House of Commons - International Development

Select Committee on International Development Eighth Report

DFID's Expenditure Plans

7. The 1998 Comprehensive Spending Review (CSR) set out the Government's plans to increase the funds available to DFID from £2,326 million in 1998-99 to £3,218 million in 2001/02.[2] We considered the Department's plans for the allocation of its CSR funds in our Report on the 1999 Departmental Report.[3] The 2000 Departmental Report contains information on the outturn of the Department against these plans for 1998/99, provisional outturn for 1999-2000, and revised plans for expenditure in the remaining two years covered by the CSR, 2000/01-2001/02. The results of the 2000 Spending Review, which sets out the Government's expenditure plans up to 2003/04, were announced towards the end of this inquiry, on Tuesday 18 July 2000.[4]

1999/2000 Outturn

8. Expenditure during 1999/2000 was £212 million higher than the £2,442 million figure contained in the CSR. £106 million of this was transferred to DFID from HM Treasury and the Foreign and Commonwealth Office. These transfers are shown in the table below. The remaining £106 million was the result of underspends by the European Commission's development programmes in previous years. When funds are returned to the UK as a result of such underspends, they are returned to DFID to be re-allocated elsewhere in its own budget. Under the end of year flexibility arrangements, these (along with any other unspent funds) may be carried over into the next year's budget.

Table 1: Additional resources made available to DFID during 1999/2000 - Transfers to and From other Government Departments

Transfers from HM Treasury	Millions
Kosovo - Humanitarian Assistance	£68.0
Heavily Indebted Poor Countries Initiative - Chancellor's Debt Initiative	£33.3
East Timor - Humanitarian Assistance	£3.3
Gibraltar Pensions	£13.1
Transfers to the Foreign and Commonwealth Office
Chevening Scholarships	£(12.0)
Net Total	£105.7

Evidence p. 56

9. The increase in DFID's budget under the CSR represented a projected increase in UK Official Development Assistance (oda) as a proportion of GNP from 0.26 per cent in 1997 to 0.28 per cent in 1999 and 0.30 per cent in 2001. However, despite an additional £212 million being made available to the Department beyond the CSR figures, reported UK expenditure on oda as a proportion of GNP fell from 0.27 per cent in 1998[5] to 0.23 per cent in 1999.[6] The Rt Hon Clare Short MP, Secretary of State for International Development, explained in a letter to the Committee that this was an anomaly resulting from the calculation of oda/GNP figures on a calendar- rather than financial-year basis. For the financial year 1999-2000, Clare Short explained that the oda/GNP ratio would be 0.28 per cent,[7] and assured us that the CSR prediction of an oda/GNP ratio of 0.30 per cent by 2001 would come to fruition, in line with the Government's promised reversal in the decline of development expenditure as a proportion of GNP during the Parliament. The Spending Review included an increase in DFID's budget over the next three years, to £3.6 billion (0.33 per cent of GNP) by 2003/04. We welcome the reversal of the decline in UK official development assistance which has taken place during the past two years, and the Government's announcement in the recent Spending Review of an increase in DFID's budget to £3.6 billion in 2003/04, equivalent to 0.33 per cent of UK GNP.

Multilateral Expenditure

10. Forty-four per cent of DFID's budget for 1999-2000 was channelled through multilateral organisations, including the International Monetary Fund, the World Bank, regional development banks, the United Nations and the European Commission. We have produced several Reports during the course of this Parliament which have considered DFID's policies towards these organisations, and their own development policies and expenditure.[8] We are currently engaged in an inquiry into the effectiveness of EC development assistance, in which we will be discussing in detail this element of DFID's expenditure. In this Report we concentrate our discussion on DFID's bilateral expenditure plans.

Bilateral Country Programme Expenditure

11. In our Report on the 1999 Departmental Report, the first Departmental Report in which bilateral country programme expenditure plans were broken down by country, we commented that we had found the figures extremely useful.[9] We preface our discussion on DFID's bilateral country programme expenditure plans with the comment that, both in our scrutiny of DFID's expenditure in this inquiry and more generally in our work during the course of the past year, we have found the provision of figures for planned bilateral country programmes at a country level in the Departmental Report to be an extremely valuable resource. We congratulate DFID on its openness and transparency in this regard.

12. DFID has been eager to emphasise the importance of flexibility in any development programme, demonstrating an ability to make changes to plans in the light of developments in the circumstances in particular countries.[10] For example in the 2000 Departmental Report DFID stated that "The revised plans for 2000/01 and 2001/02 have been updated to take into account changes in circumstances since last year and revised judgements about how we can best deploy resources to help reduce poverty".[11] We welcome the flexibility of DFID's approach to its bilateral country programmes, and its willingness publicly to discuss changes in its plans for individual countries.

13. In a number of cases, DFID's bilateral country programme expenditure during 1999-2000 was significantly different from the plans for that year provided in the 1999 Departmental Report. There are also examples of changes to the planned bilateral country programme expenditure for the next two years, 2000/01 to 2001/02, when the two Departmental Reports are compared. Table 2, below, shows several countries where this has been the case.

Table 2: Differences in Planned Expenditure Between the 1999 and 2000 Departmental Reports

£ thousands	Report	1999-00 Plans / Outturn	2000-01 Plans	2001-02 Plans
China	1999	£15,000	£20,000	£22,000
	2000	£9,560	£20,000	£25,000
Ethiopia	1999	£12,000	£12,000	£15,250
	2000	£7,000	£6,000	£6,000
Mozambique	1999	£37,500	£38,500	£38,000
	2000	£21,410	£31,000	£38,000
Pakistan	1999	£28,000	£28,000	£28,000
	2000	£21,000	£10,000	£10,000
Rwanda	1999	£15,500	£13,500	£14,000
	2000	£13,000	£25,000	£28,000
Sierra Leone	1999	£10,000	£10,000	£10,000
	2000	£25,100	£25,000	£30,000

Department for International Development, 1999 and 2000 Departmental Reports

14. In the text of the 2000 Departmental Report, DFID provided explanations of the basis for some of the significant revisions of its bilateral country programme plans.[12] We discussed some of the changes in further detail with Sir John Vereker when he appeared before the Committee.[13] He explained that in some cases a reduction in the planned level of assistance reflected a lack of opportunities to spend the planned resources, for example in Mozambique, where, before the floods and resulting humanitarian disaster in February 2000,[14] a reduction in the level of assistance had been agreed between the UK and Mozambique.[15] In Pakistan, the military coup resulted in an immediate and significant decrease in DFID's planned bilateral country programme, and the decreased level of funding had been maintained because of the "difficulty of doing useful things there".[16] In Rwanda, expenditure is planned to increase to more than twice the planned amount. This is the result of the agreement of an Understanding between the two Governments,[17] and progress in securing strong poverty-focussed policies. Sir John Vereker spoke of the "ever increasing intensity of our relationship with Rwanda, an ever increasing confidence that they are doing the right thing, and an ever increasing importance to be attached to getting stability at the heart of the Great Lakes region".[18]

15. We considered DFID's expenditure in China briefly in our Report on the 1999 Departmental Report. We expressed concern at the proposed increase in bilateral country programme expenditure as compensation for the termination of the Aid and Trade Provision, of which China had been (and continues to be) a major recipient. We highlighted the apparent discrepancy between "the published assessment of DFID and the opinion of Amnesty International on the extent to which human rights [were] being successfully addressed as a priority in China",[19] and noted that DFID nevertheless planned a significant increase in the bilateral country programme there.

16. The figures contained in the 2000 Departmental Report indicate that DFID has not been able to deliver the planned increase in development assistance to China. DFID explained in written evidence that "the 1999/2000 expenditure figure reflected slower than expected progress in implementing the first few large projects under our new poverty focussed programme. The increase for 2001/02 reflects: the build-up of the poverty-focussed programme, as support for ATP [Aid and Trade Provision] commitments is wound down; that China has the commitment to poverty eradication necessary to make effective use of external resources; and that tackling poverty effectively in China is key to efforts to meet the international development targets".[20] We note that the planned increase in DFID's bilateral country programme in China was not delivered in 1999/2000. We shall monitor with interest, and in the light of the concerns about human rights expressed in our Report on the 1999 Departmental Report, DFID's future expenditure in China.

Policy Performance Funds

17. The expenditure plans contained within the 2000 Departmental Report include provision for regional and international Policy Performance Funds. A total of £184.2 million has been allocated to the Funds over the period 2000/01 to 2001/02. The plans for these Funds are shown in Table 3, below.

Table 3: Policy Performance Funds

£ thousands	2000 / 01	2001 / 02
Africa Policy Performance Fund	£57,200	£60,000
Asia Policy Performance Fund	£20,000	£32,000
International Policy Performance Fund	£15,000	£30,000
TOTAL	£92,200	£122,000

DFID, 2000 Departmental Report, pp. 131 - 137

18. The Policy Performance Funds have been established by DFID to provide "flexibility to allocate additional funds to countries and institutions where progress on reform enables them to make effective use of our increased funds in pursuit of poverty reduction".[21] Sir John Vereker explained that the regional Funds will be used primarily as a holding instrument for resources allocated to countries according to high or low scenarios, where they are allocated a minimum figure, but if they fulfill certain conditions they may receive more. He said, "the large allocation [to Africa and Asia] reflects very largely the uncertainty involved in planning ahead where countries may or may not be performing well enough to justify the transfer of large amounts of money into their budgets ... we have two or three country strategy papers, most notably in Kenya and Zimbabwe, which have high and low scenarios ... if these countries come back on track, they will get some more [money]. You can aggregate [this potential extra expenditure under the high scenarios] into these figures. We have always, also, wanted to keep back a certain amount of money for planned programme aid when we cannot be absolutely sure when it will flow or how much will be needed".[22] The purpose of the International Policy Performance Fund, however, is less clear.

19. We welcome the introduction of the new Policy Performance Funds for Africa, Asia and the multilateral development institutions. We look forward to information being provided in future Departmental Reports on how and why the Funds have been allocated between country programmes and institutions. We would welcome further information from DFID on the intended purpose of the International Policy Performance Fund.

Cross-Departmental Budgets

20. When we discussed the question of cross-departmental development issues with Sir John Vereker, he told us about a new "cross-cutting inter-departmental budget to support the work we all do on the management of conflict".[23] Some details have been published with the Spending Review. We welcome, and look forward to receiving further details of, the new cross-departmental budget for conflict prevention and post-conflict reconstruction. We recommend that DFID keep us informed of further details of this budget as they become available, including details, for example, of the mechanisms which will be put in place for administering the budget, the resources allocated to the budget, and how the Departments concerned will account for the expenditure to Parliament.

2 HM Government, July 1998, Modern Public Services for Britain: Investing in Reform: Comprehensive Spending Review: New Public Spending Plans 1999-2002 (Session 1997-98, CM 4011) Back

3 Fifth Report from the Committee, Session 1998-99, Department for International Development: 1999 Departmental Report (HC 567) Back

4 Back

5 DFID, December 1999, Statistics on International Development 1994/95 - 1998/99, p. 95 Back

6 DFID, 3 May 2000, Statistical Release, 'Provisional Aid Flows 1999/00 and oda/GNP ratio 1999' Back

7 Not printed. A copy has been placed in the House of Commons Library Back

8 A list of Reports published by the Committee is printed on the inside cover of this Report. Back

9 Fifth Report from the International Development Committee, Session 1998-99, Department for International Development - 1999 Departmental Report (HC 567), para 7 Back

10 For example, see DFID, 2000 Departmental Report, p. 19, para 29 Back

11 DFID, 2000 Departmental Report, p.16 Back

12 See DFID, 2000 Departmental Report, pp. 15-16 Back

13 Qq. 160-68 Back