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Letwin: Idealism without illusions

A Conservative vision for international development

Speech at Conservative Campaign Headquarters

In the last two weeks, images of the Indian Ocean catastrophe have filled our screens and stuck in our minds.

But when the TV crews move on and the scenes of devastation fade from memory, the everyday catastrophe of global poverty will go on.

Conflict, disease and hunger will go on killing more children each week than did that once-in-a-lifetime tidal wave.

Spending announcement

As recent events have clearly shown, this is not a topic of concern to only a few.

It is a topic of real and passionate interest to Britain's forgotten majority.

Conservatives have made no secret of our ambition to shrink the size of government in this country. We will spend on people's priorities by cutting back on the rest of government and its bloated bureaucracies.

When we set out our tough spending plans in the next few days, it will become clear that the elimination of global poverty is indeed one of our priorities.

As Alan Duncan announced last week, and as Michael Howard has re-stated today, we will match the current Government's spending plans for the Department for International Development over the years to 2007/08, raising spending on aid from £4.5 billion in 2005/6 to £5.3 billion in 2007/8.

Furthermore, we will work towards the target of 0.7% of GDP in aid by 2013.

And because we will spend less of the taxpayers' money than Labour overall, international development would actually account for a greater proportion of a Conservative Government's spending plans than of a Labour Government's plans.

That is a sign of the intensity of our commitment.

To find the funds for an expansion of the aid budget when one is allowing public spending to grow at an unaffordable rate is one thing; to find that money in the context of a severe restraint in the growth of public spending signifies an altogether greater commitment.

IFF

As Michael has said, we would also like to take this opportunity to re-declare our Party's support for the Chancellor's proposed International Finance Facility - a declaration first given by Michael when he was Shadow Chancellor.

If Britain is to build an international consensus behind the IFF proposal, a strong national consensus is critically important.

I hope that the statements we have made today on both the IFF and the international development budget will be seen as a contribution to just such a consensus.

Value for money action plan

But, of course, this is not enough. We don't just need more aid. We need better aid.

A year ago Michael Howard and I asked the business troubleshooter, David James, to lead a review of waste and inefficiency in Government departments.

We today announce our value for money action plan for the Department for International Development. Our plan will mean:

• refocusing long-term aid on the poorest countries, because (except in cases of emergency) they are the priority;

• giving more of our aid through non-governmental, civil society organisations which are often more effective than governmental organisations; and

• giving less of our aid through the European Union and other international bodies; aid should feed children in poor countries, not nourish bureaucracies in rich countries.

Altogether our value for money plan in international development will save £800 million every year, every penny of which will be redirected to where it does the most to reduce global poverty. We will now be consulting non-governmental aid organisations on this plan. I am confident that, in tandem with our spending commitments, the result will be a substantially more effective aid effort than the government's current plans would provide.

Not enough

But this is not enough either.

Let me describe the nature of the challenge that lies before us.

The path to prosperity

2004 was the most prosperous year in world history.

Economic growth is being brought about by market economics and freer trade. Even leaving out India and China, the rest of the developing world grew by a healthy 5% last year.

Millions, now becoming billions, of the world's poor have taken the path to prosperity.

And yet...

And yet, poverty persists.

Most of all in sub-Saharan Africa, which has got poorer as the rest of the world has got richer.

And this is happening despite a big increase in aid.

In 1970, aid accounted for 5% of African GDP; by the late 1990s this had risen to a peak of 17%.

The conclusion I draw is that while more and better aid is a necessary condition for progress, it is not sufficient..

Three keys

I believe that there are three keys to a better future.

First things first

The first key is to wake up to the fact that the proper role of aid is not to fund great, glamorous projects, but to enable the poorest parts of the world to provide the basic public services that support and sustain a market economy.

A generation ago, the high level talk would have been of ground nut schemes, Aswan dams or another of the great white elephants of the age.

That age has passed away, so I suppose we have made progress; but sometimes I wonder how much.

I have worked in East Africa and West Africa - but it was when I was working in Brazzaville, in Central Africa, that my eyes were opened.

Each day, I walked from my hotel to the Finance Ministry.

Often enough, as I passed across the dusty intervening roads, a boy with no legs would come up to me, using a skateboard to push himself along with his hands.

The more often this happened and the more often I gave him some paltry sum of money, the more I began to reflect that the crying need was not for grand schemes, but for something that would make that boy properly mobile, and give him an opportunity to learn something.

How else could one expect him to rise from penury?

And then, with these thoughts in my head, I would walk into the Ministry in order to have another round of discussions with the World Bank's representative.

Reforming the institutions

Which brings me to the second key - changing the role of the World Bank.

In the case of the IMF's temporary structural assistance, conditionality is appropriate. When debt is forgiven, conditionality is also appropriate.

But, when the aim is to give developing countries the basic strength to start walking the path to prosperity, is it really any of our business to dictate the precise steps by which they should do so?

But we will fail if we insist on free market purity regardless of local circumstance.

It is not that free market solutions don't work; it's that they don't work when implemented from the top-down.

That is why we must take the red tape - and the grey suits - out of international development.

We must shift resources from multilateral aid to bilateral aid; from government-to-government aid to people-to-people aid; from foreign aid workers to local communities; from dealing in dependency to empowering independence.

The implications of this approach for the World Bank are significant.

The IFC (with its emphasis on equity investment) and MIGA political risk insurance are both helpful for the development of investment and local capital markets.

But the day of the old-fashioned, big ticket, World Bank to government loan is, I believe, drawing to a close.

We need to seek a new consensus on the World Bank and its role:

-- a consensus for radical reform;

-- a consensus that emphasises health and education rather than industrial reconstruction;

-- a consensus that emphasises grants and micro-lending rather than large-scale loans;

-- a consensus that emphasises local decision-making rather than top-down, dictated solutions.

I look forward to the day when the World Bank becomes, in Keynes' words, "a fund": a fund that acts as the partner of non-governmental civil society organisations and makes its recipients less rather than more dependent.

Free and fair trade

There is, however, little point in empowerment if, when the poor find their way onto the path to prosperity, they find it blocked by trade barriers.

As Michael Howard has pointed out, removing those barriers is the third key.

Of course, considerable progress has been made towards freer trade, but it needs to be fairer trade too.

Just tearing down the barriers is not enough.

As Michael has said, we must tear down the trade barriers faster from our side than the world's poor can do from their side.

Few, if any, countries have got rich without free trade; but, equally, few, if any, have done so without taking things at a pace consistent with the demands of domestic politics.

We must not make the mistake of supposing that developing economies can always achieve in a day what it has, in many cases, taken us centuries to achieve.

We must also recognise that the technical capacity of richer nations to pick their way through the detail gives us a great advantage over poorer nations.

That is why - as Michael has emphasised - a Conservative Government, as well as pushing for the fundamentals of free and fair trade, would take a lead in establishing and financing an Advocacy Fund, to give developing countries access to the advice and expertise they need to fight their corner at the negotiating table.

Conclusion

In trying to imagine a better relationship between the developed and the developing world, I've had a simple question in mind.

What would we want for ourselves were we in their position?

We'd want help, of course.

But help to stand on our own feet.

To find our own way on to the path to prosperity.

Not so we can be more like some other place, but so that we can be more like ourselves.

That is the attitude we should take to international development, to aid, to the World Bank, and to trade.

That I believe is a fundamentally and unapologetically conservative vision.

One of idealism without illusions.

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