Select Committee on International Development Minutes of Evidence

Examination of witnesses (Questions 800 - 819)



  800. The problem is that poor countries are quite often poor because they have poor governments.
  (Clare Short) Yes, the two go together.

  801. Therefore, if you follow inflexibly the objective ambition that you have rightly said gives you great leverage and great capability of getting a coordinated programme into a country, then you are going to exclude yourself from operating in many poor countries.
  (Clare Short) No, I do not think so because your willingness to move forward can help the reformers. If a neighbouring country starts to do better, good examples are infectious as well as bad diseases. You can show that something is working. There is no such thing as a perfect government and there are usually, even in rotten governments, some decent people out there. Given that in rotten systems it is usually where the poor are at their most frail, if you can find parts of the system and you can get inside, you get beyond the NGO support which we would do anyway. If you look for where the poor are, I absolutely agree with you, it comes out as being a poor country and it traps countries in poor government that does not invest in health and education, that does not have effective banking and that does not keep its savings at home and does not attract inward investment. That is why the prize is to try and get to help countries have more effective, modern space in order to get their development. We are always working on that interface and there is a lot of complexity and delicacy in it. What I would ask of the Department is much more to face up to all these dilemmas. It was much easier and less ambitious running very high quality projects on a fairly large scale but outside government systems, but it gave us the Tanzania example, a very, very poor country, 30 donors, more than 1,000 major projects, more than 2,000 aid missions a year all with their own accounting and banking accounts and evaluation systems and a Ministry of Finance that accounted to the donors and did not have time to get on with reforming the country. That is the old model.

  802. That model is also true of Malawi where most of their senior civil servants are out of the country because not only are they on donor led missions but it is the way in which, from the maintenance payments that they are given, they boost their salaries.
  (Mr Wilson) The switch to the budgetary and assistance wide approach has produced new instruments in poor countries. If you look at the techniques they are using these days, they include things like public expenditure reviews where they are looking at the systems they employ for allocating public expenditure and the way they are allocating that expenditure. They are exposing those results to us. There are also things like country financial assessments which look at how the accounting and audit systems work and make recommendations for improvements as well as checks such as procurement reviews and so on. There are also things like expenditure tracking systems and supplementary audits, all systems which governments use to make sure resources are used as policy intends, and we have access to the results.
  (Clare Short) Because they have to account to us for our money, they put in place systems that account to their people for the revenues of the country.

  803. Indeed, if you managed to do that and you can assure the British taxpayer that the money you have given is being used to buy books and medicines for poor people, you will get support from the British civil society as well.
  (Clare Short) The British people are not just buying books and medicines. They are also helping a country set up a health system and a school system that will reach all children. That is better because that British intervention went in. Surely, the taxpayer is going to be proud of that.

  Chairman: I would like to move on to the question of vote buying and corruption within the so-called democratic systems in governments in many of these countries. You made mention of this in your opening statement and we would like to know how those in DFID intend to tackle this.

Mr Rowe

  804. I am the proud possessor of one of the first research fellowships of the Commonwealth Parliamentary Association, United Kingdom Branch. I said I was going to look at the costs of getting elected in three countries, Germany, Kenya and India.
  (Clare Short) You are not including the USA?

  Chairman: It is not in the Commonwealth yet.

Mr Rowe

  805. I wanted to get one European country because one does not want to give the impression that one thinks all is well in the developed countries. I may come to your Department for advice. Have you programmes and projects to address these problems because I think it is the most serious threat to democracy worldwide and I think it is going to become unsustainable unless we get a grip on it. Are there any plans to limit the extent to which United Kingdom companies can contribute to political parties in other countries?
  (Clare Short) I have been going on about this since I came to the Department. We are blessed with strong controls in this country. We need to hang on to them and they are good for our politics. The national cap is strengthening it. When I look at the money you have to raise to be in politics in the USA, I could not operate in that political system. It distorts democracy if the only people who can operate are people who can get access to big funding, even if that is legitimate, if it can ever be legitimate. If money talks in politics, it distorts democracy. I feel very strongly about this. I think particularly in Africa we were all proposing and recommending, quite rightly, a move to multi-party democracy systems. This was the bit that was not attended to. We have tended to proceed, as we said earlier, with much tighter financial management systems, much more transparency and so on, but the question of controlling political expenditure has not been attended to and I have commissioned some work in the Department that is coming soon I think. Following meetings in Benue, I thought: "How would I operate in a country like that?" I feel really sorry for people. You could probably keep it on a human scale but in no time at all it is that expectation that the individual politician will bring money and help and it is going to be unaffordable. You will have to find a source for that money and then money is talking in politics and you will get corruption. I think we have failed to have this discussion out loud, about what controls political systems need to have to protect the politicians from the expectation that they will provide resources and therefore the necessity of going and getting massive resources. In the new Nigeria, no one could question President Obasanjo's commitments on these questions but he has had real difficulty with the Parliament as he has tried to get budgets through, voting all sorts of increased money for themselves. Is it better that they get it legitimately or illegitimately? This is of enormous importance. The whole world has not attended to it properly. We started some work in the Department. I agree with you. It is very important; it has not been done and I am going to start the process of trying to get it out in the open and talk about it publicly, talk about systems of control that would protect those Benue type politicians from being expected to come with cash benefits.
  (Mr Wilson) Although quite a lot of activity has been pursued around political development, including political parties, by people like the Westminster Foundation and so on, good work though that is, it has not really addressed this very central issue. I do not know of work being done in this area. The opportunity is to pursue it in the context of corruption and the increasing awareness of the whole situation.

  806. William Dalrymple has a very interesting comment in his City of Djinns where he says that although the Lok Sabha is full of convicted criminals one of the interesting things about it is that it has facilitated the transfer of power from the Brahmin who ran India for 40 years after independence to a new generation. There are huge numbers of Indian Members of Parliament, the costs of whose elections have to be recouped while they are in office. Otherwise, how on earth are they going to survive? I have great sympathy with them, but it is tremendously important. Have you any plans to prevent, or are you already preventing, British companies for example from contributing to political parties in countries where this would suit them?
  (Clare Short) British companies contributing to political parties? We have only just in our own country said this is not permitted.

  807. Exactly.
  (Clare Short) I think we have not. I do not know whether any companies' codes of conduct deal with this question.
  (Mr Wilson) They might do. The other arena in which this subject is going to be discussed is in the OECD as a follow-up to the Convention on Bribery of Foreign Public Officials, and governments have agreed they want to pursue this question which was too difficult for them to agree on first time round.
  (Clare Short) The bribery of politicians.

  808. I may say it leads from the USA because it was seriously suggested the banana war was heavily assisted—
  (Clare Short) I do not know whether that is true or not but it could be.

  809. I do not either but it is a perfectly credible scenario.
  (Clare Short) The only thing I would say about your point about Dalrymple is, in a culture where money talks in politics, as different castes have been allowed to be active in politics, there is no reason to assume they would only get engaged through corrupt activities. What is the state which has a very low caste leadership but is very criminalised? Bihar. There you have lower caste leadership, which is great in terms of prioritising the needs of the poor, but because it has been criminalised it is not bringing in the benefits. It is a transfer of power to people of lower caste but they are not operating in the interests of the poor people.


  810. Evidence given to us by the British-American Parliamentary Group last night was that it costs £40 million to be elected a senator in the United States of America—
  (Clare Short) Well, that is goodbye to all of us!

  Chairman: Yes! We must not concentrate on that sort of thing, Oona King has to talk about globalisation.

Ms King

  811. I am glad we are not talking about that sort of thing, it makes me have an anxiety attack! If I can move on to what you have set out in the Globalisation White Paper about tackling corruption, you have set out some specific actions for that and almost all of the actions fall within the remit of other government departments because, as we know, the Treasury covers certain aspects like financial crime, the Home Office other areas and the DTI corporate governance. What is DFID's role specifically in the Government's overall anti-corruption strategy? Is DFID taking any measures to improve co-ordination among other government departments tackling corruption?
  (Clare Short) The first thing to say is that it is not just in this sector. If we want to be in favour of development as opposed to administering an aid programme, you have to get the UK Department of Trade and Industry not just thinking about British trading interests but thinking about a world trading system which is fair; you have to get the Treasury in its relationships with the IMF thinking not just about our kind of economy but what the IMF's role is in developing countries; you have to get the DETR, when thinking about international environment agreements, not just to think about our type of economy and our environmental problems but what kind of agreements would be fair, and we have been working on that. The Department was given that enhanced authority to look right across the government system where improvements and changes were needed and we have done that with remarkable co-operation, I would say, from the DTI. They moved from being shocked to bits to think there was anyone in my Department who would go and talk to them about trade to really welcoming the collaboration quite deeply. We have probably got a Department of Trade and Industry which is more development-aware than most others in OECD countries. This is not new. It is one of the things which has moved Britain forward. In fact Don Johnston, who is the Secretary General of the OECD, at the Conference yesterday said, "Look at this White Paper, 12 departments in the Government are involved in making the commitments which make Britain look across the world at what needs to be done." He is very keen to do that in the OECD, to get development out of the charity box, as I would call it, into the mainstream of political, financial and economic systems in the world, and we need that to move forward. We have been working in that way since we were established as a department. It is counter-cultural for bureaucracies to have people like us popping up and interfering but it has gone better than we would have hoped. Even the Scandinavian development ministries are becoming jealous of the way the UK Government's effort is going across departments. That is good and we must keep going. Similarly with corruption. If we can only do what we can do in developing countries, then what about money laundering and what about the bribery of foreign officials abroad, which is crucial to tightening all this up? That is the push part which is coming from our kind of countries. Phil's appointment was to take on this job which the old ODA had never done. Quite reasonably, the Treasury is thinking of our financial system not being endangered by money laundering and thinking of big criminality, massive drug smuggling and the laundering of big amounts of money and offshore banking and that sort of dirtiness which can endanger financial systems. Quite rightly, it is their job to look at international systems, and it is one of the lessons of the Asia crisis, we are all vulnerable now if parts of the world system are unreliable. But our job is to say, "Just a minute, there are all these countries which do not put a lot of money through the international systems but they matter a lot, they are poor countries, if their politicians are plundering them they are bringing money in, can we please include in our consideration these countries and these needs?" Similarly, as I have said, if you look at the figures for the Home Office and requests for mutual legal assistance, there are thousands and they are overwhelmingly from the EU, so the little poor countries which have not got so many lawyers to jump into the system to make it all work, get marginalised and get not much help. So our job is to say, "Just a minute, there are these countries, they need to be included in your considerations", and that is what our role is in this and other fields. That is what Phil's job is.
  (Mr Mason) Perhaps I could give two examples. One the Secretary of State has already mentioned, trying to improve access to the mutual legal assistance mechanism. We know that many countries are either bemused or do not have the capacity to present the request. We want to see how the development programme can help countries in country to get their requests through. We have tremendous relations now with the Home Office and the Judicial Co-operation Unit and are building that rapport up because both parts of Government need to work together.
  (Clare Short) It came from scratch on the back of Pakistan not getting any help and getting more and more fed up. We only got in—when?
  (Mr Mason)—this last year, this last twelve months.
  (Clare Short) It came out of the aggravation about Pakistan and in the end we said, "What can be done?" Now we have a relationship. I would say this about development, very profoundly, you think nobody cares and that is why the international system does not move forward, but all bureaucracies and all institutions are full of inertia and no one ever asks them. The DTI never thought it was their job to think about developing countries. In fact I think they probably have a skip in their step when they go home and tell their kids what they do for a living. When we said to Treasury officials, "It is not just debt relief, writing-off debt, that has happened a hundred times before, commercial debt is endlessly written-off, can we not lever-in some policy which really gets better economic and social policy for the poor", at first they were resistant and thought, "Who are these people telling us what to do? We are the Treasury, we are very important", but then when they understood what we were saying, they liked it. So there is a real lesson there. People are not always aware they are not helping. No one ever told them they had anything to do with developing countries or development, but when you can get your foot in the door and start talking, we get responsiveness.
  (Mr Mason) The second example I would give is the forthcoming Proceeds of Crime Bill, which was launched in the Queen's Speech, and that has a whole raft of activities which are relevant to improving asset recovery of the proceeds of crime. We want to look at how, for example, the National Confiscation Agency, when it is set up, may have a capacity to be helping overseas governments. Two years ago that thought might not have been on the agenda, now it will be on the agenda and, again, is part of the process of ensuring that we can play a role in improving the recovery of assets that are plundered from developing countries.
  (Clare Short) The logic here with big drug dealers, big criminals is "let's take the power to confiscate", which is a perfectly sensible thing to do to prevent crime and then we come along and say, "What about developing countries? Can we confiscate and hand it back? Can we use this mechanism as a simpler way, rather than endless litigation, for developing countries to be able to get their resource back?" If Phil Mason was not there nobody would have thought of the question.

  812. So to summarise what you are saying would it be correct to say that, loosely speaking, DFID's role is not in a specific area but DFID's role is to mainstream anti-corruption drives throughout the rest of government? Is that what you are saying?
  (Clare Short) No, no, no. DFID's role is to ensure that the interests of developing countries are included in all Britain's systems for dealing with corruption.

  813. Is it wrong to call that mainstream?
  (Clare Short) Mainstreaming the development aspect but Britain will have systems to deal with corruption, of course, any country like this with an economy as big as this must do, but without us no-one thinks of thinking about where developing countries fit into it. Our job is to make sure in the mainstream of Britain's systems that developing countries are considered and included.

  814. Can I ask a question about the OECD Convention that you mentioned earlier. What has DFID's role been in pushing for revision of the Treaty? Could you let us know when we can expect to see legislation laid before the House?
  (Clare Short) The advice of Home Office officials was (and I think remains) that British law complies with the Convention. My view and the view of every serious lawyer I have ever met, the peer review process, says it does not, but the official advice to Home Office Ministers is that it does, which is interesting. But importantly, there was a review. I made a speech and I do not know if you remember this because you worked on it with me. It was about human rights and we put in "... and we have got law that deals with money laundering." I really mind having said that so I feel this personal thing about getting this thing right. That was our advice at the time, that British law complied so we could sign up to the Convention without any change in the law. But then Transparency International and any serious lawyers operating in the United Kingdom said this is not case and as a Department we became very keen on supporting the recognition that our law did not comply. I do not know if I am supposed to say this out loud but I am anyway! There was a working party set up in the Home Office which Roger was on and I asked him to keep in close touch with me and he was heroically fighting a losing battle. Just as one of the benefits of going through the lobbies is to see your colleagues, one of the benefits of Cabinet meetings is to see your colleagues. We did some work and it was strongly the view of our Department, and I am sure there were others—but against the advice of officials and I do not think it is improper to say that because you have had officials in front of you—that existing UK law did not comply. We ended up with a commitment to new law and differences of view about whether existing United Kingdom law complied. You might say that does not matter except it is kind of strange. So we have got a commitment to legislate to strengthen the law and when that will happen is a question for future bids on future Queen's Speeches when we see the product of that event that might take place and cause us not to meet again in the near future, and it will be a question of political priority, and I would have thought the Report of your Committee's inquiry could help to raise the sense of priority. That is not decided yet but it is a political question.

  815. Is the delay in this implementation doing our reputation any damage with the countries that we work with in trying to tackle corruption?
  (Clare Short) Again this is my own personal view, that we have a very good record as a country and the view we are taking on the OECD Convention is damaging our reputation and I really regret it because our commitment to have new legislation means that we are going to do the right thing, so why do we not do it more elegantly and say we know our existing law is too weak? I am straying, Chairman, you really should help me!

  Mr Robathan: Say more, go on, be more outspoken!


  816. I think you are being extremely honest and we are grateful to you for being so because it coincides with the evidence this Committee has already received from other sources. Thank you.
  (Clare Short) But I do not want to be behaving improperly towards Home Office officials. It is perfectly proper to talk openly about views of departments, but I am worried if I have strayed in attributing to officials who cannot answer themselves a view, but I think they came and appeared before you.

  817. They came and I think their view is moving.
  (Clare Short) Your labours might move them even further.

  Ms King: You will be proved right eventually.

  Chairman: There are huge problems of co-ordination across the very many departments involved in this. We are going to talk to Jack Straw tomorrow so we will find out. Mr Colman is going to ask about the Egmont Group.

Mr Colman

  818. Before I do that may I say I passed to your officials yesterday a copy of the Ten-Minute Rule Bill on this very subject so hopefully you will be able to look at that, Minister, and there is our meeting on joined-up government principle with Lord Bassam, the Home Office Minister, to take him through the same Bill. That will be a Ten-Minute Rule Bill coming forward on 14 March. It has been drawn up with the help of Transparency International and therefore I think is worth your looking at it and being able to comment on it as a way forward. As the Chair said, my last two questions are about the particular help that DFID has given on money laundering. I think you have largely answered the first one but in terms of the Egmont Group we were told by NCIS, the National Criminal Intelligence Service, when they came to give evidence to us that the crucial grouping of organisation which is the Egmont Group, an international group of financial intelligence units, was working to provide support to their respective national anti-money laundering programmes. What has DFID done to help a number of developing countries to perhaps become members of Egmont and by doing so to build capacity within developing countries?
  (Clare Short) I personally have never heard of Egmont so I must call on my officials. There are international codes on financial transparency where we are helping to fund regional groupings so regions can help with their own systems, but I have not heard of Egmont.
  (Mr Mason) Egmont is very much the co-ordination of criminal intelligence systems and I think we as a development agency can very much help with the broader Financial Action Task Force Regime (FATF) which is part of the OECD—
  (Clare Short)—Which we are doing.
  (Mr Mason)—Which we are very supportive of, although obviously the Treasury and Foreign Office lead on those. We have an interest in supporting the principle of the FATF mechanism and all the peer review processes that go on to test the money-laundering regimes in other areas. We have supported a rudimentary FATF grouping in Eastern and Southern Africa, for example, which was launched in 1999.
  (Clare Short) I know all about that. Where does Egmont fit in?
  (Mr Mason) This is national criminal intelligence systems.
  (Clare Short) Which should be fitted into financial systems and would flow on but then criminal intelligence would be shared.
  (Mr Mason) Banking systems and the evolution of banking control as distinct from criminal intelligence systems.
  (Clare Short) Have we any direct knowledge of this Egmont business?
  (Mr Mason) Not to date.

  819. You may wish to have a note on that from your officials. I do think this is an important area particularly from the point of view of the second point—
  (Clare Short) If I may say, criminal intelligence units will not share intelligence with leaky weak systems. It is the "chicken and egg" problem. To get better systems will make it more likely that criminal intelligence will be shared.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 5 April 2001