Lord Bates "The only way to end aid dependency is through inclusive economic growth - jobs, investment and trade"

On 27 November Lord Bates responded for the Government on a debate on DFID's Economic Development Strategy. His speech is copied below. You can read the full debate here.

"My Lords, I join others in paying tribute to my noble friend Lady Nicholson for securing this debate and for the excellent way in which she introduced it. I thank all noble Lords who have spoken for their outstanding contributions.

What we at the Department for International Development are united in is our mission, which is simple though complex. It is to eradicate extreme poverty in line with the sustainable development goals by 2030. When we look at the scale of that challenge, we can be heartened by the fact that in 1990 there were 2 billion people living below the international definition of extreme poverty, and that today different people variously put that figure between 700 million and 750 million. So the goal of eradicating extreme poverty is within reach. However, the international community and the international development community need to exercise an element of humility; we need to recognise that the reason why the vast majority of people have been lifted out of poverty has been not through aid alone but through trade and economic growth. As the Growth Commission puts it, economic growth,

“can spare people en masse from poverty and drudgery. Nothing else ever has”.

The only way to eliminate poverty is by creating trade, investment and jobs—quality jobs that help the world’s poorest to stand on their own two feet. The only way to end aid dependency is through inclusive economic growth—jobs, investment and trade. Many poor countries have achieved bouts of fast growth but the challenge runs deeper. Lasting progress comes from growth, which transforms economies, creates jobs and greater private sector investment, and spreads benefits right across society.

The stakes are significant and so are the opportunities. Over the next decade, 1 billion more young people will enter the job market, mainly in Asia and sub-Saharan Africa. We must support this growing population by creating more and better jobs, helping people to provide for their families, expand their life choices and lead healthy and prosperous lives. That is why we published DfID’s first ever economic development strategy earlier this year. Incidentally, it was launched in Ethiopia, a country that is hosting huge numbers of refugees from South Sudan and Somalia. It was launched at the same time as a compact working to develop businesses and industry in that area. The strategy emphasises the need for a sharper focus on nutrition, human development and skills in order to build a healthy, educated and productive workforce for the future.​

DfID and the Department for International Trade are working together to ensure that development and global prosperity are central to the UK’s trade and investment policy. The noble Lord, Lord Desai, said development was not just about government; it was about people. He was absolutely right. It is people—it is businesspeople—who create jobs and wealth. It is the risk-takers, the wealth-creators and the taxpayers who build strong and stable societies. The UK has introduced legislation so that we are ready to put in place a trade preferences scheme when we leave the EU. This will, as a minimum, provide the same level of access as current EU trade preference scheme commitments. My noble friend Lord McInnes mentioned the travesty that many countries find themselves put at a disadvantage when trading with the EU. We want to ensure that an independent British trade policy deals fairly with the poorest countries in the world and gives them the chance to trade their way out of poverty.

The noble Lord, Lord Bruce, mentioned the European Development Fund. That is part of the negotiations that are going forward. It is true to say that the EDF’s own rules do not permit countries that are not members of the EU to be part of it. I echo his point that we have found the EDF to be a high-performing and effective fund, and we would be interested in discussions with our European partners about how we can work together to eradicate poverty. In addition, the trade preferences scheme will offer non-reciprocal tariff reductions to around a further 25 developing counties. By helping developing countries to harness the formidable power of trade, we are creating our trading partners of the future and supporting jobs at home too. The noble Lord, Lord Bruce, also mentioned the role of the private sector with aid. I would say that it can never be a subsidy, but it can be a catalyst for growth. That is where we must focus and what we have been driving forward.

My noble friend Lady Nicholson mentioned the sustainable development goals 2030. We need to turn the trickle of private investment into a torrent. The figures for global aid flows have already been referred to. In 2015-16, they were about $150 billion. The estimated requirement to meet the 17 sustainable development goals is $3.9 trillion annually. The current level of investment in those goals is $1.4 trillion, therefore, the gap as we stand is $2.5 trillion that cannot be filled by Governments alone. We must do better at catalysing and leveraging private sector investment.

That is where the development finance institution, the CDC, is central. It is one of a handful of investors with the skills and risk appetite successfully to support businesses in the most difficult of markets. Over the past three years, companies backed by the CDC created more than 3 million new direct and indirect jobs and paid taxes to national Governments worth more than $9 billion. The CDC’s successful investments demonstrate to private investors the opportunities that exist, paving the way for other investors to follow. Last month, the UK reaffirmed our commitment to the CDC by providing a capital increase for the next five years.

I pay tribute to the work which my noble friend Lord Eccles did—I cannot remember whether it was as chief executive or general manager in those days— ​through his leadership of that organisation. I also echo the tribute of my noble friend Lady Jenkin to Diana Noble and the work which she did on the latest strategy, which focused our attention on the hardest-to-reach countries. It focused on Asia and Africa because that is where 80% of the world’s remaining poor live.

As one of the largest capital markets, the City of London is a natural partner to deliver the UK’s ambitions on economic development. By making the City of London a leading financial centre for the developing world, we can make it easier for developing countries to access the expertise, innovation, and capital available to meet their investment and growth needs. Many noble Lords—including my noble friends Lady Hodgson, Lady Jenkin and Lady Nicholson, and the noble Lord, Lord Bruce—pointed to the fact that in many ways, the greatest thing that we can give to the developing world and the poorest in it is our knowledge and expertise, as well as our finance.

Our universities are at the forefront of developing innovative solutions to many of the complex challenges which are faced in development, health and education in developing countries. Our universities and other institutions are providing groundbreaking work in the world of agriculture. Our experienced lawyers and trade advisers can offer great expertise.

I was intrigued by the proposition put by my noble friend Lady Jenkin and echoed by my noble friend Lady Hodgson: how do we harness more of the experienced entrepreneurs with deep expertise of what it takes to build businesses and networks and to trade internationally, to provide that expertise overseas? I will take that away. We had an excellent round-table with our trade envoys, which the noble Baroness, Lady Morris, who was in her place earlier, and my noble friend Lady Nicholson attended, at which we were talking about how we could further leverage the knowledge and skills in the wider community, among entrepreneurs and also among those in this House, who could offer a huge amount.

We are focusing on specific sectors that are vital to the growth in job creation, including energy infrastructure, urban planning, manufacturing, agriculture and financial services. The scale of investment needed for infrastructure far exceeds the capacity of the public sector to respond. When we talk about mobilising investment and development, we think of some incredible, liberating technologies in places like Kenya and Bangladesh, such as mobile phone technology. But if you do not have electricity, you cannot access it. We have looked at some amazing technology used in delivering education, but without electricity, it cannot be done. Often the places we deal with are too far away from the grid to be connected, so there need to be alternatives.

We are helping to mobilise private investment through our support to the Private Infrastructure Development Group. For every one dollar that donors provide to PIDG, around $17 of private investment is raised. These investments can, for example, provide much needed electricity supplies and improved transport links to some of the poorest and most fragile countries in the world. Through the CDC’s investment in M-Kopa the UK is supporting efforts to provide solar energy to ​1 million homes in Kenya by 2018. M-Kopa has already connected more than 500,000 homes. These homes now enjoy over 60 million hours of kerosene-free lighting a month, which, of course, has huge effects on the environment, too, and is projected to save up to $400 million.

Agriculture will also be a major source of economic growth in many countries for many years to come. The UK is leading efforts to clarify and strengthen land and property rights as a basic requirement for profitable and responsible investment—in particular, in our groundbreaking work in Ethiopia—by providing women with information on property and land rights. Women’s empowerment is crucial to this. No country can ever hope to lift itself out of poverty by leaving half of its population behind. Women need to be part of this, as does every other community.

DfID’s global land programme, LEGEND, works with investors to understand and manage land-related risks and with communities to help them to protect their rights and make the most of their land, resulting in raised incomes, reduced conflict and better management of natural resources. Natural disasters, to which the noble Lords, Lord Desai and Lord Bruce, referred, are an impediment to development in many countries. More than 200 million people per year are affected by these natural disasters. Economic losses are now reaching more than $60 billion every year on average. In July, I launched the UK’s new Centre for Global Disaster Protection, here in London. It is a joint venture with our German friends and European partners, and the World Bank. That will strengthen disaster planning in the poorest countries and get finances in place before disaster strikes and it will ensure better management of the economic impact of emergencies.

When businesses operate responsibly they can support environmental protection, too, and work through supply chains to tackle modern slavery. DfID is partnering with organisations such as the Ethical Trading Initiative and the UN Global Compact to promote responsible business practices. DfID action alone is not enough. We need collective action from the international community, and that includes the international trade unions, which are essential partners in this effort. Some of the ILO global labour standards are very much part of that mission that we need to implement. We need collective action from the international community to stimulate economic growth. The UK is pushing the multilateral system to be more innovative and efficient. Through DfID backing, the World Bank is establishing a new $2.5 billion private sector window to boost investment in the poorest countries, as referred to by the noble Baroness, Lady Jenkin. Through the UN high level panel, the UK’s leadership influenced leaders from business, government and international organisations to get serious about the economic empowerment of women, as the noble Lord, Lord Judd, rightly urged us to do.

Success requires a whole of government approach to economic growth. The UK used our leadership at the G20 to drive effective international action on tax. We co-launched the Addis Tax Initiative, where donors committed to double annual spend on strengthening tax systems in developing countries by 2020. That level of reach and influence is possible only through DfID ​working closely with the Treasury and HMRC, drawing on the full range of Her Majesty’s Government skills and networks.

The UK is unwavering in its commitment to boost global prosperity. Our pioneering approach to economic development and growth is supporting the development of future markets, leading to a more stable, prosperous and inclusive world, which is firmly in all our interests.

Today, more than ever, Britain must be an outward-looking and engaged country on the world stage. If we can build these developing markets and create these training partners as part of a new government approach to free trade, we can create jobs, investment and prosperity for British people, as well as the poorest in the world. Global Britain will take a lead in helping the world’s poorest to participate and contribute to strong, prosperous economies. We know that that is the path to end poverty and reliance on aid, because no other path has ever been proved to work."