I beg to move amendment No. 13, in page 3, line 2, at end insert—

`(2A) The value of loans made available to a country by way of financial assistance shall not, taking one year with another, amount to more than 10 per cent. of development assistance to that country.'.

It is apt that I rise to propose amendment No. 13, which stands also in the name of my hon. Friend the Member for South-West Devon (Mr. Streeter). It will probably please the Committee to learn that I can make my points about the amendment fairly swiftly.

The amendment would prevent countries from running up substantial debts to the UK Exchequer by limiting the proportion of development assistance that is provided to them in the form of loans. In proposing the amendment, we hope to ensure that development aid is provided mostly in the form of grants. We are concerned that a new drive to make loans to developing countries could lead to their getting into debt again, so we want to establish some sort of device to ensure that the Department of International Development is limited in the proportion of grant aid and loans that it is able to give to any one country. I am sure that the Minister would regard that as a sensible approach.

When in government, the Conservatives cancelled £1.2 billion of loans owed to the then Overseas Development Administration by developing countries. That helped to relieve their burden of debt. Conservative Members are genuinely concerned that a new push to provide loans to projects could lead to the debt burden becoming an issue again. The progress made under Governments of both parties would be reversed, because there will no limitation on the actions taken by the current Government or a future Government when the legislation comes into force.

We are also concerned that the British taxpayer will not get value for money from the loans. The Government must be sure that payment will be forthcoming and is guaranteed, and that a proper risk assessment is undertaken before projects are considered. We are also concerned about the countries that are eligible for loans from DFID. Will the Minister tell the Committee whether the Government plan to make loans to projects in countries that have failed to pay back debts to the United Kingdom: for example, will the Government supply loans to heavily indebted poor countries?

We have included a limit of 10 per cent., but I shall not be hoist on that petard. The figure seemed reasonable when we drafted the amendment, but we do not have to live or die by it. I hope that the principle of the amendment will appeal to the Minister and that he will be able to comment on it. If he cannot accept our suggestion, can he make some critical and qualitative comment on the percentage of development assistance given by way of loans to any individual country and tell us how the Department arrives at such decisions?

In the past, many developing countries got into serious debt. We should not condone that or contribute to it through any of our mechanisms. If we tie the hands of future Secretaries of State by setting parameters that will, if they take advantage of them, afford them some safety, it is likely that they will be grateful. The voluntary imposition of controls on the Secretary of State through this legislation will give him or her added protection against outside criticism.

Nothing in the clause states that financial assistance should be provided on a project basis. If the Minister can reassure us about that now, it will cancel the necessity to discuss it in connection with another part of the Bill. Are there any means of protecting the loans or grants by ensuring that they go to projects rather than directly to Governments? If funds are directed at projects and delivered through, for example, non-governmental organisations, there is far less likelihood of abuse. The problem of Zimbabwe was raised at International Development questions yesterday. It provides a prime example of aid funds going directly to a Government who have then managed to spend vast amounts of money pursuing a local war that is of no direct benefit to any Zimbabwean citizen.

I have posed several questions to the Minister, including whether the Government have placed any limit on the value of loans to individual projects. The Government have said that they do not envisage the loans being widely used, but if that is the case, why is there no limit in the Bill? I will not be hoist on the 10 per cent. petard, but I should like to know. Most important is the question of what precautions have the Government taken to ensure that the Bill does not lead to further indebtedness in poor countries?

I see the relief on the faces of Labour Members as I say that, at the moment, that is all I want to say on amendment No. 13.

I shall be even more brief. I do not think that I should support the amendment. By way of explanation, I refer the hon. Lady to clauses 1 to 3, which I think are the most important clauses in the Bill. Loans would in any case be granted only if they were

``likely to contribute to a reduction in poverty'', or for the purpose of

``furthering sustainable development''

``improving the welfare of the population'', or if they were, in the opinion of the Secretary of State,

``prudent having regard to the likelihood of ... generating lasting benefits for the population''.

No Secretary of State in his or her right mind who was mindful of those clauses would give an excessive loan to a country that was already terribly in hock to the world community. The hon. Lady should refer constantly to those clauses because they are the conditions of the Bill.

I am in some doubt. Are we also considering amendment No. 21 as well?

No. We are discussing only amendment No. 13.

I am grateful for that advice. I thought that they were grouped together.

The amendment is both interesting and important. It should be considered carefully because for the past 12 months to two years, Jubilee 2000 has been campaigning in support of the desirable aim of getting rid of all debts owed by developing countries to developed countries. I am not 100 per cent. behind the activities of Jubilee 2000, but its view that developing countries have far too many overbearing debts is supported by most people and it seems sensible that we should not make excessive loans. The hon. Member for Richmond Park (Dr. Tonge) said that no future Government would do that, but Governments have done it in the past and they may do so again.

You are wanted outside.

The Government Whip is always trying to be helpful. On Tuesday, it had to do with my tie; today, it has to do with my absent colleagues. However, I do not intend to leave the Room, as I have a lot more to say—[Hon. Members: ``Oh no!''] I see that the news is greeted with enthusiasm by Labour Members.

The Government's policies on debt reduction are in general extremely laudable and I, like every member of the Committee, support the positive and sensible actions of the Chancellor and the Secretary of State for International Development. Furthermore, they have taken no account of the hyperbole that sometimes issues from Jubilee 2000. The Government are, of course, building on the work of the previous Administration, particularly on the Trinidad terms negotiated by my right hon. Friend the Member for Huntingdon (Mr. Major), which led to a tremendous reduction in debt among developing countries.

We must consider carefully how to prevent loans being made in future, taking into account both bilateral aid and multilateral aid. I generally support the policies of the World Bank and the International Monetary Fund, but the World Bank has not always lent money wisely—indeed, many of its overseas loans were made without the controls that we referred to on Tuesday. We all want a means of preventing that from happening again to be enshrined in legislation. Although the Minister said in a previous sitting that the Bill should bind future Governments, I must point out that we cannot bind future Governments, because Parliament can always make further legislation.

We want to ensure that future Governments who want to restore the link between aid and trade, which has abused our aid programme in the past, would have to justify that decision to Parliament. Of course I realise that we cannot bind future Parliaments.

Order. I am looking at the amendment, and no reference has yet been made to 10 per cent. or any other figure. I ask the hon. Member for Blaby (Mr. Robathan) to speak to the amendment.

Of course I shall, Mr. O'Brien. As my hon. Friend the Member for Chesham and Amersham said, 10 per cent. is an arbitrary figure. However, it seems sensible to prevent that which has happened in the past, when overseas aid was generally given by way of loans, from happening again in future. The amendment is sensible and I hope that the Minister will consider it carefully. We are trying to lay down some ground rules and those parameters should be included in the Bill.

I support the Government's action on reducing debt and the policy that they have adopted since coming into, although to give grant aid rather than loans was the policy of the ODA throughout most of the 1990s. However, we must ensure that future Governments would have to ask Parliament if they wanted to start making heavy loans again.

[Mr. John Butterfill in the Chair

The amendment would place an arbitrary limit on the ability of the Secretary of State to choose the most appropriate form of assistance to provide to a country. The effect would be that the Secretary of State would not be free to determine in consultation with the country for which the assistance was to be provided the most appropriate and effective form of that assistance. The needs of the developing country must be the driving force behind the choice of the form of assistance, otherwise the primacy of the overarching requirement of poverty reduction and the two development purposes will be compromised.

That said, hon. Members have made some perfectly reasonable points. The hon. Member for Chesham and Amersham said that there had been a history of inappropriate loans. As so often in our deliberations, however, the hon. Member for Richmond Park made a strong point in response, saying that the principles guiding Secretaries of State in future would be the provisions of clauses 1 to 3. We will be a long way from the days when we gave loans to countries that could not afford to pay them back.

Currently, all financial aid is in the form of grants. There is no intention of initiating a new push to provide loans. All that the Bill does is retain the power in the 1980 Act. The Government have not used the development assistance programme for any loans to developing countries and it is extremely unlikely that there would be any grounds for using the aid programme to lend to heavily indebted countries as, for the most part, that would not be appropriate. If a country is graduating from the aid programme, a figure higher than 10 per cent. might be appropriate, but such instances are not likely to be a big feature of our aid programme. We seek merely to leave the Secretary of State with the discretion to act in circumstances that we cannot necessarily predict.

We work with the Zimbabwe Government only when there is no alternative channel for assistance and when we can be confident that our support will directly benefit the poor or is necessary to build future recovery. We have not given budgetary support or programme aid to Zimbabwe for many years, and there is not much likelihood that we shall do so in the foreseeable future.

None the less, aid has gone to Zimbabwe directly from this country through the European Union, as we pay 30 per cent. of aid money to the EU. Is the Minister saying such aid is outwith the set parameters?

It is outwith the parameters of the clause, Mr. Butterfill—welcome—that we are debating. The amendment would place an arbitrary fetter on the Secretary of State's ability to choose the most appropriate form of assistance in circumstances that we cannot foresee or predict.

It is not current policy to lend to heavily indebted countries. Almost all our aid is in the form of grants, for which repayment is not required, so I ask the hon. Lady to withdraw the amendment.

I, too, welcome you to the Chair, Mr. Butterfill. The whole Committee will be glad to see that nothing untoward befell you before you came to chair our sitting.

I am disappointed by the sparsity of the Minister's response. I do not feel that he has a grip on this piece of legislation, not least because in his brief reply to my previous amendment he told me that there was no need to return to the Overseas Development and Co-operation Act 1980. He said that we did not need its definitions because the Bill was a case of ``out with the old and in with the new'', yet he says that he wants to retain the power of the 1980 Act in this instance. He seems to want to have his cake and eat it, as I have said.

To say that all current aid is in the form of grants is a very weak argument. We are told repeatedly that the point of the Bill is to bind the hands of future Secretaries of State and ensure that nothing untoward can happen. I thought that the explanatory notes would explain what is in the Government's mind, but I find that I being told one thing by the Minister and reading something else in the explanatory notes. He said that it is extremely unlikely that loans would become an issue, but explanatory note 29 states:

``It is not envisaged that the Secretary of State will make extensive use of these forms of financial assistance in preference to the power to make grants or loans.''

Nothing in the explanatory notes states that loans will not be used.

The Minister gave something away when he said that slightly more than 10 per cent. might be appropriate. I am sure that there is a glimmer of light, that a door is opening and that the Minister believes that the amendment is reasonable. I hope that he will at least accept the spirit of the amendment. He has not answered my questions, but I shall give him another chance. What precautions have the Government taken to ensure that their policies do not lead to further indebtedness in poor countries?

I said that our main precaution was not to lend them money.

With respect, methinks the Minister doth protest too much. He has in his grasp the instrument and the wherewithal to allow some countries, unfortunately, to go down that road. There seems to be no safeguard for taxpayers that satisfies the Opposition. If loans will not to be used much, if at all, why is there not a self-imposed limit?

I am not satisfied with the Minister's comments. I have been extremely generous in withdrawing amendments following responses from the Minister, but I must press amendment No. 13 to a vote.

Question put, That the amendment be made:-

The Committee divided: Ayes 4, Noes 11.

Question accordingly negatived.

I beg to move amendment No. 21, in page 3, line 9, at end insert—

`(5) Financial assistance may not be provided now or in the future for the purposes of `tied aid'.'.

Welcome back, Mr. Butterfill. I want to ensure that clauses 1, 2 and 3 remain paramount. During discussion of the previous amendment, the Minister referred to untying aid, but there is no reference to that in the Bill. If I were someone other than myself, I would spend the next 45 minutes giving countless examples of tied aid and how it went wrong in the past, but I shall not do so. I shall say only that the globalisation White Paper contains a commitment to untying aid, as does the Conservative paper on international development, and my party has always been committed to that objective. The Bill should therefore include a clear, unambiguous statement to prevent any manipulation of aid in future.

I, too, am pleased to see you back, Mr. Butterfill. I hope that you were not indisposed.

I am pleased that the Liberal Democrats are taking part and playing a positive role in the debate, although it is a pity that the other Liberal Democrat Member who should have been here seems to have escaped back to Winchester—perhaps he is concentrating on electioneering.

He does not need to.

I hope that he does.

The amendment is sensible. I recognise that there are sometimes perfectly reasonable arguments for tying aid, but it is right that we should aim to untie it and Conservatives support the Government's action to do so. However, if that is their aim, the Bill should say so. It is bizarre that the Bill contains no clear statement to the effect that ``This Bill will untie aid and trade.''

Last Tuesday, the Secretary of State said:

``Without change, a future Minister or Administration could reinstate the use of the aid budget to soften the terms of commercial contracts through mixed credits, as under the old aid-and-trade provision. An Administration could re-tie aid, thus distorting its use and decreasing its efficiency, as the previous Government, or use that aid budget to serve the short-term political or commercial purposes of the UK.''—[Official Report, 6 March 2001; Vol. 364, c. 158.]

I do not accept all the right hon. Lady's criticisms of the previous Government, because I have often heard her praise the ODA. That is not surprising, because the same civil servants who are now implementing her policies both at home and overseas did a pretty good job before the previous election and are generally continuing to do so.

On Tuesday, at the beginning of the Committee's first sitting, the Minister said:

``We believe that the Bill will prevent a future Administration using development funds to serve short-term political or commercial ends, and, in particular, that it will prevent the tying of aid.''—[Official Report, Standing Committee B, 13 March 2001; c. 3.]

As closely as I study the Bill, I cannot see that it anywhere prevents the tying of aid. It says that the focus must be on the alleviation of poverty: that is helpful, and we all support it. It says that that must be the overriding aim, which we also support. However, it does not specifically exclude the tying of aid to trade. Given his grandiose statements, the Minister must explain how the Bill will prevent the tying of aid to trade—which is, after all, what he wants.

We had an extraordinary flash of agreement in a previous sitting, when the hon. Member for Richmond Park actually voted for one of our amendments. However, I feel obliged to tell that if she presses her amendment to a vote, I shall not vote for it—not because I do not agree with it, but because it has not gone too far.

Like my hon. Friend the Member for Blaby (Mr. Robathan), I appreciate the reasons behind the amendment. Essentially, it would enshrine in the Bill its main purpose. Let us not beat about the bush: we have frequently been told that the purpose of the Bill is to make this country's overseas aid programme whiter than white, although I am unsure how that will sit alongside the aid programmes of our European partners and the influence that they bring to bear on the European fund. This small amendment would remove the tied aid provision.

However, I would prefer the amendment to include a definition that took tied aid from the realms of possibility and probability into those of surety and security. If the hon. Member for Richmond Park presses it to a vote, I shall not support it simply because I feel that it should have gone further. However, I hope that the Minister will consider the matter and amendments in the same vein that might be made to the Bill. Thus far, our efforts have been unsuccessful but my hope is that a door might be opening. Even if he cannot accept the amendment, I hope that the Minister will give its subject matter further consideration.

As I explained previously, our aim is to keep the Bill simple, to avoid getting bogged down in definitions that would become a playground for lawyers, and to underpin in clauses 1 to 3—especially in clause 1—the primary purpose of overseas aid, which is to contribute to a reduction in poverty, to further sustainable development and to improve the welfare of the population concerned. When judged by those criteria, no reasonable person would imagine that we could go back to the days when aid was tied to commercial or foreign policy objectives. In saying so, I am not suggesting that the hon. Member for Richmond Park is an unreasonable person. Her contributions thus far suggest that she is extremely reasonable and we agree entirely with her intentions; we simply see one or two practical difficulties, which I shall touch on.

The Government have stated their position clearly. Under the Bill, a policy of tying aid would not be sustainable. The inefficiency and mixed motives inherent in tying aid would so impair the Secretary of State in the proper exercise of the core power that the policy would be open to serious challenge in the courts. As I said, we believe that any future Administration who wished to re-establish tying the UK development programme should first consult Parliament. We did not expressly prohibit such a policy because of the difficulty of drafting definitions. We know what we mean by tied aid, but writing it down in prescriptive form would run the risk of falling between two stools. On the one hand, we might not catch all that we intended to catch. By establishing the meaning of tied aid and ruling it out, we would by implication allow anything that is not brought within that definition, which would leave room to argue that some tied aid is permissible. On the other hand, by attempting to catch all that is pernicious about tied aid, we might catch some practices that are, or in certain circumstances might be, perfectly acceptable or even useful.

For example, we have been advised that, were we to accept the amendment, we would jeopardise the provision of assistance to some international institutions that limit the provision of assistance to their members. That is true of the main international financial institutions, of the United Nations—of which countries such as Switzerland are not members—of the regional development banks and of the European Development Fund. I am not a lawyer—all I can do is pass on that advice to the hon. Member for Richmond Park. I doubt whether she would want to jeopardise our relationship with those institutions, but we are advised that that might happen if her amendment is accepted.

By opting instead to let the principles and purposes of clause 1 direct the thinking of the Secretary of State, we retain the flexibility to use means compatible with those principles and purposes while effectively preventing the pursuit of opposing policies. That is why we have not chosen to make a specific prohibition on tied aid in the Bill.

The hon. Member for Richmond Park has raised an important and sensible point. If the Minister is saying that legal advice has been taken and that therefore the Government cannot refine the definition, that rather negates the purpose of the Bill. As we know, most of our European partners and most other countries often tie aid to trade. There is no reason why, as far as I can judge from the Bill, under a future Administration, or indeed, under this Administration, one might not, in giving money to NGOs, give the money only to British NGOs, or indeed why, in giving money for some particular development purpose such as construction—I know that we are not keen on dams at present and I am glad of it—one might not give the money specifically to a British company, which is tying aid with trade. The Minister has left the situation open.

No, we believe that clause 1 is adequate for that purpose. We have made the situation clear and I am told that ministerial pronouncements are taken into account when courts are interpreting legislation. The hon. Gentleman raised an important issue in mentioning NGOs. I should like the hon. Member for Richmond Park to hear that I have been advised that there are one or two grey areas, one of which relates to the civil society challenge funds, which are open only to British-based NGOs. There is a danger that her amendment would make those impossible. I have considered the matter carefully and I am sympathetic. I know exactly what the hon. Lady is trying to achieve. I approve, as I expect do all members of the Committee, with the possible exception of the hon. Member for Chesham and Amersham, who believes that it does not go far enough.

That is not fair.

I do not believe that that is unfair; that is what the hon. Lady said.

To row back to a point that we discussed the other day, is the Minister satisfied that his Department is making sufficient efforts to ensure that UK NGOs, to which the Department gives money, are energetic enough in ensuring that as high as possible a percentage of their employees come from the relevant countries and are not expatriates? In many cases, the effect of our policies and those of other northern countries, even where the money given out is not intended as tied aid, seems to be that a huge proportion is taken as salaries for, if one would like to put it this way, white Anglo-Saxon Protestant workers rather than people from the intended countries?

The hon. Gentleman makes an important point, which stands on its own. It is not often that we employ too many British citizens, who are actually rather expensive to employ and maintain in foreign climes, when there are perfectly capable local people available. One finds that time after time. Our Department increasingly makes a practice of employing well qualified local people. I have been in both Albania and Kyrgyzstan in the past few weeks, where extremely bright local people are working for us. We have taken that point on board.

Will the Minister clarify whether, as he implied, Pepper v. Hart would apply to any future interpretation of the Bill?

I will not give an answer off the top of my head. If news reaches me in the next few minutes, I will give a definitive reply, otherwise the hon. Lady will have to wait until later.

We have given careful thought to the amendment tabled by the hon. Member for Richmond Park, and are sympathetic to it. If she is willing to withdraw it, we may think about the matter further, although I cannot commit to any undertaking. I have told her of our legal advice. I would be grateful if she would give me the opportunity to take the matter away and think about it further.

I apologise for all my comings and goings but I did want advice on that point because I was not sure what would happen if I pressed the amendment to a vote. I thank the hon. Member for Blaby for his support; he was very gallant. I also thank the hon. Member for Chesham and Amersham, although it was curious that she was supporting the amendment in one respect, but not in another because it does not go far enough. For all the fluff and flummery that we have had during Committee, that important issue was not picked up by the Conservatives and tabled as a better, padded-out amendment. Never mind.

It would appear that that was not picked up by Labour Members either. I congratulate the hon. Lady on picking it up.

Perhaps it is more difficult to pick things up if you are in Government.

Why?

I do not know; I am not part of the Government.

It was also interesting that the Minister said that no reasonable person would tie aid to the future. In politics, we must assume that there will always be an unreasonable person. Even in the Government there may be such a person who wants to pursue tied aid. That is why the amendment should be included in the Bill.

With regard to the difficulty of drafting definitions, I must apologise to the Minister because I did not understand his explanation. It sounded like something Sir Humphrey might say—trying to ensure that there would be a loophole in future, so he could put his own pet project through. The Minister's reply was comically drafted and I commend the civil servant who wrote it.

I will take the advice of the Clerk and the Minister and withdraw the amendment, but I will return to the matter on Report unless I hear more from the Government. The words ``tied aid'' should appear in the Bill; the Government must make it clear where they stand on the issue.

The hon. Lady is on the verge of withdrawing the amendment, but she has not yet done so. I rise briefly because she said that I did not table an amendment along the lines she described.

On a point of order, Mr. Butterfill. I understood that the hon. Member for Richmond Park had withdrawn the amendment.

I had not yet put the question that asks leave of the Committee to withdraw the amendment. When I do so, and if the Committee decides that it will accept the request for withdrawal, the amendment will be withdrawn; until that point, it is still open to debate.

Thank you, Mr. Butterfill. I want to respond to the question from the hon. Member for Richmond Park about why we had not tabled an amendment along the lines she suggests, and made a better fist of it. That was the spirit of what she had to say. Once we had seen that there was an amendment that would give us an opportunity to raise the matter, there was no need to do anything else. The hon. Member for Richmond Park has not had the advantage of hearing what I have to say on any other part of the Bill.

I remind the hon. Lady that I was chastised on Tuesday for tabling my amendment so late, so how could her party have seen it before tabling its own amendment?

If the hon. Lady thinks about the time scale, she will realise that I had plenty of time, after her starred amendment appeared on the amendment paper, to table an amendment for today's proceedings. However, I chose not to.

I am pleased that the Minister will re-examine the issue. It is important, but I do not want to rehearse points that have been made many times before, and which his predecessor, especially, has heard in numerous small debates and exchanges. I look forward to hearing what the Minister will say on Report. I should be grateful if he would guarantee that there will be sufficient time between the end of Committee proceedings and Report and Third Reading, for us to have dialogue. The Bill has been introduced with undue haste, but if time is now made available, we would be happy to examine any Government amendments on the matter that might be brought forward at the next stage. I say that in a genuine spirit of co-operation.

Word has now reached me regarding the relevance of Pepper v. Hart. The records of debates in both Houses, including those in their Committees, can be taken into account in an interpretation.

I am grateful to the Minister for seeking inspiration. I was not trying to catch him out. As he had referred to the proceedings being taken into account in an interpretation, I thought that he was familiar with Pepper v. Hart.

I am afraid that I am just a simple country boy.

There is nothing simple about any country boy that I know.

I thank the Minister for that information, and look forward to hearing what he will introduce before Report and Third Reading.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 6 ordered to stand part of the Bill.