Examination of witnesses (Questions 800
- 819)
TUESDAY 27 FEBRUARY 2001
THE RT
HON CLARE
SHORT, MR
ROGER WILSON
AND MR
PHIL MASON
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.
Chairman
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!
Chairman
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.
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