The Minister of State, Department for International Development (Mr. Gareth Thomas): I beg to move,

Let me say at the outset that it is a pleasure to serve under your chairmanship, Mr. Weir. I trust that you will intervene with vigour if I am ever bullied during the proceedings.

We meet to consider the UK’s proposed contribution to the seventh replenishment of the special development fund of the Caribbean Development Bank. As hon. Members on both sides will recognise, the Caribbean, like other parts of the world, is suffering from the impact of the global financial crisis. Some Caribbean countries are in recession. The crisis has reduced regional growth by 0.5 per cent. this year, and we expect an impact in 2010 as well. Tourism receipts are expected to fall by 15 per cent. this year. We also expect unemployment to increase.

The CDB is playing a key role in the response to the financial crisis. It provides funds for Governments and infrastructure projects, it helps to strengthen social safety nets and it is helping to co-ordinate responses to the financial crisis between countries and donors. The new funding for the seventh replenishment of the special development fund is crucial to our wider efforts to help Caribbean countries tackle poverty.

By way of introduction to the CDB, let me say that the bank has a quite unique regional focus. It is an important Caribbean institution. By bringing Caribbean countries together, it is helping to make real progress in the region towards achieving the millennium development goals, supporting economic development and, crucially, supporting regional integration.

The CDB has two lending elements: first, ordinary capital resources and, secondly, the special development fund, which is the subject of the draft order. Ordinary capital resources are lent at near-market rates and aim to be self-financing. The fund provides grants and lending on concessional terms to the less developed members of the CDB, and it relies almost entirely on donor contributions for replenishment every four years. The negotiations for the current replenishment resulted in an agreement in March 2009. The total resources agreed for the fund were £197.5 million, of which donors collectively will contribute £122.6 million. Our proposed contribution is £35.4 million, which represents a 24.4 per cent. share.

During the negotiations, we pushed for and achieved agreement on a number of issues: first, a more focused strategy for the CDB and particularly the fund, prioritising measures to support economic growth, work on climate change, regional integration and aid effectiveness; secondly, a results-monitoring framework with clear targets and baselines to measure progress; thirdly, more progress on human resource management, including more specialist professional staff to help with the implementation of programmes; fourthly, an increased emphasis on climate change, regional co-operation and gender equality; and, fifthly, a scaled-up programme of assistance to Haiti, where more than 60 per cent. of the Caribbean’s poorest people live. In short, SDF 7 offers a well-targeted and effective means of tackling the most serious poverty in the Caribbean. In that spirit, I commend the order to the Committee.

Mr. Mark Lancaster (North-East Milton Keynes) (Con): This is the latest in a line of replenishment orders, and we have already dealt with instruments for the World Bank, the African Development Bank and the Asian Development Bank.

The replenishment for the CDB marks a significant increase. The last replenishment totalled £23,492,000, whereas the present one totals £35,357,000. Although it is broadly in line with the replenishments for the other development banks, it none the less represents a large increase. The Minister has outlined some of the reasons for that, but I would like him to explain it in greater depth. Organisations that do not receive Department for International Development funds to the same degree state—this is not my personal view—that we are increasing our contributions to regional banks because it is relatively easy to do so, rather than finding other means to spend money through bilateral contributions, non-governmental organisations and other sources. The Minister should therefore expand on why the increase is so significant.

The Minister mentioned the key objectives, but I would like to go back a stage and ask what the key objectives for the sixth replenishment were. Perhaps we should see whether those objectives were met before we wade ahead with the seventh replenishment. It is important when we set objectives that there is a reckoning as to whether they are met. Indeed, I recall from a previous debate on the Asian Development Bank that not all of the payment was made; some of it was conditional on the bank achieving various outcomes. There does not seem to be any such conditionality in relation to the replenishment for the Caribbean Development Bank. Why is that? Is it because we are more confident about the Caribbean Development Bank than we are about the Asian Development Bank, or have all the objectives been met? We should explore that and see whether all the objectives for the sixth replenishment were met.

The explanatory notes state that the key objectives include:

I certainly support the aim to focus on fewer areas, but why those particular areas? The Minister said that the CDB has a unique focus. I recall the African Development Bank deciding that its comparative advantage was in regional infrastructure, but the unique focus of the CDB is not clear. Is the Minister saying that none of the other institutions focus on growth, climate change, regional integration or development effectiveness? What is the unique focus?

Another key objective is:

Who can argue with that? That is exactly what we want, but does that imply that there has not been a fully quantified results monitoring framework in the past? What concerns did that raise with the most recent replenishment, and have they been met? The next key objective is to achieve:

That, too, is a worthy aim, but, as with the other regional banks, will the Minister comment on the composition of the board? Every bank, including the World Bank, is giving that consideration; is the Caribbean Development Bank doing that? Other regional banks are also focusing on decentralisation and country offices. That is certainly true of the African Development Bank, but is it also true of the Caribbean Development Bank?

The final key objective is:

That is fine, but it raises the question: why are we no longer focusing on good governance?

Mr. Michael Moore (Berwickshire, Roxburgh and Selkirk) (LD): It is, as always, a pleasure to serve under your chairmanship, Mr. Weir. I think that the need to defend the Minister from bullying will be fairly limited this afternoon. I would simply like him to answer a few questions and elaborate on his commendably concise introduction.

The hon. Gentleman was right to put the draft order in the context of the terrible global downturn and the particular pressures that it is putting on the developing world. We have rightly been focusing on the downturn’s impact in our country, but several of the problems here are also being experienced in the developing world. Our discussions often focus—understandably so—on Africa. The draft order allows us a brief opportunity to look at some of the serious issues affecting the Caribbean.

From what the Minister said, it seems that the 24 per cent. of the overall replenishment that the UK contribution represents is consistent with previous shares that we have contributed. Following on from the question put by the hon. Member for North-East Milton Keynes, the question is not so much why are we increasing our contribution—because I would think that, pro rata, it is the same—but what led to the decision back in December last year to increase it by that amount? At that stage, what additional needs had been identified? Clearly, since the negotiation was concluded in December, the world has changed and there are additional pressures that perhaps were not foreseen then. I would be interested to know how that now plays into the support for the Caribbean Development Bank and others.

Mr. Thomas: To answer the hon. Gentleman’s point and, tangentially, if he will forgive me, the question put by the hon. Member for North-East Milton Keynes, let me highlight two issues. Two specific issues were part of the rationale for increasing funding under SDF 7. Firstly, there was the clear impact of the global recession, which we were already beginning to see was a problem in December. It was clear that that would play into the next two or three years at least in the Caribbean.

The second issue is the challenge of climate change. Anyone who knows the Caribbean—I am sure that the hon. Member for Berwickshire, Roxburgh and Selkirk recognises this—will be aware of the scale of the disasters that have hit the Caribbean region, particularly hurricanes. Stronger responses need to be put in place to deal with the impact of climate change, to ensure that the Caribbean is better able to cope with such disasters. Those are just two of the reasons for the increase.

Mr. Moore: I am grateful to the Minister for that intervention, which provides a useful illustration of the fact that although hurricanes have been a feature of that part of the world for ever, climate change means that such disasters can only get worse. The fact that additional resources have been put in for such a purpose is welcome recognition of that. I do not know if the Minister is in a position to tell us now, but it would be helpful to break down within the sum that we are contributing and within the new replenishment as a whole what the balance of investment areas will be and the extent to which, in signing up to the replenishment, we have ring-fenced sums along the lines that he suggests, or the extent to which that is left to the development bank to determine.

In his contribution to the G20 follow-up in September, the Prime Minister recognised both the strengths of the development banks and some of the problems. In chapter 4, paragraph 4.12 of the document “Supporting Global Growth,” he states that multilateral development banks

To pick up the other point I was making to the Minister, it would be helpful if he set out how he envisages a more flexible response being built into how those banks operate, because a four-yearly replenishment is clearly not swift and nimble enough to deal with the sort of problems we are seeing now and might expect to see again.

Last year, the Government started off one of our rare debates on international development on the Floor of the House by raising the subject of transparency. They recognised that giving our constituents confidence that the money we spend on development is well spent is very important, particularly when there are financial pressures here at home and every pound spent must be properly justified. The Minister mentioned results frameworks and talked about very important objectives, with which, as the hon. Member for North-East Milton Keynes said, few of us would disagree, whether in relation to the environment, gender equality or whatever. However, it would be helpful to understand a bit more about the reporting process and the extent to which that is fed back not just to DFID but to Parliament. Do the new arrangements represent an enhanced version of that reporting process compared with what we had under the previous replenishment?

The key to that, notwithstanding the presence of any conditionality, is what sanctions there are if we are not happy with what is being done. I hope that, in answering that broader point about development, which many of our constituents ask, the Minister will give us some further detail. Other than that, I am pleased to say that, as with other orders of this type, we are happy to support it.

Mr. Philip Hollobone (Kettering) (Con): I am delighted to have been appointed to the Committee, because I think that investment in developing countries is hugely important. Many of my constituents will be proud that this country is investing a lot of money in the Caribbean and much of that money will go to former Commonwealth countries.

In relation to the order, will the Minister say what the definition of the Caribbean is? Twenty-five years ago, I spent the best part of a year as a voluntary development worker in the Bay islands off the coast of Honduras, which is a central American country, although those islands regarded themselves as part of the Caribbean. Would any parts of central or, indeed, south America be caught in the definition of the Caribbean used in the order?

It would also be informative to know the balance between Commonwealth and non-Commonwealth countries in the SDF-participant countries, because although the United Kingdom controlled much of the Caribbean for a very long time, we never controlled all of it. I read in the explanatory note that among the 26 member countries in the SDF, 21 are regional member countries and five are non-regional. Two of the non-regional countries are cited: the United Kingdom and Canada, both having about 9.5 per cent. shares and votes. What are the other three non-regional countries? I would be intrigued to know whether one of them is the United States. Clearly, the Caribbean is very much an “American lake” in terms of US foreign policy. If the US is not involved in the Caribbean Development Bank, how is the US funnelling money into development projects in that region, and to what extent can the United Kingdom assess the value of its contribution through the CDB vehicle compared with any other vehicle that the US might be employing?

I was very encouraged by the Minister’s remarks that extra investment is to go into Haiti, which has been the poorest part of the western hemisphere for a very long time. I know that because Honduras, certainly when I was there 25 years ago, was the second poorest part. If investment in Haiti through the Caribbean Development Bank is increasing, what investment elsewhere is being cut? I hope that the Minister will address the point made by the Liberal Democrat spokesman about giving us a better picture of where the bank’s investments in the region are going.

There seems to be a regular replenishment of the funds available to the bank, which I am sure is an excellent thing, but I would like to know how much of the investment that this country and other countries are putting into the bank is invested in endowment funds, for example, to try to provide future income for the fund. Or is it the case that every time there is a replenishment, it all comes out of revenue expenditure from the donor countries?