The Prime Minister spoke at the Open for Growth event on the G8 agenda of transparency, trade and tax.
Eight years ago, when the UK last held the G8, hundreds of thousands marched to make poverty history. Nelson Mandela stood in Trafalgar Square and called on humanity to “rise up” and free millions “trapped in the prison of poverty.” Unprecedented agreements were reached on aid.
And in recent years a combination of economic growth and smart aid has helped to deliver huge advances in cutting poverty. Aid has been particularly vital in the fight against diseases like malaria and polio.
But eight years later, poverty is still very much present in many of the countries represented here today.
Today I want to talk about why.
And how I believe we can use this G8 – and this meeting here today – to forge together a new agenda that will drive growth for us all and in doing so finally give us the chance to fulfil the ambition of 2005: to eradicate extreme poverty from our world.
WHY POVERTY PERSISTS
Let me start with why the problem of poverty has not gone away. Some will say that promises on aid weren’t kept. And they would be right. Britain is one of the few countries in the world to have honoured its commitment to spend 0.7 per cent of its Gross National Income on aid.
We are proud of that. And we will keep up the pressure on our international counterparts to do the same.
Some will say that too much aid has been badly spent. They are right too. All of us need to get better at how we use aid. And we are doing that. That’s why Britain is focusing our aid on tangible, measureable outcomes like vaccinating 50 million children against preventable diseases and securing schooling for 20 million.
But I believe there is an even more fundamental reason why poverty has not yet been beaten. And it’s this. We simply can’t eradicate poverty by using aid alone. Yes, aid is vital and it has helped to drive extraordinary progress. But aid inevitably focuses more on the consequences of poverty. To eradicate poverty we need to deal with its causes too.
That means supporting what I call “the golden thread” of conditions that enable open economies and open societies to thrive the absence of conflict and corruption, the rule of law, free speech and the presence of property rights and strong institutions. These things aren’t just valuable in themselves.
They are also vital in providing the foundations for the sustained economic growth that can lift countries out of poverty. It is a simple fact that countries beset by corruption and weak governance are most likely to succumb to conflict. And remember this: no country in conflict has ever met a single one of the Millennium Development Goals.
WHY TAX, TRANSPARENCY AND TRADE MATTER
Now a big part of tackling the causes of poverty is ensuring that developing countries get the revenues and the benefits of growth that are rightfully theirs. And three vital things are needed to make that happen.
Fairer taxes, greater transparency and more trade.
The 3 Ts is a snappy title, but, really, why link these three together? Because they all have something in common: in each case developing countries are badly missing out.
When taxes are not collected, the poor suffer. In fact, illicit flows out of African countries exceed what they gain in aid. When companies extracting natural resources like minerals and oil are not transparent and don’t publish the payments they make or when governments allow these payments to leach away into corruption people in developing countries miss out on the vital revenues they are due.
And when trade is choked by barriers and bureaucracy – developing countries miss out on the chance to grow. These issues are not just important they are ever more urgent too. Developing countries are finding new sources of natural wealth like offshore oil and gas in Ghana and Tanzania and the forces of globalisation are driving ever greater opportunities for growth and trade.
Just think what missing out on this growing income means for a country where thousands of children are dying every day because of malnutrition or where sick parents have to choose between whether to buy medicine to save their own lives, or pay for food for their hungry children.
So fairer taxes, greater transparency and more trade are three vital and linked weapons in the war against poverty. And the other thing that joins them all together is that they all need political leadership. Too often in the past this has been missing.
Take Equatorial Guinea Africa’s third largest oil producer where the President has maintained that oil revenues are a state secret. Action by the US Justice Department against the President’s son lists assets allegedly acquired with money stolen from the state including a Gulfstream jet, eight Ferraris, seven Rolls-Royce, a $38 million estate in Malibu, and white gloves previously owned by Michael Jackson. Per capita, Equatorial Guinea is richer than Poland – but its child death rate is 20 times higher.
According to Kofi Annan’s Africa Progress Panel, 12 of the 25 countries in the world with the highest child mortality rates are resource-rich African countries.
Many of these countries should be rich enough not to need our aid and industrious enough to be great trading partners in the years ahead of us. So I want to break something of a taboo today.
For too long the international community has shied away from condemning the appalling degree of corruption and mismanagement of resources and the fundamentally bad governance that is destroying lives in some developing countries. And there are always voices saying: why cause the stir; why be the one to point the finger? Well Britain has kept our aid promises so I don’t think we should hold back.
Corruption is wrong. It starves the poor. It poisons the system. It saps the faith of people in progress. It wrecks the case for aid. When we see it we should condemn it utterly.
I know some people put their hands up in the air and say this can never change. But by ending the era of tax secrecy and driving real openness over what governments and businesses do - it can change. And there are political leaders here are who making that happen.
President Mahama of Ghana, who has opened up his country’s budget so his people can see how their money is spent. President Conde of Guinea, who has recently led the way on publishing mining contracts online. President Kikwete of Tanzania, who is working to ensure that the citizens of his country can enjoy clear and secure property rights And President Sall of Senegal, who has simplified taxes, unleashed auditors on public finances and set up a commission to tackle corruption.
But this needs political leadership from the developed world too. We have the tools in our hands to tackle these problems.
We can build international tax systems that make it easier for developing countries to collect the taxes they are due. We can ensure our extractive companies are accountable and transparent in their dealings. And we can do more to promote trade in Africa.
And the extraordinary thing about this tax, transparency and trade agenda is that it’s not just the right thing for us to do morally it’s right for our economies too. Because when some businesses don’t pay their taxes, it corrodes public trust. When some companies don’t play by the rules, that drives more regulation and makes it harder for other businesses to turn a profit. And when Africa doesn’t trade to its potential, we all lose the chance to benefit from trading with one of the fastest growing continents on the planet.
By 2050 the continent of Africa will have nearly twice the population of China. And a third of the world’s youth will live there. We’d be crazy not to be part of this journey with Africa. In short getting tax, transparency and trade right is good for us and it’s vital for developing countries too. So let me tell you what we are going to do.
First, at the G8 I’m going to push for international agreements to fight the scourge of tax evasion and aggressive tax avoidance. That means automatic exchange of information between our tax authorities – so those who want to evade taxes have nowhere to hide. It means getting companies to report to tax authorities where they earn their profits and where they pay their tax. It also means transparency about who owns which companies and who benefits from it – so called beneficial ownership.
Because some people use complicated and fake structures to hide their profits and avoid taxes and because bribes are often held in opaquely owned companies with bank accounts in secrecy havens.
The UK is today leading the way by committing to create a central registry of company ownership.
And this morning I have held meetings with our overseas territories and crown dependencies.
Each and every one of our overseas territories and crown dependencies has agreed to sign up to the multi-lateral convention on information exchange to exchange information automatically with the UK and to produce action plans on beneficial ownership.
I commend their leadership and I look to other international partners to work with their own territories to reach similar agreements. Just as in Britain people get angry when they work hard, pay their taxes and then see others not paying their fair share so we should demand the same justice and fairness for others in developing countries too.
That means we need to put the information out there so they can calculate the taxes they are owed. And we need to help them improve their ability to collect taxes. That’s what the UK has done right across the world. In Rwanda tax revenues have increased six-fold in the last decade. In Afghanistan, eight-fold since 2004. And in Ethiopia – nearly a 50 per cent increase between 2007 and 2011.
So that’s why tax is so important. The next T – which is linked to it – is transparency.
We need real transparency in the payments companies make and the revenues that governments receive. Just think for a moment about the discovery of North Sea Oil off the coast of Britain. It has given this country revenues of over £150 billion boosting our balance of payments by almost £50 billion a year and supporting nearly half a million jobs. Now imagine if we had no transparency over the way that oil was extracted. Imagine what it would have been like if we had most of our oil revenues taken from us by corrupt politicians, officials and companies. Too often that has been the story for developing countries. But with transparency we can change that.
In the last few years we have seen huge advances. Oil, gas and mining companies will now have to publish what they pay in every country and for every project they work on. That’s already law in America. It’s becoming law in Europe. And will be in Canada too. Governments in return are committing to publish what they receive. Many developing countries made this commitment a while ago. Now Britain, France and America are joining them too. And we hope that others will follow suit.
We need to apply the same principles where land changes hands too. We need transparency over who is buying up land and for what purpose so that people get a fair deal when they sell or lease out their land and the property rights of people and communities are properly protected. Today G8 and developing countries have agreed to work together to make the most of these huge advances on both land and extractives.
And the UK will continue to drive a transparency revolution in every corner of the world through our leadership of the Open Government Partnership.
But to make this work there is something else we need to do. And that is to recognise and get behind heroic individuals who drive this agenda on the ground.
People I met this morning like John Githongo – who was willing to blow the whistle on fraud and corruption in Kenya, at real personal cost.
And Aruna Roy, who, almost single-handed, brought on the Right to Information revolution in India helping citizens to secure better services and a say in how they are governed.
And that is why we are also welcoming the “Transparency Champions Challenge” launched today by the Open Society Foundations – to provide practical support to people like John and Aruna around the world.
So we need fairer taxes and greater transparency to deal with corruption. But, third, we also need trade as the engine of growth. That means completing the trade deal between the EU and Canada and launching one between the EU and the US.
But just as important is to make sure that the growth of trade benefits Africa too. So let’s back African countries in achieving their goal of doubling intra-African trade by 2022. Let’s back Africa in ending the crazy bureaucracy that means a trucker taking goods from Cape Town to Kigali has to carry up to 1000 documents.
And let’s back Africans on infrastructure – where they have a point when they say it was largely designed in another era and primarily focused on getting products out of the continent rather than promoting trade within it. So let’s get behind President Kaberuka’s work through the African Development Bank to secure the private finance that can deliver the infrastructure that is so badly needed.
So that’s our agenda today and for the UK’s G8 Summit next week. It is about proper companies, proper taxes and proper global rules ensuring that openness delivers the benefits it should for rich and poor countries alike. Aid is important but these things matter just as much. Now is the time. This is the agenda The world should get behind it.