The Parliamentary Under-Secretary of State for International Development (Mr. Gareth Thomas): I beg to move,

May I say at the outset what a pleasure it is to serve under your chairmanship, Mr. Benton? It is particularly appropriate given your interest in the subject matter.

The International Fund for Agricultural Development is an international financial institution and a specialised agency of the United Nations that is dedicated to the eradication of poverty in the rural areas of developing countries. Three quarters of the world’s poorest and excluded people—some 800 million women, men and children—live in rural areas. IFAD works exclusively with them, their organisations and those who help them. It provides developing countries’ Governments with a mix of low-interest loans and grants, and works with them to design programmes that support national priorities and respond to the needs and priorities identified by poor rural people.

IFAD’s strategic framework for 2007 to 2010 sets out how it will contribute to the millennium development goals, particularly the eradication of extreme poverty and hunger. Its six objectives focus on providing the rural poor with better access to land and water, agricultural technologies, financial services, markets, employment and enterprise development, and policy processes in-country.

IFAD also contributes to the goals of the empowerment of women and reduced child mortality, and makes a contribution to combating diseases and creating a global partnership for development. For example, a recent independent evaluation of an IFAD-supported irrigation project in Tanzania shows that not only has food security been improved, but children’s school enrolment. Empowering local communities, particularly women, through training, setting up irrigation, developing savings and credit groups, building access roads and improving farm production, can also help children to get into school. Clean water and sufficient food make them healthy enough to do so.

Six years ago, Kenya Women Finance Trust was losing $290,000 a year. With IFAD’s help with training and financial management and credit, increasing the membership basin and disbursing money through women’s associations, it was able to turn around loan recovery and to sort out some of its allocation problems. In the first nine months of 2006, membership of the trust in western Kenya alone increased by a third to almost 27,000. The number of projects in which the trust was involved increased by almost two thirds and now represents activity worth 525 million Kenyan shillings. Members’ savings rose by half to some 254 million Kenyan shillings. Repayment rates are at more than 95 per cent. Most loans are for $400 or less, which is enough to start raising chickens or selling fish, which is a key step to getting out of the extreme poverty that many trusts’ clients previously faced.

In Mali, which is one of the world’s poorest countries, the Government have asked IFAD to lead on development in the arid northern zone. According to an independent evaluation made earlier this year, the area has been turned from a deficit zone to a surplus zone in terms of food crop production. No one would wish to say that every food crop production problem has been solved but, thanks to IFAD’s involvement, significant progress has been made. Production has increased, markets have expanded, and more revenue has been generated. In an area prone to conflict between herders and farmers over land and water, the programme has made a significant contribution to conflict prevention which, because Mali borders seven other countries, is important.

Although two thirds of IFAD’s resources are allocated to Africa, it works in other regions, which enables it to share its acquired knowledge between countries and continents. Other international organisations such as the World Bank and the African Development Bank also work on agriculture and rural development, and IFAD works closely with them. Those other organisations focus mainly on larger programmes—for example, infrastructure—but IFAD is the only international organisation to focus exclusively on rural poverty. Its activities are rooted in local communities, often in the most remote and isolated areas of a country. Its approach is to develop projects in partnership with the rural poor that respond to their needs and build up skills for long-term sustainability.

Since its beginning in 1978, IFAD has invested some $9.5 billion in more than 730 programmes that have reached more than 300 million rural poor people around the world. A further $16 billion have been contributed as co-financing by other partners. The seventh replenishment that we are considering has a target of $720 million, which will enable IFAD to increase its programme work. We have pledged a total of £27,725,000 million, but we have agreed that 30 per cent. of that—some £8,317,500—will be contingent on continued improvements in IFAD’s performance.

Mr. James Gray (North Wiltshire) (Con): Will the Minister give way?

Mr. Thomas: I will give way in a second. Before I do, let me say that the 30 per cent. contingent element was negotiated in part as a result of conclusions reached by the independent external evaluation to which IFAD has been subject.

Mr. Gray : I am sure that there is a simple answer to my question. The order is laudable, but what is the reason for this specific sum?

Mr. Thomas: It was reached as a result of negotiation. We want an increase in IFAD’s funding so that it can increase its programme work. It has negotiated with all those who contribute to it and agreed with its donors collectively an increase in its budget of approximately 10 per cent. Because of the organisation’s effectiveness, we are happy to contribute the suggested sum.

Mr. Gray: Will the Minister clarify that? He said that the figure is the result of negotiation. I presume that he means that we said one figure, IFAD said another, and we ended up with a figure in the middle as a compromise. That is perfectly sensible, but implies that initially we sought to pay less and we were persuaded to pay more after negotiation. Will the Minister confirm that that is correct? If it is not, how did we end up with this very odd figure instead of a round figure, such as £300 million?

Mr. Thomas: What takes place is negotiation between the partners who sit on the executive board of IFAD as to what its overall budget should be. There is then a conversation about how the shares should be allocated. If we had reservations about IFAD’s effectiveness, we would have sought to contribute less. We do not have such reservations, although we are never complacent about effectiveness as an issue, and we want further changes, which I shall come to. We think President Båge and his senior management team are doing an extremely good job. I hope that the examples that I gave of some of the projects that IFAD supported give the hon. Gentleman and other hon. Members confidence that it is extremely effective.

One of the matters that we continue to monitor carefully is IFAD’s performance. It will be measured against its own action plan for improving development effectiveness, and the keys areas of performance that we will monitor closely are UN reform, improvement in the performance of all projects in IFAD’s portfolio, human resource management, and the fund’s capacity on knowledge management and innovation. All the targets that we have asked IFAD to work on are due to have been met by the end of 2007. Those results will be reported to the executive board, and a decision will be made by the end of January 2008 about whether to grant the full amount of the incentive contribution that I have described.

We have taken this approach because although we believe strongly in the importance of IFAD’s mandate, we have wanted further improvements in effectiveness in some areas of IFAD’s work, as we have in other multilateral organisations. I touched on that in answer to the intervention by the hon. Member for North Wiltshire. We have worked closely with IFAD to encourage reform. We are pleased that President Båge has recently renewed his entire senior management team and that one of our senior staff members is now assistant president for external affairs, on secondment to the organisation. We are already seeing the impact of that strong new team in leading the implementation of the different elements of the action plan, which we are supporting and monitoring closely.

This international financial organisation is an effective body. It does an important job and focuses on a key area that often does not get attention from other crucial international financial institutions. On that basis, I commend the draft order to the Committee.

Mr. Geoffrey Clifton-Brown (Cotswold) (Con): I echo the Minister’s sentiment about being delighted to serve under your chairmanship, Mr. Benton.

It is a pleasure to serve opposite the Minister in my new capacity, partly dealing with trade policy, which the Minister shares with the Department for Business, Enterprise and Regulatory Reform, which has replaced the Department of Trade and Industry. I also work on trade promotion, which relates partly to DBERR and partly to the Foreign Office.

I am delighted to be in this Committee in my foray—or reforay—into Department for International Development matters. I used to chair the all-party group on population, development and reproductive health, so this is not a new field for me. I am returning to a welcome home, on which the Opposition have, to a large degree, supported the Government. We are delighted to be able to continue to do that. One of our few monetary pledges is that we should move towards the 0.7 per cent. of GDP aid target. The Government have also pledged to do that, and I welcome the fact that we will be working in a great deal of harmony.

The draft order arises from part 2 of the International Development Act 2002, section 11(5) of which states:

I believe that the commencement orders say that it must be laid for approval by an affirmative resolution of both Houses of Parliament.

My first few questions are technical ones. It was set out in the 2002 Act that an affirmative resolution would be used, but such resolutions are largely held for more contentious matters. Perhaps my hon. Friend and neighbour the Member for North Wiltshire has begun to drill down into why the Minister thinks the draft order is controversial.

Is this the first time that the funding has been renewed? I believe that IFAD has been in existence since 1977—a long time—and has 160 member states. It would be interesting to know from the Minister about not only some of the more recent projects, which he kindly informed the Committee about, but a little flavour of how much the organisation has achieved since 1977 and how many of those 160 countries contribute to it.

There must be some disquiet about some of the past management, otherwise why would President Båge have had to renew his entire team? I share my hon. Friend’s sense that there must be a little more to that than meets the eye. That must be borne in mind, given that the Government are making 30 per cent. of the money contingent on the fund’s performance, as the Minister said. There must be a reason for that. Why is the full £27 million not being made available? What has gone on to make the Government want to make funding contingent in that way? What has the independent external finance board said about the fund’s effectiveness? I cannot help but feel that there must have been some reservations about it.

Mr. Gray: I am following my hon. Friend’s argument with great interest; he is making a sound point. I take him back to what the Minister said a moment ago about negotiations. Surely negotiation means that one party wants to pay less than the other wants it to pay, so haggling takes place and they end up somewhere in the middle. That might be an explanation for these rather bizarre figures, although on reflection it may be something to do with the conversion from US dollars. The first instalment was £18 million, and the others have been very odd figures. I wonder whether the negotiations have been tough and whether the Government are trying to pay less—and if so, why?

Mr. Clifton-Brown: The Minister has heard the poignant point made by my hon. Friend. I hope that in a spirit of helpfulness he will be able to give the Committee more information.

Having asked how many of the 160 member countries contribute, I want to know on what basis it is agreed that each should contribute. Is there a quota? How is the finance organised?

I was interested to hear about the four categories upon which Minister said the £8 million would be contingent. He mentioned UN reform, performance—presumably IFAD’s—human resource management, and knowledge management and resource. Again, that rather points me in the same direction as my hon. Friend; he, too, has a sense of unease about previous underperformance and perhaps even misappropriation of funds. If that has happened, we need to know.

Mr. Thomas: I shall deal later with the series of points that the hon. Gentleman has identified, but let me deal now with the question of misappropriation of funds. We do not believe that there has been any misappropriation by senior management or anyone else, and we believe that strong systems are in place within IFAD to prevent money being lost through corruption. More generally, the key factor is that although IFAD is a good organisation we want it to improve further. Making some of our funding contingent on performance is one way of incentivising that senior management team, good though it now is, to drive the reform process even harder.

Mr. Clifton-Brown: I am grateful to the Minister for that information. If that is the objective, one wonders why only 30 per cent. of the funding is contingent and not the whole £27 million. We need to know a little more of the Government’s thinking. As my hon. Friend the Member for North Wiltshire said, we want to know what negotiations took place.

The Minister’s helpful intervention came in the middle of my listing the four categories, so I shall revert to where I left off. The sections are UN reform, performance, human resource management, and knowledge management and resource. Are they solely related to the fund? Seeing UN reform in the list leads me to ask whether it is related to the Government’s wish to see further UN reform in other areas. Is the money in any way contingent upon UN reform in other areas, or is it solely to do with UN reform in relation to the fund?

Mr. Thomas: It is solely in relation to IFAD’s contribution to the broader agenda of getting the UN development systems to work more effectively and more closely together. Many different parts of the UN system do excellent work on their own; we want them to work more effectively together, and we want IFAD to be part of that process.

All the indications are that IFAD wants to be part of the process. Indeed, its president, Lennart Båge, served on a high-level panel set up by the previous UN Secretary-General, which considered various reforms to the UN development system. All the signs are positive. It is about encouraging his organisation to continue to be closely involved in the reform process.

Mr. Clifton-Brown: Again, I thank the Minister for that helpful intervention. The most important word was “continue”, as it implies that the process will develop further. When I was looking at UN reform, it was thought that there were far too many funds and programmes, not all of which were as effective as they ought to be, and that the UN might do less, but do what it did better. I wonder whether IFAD could do better, and whether it is spreading itself too thinly. Will the Minister comment on that?

The Minister said that two thirds of IFAD’s funding is devoted to Africa. Will he tell us in a little more detail which African countries are involved? He mentioned Mali and Tanzania, but it seems to me that its remit would be ideally suitable to Zimbabwe, where the people are not able to feed themselves. Is the fund involved there, and if not, could it be?

Will the Minister tell us more about how President Båge prioritises? There is a lot in the world that needs doing. The Minister has spoken of 800 million women, children and men who live in rural areas and depend on agriculture and related activities for their livelihoods, and who are some of the very poorest in the world. There is a huge unmet need out there for the fund. Will he therefore say how it prioritises its activities? Could it, for example, get involved in Afghanistan and help in the poppy-growing reduction programme?

Mr. Gray: I am just contemplating what my hon. Friend said about Zimbabwe. I for one would not feel at all happy if what is effectively British taxpayers’ money were being piled into the huge empty gap that is Zimbabwe today. We would need to see very significant improvements in the governance of Zimbabwe. I am not sure that I would encourage the use of the fund in that country at all.

Mr. Clifton-Brown: I take the point made by my hon. Friend. Nevertheless, we must consider the Zimbabwean situation; people are starving there at the moment, as he knows. How we get help to them is a subject with which I know the Minister will be deeply involved. As my hon. Friend says, we do not want to make life any easier for the Zimbabwean Government; however, we certainly want to make life easier for the Zimbabwean people. That is a real conundrum which affects how the NGOs go about their work in that very difficult country.

The Opposition will not oppose the order in principle. However, we want the Minister to say more about the origin of the figure of £27 million, about what the fund actually does, and about whether the debate will be an annual affair.

John Barrett (Edinburgh, West) (LD): I have only a few points to add. We have already heard today about the scale of the problem and about the 800 million people living in rural areas who make up 75 per cent. of the world’s poorest people. The number of undernourished people in Africa has grown from 169 million in the early 1990s to 206 million. We have heard about countries where the fund can be used; I am aware of other countries, such as Malawi, that are heavily dependent on agriculture and agricultural development and that lack other natural resources. Just this week we have heard fresh warnings from Somalia about major crop failures, which highlight the importance of successful agricultural development.

I have two points for the Minister. We have heard mention of the effectiveness of the sum of money that we are discussing—£27,725,000. However, it is vital that there be an audit trail so that we can examine the effectiveness of aid. Not only would that reassure our taxpayers that their tax money is spent effectively when it goes abroad, but it would help us to fulfil our duty to recipients of aid to ensure that aid is not filtered away to bank accounts or elsewhere, and that the maximum bang for each buck spent is delivered to people who are among the world’s most needy. We need to know there is an audit trail to reassure Members of Parliament and recipient countries that they are getting value for money.

There are many other ways to help the poorest of the poor and the needy, but agriculture is often seen as the poor relation. There is a lot of emphasis now on trade, aid and a range of other measures in the developing world. When so many people have no alternative but to develop what are often very small plots of ground using basic techniques, it is good to see funds such as IFAD that are well focused on that aspect of life. As has been mentioned, the fund was established in 1977 and has focused exclusively on rural poverty reduction since its inception. Unlike other financial institutions, which have a broad range of objectives, IFAD has a clear focus and my party is happy to support the approval of the funding that is the subject of today’s debate.

Mr. Thomas: I shall try and do justice to the questions asked by the hon. Member for Cotswold. I congratulate him on his new brief, albeit that it is a return to an agenda with which he is to some extent familiar.

The hon. Gentleman asked a series of questions, and I shall deal with them in order. He asked whether this debate was to be an annual one, and whether the fact that the order must be approved in this way suggests deep controversy about IFAD and its effectiveness. I do not think that he needs to worry: IFAD is an effective organisation. Since I had the privilege of moving the order for the last replenishment round in 2004, IFAD has not featured on the list of concerns of the Select Committee on International Development, or indeed that of the Select Committee on Public Accounts. I hope that that reassures hon. Members further.

As we seek further and faster progress toward achieving the millennium development goals, it is appropriate that all agencies, both those run by the Government and DFID and those run by international development organisations, should ask themselves whether they are doing enough to improve their effectiveness. As a result, we are asking that question of all the multilateral organisations with which we engage, and challenging them to go further and faster in areas where we think they need to reform their management.

We have had extremely good discussions with President Båge during his term of office. His term as president will end in February 2009, and he is clear that he wants to leave an organisation that has reached the pinnacle of its possible effectiveness under his leadership. That is why he wants to establish an action plan to drive further the necessary reforms in his organisation.

UN reform is in the mix because we need leadership from many different organisations in the UN family to get the UN system working more effectively to help developing countries to make progress on the MDGs. Given that President Båge served on the high-level panel for system-wide coherence—a ghastly title for an important process set up by the Secretary-General—it is entirely appropriate that he should want to continue to provide further leadership in that area, and we want to support him.

Does IFAD do too much? That was the second of the hon. Gentleman’s questions. The answer was provided in part by the hon. Member for Edinburgh, West. IFAD has a narrow focus on the needs of the rural poor. No other international financial institution or UN agency focuses on that to the same degree. the hon. Member for Cotswold also asked how the replenishment process is organised. It occurs every three years; 85 countries are contributing to the seventh replenishment and negotiations took place over the course of a year.

The hon. Gentleman asked whether the Government were concerned about the senior management team. Obviously we were, which is why we have worked with President Båge as he has sought to replace them. The priorities in respect of which countries are supported through IFAD funding are determined predominantly by countries’ level of rural poverty and their performance in addressing the needs of the rural poor.

The hon. Member for North Wiltshire raised the issue of Zimbabwe. He will not be surprised that the Government share IFAD’s view. So poor has the Zimbabwean Government’s performance been that it is right that no money should go to them. Bluntly, we simply cannot trust them to spend it appropriately. Because they have defaulted on IFAD loans in the past, there is no ongoing IFAD activity in Zimbabwe at the moment.

If I understood the hon. Gentleman’s point correctly, however, I do not endorse the notion that the Government should not provide resources to the people of Zimbabwe. Obviously that should not be done through these Zimbabwean Government, but we have a responsibility to recognise the needs of the Zimbabwean people and, through NGOs and UN organisations, to do what we can to alleviate much of the terrible suffering of many of the Zimbabwean people, while also working on the international stage to try to seek an improvement in the governance of Zimbabwe. That is a wish which I think the whole House shares.

Mr. Gray: That is precisely what I meant. I hope that my earlier remarks were not misunderstood.

Mr. Thomas: The hon. Gentleman has clarified even further the point that he made. I accept his intervention in that spirit.

The hon. Member for Edinburgh, West asked two questions about effectiveness and financial systems. He spoke about the need to protect the organisation and British taxpayers’ money against the possible loss of resources through corruption. IFAD has a very strong anti-corruption policy. It has on occasion pulled out of projects—for example, in Kenya—because of concerns about corruption. Indeed, IFAD’s withdrawal from the projects it was supporting in Kenya led to the creation of an independent external audit function specifically for its work there. It has now gone back into Kenya but its work is very closely monitored by that independent audit function. Part of IFAD’s role is to work with Governments of countries where it is active to strengthen financial management systems more generally. Not only are its resources well managed, but so are other resources generated in-country or through other donors.

Lastly, on effectiveness, IFAD was one of the first organisations to adopt the independent evaluation process which I described.. We strongly encourage players in the multilateral system to go down that route. IFAD has been a model. It has identified issues in the past that need reform. We have sought through the action plan that we have agreed with it to make progress on that agenda. I hope that I have answered hon. Members’ points.

Mr. Clifton-Brown: The Minister has not answered one of my key questions. I know that there is vote coming up in the House in a minute and so we want to finish this sitting, but how does the fund prioritise its activities given that only 85 out of its 160 members contribute to it?

Mr. Thomas: With respect, I think that I did answer that point. I said that IFAD looks at the levels of rural poverty and makes a judgment about the performance of a country in addressing those needs. On that basis I commend the order to the Committee.

Question put and agreed to.

Committee rose at three minutes past Three o’clock.