Although the United Kingdom does not have a development bank, there is one which was set up in London – France’s Agence Francaise de Developpement (AFD), now one of the world’s largest. It was founded in 1941 during the darkest days of the Second World War by the French Government in London, and was first known as the Central Fund for Free France.

I believe that now is the time to found another development bank here, this time for the UK to fund development, both at home and internationally.

When we leave the EU, we will also no longer be members of the European Investment Bank (EIB), currently based in London and in which we have been a major shareholder. The EIB has helped to fund many major investments in the UK, including the Thames Tideway Tunnel, the Midlands Engine partly in my own constituency, Merseytravel’s new trains, and has guaranteed €200 million in loans to northern SMEs. It is essential that the private and public sector continue to have access to such substantial long-term funding on reasonable terms which is often not available from the commercial sector.

Internationally. one of the most important challenges in the near future – alongside protecting the global environment – is the creation of decent jobs and livelihoods for the, at least, one billion young people who will need them during the next ten to 15 years. Most of these jobs and livelihoods will be in the private sector or family enterprises. They will need both access to capital and the development of public infrastructure. Without these, young people from Africa and beyond will continue to undertake dangerous journeys to seek opportunities that they do not have at home.

Job creation and economic development is often better achieved through returnable capital (loans or equity), rather than through grants. The former have two advantages.

Firstly, they ensure accountability over a longer period. A grant may typically last for two to five years, after which an evaluation is carried out and often support is terminated. Rarely does DFID or any other grant-making agency go back 10 or 20 years later to assess the long-term impact of the money which was granted. The performance of the work supported by loans or equity will be assessed regularly and corrective action taken where necessary. Hence long-term success is more likely, though by no means certain; and 20 years later the impact can be readily assessed.

Secondly, the funds are returnable, and therefore can be used again if and when repaid. Grants are ‘one-off’. As an example, the International Development Association (IDA – the World Bank’s fund for low income countries) is replenished every three years. About 36 per cent of the $75 billion for 2017-2020 is coming from donors; but nearly 30 per cent was recycled funds which had been repaid by the borrowing countries. If all the money had initially been granted, these recycled funds would not be available.

There is another advantage which a development bank has and a grant-making agency generally does not – the ability to increase investment through raising bonds based on its balance sheet. AFD does this regularly.

The proposal which I am therefore supporting in a Commons debate tommorow is that the UK establishes a development bank both to support medium- and long-term investment in UK projects and businesses, replacing the EIB; and to commit more of our existing international development assistance to loans supporting the creation of jobs and livelihoods. The Government and Parliament have already moved in this direction on equity capital by substantially increasing the taxpayer’s investment in CDC (formerly the Commonwealth Development Corporation) through the international development budget.

The International Development Committee (on which I served from 2010 to 2017) recommended that the Government look at the establishment of a UK Development Bank for our work with developing countries. As the UK leaves the EU, and the EIB, there is even more reason to do so.

There are a number of arguments which I have heard against the establishment of a UK Development Bank. The first is that the UK already subscribes to multilateral development banks such as the World Bank, the African and Asian Development Banks. That is true. However, the UK has a limited (though valuable) say in the operation of those banks. That is why other countries such as France, Germany, Brazil, Japan and others have their own development banks. In addition, those banks could not fund UK-based projects.
The second is that the UK Government does not favour such ‘independent’ financial institutions owned by the taxpayer. The last few years will surely have proved the opposite. The Government has established the British Business Bank, focussing on investment and lending to SMEs. It also set up the Green Investment Bank, although it then (wrongly in my opinion) sold it.

The final argument is that a Development Bank will require additional taxpayers’ money to establish, which we cannot afford. That need not be the case. The initial capital for the bank could come from the return of the UK’s capital in the EIB and from our international development budget, as has already happened in the case of CDC. Once established, the UK Development Bank would then be able to issue bonds on the basis of its balance sheet.

The UK is a world leader in finance. Yet with the departure of the EIB, we will be losing a major financial institution. A UK Development Bank will not only replace that but give us an opportunity to demonstrate expertise and innovation, while ensuring that we meet some of our own and low-income countries’ needs for development capital. This Bank will be owned by the taxpayer and, if well managed, will be an investment that will benefit UK citizens for decades to come.