Examination of Witnesses (Questions 20
TUESDAY 31 OCTOBER 2000
20. The other end of that same area is, of course,
the area where you give money directly to a country such as Malawi,
which is in the news at the moment. How can you be certain that
the governments are not using the money corruptly, by fungibility,
for example? If you give money to Malawi for education programmes
or health programmes, this relieves them of putting money into
those areas, and then they go and buy 37 Mercedes Benz for ministerial
transportation at a huge cost. That is a form of corruption, surely?
You must be as concerned about it as I am.
(Mr Manning) This is worth quite a bit of reflection.
We should be equally concerned, in a way, if the Malawi Government
bought a series of inappropriate things but if we were not providing
any kind of budget support at all. If we were just providing narrowly
based projects, let us say, to provide direct assistance to poor
Malawians in health and education, I do not think we should be
satisfied if we were doing that in an area where the government
of the country was systematically allocating its resources the
wrong way. However, although you can argue that there is some
accountability point in providing programme assistance rather
than project assistance, I do not think that really reflects the
reality. The reality of the situation is that development will
only take place positively in countries if their governments are
taking substantive decisions on resource allocationsone
of the most important set of decisions that any developing country
can take when resources are so constrained. It follows from this
that whatever the sort of assistance one is providing, if you
are working in an aid dependent country donors should be concerned
about the quality of decision making in that country generally
and we are working to try and strengthen that. There are now international
processes in place which give us more of a lead into this than
we have had in the past. For example, we are very strongly promoting
in Africa the concept of sound medium-term expenditure frameworks
in countries where we are operating, which provide a degree of
transparency and predictability to the level of budget support
to key sectors. We are working very closely with the international
institutions and other donors and countries concerned, to put
in place these poverty reduction strategies, which have been called
for under HIPC. For all these things, the quality of day-by-day
government decision making is absolutely fundamental. So we have
to satisfy ourselves, at the end of the day, if we are going to
provide any significant assistance in any country, that there
is a reasonable basis for doing so. I do not think that we should
over-dramatise one particular procurement decision, unwelcome
though it may be, but we have to look very carefully at the overall
set of decisions that any of our partner governments are taking,
as we did in the Kenya case that I brought to your attention,
and take decisions ourselves and with our international partners
as to whether that country is, broadly speaking, following reasonable
strategies and taking sensible government decisions. I will give
you another example. There was a lot of concern in the donor community
when the Bangladesh Government invested in a significant number
of MIG fighter planes, which was not arguably the most important
single investment that the Bangladesh Government could make. We
have not made any secret of our concern over that decision. One
can look at many of our partner governments and pick out cases
where they have taken procurement decisions, which we would certainly
not wish to support ourselves, but we have to take an overall
judgment of the effectiveness of these in considering the levels
of future assistance. I welcome the fact that our High Commissioner
in Lilongwe made a significant point of this to his interlocutors
in Malawi. I am very pleased he has done that. That is what we
should be doing, as and when we see decisions which we consider
to be inappropriate
21. You see, Mr Manning, all of us around this
table have got to go and justify aid being given to Malawi, and
down at our constituency level and on the doorsteps they will
ask what are we doing supporting a government which is prepared
to buy expensive motor cars, which even our own Ministers do not
afford in Britain. We do not afford such expensive motor cars
for our Ministers or our officials, yet we know that the Malawian
people are starving to death in the fields and farms of Malawi;
that they are stricken with AIDS and serious over-population.
I think it is extremely difficult to justify, except in the sort
of terms you have said, but by the time we begin those explanations
our constituents have stopped listening. So we have to be, do
we not, much more dramatic than simply making a diplomatic representation
to the Government in Malawi?
(Mr Manning) I am certainly in no way condoning the
particular procurement decision that the Government of Malawi
took. It does seem to me as inappropriate as it seems to you.
I am sure this is why the High Commissioner spoke as he very reasonably
did. We are working with the Malawi Government to try and strengthen
civil society; to try and work against corrupt practices; although
there is no suggestion that any corrupt practice was involved
in this decision. It appears to be a bad piece of government decision
making, as I read it. I do not think that anybody is suggesting
that anybody has paid anybody off as a result of this. It is a
matter of poor procurement by one of our key partner countries
in Africa. As in all such cases, we will have a dialogue with
the Government concerned and this will be one of the many things
we factor into future decisions. I do not think that the Committee
would seriously want us to up-sticks and leave Malawi because
of one procurement decision of this kind. Clearly, if we saw a
pattern of inappropriate decision making in Malawi or any other
country, we would draw very serious consequences for that. You
will again have seen the phrase in the Kenyan paper, that we have
been quite ready to talk to African governments in terms of higher
and lower case scenarios, depending on how effectively they operate.
That applies to the Malawis as it applies to anyone else.
Chairman: Maybe we will consider that
as a form of corruption. It is certainly one that hits the headlines.
I think we have to hurry on. We need to give shorter questions
and if we could plead for shorter answers we will get through
our agenda this morning.
22. I wanted to ask if Mr Manning had seen the
US General Accounting Office's report, that the World Bank management
has control but strong challenges remain. Some of our evidence
has suggestedTake two examples. The Bank has failed to
carry out more than rudimentary assessments for the procurement
and financial management systems of its top ten borrowers, who
have collectively received 62 per cent of the Bank's financing
in 1999. Then other studies reveal that auditing of World Bank
projects often amount to looking at the books without checking
whether the records match reality. I share your enthusiasm for
the World Bank's improving stance but there is a lot further to
go than your remarks suggested.
(Mr Manning) This is a never ending story. I will
certainly look more carefully at the GAO study to see what we
can take from it.
Chairman: Tony Worthington, could we
look at the global action to combat corruption with the international
financial institutions and development agencies.
23. Could I ask, first of all, if you can point
to any success stories where corruption is significantly decreased
because of national donor initiatives.
(Mr Manning) I think we would take a fairly positive
view of progress for example, in Uganda, where there has been
certainly strong top-level attention to the issue. I am not going
to argue for a moment that any country, including the United Kingdom,
is free from corruption. As I say, it is a thing we have to work
on all the time. There is evidence in Uganda that Ministers have
been sacked and various decisions have been taken, which have
tended to improve public accountability. Another very important
example is in India where I do believe that certain organisations
have been quite effective in holding government to account at
local level and the more progressive governments are beginning
to see the value of this. Certainly the Government of Andhra Pradesh
for example, I am told that if you go to a project in the field,
it is stated clearly what the villagers should be receiving. The
Government is saying, "This is what you should be getting
under this project," and giving the villagers some opportunity
to raise points on that. I am sure we will see most programmes,
where we have an engaged civil society, being serious about these
24. Taking that further, it seems to me the
issue of corruption has been coming up in the national agenda
and the international agenda in terms of development. How have
you changed DFID's policy? What is it that you are funding? What
do you think is successful? What further developments would you
like to see in terms of increasing the profile of anti-corruption
measures in development budgets?
(Mr Manning) I am particularly pleased with the serious
collaboration between us and the World Bank Institute, which has
some quite interesting programmes for bringing together countries
where there is some commitment from the top for doing something
about corruption. We have identified 14 countries where we are
working with the World Bank Institute. We have also developed
good collaboration in this area, particularly with the Governments
of Germany, Norway and the Netherlands. This has already led to
some collaborative work in one or two countries. It is now to
lead to the setting up of a resource centre, which will support
this activity. What we are seeing nowwhich we would not
have seen ten years agois a much greater willingness to
engage with society across the board in these areas. We have realised
increasingly in developing countries that we have to work with
governments. We have to look beyond governments to help energise
civil society, and to work with those who are concerned about
these issues, with government and without.
25. Can you elaborate on that a little bit?
What are the major elements in a civil society which you think
we have to engage in and how would we fund them? How would we
(Mr Manning) I am pleased to say that in most countries
there are groups concerned about these issues. One has to pay
tribute to Transparency International, who have been successful
in engaging their southern partners and helping to develop transparency
chapters in many countries. We are providing assistance to Transparency
International, not least for their new Report on corruption, which
will be coming out next year for the first time. In most countries
there are some civil societies, whether it is normal NGOs or other
associations, who are interested in these areas. There is scope
for providing modest financial support for some of their activities.
26. How far are you going to go with this? As
we go around it seems to me that a free press and a free media
is crucial, that the judicial system is crucial, that the police
are crucial, audit systems are crucial, that the tax revenue systems
are crucial. Are we not getting sucked further and further into
areas that are directly about governance in those particular countries?
(Mr Manning) In many ways that is one of the more
important things we can potentially do. One has to do it in a
very sensitive way. We can only work in such areas where there
is a genuine commitment to reform and where there is something
we can make a contribution to. To give you an example, the Crown
Agents work on customs reform in Mozambique. The Government decided
that their Customs Service was so corrupt it had to be done away
with, and started from scratch. We funded the Crown Agents over
a number of years to put in a brand-new Customs Service in Mozambique,
which I believe is delivering very good results. That was only
possible because the Government of Mozambique took a rather dramatic
27. Do you have figures on our expenditure on
anti-corruption measures? I know how difficult that must be, because
you are unlikely to be funding an anti-corruption initiative or
you will be calling it other things.
(Mr Manning) In the last three years, on average,
we think we have spent about £90 million a year of our bilateral
programme, which is about one billion, on, broadly speaking, projects
on better governance. Many of those would be relevant to corruption,
but not all those. We do not have a further breakdown. I would
suspect that some of our most valuable anti-corruption work is
actually inexpensive, providing the right expertise at the right
time. I do not think looking at it in terms of are we doing well
because we spent money on it, is necessarily the best way of assessing
the success. That is the general order of magnitude.
28. In our travels around, almost all countries
now seem to have anti-corruption bodies of one kind or another.
You mentioned Uganda. Intriguingly they named a minister for Ethics
and Integritya nightmare title. In some places they seem
to have conviction and in other places they may be part of the
system that you are trying to get rid of. Can you point to good
examples of where the anti-corruption measures with our assistance
have been working? You mentioned Uganda. Can you think of any
other African countries? We were in Zambia and Malawi, for example,
and I think, rather oddly, the Malawian system seemed more successful
to us than the Zambian one. Can you reflect a bit more on those?
(Mr Manning) Given what the Chairman said about time,
would it be better if I were to send the Committee a letter about
29. It would be. We need to get into those areas
of detail. The final area I would like to cover at the moment
isit is so striking how many donors there are and how many
people are coming into countries from different angleshave
you seen examples of good collaborative activity on the ground
in countries where corruption is seen to be a problem?
(Mr Manning) I am pleased to say this is increasingly
beginning to happen. It is also true to say that some bilateral
donors are a bit cautious about getting too engaged in what you
have already indicated are very sensitive areas. I would highlight
the collaboration between ourselves and the Tanzanian health sector,
where part of the work going on is to look at procurement and
accountability issues within the health sector, which is an essential
precursor to joint financing of the sector programming.
Chairman: I think we should move on to
"Implementing the OECD Convention".
30. Perhaps I can widen it out to take account
of this great panel before us. To remind everyone, it is the OECD
Convention on Combatting Bribery of Foreign Public Officials in
International Business Transactions we are talking about, signed
by the United Kingdom in 1997 and ratified in 1998. We were peer-reviewed
by France and the Netherlands earlier this year and they were
extremely critical of the United Kingdom Government failing to
address all aspects of the Convention. They were unable to determine
whether United Kingdom laws were in compliance. The Review, and
this is reported, stated, "There is no explicit provision
criminalising bribery of foreign public officials. There was a
lack of legislation specifically prohibiting bribery of foreign
officials. The United Kingdom relied on common law, which does
not expressly mention bribery of foreign officials. There was
insufficient case law to support the United Kingdom's interpretation
of the 1906 Prevention of Corruption Act and there is potential
for this Act to clash with the European Convention on Human Rights".
That is plainly quite an indictment against the Government. Before
I ask whether you think the criticisms are justified, can I ask
two factual questions. How many convictions, prosecutions or investigations
have there been under the anti-corruption laws in the United Kingdom?
Secondly, how many of these relate to the bribery of foreign public
officials and how many to the bribery of United Kingdom public
officials? The factual answers first, please.
(Dr Drage) If I may, I will attempt to answer those
questions from Mr Colman. As you know, there are three United
Kingdom statutes which are most relevant and go back very many
years. I cannot give you the figures going all of the way back
for convictions within the United Kingdom on those. The Minister
for Trade did answer a Parliamentary question in June this year
which gave the convictions under those Acts for people within
the United Kingdom from 1993 to 1997.
I now also have the figures from 1998 and 1999 from the Home
Office statistics. It is probably easiest if I make sure the Clerk
has copies of those.
There are certainly prosecutions and convictions of people for
corruption within the United Kingdom. There is one case that I
know of, back in 1989, which was certainly a successful prosecution
for a foreign public official in the United Kingdom called R.
v. Raud. I can give a copy of the details of that case to the
Clerk of the Committee.
The United Kingdom's view was that although our law was not
explicit in the way those in Roman law countries would expect,
we took the view when we signed the Convention that United Kingdom
law did permit us to prosecute foreign public officials in the
United Kingdom for these types of acts. There was one piece of
case law to support us on that. I can say that that Government
would not have signed the Convention if we did not believe we
already complied with it. What the Convention does not require
us to do in the text of the law is to apply the corruption tenets
of the Convention outside the United Kingdom. It clearly would
like, and it is the Government's intention when new legislation
is enacted, as you will have seen from the Home Office White Paper,
that when the legislation is brought before the House it will
include a clause which would allow the United Kingdom Government
to extend extra-territoriality to the offence of bribery in the
same way that there is already extra-territoriality for issues
like murder and for fraud. Extra-territoriality is so rare in
United Kingdom law at present that the Government attaches sufficient
importance to the area of bribery to say that when the legislation
is revised and updatedwe hope it will not be longit
will include an extraterritoriality clause within that legislation.
31. Would you agree that it was a pity, given
the endorsement of Transparency International, which was given
by Mr Manning in terms of being an independent organisation taking
a view on anti-corruption measures in other countries, that when
they approached the Government, the DTI and the Home Office, to
point out the inadequacy of the current situation, the Government
again and again in those Departments refused to accept their view
prior to the peer-review done by France and the Netherlands?
(Dr Drage) Our legal advice at the time was that the
law and case law did support the United Kingdom's view and we
were already compliant with the Convention. If the Government
had not been aware of that we would not have signed the Convention.
32. Clearly that view has changed following
(Dr Drage) It is clear that the United Kingdom law
is not sufficiently clear and it was also defective in the fact
that it did not give extra-territorial powers for the Government
to deal with corruption that occurred outside of the United Kingdom,
which is something that the Convention encourages, but does not
require signatory States to do.
33. Does it show, Dr Drage, that it is not just
on legal advice you should be relying, you should be taking action
under the law? The fact that you have only prosecuted, I think,
once under the 1906 law indicates that the Department of Trade
and Industry is either reluctant or insufficiently staffed to
actually take action under the law. Even if we get a load of new
law, if you do not take action nothing is going to happen, is
(Dr Drage) The important point is, if there is evidence,
then evidence needs to go the police and the police need to take
a view as to whether there is a case and that it is justiciable
at the time.
34. Do you think we need a better system than
going to the police? Obviously the police advice is that you bring
(Dr Drage) Under general United Kingdom law the police
are always the people who take a decision on the evidence, along
with the CPS.
35. What I am suggesting is that this is inadequate.
(Dr Drage) I see no reason why bribery, even under
a new law, should be treated any differently from a range of other
36. You mentioned about a potential Bill that
would be coming forward in the Queen's Speech. Would you agree
that it would be possible to have a very short Bill which would
deal with the matters which we have criticised under the peer-review
process, which would be separate from the wider issues that were
discussed in the White Paper, "Raising Standards and Upholding
Integrity, Prevention of Corruption", which is very broad
and covers a whole range of areas which are outside this inquiry?
Given that the noble Baroness Chalker of Wallasey has stated clearly
to the Government that there would be Conservative supportand
I believe that is on the basis of support from William Hague for
a short Bill to deal with this problem, and I understand there
is Liberal Democratic backing for such a short Billdo you
think it would be a way forward to separate out this issue in
terms of corruption on foreign officials from the other areas
that are covered in the White Paper?
(Dr Drage) First of all, can I say, I cannot possibly
comment on the Queen's Speech. I cannot necessarily agree with
you on that. I know it is an issue. Transparency International
have helped prepare a short Bill which is designed to implement
the OECD Convention. There is also a Council of Europe Convention
on a very similar topic. One of the aims, as you will have seen
from the Home Office White Paper, is to implement that Convention
as well as a number of other areas we believe are closely related.
It remains the Government's intention to try and bring forward
a Bill as soon as possible and to implement it in a way that is
more comprehensible to other signatories, both the OECD Convention
on Bribery and the Council of Europe Convention, and other areas
of the law which are closely related to that. The view very much
at present is that just to extract from that group the OECD Convention
on Bribery and take it forward would not produce a significantly
shorter Bill and would not reduce the amount of Parliamentary
time required. Consequently, beyond that, were we to do a short
Bill it might make it more difficult to do the other legislation
in terms of pressure and Parliamentary time. The Government is
continuing to have a Bill that puts together implementing the
Bribery Convention with the Council of Europe and the other areas
covered by the Home Office White Paper, on which we have consulted.
I believe the consultation period finished at the end of October.
37. We may wish to invite the Home Secretary
and the Secretary of State for Trade and Industry after the Queen's
Speech in terms of this issue. Mr Smith, I understand it, was
not mentioned in the peer-review, but is it still the situation
that the Tax Inspector's handbook allows, in fact, bribery to
be set against pre-tax profits? Is there any intention, in fact,
to examine this to see if that could be changed without the need
for primary legislation in the coming months?
(Mr Smith) I have to confess that that is an area
I am not particularly expert in. My understanding is that a criminal
offence is not something that can be offset against your tax liability.
If there was a commission which was, in the eyes of the Revenue,
a reasonable commission, commensurate with the size of the contract,
that could be offset. That is sometimes portrayed as saying bribery
is tax deductable. As far as I am aware, that is not the position,
that bribery or any other criminal act is tax deductible. I can
clarify that in writing.
38. Perhaps you can. Given that the United Kingdom
was in the dock, can I ask in terms of any of the other peer-reviews
that went on, was any other country within the OECD equally criticised?
(Dr Drage) I am informed that all countries were criticised,
but to varying degrees. We were criticised the most severely.
39. It would useful to know the situation in
terms of other countries.
(Ms Harris) I think the issue with the International Convention
is that one is dealing on so many different levels. Negotiations
are currently taking place in Vienna, leading to an International
Organised Crime Convention which will be signed in Palermo in
December, and indicate that countries involved are coming from
so many different areas it is very difficult to make them of any
greater or broader impact than the very specific nature we are
dealing with in the Transnational Organised Crime Convention.
There was an EU common position on a number of aspects in the
Transnational Organised Crime Convention, there was also a G7
position and there was very much an "other countries"
position, who were not either part of the EU or the G7 or, indeed,
any of the developed world. I think it is very difficult to make
everyone go at the same pace in these Conventions as we would
like. Indeed, standards and legislative systems are at very different
levels. We mentioned the OECD Convention, you mentioned the Council
of Europe, the Inter-American Convention against Corruption and
the UN International Convention Against Transnational Organised
Crime. Is it possible, do you think, to draw together all of the
regional agreements under a single UN Convention? What do you
believe is the way forward to ensure that participating States
within the UN can back up the rhetoric of these Conventions and
see some real action on the ground?
9 See Evidence pp. 41-4. Back
H.C. Deb, 20 June 2000, cc. 143-4W. Back
See Evidence pp. 34-5. Back
Not printed. Back
See Evidence pp. 32-3. Back
See Evidence p. 33. Back