to oversee the programmes in which we have a share.

There is an oblique reference to that idea on page 30 of the annual report, in the context of delegating more responsibility to the EU's overseas offices. However, those offices have few staff. Perhaps by that means we could help to avoid duplication. Fundamentally, we must face up to the criticisms that abound about EU overseas aid, and together work out how it could be made more effective.

If the EU aid budget is a thorn in the side of the Secretary of State, Tanzania must be another. I could find nothing in the annual report about the notorious BAE Systems deal. We know that it was a test case to find out whether the good intentions of getting debt-relieved nations to spend money on health and education would work, and it failed. The Secretary of State might have had more chance of opposing the deal if she had found out about it earlier. BAE Systems applied for a licence in 1997, but as the Secretary of State told me in a written answer, she was not informed until October 2000. A constructive suggestion would be to improve that process in Government.

The Secretary of State will be aware of the sustainable development amendment to the Export Control Bill, which was recently approved in another place. It was supported by Conservatives, Liberal Democrats and bishops, and might give the Department for International Development a greater say in such matters. I call on the right hon. Lady to have the courage of her convictions and tell the House that she will support the sustainable development amendment.

As I read the report, my big concern is whether our aid programme is really effective. We cannot be complacent or rest on our laurels. To her credit, the tone in which the Secretary of State presented her review of international development showed no complacency. I welcome that.

There is much rhetoric about helping the world's poorest, but the truth is that much aid is determined by political motives. The vast majority of European development aid goes to central European countries hoping to accede to the EU. Although my hon. Friend the Member for Uxbridge (Mr. Randall) rightly drew attention to the genuine plight of a nation in central Europe, I feel deeply uneasy about the fact that more European development assistance goes to Poland than to Asia, Africa and Latin America put together.

The largest recipient of British overseas aid is India, from which I have just returned. We are about to treble the amount that we give from £110 million to £300 million. India is a country of terrible poverty, with a third of the world's poor living there. Imagine my surprise when I opened The Times of India to read an

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editorial with the headline "Who needs foreign aid anyway?"—a startling point of view from a major recipient country.

The editor points out that incoming aid just about cancels out the interest on loan repayments, and all the while India is undergoing phenomenal growth through foreign inward investment, especially in computer services. I need to be clear: I am not saying that India should not receive aid, but the way in which it is given is crucial. If the Indians themselves challenge the way in which we do that, perhaps we should stop and listen. There should be seed-corn capital for investment, grants for projects and assistance to kick-start local initiatives, but not dependency-creating loans. There is a crying need for internal reform in India, and our expertise in good governance is almost as important as money.

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