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House of Lords

Friday, 27 February 2015.

10 am

Prayers—read by the Lord Bishop of Carlisle.

International Development (Official Development Assistance Target) Bill


10.08 am

Clause 1: Duty to meet United Nations 0.7% target from 2015

Amendment 1

Moved by Lord Butler of Brockwell

1: Clause 1, page 1, line 2, at beginning insert “Subject to the assent of the Treasury following each Spending Round,”

Lord Newby (LD): My Lords, I thought it might be to the benefit of the House if I reminded your Lordships of the rules of debate on Report. The Companion states:

“On report no member may speak more than once to an amendment, except the mover of the amendment in reply or a member who has obtained leave of the House, which may only be granted to: a member to explain himself in some material point of his speech, no new matter being introduced; the member in charge of the bill; and a minister of the Crown … Only the mover of an amendment or the member in charge of the bill speaks after the minister on report except for short questions of elucidation to the minister or where the minister speaks early to assist the House in debate … Arguments fully deployed either in Committee of the whole House or in Grand Committee should not be repeated at length on report”.

Lord Butler of Brockwell (CB): My Lords, in moving Amendment 1, I make it clear at the outset that I have no objection to the Government committing themselves to the 0.7% target for international aid. As I said in Committee, I believe that the Government have both a moral duty and a national interest in doing what they can to promote the growth of the developing world, provided always that that development aid is effectively spent. My concern about the Bill is on two aspects. One is that since it does not apply to the present Government, its only purpose is to remove the freedom of future Governments on matters which it should be for them to decide. The second is that, uniquely, it seeks to exempt this public expenditure programme from the discipline which applies to other such programmes.

The purpose of this amendment is to address the second of those points. It is to ensure that this programme is subject to the same disciplines that apply to other public expenditure programmes which also have great merit, and where there are also legal obligations—programmes such as those on health, education and defence. When we read daily about the strains which are applying to those programmes and the challenges

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that face them in the years ahead I cannot see why this programme, whatever its merit, should not be subject to the same disciplines.

There is another reason why this programme should similarly be subject to the discipline of public expenditure rounds. In those periodic rounds, expenditure programmes are required to consider and make their case again to the Treasury, to face Treasury challenge, and indeed to make a case about why expenditure should remain at the same level or even be increased. As I also said in Committee, that is a very useful discipline and it is in the interests of the programmes themselves, because it helps to ensure continuous effectiveness and value for money. To give a particular programme exemption—to give it, as it were, a statutory entitlement to a sum of money—without the challenge of each public expenditure round is not in the interests of that programme itself or of the rigour which should apply to public spending.

It will not have escaped notice that the other noble Lords to have put their names to this amendment are all former members of the Treasury, and there is a reason for that. The Treasury has long experience of attempts to hypothecate particular types of revenue, or indeed, as in this case, of national income, to particular public expenditure programmes—and it does not work. We have always lived to regret it, and previous programmes have always been reversed. That is not something that we should depart from in this case.

The amendment proposes that the Secretary of State should indeed be subject to the duty that the Bill proposes, but that that duty should be subject to the discipline of successive public expenditure rounds. The fact that the Treasury has to signify its agreement is not a way of making the Treasury particularly powerful but to give an assurance that the discipline has been undertaken.

The nub of the matter is this: it seems incumbent on those who would oppose this amendment to make the case for why this programme uniquely should be exempt from the discipline that applies to other public expenditure programmes of great importance where there is also a moral duty and a national interest in providing first-rate public services. What justification can there be for dealing with this programme uniquely? That is the case that those who would oppose this amendment have to make. I beg to move.

10.15 am

Lord Lawson of Blaby (Con): My Lords, I give my full support to the amendment that the noble Lord, Lord Butler, has just moved. He pointed to the names of noble Lords who have put their names to this amendment, all of them former Permanent Secretaries to the Treasury, Cabinet Secretaries or, in some cases, both. In all my 23 years as a Member of your Lordships’ House, I cannot remember this ever occurring before, and it may well be that it is unprecedented. There is a reason for that.

I pay tribute personally to the noble Lord, Lord Butler. I have known him for many years. When I first became Chancellor, he was Permanent Secretary in charge of public expenditure at the Treasury, a duty that he fulfilled impeccably and has done over the years. We are very lucky in our senior Civil Service. He has

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been an outstanding public servant in a number of ways over a large number of years, and we ignore what he says at our peril.

The amendment is fundamentally about good government. I do not know whether this is still the case, but in my day the Treasury used to be known as “the central department”. It was called that because it had a responsibility that went beyond the question of the management of the economy, in so far as one is capable of doing so; it also had a responsibility for good government. We in this House also have an overarching and overriding responsibility for good government. However well intentioned, the Bill, for the reasons outlined by the noble Lord, Lord Butler, is the antithesis of good government. It is gesture politics. Good government really matters, and the amendment from the noble Lord, Lord Butler, goes to the heart of that issue. I warmly support it.

Lord Davies of Stamford (Lab): My Lords, the noble Lord, Lord Butler, in his normal way, spoke extremely powerfully. His arguments are extremely strong, his logic is irrefutable and his experience is something that no one would wish to challenge.

The trouble is that I think he has missed the essential point of the Bill, which is that it is a quite exceptional measure designed to send an exceptional message to the world. First, it says to the developing world, the poor countries containing the 4 billion or 5 billion people in this world who live on less than $1,000 a year per capita income, that we care about inequality and are making a fundamental qualitative change in order to demonstrate the authenticity, the reality, of that commitment and a desire to make a new move in that direction. The second reason is of course to send an equally unmistakable signal to other developed countries and to set an example that we hope they may follow.

The trouble with the amendment from the noble Lord, Lord Butler, for all the quite sincere compliments that I have just paid it, is that it undermines completely that sense of authenticity. If it is clear that at any time the Treasury can decide in a given year that our obligation to spend 0.7% of GDP on international development no longer applies, then the whole commitment that we are trying to make will simply be emptied of its content. The message will not have any strength at all for either the developing world or the rest of the developed world, and that is the basis on which, very sadly, I feel I have to oppose the amendment.

Lord Lamont of Lerwick (Con): My Lords, I know that the mere appearance on the Marshalled List of the dread words “the Treasury” will send a shiver through most of my former colleagues and a very large part of the House. None the less, I feel that this amendment might be more persuasive if people unconnected with the Treasury supported it. I feel an obligation to support the proposal of my noble friend Lord Butler, and I strongly disagree with what the noble Lord, Lord Davies, said, which was that this amendment is incompatible with the 0.7%.

There is no reason, as I shall explain in a minute—I shall speak very briefly— why the 0.7% should not be compatible with rigorous examination by the Treasury of the budget of the department. One of the fears that

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have been expressed by those who are sceptical about this Bill is that it creates a perverse incentive to spend money so that the whole focus is on the quantity, not the quality, of expenditure. There is a risk that we may be jet-hosing the programme with money, with the only objective being to meet the 0.7%.

The noble Lord, Lord Davies, quite rightly reminded us of our obligations to the poor, and he made the point that there are huge numbers of people in this world who survive on tiny incomes. There are 2.8 billion people surviving on less than $2 a day, and 20% of those people survive on less than $1 a day. That fact makes it very important that we see that this expenditure is economically and properly spent, because every bit that is saved, every bit that is not wasted, can be the difference between life and death for people living on the poverty line.

Exempting overseas aid from the public expenditure process is the removal of the process. The process of the public expenditure round is that departments have to make a case for spending money, not just for the global total. There is examination in advance of the major items that make up the totality of the programme. Getting rid of that entirely removes the discipline that a spending department, or in this case DfID, has to make for the money that it wishes to spend.

There a provision in the Bill for examining the expenditure retrospectively, but that is not the same as examining it in advance. Surely the department would benefit from having the effectiveness of its programme examined not just retrospectively, when nothing can be done about it, but in advance, when people can be warned and when projects can be examined by people outside the department. It is a great pity that there is no single body in the Bill, as far as we can see. At previous stages, the noble Baroness, Lady Northover, made the point that they did not want to have one department looking at this, but that re-emphasises the need for the Treasury to have a look at this in advance. That is compatible with the 0.7%, because all that would be involved would be the Treasury examining it and saying, “We would like you to look at this project”, and, “We think this project is better than that project”.

Incidentally, Clause 2(3)(b) refers to how, if the Government fail to meet the target of 0.7%, they have to explain how it may be due to fiscal circumstances. If you are going to have fiscal circumstances involved in the calculation of the 0.7%, it seems very sensible that the Treasury should be involved. Who else would know about the likely fiscal circumstances? Indeed, it is implied in the Bill that the Treasury would have to be involved because nobody else can talk very persuasively about the fiscal circumstances.

I believe that in order to make the Bill effective and to make sure that expenditure reaches the poorest of the world, this amendment ought to be supported.

Lord McConnell of Glenscorrodale (Lab): My Lords, I fully endorse and support the two important points made by the noble Lord, Lord Davies, which were both about our values as a nation, our leadership and our use of soft power, the importance of which was so ably described in the recent report of your Lordships’ Select Committee on Soft Power, which I hope we will debate in the near future.

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I want to add one point that addresses precisely the point just made by the noble Lord, Lord Lawson. He raised the issue that is at the heart of the debate on this Bill; it is that this Bill, above all else in my view, allows us to move from a debate on the quantity of aid from this country to the developing world to a debate on the quality of that aid. For 40 years, we have debated only the quantity of our international aid. This Bill allows us once and for all to move on from that debate on quantity to debate the quality of that aid year after year, as the budget for the Department for International Development or any successor department comes in front of Parliament.

Therefore, contrary to the point that was just made by the noble Lord, Lord Lawson, I think that at its heart this Bill allows us to move from the debate on quantity to a debate on quality, and that is why your Lordships’ House should support it.

Lord Howell of Guildford (Con): My Lords, I rise to support this amendment for non-Treasury reasons, which may be a relief to noble Lords. We all know that the Treasury is full of very clever people, but frankly the Treasury is not always right and therefore there would have to be good reasons, other than the very fine reasons put forward by noble Lords who have already spoken, for urging that there should be an extra annual check on this programme and target.

My reason is simply that other, more effective, ways of promoting overseas development, eradicating poverty and meeting development goals are emerging all the time. The concept of ODA was invented 30 or 40 years ago, possibly more, and many new ideas have developed for promoting development and for contributing to development in more effective ways since then. The truth is that in looking at this Bill and the idea of the 0.7%, your Lordships are really dealing with an old agenda. These were fashionable views 20 or 30 years ago. Aid and development techniques have moved on rapidly.

Official development assistance—the ODA concept that we are dealing with—is rapidly becoming irrelevant. The complex challenges the world is now facing require a radically different financing model, one that requires a comprehensive approach to financing, embracing all sources of public and private finance available to developing countries. Tying the development effort unconditionally and without annual review into an “ODA-able” programme is bound to divert resources from far more productive ways of helping the poorest and encouraging development in today’s conditions.

One of the major contributions developing countries need is peace and security through military assistance, techniques and training, none of which is “ODA-able”. We are deliberately limiting our capacity to help the development process in the conditions of the 21st century, so the case for annual review and revision by the Treasury to keep our development spending programmes up to date and effective seems unanswerable.

Lord MacGregor of Pulham Market (Con): My Lords, I am very much aware of ex-Treasury Ministers speaking, but nevertheless I want strongly to reinforce the points made by the noble Lord, Lord Butler. Before I go on to my arguments, I state for the record that I

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wholly support the commitment and proud record of the UK on humanitarian and development aid. We are one of the world leaders. I do not agree with the noble Lord, Lord Davies, that it has to be enshrined in law to make that point, because our record and the level of spending to which we commit ourselves demonstrate that. This amendment in no way detracts from that.

I shall make four points in favour of this amendment, and I shall repeat very briefly what the noble Lord, Lord Butler, said. It all stems from my years of experience in dealing with public expenditure, in particular as Chief Secretary when the noble Lord, Lord Butler, was leading the programme in the Treasury under my noble friend Lord Lawson as Chancellor.

10.30 am

First, I am opposed in principle to enshrining in law and perpetuating in practice any area of government spending so that it is immune from challenge and all the processes that are gone through in the public spending round. There is always huge pressure from departments for additions to their spending programmes, as those of us who have dealt with it know only too well. Priorities change from year to year. The overall economic situation changes, new demands arise and negotiations can be particularly tough, especially when there is a need for downward pressure because of the fiscal deficit. I recall clearly, some years after I was in the Treasury, one of my ministerial colleagues said that he had come to me about a department’s budget. He said that he had had extremely good arguments and I had agreed with them, but at the end I had said, “I’m sorry. I have no more money left”. He said that there was nothing one could do about that and had to accept the argument. There are these processes but it is important to stress that, while it is right for the final package to be argued out in negotiations, in the Star Chamber if necessary, the final decision will always go to the Cabinet. No department should be immune from that process. That is why I was opposed to the Barnett formula and always have been.

Secondly, once the principle of hypothecation has been set, others will argue for the same. Defence is the primary candidate, not only because of the need to spend more on defence but because it is in exactly the same position as overseas aid. We are committed to the NATO commitment of 2% of gross domestic product. We have made exactly the same commitment in defence and not yet reached it. It is the same question of a commitment to a particular proportion. I must say, defence has a very high priority in the current environment and it is important that we should spend more on it, which I believe will result from the annual spending round.

Thirdly, the economic situation invariably changes over the years and the public expenditure programme in any one period should reflect that. We face fiscal constraints for some time ahead. The more individual programmes, such as aid or possibly defence, are exempt from this process—and we except our international obligations in legislation—the more other areas of government spending such as transport, local government, the arts and so on will suffer. It is therefore right that these final decisions should be taken in Cabinet each year.

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Finally, during the spending round—this is a point that has been made and to which we will return on other amendments—all departments must currently justify their proposed programmes in detail, which includes many other things such as value for money, proper controls, challenges where they have overspent and so on. The overseas budget will now be immune from that process in the spending round. Indeed, DfID may even be tempted to rush ahead with untested programmes towards the end of the financial year to meet its target. I know that we will be debating other amendments to do with value for money, but there is no substitute for any department having to justify its proposed budget in the spending round. It is a useful and important process and no department should be immune from it. That is why I strongly support the amendment of the noble Lord, Lord Butler.

Lord Reid of Cardowan (Lab): My Lords, I suspect I am in a minority on this side so I start by declaring an interest. I was involved in negotiations with nine departments of state as a Minister; none of them was the Treasury. Two, defence and health, were huge spending departments. Several others were also spending departments. I therefore bear the scars on my back from many discussions with the Treasury. Do I think that was a useful function? Yes, I do. It was necessary because there is an obligation on us all to ensure that, however well motivated a Minister, a Government or a policy is, it is subject to continual scrutiny. That is why there is merit in the amendment that has been moved.

I should make it absolutely plain that I fully support a 0.7% target and not only in politics. When I was chairman of a football club, we unilaterally adopted the same target for giving to charity. It is worthy, moral and has an element of leadership, as my noble friend Lord Davies said. However, for two reasons it would be quite wrong to have that target completely bereft of scrutiny by other departments, particularly the Treasury.

The first is to ensure that the 0.7% is spent not just with good intentions but with good outcomes. It is the objective effect of what we do, not just the morality of our intention, that will affect the lives of billions of people throughout the world. Each programme must be inspected to make sure that, however good the intent, it is not just making up numbers in a less effective way than might otherwise be the case.

Secondly, I have always believed that although each department has a degree of independence and autonomy, they should be part of an overall government strategy. Therefore, we must ensure not only that the individual programmes are beneficial but that the whole thrust of the aggregate of the programmes is complementary to our foreign policy, our defence policy and, indeed, our domestic policy. If not—if there is no scrutiny of a department and it is automatically given the right to spend money, unlike every other department—we could find an incompatibility between the two.

Therefore, I see no contradiction between a commitment to 0.7% being the aim and being enshrined in our policy for the future, and an insistence that that

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be spent to the best effect, not just for the good governance that has already been mentioned but for the benefit of the beneficiaries of that money—to ensure that it genuinely improves their lives in the best way possible.

Lord Ramsbotham (CB): My Lords, I strongly support the point so powerfully made by my noble friend Lord Butler, for reasons very much connected with what the noble Lord, Lord Reid, has just said. The Committee on Soft Power, which was so admirably chaired by the noble Lord, Lord Howell, considered this matter because the contributions of all the other ministries to that 0.7% must be taken into account. It should not merely be a 0.7% DfID budget. Therefore, if in future, as I hope, the contributions of all the various ministries are included in the 0.7%, it is essential that DfID’s co-ordination of that contribution—if that is what it amounts to—should be subject to the discipline of making certain that it is properly spent in the national interest.

Lord Marlesford (Con): My Lords, I am a mere observer of government over quite a long time. Obviously, we all support the 0.7% target and the whole gesture of telling the world that we intend to stick to it. However, you cannot translate a gesture literally into statute like this. The way that it is being done shoots an arrow straight into the heart of good government. The Treasury system of controlling spending is a complicated and sophisticated one but one that, in my view, has done very well.

The last big change to it was in the 1970s. At that time, public spending was based on the old Plowden system of allocating resources, which effectively pre-empted decisions. The House of Commons was, again and again, asked to vote supplementary estimates, which it did with virtually no discussion. The whole thing descended into total chaos and there was a major economic crisis. That was then changed to the present system, with cash limits and proper scrutiny of each proposal, by the great Leo Pliatzky, who was then the Permanent Secretary in charge of spending. That was based on the system of cash-flow management used in the private sector. Until cash-flow management came into force, an awful lot of perfectly good companies went bust because cash flow was out of control. I do not believe we can change the principle of proper control of public spending for one particular thing, however desirable and however much we support it. That is why I support the amendment of the noble Lord, Lord Butler.

Lord Armstrong of Ilminster (CB): My Lords, it is 45 years since I walked out of the Treasury, never to return. However, that was after 20 years there, and once a Treasury man, always a Treasury man. For that reason, and for many others, I support the amendment in the name of the noble Lord, Lord Butler. Like him, I have no difficulty with the commitment to make the target 0.7%. We do not need legislation to do that. The noble Lord, Lord Davies of Stamford, talks about the signal that the passage of the legislation would send. With great respect to him, I do not believe that the passage of a Bill with this title would set all the flags flying in the capitals of the developing world. Legislation is not the best vehicle for gestures and

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signals. If you want to send gestures and signals, things like manifestos and Queen’s Speeches are the appropriate means of doing that. Therefore I support wholeheartedly the spirit behind this amendment, that this expenditure, however good and however meritorious, needs to be subject to the same discipline as other public expenditure.

Lord Anderson of Swansea (Lab): My Lords, I have no interest to declare save that some of my best friends are in the Treasury. The argument has been made about a signal. I think that it is an important signal to the developing world and to other countries, which are manifestly failing in respect of the moneys that they spend. It would certainly give us a greater lever to use with regard to that, although I am not so convinced by that argument.

However, I notice—and I will be very brief—that the argument used, very powerfully, by those who have spoken in favour of the amendment is rigour and accountability. They speak as if no accountability is likely. There are a number of accountability mechanisms, one of which is of course the Select Committee. The Select Committee is able to throw a searchlight on mistakes that are made by any government department so that any middle-ranking civil servant or higher civil servant who made the decision knows that at any stage they may be hauled before the committee and asked to justify their action or lack of action, which can be extremely embarrassing. Of course, the proposal then is retrospective, but it has relevance for any future decisions. It is also certainly a corrective for anyone particularly in a ministry such as this, which is more than most subject to pressure groups and non-governmental organisations from outside, and it gives them a degree of rigour.

Equally, of course, one has the NAO. That very powerful report—and I have not heard DfID give a very convincing reply to this—showed the extent to which there was a readiness to spend almost for the sake of spending. All of us, and perhaps most of us, have been in such positions. I recall once having an entertainment allowance; as I had only spent 50% of it by the end of the year, I ensured that I used up the rest of the money very quickly in the last few weeks—so there is that temptation.

Those noble Lords who have spoken thus far seem to ignore the relevant clause, Clause 5, where again there is a mechanism for accountability. There is accountability, and the danger is that if we were to accept this amendment, it would be rather like the French “en principe”. Yes, of course we are all in favour of aid and of 0.7% of GNI in principle, but if this amendment were to be accepted it would effectively drive a coach and horses through the Bill.

Viscount Eccles (Con): My Lords, I speak as somebody who was part of the aid programme for a number of years with the Commonwealth Development Corporation and who was subjected to Treasury discipline. At the time, in today’s money we were responsible for about £3 billion of assets. Under the statutory arrangements of the day, we were partly responsible to the Foreign Office and partly to the ODA. The ODA arranged the monitoring meetings at which we would account for

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how we were getting on with the income and expenditure related to £3 billion of assets. In the run-up to the meeting, the discussions we had within CDC were all about what the Treasury official would ask us in the meeting which followed. From our point of view, in formal terms, the Treasury official had no right to be there, but of course the Treasury has a way of being where it wants to be.

10.45 am

In particular, when we discussed what might happen in the meeting, we did two things. We speculated on whether there would be two Treasury officials, and we knew that if there were, we had better be even better prepared than we had decided to be before. The second thing we did was to say to our minute taker, “Will you please say nothing and listen very carefully? If the Treasury man writes a note, make a little mark so we know at what point he made that note, because afterwards we will consider what he or she had in their mind at the time”. That monitoring and discipline was absolutely essential to the proper conduct of our affairs. I cannot understand why anybody would think that the Treasury should not be in at the beginning of all these processes as well as throughout them and at the end.

Lord Brown of Eaton-under-Heywood (CB): My Lords, I speak from a position of deep ignorance, having had no relationship with the aid programme nor in any shape or form with the Treasury—except that I used to think myself a rather overgenerous contributor to it during my years at the Bar. I support this amendment, but I see the force of the point made by the noble Lord, Lord Davies of Stamford, about the messages sent. I appreciate of course that one cannot amend the amendment today, but there is an opportunity between today and Third Reading; one could, after the proposed addition set out in Amendment 1, include in parentheses something to the following effect, which would accommodate the noble Lord’s point. After saying:

“Subject to the assent of the Treasury following each Spending Round”,

one could add, in parentheses: “which shall not be withheld, save only to promote the most effective use of the committed fund”. That, with respect, would indicate plainly in the statute that the only point about this amendment is to have the scrutiny to ensure the efficient, effective use of this fund, so you do not escape—as unamended you would escape—all discipline at all in the use of this money.

Lord Forsyth of Drumlean (Con): My Lords, I will make a brief point in response to the point that was made, and the point made by the noble Lord, Lord Davies. It would appear that some noble Lords are under a misapprehension about what the Bill does. All it does is require the Secretary of State to have a target of 0.7%, and where under Clause 2 he or she has established that target, they have to make a statement to Parliament if they have not met the target. Clause 2(3) says that a statement made,

“must explain why the 0.7% target has not been met in the report year and, if relevant, refer to the effect of one or more of the following”,

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which are, in paragraphs (a) to (c),

“economic circumstances and, in particular, any substantial change in gross national income … fiscal circumstances and, in particular, the likely impact of meeting the target on taxation, public spending and public borrowing … circumstances arising outside the United Kingdom”.

The noble Lord, Lord Davies, thinks that that is a flag, but it is more of a dish-cloth. All it does is to say, “This target is desirable, but if it’s not met, you’ve got to give a statement to Parliament, and these are the range of reasons”.

Circumstances outside the United Kingdom could be anything whatever. There could be a crisis in euroland or a whole range of things such as difficulties in Ukraine. The Bill does not impose an absolute statutory duty to spend 0.7%, as has been suggested by some noble Lords; it simply imposes a duty to tell Parliament if this has not been done and to give a reason for that. What it does do, however, is to mess up the procedures by which our country has accountability for public expenditure and to confuse the fiscal year with the financial year, and it does so because it is a flag-waving Bill in terms of meeting an international target. Those of us in this House who are seriously concerned about getting money to poor people in poor countries, and ensuring that that money is spent wisely, ought to support this amendment. Far from weakening the Bill, it would strengthen it as it would bring the Treasury into the process from day one and avoid the situation whereby the Secretary of State can say, “I didn’t meet the target because the economy wasn’t right and the Treasury wasn’t too happy”. This amendment would strengthen the Bill and preserve the integrity of our financial control.

The Parliamentary Under-Secretary of State, Department for International Development (Baroness Northover) (LD): My Lords, I thank noble Lords for bringing this amendment before us and welcome the level of attendance in the Chamber.

The noble Lords who have tabled this amendment have a formidable track record in the Civil Service and in government, not least in the Treasury, as the House will recognise, and are supported by very experienced voices. I value enormously their input and insights. It is extremely important that we take what they say very seriously. Nevertheless, I am afraid that, on behalf of the Government, I must resist this amendment. Perhaps I can explain why.

The Bill places a duty on the Secretary of State for International Development to meet the 0.7% GNI ODA target in 2015 and each subsequent year, and to lay a statement before Parliament in the event of it not being met. This proposed amendment in effect places the decision, though not the responsibility, to meet the target first and foremost with the Treasury at each spending round. It therefore provides the possibility for the Treasury to decide that 0.7% is no longer a priority, and for budgets to be accordingly adjusted downwards.

Of course, I am certain that the Treasury will fully scrutinise what DfID does, as, I assure the noble Lord, it does now. The department will, of course, still be subject to scrutiny through the spending review process in terms of how it spends the money. The department

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is scrutinised not only by the Treasury through the spending review process, as are all departments, but also through the Treasury approval of individual programmes within an agreed regime of delegated authority. I assure noble Lords that this Bill does not affect the role of the Treasury. What it does is send a clear message from this Parliament of its expectations in regard to the aid programme. As the noble Lord, Lord Anderson, put it, it would be wrong to interpose the Treasury into this arrangement through writing it into legislation. The Treasury’s role remains unchanged. Therefore, the proposed amendment of the noble and learned Lord, Lord Brown, is not needed either because of the scrutiny I mentioned, and it too should be resisted, if it were put.

The allocation of public expenditure is already a primary Treasury function. The Treasury’s role in the spending review is to ensure that the Government’s limited resources are allocated in the best way possible to DfID and other government departments to deliver government objectives, including enabling the UK to meet the 0.7% target—a commitment which this Parliament has debated and on which it has come to a settled view in the other place, and may yet in this place.

One of the challenges of the ODA level has been its huge variation, dropping sometimes to around 0.2%, and at other times moving up to 0.5% and now to 0.7%. That is not the pattern for other departments. Stability and long-term commitment are required. As the noble Lord, Lord McConnell, pointed out, this Bill enables us to move beyond the quantity to the quality of aid. We would not reach 0.7% if we did not already have formal Treasury approval in the spending round. This amendment proposes an additional legislative requirement to do what the Government are already required to do: tell Parliament how they propose to allocate public expenditure.

The noble Lord, Lord Butler, and other noble Lords expressed concerns that legislation of this nature relieves departments of having to make a case for expenditure. The noble Lord was particularly concerned about the impact that the commitment to 0.7% would have on value for money, as he said in Committee. I reassure him that the commitment to 0.7% is in fact having the opposite effect to that which he fears. It has resulted in a great increase in scrutiny, not a reduction. The Government have stepped up scrutiny and value for money. We have set up the Independent Commission for Aid Impact, which enables strong parliamentary oversight. All DfID spend is subject to a rigorous value for money assessment. A recent review by the OECD’s Development Assistance Committee said that the scaling up of the UK’s aid budget was planned in a way to ensure that the extra money was well spent and had the greatest possible impact. We are now ranked second in the world in transparency on aid finance.

In conclusion, I am afraid we do not feel that this proposed amendment is in the spirit of the Bill. The Bill allows Parliament to send a clear message to the Government about the spending expected on ODA from year to year. Most accept that the need is there. I thank the noble Lord, Lord Butler, and others for their recognition of that. Most accept that we can be very effective in helping to meet that need, for which I

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thank them. One day, of course, we all hope that this assistance will not be needed, but we are still very far from that place. Of course, as my noble friend Lord Howell said, we also harness many other means to assist development, including working with very fragile states such as Somalia and Syria.

Lord Howell of Guildford: I am extremely grateful to my noble friend. Before she sits down, will she address the point that the noble Lord, Lord Reid, made, and which I tried to make, about outcomes? Will she comment on the fact that ODA and “ODA-able” expenditure is of less relevance in promoting development and overseas assistance to eradicate poverty than it was in the past? That is a rather important consideration on which I would value her views.

Baroness Northover: Outcomes and results are a major focus of what DfID does; I hope that will reassure the noble Lord. We recognise the complexity of working in developing countries. The very fact that we focus on fragile states, and use all sorts of other means to try to assist their development, stability and security, shows that we understand how complex this environment is. However, it would be contrary to the aims that we are talking about if we made a provision that the Treasury, however laudable the institution, organisation and department may be, can effectively switch the target on and off at will.

The amendment has the potential to undermine the clear message that Parliament is sending and the consistency and predictability that the Bill, in its essence, seeks to achieve. It also has the potential to undermine the authority of Parliament itself by placing the Treasury in the role of gatekeeper between Parliament and government.

I have given a great deal of thought to the noble Lord’s amendment. Even if he does not agree with my position and is therefore unwilling to withdraw it, I hope that he will accept the argument that I make. If he wishes to test the opinion of the House, I make it clear to those who support the essence of the Bill that we oppose the noble Lord’s amendment.

11 am

Lord Purvis of Tweed (LD): My Lords, I similarly acknowledge the wide experience of those who have put their names to the amendment. I acknowledge that one of the signatories, the noble Lord, Lord Turnbull, is a distinguished ODI fellow, and I do not question the commitment that noble Lords have to international development aspects. However, I do not accept the amendment and I hope to explain why. I will avoid some of the wider aspects that are more relevant to further groupings that we will be debating.

First, as a practical step of good legislation, the reference to a “spending round” is deficient because it has no definition in statute or standing in law. The House of Lords Library conducted a search of the legal database of all primary and secondary legislation for me, and there is no reference in statute to what a spending review may well be. Spending reviews or spending rounds, as the Treasury itself says, are interchangeable terms, and the only reference there has been came in Explanatory Notes referring to statements by Ministers.

27 Feb 2015 : Column 1850

The amendment would therefore open up a high degree of potential confusion in primary legislation, without a definition or legal clarification of what a spending round may be, of what period is involved or of who conducts it.

However, that is not the essence of the amendment, which is whether, once a Government have announced their intention to meet our long-standing 0.7% commitment—it is not a new commitment—there would be a secondary power for the Treasury alone to authorise exactly the same thing but post hoc, and on an annual basis. This would be after the departmental round of discussions to which the noble Lord, Lord Reid, referred. There would therefore be a secondary process—the first part of the discussions would be on how the departments responsible for delivering ODA were conducting their business, and the second would be on whether the Government would actually meet the 0.7% target. Both are not compatible processes of discussion with the Treasury.

The argument about lack of control is not therefore valid, because the processes that DfID has to carry out, including the annual estimates that are then brought to Parliament, will continue on an annual basis. Indeed, on coming to the House this morning, I went through the main estimates for 2014-15. If the noble Lord, Lord Ramsbotham, and my noble friend Lord Marlesford wish to refer to the main estimates, they will see clearly that the Department for International Development estimates include those for the Department of Energy and Climate Change, the Department of Environment, Food and Rural Affairs, the Ministry of Defence, component parts of the ODA and also the FCO. It takes a wider consideration, and these estimates are part of the discussions about delivering best value for the aid programme that we wish to carry out.

The Bill already therefore creates the duty for the Secretary of State to demonstrate value for money in other parts of the Bill, as has been mentioned—including by the Minister and noble Lords opposite. There is therefore a very high level of accountability to Parliament. The question is: is this level of accountability unique, as well as maintaining the existing processes and the level of scrutiny by the Treasury? The level of accountability is unique. This Bill is unique and the Department for International Development is an unusual department. That is why there are frameworks with independent verification not only through ICAI, the National Audit Office and, indeed, our international partners in the OECD Development Assistance Committee—which carries out both peer review and annual reviews that we report to—but also in Parliament by the International Development Committee. That framework, far from exempting proper scrutiny, provides arguably a much higher level of scrutiny of delivery than other departments.

I wish to address the trade union of former Permanent Secretaries with a quote from the director-general of finance at DfID, Richard Calvert, who gave evidence to the International Development Committee in the Commons. He was asked about almost exactly this point regarding good budget management in the department. He said that,

“now we have reached 0.7% and we are into delivery of 0.7% at a broadly consistent level, there is a lot to be said, from a departmental

27 Feb 2015 : Column 1851

management point of view, for keeping a steady budget. It comes back to the point about living within annual control totals anyway. We are going to have to live within an annual financial-year control total. From my perspective, having that broadly steady and then just managing 0.7% within that is more straightforward than having that zig-zagging up and down, particularly having late adjustments because maybe you have undershot or overshot in a previous year”.

That is rather compelling.

Finally, most of us who were here at Second Reading were taken with the contribution of the noble Baroness, Lady Chalker of Wallasey. She said that,

“it is critical that people know from year to year how they are going to be able to finance projects. One of our great nightmares was that we never knew how much we were going to have”.—[

Official Report

, 23/1/15; col. 1523.]

This Bill is one part of correcting that, and in addition to the level—in fact, the increased level—of proper scrutiny for value for money, I hope that that will persuade the noble Lord not to press his amendment but to withdraw it. If he is minded to test the opinion of the House, I respectfully invite it not to accept the amendment.

Lord Butler of Brockwell: My Lords, I am very grateful to the noble Lord, Lord Purvis, for his reference to the noble Lord, Lord Turnbull. As he said, the noble Lord is a strong advocate of overseas development aid and wanted me to express his regret that he could not be here today.

I hope that the House will agree that some very powerful arguments have been made in favour of the amendment. I am very glad that they were not all Treasury arguments. There are wider arguments for it. I have listened carefully for what reasons there might be to treat this programme uniquely. Some of the arguments have been answered. The noble Lord, Lord Davies, argued that the purpose of the legislation is to send a message. Frankly, I am always a bit allergic to the idea that the purpose of legislation ought to be to send a message. It is really not the purpose of legislation. What matters are not the words or any law we pass but what we do. The UK’s record in that respect is, and I hope will continue to be, very good.

The noble Lord, Lord McConnell, said that one of the values of the Bill would be that it would allow the debate to move on from the input to the output. I agree that what we should concentrate on is the output, but we cannot ignore the input. The purpose of looking at the input is precisely to be able to challenge it, look at what the programme is achieving and ensure that it goes on achieving it. The noble Lord, Lord Anderson, referred to Select Committees being an alternative machinery for doing that, and now, as a parliamentarian, I am wholly in favour of Parliament being effective in this way and of the work of Select Committees. However, that is after the event. What we are talking about here is the processes in government before the event, and planning programmes properly.

Finally, I come to the argument made by the noble Baroness, Lady Northover, and the noble Lord, Lord Purvis. I say with great respect to her that it is, I am afraid, a misunderstanding of the process of government to say that the consequence of the amendment would move responsibility from a Secretary of State to the Treasury. The Treasury is not being given unique

27 Feb 2015 : Column 1852

control by this amendment. The Treasury is part of the Government. Of course, if the Government and Secretary of State reach the conclusion that 0.7% or a higher figure should be spent on overseas aid, the Treasury has no independent right or way in which to countermand that. What we are talking about here is a collective process in which Treasury scrutiny performs a vital role.

The noble Baroness, Lady Northover, and the noble Lord, Lord Purvis, said that the Treasury will continue to do that within government. I say to them, with great respect, that if that is what they are saying, surely this is a reason why they can accept the amendment. I notice that she nods her head—actually she shakes her head—but surely those two points follow from each another.

With gratitude to those who have taken part in the debate on both sides, I am afraid that I cannot find myself persuaded that there are reasons to treat this programme uniquely. I am realistic enough to know, with the Opposition and the Government seeking to get the Bill through in this pre-election period without further amendment, that the prospects of this amendment succeeding are not great. However, I ask those who share my view that the amendment would be in the interests of good government, proper process and achieving the best value for money for the programme, to support it and express their opposition to rushing through a Bill in this way, which does not promote its objectives but in many ways undermines them. With that, I beg leave to test the opinion of the House.

11.10 am

Division on Amendment 1

Contents 56; Not-Contents 151. [The Tellers for the Contents reported 56 votes; the Clerks recorded 57 names. The name of a Lord who voted in both Lobbies has been removed from the voting lists.]

Amendment 1 disagreed.

Division No.  1


Armstrong of Ilminster, L.

Baker of Dorking, L.

Berkeley of Knighton, L.

Borwick, L.

Brooke of Sutton Mandeville, L.

Brown of Eaton-under-Heywood, L.

Burns, L. [Teller]

Butler of Brockwell, L.

Caithness, E.

Callanan, L.

Carrington of Fulham, L.

Cathcart, E.

Clancarty, E.

Condon, L.

Craigavon, V.

Donoughue, L.

Eccles, V.

Elton, L.

Empey, L.

Falkland, V.

Fellowes, L.

Flight, L.

Forsyth of Drumlean, L.

Framlingham, L.

Gardner of Parkes, B.

Greenway, L.

Hay of Ballyore, L.

Hollick, L. [Teller]

Holmes of Richmond, L.

Horam, L.

Howell of Guildford, L.

James of Blackheath, L.

Lamont of Lerwick, L.

Lawson of Blaby, L.

Lipsey, L.

MacGregor of Pulham Market, L.

Marlesford, L.

Masham of Ilton, B.

Mawson, L.

O'Cathain, B.

Pannick, L.

27 Feb 2015 : Column 1853

Phillips of Worth Matravers, L.

Quirk, L.

Ramsbotham, L.

Selsdon, L.

Skelmersdale, L.

Slim, V.

Smith of Clifton, L.

Stirrup, L.

Sutherland of Houndwood, L.

Thomas of Swynnerton, L.

Trefgarne, L.

Truscott, L.

Tugendhat, L.

Warnock, B.

Wilson of Tillyorn, L.

Wright of Richmond, L.


Addington, L.

Adonis, L.

Anderson of Swansea, L.

Andrews, B.

Avebury, L.

Bach, L.

Bakewell of Hardington Mandeville, B.

Barker, B.

Bassam of Brighton, L.

Benjamin, B.

Berridge, B.

Best, L.

Boateng, L.

Bonham-Carter of Yarnbury, B.

Brooke of Alverthorpe, L.

Campbell-Savours, L.

Carlisle, Bp.

Cashman, L.

Clinton-Davis, L.

Collins of Highbury, L.

Colwyn, L.

Corston, B.

Courtown, E.

Crawley, B.

Cunningham of Felling, L.

Davies of Oldham, L.

Davies of Stamford, L.

De Mauley, L.

Derby, Bp.

Dholakia, L.

Donaghy, B.

Doocey, B.

Dubs, L.

Dykes, L.

Eames, L.

Eaton, B.

Elystan-Morgan, L.

Evans of Temple Guiting, L.

Falkner of Margravine, B.

Farrington of Ribbleton, B.

Faulkner of Worcester, L.

Foster of Bishop Auckland, L.

Foulkes of Cumnock, L.

Garden of Frognal, B.

Garel-Jones, L.

German, L.

Giddens, L.

Glasman, L.

Goudie, B.

Gould of Potternewton, B.

Grantchester, L.

Grender, B.

Grocott, L.

Hamwee, B.

Hanworth, V.

Hart of Chilton, L.

Hayter of Kentish Town, B.

Healy of Primrose Hill, B.

Henig, B.

Hodgson of Abinger, B. [Teller]

Hollis of Heigham, B.

Howarth of Newport, L.

Howe of Idlicote, B.

Hoyle, L.

Humphreys, B.

Hunt of Chesterton, L.

Hunt of Kings Heath, L.

Hussain, L.

Hussein-Ece, B.

Irvine of Lairg, L.

Jenkin of Kennington, B.

Jolly, B.

Jones of Cheltenham, L.

Jones of Whitchurch, B.

Kennedy of Southwark, L.

King of Bow, B.

Kinnock, L.

Kinnock of Holyhead, B.

Kirkwood of Kirkhope, L.

Lawrence of Clarendon, B.

Lea of Crondall, L.

Loomba, L.

Low of Dalston, L.

Ludford, B.

McColl of Dulwich, L.

McConnell of Glenscorrodale, L.

McIntosh of Hudnall, B.

MacKenzie of Culkein, L.

McKenzie of Luton, L.

Maclennan of Rogart, L.

McNally, L.

Maddock, B.

Manzoor, B.

Massey of Darwen, B.

Miller of Chilthorne Domer, B.

Mobarik, B.

Monks, L.

Morgan of Huyton, B.

Morris of Handsworth, L.

Newby, L.

Newlove, B.

Northover, B.

Nye, B.

O'Neill of Clackmannan, L.

Paddick, L.

Palmer of Childs Hill, L.

Perry of Southwark, B.

Phillips of Sudbury, L.

Prashar, B.

Prescott, L.

Purvis of Tweed, L.

Ramsay of Cartvale, B.

Richard, L.

Rosser, L.

Royall of Blaisdon, B.

Scott of Needham Market, B.

Seccombe, B.

Shackleton of Belgravia, B.

Sharkey, L.

Sharp of Guildford, B.

Sharples, B.

Sherlock, B.

Shrewsbury, E.

Shutt of Greetland, L.

Simon, V.

Smith of Basildon, B.

Smith of Newnham, B.

27 Feb 2015 : Column 1854

Stern, B.

Stoneham of Droxford, L.

Storey, L.

Stowell of Beeston, B.

Suttie, B. [Teller]

Taverne, L.

Taylor of Blackburn, L.

Taylor of Holbeach, L.

Thomas of Gresford, L.

Thomas of Winchester, B.

Tomlinson, L.

Tonge, B.

Tope, L.

Turnberg, L.

Wallace of Saltaire, L.

Wallace of Tankerness, L.

Walmsley, B.

Wheeler, B.

Whitaker, B.

Williams of Baglan, L.

Williams of Trafford, B.

Winston, L.

Woolmer of Leeds, L.

Worthington, B.

11.23 am

Amendment 2

Moved by Lord Lipsey

2: Clause 1, page 1, line 5, leave out from “Kingdom” to end of line and insert “over the period 2015/16 to 2019/20 and each subsequent five year period”

Lord Lipsey (Lab): My Lords, I very much regret that I was not able to be here to move this amendment in Committee, but I am delighted to say that the noble Lord, Lord Forsyth—as I would have expected—did that job much better than I could have done. I certainly do not intend to detain the House for longer than I need, as it would be a better use of its time to read his magnificent speech.

The amendment is designed to increase the flexibility of the one-year programme so as to avert the danger that the money will be rushed out to hit the target in one year and that there will not be enough to hit the target so easily the year after. It is intended to avoid waste, to provide ministerial flexibility and to help in the management of our national budgets.

As I said, I do not intend to expand on that theme for long but I want to deal with one argument which was put very powerfully this morning by my noble friend Lord McConnell and which appeared very much in the debate at Second Reading. The argument is that the Bill will set the quantity of aid, enabling us then to focus on the quality. I will not address the second half of that—the quality, which comes up in other amendments. I just caution the House against thinking that the Bill will in practice set the quantity, and I do so by reference to Ireland. A report states that at the millennium summit in 2000, the Taoiseach announced a framework for reaching the UN target. It was to be attained by the end of 2007. In 2005, the target was adjusted to 2012. According to a subsequent OECD peer review, that deadline was extended again to 2015, but this has also been missed. Now, according to that authoritative source, the 2015 target is also going to be missed.

In other words, you can set these targets, and you can even enshrine them, as the Bill does, in legislation. You can insist that each year the Secretary of State gives an explanation to the House if the target has not been met; nevertheless, the targets do not easily hold, and if economic imperatives dictate otherwise then we will find that they do not hold. I would be pretty willing to have a fair bet with anyone in this House that within the next 10 years there will be one or more such occasions when they do not hold. The debate

27 Feb 2015 : Column 1855

over quantity will inevitably persist while there is pressure on public expenditure and there are competing programmes.

I am realistic enough to know that this amendment is unlikely to be accepted today. However, it would be comforting and would help to bring the House together if the Minister could indicate that the Government are not without sympathy on the point about flexibility. It would help if they could indicate that, within the terms of the legislation, they will be prepared to look at this flexibly and will not allow something stupid such as a last-minute rushing out of the money through the door—as I am afraid happened last year, according to the independent National Audit Office reports—and that they will manage the Bill so as to minimise any possible ill side-effects from what is generally agreed to be a desirable thing; namely, effective overseas aid.

Lord Lamont of Lerwick: My Lords, I support the amendments in this group, which give effect to the target being achieved over a five-year rather than an annual period. I do so because I believe that that would give much needed flexibility in meeting the target. If there were flexibility, that would lessen what some of us perceive as the perverse incentive of the target—rushing projects towards the end of a year in order to meet the target within a year. It is much more likely that the money will be more effectively spent if that happens over a period of years.

The noble Lord, Lord McConnell, has already rather anticipated these arguments. He said that—this was his reason for voting as he did on the previous amendment —he felt that the target of 0.7% of GDP gave greater certainty. That was, to some extent, supported by the arguments of my noble friend the Minister. However, I am deeply puzzled by the argument that having a target of 0.7% creates certainty or will give greater confidence about how the money will be spent. Meeting the target of GNI or GDP will not be that easy. It would be easy if we were certain what GNI and GDP were going to be. However, as everybody knows, economic data are subject to constant revisions. There is uncertainty about the future during the year when you are trying to determine what your target is a percentage of and you have to rely on economic forecasts. However, there is not just uncertainty about the future; there is uncertainty about the present and—dare I say it?—about the past. These statistics are constantly being revised. Noble Lords will recall our famous double-dip recession—there was great excitement on that side of the House that it was occurring. A few months later it had been revised out of existence by the statisticians.

11.30 am

I remember when Harold Wilson lost the general election because of a balance of payments deficit. A few years later that deficit was wiped out of existence. There was no deficit: it was a surplus. The idea that GNI or GDP gives us some certainty of a target is quite illusory. There are different ways of measuring GNI. I think it was referred to in the proceedings earlier that the NAO had pointed out that there was something like four different measurements of GNI which gave a great variation in the definition of the 0.7%.

27 Feb 2015 : Column 1856

Because of these uncertainties about the trend of GNI, it is very far from being the case that the Bill gives certainty. In fairness to the Bill, it recognises that. Under Clause 2(3), when the Secretary of State has to make a statement to the House as to why the target has been missed, if it has been missed, one of the reasons that he or she can give is because there has been a substantial change in GNI. How wonderful. What is the Minister meant to say? Is he meant to say, “We haven’t missed the target” or “We have missed the target, because the economy has developed differently from how we would have expected”. What is the point of making that statement? There is not very much accountability simply in the fact that someone has to make a statement.

The Bill goes on to state that the Minister should explain what steps will be taken to make sure that the target is reached the following year, if it has been missed in a year. We know exactly what will be the outcome of that: the Secretary of State will simply say, “We are going to spend more money in order to reach the target next year that we have missed this year”. Again, that seems rather pointless and a very predictable statement to be made.

Lord Purvis of Tweed: I am grateful and I have been listening very carefully to my noble friend. Perhaps he could clarify to the House what he means by “over the period” of five years. Is it that we would meet it once in every five years? Is it an average over five years? Is it rolling over five years or is it in each year of those five years? Will he clarify his understanding?

Lord Lamont of Lerwick: It is not intended to be each year of the five years but an average of or a rolling over the five years. That is what I suggest. Of course, we would be open to amending the amendment if my noble friend chooses to give us his support. The confusion which can be caused by the different outcomes of GNI is also recognised under Clause 2(2)(a), where,

“under section 1(4) of the 2006 Act”,

it is possible for the Secretary of State in a subsequent year—this could be years later if it proves that, because of revisions of GDP, the target it was thought had been met had not in fact been met—to make a subsequent statement, which would not refer to the current year but to years gone past. Of course, one might have a whole series of statements where one year it was thought that the target had been met and then the next year it was thought that the target in the previous year had not after all been met. You could go on contradicting yourself year after year because these statistics bob around on a very thin margin which could easily affect the 0.7% one way or another. That is why I say to the noble Lord, Lord McConnell, and others that the idea that the 0.7% gives certainty is somewhat fallacious and not very profound. Those are the external factors.

More importantly in terms of policy and what we are trying to achieve in debates around this issue, there may be factors other than external factors which affect whether the target was not met. These could be that projects were not ready or that there was not enough time to get them ready, However, if we want to place a premium on management, rather than just meeting the target on outcomes rather than input, again I suggest that that would be greater if we looked at this

27 Feb 2015 : Column 1857

target not in one year but over several years. If we looked at it over several years, it would remove the incentive which came to light in Committee to hand over cash to multilateral institutions simply in order to meet the target. Although, as we learnt in Committee, it would take on average two years before the money handed over to a multilateral institution is spent, for the purpose of meeting the target it counts as though it was spent. Therefore, in any year, if you are not getting near to the 0.7%, there would be a tremendous incentive just to hand the money to a multilateral institution in order to say that the target has been met.

It also seems to me that the way in which the 0.7% works is that there will be a great incentive to spend money rather than to economise or to manage it efficiently. There is no way to claw back money in years in which there is an overspend. If the target is exceeded—if it is 0.8% of GDP—there is no way in which that money can be recouped. Therefore, the fear of the department will never be of overspending, it will always be the risk of underspending and, therefore, it will tend to overspend. For all those reasons, the amendment put forward by the noble Lord, Lord Lipsey, would be conducive to good management of the budget and thoroughly consistent with the aims of the Bill as put forward by its promoters.

Lord Brooke of Sutton Mandeville (Con): My Lords, this debate is essentially about flexibility, and this measure is essentially one which has been brought forward by Members of the Liberal Democrats. I wish to say a brief word about my relations with their party. Before anyone accuses me of making a Second Reading speech let me say not only that I could not make a real Second Reading speech at Second Reading but also that my relations with the Liberal Democrats are an essential part of my contributing to this particular amendment.

In the 183 years since the Great Reform Bill—which amounts to six generations, at 30.5 years each—six members of my family, one per generation, have served in the House of Commons, the first four being Liberals and the final two being Tories. The first was Member for the Southern Division of Northumberland. He was said to be the richest commoner in England, and he was presumably a Whig. It was perhaps apposite for what was then essentially an Irish family that the second MP was the MP for Armagh, a niece of his having married into the Brookeses.

The third Member was my great-grand-uncle, the son of the richest commoner in England. He entered Parliament as a Liberal MP for Wakefield.

Lord Purvis of Tweed: May I help my noble friend? These amendments consider a rolling average of meeting the target, not a rolling average of former MPs of my noble friend’s family.

Lord Brooke of Sutton Mandeville: I do not know on what amendment I am going to make this speech if I do not make it on this one. But I do take the point, and I am extremely grateful for the intervention.

Baroness Williams of Trafford (Con): My Lords, perhaps I may just ask noble Lords, if they would not mind, to stick to the amendment in a general sense.

27 Feb 2015 : Column 1858

Lord Brooke of Sutton Mandeville: That is certainly what I am about to do. The third MP was my great-grand-uncle, a son of the richest commoner in England. He entered Parliament as Liberal MP for Wakefield. On reaching the Commons, he decided that he much preferred Mr Disraeli to Mr Gladstone, the latter having, of course, formerly been,

“the rising hope of the stern and unbending Tories”.

But being a member of our family—and thus, I hope, instinctively—he behaved honourably and never considered crossing the Floor, while being sufficiently practical as to advise his constituency association that it would be prudent to start identifying a new prospective candidate for the next election.

The family’s fourth Liberal MP, the MP for Wakefield’s nephew, was a Unitarian minister who had served as a curate to Phillips Brooks, the great carol-writing American bishop, and who became Member of Parliament for Bethnal Green and Bow—where I was later a constituent of the noble Baroness, Lady King. I have now finished my references to my Liberal ancestors and forebears and will proceed with the relevance and substance of my speech. The last two Members of Parliament were my late noble kinsman and myself.

The reason for this rather long prolegomenon is that the retirement of my family’s final Liberal MP in the East End almost coincided precisely with the retirement of the last Liberal Chancellor of the Exchequer, and so their party has certainly not latterly benefitted from any family contribution of advice. This is why I come back to the virtues of flexibility. I spoke only briefly in Committee on 6 February—although I did speak for half a column, at col. 930 of Hansard, that day. I wish to speak to the virtues of flexibility which have been alluded to already. What I did not do at that stage was to describe how we broke the deadlock between the Budget Council and the European Parliament when, for six months, the EU was without a budget at all.

The deadlock that arose, and which was wholly inflexible at the time, was that Parliament had to have the final say in the budget. In this particular instance, and indeed in others, its budget was, in one sense, a house of cards in that it would take 100% up to the maximum that it was allowed to have. This was secured by a great deal of horse-trading between individual Members of the European Parliament. Let us say for the purposes of this example that, in order to secure the Greek vote, a road through Macedonia, paid for by the EU, was the price. Therefore you could not change the budget in any way because the whole house of cards would collapse if you did.

What the British Government did on that occasion, which resolved the matter not only for that occasion but for any future similar one, was to introduce the concept of a negative reserve. As it was never the case that all the money in the budgets was spent, there was always going to be a surplus of some sort, and enough to take care of any overstatement that we went into when the budget was set.

We earned the good will of our colleagues on the Budget Council by a quite separate intervention that we made when the EU asked us all to pay what we would have paid if the budget had been passed. The amounts for which it asked had no legal or statutory

27 Feb 2015 : Column 1859

cover, but the fact that we alone challenged them and secured victory in the European court meant that we were extremely popular with our colleagues. Thus, when we came in July to hold the presidency, we were able within two days to get a budget which had been unavailable for the previous six months.

I state that simply to say that I fear the absence of flexibility in a Bill which has been, as I said, brought forward primarily by the Liberal Democrats. Flexibility is so important. It is desirable that anything we can introduce to calm it down is to be looked for.

11.45 am

Lord Howell of Guildford: My Lords, this amendment, like the last one, is about more than public expenditure control, important though that is. It is, as my noble friend has just emphasised, about flexibility. Why is there an essential need for flexibility? Because the fundamental views about the relationship between ODA, development and the eradication of poverty are changing fundamentally all the time—and certainly will change radically over a five-year period.

The worry of many of us who have worked for years in development and overseas aid issues—almost half a century in my case—is that the promotion and thinking behind this Bill, and behind the reluctance to have more flexibility, is blind to the entirely new thinking that has been developed in the OECD and other areas about the way in which development assistance should be contributed by the richer countries of the world. The concept of what is called “country programmable aid” has now been introduced. This is generally recognised to be a far more effective measure and a real contribution to aid from richer to poorer countries than the old ODA definition. The other very powerful new tool that has come along is impact investment, which would not be included under ODA at all because there is no grant element in it, and it would have to have a grant element to be ODA.

It is sad that we should be ignoring flexibility and insisting on a rigidity that will exclude development of the most effective new instruments for the eradication of poverty and for helping poor people and development processes throughout the world. That is why this amendment, like the last one, would give flexibility and help in our aid efforts and not hinder them.

Viscount Eccles: My Lords, Clause 3(2) states:

“Accordingly, the fact that the duty in section 1 has not been, or will or may not be, complied with does not affect the lawfulness of anything done, or omitted to be done, by any person”.

It seems to me that this means that the promoter of the Bill recognises that there has to be some flexibility. If this clause does not provide flexibility, I am not sure what it is for. I would be grateful if I could be told how I am expected to explain this in the bar of the Black Bull, if I am asked, without the other members in the bar of the Black Bull saying, “Oh well, that is typical political behaviour. Now you see it, now you don’t. Now you’re going to do it, now you’re not. All you do is put a provision in a Bill and then in an Act of Parliament which lets you completely off the hook”.

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Baroness Northover: My Lords, I entirely understand and appreciate the sentiments behind these amendments as they seek to introduce greater flexibility through turning the target into a five-year one rather than an annual one. However, in practice, the greater flexibility that noble Lords are seeking cannot be achieved in this way and I cannot support the amendment.

First, as the House is aware, the 0.7% target is an internationally agreed one, monitored by the OECD Development Assistance Committee. Through a consensus of its 29 member countries, the DAC has long monitored levels of ODA spend—

Lord Forsyth of Drumlean: My Lords, will my noble friend confirm that the international target is 0.7% but that it is not 0.7% in any one year?

Baroness Northover: I can inform my noble friend that the DAC measures this on an annual basis. That is why the UK needs to report its ODA spend to the OECD in that way. Making this amendment to the Bill would have no bearing on our international reporting requirement, and it is crucial for clarity, consistency and transparency that we continue to report to the OECD in this way.

Secondly, regardless of this amendment, DfID will still have an annual budget, allocated by the Treasury, as we discussed in much detail in the last amendment, which it will plan to spend according to agreed forecasts. DfID will continue to seek funding from the Treasury that would enable the UK to meet the 0.7% ODA target from year to year. This amendment would serve only to risk reducing somewhat the predictability and consistency of the size of the annual budget, again something we addressed in the last amendment. I can assure the House that annual limits and measurements do not prevent long-term planning, which is what I think noble Lords are seeking to do in their amendments. As I said in response to the last amendment, delivering 0.7% GNI as ODA annually provides the United Kingdom with a relatively steady ODA budget each year. This allows for better long-term planning and more effective use of resources over multi-year periods, providing greater certainty over funding levels than would happen if this same target were measured over a five-year period.

DfID has a flexible portfolio of programmes and all of DfID’s spend is subject to a rigorous value-for-money assessment. Due to the dynamic nature of DfID’s portfolio, it is reasonable for programmes to be accelerated and decelerated to accommodate emerging priorities such as the crisis within Syria, for example. In its reporting on managing delivery of the 2013 ODA target, the National Audit Office found no evidence that DfID had failed to deliver value for money in the programmes contributing to the delivery of the ODA target.

My noble friend Lord Lamont expressed concern about measuring the ODA:GNI ratio. There is a clear and agreed statistical process which is overseen by the Office for National Statistics for reporting the ODA:GNI ratio. This enables a final figure to be reported in the year following the year in question. Of course, GNI estimates can and do vary. However, estimates are updated on a quarterly basis during the year in question

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and the method for assessing 0.7% allows for a reasonable level of statistical rounding to accommodate modest last-minute changes.

The noble Lord, Lord Lipsey, and my noble friend Lord Lamont were also concerned about a potential rush to spend at the end of the calendar year. This is something that we addressed both at Second Reading and in Committee. I would like to reassure noble Lords once more that this is not the case and that there are mechanisms which the department uses to ensure that it spends its money in a strategic and long-term way. As noble Lords will be aware, the spending around the end of the calendar year 2013 was in part because there are some bills which always come in during December. Our bill for the EC attribution always comes in in December. Deposits of promissory notes for the Global Fund to Fight AIDS, Tuberculosis and Malaria and the World Bank are concentrated at the end of the year. I would dispute the suggestion that contributions to the global fund would be a less effective use of resources. I am sure that my noble friend Lord Fowler would certainly dispute that. Reaching the poorest through an organisation like that is often the best use of such funding. The NAO and the OECD DAC have recognised this good practice and have given their assurance that the Government have robust processes and mechanisms in place to manage those budgets.

My noble friend Lord Howell mentioned ways of making sure that we are contributing to development other than through grants. He will be well aware, for example, of the CDC and the contribution that DfID can make through that organisation. The Government are able to invest in a wide range of activities of which I am sure he would be supportive. They lead to wider development and can also contribute in terms of ODA. I will be very happy to give my noble friend all the details of what DfID does in that regard. As I said in response to the last amendment, giving 0.7% of GNI as ODA annually provides a steady budget.

I was extremely glad to hear about the family background of my noble friend Lord Brooke, which rather differs from my own. However, that said, I hope that noble Lords will be prepared not to press these amendments. I understand what they are arguing for, but I would like to reassure them that there is a strategic long-term plan, and adopting 0.7% enables us to deliver it more effectively. We report on it on an annual basis, but that does not mean to say that it is simply an annual budget. It is a longer-term, strategic approach to what we wish to achieve through development. On the basis of that, I hope that the noble Lord will withdraw his amendment, but if he decides that he wishes to test the opinion of the House, I should make it very clear that we will oppose it.

Lord Purvis of Tweed: My Lords, I do not think that any new arguments have been put forward on Report on these amendments, which are identical to those we debated in Committee. I do not think that the case has been prosecuted, but let me respond to some of the points that have been raised. I believe that far from improving financial management or making the delivery of ODA more effective, these amendments would actually create a worse situation. In addition,

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they do not acknowledge that we would have to continue to report annually in accordance with the OECD Development Assistance Committee requirements along with what has not been mentioned, which is the International Development (Reporting and Transparency) Act 2006. These would carry on, quite rightly, because the annual target, which is based on the UN annual target for the number of annual transfers that are direct from government, and the OECD DAC annual reporting mechanisms are both there.

Lord Forsyth of Drumlean: Will my noble friend give way?

Lord Purvis of Tweed: Of course I will because I know that my noble friend enjoys intervening on me. It would be churlish to refuse him another opportunity to do so.

Lord Forsyth of Drumlean: I have to tell him that I can think of better things to do on a Friday morning. He keeps referring to an annual target, and it is true that the Bill provides for one. The target that was adopted by the UN is that:

“Each economically advanced country will progressively increase its official development assistance to the developing countries and will exert its best efforts to reach a minimum net amount of 0.7% of its gross national product at market prices by the middle of the Decade”.

That, by the way, was in 1975. It makes no mention whatever of having to do that each and every year.

Lord Purvis of Tweed: My noble friend is repeating a point he put to me in Committee and says from a sedentary position that I was not listening. I did listen, and not only did I listen, but I responded. The whole UN resolution is the context. The 0.7% is one part of it and it was based on the Pearson Commission report which analysed what the annual transfers were going to be with regard to direct aid from countries that adopted the target. It is perfectly clear. My noble friend says that he has better things to do than intervene on me, and I have better things to do than to respond to that type of intervention.

Noble Lords: Oh!

Lord Purvis of Tweed: Perhaps I may now restore the tone and tenor of the debate and respond to the noble Lord, Lord Brooke, and the invitation of the noble Viscount, Lord Eccles, to address the drinkers in the Black Bull on how they would understand this to work.

I can answer that by quoting the Permanent Secretary at DfID. On 4 February, he was asked specifically by the International Development Committee about the consequences of moving from an annualised basis to a three-year rolling programme. He said to the committee:

“If you take a rolling three-year programme, what that means is for years one and two you have a lot of flexibility. In the third year, by definition, you have to hit a precise number, because it is the end of the rolling three-year period. In the fourth year, you also have to hit a precise number, because you are dealing with what you had in years two and three. In the fifth year, you are dealing with years three and four. In a rolling programme, you get the benefit in the first year and possibly the second year, but not at any point thereafter. You are locked in after that”.

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We now have the annual target and the framework of accountability, involving both the ICAI and Parliament. Now we have moved on from understanding that we are seeking to meet the target, we have a degree of stability. That is a very strong argument. However, of course, we are not starting from this year as a base. The target was in the 2010 spending review, which built on the spending review in the previous Administration. That type of long-term planning already existed.

I hope that the noble Lord, Lord Lipsey, understands that there is not only that spending review strategic planning to maintain the target going forward but there are the annual controls with regard to the relationship to the annual estimates that Parliament scrutinises and the international reporting on our undertakings. We also now have DfID’s monthly reporting of the programmes that are under way for which ICAI provides independent evaluation.

The final point raised related to multilateral giving and whether or not this skews the way that the profile of expenditure has been delivered.


Viscount Eccles: My noble friend mentioned my name. I hope he will accept the clarification that he did not answer my question. The thrust of my question was why the promoter of the Bill thought it necessary to introduce a flexibility that allows the Secretary of State off the legal hook. That is the question that my friends in the public are going to ask me. They are going to say, “Legislation is about passing law, and that law needs to be enforceable. You have included a clause which means it is not”.

Lord Purvis of Tweed: I was going to come back and clear up that point. However, I will finish this element first. The Bill provides for the very form of independent evaluation that can take into consideration external factors that may have been at play if the target has not been met. That independent evaluation then reports to Parliament.

I am glad that the noble Viscount intervened because he pre-empted exactly how I was going to conclude. Ultimately, the framework provided by the Bill allows for Parliament to have the powers to do its job and hold the Government to account when they make a promise. I hope that that would be sufficient not only for those people in the Black Bull but for Parliament. There is important evaluation and monitoring of these programmes. I hope that the explanation from the Permanent Secretary of DfID showing the deficiency of moving to the programme that the noble Lord, Lord Lipsey, has argued for is sufficient for the noble Lord to withdraw the amendment. I am not in a position to accept it.

Lord Lipsey: My Lords, I thank all noble Lords who participated in this debate. I am sure that the political history of the Brooke family will be required reading whenever experts assemble to discuss aid issues for many years to come.

This debate has established one thing, which is that there is no UN resolution requiring annual aid targets, and the fact that it happened to be mentioned in the

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Pearson report seems to me a very feeble response to that point. However, there is a second issue, which goes to the Minister’s reply, too. Yes, we have to report annually, but “report” is not the same as “attain”. Nearly all the reports coming to the OECD are from countries which have had to say that they have not attained the target. The target will, this year at least, be attained by the United Kingdom, but nearly every other country has failed to attain it. A reporting requirement should not be confused with a requirement to spend the money.

There is more business to get through. I will have to draw what comfort I can from the Minister’s favourable references to flexibility, for which I thank her. With that, we should leave this issue until the repeal Bill for this Bill is introduced, which I confidently predict it will be within the next few years. I beg leave to withdraw the amendment.

Amendment 2 withdrawn.

Amendments 3 and 4 not moved.

Amendment 5 had been withdrawn from the Marshalled List.

Amendment 6 not moved.

Clause 2: Duty to lay statement before Parliament if 0.7% target not met

Amendments 7 to 15 not moved.

Amendment 16 had been withdrawn from the Marshalled List.

Amendment 16A

Moved by Lord Lawson of Blaby

16A: Clause 2, page 2, line 15, at end insert—

“(d) circumstances where meeting the 0.7% target would lead to excessive spending towards the end of a calendar year;

(e) circumstances where anything outlined in paragraphs (a) to (d) is likely to persist.”

Lord Lawson of Blaby: My Lords, when the noble Lord, Lord Butler, introduced his excellent amendment, he prefaced it by saying that he was strongly in favour of the 0.7% target. I will preface my brief remarks by saying that I am not in favour of the 0.7% target and that I am not alone. In an earlier debate, one noble Lord mentioned the role of Select Committees in all this. The only Select Committee of your Lordships’ House to have looked at this issue in great detail is the Economic Affairs Committee, which, under the chairmanship of my noble friend Lord MacGregor, produced a unanimous report. It was unanimous because the evidence was so strong that 0.7% should not be a plank, let alone the plank, of the Government’s policy in this area and that least of all should it be enshrined in legislation.

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What I am in favour of is economic development, and particularly of helping the poorest countries of the world, and the poorest people in those countries, to have a better standard of living. We received evidence about the role that ODA played in that process, and I am glad to say that since this ridiculous target was first suggested in the 1950s and then agreed by the United Nations in 1970, the world has changed. One of the great changes is that there has been an improvement in the countries of the so-called emerging world, and it has not been due to overseas aid. As my noble friend Lord Howell mentioned, there are other things that are far more important, although when my noble friend the Minister replied, she seemed to be totally unaware of this. She said, “Of course there are other things;DfID and other government agencies are doing this and doing that”—but it is not government agencies, it is the expansion of trade and, above all, the massive expansion of private capital flows to these countries that have made the change.

Lord Lamont of Lerwick: Would my noble friend also agree that the whole phenomenon of remittances has played a major part in development, perhaps even more so than investment per se? The value of remittances is several times that of official aid.

Lord Lawson of Blaby: It is certainly true that remittances are important, but I was including them in private capital flows, because remittances are one example of them. There is also a great deal of business investment in these countries. That is what is making a difference. There are other things, too, such as better governance. The so-called failed states, which are riddled with corruption, are a real problem, as noble Lords on both sides of the House are well aware—as DfID is well aware and as the evidence that we had on the committee pointed out very clearly. However, the problem of corruption is not going to be solved by dishing out 0.7% of GNI on overseas aid.

Because this is so absurd, I welcome, in general, Clause 2, to which this amendment refers. The clause makes it quite clear that this is not really a serious commitment at all, because all that the Government have to do, if the 0.7% target is not reached in any year, is to lay a Statement before Parliament saying why it has not been reached. This is what my amendment relates to. The clause gives three reasons that the Government can give in telling Parliament why the 0.7% has not been attained, which are,

“economic circumstances … fiscal circumstances and … circumstances arising outside the United Kingdom”.

Noble Lords might think that is pretty comprehensive, but it is not completely comprehensive, which is why I have added one further condition—there are two further conditions, but one in particular belongs to this set—which has been alluded to, very rightly, in some earlier contributions today. It refers to,

“circumstances where meeting the 0.7% target would lead to excessive spending towards the end of a calendar year”.

That is separate from overall economic circumstances, fiscal circumstances or things happening overseas that have affected the picture.

We know that this is a problem. The NAO was extremely critical of it only last year. If you have to shovel stuff quickly out of the door, it will not have

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the same value-for-money scrutiny that DfID tries to ensure throughout the year on everything it does. I commend DfID for its attempts to get value for money so far as that is possible in this area. It is far better than any other national aid agency in doing that. It is certainly better than the multinational organisations—the United Nations or the European Union. We discovered that in the evidence we took. But of course the incentive will be to shovel it out to, say, the United Nations in order to hit the target. Therefore, this should be as good and real a reason as the other reasons that are listed in the Bill—economic, fiscal and overseas events—why the Minister should go to Parliament and say, “That is why we have not achieved the target, because to do so would have meant shovelling a large amount out at the end of the year without adequate scrutiny”.

The other condition that I am asking the House to accept is,

“circumstances where anything outlined in paragraphs (a) to (d) is likely to persist”:

that is, economic, fiscal, overseas, and (d), which is my suggestion that it would require too much money to be shoved out quickly to meet the end-year target. This really concerns Clause 2(4), where the Secretary of State also has to inform Parliament of what steps are going to be taken to ensure that the target will be met in the subsequent year. This is even more absurd—we are even more in Alice in Wonderland territory. How on earth can the Secretary of State for Industrial Development—and I have a high regard for the present incumbent, my right honourable friend Justine Greening— ensure that,

“circumstances arising outside the United Kingdom”,

are not going to continue to make the achievement of the target difficult? It is a complete absurdity. Therefore, to try to minimise the absurdity slightly I have suggested this amendment. I beg to move.

Lord Forsyth of Drumlean: My Lords, I support my noble friend’s amendment, which I think is an important one, particularly in the light of the material that has been produced by the National Audit Office and others showing that in the last eight weeks of 2013, while most people were thinking about Santa Claus, the department spent £1 billion of its budget, and 40% of its budget was spent in the last two months of the year. That indicates what we used to have blighting local government, where suddenly all the roads were being dug up and the parks were being spruced up in the last few weeks of March because the local authority had to spend the budget. We all know that that does not result in value for money. I am entirely persuaded that there may have been examples in the last two months of 2013 that did represent value for money, but that is not the point that is being made. My noble friend’s amendment is very important for that reason.

12.15 pm

I am really looking forward to hearing the reason that will be given by the noble Lord, Lord Purvis, and my noble friend the Minister for refusing to accept it. The noble Lord, Lord Purvis, has been selling the Bill on the basis that it places a statutory requirement on government to spend 0.7% of GDP on overseas aid. As my noble friend has pointed out, it does nothing of the sort. As I indicated earlier, it simply requires the

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Secretary of State to make a Statement explaining why the target has not been met. The Government have met—in fact, gone over—the 0.7% target without the benefit of the Bill. But once the Bill reaches the statute book, the position that obtained this year, where the Government could choose to spend 0.7%—or more, in this case—if they wished will be constrained because, according to the Bill, the Secretary of State must explain why the 0.7% target has not been met, and there are certain criteria that would seem to justify not meeting the target.

The criterion in Clause 2(3)(b) is,

“fiscal circumstances and, in particular, the likely impact of meeting the target on taxation, public spending and public borrowing”.

I respectfully point out that the target was met by the Government this year entirely on borrowed money. There was no money in the kitty for this purpose. If a Secretary of State was a member of a Government who had a statutory requirement to make a Statement to the House if they had not met the target, which included a condition that related to the levels of public borrowing—I recall that the coalition Government promised at the start of this Parliament to eliminate the deficit; in fact we have managed to eliminate only half the deficit—would it be reasonable for a Government in those circumstances to argue that they could not meet the 0.7% target because of the,

“fiscal circumstances and, in particular, the likely impact of meeting the target on taxation, public spending and public borrowing”?

Therefore, far from strengthening the position of a Government to spend 0.7% of GDP, the Bill greatly weakens the position, and I commend my noble friend Lord Lawson for his amendment, because it is entirely appropriate that these conditions should be there to justify a Secretary of State perhaps not being able to meet the target. I look forward to hearing an explanation as to why it is appropriate to have paragraphs (a), (b) and (c) and not (d) and (e) as my noble friend is proposing.

Baroness Northover: My Lords, I thank noble Lords for their amendment, which seeks to require the Secretary of State to report on circumstances where meeting the target would lead to excessive spending towards the end of the calendar year. Clearly, there should be no circumstance where the Secretary of State incurs excessive spending. I express my appreciation for my noble friend’s honesty that he does not support the 0.7% target. That is extremely clear and comes over loud and clear from his contributions.

In the previous amendment I addressed the issue of quality at the end of the calendar year, so I will just very briefly mention that the expenditure at the end of 2013 included the contribution to the EC. My noble friend Lord Forsyth said that DfID was otherwise engaged and not thinking about Father Christmas, which of course was extremely appropriate, and we were concentrating on what we could manage to contribute to the Global Fund, which I have discussed before, and the World Bank. I also mentioned that the National Audit Office and the OECD DAC recognised that this was all done in exactly the way it should have been. Obviously, it is critical for us to build up a strong enough pipeline that gives us a choice and the contingency to manage the budget that we have. We have such a

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good pipeline, and this means that we are able to choose between programmes that represent good value for money.

I agree with my noble friend Lord Lawson about trade, FDI and the other aspects that he mentioned, and with my noble friend Lord Lamont, who mentioned remittances. They all play their part in development. That is key. However, the economist Jim O’Neill, formerly of Goldman Sachs, who devised the terms BRIC and MINT for some of the emerging economies that I think they are talking about—I am sure my noble friends are acutely aware of how they have managed to develop—advised that Goldman Sachs’s investment should be partly guided by the Human Development Index. He says that it was when Turkey and Mexico reached a certain level of education that it was possible to drive industrial development and investment. That is why, for example, aid supporting education and health for the whole population may be key and complementary to those other aspects.

I note that my noble friend Lord Lawson said, perhaps inadvertently, the department for “industrial” development rather than international development. Looking forward, and bearing in mind our support for CDC and what I have just said in relation to the Human Development Index, perhaps that is a prescient description. Let us hope that it is sustainable industry in the future.

There are all sorts of other drivers of poverty reduction, and I fully appreciate that. They lie beyond aid, and include trade, tax, conflict, corruption and disease. That is why we also play our part in shaping the international system to work for poor countries. That underlies the UK’s approach, for example, to the post-2015 development framework. It is a false dichotomy to set “aid” and “beyond aid” as if they are competing, for the very reasons that Jim O’Neill stated.

We do not believe that it makes sense for this amendment to include a report on the relevant factors for the target not being met and speculation about future events, as it appears to require. In any event, Clause 2(4) already makes provision for the Secretary of State to describe what steps she or he has taken to meet the target in the coming year.

I hope that I addressed very thoroughly, when speaking on the previous amendment, our approach to spending over the year and the importance of a sustainable, long-term programme that does not commit us simply to spending in a particular year but looks at an overall strategy over a longer period. Therefore, let me make clear that we do not accept this amendment and hope that it will be withdrawn.

Lord Reid of Cardowan: Perhaps I may clarify one point, which bears upon what the noble Lord, Lord Lawson, said, although not necessarily his amendment. It is the relationship between what the Minister called human development and economic development. I have great respect for Jim O’Neill. He is a very intelligent, very successful man and a great Manchester United supporter, so I have no reason to object to what he said, but I am sure that he would be the first to point out that, although education is of great importance in development, the production and maintenance of increasing levels of education are dependent on the

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production of a surplus domestically, which allows the development not only of education but of other social services. I understood the noble Lord, Lord Lawson, to be making the point that economic development, including capital investment, remittances and trade and so on, was the very basis on which future prosperity and a fair society are built. I do not think that the two are in dichotomy, as the Minister appeared to suggest.

Baroness Northover: The noble Lord has it absolutely right. I am saying that there is no dichotomy between them. It is clear that economic development is transformative; the issue is how you underpin it and take it forward. I was indicating that Jim O’Neill puts that emphasis on human development to have the economic transformation that the noble Lord and my noble friend seek. There is no dichotomy. That is why we approach it in terms of both human development and taking economic development further forward.

Lord Purvis of Tweed: My Lords, I thank my noble friends for their amendment and the case that they made, which I understood clearly and which was sincerely made. However, I cannot accept the amendment and shall explain briefly why. In doing so, I hope to give satisfactory answers to the points that they made.

As I understand it, the amendment would place a duty on the Secretary of State to report to Parliament if they had not met the target because the budget was low at the start of the year, they had no ability properly to deliver the expenditure towards the end of the year and this mismanagement would persist in future years. However, not only are there other parts of the Bill that provide for independent evaluation of the impact of the aid in the widest terms, but this Bill complements the 2006 Bill, which also requires statistical reporting that addresses many of those aspects, too. Together, they provide a proper reporting mechanism on the proper delivery of the budget that DfID will have. Therefore, it is a quite distinct issue from whether there are factors that mean that it is hard for DfID to deliver its budget from year to year. That is a slightly wider aspect to which the Minister responded to very properly.

The NAO report was cited again. It is worth stating that I agree with the report and have sympathy with its finding at paragraph 12, which states:

“The requirement to hit, but not significantly exceed, aid spending equal to 0.7% of gross national income every calendar year means the Department has to hit a fairly narrow target against a background of considerable uncertainty”.

That is of course the case. Indeed, the delivery of aid has often been one of the more difficult aspects in different circumstances around the world. That is why there are a number of tools available to government for the proper delivery of it, either through multilateral organisations or from the promissory note mechanism. They are a positive means of delivering proper budget management. In responding to the previous group of amendments, the Minister indicated, for example, that towards the end of a calendar year DfID provides a £1 billion contribution to EC ODA. That is drawn down in December after approval, funnily enough, by the Treasury. Deposits on promissory notes, the Global Fund to Fight AIDS, TB and Malaria and the World

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Bank contributions are concentrated at the year end. What this Bill affords is the ability for the UK now to enter into a different form of discussions with its multilateral partners, because we will be moving from a situation where we are seeking to reach the target to one where we have met it and are seeking to sustain that. Not only will we be striving to have better delivery of our own aid programme, but we will have a much stronger standing internationally to deliver this for our partners around the world.

Even in the circumstances where we were meeting the target, as we were discussing in Committee, the NAO report recognised the work of DfID in delivering this. I think that the Bill addresses what my noble friends are seeking to achieve, which is that all factors with the proper delivery of aid will be reported to Parliament and will be afforded proper parliamentary scrutiny. Together with the 2006 Act, this legislation will provide for that ability. On that basis, I hope that my noble friend will withdraw his amendment.

Lord Lawson of Blaby: My Lords, I listened very carefully to what the noble Lord, Lord Purvis, the promoter of this Bill in this House, has said, as well as to my noble friend the Minister, who is no longer in her place. I have to say that neither of them went anywhere near addressing the points that I made.

I am glad to see that my noble friend the Minister is now back to grace us with her presence and hear what I have to say. I was surprised that she mentioned Jim O’Neill in this context. Like the noble Lord, Lord Reid, I know Jim O’Neill well, and at no time has he said —nor would he dream of saying—that the 0.7% target is necessary for human development. The 0.7% target is a great irrelevance. Look around the world at the big countries, the G7 countries. The other six have no intention of meeting that target. The ones who are nearest to it, France and Germany, contribute 0.4%. At the other end of the scale, Italy and United States contribute 0.2%. They have no intention of doing any more. Some of those countries are actually reducing the amount they give, for reasons that we have gone through before, which I shall not repeat now.

12.30 pm

Despite the fact that this 1970 United Nations target has been nowhere near achieved, nor does anyone else have any intention of achieving it, there has been enormous development in huge swathes of Asia—India and China, in particular—much of Latin America and, I am glad to say, parts of Africa, although Africa has been somewhat of a laggard in this area. Those improvements have been despite the United Nations target being totally ignored by everybody except the United Kingdom, it seems. That is because of its total irrelevance—the total disconnect between the target and what really happens to the poor people in those countries.

The whole thing is so absurd, I do not wish to detain the House any further, so I beg leave to withdraw my amendment.

Amendment 16A withdrawn.

Amendments 17 to 20 not moved.

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Amendment 21

Moved by Lord Forsyth of Drumlean

21: After Clause 2, insert the following new Clause—

“Duties related to defence expenditure

(1) The duties under sections 1 and 2 will not apply in any year following a year in which the expenditure on ODA is greater than 35% of the amount of defence expenditure.

(2) In this section “defence expenditure” has the same meaning as the NATO definition of defence expenditure.”

Lord Forsyth of Drumlean: My Lords, the amendment has the effect that in the event that the ODA’s expenditure is greater than 35% of spending on defence, the provisions of the Bill will not apply for the following year. Noble Lords will have worked out that that percentage corresponds to the UK’s international target of 0.7% of GNI and the UK’s NATO defence spending commitment of 2% of GDP. The provisions offered by the amendment seek to ensure that commitments on international aid do not hamper the United Kingdom’s military capabilities.

It must be obvious by now to everyone in this House and those who have been following our debate that the Bill is a piece of public relations. The arguments put forward by the Minister this morning and by the sponsor of the Bill, the noble Lord, Lord Purvis, just a few moments ago are all about how it will give us international standing and enable us to take a lead. As my noble friend Lord Lawson pointed out, there is quite a lot of catching up to do by other member states on their commitment.

If we take that as a principle and take it as read, I should have thought that the promoters of the Bill would find the amendment extremely attractive. It takes exactly the same argument in respect of our commitment to development aid and applies it to our commitment in NATO. I believe that the first duty of any Government, above anything else, is the defence of its people and the security of the country. Therefore, that 2% commitment to NATO is to my mind far more important than the 0.7% commitment in the Bill.

It is striking, and it is important that we address this issue, that our ability to meet that NATO commitment depends on us having the money and making it a priority. The effect of the Bill is to give overseas aid priority over defence. That seems wholly wrong and inappropriate—particularly in the circumstances in which we find ourselves today.

I am looking forward to hearing from the noble Lord, Lord West, and others who are far more experienced and knowledgeable about defence expenditure than I. I had hoped that I would get a glimpse of the extent of the challenge from the speech which the Chief of the Defence Staff was going to make at Chatham House on Monday but, for reasons that are completely mysterious, apparently he was told by the Government that he could not make that speech. I find that quite extraordinary. Was that because, at a later stage, the Defence Secretary wishes to take credit for the situation that we are in, or was it because people are nervous at this sensitive time about what is happening to defence expenditure? There is an opportunity through the amendment to reassure those of us who believe that we absolutely must meet that NATO commitment. Of

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course, I can claim as a strong ally in that respect the Prime Minister himself, who has been telling other members of NATO how they must meet the 2% commitment for expenditure.

Having said that, I think that the only country which will spend 2% of GDP on defence in the fiscal year 2015 is Estonia. Again, there is a parallel in the position on overseas aid. I expect those Members—such as the noble Lord, Lord Davies—who have argued in this House with great passion that we need to take a lead, fly a flag and send a signal on overseas aid to support the amendment, because we need to send a signal on defence expenditure as well.

I just highlight a couple of issues which explain my very strong feeling that we should make that commitment. The United States is spending 3.8% of GDP on defence. Having scrapped the Nimrod programme, our Navy is very vulnerable to submarine attack. I am sure that the noble Lord, Lord West, will be able to reassure me that that is correct. I read in a newspaper the other day that a periscope was spotted in the Irish Sea and the MoD had to ask our ally forces to come to its rescue with their own military marine patrol assets.

In the SDSR 2010, the number of battle tanks was reduced by 40%, as a Ukraine-type conflict was not anticipated to take place. In 2001—long after I had left government—we had 33 frigates and destroyers. It is now down to 19. The RAF has seven fast jet squadrons; it had 33 in 1990. It is true that we have taken on an order for the F-35 joint strike fighter, but that is a few years away. Despite the fantastic efforts being made in Fife, at present we do not have an aircraft carrier capability. The Harriers which operated from the aircraft carriers which were decommissioned have been sold to the US for spares, leaving us in the position where, in Libya, the Typhoons are having to fly much further and get refuelled in the air.

Let us consider troop numbers. Our Army will be down to the smallest since the Boer War at 82,000, cut from 110,000, the Navy service will be down by 5,000 to 30,000 and RAF personnel will be reduced by 5,000 to 33,000. General Richard Shirreff, who is Deputy NATO Supreme Allied Commander, says that,

“the sort of defence cuts we have seen … have really hollowed out the British armed forces and I think that people need to sit up and recognise that”,

and that it is,

“one hell of a risk”.

President Obama, who I know has a few supporters in this House, earlier this month called on the Prime Minister not to let the figure fall below 2%. I have reservations about hypothecation, which I have spent a great deal of time arguing about. However, if we are to have hypothecation for overseas aid and if that is because the Government want to take an international lead and believe that we have a moral duty to do so, we need to have hypothecation for the commitments that we have made in respect of our defence. The highest duty of government is to defend our people. I beg to move.

Lord West of Spithead (Lab): My Lords, I have put my name to this amendment and I support it. I should add that the noble Lord, Lord Dannatt, has also put his name to the amendment but has asked me to say

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that he unavoidably cannot attend today, and to mention that he had raised this very issue in Questions earlier in the week.

Defence and security of the nation, as has been said by the noble Lord, Lord Forsyth, are the first responsibility of any Government. Indeed, the Prime Minister has said so, as did the Prime Minister before him and the Prime Minister before him. But in 2015-16, the next financial year, defence spending is on track to fall to 1.88% of our GDP. This is the lowest percentage of our GDP in 25 years, yet we are in a highly dangerous and chaotic world.

In that highly dangerous and chaotic world, defence spending has been reduced by 8% since 2010 through a lot of the measures that the noble Lord, Lord Forsyth, mentioned. A recent study by the International Institute for Strategic Studies shows that the United Kingdom’s military capability—our capability to do things—has reduced by more than 20% since 2010. That is more than a fifth; which is an incredible reduction in our military capability. We are standing into danger—I apologise for using a nautical term but that is what you say when you are about to go on to the rocks—and I think we should be afraid. Our forces have not just been cut to the bone; they have been cut into the bone. Our military now is unable to do what the people of our great nation expect it to be able to do. The noble Lord, Lord Forsyth, mentioned a submarine to the west of the UK. Our inability to prosecute that properly is a dreadful indictment of what has happened to our forces.

If our defence forces are incapable of defending our nation, its people and its interests worldwide then to be quite honest welfare, health, education and foreign aid are as naught. They become irrelevant if we cannot do those other things and, ironically, in many parts of the world where DfID is working it can do so only courtesy of the military. As has been said, the Government made it very clear at the NATO summit in Wales that the European nations of NATO should spend a minimum of 2% of their GDP on defence because of the threats that there were, which are now seen rising within the European theatre, let alone worldwide. Indeed, the Secretary of State for Defence has referred to a “real and present danger”.

One would like to think that the Government believe that the UK should do the same as it has told all these other countries to do, yet almost every statement and action by this Government since the NATO summit seems to indicate that the Chancellor wishes to renege on that promise. I can of course understand the problem that he has. As a result of multiple ring-fencing of budgets, his room for manoeuvre over the allocation of sufficient funding to departments is seriously curtailed, right across government. Indeed, ring-fencing has a lot of unintended consequences and is not necessarily a clever thing to do.

For this reason, if we are going to ring-fence I believe that it makes absolute sense to link the ODA to the defence budget so that as the noble Lord, Lord Forsyth, says, we can show that defence is more important —because without the defence, we cannot have an aid budget. This amendment would assist the Government in meeting their promise of spending 2% of GDP on

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defence. For that reason, it is a very sensible and proportionate amendment, which would enhance the security of our nation and therefore enable us to continue to provide aid into the future.

Lord Lamont of Lerwick: My Lords, I support this amendment and what has been said by my noble friend Lord Forsyth and the noble Lord, Lord West. I do not believe in hypothecation of expenditure but given that the Government believe in the hypothecation of defence expenditure, and the problems referred to by the two noble Lords who have spoken, why are the Government blocking the Defence Expenditure (NATO Target) Bill in the House of Commons? That Bill specifies the ring-fencing of defence expenditure so as to meet the 2% target. Why meet it for overseas aid but not have a Bill to enshrine that, too, in the legislation which the Government are blocking in the House of Commons?

12.45 pm

Lord Reid of Cardowan: My Lords, I associate myself with the amendment and particularly with the remarks made by my noble friend Lord West. I do that for three reasons: first, because the primary duty of government is the security and welfare of our citizens and our sovereign nation in the world. I will not elaborate on that, as I think it is accepted by most of your Lordships’ House.

My second reason, however, is the commitment of honour that we have towards the men and women who serve this country—not just because charity starts at home but because of the unique contract that they have with the people of this country. It is a contract even until death and, tragically, many of them encounter that and lose their life in the service of this country. We have a debt of honour to illustrate that we are giving just as much attention to them as to others.

The third reason is because of the relationship between development overseas and our position as a nation which has a proud tradition of soldiering and contribution overseas. I am not one of those who believe that every problem has a military solution; they do not. Nor do I believe that you should develop military plans, strategy, operations or structures without regard to what used to be called “grand strategy”. Grand strategy, if we are to have it—I have to say that I do not see many signs of it in the Government—must encompass both hard and soft power: economic development, aid, diplomacy, military, Armed Forces and so on. That needs to be at both the strategic and the operational levels.

As the noble Lord, Lord West, pointed out, there are many cases—though not the majority, I accept—where aid can be supplied only under the umbrella of protection of the British Armed Forces. There are cases where the Armed Forces commit themselves, as in the Ebola crisis, to functions that are not necessarily directly related to defence, but where they are operating in difficult circumstances where they have particular attributes to defend themselves. In other words, you can no longer isolate military and Armed Forces action from soft power, whether diplomacy, aid or whatever. That is the essence of the strategy. In many cases you will not need the military and it would be better, as in some

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of our recent experience, to pay a little more attention to providing civilian attributes such as justice systems, but the two are meshed together.

The truth is that I believe we are now falling beneath the critical mass regarding our Armed Forces—certainly, though I will not rehearse all the details, with regard to our soldiers, surface fleet and aircraft, some of which has been pointed out already. We are also falling beneath critical mass in terms of our commitment. When I was a much younger lad, we were spending 5.4% of GDP on our Armed Forces. We are now spending less than 2%. If the nuclear deterrent is transferred from the central budget, out of which it has been paid for 50 years, into the defence budget, we will have an even greater deterioration, although that will be disguised because of that internal transfer.

I accept that we are among the highest spenders in NATO in this regard because other members of NATO are, frankly, not even getting to 2%. In some cases, when they are getting to 2% that is rather cloaked in euphemisms as well. I was talking to someone recently about the details of the Belgian defence budget. That country spends 2%, 90% of which is on salaries and pensions. As one official said, “We don’t so much have an Armed Forces as an extremely well guarded pension scheme”. So it is not the case that we are falling dramatically behind the rest but, given some of the things that are happening in Europe and the wider world, and the necessity to combine soft and hard power together, we can no longer allow the isolation and continued deterioration of defence; that is not something that can be put back quickly.

I understand that education, health and other domestic issues are extremely important to people in the country. I understand also the sincerity and motivations behind the discussions on the 0.7% target. Still, it would be better to be cautious about our future strategy as a country, for ourselves but also for the many people in the world who look to us not only for moral assistance and diplomatic and development aid but as partners who can be counted upon when the real hard times come, and they come in the form of threats. There is therefore nothing incompatible between arguing for a strong, robust and effective budget with regard to overseas development—particularly economic development, which is the basis of all human progress—and our commitment to adequate funds for defence.

Lord Stirrup (CB): My Lords, I suspect that it will not surprise the House to learn that I agree with everything that has been said so far on this amendment. Let me be clear: I support the 0.7% target, although I accept and acknowledge the importance of the much wider suite of tools that can and should be brought to bear on international development, as the noble Lord, Lord Lawson, has rightly pointed out.

I have been in the position to see personally some of the outstanding work that is done abroad by the Department for International Development. I have also been in a position personally to witness how much of this work has contributed not just to the betterment of humankind in general but to our own national security; it is important to us in a much wider sense. Equally, I have been in a position to see the

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importance of what the noble Lord, Lord Howell of Guildford, who is not in his place at the moment, referred to earlier as the comprehensive approach. In so many difficult areas of the world, development and military effort have gone hand in hand, as they need to do. Indeed, one of the great improvements we have made in this country over recent years is the breaking down of the barriers that used to exist between the different departments. Here I include the Foreign Office, the Department for International Development and the Ministry of Defence. Their joint working has improved immeasurably over the years, and as a consequence, the output, the effect that we have in the world, has improved immeasurably as well.

I have listened very carefully to the arguments that have been made in support of this legislation and for why the 0.7% target needs to be enshrined in legislation. I listened very carefully to the arguments the noble Baroness the Minister made in resisting a number of the amendments that have been put forward. Any one of her colleagues from any of the other spending departments could stand at the Dispatch Box and make the same case with the same force for their own department. Most of the arguments that have been advanced today have no particular significance in international development over any other task that the Government undertake in general public expenditure, except, perhaps, for one, and that one is that we have agreed to an international target for international development, but so we have for defence, as the noble Lord, Lord Forsyth, has pointed out. We have said that it is crucial that nations do not fall below spending 2% of their GDP on defence within NATO. Those nations that do not meet that target should work towards achieving it. We have taken the lead, at least in terms of words, in this regard. What we have not yet done is taken the lead in terms of action.

Surely two departments that have worked and will continue to work so closely together in future as defence and international development, two departments that rely upon each other so much for a synergistic approach in the world, two departments, perhaps the only two departments, which have an international commitment to a specific target, two departments that are linked so closely, should be treated the same in our legislation. I support the amendment.

Lord Tugendhat (Con): My Lords, the Minister will recall that at Second Reading and in Committee I stressed my support for the aid programme and that I have also supported the 0.7% target. The points made by my noble friend Lord Forsyth and the noble and gallant Lord, Lord Stirrup, are central to the debate we are having. Although I and other colleagues doubt the wisdom of guaranteeing a particular share of the national budget to one particular spending programme for exactly the reasons that the noble and gallant Lord, Lord Stirrup, emphasised, the Government are arguing that that is the right thing to do in the case of this programme, as distinct from any other, partly because of its international nature, partly because of the commitments we have entered into, partly because of their belief that we would be setting an example to other people and partly because of their belief that others will follow that example.

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Given that that is the Government’s position, the Minister owes it to the House to explain why what is sauce for the development goose is not sauce for the defence gander. I recognise that she is not a member of the Conservative Party, but she is speaking on behalf of the Government in this House and the Prime Minister, who leads the Government of which she is a member, has been emphasising very strongly in recent days the importance of other nations following our example in relation to the 2% target set for NATO. We have recently received evidence that the British Government may not be able to meet that target next year. If this idea of setting targets and guaranteeing a share of national expenditure is so important in one field, the Minister must be able to argue, for the reasons set out so eloquently by my noble friend Lord Forsyth and the noble and gallant Lord, Lord Stirrup, why they should not apply in the case of defence.

I hope she will also be able to accept that while the problems of the developing world are of a continuing nature, problems in the case of defence wax and wane, and at the moment, when we look at what is happening in Ukraine and the Middle East, problems in the defence sphere are certainly waxing. Therefore, if the Government are going to be able to defend on a rational basis the reasons why they are privileging the development budget in his way, it is essential that they are able to explain why they do not wish to do so for defence. I know defence is not the Minister’s department, but she is proposing this Bill and doing so on a particular set of grounds which apply to the defence area, where we are also committed to a particular target.

Lord Davies of Stamford: My Lords, the noble Lord, Lord Forsyth, invited me to be consistent in my attitude towards this amendment and the first amendment we debated this morning. I think it might have been a slightly rhetorical invitation, so I will probably surprise him when I say that I propose to be exactly that. The way in which the amendment is worded, making public expenditure in one department a function of public expenditure in another, is a rather peculiar way to go about managing public expenditure. I rather doubt whether the noble Lord and his colleagues, including my noble friend, plan to put this amendment to the vote, but I certainly share the aspirations and inspiration behind this initiative.

Earlier, I said, and I stand by it, that one of the two major points of this Bill is to set an example in the world and therefore to achieve something of a leverage effect so that, where we spend more money, we may succeed in persuading others to spend more money in the same way and the same direction and thereby greatly promote the cause we have in mind. That applies, in my view, to the 0.7% target in international aid. It would also apply in the case of the 2% of GDP defence spending target that NATO has formally adopted. As the noble and gallant Lord, Lord Stirrup, just said, that is the only other field in which such an international target exists.

1 pm

I have to say that if the Prime Minister were, by some misfortune, to be re-elected in May and our defence spending went below 2%, not only would we have no influence at all in saying to our NATO partners,

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“You ought to increase your defence spending to 2%”, but saying such a thing would be the most blatant hypocrisy. He would make a complete fool of himself and his words would be entirely counterproductive.

I think we all know that, very sadly, when this Government came to power, they decided that they could safely cut defence expenditure quite dramatically in real terms. They got rid of some absolutely fundamental capabilities, including our carrier strike capability and our long-range marine surveillance capability, which was just mentioned by the noble Lord, Lord Forsyth, and is a very serious matter. We have no such capability at all now and depend entirely on our allies. The Army was reduced by 20% and our escorts were reduced to 19, as my noble friend reminded the House. On the reduction of the fast jet squadrons, the noble Lord, Lord Forsyth, is slightly wrong; there are eight at the moment, not seven, but there is a prospect of our going down to seven, which I believe is the Government’s present plan. That would be seven squadrons of fast jets when we have to defend the Falklands and provide air support for the Afghan National Army if we do not want everything to go completely down the tubes there. We have rightly decided to deploy to deal with the considerable threat of Islamic State. Even more rightly, we are deploying Typhoons in the Baltic at present. We are also having to scramble our own quick-reaction force ever more frequently because Russian incursions are becoming more frequent, bolder and closer to our shores. We can hardly turn around to Mr Putin and say, “I’m sorry, we haven’t got enough aircraft”. If we did that, we would very soon find him flying over the skies of London.

This is a very serious matter. The world has become increasingly dangerous, volatile and unstable. During precisely that period, we have been cutting our defence capability. We must change that and we must set the right example to our EU and NATO partners. Doing something of this kind—accepting the 2%—would be the right way to do it. One of my great hopes for the country is that, in the course of the coming election campaign, both major parties—in the tradition of responsibility over national security that they have both displayed for countless generations, thank God, otherwise we would not be here today—will commit to spending not less than 2% of GDP on defence.

Lord Marlesford: My Lords, the speeches of the noble Lord, Lord Reid, and the noble and gallant Lord, Lord Stirrup, emphasise a very important point: the synergistic act between aid and the military. We know that the help we recently sent to Sierra Leone to combat Ebola had to be assisted by military forces to make it possible to administer it. I suspect that there are a lot of instances where the provision of what we loosely call aid is the need to make it possible to deliver the aid.

I suggest—it may not be a matter for this amendment, although I think it is the point of the amendment—that very much more careful consideration be given to the extent to which the Ministry of Defence budget is used to facilitate aid. Particularly now, in the days of ISIS, that so much is needed to introduce minimum stability—to help refugees, for example—I suggest that one could look at the defence budget and the aid

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budget as a single budget and use that synergy to make both most effective. It is quite extraordinary to me that we set aside the aid budget with a special ring-fence and do not do the same for defence, especially when we are underspending on it.

Lord Forsyth of Drumlean: I entirely agree with what my noble friend is saying. However, of course the root of this problem is that the Government’s focus is on meeting an international target, and the requirements as to what can be included in the international target exclude things which are contributed by the MoD, even though they are helping poor people in difficult circumstances.

Lord Marlesford: In that case, I would have thought that we should redefine aid to take into account the need to be able to deliver it, if necessary unilaterally but maybe with other countries as well—particularly the United States, where the expenditure is not that great, as we have heard.

Baroness Northover: My Lords, I thank the noble Lords for tabling this amendment, and I agree that both the ODA target and the level of defence spend are very important issues. Once again, reflecting this House, we have had a profoundly well informed debate on this amendment, with the participation of, I reckoned: a Chief of the Air Staff—later Chief of the Defence Staff—a First Sea Lord, a former Secretary of State for Defence, and so on. Where else but here? This has also been extremely thoughtful and well argued.

However, to tie one set of spending to the other would not do justice, in our view, to the intention behind the Bill, which aims to increase the predictability of the aid budget and consolidate the United Kingdom’s position as a leader in international development. I understand the noble Lords’ concern to ensure that the defence budget is adequate for the task at hand. They will know that the United Kingdom has the second largest defence budget in NATO and the largest in Europe, and that the Government are committed to spending 2% of GDP on defence. I absolutely hear what noble Lords have said about the importance of the defence of the realm. However, I am afraid that, while I respect the views expressed by noble Lords today, I cannot agree that this amendment belongs in the Bill.

Lord West of Spithead: Can the Minister clarify whether she disputes the fact that, according to this latest study, the percentage of GDP we spend on defence will be 1.88%? That is a fairly definitive and very thorough study, and that seems to be what it will be. However, the noble Baroness said that we will still stay above 2%.

Baroness Northover: I have just given the Government’s commitment. Interestingly, I also have here the figures for defence spending year on year—which I am assured the noble Lord is extremely well aware of—from 1990 up to the present. One of the things that strikes me, coming out of DfID, is how steady it is. Yes, it went up, in particular between 2007 and 2011, but generally speaking it has been remarkably steady over that

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period from 1990 to the present, in contrast to the aid budget. Noble Lords can look at those figures. That brings me back to my point.

Lord Davies of Stamford: May I give the noble Baroness another chance to answer the question from my noble friend Lord West, which she did not do? Did she or did she not say that the Government are committed to maintaining defence spending at more than 2% of GDP after the next financial year?

Baroness Northover: I remind the noble Lord that we have a general election between now and then, and although we are not standing for election many of our colleagues are. The new Government will no doubt take a decision as to what they say their spending should be. However, I set that in the context of a continuity here, as regards defence spending, which you do not see in the DfID budget.

Lord Reid of Cardowan: I am grateful to the Minister but I have to come back on this. We understand that, tragically from her point of view, the present Government may not be in office after the general election, but if they are, will they maintain expenditure at 2% or above? Incidentally, I say that in the context of not accepting her figures on continuity. I do so for very good reasons. For instance, just after the Cold War, under Mrs Thatcher as Prime Minister, there was a 25% cut in real terms in defence expenditure over a six-year period.

Baroness Northover: I am very happy to share these figures with noble Lords but I am making a comparison with the aid budget, which is what we are addressing—perhaps I could bring noble Lords back to that. I do not dispute the value of the defence budget but we are trying to make sure that the aid budget is much more predictable. I hope that I may be allowed to carry on because I realise that noble Lords wish to get through some other elements.

Lord Tugendhat: I thank the noble Baroness. She has just asserted that there has been considerable continuity as regards defence expenditure. I recognise that the noble Lord opposite disputed that but she has asserted that there has been considerable continuity in that regard. That continuity has been achieved without a legal obligation, so does not that cast doubt on the whole essence of her argument that a legal obligation is necessary to achieve continuity?

Baroness Northover: That is an interesting point. The problem with the aid budget is that you do not see the level of continuity and predictability that you see in other government departments, so, in some ways, the noble Lord has put his finger on why we have this Bill.

Several noble Lords have linked aid and defence. Of course, we recognise that conflict is development in reverse, with no fragile low-income country meeting a single millennium development goal. Helping rebuild fragile states will help tackle the root causes of global problems such as disease, drugs, migration and terrorism, and is far less costly than military interventions. The United Kingdom is, and has long been, a global leader

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in promoting a “whole of government” approach to international peace and security. The establishment of a new, more than £1 billion Conflict, Stability and Security Fund in 2015-16 will support a larger and more integrated UK effort in National Security Council priority countries.

The noble Lord, Lord Reid, rightly pointed to the outstanding contribution that the military has provided in supporting civilian efforts to combat Ebola in Sierra Leone. I welcome, as we all do, that close working and am sure that we will need to develop it further in the future. Some ODA is, of course, spent by the MoD as well as by the FCO, DECC, Defra, DoH and the Department for Education. I come back to my main point: we are trying to ensure that aid is predictable. It should not be tied to the entirely laudable aim of ensuring that defence or other areas are properly addressed. That is why we cannot support this amendment and I hope that the noble Lord will be willing to withdraw it.

Lord Purvis of Tweed: My Lords, if the House will forgive me, I will focus on the specific amendment as it affects the Bill. However, in so doing, I should say that I have respect for, and have been highly impressed by, the quality of this important debate, to which the Minister referred, and its imperative going forward.

I believe that a similar debate is taking place in another place today on the resumed Second Reading of the Defence Expenditure (NATO Target) Bill introduced by Mr Christopher Chope. It will be interesting to see whether Mark Francois, the Minister of State for the Armed Forces, responds to that debate. He will no doubt reinforce his opposition to the Bill in the Commons today, and my noble friends may correspond with him to discover his reasons for that.

1.15 pm

I do not agree that it is right to peg, under the provisions of the Bill, ODA expenditure with defence expenditure. While I support wholeheartedly the need for proper co-ordination between defence activity and our deployment in the world, as well as the ODA budget, at Second Reading I cited what I hoped the UK to be—a global citizen with our ODA. We are a free citizen in the world because of our Armed Forces and the debt we owe to them. As noble Lords have indicated, they play a critical role in the effective delivery of our aid budgets. However, the amendment would peg ODA expenditure to the defence budget and I therefore do not believe that that is appropriate.

In the context of the Bill and in due recognition of the important points made regarding a wider, separate debate on defence expenditure, I ask the noble Lord to withdraw the amendment.

Lord West of Spithead: My Lords, can I clarify what the noble Lord said and that he accepts that the first duty of any Government is the defence and security of the nation?

Lord Purvis of Tweed: I do not think that there is any question that we owe our liberties and freedoms to defence spending, and that is why it is required. Not

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only that, I understand absolutely the Wales Declaration on the Transatlantic Bond that we signed up to, which states that we will aim to move towards the existing NATO guideline of spending 2% of GDP on defence within a decade. I know that we have a leading role in this and know the strength of the argument made by my noble friends and noble Lords to ensure that the UK continues in this leading role.

Lord Forsyth of Drumlean: My Lords, I am a very humble sort of chap. I have sat here this morning, participated in the debate and have listened to former Cabinet Secretaries, former Permanent Secretaries, former chiefs of staff with great experience in defence, former Secretaries of State and former Treasury Ministers. There is an almost unanimous voice saying, “Look, we support the principle but, actually, the way in which this is being implemented is mistaken”. No doubt the Bill will make its way towards the statute book and people will be able to change it in the future. However, on this matter of the defence of our country, we are in territory that is of fundamental importance.

Having listened to the speeches of the noble and gallant Lord, Lord Stirrup, the noble Lord, Lord West, and, speaking from the opposition Benches, a former Secretary of State for Defence, who has held quite a number of other positions—a vast experience of government—I am very surprised that my noble friend the Minister has not said, “You know what? We need to go back and think about this”. I did not grasp whether she was saying that the Government remain committed to a target of 2% or that they would meet their 2% target this year. I shall happily give way to her if she can clarify what she was saying, because there is a degree of confusion about that.

Baroness Northover: I trust that I made it clear in answer to my noble friend Lord Tugendhat. He made the very reasonable point: why hypothecate this one but not the other one? I responded that the defence budget has been much more predictable. I understand the pressures on it and, therefore, there is a strong argument for making sure that the aid budget, which has zig-zagged all over the place, as we have heard, is fixed in the way in which we are seeking.

Lord Forsyth of Drumlean: I am rather disappointed with that answer. I am happy to give the Minister another go as she did not actually answer the question. The reason the aid budget has, as she said, wiggled all over the place is because the Government have added another £5 billion to it in order to meet their target. They have met—in fact, they have more than met—the 0.7% target this year, without the need for the Bill. Saying that the defence budget has been reasonably consistent has been challenged and I do not want to go over those arguments. The aid budget has moved all over the place because of the decisions made by Governments.

The point that I am asking her about is this: was she saying that the Government will indeed meet the 2% target this year, and are committed to that? If she is saying that, I am much less concerned about my amendment, and that is fine. If she was just saying that the Government

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have committed themselves to the NATO target, that is a completely different position. That is why she is arguing for the Bill in respect of the overseas aid target: it is not enough for the Government to commit to meet the target and we need to have it in statute. What she is saying about this is very important, so what was she saying?

Baroness Northover: We are talking about a Bill relating to development. We are talking about a 0.7% target to do with development. That is what the Bill is about and that is why we oppose the amendment: it does not relate to the Bill in question.

Lord Forsyth of Drumlean: We can all take it from that that the Government are not prepared to say on the record, with all the risks and threats around us in the world, that they are committed to meeting that 2% target. That is extremely disappointing, especially when the Prime Minister is going around telling other countries that they ought to do so. Surely the whole basis of the debate has been about setting an example to the rest of the world.

A number of points have been made. I want to pick up on points made by my noble friend Lord Marlesford and by the noble and gallant Lord, Lord Stirrup, which are profoundly important. The noble and gallant Lord talked about the fantastic job being done by our troops around the world, in conflict zones and elsewhere, to help improve people’s quality of life. That is something of which we should be immensely proud. We should not be proud of the fact that only £5 million of Ministry of Defence spending counted as overseas development aid for the year 2013. The Government are obsessed with sticking to conditions set by other people—who do not actually meet the target—as to what can be included in the target.

I listened to my noble friend the Minister’s boss, the Secretary of State, on the radio this morning, speaking from Sierra Leone. She was very good indeed. She said how committed she was to aid being about helping people economically. She spoke with great affection about the role being played there by our defence forces. But that is not allowed to come off her budget because it does not meet the target. Indeed, in one instance where we sent troops and people—I think to Haiti—the only thing that the MoD was allowed to claim was the fuel for the ships. That is an absurd position, which arises from being determined to meet a particular target determined by someone else, as opposed to thinking about how we can spend the money most effectively to help people in distress and need. In that latter example, humanitarian aid is less than 10% of the budget that we are discussing.

Lord Reid of Cardowan: I am grateful to the noble Lord for allowing me to intervene. This is an important point for recognition, I hope, by those who approach this not from the defence side but from the side of international development, whether economic development or aid. The point is simply this. We synergise the efforts, finances and resources of DfID and the Ministry of Defence when specific emergencies arise. We did so in relation to Ebola and the Pakistan earthquake and so on, as I think everyone would accept.

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However, there is so much more that we could do on a more general scale to aid the development of countries throughout the world in two areas. One is post-conflict reconstruction, where a massive job could be done for the benefit of people, and I would go further by referring to the second area, pre-conflict reconstruction. Both those are part of what the noble Lord, Lord Howell, mentioned today as developing areas for international development and aid, and they are relatively recent. If we could conscript a vast army not of soldiers but of civilians with expertise in human rights, law, prisons, policing and so on, pre and post-conflicts, there would be enormous benefits. This is not just a matter of the protection of our own country.

Lord Forsyth of Drumlean: I am most grateful to the noble Lord, who speaks from experience, and I agree with everything he says. What we spend at the moment on overseas development aid accounts for about a third of the defence budget. All my amendment would do is say, “If you want to increase the overseas aid budget, you can do so, but we have to meet that other target as well”. That seems entirely reasonable and sensible, and I am afraid that the arguments put forward for not linking these two things were thoroughly inadequate. The advocates of the Bill have been hoist by their own petard.