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World Poverty

1.30 pm

Ann McKechin (Glasgow, North) (Lab): As we are all aware, 2005 witnessed the unprecedented Make Poverty History campaign, with global calls to take action on debt relief, increased aid and trade justice. As my hon. Friend the Minister will no doubt mention, substantial progress was made on the first two of those demands, and the Government should rightly take credit for that. However, the issue of trade justice still waits to be resolved.

Those developments have created new opportunities to tackle global poverty, but the debate has moved on this year to the question of the best ways of achieving a sustainable route out of poverty. The Department for International Development's current policy review, which will lead to the anticipated White Paper this summer, should look at three macro-economic priorities: economic growth to create real employment for local populations; durable and sustainable tax systems to achieve a route out of aid dependency; and social protection systems to ensure that the most vulnerable in society can benefit from development progress. Those are weighty issues so I shall focus on the latter, although it is not unconnected to the other two or, for that matter, to the thorny issue of fairer world trade.

As the Minister will be aware, I visited Malawi with fellow members of the Select Committee on International Development a few weeks ago. One of our first visits was to a food aid programme that had been set up to cope with last year's partial failure of the maize crop, which forms a staple part of the country's diet. The system was being run—fairly efficiently, I might say—by a non-governmental organisation, with financial assistance from our Government. Indeed, almost 5 million people in Malawi currently benefit from such schemes, and famine has been prevented. However, I was reminded of a comment that Professor Jeffrey Sachs made when he visited Westminster last November. He said that people who visit Africa frequently comment that they can see little evidence of progress on the ground. According to Professor Sachs's figures, $38 per person was spent on development assistance to Africa in 2003. However, the cash flow that is released and which reaches the ground in sectoral investment is much lower than that figure suggests. Of that $38, $4 goes on emergency aid for food, $10 goes on what Professor Sachs terms debt relief accountancy and another $6 goes on technical co-operation, which he believes does relatively little for the developing world. On that basis, the real figure is reduced to $17 or $18 per person per annum for investment. That stands in contrast to the $70 per capita that Professor Sachs calculates is necessary to pull Africa out of poverty.

It is very likely that all the people we met on that food programme in Malawi faced malnourishment consistently and regularly, as did those who just failed to qualify for such schemes. Crop failures are nothing new, and with increasing signs of global warming they are likely to increase. However, we still appear to rely on methods that were considered outdated in our own country by the 19th century and which work on the underlying theory that we cannot trust the poor with cash. That is not to say that the current aid spending
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priorities are not important. Improving Government capacity at the upper levels is vital, and investment in major infrastructure and economic development is essential. Improving agricultural production in countries such as Malawi is a key long-term objective, while tackling corruption and inefficiencies in regulation must be a main priority. However, many people are falling behind and have witnessed precious little progress throughout their lifespan.

In its recent practice paper on social transfers, which was printed last October, DFID states that the number of people living on less than $1 a day is projected to rise in sub-Saharan Africa from 314 million to 366 million. Deaths from AIDS continue to rise over the next 10 years, leading to an increase in the number of orphans from the present level of 43 million. Only yesterday, Save the Children highlighted the fact that among 15 to 24-year-olds in sub-Saharan Africa, young women are six times more likely than men to be infected with HIV/AIDS.

Although change at the top of Government and in state institutions is essential, we also need to refocus our efforts on the ground to provide protection for the elderly, the disabled and children if we are to achieve the first millennium development goal of reducing the number of people living on less than $1 a day. There is growing evidence that the use of cash transfers as part of comprehensive social protection systems, which are grounded not in simple charity but in a human rights approach, can play a key role in reducing poverty and vulnerability.

In its report "Age and security", which was published in 2004, Help Age International showed how poverty in old age impacted on the whole family. In South Africa, one in three households is headed by an older person. In 66 per cent. of those households, older people care for children. The impact of AIDS means that the role of older people is changing rapidly. Many are acting as the main family breadwinner and caring for sick adult children and orphaned grandchildren. Some of the older people I met in Malawi also informally adopt orphan children when they have no children of their own.

The social pension scheme in South Africa has reduced older people's poverty by an astonishing 94 per cent. and the poverty of the population as a whole by 12.5 per cent. Research shows that even very low social pensions are extremely valuable to poor, older people. The fact that the payments are consistent and regular allows households to put money aside for emergencies and to invest in their children's health and education. That reduces their vulnerability in the event of a crisis and significantly reduces the risk of their remaining permanently stuck in absolute poverty.

A further report, which was commissioned by Help Age International, Save the Children and the Institute of Development Studies and issued last year, reviewed cash transfer schemes in 15 countries across east and southern Africa. It showed that most of the schemes had transparent eligibility criteria and were accepted as fair by community members. Those who support vulnerable children and community members are often poor themselves, so social transfers can help to reduce the burden of care. The study showed that, rather than
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creating dependency, cash transfer schemes are a crucial response to rising dependency ratios in the context of high HIV prevalence.

For children, specific payments that are dependent on school attendance or health care have proved successful in many south American countries. In Mexico, for example, the Opportunidades programme has showed impressive results, with improved health care for under-fives and increased school enrolment for girls, and the growth rate for 12 to 36-month-old infants has risen by 16 per cent. That last statistic is important because infant malnutrition often has an irreversible effect on life expectancy, and targeting vulnerable children, particularly in that age group, is key not only to their own long-term survival, but to that of future generations.

Clearly, many political and financial decisions will shape the size and type of social protection. However, it should always be remembered, as Plan UK noted in its report "Ending Child Poverty and Securing Child Rights", which it released last October, that

All too frequently, the voices of women and, to an even greater extent, children are undervalued in decision-making processes. Donors, including DFID, need to play a part in bringing the solutions that I have outlined into the poverty reduction debate. Such schemes not only give poor people dignity and choice in their everyday lives, but form an important social contract with Government that helps to improve state accountability.

Schemes also need to suit a country's individual circumstances. For example, payments dependent on children's school attendance or on attending health facilities have not been as successful in Africa as in south America, perhaps owing to the lack of adequate facilities, which have not been able to cope with increases in demand. Identifying the vulnerable children can be difficult in countries where births are not registered, or where there are urban street children or child-headed households.

Cash transfer schemes need to be integrated into a comprehensive package of social protection measures that involve scaling up pilot projects, providing the necessary capacity to achieve effective delivery and institutionalising those measures within Government structures. The social contract between citizen and Government must be upheld and cannot be viewed just as a donor-driven experiment that can be abandoned when the project cycle ends.

Securing sustainable funding for such systems is obviously crucial, but evidence that DFID presented last year shows that although the costs are not insignificant, they are affordable if the political will exists, even for many of the poorest nations. The cost of scaling up the Kalomo pilot cash transfer programme in Zambia to the national level, to provide the poorest 10 per cent. of households with around 50 cents a day, would be about $20 million a year, or just less than 1 per cent. of the 2005 Zambian Government budget. Similar schemes in sub-Saharan Africa could be achieved in most cases with less then 5 per cent. of existing development assistance.
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The current increases in donor aid, which are based on much longer-term and predictable commitments, now allow Governments in sub-Saharan Africa and other poor parts of the world seriously to consider such initiatives on a wider scale. Obviously such schemes need to be linked with policies to increase taxable income streams, so that in the long term they can provide funds from their own resources.

I mentioned the link between social transfers and trade justice. Sadly, in the current trade discussions there is far too little debate about how trade should link with labour policies. Increasing globalisation and industrialisation lead inevitably to more "churning" of jobs. If we are to encourage workers in emerging economies to take risks, we must also consider the need to provide basic social protection during periods of unemployment, so that they are less vulnerable to financial disaster and better able to make use of new opportunities created in the labour markets.

In the approach to the White Paper, the Secretary of State for International Development has placed emphasis in his speeches on the need to look at fundamental rights, such as social payments. I very much welcome his thinking on that. I hope that we can use the principles of social protection that we developed to such success in the 20th century in our new policy approach. I should be interested to hear from my hon. Friend the Minister how his Department hopes to take such initiatives forward in the coming years.

1.43 pm

The Parliamentary Under-Secretary of State for International Development (Mr. Gareth Thomas) : I congratulate my hon. Friend the Member for Glasgow, North (Ann McKechin) on securing the debate and more generally on her work on the International Development Committee and as chair of the all-party group on debt, aid and trade. I share her view that we made substantial progress on debt and aid last year. We saw important progress for the very poorest nations of the world at Hong Kong. However, like her, I hope that we shall see more substantial progress on securing the outcome from the Doha development round of World Trade Organisation talks that we all want.

I have been interested in social transfers ever since I    visited the Germiston township just outside Johannesburg to see a project that DFID was funding and which Christian Aid ran. The project supported a number of women in the township and provided support to those living with HIV/AIDS. The scheme helped to ensure that orphans got into school and—crucial to this debate—that elders in the community were provided with support to access the pensions that are available in South Africa. Those pensions make a fundamental difference to the lives of elderly people in that community helping to look after those who have been orphaned by HIV/AIDS.

My hon. Friend's contribution in this debate is particularly timely, building on the attention generated by the Department's paper on social transfers, which was published in October 2005, and on what was more recently expressed in the UNICEF and DFID-hosted global partners forum on AIDS-affected children, which also considered how social transfers might best help those orphaned by AIDS.
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As my hon. Friend rightly said, the Department is preparing a new White Paper on international development. We are exploring a range of options and I shall take her comments about meaningful work on economic growth, tax systems and social protection systems as a contribution to the consultation process on that White Paper. My right hon. Friend the Secretary of State has already made it clear that further work on economic growth will be a key part of DFID's work going forward. I accept my hon. Friend's point about the need to support developing countries to do more work on tax systems—I would see that as part of the broader work on governance—and social protection systems. There is a debate going on in the Department, and more generally with NGOs, parliamentarians and so on, about the role that social protection and social transfers can play.

My hon. Friend drew attention to a number of countries where social transfer systems are already in place. Bangladesh and Nepal have social pensions, and Mozambique has had a social transfer programme since the early 1990s. There is no question in my mind or the Department's but that social transfer schemes have a role to play. The idea that poor people cannot be trusted with money, which my hon. Friend described, certainly has no traction in DFID or on the Labour side of the House generally. If there were any doubt, the appetite for micro finance and the success of micro-finance institutions around the world should have put that to bed. The success of social transfer programmes also provides powerful evidence of that point.

There is an issue, however, about the speed at which social transfers are introduced. If it happens too fast, it can overwhelm local capacity and often undermine broader civil service reform initiatives. A gradual expansion, from smaller initiatives and pilot projects, has proved to be effective, not least in Brazil and Mexico, which are two of the examples that I think my hon. Friend mentioned. We see our role as providing finance and helping to build the capacity of the developing country Government to put in place social transfer schemes.

My hon. Friend will be familiar with the Commission for Africa, which recommended in its final document that donors should commit to long-term predictable funding of national social protection strategies with some $2 billion a year immediately, rising to $5 billion to $6 billion by 2015. We are seeking to build a consensus on the adoption of such commitments. As part of our work following last year's publication of the social transfers paper, we are developing a handbook to provide guidance and advice for developing country Governments and for our staff who work on such projects on the setting up of social transfer programmes, drawing on good and bad experiences from around the world. I hope that that will be ready towards the end of May and that my hon. Friend will see it as a tangible demonstration of the fact that the Department wants to take such work forward.

My hon. Friend is also right to highlight the scale of the challenges that face us in tackling poverty, which is demonstrated by many statistics, not least that half of Africa's children live in absolute poverty. A daily reality
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for many of the families wherein those children live is the constant worry as to whether the children will go to bed hungry or have to miss school because they cannot afford the user fees, and whether they can afford to go to the clinic and access the necessary medicines when they are ill.

Hundreds of millions of families worldwide live with those uncertainties, and are unable to care properly for their children or plan properly for their future. They cannot access the fundamental human rights to social security and an adequate standard of living. In that context, social transfers have a huge potential role to play in helping to reach poor families with regular and predictable grants of cash or food over a period of years.

My hon. Friend rightly pointed out that social transfers are not new. In the UK, our poverty rate would probably be three times higher if we did not have a national, tax-funded system of social transfers. In the past 10 to 15 years, middle-income countries such as Brazil, Mexico and South Africa have put in place national social transfer programmes. The most common schemes are non-contributory old-age pensions and programmes that provide cash transfers to support children and their families. In Brazil, the Bolsa Familia cash transfer programme aims to reach a quarter of the population by the end of this year.

Evaluations of existing social transfer programmes suggest that their impact has been pretty impressive to date. They have transformed the lives of millions of households and increased the incomes of poor households—significantly, in some cases. The evaluations show that in South Africa and Mexico there have been major impacts on early childhood development, with young children being significantly taller than they would have been. Clearly, the health and education of the poorest families has improved as a result of the programmes.

Evaluations of the effects of such programmes in Mexico, Brazil, and South Africa show that people are healthier as a result of their improved nutrition and greater ability to travel to and access health services and buy medicines. School attendance among those who benefit from social transfer programmes has also risen as families use the cash to send their children to school. Given the success of such programmes in middle-income countries, it is clear that well-implemented social transfers have a role to play and could have a similar impact in the world's poorest countries.

My hon. Friend might know that last October I travelled with the Minister of State, Department of Health, my hon. Friend the Member for Doncaster, Central (Ms Winterton), to Zambia and then Malawi. We were in Zambia at the start of a small pilot scheme, to which my hon. Friend the Member for Glasgow, North referred, that provides 1,000 households with up to $8 a month, which is beginning to demonstrate the potential of social transfers in the world's poorest countries. The early results of that scheme show that families are eating more meals, fewer people are dying, health has improved and there has been a significant increase in school attendance.

In Bangladesh, a social transfer programme that we fund has resulted in a 70 per cent. reduction in the number of families without enough to eat.
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My hon. Friend talked about children who are affected by AIDS, and the potential for support to carers. Given the severe challenge that HIV/AIDS poses in sub-Saharan Africa, where the number of AIDS orphans is projected to rise to 18 million by 2010, we certainly believe that social transfers have a huge potential role to play.

Let me give a personal example of the difference that social transfers make. In Zambia, a 50-year-old widow called Jesinaya Kambanje, who cares for eight children who have been orphaned as a result of HIV/AIDS, has been able to access the social transfer pilot programme. The children used to go hungry and she was often forced to beg from her neighbours. Now, as a result of the pilot, she can buy maize and vegetables for the children, and when one of them was ill she was able to take her to hospital and buy medicine to support her.

Social transfers can provide millions of children with a future. They are an investment by the state in its poorest citizens. I agree with my hon. Friend's point that by sharing wealth, the state creates wealth. As a result, children can grow up free from hunger, better educated, and healthy enough to become more productive members of society, in turn providing poor countries with more competitive work forces. By directly channelling cash to poor people, the state is recognising that poor people know best how to care for their families. The evidence suggests that they spend that cash well. As my hon. Friend says, they can be trusted to spend money appropriately and in a way that suits their needs.

Supporting human development is not the only way in which social transfers contribute to economic growth. As well as providing poor people with security and the knowledge that they can provide their children with the essentials for life for the foreseeable future, social transfers encourage adults to invest in new business opportunities. In Mexico, beneficiaries of the Progresa programme—to which my hon. Friend referred—spend, on average, a quarter of their social transfer payment on investment in micro-enterprises, giving, on the basis of the evaluation that we have seen, high returns up to 50 per cent. In Zambia, Jesinaya used her transfer to buy two chickens to invest in production, and is planning to purchase a pig. My hon. Friend will recognise that there is potential for Jesinaya to make more money as a result of those investments.

The criticism that social transfers create dependency is not a valid argument. In South Africa and Brazil, recipients of social transfers are more likely to be in work than those without a transfer. That might be partly because the extra cash means that poor people are better able to cover the costs of finding work and more likely to keep their jobs due to their improved health. There is also evidence that cash transfers help to stimulate local economic activity by increasing purchasing power, particularly in areas where the economy is weak.

Ann McKechin : Does my hon. Friend agree that social payments establish—for the first time in many cases—a direct relationship between the poorest citizens and the state because they act as a contract of payment, and that that helps to strengthen the democratic accountability of the state to its citizens?

Mr. Thomas : I certainly agree that it helps to encourage the relationship between the citizen and the
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state. One hopes that it is not the first time that there is evidence of that relationship, and that direct democracy provides that first opportunity. However, I accept my hon. Friend's point that it helps to cement the relationship and give the poorest citizens confidence in the ability of the state to help them, and that it helps to build social cohesion in the poorest communities in that way.

Another argument that is often made about social transfers is that they cost too much and cannot be afforded. My hon. Friend referred to studies on this issue. A recent study conducted in seven African countries suggests that most countries could already afford a minimum package of social security, if it were a political priority. In all but one of the countries, a
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transfer equivalent to half a dollar a day to 20 per cent. of the population could be financed by less than 10 per cent. of donor assistance. A study by the International Labour Organisation suggests that if that initiative were rolled out across sub-Saharan Africa, it would cost $1.5 billion annually, which is a relatively small sum when set against the commitments made last year to scale up donor assistance.

It is not easy to implement social transfer programmes, because many countries have weak capacity, but it is clear from the experience across a range of middle and low-income countries that it is possible—

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