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House of Commons

Wednesday 17 December 2003

The House met at half-past Eleven o'clock


[Mr. Speaker in the Chair]


Queen's Speech (Answer To Address)

The Vice-Chamberlain Of The Household reported Her Majesty's Answer to the Address, as follows:

I have received with great satisfaction the dutiful and loyal expression of your thanks for the Speech with which I opened the present Session of Parliament.

Association Agreements

The Vice-Chamberlain Of The Household reported Her Majesty's Answer to the Address, as follows:

I have received your Addresses praying that the (1) European Communities (Definition of Treaties) (Euro-Mediterranean Agreement Establishing an Association Between the European Communities and their Member States and the People's Democratic Republic of Algeria) Order 2003, and that the (2) European Communities (Definition of Treaties) (Euro-Mediterranean Agreement Establishing an Association Between the European Communities and their Member States and the Republic of Lebanon) Order 2003, be made in the form of the draft laid before your House on 4th November, in the last Session of Parliament.

I will comply with your request.

Oral Answers to Questions


The Secretary of State was asked—

EU Aid Programmes

1. Sir Michael Spicer (West Worcestershire) (Con): What measures his Department has proposed for tackling fraud in EU aid programmes. [144406]

The Parliamentary Under-Secretary of State for International Development (Mr. Gareth Thomas): We take very seriously any accusations of fraud in EU aid programmes. My Department has therefore supported the reform of the EC's aid programmes and policies, in particular the establishment of the EuropeAid office, progress with de-concentration, reduction in the backlog of unspent Commission funds and the reform of

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the financial management of the Commission's external assistance. Those measures should continue to improve the transparency and accountability standards of the EC aid programme financial management through better scrutiny.

Sir Michael Spicer: Why give the money to the EU at all? Why not give it to the countries direct?

Mr. Thomas: Many countries already have extensive bilateral development programmes. The advantage that the European Commission offers is that it is able to lever in development money that might otherwise not be spent by member states. The hon. Gentleman might want to consider that especially pertinent point while bearing in mind the huge cuts in development spending as a proportion of gross national income over which his party presided.

David Taylor (North-West Leicestershire) (Lab/Co-op): Among the countries and groups given aid by the EU is the Palestinian Authority. Only two weeks ago strong evidence showed that some of that aid is being fraudulently channelled to militant groups that are behind some of the suicide bombings in Palestine. Will the Minister comment on that and tell us what help his Department has given to root out such corruption and fraud?

Mr. Thomas: I hope that I can reassure the House that the European Commission's investigations have found no evidence to corroborate allegations that EC funds have been misused to finance terrorist activities or used for anything other than their original purpose. We are satisfied that the Commission, with the assistance of the International Monetary Fund, has ensured that all the terms of the conditionality on which it insists when giving aid to the Palestinian Authority have been met. Israeli concerns, which prompted some of the allegations, have receded in the light of further recent reforms in the Palestinian Ministry of Finance, and Israel has resumed the transfer of tax revenues due to the Palestinian Authority. I hope that that reassures my hon. Friend.

Mr. John Bercow (Buckingham) (Con): Given that roughly one quarter of British aid spending supports European Union programmes and that fraud in the EU aid budget is currently running at approximately £14 million a year—for the ninth successive year, the European Court of Auditors has refused to give a clean bill of health to the European Union accounts—can the hon. Gentleman explain to the House why in the Department's 2003 annual report, neither the section on the European Community, nor the list of 2003 to 2006 public service agreement targets, makes any mention of the fight against fraud in EU aid?

Mr. Thomas: The 2002 European Court of Auditors report actually suggests that while there are some continuing concerns, about which we continue to press for serious improvements, over supervisory systems and controls and standards, a sample audit of the transactions undertaken by the Commission in development spending threw up only a number of relatively marginal errors. Clearly we need to continue

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to investigate those errors, but the programme of reform that the Commission has implemented in our development spending has produced fewer examples of irregularity and fewer accusations of fraud—far fewer than before 1999 when the current reform programme began. There is thus considerable evidence that the reform programme continues to work. Clearly more reforms may be necessary and we shall continue to support them.

Migrant Remittances

2. Mrs. Betty Williams (Conwy) (Lab): What assessment he has made of the benefit to developing countries of their nationals working in the United Kingdom and sending remittances home. [144407]

The Secretary of State for International Development (Hilary Benn): In October, DFID, together with the World Bank, hosted the first international conference on migrant remittances, which are estimated by the World Bank to be worth $88 billion a year. Research, including that funded by DFID, shows that both migration and remittances help to reduce poverty in developing countries, with remittance transfers making up as much as 40 per cent. of the household budget for receiving families.

Mrs. Williams : I thank my right hon. Friend for that answer. Remittances are clearly a very effective way of getting cash help through to developing countries. However, in view of the fact that much of that money goes through banks and significant costs are therefore involved, can my right hon. Friend tell the House how he hopes to bring down the cost of remittance transactions?

Hilary Benn: My hon. Friend raises an important point about high costs, but the market is changing—and changing fast—so increased competition and new technology are helping to lower those costs. For example, the cost of sending remittances from the United States to Mexico has halved over the past four years; in Ecuador a bank has issued ATM cards to people who have no bank account, to enable them to access remittance funds from Spain; and similar developments are being considered in other countries. Lloyds bank has a pilot scheme that allows customers to send remittances to India cost-free. There is also the traditional hawala system, of which my hon. Friend will be aware. I hope that all those developments will help to address the question and will reduce the cost of that important support to developing countries.

Mr. Quentin Davies (Grantham and Stamford) (Con): Is not that response a little complacent? Is the Secretary of State aware that only the other day his Department gave evidence to the Select Committee that the individual transaction costs—the amount abstracted by banks and intermediaries—were between 13 and 20 per cent. of the money earned by hard-working, often poor people who are generously trying to support their families in poor countries? That 13 to 20 per cent. on total remittances of $80 billion amounts to more than twice the right hon. Gentleman's total aid programme. Would it not be a good idea to focus a bit more attention

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on the matter, and will he give the House a considered report about the overall position on the cost of remittances—the extent to which the costs are falling or rising and what can be done about them?

Hilary Benn: I do not accept that my answer was complacent. Indeed, I recognised that the issue raised by my hon. Friend the Member for Conwy (Mrs. Williams) and the hon. Gentleman is a real problem and that it needs to be addressed. I gave some examples of practical steps that are being taken, because the market is changing, to bring the costs down. If the hon. Gentleman is looking for a practical contribution, however, I can tell him that one of the things that the Department is doing is establishing a remittance taskforce with 15 donors in international agencies to look at what more we can do in the international community to bring those costs down because, as the hon. Gentleman is only too well aware, the benefit of that money to the recipients is enormous, not least, as he pointed out, because the amount is larger than all the aid that the rich world currently gives the poor world.

Departmental Contracts

3. Hugh Bayley (City of York) (Lab): What steps his Department is taking towards spending a greater proportion of its budget on goods and services supplied by companies based in developing countries. [144408]

The Parliamentary Under-Secretary of State for International Development (Mr. Gareth Thomas): DFID contracts are open to international competition from all sources. Suppliers must compete on price and quality and we do not give preferential access. The number of high-value contracts won by developing country firms against international competition rose from two in 2001–02—the first year in which we untied our aid—to 24 last year.

We have also given delegated authority to DFID's overseas offices to make lower-value purchases in local and international markets, which resulted in about 1,500 low-value contracts worth a total of £20 million last year. We do not record company origin for those services but many of those contracts will have been awarded to developing country firms.

Hugh Bayley : According to the Department's answer to my question in May, last year DFID headquarters awarded only eight contracts to African-based businesses, worth a total of £10.6 million, and DFID missions in Africa awarded additional contracts of about £9.5 million. Given that the Government have almost doubled aid to Africa—to £1 billion a year—does my hon. Friend agree that there is scope for awarding many more contracts to African countries? What will the Department do, consistent with the good management of public money, to enable more African businesses to bid for contracts from DFID?

Mr. Thomas: My hon. Friend alludes to the fact that African-based companies are showing increasing interest in bidding for DFID business. There have been a number of notable recent successes, including the awarding of contracts to companies from Uganda, Tanzania and South Africa. My hon. Friend will be

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aware that since 1998 about £160 million has been allocated to developing trade-related capacity in developing countries, including countries in Africa. Included in that help is support to assist countries to develop their business sectors by supporting small business development and access to credit, and by increasing understanding of the standards that are necessary to win contracts from DFID and from other European countries. That process is under way. I would expect to see more African companies bidding—and I hope being successful, and winning contracts from DFID.

Rev. Martin Smyth (Belfast, South) (UUP): Does the Minister agree, however, that sometimes purchasing officers are not imaginative enough in considering new bidders, and continue on old pathways rather than giving people an opportunity to sell their goods and develop properly?

Mr. Thomas: We need to do two things: first, to develop the capacity of countries themselves to support their own businesses to enable them to grow and develop and to exploit the opportunities that are available; secondly, to ensure that the staff that we have in-country are fully trained in recognising the opportunities and the potential for particular companies. With that in mind, we have given our staff appointed in-country training courses in procurement work so that they can exploit opportunities in terms of the local companies that could possibly do work for us.

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