Draft International Development Association (Multilateral Debt Relief Initiative) (amendment) Order 2014
Draft International Development Association (Seventeenth Replenishment) Order 2014
The Committee consisted of the following Members:
† Bingham, Andrew (High Peak) (Con)
Campbell, Mr Gregory (East Londonderry) (DUP)
† Cooper, Rosie (West Lancashire) (Lab)
Gilbert, Stephen (St Austell and Newquay) (LD)
† Greening, Justine (Secretary of State for International Development)
† Knight, Sir Greg (East Yorkshire) (Con)
† Lazarowicz, Mark (Edinburgh North and Leith) (Lab/Co-op)
† Lewell-Buck, Mrs Emma (South Shields) (Lab)
Moon, Mrs Madeleine (Bridgend) (Lab)
† Murphy, Mr Jim (East Renfrewshire) (Lab)
† Newton, Sarah (Truro and Falmouth) (Con)
† Rudd, Amber (Hastings and Rye) (Con)
† Smith, Julian (Skipton and Ripon) (Con)
† Stevenson, John (Carlisle) (Con)
† Thornton, Mike (Eastleigh) (LD)
† Vickers, Martin (Cleethorpes) (Con)
† Wilson, Phil (Sedgefield) (Lab)
Mark Oxborough, Committee Clerk
† attended the Committee
Ninth Delegated Legislation Committee
Wednesday 2 July 2014
[Philip Davies in the Chair]
Draft International Development Association (Multilateral Debt Relief Initiative) (Amendment) Order 2014
8.55 am
The Secretary of State for International Development (Justine Greening): I beg to move,
That the Committee has considered the draft International Development Association (Multilateral Debt Relief Initiative) (Amendment) Order 2014.
The Chair: With this it will be convenient to consider the draft International Development Association (Seventeenth Replenishment) Order 2014.
Justine Greening: It is a pleasure to take part in this Committee under your chairmanship, Mr Davies.
The Committee is considering the UK’s pledge to the 17th replenishment of the International Development Association. IDA is the World Bank’s fund for the world’s poorest countries. An estimated 1.8 billion people in those countries survive on incomes of less than $2 a day. IDA is a transformative fund that enables the UK to improve their lives. Thanks to IDA, in the past 10 years, nearly 44,000 firms have received credit and technical advice, enabling them to increase employment; 188 million women have received prenatal care; more than 120 million people have gained access to clean water; and nearly 500 million children have been immunised.
The UK’s pledge to IDA 17 is £3.3 billion. As I have said before, the UK public need to have a clear sense that when a pound of their money is spent, it is a pound that takes poor countries further along the path of development. I believe that that is the case with IDA. Its priorities go to the heart of what we must do to end poverty. Economic growth is essential for sustained poverty reduction at national level; and for individuals, a job and the dignity of work are key to lifting living standards and aspirations. During IDA 17, there will be an increased focus on creating economic opportunities for the poor. For example, access to electricity will be extended to up to 20 million people and microfinance loans will be provided for more than 1 million women.
IDA will not only promote economic empowerment for women, but make more targeted investments to deal with gender inequality across its whole portfolio. For example, up to 55 million women will receive medical support during their pregnancy. Gender equality is critical for ending poverty—no country can develop if it leaves half its population behind. IDA 17 will also provide life-saving support across a range of areas, with basic health services for 65 million people and vaccines for 200 million children.
I am determined to ensure that this funding delivers the greatest possible impact on the ground. Since becoming International Development Secretary, I have been clear that whether we give a pound directly or through another
organisation, I always expect value for money on behalf of the taxpayer. The UK’s multilateral aid review in 2011 assessed IDA as one of the most effective multilateral institutions. The World Bank is not resting on its laurels. It has set itself two ambitious new goals: to help to end extreme poverty by 2030 and to ensure that development gains are shared by all. It is now undergoing a series of reforms to deliver on that challenge, including $400 million of efficiency savings that will be reallocated better to serve the poor.Sarah Newton (Truro and Falmouth) (Con): I am very supportive of what my right hon. Friend the Secretary of State is saying and the aspirations that we have for this programme, but can she confirm the commitment from other nations, and that they will also be making the contributions that they have pledged at previous meetings?
Justine Greening: Yes, I can provide that reassurance. For example, Japan was another country that increased its contributions, and of course we should not forget that China contributed to this replenishment, having now itself transitioned out of IDA because it is a country that has gone through significant development already.
It is clear that to end extreme poverty, we need to focus on the very poorest countries and fragile states. We have therefore secured changes to how IDA is allocated to increase the share for those countries facing the greatest challenges. Exceptional finance will also be available to those fragile states in which there are significant new opportunities for change. We have agreed that countries such as India, which are graduating from IDA support but still have large numbers of very poor people, will be given transition support to avoid a sudden reduction in their development funding.
We have driven home the importance of using IDA funds effectively. Under IDA 17, the bank will deliver projects faster and at reduced costs, and for the first time ever, the UK has made part of its pledge in loan form, meaning that those funds will eventually be returned to the UK to be reinvested, with Treasury agreement, in new development opportunities, reducing poverty.
We have succeeded in IDA being used to facilitate private sector investment in poorer countries. A World Bank report of 2013 says that about 600 million jobs will be needed over the next 15 years just to keep employment rates constant, and it is expected that 90% would be created by the private sector. IDA will work jointly with the World Bank institutions—the International Finance Corporation and the Multilateral Investment Guarantee Agency—to improve their collective effort to generate new ideas and finance to bring people out of persistent poverty. I can assure the Committee that the UK will ensure the bank lives up to these commitments, and I meet regularly with the president, Jim Kim, to check that it does so. The bank’s operations and projects will be scrutinised by the UK’s executive director on the World Bank board and through DFID’s regular engagement with bank staff, including between DFID’s country offices and the bank.
I am also asking the Committee to consider an amended order for the multilateral debt relief initiative. This initiative meets the payments due to certain multilateral organisations by countries that have completed the
heavily indebted poor countries initiative. The amendment we are considering today relates to payments due to the International Development Association.In 2006, the G8 members, including the UK, committed to funding the multilateral debt relief initiative. The UK currently has Parliamentary approval for payments to 2022 and is now seeking to extend this to 2025. The changes will increase the indicative total cost to the UK from £1,279 million for 2007 to 2022, to £1,691 million for 2007 to 2025. The multilateral debt relief initiative has been a significant success since it was first proposed at Gleneagles in 2005, helping to increase government spending on poverty reduction in developing countries by almost 3.5 percentage points of GDP between 2001 and 2012. That means developing countries investing in their own development. The amendment to the existing order reflects the continuing need to provide such support.
The period covering IDA 17 captures a unique time for international development. It will see the final push to achieve the millennium development goals and the start of a new and equally ambitious framework for post 2015. IDA, as the World Bank’s main instrument for ending extreme poverty and boosting shared prosperity, has a critical part to play in both. With the wider World Bank reform process and stretching new policy and performance commitments, the Committee can expect to see an IDA 17 that will bring real change to the lives of the world’s poor.
9.2 am
Mr Jim Murphy (East Renfrewshire) (Lab): Good morning, Mr Davies; I expect it to be a delight to appear before you, for the first time in my experience. To the best of my knowledge, it has been eight or nine years since I served on one of these Committees. I do not know how far modernisation has gone, but I am sure that, as a moderniser, you will keep me in check, Mr Davies. Indeed, it is so long since I served on one of these Committees that the news of my previous appearance came to me via that new Labour control gadgetry of a pager, which we have all subsequently lost. I am delighted to be invited to be here by my hon. Friend the Member for Sedgefield, the Opposition Whip—I believe I am modernised enough for it be an invitation; nevertheless, I am pleased to be here. However, I did wander into Committee Room 10 and stumble into European Committee B, which, all these years later, seemed to be the same characters having the same conversations, just at a different time of day.
Nevertheless, I am not here simply because I was summoned by my hon. Friend; I am here because the right hon. Lady, the Secretary of State has rightly chosen to speak on behalf of the Government on this important issue. I thank her for her speech and for bringing this important matter before the Committee and for the open way she has explained the purpose behind the orders. As the right hon. Lady would expect, because of the validity of the argument she made, the content of the order and the fact that it commands a good degree of cross-party support, I am happy to confirm, including to Government Members, that we will not be dividing the Committee this morning. Nevertheless, I am sure she will encourage them to stay.
As the right hon. Lady made clear, the proposed order increases the amount payable by the Secretary of State to the International Development Association
of the World Bank from £1.2 billion to an amount not exceeding £1.6 billion for the purposes of the multilateral debt relief initiative, pursuant to the arrangements made between IDA and Her Majesty’s Government, in accordance with resolution No. 211 of the board of governors of the World Bank. The International Development Association of the World Bank Group is, as many of us already know, an extraordinarily important institution. The grants and highly concessional loans that IDA provides help the poorest countries in the world to reduce poverty and lift communities out of despair. Nevertheless, it is right that Parliament has the opportunity, through this Committee, to scrutinise the order in detail, as it pertains to such a substantial level of investment.Almost 10 years ago, the Finance Ministers and leaders of the G8 nations gathered in London and Gleneagles. The agreements they made are a cause for no little pride among Labour Members—and, I suspect, Members on both sides of the House. My right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) and Tony Blair pushed through an agreement that has helped to change the lives of many millions of people across the world. When they met in London in June 2005, the G8 Finance Ministers—led, it is fair to say, by the UK—proposed that debt stock cancellation be extended, so that 100% of the remaining debts owed by qualifying countries to the International Monetary Fund, IDA and the African Development Fund of the African Development Bank would be cancelled. The costs of this debt stock cancellation at the IDA and the African Development Fund in terms of forgone debt service payments would be met in full by donors, thus maintaining the funds’ ability to continue to lend on concessional terms.
That agreement saw the formation of the multilateral debt relief initiative in 2006, which provides considerable additional resources to all poor countries to accelerate their progress towards the millennium development goals. Under the MDRI and the heavily indebted poor countries initiative, nations receive 100% irrevocable debt cancellation when they complete the HIPC initiative. The system allows for the allocation of additional concessional lending, made possible through MDRI, using the existing performance-based allocation systems, which helps to maintain a strong incentive for good policy and performance.
In the light of my comments about supporting but seeking to scrutinise the orders before us, I want to ask the Secretary of State for a little further information, which she may choose to respond to today; or she may, at her convenience, choose to write to members of the Committee with further information. What assessment has her Department made of the performance allocation systems and what improvements has the scheme helped to bring about? To ensure that the financing capacity of the International Development Association and African Development Fund is not reduced, the UK and other contributing members committed to cover the costs of debt cancellation for the duration of the loans. The hon. Member for Truro and Falmouth has already hinted at this question, but can the Secretary of State provide a little further detail, either today or subsequently, about her assessment of our donor partners’ moves to fulfil their commitments to the agreement and within what time scales that will be done?
The funds requested of Her Majesty’s Treasury today are in addition to those already agreed for these institutions as part of the latest replenishments of the funds. Today we are being asked to increase the figure again, to cover the period up to 2025. Following agreement at the World Bank, donors should provide unqualified MDRI commitments for the 16th replenishment disbursement period, in order to maximise both the bank’s internal resources as well as the donor resources from the 16th replenishment. That means, as the Committee will be aware, that it is necessary to update the cost estimates for debt cancellation by the IDA under the MDRI, which is what has resulted in today’s draft order. What assessment has the Department made of likely further additional costs to the Exchequer and when would the Secretary of State expect those to be incurred, if at all?
In conclusion, although my comments have been, by necessity, technical, behind the architecture of the necessarily technical wording of the orders and the inevitably dry and technical nature of my comments, is the UK’s ability to play its part through multilateral organisations and, indeed, to go beyond that and beyond what can be reasonably expected in our commitment to international development. One need only look at the massive strides the world has made in striving towards the millennium development goals to understand the importance of freeing poorer countries from the anchor of unimaginable debt.
I am rarely into the politics of cultural conceit, which is one reason why I spend most of my time campaigning in favour of keeping Scotland in the United Kingdom. Indeed, I do not believe in the politics of cultural conceit—despite your tolerance and good nature, Mr Davies, you will rightly chastise me if I go too far down this path—but the work that the Department for International Development does, regardless of which party is in power, should be a great source of national pride. It can and often does lead the world on issues such as debt cancellation and transforming people’s lives. I confirm to the Committee and the Secretary of State that the Opposition support this initiative and will not seek to divide the Committee.
9.11 am
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): It is a pleasure to serve under your chairmanship, Mr Davies, particularly given your commitment to the work of the Department for International Development, which is well known in the House.
I have one question for the Secretary of State. She might be able to answer it today, but if not, perhaps she could answer it at a later stage. Is it possible to give an indication of which countries are likely to be brought into the initiative as a result of the extra funding, and can she give the Committee an update in broad terms of how that policy is developing as far as UK aid and support are concerned?
9.12 am
Justine Greening: It is entirely right that a commitment of such magnitude receives proper scrutiny. This debate provides a welcome opportunity to discuss the issues raised by hon. Members and to put that discussion on the record. I am grateful to them for their comments.
The right hon. Member for East Renfrewshire is right to highlight the impact of debt relief on countries that have been able to achieve it. A number of countries have gone through the two-stage process of getting full debt relief since the initiative was introduced. For example, as a result of the debt relief that Tanzania has received, its level of debt servicing went down from what equated to 3% of its GDP every year to 0.7% of its GDP. That has allowed Tanzania to pretty much double the percentage of Government revenue it puts into its own development.
The performance allocation system has been broadly successful, and I am happy to write to the right hon. Gentleman with a more detailed assessment. As for whether other donor partners have lived up to their commitments, I am proud that the UK has lived up to its commitment. Gleneagles was the height of the Make Poverty History campaign, but it galvanised a lot of countries to sign up to ambitious commitments. Not all have met those commitments; nevertheless, I believe the most recent published figures—from last year—show a record level of official development assistance provided by donor countries. The UK is living up to its commitments. Not all other countries are; nevertheless, we are seeing significant investment in development from around the world.
The right hon. Gentleman and the hon. Member for Edinburgh North and Leith asked about the prospects of UK support for the debt initiative, our level of commitment and how our spend might work. Broadly, that partly depends on which countries now qualify for debt relief. Countries such as Sudan and Zimbabwe could both go down that path, and the UK would very much like to see Somalia go through the debt relief process. Those countries need to go through a two-part process. First, they need to ensure that they are eligible by meeting financial reform targets. Secondly, they need to deliver those in order to fully take advantage of the debt relief initiative that is on offer. We want countries to go down that path, but the extent of our support clearly depends in part on how many are successful in doing that.
Ultimately, I am proud that Britain is keeping to its aid commitments. Supporting these orders will keep the UK at the forefront of international efforts to eliminate the poverty that blights so many lives. It will also strengthen our influence with the bank and among other shareholders, and will help us to make the bank even more effective at reducing global poverty. It is worth saying that the bank’s priorities—focusing on fragile and conflicted states; women and girls and the equality agenda; and galvanising private sector investment for the benefit of poverty reduction—are shared by the UK.
Finally, I am grateful to all members of the Committee for their questions and to you for your chairmanship, Mr Davies. If when looking at the Official Report I see that there are areas that time has not permitted me to address, I will write to hon. Members. I commend the orders to the Committee.
Draft International Development Association (Seventeenth Replenishment) Order 2014
That the Committee has considered the draft International Development Association (Seventeenth Replenishment) Order 2014. —(Justine Greening.)