House of Commons - International Development

Select Committee on International Development Fifth Report

DEPARTMENT FOR INTERNATIONAL DEVELOPMENT: 1998 DEPARTMENTAL REPORT

Expenditure by Method of Delivery

25. Information about the method of delivery of DFID's bilateral projects and programmes (for example, whether aid is delivered through DFID projects, budgetary support or non-governmental organisations) is as important as geographical and sectoral details of its expenditure. As such, we would expect the Departmental Report to provide a good indication of the activities in which DFID is involved relating to each of its aims. Mr Vereker told the Committee in oral evidence that it was not always the case that a change in the focus of DFID's activities would be evident from its overall expenditure in a certain region or country.[34] This makes information on the activities, as well as the expenditure, of the Department even more valuable. There are two sets of circumstances under which details of the delivery of DFID's programme are particularly useful: first, expenditure in middle-income countries, which could prima facie appear to be contrary to DFID's emphasis on poverty eradication as the driving force of its activities, and secondly, expenditure in countries with unscrupulous regimes, which could appear to be contrary to DFID's policy on partnerships with developing countries as stated in the White Paper.[35] Only information about DFID's actual activities and methods of delivery (for example through governments or NGOs, in projects or sector-wide programmes) in such countries, rather than purely its overall expenditure, can allow effective scrutiny.

26. The information relating to DFID's bilateral programme provided in the 1998 Departmental Report does not contribute to transparency or accountability to any meaningful extent. Information is on the whole restricted to extremely brief descriptions of projects and programmes, which give little insight into what they actually involve or why these particular projects and programmes, and not others, are being discussed. We recommend that in future Departmental Reports DFID include much more detailed summaries of its activities than are provided in the 1998 Departmental Report, and provide details of sources of further information, such as British Aid Statistics and relevant Country Strategy Papers.

Aid and Trade Provision

27. DFID has abolished all future use of the Aid and Trade Provision (ATP),[36] although a supplementary memorandum sent to the Committee showed that DFID has significant outstanding ATP commitments, some of which extend over the next 20 years, and amounting to expenditure of £64.6 million in 1997-98, or six per cent of the total bilateral aid budget for that year, and a total of £290.2 million over the next 20 years. The importance of displaying ATP expenditure as separate from other bilateral expenditure can be illustrated with the case of Indonesia. During oral evidence it became clear that the majority of aid to Indonesia has been granted under the ATP. Mr Manning told us that "because the ATP expenditure will run on for years because of the way the ATP was financed, the figures we produce year by year will keep appearing to have a high proportion of work directly with the Indonesian Government. Much of that will reflect decisions taken over the last ten years."[37] This fact alone would make displaying ATP expenditure separately from other bilateral expenditure relating to current policy the most logical option. Furthermore, without explicitly showing expenditure in Indonesia broken down into its aggregate parts, including ATP, it is difficult to ascertain the nature of the UK's development assistance to Indonesia. Again, British Aid Statistics contains such information up to 1996-97.[38] But Parliamentary scrutiny must be prospective, as well as retrospective. We recommend that Departmental Reports show Aid and Trade Provision expenditure as a separate line in the cash plans until all commitments under the Provision have been fulfilled.

Expenditure through Non-Governmental Organisations

28. A similar argument could be put forward for displaying expenditure through NGOs as a separate figure. It is important that contributions by DFID to other agencies are used in ways which accord with the Department's own objectives, in particular with its poverty-focus and guidelines on the delivery of aid to which DFID is committed, such as those on humanitarian aid.[39] It is certainly important that contributions to NGOs are available for scrutiny. We recommend that future Departmental Reports include a list of non-governmental organisations in receipt of core grants or other funding from DFID, and the amounts received in the last and current financial years.

Emergency Aid

29. Planning emergency aid expenditure accurately is clearly impossible. However, we note with some concern that, according to the Departmental Report, bilateral emergency aid expenditure was £142 million in 1995-96, £100 million in 1996-97, with expenditure during1997-98 estimated at £58 million, yet planned expenditure in 1998-99 is only £22 million. This represents a decrease of 62 per cent between two years. There are three problems associated with this reduction. First, no explanation is offered for the decrease. Secondly, there is a lack of clarity in the presentation of figures for emergency bilateral aid, which makes scrutiny of this expenditure extremely difficult. One apparent cause of the confusion which surrounds figures for emergency bilateral aid is that the emergency aid provision is not the only source of the expenditure: "The Department for International Development has a contingency reserve which can be drawn on to respond to emergencies. Funds may also be allocated from country programme budgets.".[40] A further confusion is that whilst the Secretary of State stated in a recent written answer that emergency aid in 1997-98 had amounted to an estimated eight per cent of total bilateral aid,[41] this was significantly different from the figures provided in the Departmental Report. Eight per cent of the estimated £1022 million bilateral expenditure in 1997-98 is approximately £82 million, exceeding the figure in the Departmental Report for estimated expenditure on bilateral aid by some £25 million. Thirdly, the significant reduction in the provision for emergency bilateral aid seems to reduce the provision below an adequate level. In the current financial year, DFID has already pledged £22.3 million to the Sudan crisis,[42] exhausting the 1998-99 provision before the first quarter of the year is passed. Clare Short has stated that "adequate provision has been built into 1998-99 planning for both foreseeable relief needs and unforeseeable emergencies".[43] We are unable to ascertain from the information provided whether this is in fact the case. The lack of explanation of the cash plans table in the Departmental Report makes it impossible for us to evaluate DFID's emergency bilateral expenditure. We recommend that future Departmental Reports include a more detailed account of emergency expenditure, including explanations of significant fluctuations in emergency bilateral expenditure.

Expenditure through Multilateral Agencies

30. Detailed figures for contributions to multilateral agencies are given only for 1996-97. This is unacceptable for the reasons outlined above in relation to bilateral expenditure. We asked for a more detailed analysis of expenditure through the European Union in 1997-98,[44] and DFID provided it.[45] This information is extremely useful for the purposes of scrutiny of DFID's expenditure, and should be published as a matter of course in future Departmental Reports. For example, it reveals that £199.6m (35 per cent of the UK's contribution to the European Union, and approximately 10 per cent of DFID's overall budget) is expected to be spent on PHARE and TACIS in 1998-99, which resources are directed towards Central and Eastern Europe, the New Independent States, and former Yugoslavia. This is exactly the type of information which should be included in Departmental Reports if there is to be informed discussion on the relationship between regional allocation of DFID's funds and poverty eradication.

31. DFID could have taken the opportunity offered by the Departmental Report to explain fluctuations in multilateral contributions; however, they failed to do so. The Cash Plans table shows significant fluctuations in contributions to some multilateral agencies, which the Departmental Report does not explain. For example, contributions to the UN agencies in 1996-97 totalled £74m. This increased to an estimated £126m in 1997-98, and expenditure of £98m is planned for 1998-99. UNIDO[46] is a further example: DFID contributions to this agency decreased from £4,727,000 in 1995/6 to £41,000 in 1996-97.[47] Given that multilateral expenditure now accounts for almost 50 per cent of DFID's budget,[48] and in the light of DFID's commitment to place a much greater emphasis on its work with multilateral institutions,[49] we recommend that future Departmental Reports display more detailed figures for recent and planned future contributions to multilateral agencies, including regional development banks, and provide explanations of significant year-on-year fluctuations and deviations from plans.

Expenditure Target

32. The Government reaffirms its commitment to the UN spending target of 0.7 per cent GNP in the Departmental Report.[50] However, as we have noted in previous Reports,[51] no timetable has yet been established for the achievement of this target. This is important not only as a demonstration of the Government's commitment to the target, which may act as a catalyst for other donors to make similar commitments, but also from an efficiency point of view, as the Development Assistance Committee (DAC) of the OECD pointed out in their recent review of the UK development assistance programme: "the British policy on ODA (Overseas Development Assistance) volume, which commits the UK to the long-term goal of 0.7 per cent of GNP, should be buttressed by a medium-term plan to move up in phases from the present 0.26 per cent ODA/GNP ratio, allowing for effective planning and preparation of an expansion in the programme from 1999/2000".[52] There is also a further potential negative effect of a failure of the UK and others with low ODA/DNP ratios to reach the 0.7 per cent target, which is that those countries who are currently contributing in excess of the target may become unwilling to continue to do so without other donors making similar commitments. The Comprehensive Spending Review introduced a timetable for the next three years (1999-2000 to 2001-2002), during which the ratio of official development assistance (ODA) to GNP will increase to 0.3 per cent. We are delighted at this first step towards the target of 0.7% GNP, and congratulate the Department on the outcome of the Comprehensive Spending Review. We note that some of this increase in resources will be the result of the sale of a majority share of the Commonwealth Development Corporation.[53] Presumably this sale will yield a finite amount of resources, and we trust that once these are exhausted, DFID's budget will continue to increase. Our earlier recommendation was that the Government aim to reach the 1997 EU average of 0.37 per cent ODA/GNP by the end of the Parliament.[54] On present projections this target will not be met. Continuing efforts must be made to increase further our development spending.

Presentation of Estimates and Expenditure: Conclusion

33. We are disappointed that the Departmental Report fails to go significantly beyond the Treasury core requirements relating to expenditure. The Departmental Reports of Government Departments other than DFID provide a far more detailed analysis of spending over several years. For example, the Department for Education and Employment[55] and the Scottish Office[56] provide detailed summaries of spending in each section of their Departmental Reports. We see no reason why DFID should not provide such detail as a matter of course. We are particularly dismayed at the paucity of information at sectoral and country levels, the lack of estimated outturn figures for 1997-98, and the lack of detailed plans for 1998-99. It is simply impossible to scrutinise the work of a Department with a budget in excess of £2 billion per year on the basis of the scanty account of its expenditure in the last and current financial years provided in the Departmental Report.

34 Q. 52. Back

35 White Paper, p. 39. Back

36 White Paper, p. 45. Back

37 Q. 58. Back

38 British Aid Statistics, pp. 28-69. Back

39 Evidence, pp. 21-22. Back

40 House of Commons Official Report, 1 July 1998, c. 209W. Back

41 House of Commons Official Report, 3 June 1998, c. 232W. Back

42 House of Commons Official Report, 6 July 1998, c. 332W. Back

43 House of Commons Official Report, 3 June 1998, c. 232W. Back

44 Q. 56. Back

45 Evidence, p. 25. Back