Reports on
Government Policy, Expenditure and Administration
THE DEVELOPMENT
WHITE PAPER [SECOND REPORT, SESSION 1997-98, THE DEVELOPMENT WHITE
PAPER]
23. The Committee's consideration of the Development
White Paper proved to be the seedbed for much of the Committee's
further work in this Parliament. Amongst the issues raised to
which we later returned were reform of the EC development programme,
conflict prevention, women and development, clear and published
targets for DFID bilateral programmes, the future of CDC, and
corruption. The response of the Government was positive and constructive,
pointing to various initiatives planned by DFID to meet the points
we raised. Many of these were discussed in greater detail by the
Committee in later inquiries.
24. A few particular points are worth noting. First,
the Report emphasised the cross-cutting nature of development
work and recommended that the Secretary of State be a member of
the Cabinet Committee on Defence and Overseas Policy. This recommendation
has not been accepted though the Secretary of State is invited
to attend all relevant meetings of that Cabinet Committee. To
a similar end, the Committee recommended that the departmental
reports of relevant government departments other than DFID include
a section on development.[10]
This recommendation was accepted by the Government. However, in
the Committee's Fifth Report, Session 1998-99, we noted that,
despite our past recommendation, these departmental reports gave
no evidence of the mainstreaming of developmental issues.[11]
The Government accepted that there could be greater coverage of
development matters in departmental reports other than DFID's[12]
and we were pleased to note significant improvements in the departmental
reports which were produced for the following year (2000).
25. Secondly, the Committee also recommended that
the Government set itself a target for the increase in UK official
development assistance (ODA) as a percentage of GNP. The United
Kingdom is, in principle, committed to 0.7 per cent but by 1997
the actual percentage was 0.27 per cent. We recommended that the
Government commit itself to expenditure amounting to at least
0.37 per cent of GNP (then the average for EU Member States) by
the end of the Parliament. The Government agreed on the need to
increase ODA expenditure but ignored the recommendation of a 0.37
per cent commitment, citing instead the forthcoming Comprehensive
Spending Review.[13]
Through the Comprehensive Spending Review and the subsequent Spending
Review 2000, the Government is now committed to 0.33 per cent
by 2003-04. This falls short of our original recommendation. We
have nevertheless welcomed the significant progress which is being
made towards the 0.7 per cent target.[14]
26. Thirdly, the Committee expressed concern about
the plans for the future of CDC. The Government agreed to prepare
a separate paper for the Committee on their proposals and this
paper was the basis for the Committee's inquiry into CDC later
in that session.
DEPARTMENTAL
REPORTS [FIFTH REPORT, SESSION 1997-98, DEPARTMENT FOR INTERNATIONAL
DEVELOPMENT: 1998 DEPARTMENTAL REPORT; FIFTH REPORT, SESSION 1998-99,
DEPARTMENT FOR INTERNATIONAL DEVELOPMENT: 1999 DEPARTMENTAL REPORT;
EIGHTH REPORT, SESSION 1999-2000, DEPARTMENT FOR INTERNATIONAL
DEVELOPMENT: 2000 DEPARTMENTAL REPORT]
27. The Committee has looked in detail at the last
three DFID departmental reports. In its Report on the 1998 Departmental
Report the Committee concentrated on the presentation of information
by DFID, concluding that it did not contain enough information
for an accurate assessment of the Department's activities and
performance.[15]
In particular, the Report criticised the failure to provide expenditure
information over a three year period on a country by country basis,
the difficulty of using the international development targets
in establishing departmental targets and performance measures,
and the lack of information on evaluations of DFID's work. In
its evidence at the time of the inquiry, the Department claimed
that it would be difficult and misleading to present information
in the detailed way requested. However, in the Government response,
DFID promised to provide much more detailed financial information
in future departmental reports, including planned bilateral country
expenditure, remaining commitments under the Aid and Trade Provision,
greater breakdown of multilateral expenditure and contributions
to multilateral agencies. Subsequent departmental reports have
seen an immense improvement in the detail and quality of financial
information presented to Parliament.
28. The Report on the 1999 Departmental Report examined
in more detail DFID's bilateral country strategies, and how DFID
decides to increase or decrease over time its expenditure in particular
countries. The Report raised questions about how human rights
and good governance were taken into account in DFID's planning
in China and Pakistan.[16]
The Committee was unhappy with the Government response on this
issue and therefore organised a further evidence session with
the Secretary of State for International Development where the
human rights issues involved were explored in further detail.[17]
The Government response also ignored one recommendation concerning
notification to the Committee of planned replenishment of Regional
Development Bank funds.[18]
The Chairman wrote a letter to the Secretary of State bringing
this to her attention and in her reply she agreed that the Department
would notify the Committee as requested.
29. The Report on the 1999 Departmental Report also
considered staffing issues such as the numbers of women and ethnic
minority staff in the Department, and the use of local consultants
by DFID in developing countries.
30. The Report on the 2000 Departmental Report returned
to an issue raised in the Report on the 1999 Departmental Report,
that of DFID's performance targets. We argued again, and in more
detail, that DFID's performance targets did not provide a meaningful
measure of DFID's success and efficiency in the spending of taxpayers'
money. We recommended targets which bore a much closer relationship
to outcomes as assessed in project completion reports and evaluations.
In the Government response DFID accepted the inadequacy of the
performance targets but pointed to the recently published Public
Service Agreement for 2001-04 (Cm. 4808) which "is along
the lines recommended by the Committee".[19]
We do consider the new PSA targets to be an improvement on the
previous targets but we are not convinced that all our concerns
have been met and we will return to this matter in the future.
31. During the inquiry into the 2000 Departmental
Report, the Committee visited the DFID office in Glasgow —
Abercrombie House — taking formal evidence there from DFID
officials. The main issue discussed was DFID procurement practice
and use of consultants. The Report recommended improvements in
the selection of contractors to ensure fairness and transparency;
greater use of local consultants; and changes to the Department's
complaints procedure for those unhappy with procurement decisions.
The Government responded positively to the Committee's visit and
to its subsequent recommendations. The Department also announced
a review of their contracting and procurement procedures during
the course of the Committee's inquiry. We will continue to take
an interest in how DFID exercises its considerable market power
in developmental procurement and contracting.
THE COMMONWEALTH
DEVELOPMENT CORPORATION [EIGHTH REPORT, SESSION 1997-98, THE FUTURE
OF THE COMMONWEALTH DEVELOPMENT CORPORATION; SECOND REPORT, SESSION
1998-99, THE PROVISIONS OF THE COMMONWEALTH DEVELOPMENT CORPORATION
BILL [LORDS]]
32. In its Development White Paper the Government
announced plans to turn the Commonwealth Development Corporation
(CDC) into a public/private partnership. The Commonwealth Development
Corporation was a statutory corporation investing in developing
countries, able to draw on highly concessional government loans.
In response to initial questions raised in the Committee's Report
on the Development White Paper,[20]
the Government prepared a paper for the Committee giving details
of its PPP proposals. The Committee's Eighth Report, Session 1997-98,
raised concerns about the recent returns of CDC, the need for
CDC to establish a track record in the successful management of
equity investments, the importance of maintaining CDC's developmental
role, and the need to ensure the accountability of CDC in the
future.
33. In November 1998 the Government introduced the
Commonwealth Development Corporation Bill [Lords]. The
Committee took evidence on the content of the Bill and reported
between second reading and standing committee stage in the Commons.
In its Eighth Report, Session 1997-98, the Committee had recommended
that the Bill be referred to a special standing committee.[21]
The Government did not, however, accede to this recommendation
and the bill went to an ordinary standing committee. The Committee
was concerned to assist the House in its scrutiny of the Bill.
A number of key considerations for the future of CDC were contained
not in the text of the Bill itself but in the proposed Articles
and Memorandum of Association, the draft investment policy, and
the draft Statement of Business Principles. In response to the
Committee's Eighth Report, these papers were deposited in the
Libraries of both Houses. During the inquiry the Committee requested
that these documents also be made available on the Department's
internet site — this also was done.
34. The Committee's Second Report, Session 1998-99,
on The Provisions of the Commonwealth Development Corporation
Bill [Lords] made further comment on the future profitability
and developmental focus of CDC as a public/private partnership.
The Government response agreed with the main lines of argument
in the Committee's Report but was, on the whole, more optimistic
than the Committee on prospects for success. One particular issue
raised by the Committee was the tax status of CDC once it had
become a public/private partnership and the danger for CDC, unable
for political reasons to bank offshore, of thus being liable to
the competitive disadvantage of double taxation. The Committee
recommended a special tax status for CDC and such a status was
introduced at Standing Committee stage in the Commons on 22 June
1999.
35. Following the passing of the Commonwealth Development
Corporation Act 1999, CDC was transformed from a public corporation
into a plc. The nominal share capital then issued remains wholly
government owned. The Government is currently restructuring CDC's
balance sheet. The Government has agreed to keep the Committee
informed of all significant developments in the transformation
of CDC into a public/private partnership.
ANNUAL
REPORTS FOR 1997 AND 1998 ON STRATEGIC EXPORT CONTROLS; STRATEGIC
EXPORT CONTROLS: FURTHER REPORT AND PARLIAMENTARY PRIOR SCRUTINY
[THIRD AND SEVENTH REPORTS, SESSION 1999-2000] (JOINTLY WITH THE
DEFENCE, FOREIGN AFFAIRS AND TRADE AND INDUSTRY COMMITTEES)
36. In March 1999, the Government published its first
Annual Report on Strategic Export Controls providing details of
UK policy on arms exports and of licences granted for arms exports.
Following the publication of the Report and, in light of previous
inquiries into arms export policy, the four Select Committees
principally concerned — Defence, Foreign Affairs, International
Development and Trade and Industry — agreed jointly to examine
the Annual Report and to produce a report. The Committees took
evidence from NGOs and from the Foreign Secretary and, in November
1999, a delegation of four Members from the Committees spent a
day in Stockholm, examining the Swedish model of prior scrutiny.
The Committee has greatly appreciated the Government's willingness
to provide the Committees with the (often confidential) information
they requested, which the Report described as being "the
raw material of parliamentary accountability".[22]
Supplementary information supplied to the Committees has, in the
vast majority of cases, served to allay initial concerns about
individual licences.
37. The so-called 'Quadripartite' initiative turned
out to be a very positive example of "joined up parliament"
and all four Committees were able unanimously to agree two separate
reports[23].
Nevertheless, the Committees experienced a number of difficulties
in conducting the inquiry. These obstacles are set out in the
first joint Report.[24]
38. Both Reports published by the Committees to date
have covered a wide range of issues examining both individual
licensing decisions — for example China, Hong Kong, Indonesia,
Pakistan and Zimbabwe — and Government policy. In respect
of individual licensing decisions, the Committees were particularly
critical of a decision to grant several military Open Individual
Export Licences (OIELs) in late 1998 and early 1999 which covered
Zimbabwe. The Committee considered this to be "an error of
judgement".[25]
Moreover, the Committees considered that UK policy towards Zimbabwe
since 1998 had demonstrated a "disturbing degree of muddle
and confusion".[26]
39. In respect of Government policy, the Committees,
in their first joint Report, made a number of comments relating
to the presentation and content of the Annual Report. The Committees
also recommended that future Annual Reports be signed by the Secretary
of State for International Development. In particular, the Committees
(in both reports) supported a more stringent national policy on
arms brokering and trafficking, and end-use monitoring and looked
to the Government to address the Committees' concerns. The Committees
criticised the Government's failure to bring forward a Bill to
implement the recommendations made in the Scott Report.
40. The Committees' Report on Strategic Export
Controls: Further Report and Parliamentary Prior Scrutiny,
expanded on the Committees' initial thoughts set out in the February
2000 Report on the issue of prior parliamentary scrutiny on applications
for export licences. The Report concluded that "We are convinced
that accountability demands that Parliament is engaged in scrutiny
of arms export licences ... issues of such importance warrant
democratic involvement".[27]
The Committee then set out proposals for a two-stage system of
prior scrutiny
41. The Government accepted 16 out of the 21 recommendations
made in the first Report including a number of the Committees'
recommendations relating to the format of the Report, agreeing
to a number of presentational changes. It rejected the Committees'
recommendation that the Secretary of State for International Development
also sign the Annual Report as DFID had chosen to review its involvement
in the export licensing process such that it was seeing fewer
than 5 per cent of export licence applications received by the
DTI.[28]
42. The Government response to the Committees' second
Report was far less positive. It rejected the Committees' proposals
for a system of prior scrutiny. It also denied the Committees'
conclusion that there had been an unannounced change of policy
on exports to Zimbabwe or that the inclusion of Zimbabwe on OIELs
issued in late 1998 and early 1999 represented an error of judgement.[29]
43. Since the publication of the Committees' Reports,
the Government has announced the publication of a "draft
Bill to improve the transparency of export controls and to establish
their purpose".[30]
The four Committees that make up the Quadripartite Committee are
likely to examine this Bill as and when it is published. We have
mentioned above the unacceptable delays in the publication of
both of the Annual Reports on Strategic Export Controls and of
the Government responses to the 'Quadripartite' Committee's reports.
THE
EXPORT CREDITS GUARANTEE DEPARTMENT [FIRST REPORT, SESSION 1999-2000,
THE EXPORT CREDITS GUARANTEE DEPARTMENT AND DEVELOPMENTAL ISSUES;
SIXTH REPORT, SESSION 1999-2000, ECGD, DEVELOPMENTAL ISSUES AND
THE ILISU DAM]
44. The Government announced a Review of the Mission
and Status of the Export Credits Guarantee Department (ECGD) on
27 July 1999. The Committee was concerned that there should be
proper consideration of developmental issues during the course
of the Review. To that end the Committee invited memoranda from
developmental organisations on ECGD, which it would then pass
on to the Government, along with comments of its own. The Committee's
First Report, Session 1999-2000, for the most part drew the Government's
attention to the evidence. We did recommend that developmental
objectives be explicitly included in ECGD's Mission Statement.[31]
In its response the Government agreed to include as an objective
— "to ensure its activities accord with other Government
objectives, including those on sustainable development, human
rights, good governance and trade".[32]
We do not, however, consider this fully meets our recommendation,
particularly as expanded upon in our Sixth Report, Session 1999-2000.[33]
45. The Committee in its First Report, Session 1999-2000,
stated that it intended to return to some of these issues in the
new year. An evidence session was held on 1 February 2000 which
concentrated on the proposed export credit support to Balfour
Beatty for the Ilisu Dam project in Turkey. The Ilisu Dam had
become a test case for social, environmental and human rights
criteria which many argued must be rigorously applied in considering
export credit support. The Committee concluded that the Dam should
not be supported and criticised the inadequacy of human rights
consideration within Whitehall on the issue. The resulting controversy
on that particular point has already been discussed above. The
Government responded positively to recommendations on the improvement
of ECGD's in-house capacity to handle sensitive cases and on the
question of corruption where the Government stated that "In
the light of the Committee's recommendation, the Government has
given further consideration to this issue".[34]
The Government has not yet come to a view on the request for export
credit support for the Ilisu Dam, waiting for further reviews
of the environmental impact and resettlement provisions.
10 
