APPENDIX
MEMORANDUM FROM THE SECRETARY OF STATE
FOR INTERNATIONAL DEVELOPMENT
1. "We welcome the Government's positive
response to the two previously unanswered recommendations and
urge some belated recognition that there are organisational lessons
for the future that can be learned from the treatment of the Wadge
and Isaacs report. But our more general conclusion is one of displeasure
that to the First Report of this Committee in a new Parliament
the Government should produce a response which was incomplete
and fell short of the standards we expect. We criticise this failing,
perhaps another unhappy example of DFID/FCO coordination, and
trust that it will not happen again."
— Since responding to the First Report of the
Committee, FCO and DFID working methods and practices have improved
and now secure effective coordination. The Foreign Secretary's
letter of 15 May made good the omissions in our response to that
Report, and explained the Government's position on the Wadge and
Isaacs report.
— As the Committee is aware, two DFID studies
will address the lessons to be learnt from the Montserrat crisis:
a study of Caribbean Overseas Territories Disaster Preparedness
and an ex-post evaluation of the response to the Montserrat emergency
itself. Following these studies, procedures will be reviewed to
see if any further changes are needed.
— Following the Foreign Secretary's letter of
15 May, a major simulation of the Emergency Evacuation Plan was
carried out on 1 August. Disaster Preparedness was also tested
recently in Montserrat (as in the other Caribbean Overseas Territories)
when Hurricane Georges passed close-by. HMG made contingency plans,
including appropriate deployment of the West Indies Guardship
with an additional support vessel for the occasion. However, in
the event, Montserrat suffered no casualties and only superficial
damage to property.
2. "We conclude that the Government has
failed to address the main organisational weakness identified
in our previous Report. There will always be unnecessary tensions
and inefficiencies if DFID money is used to fund FCO political
priorities."
— Both the FCO and DFID have reviewed the way
in which their structures for dealing with Overseas Territories'
issues can be improved taking into account, among other things,
the Committee's recommendations. A new department for the Overseas
Territories has been set up in the FCO; and an Overseas Territories
Unit has been formed in DFID. The two organisations will work
closely together. The two responsible Ministers, Baroness Symons
and George Foulkes have set up a joint liaison committee to coordinate
the two Departments' work. Decisions on the allocation of developmental
assistance to Overseas Territories need to take account not only
of political and development considerations but also issues such
as the environment and security. Consultative mechanisms are in
place to ensure that all Departmental views are given due weight.
— The Select Committee felt that responsibility
and resources for the Dependent Territories should be in the same
Department. We understand the Committee's reasons for this recommendation.
However, both the International Development Secretary and the
Foreign Secretary have already made it clear that having considered
all the options they believe the arrangements made are the most
appropriate. There is no capacity within the FCO budget to deal
with emergencies such as that resulting from the Montserrat volcano
eruption and the FCO does not have the broad range of expertise
required to manage the assistance programme for the Overseas Territories.
The FCO must obviously retain responsibility for political issues
in the Overseas Territories. The Committee also noted that in
the case of a humanitarian emergency, DFID could supplement the
work of the FCO with its own funding and personnel. Indeed, this
is the present situation with regard to Montserrat.
3. "The real reason for a continuation
of the status quo is a lack of political will."
— Changes have been made to rationalise and simplify
existing structures and to strengthen mechanisms to provide the
best possible support for the Overseas Territories. The political
will necessary to sort out the muddled arrangements inherited
from the previous administration has been clearly demonstrated.
4. "We note, however, that the review
of the Dependent Territories is yet to be completed. We urge the
Government to consider its position before the review is finalised."
— The results of the review will be announced
in a forthcoming White Paper. Ministers are confident that the
new procedures for handling the administration of Overseas Territories'
(OT) matters will ensure effective discharge of HMG's responsibilities
to Montserrat and the other OTs. There are no plans to make further
changes to FCO and DFID responsibilities.
5. "The inability of Montserratians to
have access to 65 per cent of their savings must be a significant
constraint on the economy and reconstruction of the island. We
are surprised that the High Court has not returned to the issue
of the Montserrat Building Society and would urge all those involved
in the process to do their utmost to end this paralysing uncertainty."
— The Government shares the Committee's concern
about the Montserrat Building Society and has done everything
in its power to end that uncertainty. HMG has made it clear to
the Directors of the Montserrat Building Society, the Chief Minister
(who is also the Minister of Finance), and the Registrar of Companies
that it will not directly or indirectly assist the institution.
The Society, which is a private institution, is insolvent, only
partially liquid and not commercially viable. HMG has no locus
to approach the Court directly.
— The Government shares the Committee's concerns
about the effects on the economy and reconstruction of the island.
DFID have provided infrastructure and services to the value of
£69m since the crisis started; in turn, this has provided
significant stimulation of the economy. Some investors have already
withdrawn 35% of their savings and they may recover more if the
Society is put into liquidation. They may or may not choose to
re-invest any withdrawals from the Building Society in Montserrat;
some who have relocated have taken their money abroad. DFID's
development programmes are the best investment HMG can make in
Montserrat. Such aid reaches the maximum number of individual
Montserratians.
6. "The Government Response to the Montserrat
Report stated that "HMG does not consider it appropriate
to underwrite insurance on damages relating to natural events".
In the case of Montserrat we do consider it to be appropriate,
at least during this period of uncertainty as to the future activity
of the volcano, and again recommend that the United Kingdom Government
intervene."
— HMG does not consider that underwriting insurance
for Montserrat would be a proper use of public funds. HMG does
not provide insurance cover for other damage caused by natural
events, whether in other Overseas Territories or in the UK.
— The Committee suggests that more could be done
to encourage the restoration of insurance cover on the island.
The provision of insurance cover is a commercial judgement for
insurance companies to make. However, it is simplistic to suggest
that HMG's policy is to wait until commercial conditions allow
the resumption of cover; HMG is actively creating those conditions
and has remained in close and regular contact with the industry.
The same conditions that will allow economic regeneration in Montserrat
will also allow the reintroduction of insurance necessary for
that regeneration. DFID's projects, such as the Small Business
Scheme and the Soft Mortgage Scheme, will help to kick start the
insurance business.
— Furthermore, the latest scientific report indicates
that the risks to the areas north of the Belham River are now
assessed as comparable to those on some other Caribbean islands
with volcanoes in repose; insurance companies are currently studying
this report. Exploratory talks continue between UK officials and
insurance companies, to examine ways in which cover can continue
to be available for risks on Montserrat. As part of this, we keep
insurance companies informed of HMG measures to create an appropriate
climate for economic recovery on island. We are pleased to report
that one insurance company has recently decided to offer all types
of cover (except life) to businesses and residents in Montserrat
outside the Exclusion Zone. They are not, however, offering cover
against volcano-related events.
7. "We recommend that DFID provide the
Committee as soon as possible with an estimated costing of the
Sustainable Development Plan, including a projected yearly breakdown
of expenditure. We recommend that expenditure on the Dependent
Territories be excluded from calculations of progress towards
the UN target of official development assistance as 0.7 per cent
of GNP."
— The Select Committee has misunderstood the
nature and purpose of the Sustainable Development Plan (SDP).
The SDP is not intended to be a costed list of projects. Instead,
it will be a strategic document setting out the policy framework
that will be adopted by the Government of Montserrat (GoM) to
rebuild the island. It will link national development goals to
individual government activities to ensure consistency across
government policies and activities. It will, indeed, need to be
informed by the resources likely to be available, but it would
be inappropriate for it to provide a detailed list of projects
for each sector. Rather, the SDP will provide the basis for GoM
to allocate resources to projects through other more appropriate
planning exercises. The most important of these will be the production
of a Country Policy Plan (CPP) in agreement with HMG. The CPP
will, among other things, allocate the £75 million of DFID
resources to specific sectors. A copy of the CPP will be made
available to the Committee as soon as it is agreed.
— A number of Dependent Territories, though not
all of them, are currently included in Part 1 of the DAC list
of countries in receipt of financial flows from the donor community,
i.e. they are classified as eligible for official development
assistance (oda). The DAC list is reviewed every three years.
As long as Dependent Territories remain in Part 1 of the list,
UK assistance should obviously be classified as oda.
8. "We would value evidence from the
Department that there is a realistic possibility of Montserrat
escaping dependency on United Kingdom development assistance."
— There is clear evidence that economic activity
is recovering on Montserrat. The initial tranche of loans through
the DFID-funded Business Programme has been allocated. The factory
shell is now occupied. The amount of land in agricultural cultivation
has doubled over the last year to about 60 acres. Every month,
new commercial premises open. As a result, GoM revenue performance
for the first half of 1998 has been stronger than envisaged, suggesting
that total collection over the year may be higher than original
budgetary estimates.
— The backlog of investment is being addressed
by the substantial portfolio of DFID funded projects. With the
recent scientific assessment, that the volcanic risks have fallen
to similar levels in other volcanic Caribbean islands, we expect
that the private sector will meet a higher proportion of future
investment needs.
— There are therefore good grounds for expecting
that the extent of Montserrat's dependancy on United Kingdom development
assistance is now starting to diminish. But it would obviously
be premature to speculate on the likelihood of Montserrat graduating
to the stage when it will no longer require any HMG financial
assistance.
9. "The United Kingdom Government must
face up to its responsibilities to the people of Montserrat. Such
an outcome would be at least one benefit to emerge from these
unhappy events."
— The Committee's recommendation refers to Montserratians
in the UK. Since Montserratian evacuees first arrived in the UK,
the Home Office Community Relations Unit (now called the Race
Equality Unit) has been responsible for liaising with refugee
voluntary agencies and Montserrat community groups in the UK on
the arrangements for the settlement of Montserratians.
— Initially, the Montserratian community provided
support to the evacuees on a voluntary basis. After further eruptions
in 1997, however, the Assisted Passage Scheme was introduced and
the numbers arriving increased dramatically. It became clear at
that point that the volunteers would be unable to continue in
their work without financial assistance.
— From August 1997, the Montserrat community
organisations began working with the refugee voluntary agencies,
experienced in settlement programmes, to draw up costed proposals
to assist Montserratians to access statutory benefits and services
to support the work of the volunteers in the Montserrat communities.
These discussions resulted in the following two initiatives:
(a) a contract was placed
with Heathrow TravelCare, a registered charity, to provide a reception
service for Montserratians arriving at both Heathrow and Gatwick
airports; and
(b) a community support
project, known as the "Montserrat Project" was set up
to provide community support to Montserratians who have responded
to the Government's offer of voluntary relocation.
Both these projects are funded by the Home Office.
— As the Select Committee noted, HMG's total
support to Montserrat and Montserratians in the Caribbean region
over a six year period is expected to total around £135 million;
that does not include support given to Montserratian evacuees
in the UK. Evacuees have access to the full range of benefits
in the UK (health, education, welfare and housing). They also
have the right to work. On 21 May 1998, Montserratians in the
UK, Montserrat or the Caribbean region were offered the right
to settle in the UK indefinitely. This is clear evidence that
HMG is doing rather more than simply facing up to its responsibilities.
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