SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS
1. During 1999 the Community will agree its "Financial
Perspective", setting development expenditure for the next
seven years, from 2000 to 2006, as well as a number of multi-annual
expenditure envelopes for particular development programmes. Decisions
taken in the next few months will determine the character and
effectiveness of EC development policy for several years to come.
As the following paragraphs will make clear, we have serious criticisms
of both the priorities and effectiveness of current EC development
expenditure (paragraph 4).
2. The Department has been active, particularly
during the United Kingdom presidency, in promoting the interests
of the poorest developing countries within Community institutions.
We congratulate the Secretary of State and her Department on this
important work and trust that the Committee's Report will also
contribute to the long overdue reform of the European Community's
development budget (paragraph 5).
3. We support the priority given to pre-accession
aid in the Agenda 2000 document. However, the external action
priorities of Agenda 2000 also involve a shocking and completely
unacceptable neglect of the needs of the poorest countries of
the world (paragraph 16).
4. There appears to be no relationship between
the well-meaning policy statements emanating from the Council
of Ministers and the work and agenda of the Commission...
It is certainly clear that the Commission has no intention
of allowing "the war against poverty to figure among the
top priorities of international relations." (Paragraph 20).
5. "In terms of aid per capita
in the recipient countries, the EC provided $0.70 to low income
countries in 1996, $1.40 to middle income developing countries
and $4.50 to other countries (primarily those of eastern Europe
and the Former Soviet Union)."... The current external action
policy of the Community is to give more to the better off and
less to the poor (paragraph 22).
6. Ethiopia — one of the poorest countries
in the world, with a GNP per capita of only $100 — was the
recipient of the largest volume of EC ODA in both 1986/87 and
1991/92. In 1996/97, however, Ethiopia was not even among the
top ten recipients. Instead, the largest volume of EC ODA went
to Morocco, with a GNP per capita of $1,290... We find the changes
in composition of the major recipients of EC official development
assistance during the past ten years astounding. In 1986-87, five
of the top seven had been low-income countries, and of the top
ten, four were least-developed countries. Ten years later, in
1996-97, none of the top seven recipients of EC official development
assistance were low-income countries and only two of the top ten
recipients were least developed countries. (Paragraph 23).
7. "The Government's main concern in approaching
these negotiations is that too low a proportion of the European
Community external assistance budget goes to the poorest countries,
that their share is still falling and that it is likely in the
immediate future to fall further." The aim of all those genuinely
concerned to relieve poverty must be to redirect ODA to the poorest
countries, those classified by the OECD as "Least Developed"
and "Other Low Income." (Paragraph 24).
8. Any reorientation of external assistance to
the poorest countries must coincide with a commitment in all RELEX
DGs to poverty-focussed development within those countries (paragraph
29).
9. We do not consider it acceptable for the Community
to decide on the total amount to be spent on 'external action'
for the next seven years without any commitment as to how much
will go to the poorest countries (paragraph 31).
10. We recommend that the Financial Perspective
include for Category 4 a commitment to a proportion being spent
in low-income countries. The current average for member state
aid, 62 per cent, should be the minimum percentage acceptable
(paragraph 34).
11. We support the creation of a new category
of expenditure exclusively dedicated to pre-accession aid. The
creation of such a category will provide an ideal opportunity
for a reconsideration of the Agenda 2000 priorities for external
action. It is clearly nonsensical to retain a single group of
priorities for activity which is now to be separated between two
budgetary Categories. In the new list of priorities for Category
4 we recommend the inclusion as a first priority of "Poverty-focussed
Assistance to Least Developed and other Low Income Countries".
(Paragraph 36).
12. The creation of Category 7 is a chance to
re-title Category 4 "Development Cooperation" and we
recommend accordingly... The Community must, for the first time,
create a 'development budget' and thus give substance to its many
excellent policy statements on poverty and development (paragraph
37).
13. We agree with DFID's call for a financial
envelope for the ALA programme. It is also, however, only an interim
solution. The disarray of the EC budgetary process will continue
for as long as the Community delays the introduction of a single
resource allocation process... We recommend that the RELEX DGs
produce a strategy paper for Category 4 expenditure to 2006 which
includes the proposed financial envelopes for those programmes
to be renewed in 1999. The paper should, however, relate these
decisions to all other aspects of Category 4 expenditure as well
as the European Development Fund. In the longer term we recommend
that the EC move to a single resource allocation process which
includes, on a multi-annual basis, both the overall Financial
Perspective and the particular development programmes (paragraph
46).
14. One of the key concerns put to the Committee
during this inquiry has been the allocation of resources to programmes
which are politically important at the expense of those which
are developmentally important. This is all the more shocking given
that programmes which focus on better off developing countries
consistently underspend. (Paragraph 47).
15. The OECD DAC peer review of the EC suggests
that in the EC, the gap between commitments and disbursements
is unacceptably large, concluding that, "A significant gap
between amounts committed for ODA and actual disbursements has
become a persistent concern in the Commission's programmes in
the 1990s. Between 1992 and 1996, ODA commitments exceed disbursements
by about $1600m each year, with the gap having reached more than
$2200m in 1994." This assessment is reinforced by an examination
of the extent to which the Commission succeeds in disbursing the
amounts which it predicts in its annual budgets (paragraph 51).
16. It is not enough simply to blame underspends
on the inefficient management of the Commission. The fundamental
mistake has been to allocate excessive funds in the first place
for predominantly political reasons (paragraph 52).
17. Funds appear to have been repeatedly allocated
to the Phare and Tacis programmes which, for whatever reason,
have been unable to disburse those resources. This demonstrates
an unacceptable over-emphasis on political priorities during budget
allocation discussions, with a lack of attention to whether the
money could be spent effectively, or indeed whether it could be
disbursed at all (paragraph 57).
18. The Court of Auditors report on the Financial
Year 1997 shows that during 1997, the MEDA programme committed
98 per cent of its budget for commitments, but disbursed only
64 per cent of its budget for payments (paragraph 58).
19. We support DFID's call for a decrease in the
allocation of resources to the MEDA programme, with a corresponding
increase in the budget for the ALA programme. (Paragraph 59).
20. Philip Lowe, Director-General of DGVIII, pointed
out to us that the budgetary discipline, or lack of it, evident
in the EC was far below the standard expected of its peers. He
suggested that the EC must adopt such procedures: "that is
we forecast a budget which we plan to meet 100 per cent and we
tell the member states at the beginning of the year how much the
contributions shall be and we stick to it and we do not take any
more or any less than what we say at the beginning of the year
... that is the normal budgetary mechanism of every national administration,
and by the way it is the normal budgetary mechanism which other
parts of the Commission respect." (Paragraph 60).
21. The excessive underspends in so many of the
Community's external programmes reveal a Commission unable to
manage and disburse its resources but unwilling for political
reasons to take the necessary budgetary action. In the light of
such underspends, we agree with the Government that there should
be no increase in Category 4 funds in the new Financial Perspective.
The Commission should concentrate on managing its current level
of funding and on distributing those funds more generously to
the poor (paragraph 61).
22. Over recent months, serious allegations of
fraud and financial mismanagement within the Commission have been
raised. These have referred in particular to the MEDA and ECHO
budget lines. This is a matter of great concern to the Committee,
and we await with interest the results of current European Parliamentary
investigations. We are not surprised, however, to see such concerns
emerging from a Community where there are huge discrepancies between
political priorities and administrative capacity, over-commitment
of funds to programmes which cannot disburse them effectively,
and serious delays in the payment of some accounts (paragraph
62).
23. We recommend that the Community agree with
donors a statement of their respective `comparative advantages`
in development work (paragraph 64).
24. We are concerned that the establishment of
the SCR, and the separation of policy and implementation which
it involves, may further erode the already fragile link between
evaluations and future programme design. Evaluations should not,
however, only influence future programmes but also future budgets.
We recommend that all future budgetary proposals for development
programmes include an account of past overspends and underspends,
and of all relevant evaluation reports, with a detailed justification
of the funds proposed in the light of this information. (Paragraph
67).
25. The establishment of the new Common Service
Directorate (SCR) represents a welcome gesture on the part of
the Commission towards increased coherence in the management of
external action expenditure. We trust that once it is fully operational,
it will contribute to greater efficiency in the disbursement of
resources and in particular a significant reduction in the backlog
of undisbursed commitments and unmet contractual obligations.
(Paragraph 70).
26. The new Commission provides an ideal opportunity
for an examination and possible restructuring of the management
of the EC's development programme (paragraph 73).
27. The only way to ensure that development priorities
receive due attention in future discussions surrounding budgetary
allocations is to create a separate Directorate-General for Development,
with exclusive responsibility for official development assistance.
We support DFID's promotion of the establishment of a single Directorate-General
for external assistance programmes. This Directorate-General should
be responsible both for budgetised EC aid and the EDF, and should
introduce all those tools of accountability taken for granted
in other organisations: a comprehensive and detailed policy statement;
an annual report; a transparent budget and a European Commission
document equivalent to 'British Aid Statistics' (paragraph 76).
28. We reiterate our previous support for measures
to decentralise the management of EC official development assistance
(paragraph 77).
29. We agree with DFID, that no increase in staffing
levels at the Commission should be approved until the Commission
has carried out a review of its current staffing arrangements
and reallocated its current human resources and mix of skills
so as to improve the effectiveness of its operations (paragraph
79).
30. We recommend the rationalisation of horizontal
budget lines within the more comprehensive reform of EC development
policy and its budgetary process (paragraph 86).
31. In the interests of transparency and efficiency,
we share DFID's support for the proposal put forward by the Commission
to cut the emergency aid reserve by 150 million ecu and allocate
those resources directly to ECHO (paragraph 88).
32. We believe that the role of the European Parliament's
Development and Cooperation Committee, which is active in its
contribution to policy discussions, should be strengthened to
include scrutiny of the EC budget. (Paragraph 89).
33. The reforms we advocate in this Report, both
to the structure of the Commission and the budget, will require
support across the Community, from all member states, if they
are to be implemented. We therefore urge the Parliamentary Committees
of other member states with responsibility for development to
consider and support our analysis and recommendations (paragraph
90).
34. Recent fraud allegations have undermined the
reputation of the EC. Now more than ever, public attention is
focussing on how much the EC spends, on what, and why. This Report
tells the story of an external assistance budget unfocussed, uncoordinated,
ineffectively implemented, and, to use the words of the Secretary
of State, "skewed quite dreadfully against the poorest."
The budget has placed the political and strategic interests of
member states above the needs of the poor. This too is a scandal
and it has been accepted for far too long. We have made recommendations
which call for a fundamental reform of the structure of this budget,
its management and the policies which underpin it. Political convenience
and particular interests can no longer be allowed to bring the
EC development budget into disrepute. The changes we propose will
not only repair the Community's damaged reputation in development
but, more importantly, give help to those who genuinely need it,
the poor of the world (paragraph 91).
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