House of Commons - International Development

Select Committee on International Development Sixth Report

MONTSERRAT - FURTHER DEVELOPMENTS

The Unanswered Recommendations

1. The International Development Committee published its First Report of this Parliament in November 1997 in response to the crisis resulting from the volcanic eruption on the island of Montserrat. The Government's response was published in February 1998 in the First Special Report of the Committee. We were concerned, given the many uncertainties surrounding the future of the island and the treatment of Montserratians, to place the Government's comments in the public domain as soon as possible. We were, however, unhappy with the content of the response, in particular the fact that one of the conclusions in the Report and two substantive recommendations were simply ignored by the Government in the reply. In our view this alone is enough to justify our decision to invite both the Rt. Hon, Robin Cook MP, Secretary of State for Foreign and Commonwealth Affairs, and the Rt. Hon. Clare Short MP, Secretary of State for International Development, to return to the Committee to give further evidence. We also took the opportunity to learn of recent developments from the two Ministers. This Report thus examines the three points omitted from the original Government response and discusses certain other unsatisfactory aspects of the Government's current position. We also consider the recently published Draft Sustainable Development Plan.

2. The three points made by the Committee and ignored by the Government were as follows-

(ii) The conclusion on the treatment of the Wadge and Isaacs report - "What is clear is that Montserrat would have been immeasurably more prepared for the crisis which has come upon it if the Wadge and Isaacs Report had been carefully read and digested. That far from being read it was hastily forgotten is an opportunity tragically lost. This sorry account must be a signal example of failure in communication, political leadership and responsibility"[2]

(iii) The recommendation that "the High Commissioners and other FCO representatives take a much more active role in explaining HMG's actions in Montserrat, in providing essential information and in overseeing the welfare of Montserratians who have relocated to other islands in the Caribbean"[3] .

3. Responses were finally given on 15 May 1998 in a supplementary memorandum from the Foreign Secretary published with this Report. With regard to the evacuation plan, we were told that "the intention is indeed that the new plan be exercised once all the revised details are worked out. This revision is nearly complete and the testing of some elements of the plan has already begun ... a major simulation will take place in August".[4]

4. Commenting on the Wadge and Isaacs Report, Mr Cook sympathised with the view that "somewhere back in time something may have been less than brilliantly handled".[5] He added that the content of the report "was not such as would have persuaded people at the time to abandon Plymouth".[6] We discussed this defence in our First Report[7] and will not rehearse again our earlier argument. He also made in mitigation two further points - that the report was not commissioned by the Government and the FCO never saw it. The Wadge and Isaacs report was in fact funded by the United Nations Disaster Relief Organisation as part of a project entitled the Pan Caribbean Disaster Preparedness Project. The Government is preparing a report on the disaster preparedness of the Caribbean Dependent territories in the light of the events in Montserrat. The least that might come out of the fiasco of the treatment of the Wadge and Isaacs report is a review of procedures within the Governor's offices, DFID and the FCO for the reception and analysis of current scientific research on disaster vulnerability. We trust that the forthcoming report on disaster preparedness considers this point.

5. Mr Cook entirely accepted the third unanswered recommendation on the role of the United Kingdom's High Commissioners in the Caribbean region. Missions are kept up to date with developments. There was involvement in a regional workshop on evacuation planning and work with DFID on the welfare side in the introduction of the Community Empowerment Project and Special Needs Fund in the region.[8]

6. 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.

The Future Responsibilities of the FCO and DFID

7. The Committee in its Report on Montserrat concluded that the source of future funding for Montserrat be considered within the current review of the administration of the Dependent Territories, "Funds might come from the Foreign Office or from another specified department with dependent territory responsibilities. The important point is that responsibility and resources for the Dependent Territories should be in the same department".[9] We argued that the Dependent Territories should no longer be a first call on the DFID aid programme, but should be funded from another department within Whitehall.

8. We were therefore concerned to hear from Mr Cook that the Government had decided to retain the current division of responsibility between the FCO and DFID. They had at first worked on the details of a joint department for the Dependent Territories but as they "worked on those details there was a view taken that it would work better if we had parallel structures rather than joint structures".[10] A single department for the Dependent Territories had been created within the FCO whereas previously they had been administered by the relevant regional department. Now all Dependent Territory expertise would be in the same department and under a single Minister. In DFID there was "a parallel structure with the Dependent Territories Unit which within DFID will be bringing together also expertise on the Dependent Territories".[11]

9. Both Mr Cook and Clare Short emphasised the greater efficiency of their internal procedures. Both Departments, we were told by Mr Cook, had made "restructuring steps which will greatly improve the administration and policy expertise on the Dependent Territories. We have created also clear lines of accountability within our department which ... will assist in making sure that there is the political leverage for any steps that need to be taken".[12] Clare Short told the Committee that they had stripped out layers of bureaucracy to establish "a more efficient form of decision making".[13] These internal reforms within both the FCO and DFID are certainly welcome. We had concluded in our original Report that "there have been too many parties involved in the delivery of aid without discrete and clear areas of responsibility".[14] Internal departments in both FCO and DFID based in London and dedicated to the administration and welfare of the Dependent Territories will no doubt improve the capacity and expertise of Whitehall. We were worried, however, not only at the internal organisation of departments but the relationship between them. It is clear that the Government have decided to reject our recommendation of a single Whitehall department for the Dependent Territories which will have both political responsibility and financial resources. They have instead chosen the status quo.

10. Mr Cook had investigated whether it would be possible for financial responsibility for the Dependent Territories to reside in the FCO. The problem was that the Foreign Office budget was very small. It did not therefore have the capacity "to absorb large surges of expenditure of the kind that was required in Montserrat because of the volcanic eruption. If I was expected to find £50 million in one year it would probably require me to close half a dozen or more embassies around the world".[15] Furthermore, the Foreign Office did not have the "expertise on development and aid management". The experts on emergency housing and natural disasters were in DFID.[16] Clare Short also said that she began by arguing for the solution recommended by the Committee. The problem of the expertise being located in DFID convinced her that such a solution was not in fact practicable.[17] A Joint Liaison Committee had been established between the two departments to ensure close cooperation between the FCO and DFID on Dependent Territory issues.[18] When asked whether the Foreign Office would have the final say in any decision Mr Cook became coy, "I would not wish to pose it in the stark way that you do ... I would hope that since we have a Joint Liaison Committee the decision will be taken jointly and we will take account of each other's views in that".[19]

11. Experience over Montserrat suggests that when difficult decisions have to be taken quickly this spirit of cooperation is placed under severe strain. 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. The explanation given by the two Secretaries of State is not convincing. We do not see why the relevant department within the FCO could not be provided with the necessary funds and expert staff to provide for the longer term development of the Dependent Territories. There is no reason why all development experts should be employed by DFID. There are of course concerns at possible surges in expenditure resulting from natural disasters. There is however provision for departments to receive contingency funding for unexpected and significant spending requirements. In the case of a humanitarian emergency DFID could of course supplement the work of the FCO with its own funding and personnel (as it does with the internal administrations of other countries). The real reason for a continuation of the status quo is a lack of political will, a point effectively admitted by Clare Short who agreed with the Committee that the Dependent Territories involved "a different set of responsibilities than the rest of our aid and development responsibilities".[20] The current option was the best possible "short of a new budget head and the Treasury deciding to fund it separately".[21] She saw little prospect of the Treasury agreeing to such a proposal.[22] We note, however, that the review of the dependent territories is yet to be completed. We urge the Government to reconsider its position before the review is finalised.

Insurance and Savings

12. The Committee also made recommendations concerning the provision of insurance on Montserrat and access to savings deposited in the Montserrat Building Society.[23] Montserratians had access to only 35 per cent of their savings in the Montserrat Building Society. We recommended that the Bank of England and the Treasury intervene to ensure that the Montserratians had access to the remainder of their savings as soon as possible. We had also been told in evidence of higher premiums and the withdrawal of future insurance cover. We recommended that the FCO and DTI gather detailed information on the current state of insurance cover on Montserrat and that the Treasury offer suitable guarantees which will enable current insurance cover to be maintained and insurance companies to secure reinsurance and thus provide renewal of cover.

13. The Government response made clear that it was considered inappropriate to provide financial support for a private financial institution such as the Montserrat Building Society. A High Court review was expected shortly which, in the event of the closure of the Building Society, would provide greater access to savings. We understand that this review has still not happened..[24] This 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.

14. With regard to insurance cover the Government told us that "no cover is currently available for new property risks on Montserrat". Two of the insurance companies previously writing insurance business on Montserrat had also cancelled current policies, leaving only one still operating on the island.[25] The Government had no information on increases in premiums nor did they "consider it appropriate to underwrite insurance on damages relating to natural events".[26]

15. In oral evidence Mr Cook repeated the Government's position on both the Montserrat Building Society and insurance cover. They were looking at the possibility of a soft loan scheme for the purchase of houses through mortgages. There were, however, difficulties finding a willing private sector partner in the exercise.[27] Mr Westmacott, Director (Americas) at the FCO, told us that the Government did not have the authority to collect information on insurance premia. They were, however, in close contact with the insurance companies "because we recognise entirely that one of the keys to the future viability of the community and economy at the north of the island is going to be the availability of insurance cover".[28] The insurance companies were at present unwilling to renew cover in the north for reasons of "commercial good practice"[29]. We are very concerned at the absence of effective insurance cover on Montserrat. The Draft Sustainable Development Plan identified this as a problem for financial services in Montserrat, for small and medium sized businesses and for the development of housing in the north.[30] It is essential to the future of Montserrat and yet the policy of the Government is simply to wait until the insurance companies consider the renewal of cover to be commercially viable[31].

16. We remain unpersuaded that the Government has done enough to encourage the restoration of insurance cover on the island. The Government mentions the danger of precedent and the importance of non-involvement in the affairs of private businesses. But there are in fact many precedents for such action. The Government does not address the fact that in the case of Montserrat we do not merely have the unfortunate losses of a few thousand individuals but an imperilled society. The normal rules cannot apply. The Government response to the Montserrat Report stated that "HMG does not consider it appropriate to underwrite

insurance on damages relating to natural events".[32] 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.

The Draft Sustainable Development Plan

17. The oral and written evidence presented by the FCO and DFID contains valuable information on recent developments on Montserrat since our last Report. We have also received the Draft Sustainable Development Plan for 1998 to 2002 which is subtitled "the key policies and strategies to move the Island of Montserrat from crisis to development". The document is an impressive survey of the current difficulties facing Montserrat and the action necessary to develop the island. Some questions remain unanswered - for instance, the difficulties of attracting investment in a situation of such uncertainty; the shortage of labour on the island; the vexed question of an airport (we are told that "A feasibility study of the airport is underway"[33]). We note also that the Plan contains no costings for the various projects proposed. DFID has, however, pledged £75 million to cover all DFID expenditure related to Montserrat from 1998-99 to 2000-01. This "represents an investment of £25,000 for every Montserratian currently on the island and a 25 per cent increase in DFID expenditure compared to the previous three year period".[34] The detailed relationship between the pledge and the proposals in the Plan is not made clear.

18. Since volcanic activity started on Montserrat in July 1995 some £62 million of emergency aid, development assistance and budgetary aid have been committed by DFID to the island.[35] In 1992-93 the Department (then ODA) spent £3.3 million on Montserrat. That has risen to an estimated £33 million in 1998-99 (£28 million at 1992-93 prices).[36] The contents of the Draft Sustainable Development Plan suggest continuing and substantial DFID expenditure for several years. India with a population approaching one billion, 36 per cent in extreme poverty, received from DFID in 1996-97 just under £112 million (about 11 pence per head). This compares starkly and unfavourably with the £25,000 over three years given to inhabitants of Montserrat.

19. We welcome expenditure on Montserrat. We believe that the United Kingdom has a duty to reconstruct society on the island and ensure that a viable future is secured for the inhabitants. The above figures, however, raise again the question of whether the DFID budget is the right source for these funds. We are concerned at the distorting effect of Montserrat on the aid budget and continue to believe that such a fundamental responsibility would be better financed from an alternative Whitehall department. 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.

20. We would emphasise again the point made in our previous Report, that "The Sustainable Development Plan will need to take a realistic look at the prospects for the economy of the north. The Plan should propose development which can maintain a community on the island appropriate to current circumstances, in other words development which is genuinely sustainable".[37] For instance, we suggest that consideration of an airport for Montserrat include investigation of the re-use of the existing runway at W H Bramble, with buildings and road access to the north. Safety would of course have to be taken into account. We also recommend that more attention be paid to the development of small and medium-sized enterprises for Montserratians off-island, such as in Antigua, for possible later relocation back to Montserrat.

21. Clare Short admitted when giving evidence that DFID did not consider "sustainable" to mean "self-sufficient".[38] She said that the reconstruction of the society and economy of Montserrat would take a long time but that she was "absolutely sure that there will be viable life and a viable community".[39] With the finalisation of the Sustainable Development Plan and a detailed costing of DFID's future commitments we would value evidence from the Department that there is a realistic possibility of Montserrat escaping dependency on United Kingdom development assistance.

Montserratians in the United Kingdom

22. Our previous Report on Montserrat contained a section on the treatment of those Montserratians who had relocated to the United Kingdom.[40] We made a number of recommendations, including the proposal that "a liaison officer be established without delay to help Montserratians as they settle in the United Kingdom and adjust to life here".[41] Nearly 3500 Montserratians have come to the United Kingdom since the volcano erupted in July 1995. Mr Cook admitted that "arrangements for the arrival of the people from Montserrat at the beginning were not good enough".[42] In response to the Committee's recommendation a Home Office project was established "focussing entirely on integrating and assisting those who have come from Montserrat to Britain ... They have already provided direct assistance and counselling to over 500 households".[43]

23. An effective welcoming project for Montserratians was only established by the United Kingdom Government two and a half years after the first eruptions of the volcano in July 1995. The fact that in the last few months 500 households have already turned to the project for help demonstrates how necessary such work was and how sorely it must have been missed. We have received and are still receiving extensive evidence that difficulties continue for Montserratians in both housing and appropriate social security provision. Montserratians endured the loss of their savings, the destruction of their property and the scattering of their community. Beyond the bare assistance to enable Montserratians to get here, no concerted and specific measures were put in place by the United Kingdom Government to provide as smooth as possible a relocation to this country for people who were already distressed. 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.

1 First Report from the International Development Committee, Session 1997-98, HC 267, para. 30 Back

2 First Report from the International Development Committee, Session 1997-98, HC 267, para. 39 Back

3 First Report from the International Development Committee, Session 1997-98, HC 267, para. 85 Back

4 Evidence p.16 Back

5 Evidence p.16 Back

6 Evidence p.16 Back

7 First Report from the International Development Committee, Session 1997-98, HC 267, paras. 36-38 Back

8 Evidence p.16 Back

9 First Report from the International Development Committee, Session 1997-98, HC 267, para. 101 Back

10 Q.2 Back

11 Q.2 Back

12 Q.2 Back