Examination of witnesses (Questions 60
- 69)
THURSDAY 20 NOVEMBER 1997
MR JOHN
VEREKER, CB,
MR DAVID
BATT and MR
EMYR JONES
PARRY
60. That is very clear, thank you.
(Mr Batt) Could I add, if I may, that it will
be a continuous process not only through the Convention but then
also through management committees, as Mr Vereker referred to
previously, as we did with country strategies, as when we look
at projects. We should not focus our attention exclusively on
the Convention, important though that is to set the framework.
Chairman: Your answer,
of course, Mr Vereker, leads us straight into how we are going
to deal, as the European Union and bilaterally, with issues in
India and China, but I will leave that to another time. I shall
ask Mr Canavan to continue on the question of the centralisation
of the European Union's programme.
Mr Canavan
61. During the last Parliament you may recall,
Mr Vereker, that the Foreign Affairs Committee did a report on
European Union aid. The Committee was quite critical of certain
aspects of it. One criticism was that the decision-making was
far too over-centralised in Brussels, rather than being decentralised
through the European delegations in the ACP countries, for example.
I wonder if you could tell us what are the views of the British
Government on this, and what steps will be taken to try to ensure
that in the post-Lomé situation there is more decentralisation
of decision-making regarding European Union aid, in order to ensure
more speed and effective delivery?
(Mr Vereker) Yes, Mr Canavan. I recall the discussion
in the Foreign Affairs Committee in the last Parliament very well.
I am not sure that I can honestly say that the debate has moved
on a great deal. Just to rehearse the position, we feel—and
it is reflected in the Development Assistance Committee's review
of Commission assistance—that the Commission does need to
take a critical look at its field offices, its field delegations,
at its relations with them, and at the prospect of further decentralisation
to them, its ability to interact with recipient governments on
the spot. We feel this because all recent experience shows—I
am telling you something you know very well—that development
assistance is at its most effective when there is a good local
dialogue, when people on the ground who understand what they are
doing talk to the developing country concerned, preferably with
other donors, and understand their needs. That is the basis for
an effective partnership. Effective partnerships are not created
by people like me sitting behind comfortable desks in the air-conditioned
offices in Victoria Street. So that is the objective. We ourselves,
as the Committee knows, believe ourselves to be exemplars of it.
We run a highly decentralised operation. My South Asia department
is physically in Delhi. Most of my African departments are in
Africa. If you ring up my department you will find nobody below
Under Secretary level able to talk to you about anything to do
with India or most of Sub-Saharan Africa, although the Under Secretary
will always be happy to talk to you. However, the constraint on
moving in that direction remains. Our experience is that in order
to operate such a decentralised system, whereby not only the dialogue
but also a lot of the authority takes place locally, you do need
to have tremendously robust and well-tried systems. Frankly, these
need to include robust financial systems. With another part of
my persona—my accounting officer persona—I worry deeply
about accounting to Parliament for resources we give to DG VIII
or any other part of the Commission, which cannot be robustly
controlled and accounted for. A decentralised system which I do
not have direct responsibility for always makes me nervous. We
receive constant reports from the Court of Auditors about weaknesses
in Community financial procedures. We have plenty of anecdotal
evidence of things from time to time going wrong. We do not want
the pace of decentralisation to take place faster than the systems
can bear. So I think that that is a long way off saying that the
direction should be in the direction of decentralisation and delegated
authority, but while that happens a big effort must be made to
strengthen Commission systems.
62. Are staffing levels and the location
of staff relevant here? I understand that the European Union Member
States decided against increasing the staffing levels on the ground
in the EU delegations in ACP countries. I do not like to put myself
in the position of arguing for more European Union staff, but
is there not a case perhaps for decentralisation or relocation
of people from Brussels to have more people on the ground, close
to where the people in need are and where more effective and relevant
decisions can be taken more quickly?
(Mr Vereker) I would agree that first of all in
general DG VIII is, by the standards of the task it is setting
out to do, probably under-equipped professionally in certain particular
areas. I would also agree that strengthening of Commission offices
overseas, particularly at professional level, would be helpful.
Of course, there are constraints, in terms of budgets, always
on staff numbers.
(Mr Jones Parry) Perhaps I may add one point here.
There is in all of this a tension. The tension is between the
Member States who wish to control the Commission and ensure that
when the big decisions are taken they are at least involved in
them to some extent, and the other side—the Commission—wanting
to take quick, rapid decisions of the sort that are taken locally.
We have seen that, for example, in Bosnia at the moment, where
the Commission would argue that it is hampered by the constraints
of the Council which the Council has imposed upon it. For our
part, we say that that is a proper control of what the Commission
is actually up to, but it does complicate things.
63. Can I go on to budgetisation now. The
Commission seems to be very much in favour of budgetisation of
the European Development Fund, claiming that it would lead to
harmonisation of EDF procedures, it would speed aid disbursements
and increase accountability. What is the British Government's
view on budgetisation?
(Mr Vereker) Let us start with the British interest,
because there are some basics here. First of all, we recognise
that budgetisation could lead to downward pressure on the total
volume of Community external assistance, and that might be seen
as an advantage to those who would like to see a higher proportion
of the fixed British aid budget going through bilateral sources.
But that is a "could". What is certain is that our share
of the European Development Fund—12.7 per cent—is
lower than our present or likely future budget share of around
15 per cent. So the key judgement would be, if it were budgetised
would that reduce Community aggregate external expenditure sufficiently
to give us a benefit, compared with the undoubted extra cost of
a higher budget share? Furthermore, if EDF were budgetised, it
is entirely possible that the volumes for the ACP within the budget
might be somewhat squeezed by the fact that some of our Community
partners give very high priority to some of the other instruments,
and we would be taking the risk of even higher amounts flowing
to the Mediterranean or Eastern Europe, at the expense of the
ACP. On balance, as we at present see it, therefore, the British
interest lies in keeping the EDF off the budget. It is also worth
looking at the position of other Member States. France might benefit—probably
would. Its EDF share is 23½ per cent, its budget share between
18 and 20 per cent. But Germany, whose EDF share is 22½ per
cent, but whose budget share is 30 per cent, would disbenefit
to the extent that we could not reasonably expect them to go along
with it. In addition to all that, there are some practicalities.
Member States did agree at Maastricht that financing arrangements
for EDF should remain as they are. The Commission has only, I
think, made a few glancing references to it in the past. I do
not think that having EDF off the budget is likely to change,
frankly, unless all Member States support it, and I do not think
the Germans will. So where we come out is that it probably is
not worth the Community being diverted into a big argument about
budgetisation, when it is not really an issue and it is not in
the Commission orientations paper. I would not rule out revisiting
this issue if circumstances changed and we could see a clear advantage
to the UK.
64. You mentioned earlier the proportion
of our aid and development budget which goes to the European Union
as distinct from bilateral projects or, indeed, other multilateral
agencies. This was a point which was also mentioned in the Foreign
Affairs Committee report in the last Parliament, which I mentioned
earlier. There was concern within the Committee about the increasing
proportion of our aid and development budget which was going to
the European Union. We felt that we got better value for money
and the recipients of aid got far better value too through our
bilateral projects rather than the European Union. So does your
answer to my previous question show some sympathy with the views
of our Committee in the last Parliament?
(Mr Vereker) I do not know if I can properly have
sympathy with a Committee in a previous Parliament, Chairman,
but I can certainly share Mr Canavan's judgement and the judgement
of the then Committee that our bilateral aid programmes are effective
and, other things being equal, ought to be preserved, if not expanded.
That is certainly the view of my Secretary of State. In that context,
Mr Canavan, we have some encouraging news, from that perspective,
in terms of the way in which the figures are moving. For whatever
reasons—and they include exchange rate changes, importantly—our
exchange rate vis-à-vis the Ecu has gone up by 20 per cent,
so the cost of Community aid has fallen by 20 per cent since then.
They also include emerging implementation constraints within EDF8—that
is to say, they are spending much more slowly than expected. We
are now looking at a substantially lower proportion of the British
aid programme going through European Community channels in 1997-98
than we did when we gave evidence to the previous Committee. The
figure we put in the departmental report, Chairman, at the end
of the last financial year, was a forecast of 34½ per cent
of the British aid programme going through budgetised and non-budgetised
European Union channels. We now think that that figure will be
down to around 28 per cent.
65. Does the Government think that is a
good thing?
(Mr Vereker) I think that the Government is———
I am hesitating because I am always cautious about putting words
into the mouth of my Secretary of State. I am sure my Secretary
of State would welcome the fact that this enables us to maintain
an effective bilateral aid programme.
Chairman
66. I think that actually your answer probably
would satisfy some statisticians but not aid objectives, if I
may observe that.
(Mr Jones Parry) May I add one institutional point,
which is that if this were budgetised it would mean that this
expenditure would become non-obligatory expenditure of the Community
budget. The final arbiter of that would be the European Parliament,
and we would be locked into 15 per cent, or whatever was decided.
The UK rebate mechanism would not apply to it, and there would
be direct transfer. So all the concerns about the ratio of bilateral
to multilateral would come out in spades.
Chairman: That is
very important.
Mr Canavan
67. Can I ask Mr Vereker one factual question.
Is it the policy of HM Government that there should be a higher
proportion of our aid and development budget spent on bilateral
projects rather than channelling the proportion which is channelled
through the European Union?
(Mr Vereker) I am a bit cautious about endorsing
that as you put it, Mr Canavan, and I think it would be a question
possibly more appropriately addressed to my Secretary of State.
I would refer you to the answer I gave you earlier, which is that
our Secretary of State has guided us in terms of viewing multilateral
channels on their own merits, rather than coming to them with
a firm prejudice against.
Chairman
68. I want to draw our proceedings to an
end after nearly 2½ hours, for which I would like to thank
you for your endurance and patience. We shall have to come back
to the whole trade section which I have left out of our questioning
this morning, simply because we were so interested in your replies,
and these things cannot be hurried. Mr Jones Parry, I believe
you thought you could give us two minutes on trade now, to help
us prepare for our Brussels visit, so could you do that now?
(Mr Jones Parry) Yes, if the Committee would find
that helpful.
69. Yes, I am sure we would.
(Mr Jones Parry) What we have is a very complex
array of external trade arrangements, but there is a consensus
between the British Government and the Commission that the Lomé
arrangements, as I say, cannot be substantially changed in the
next four or five years. What we are talking about is what should
happen in 2003 plus. That will take into account what happens
in WTO, what happens in terms of CAP reform, what happens in terms
of GSP review and so on. The Commission, in what they have said
in their papers—something you might want to bear in mind
in your discussions in Brussels—started the original basis
on free trade arrangements and said that GSP is a possible add-on,
but essentially they envisage the Union having separate arrangements
with the three areas of Caribbean, Pacific, Africa. We have considerable
doubts about that, partly because within a region there is no
homogeneity, it is an artificial assumption that you can have
a free trade arrangement with, say, Africa. Secondly, on trade
policy grounds, a proliferation of free trade areas risks undermining—that
may be too strong a word—or it certainly brings into question
a global trade arrangement. It would be far better if, in the
end, we had global free trade everywhere. If you end up with a
whole range of different agreements, all you are going to do is
make things, we think, far too complex. So what we have set out
in the memorandum and in what we separately submitted to the Commission
is an arrangement which we would like everyone to think about,
which is that the GSP system should be modified into two divisions.
One would say that for all the least developed countries in or
out of Lomé they would get the maximum benefit both in
terms of access and tariff that we could provide, but there would
be a second category which would be the better-off developing
countries, and they would get ordinary GSP preferences.[7]
That is certainly, in trade policy terms, better. It also permits
you to differentiate between countries better according to need.
We would certainly want the Community to be addressing that sort
of issue in the time that is available to us. But this question
of WTO compatibility and separately what is happening about CAP
reform is something you might well want to take up with the Commission.
In the context of the enlargement debate, the Agenda 2000 proposal
envisages substantial modification and updating of CAP, particularly
in some regions, in beef, milk and cereals. We are pushing those
very hard, not so far with too much success in other Member States,
but it is a longer-term process. There is the impact of those
changes on the developing countries—what it says, for example,
on the Beef and Veal Protocol, where in the shorter term, if we
drop the Community price, the price of sendings to the European
Union will be reduced, but you might well want to ask how does
the Commission envisage that countries like Botswana would actually
come out of that, is there going to be an increased quantity that
they would be permitted to send, with consequent dislocation for
Community producers, or is it going to be a different pricing
system? CAP reform touches that whole question of this key business
of agricultural access into the European Union. The position of
this Government is very firm that we should aim to liberalise
that access—a direct way of benefiting the developing countries—and
we need to give greater emphasis to that. My last point, Mr Chairman,
of particular interest to you, will be bananas where we have this
difficulty of reconciling the WTO judgement with, on the other
hand, the commitment to preserve the preference on the market
which the ACP suppliers enjoy. The Government is firmly committed
to doing both of those, but it is very difficult technically.
What we require from the Commission in order to get to square
one is a proposal. If we can get that proposal, then in our Presidency
we would aim to bring to a successful conclusion a revised banana
policy which does justice to the Caribbean, which meets the particular
problems of Belize, but also meets the WTO rules. Anything you
can do, Mr Chairman, to push that in Brussels and encourage the
Commission to produce proposals, would be very helpful.
Chairman: I was planning
to do so, actually, and I know Mr Grant was. That is very useful
indeed. Thank you all very much for coming this morning and giving
us such a comprehensive and detailed briefly which is very useful
to the Committee. We shall have to come back to all these questions,
and we look forward to seeing you again soon. Thank you very much.
7 Note by witness: The second category of developing
countries would in fact get improved GSP preferences. Back
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