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Mr. Mullin: We have had a good debate about a large group of amendments, and I shall do my best to say something about all of them.

The amendments and the new clause tabled by the hon. Member for South-West Devon (Mr. Streeter) all seek to change the aim or purposes for which development assistance can be provided. The Bill sets out a simple aim for British development assistance. With the exception of assistance to the overseas territories and that provided in response to disasters and emergencies, assistance can be provided only if it is likely to contribute to a reduction in poverty.

New clause 2 provides that no UK development assistance could be disbursed through third parties unless the Secretary of State is satisfied that it is likely to contribute to a reduction in poverty. I am afraid that the new clause stems from a misreading of the Bill. Most of the assistance listed in it--in particular, assistance to agencies of the United Nations and to the European Development Fund--is provided for under clause 4(2), which allows a Secretary of State to support organisations and contribute to funds, and here I quote from that subsection,

That is exactly the same as the test proposed in the new clause.

The Opposition may have been confused by clause 8, which provides for a Secretary of State to enter into arrangements to provide development assistance with third parties. I can reassure the House that this clause, too, is subject to the powers set out in clauses 1 to 4. Assistance given via third parties must, to the same extent as assistance given directly by the Secretary of State, be likely to contribute to a reduction in poverty.

The new clause also refers to payments via multilateral development banks. I take this to be a reference to payments made under clause 11. I will cover that point when I reach amendment No. 4 shortly.

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The hon. Member for South-West Devon and some of his colleagues got excited at the mention of the European Union. He is right to draw attention to the poor record of the EU's aid policy, but it might help to put his indignation in context if I say that, at the Edinburgh summit in 1992, a Tory Government signed up to the huge increase in aid to be channelled via the European Community.

Mr. Streeter: I have made this point before, but the Minister will know that it is only since 1997-98 that the true horror of the EU's aid programme has become apparent to us all. If he is right to say that all British Government aid--whether or not it goes through the EU--must reduce poverty, what will he and the Secretary of State do the day after the Bill becomes an Act? He surely cannot pretend that the EU's programme has a poverty focus.

Mr. Mullin: I am about to deal with that point. However, it is slightly odd that the horror, as the hon. Gentleman describes it, of the EU's development budget became apparent only after the change of Government in 1997. That makes one wonder what the previous Government were doing before then. However, I shall not make too much of that point, because we have had a good-natured debate and I acknowledge that there is a serious problem with the EU development budget and the way in which it is spent.

I think that the hon. Gentleman misunderstands one point, so I should clarify the scope of the Bill. Only expenditure on the European Development Fund is covered by the Overseas Development and Co-operation Act 1980 and will be covered by the Bill. Expenditure on all other European Community development programmes, such as Poland and Hungary Aid for Reconstruction of the Economy--PHARE--which provides financial and technical co-operation to central and eastern European countries, and the MEDA programme, which provides development assistance to 12 middle-income countries in the Mediterranean, are and will continue to be covered by the European Communities Act 1972.

2.45 pm

Over the past five years, programmes covered by the 1972 Act have accounted for more than 70 per cent. of DFID's expenditure in the European Community. Therefore, this Bill deals with the European Development Fund and the 30 per cent. of our contribution to the EC aid programme that is spent through the EDF. The fund provides development assistance to 77 African, Caribbean and Pacific countries and, with one exception, they are all developing countries. The EDF covers 39 of the world's 48 least-developed countries and the central objective of the Cotonou agreement, which governs the EDF, is poverty reduction.

In 1999-2000, DFID contributed £213 million to the EDF and the UK Government argued strongly and successfully that EDF allocations should reflect its poverty focus and 71 per cent. of country allocations now go to the least-developed countries, and a further 18 per cent. to other low-income countries.

We have taken advice and I can confirm that, given the EDF's clear focus on poverty reduction as set out in the Cotonou agreement, the Secretary of State will be able to

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continue to contribute to it under the Bill. I think that that addresses the point that the hon. Gentleman made a moment ago. The fact that the majority of EC development programmes fall outside the scope of the Bill does not mean that we do not engage with them to improve their efficiency, effectiveness and poverty focus. The scale and scope of the EC's development operations mean that it has the potential to play a major role in reducing poverty but, so far, it has not come close to fulfilling that potential.

Mr. Wells: We should reflect on the ties on the EU aid budget outside the EDF. It is compulsory that every country in the EU contributes and many of them have never spent any money on development at all. To abandon that source of money would lead to a serious reduction in the amount of aid available to poor countries.

Mr. Mullin: I agree with the hon. Gentleman that we should reflect on that point. He and other hon. Members are right to draw attention to it, but it is not relevant for the purposes of this Bill. Much of the discussion about aid to middle-income countries and the aid that has been misdirected is covered by the European Communities Act 1972 and it will not be affected by the Bill. That is the only point that I wish to make.

Mr. Rowe: I had not until this moment realised the point that the Minister has just made, and I am grateful to him for making it. However, does he not realise that the issue is extraordinarily confusing for the general public? As I understand it, the 0.3 per cent., or whatever it is, that we now spend includes the money covered by the 1972 Act. It is therefore caught up in the rhetoric about whether our money goes to the poorest countries. When ordinary people try to reassure themselves that we are a generous country, they will think that the whole of that 0.3 per cent. goes to the poorest countries, but that is clearly not so.

Mr. Mullin: I say again that hon. Members are right to draw attention to the problems with a large part--if not all--of the EU's development spending. However, many of those points are not relevant to the Bill and the new clause, because they deal with funds that will not be governed by the Bill. The money spent by the EC through the EDF is, by and large, spent in a better way and is more directly targeted at the poorest countries than some of the EC's other expenditure.

Mr. Davidson: Does my hon. Friend accept that EU aid generally is inefficient, slow, disorganised and unaccountable? If so, what action are he and the Government taking to ensure that the 30 per cent. which is covered by the Bill is spent more effectively? If that money is focused on the poorest countries but is not spent well, why should we give the EU aid budget more money?

Mr. Mullin: My point is that the 30 per cent. that is accounted for in the European Development Fund is the better-spent European aid. It is targeted at the poorest countries, which is what my hon. Friend wants. My right hon. Friend the Secretary of State has put us at the forefront of ensuring that all the EU's budget--not just the 30 per cent.--is spent more efficiently, and we shall continue to lead the way. The relatively new Danish European Commissioner is making a great effort to

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implement reforms. As he is dealing with a mighty task, we have to give him some leeway to make progress, and there are signs that that is happening.

Many other issues besides the European aspect of our development aid have been raised. Amendments Nos. 2, 3 and 4 attempt to insert a reference to good governance. They are all unnecessary and undesirable, and the Government will resist them.

Amendment No. 2, which relates to clause 1, proposes that good governance should be an aim of development assistance and independent of poverty reduction. I entirely accept that the quality of governance is critical for the eradication of poverty. If Governments are unrepresentative and ineffective, and where corruption is endemic, economic growth and sound development suffer. I do not disagree with anything that the hon. Member for South-West Devon and other hon. Members said about the importance of good governance.

Chapter 1 of our 2001 departmental report, published last month, details the policies and actions that we are pursuing to promote sustainable livelihoods. We are strengthening governance and encouraging economic growth, which benefits the poor and upholds human rights. Let me offer a few brief examples to demonstrate the range of activities and initiatives that we support. In Uganda, we are supporting changes in the banking laws to increase access by the poor to financial services. We are also supporting a five-year commercial justice reform programme that aims to create a sound legal environment in which both foreign and domestic businesses can feel confident, and thereby increase investment levels. In Croatia, the Ukraine, Uganda and Russia, we are working with the Clerk's Department to strengthen the parliamentary system. In Jonestown, Jamaica, we are working with the Government and the local community to reduce violent crime.

The Bill will not prevent the Secretary of State from supporting those interventions because they all contribute to the reduction of poverty, either through furthering sustainable development or through promoting the welfare of the people. So to make good governance an additional aim of development assistance is unnecessary and undesirable. The quality of governance is important, but, as the hon. Member for Richmond Park forcefully made clear, so are health, education, water, enterprise development, trade, investment and so on. All those aspects of development are interdependent. To mention one without the others would give a distorted perspective on development, which could weaken the Secretary of State's other powers.

We are clear in our understanding that support for good governance is possible within the powers set out in the Bill. If we elevate it to the level of a specific free-standing aim, then on the principle that nothing unnecessary is stated in legislation, every additional aim would cast doubt on the core power. If support for good governance is not, as we believe, implicit in action to reduce poverty, what does the core power cover? We are anxious not to dilute that power. That is our key consideration.

Amendment No. 3 provides that the activities authorised in clause 4(1) should be likely to promote the reduction of poverty or good governance. Concern was expressed in Committee that because it was not linked to

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that requirement, it created a loophole that would allow the Secretary of State to provide development assistance for any reason whatsoever. That concern is misplaced and stems from a misunderstanding of the Bill's structure.

As clause 4(1) makes clear, the Secretary of State may only exercise his or her powers

It is wrong to suggest that there is no link between that power and the core power. It does not create a loophole and is entirely consistent with the Bill's poverty focus. The amendment is therefore defective.

Amendment No. 4 relates to clause 11, which provides for payments to multilateral development banks. It is a reworking of the provisions of the Overseas Development and Co-operation Act 1980 and supports payments by way of subscription and contribution to a number of multilateral financial institutions. The amendment would require that all such payments must be likely to contribute to the reduction of poverty or to promote good governance.

I need to make two points on that. First, those payments fall due because of international agreements entered into by various Governments, including the previous Administration. It would be a very serious matter if Parliament proposed that the Secretary of State be put in a position of having to renege on the United Kingdom's financial commitments. Secondly, any such payments are, in any event, subject to the prior approval of the House, as stated in subsection (5). It follows that if the House is unhappy with the making of a particular payment, it has the power to prevent it. In that respect, the amendment is unnecessary and an undesirable additional constraint.

A common thread runs through the amendments: they all attempt to add good governance to the aims or purposes of the Bill. Let me again make it clear that the Secretary of State will be able to support activities that promote good governance. The quality of governance is vital for the sustainable reduction of poverty. I can further reassure hon. Members that the Secretary of State will be able to continue to support all the activities--including those of good governance--that we are currently backing.

Amendment No. 5, tabled by the hon. Member for Ceredigion (Mr. Thomas), relates to clause 1 and deals with a different issue. It attempts to insert a particular interpretation of sustainable development which would impose an unreasonable constraint on the Secretary of State. The amendment interprets sustainable development as being something that

As the hon. Gentleman said, that is taken from the 1987 Brundtland report. We believe that the interpretation is excessively narrow and puts undue emphasis on environmental concerns. We are aiming for a balance between environmental, economic and social concerns. Let us take, for example, the extraction of minerals. If extraction is managed properly and the income generated is used for productive purposes, it can enable a country to lift itself and its people out of poverty; yet such extraction

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would diminish the resources available for future generations. Would that compromise their ability to meet their own needs?

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