Examination of Witnesses (Questions 1
- 19)
TUESDAY 18 JUNE 2002
MR SUMA
CHAKRABARTI, MR
RICHARD MANNING
CB AND MR
MARK LOWCOCK
Chairman
1. Good morning. Firstly, many congratulations
on your new appointment, Permanent Secretary. I think this is
the first time you have been to a committee to give evidence since
you became Permanent Secretary, so many congratulations on that.
Can we take this opportunity to thank, through you, all your officials
and departments who help the Committee, particularly when we are
overseas. That is very much appreciated. We fully recognise that
having a select committee visit to, say, West Africa—or
indeed anywhere in the world—is an extra demand on your
team's resources. We hope that by our having a better understanding
of what DFID is seeking to achieve in countries that we can often
help you explain not only to our colleagues in Parliament but
to a wider world what DFID is seeking to achieve. These sessions
always tend, by their very nature, to concentrate on potential
weaknesses, but I think it would be fair to report that practically
every witness we have had before us from other organisations congratulates
DFID on DFID being in the vanguard of reform and of delivery.
For example, Mr Battle and myself were in Washington the week
before last and we met with USAID and I think it would be fair
to say that they saw DFID as their role model. So if you have
ways of how they can spend the Millennium Challenge Account money
they would welcome a letter in the post because they are all clearly
grappling with that at the present moment. Yesterday we heard
the senior members of the World Food Programme who came to talk
to us informally about the situation in southern Africa. Again,
they made the point that DFID was one of the first to convert
pledges into action and that you had been enormously helpful in
enabling them to set up a whole number of facilities which otherwise
they would not have been able to achieve. I think it is important,
therefore, that a session which may well concentrate on frailties
and potential weaknesses, when we put it into context overall,
the general message that this Committee hears from people making
representations to us is one of support and congratulations for
the Department. That being said, Permanent Secretary, what is
the question that you would least like us to ask, so to speak.
When you became Permanent Secretary, what were the areas of the
Department's performance and delivery that you thought you needed
to give attention to?
(Mr Chakrabarti) Thank you, Chairman. Maybe I could
just start with one or two general remarks. Firstly, your remarks
are greatly appreciated in our Department. We also feel we gain
from the Committee's visits and its investigations partly because
development is a sort of journey of exploration and there are
no certainties in it. The more people who question and ask about
the subject, the better. Also it is a way of partly explaining
to the public what we are doing. I do not think it gets enough
airtime domestically and to have a Committee looking at some of
these issues is very, very useful. On my left is Richard Manning
who as you probably know is Director General (Policy); on my right
Mark Lowcock who is Director of Finance and Development Policy.
What we will try to do is give you a collective view on some of
these issues. What is the question I have found most difficult?
I think the question we have been grappling with for the last
six months—and has been touched on also by the NAO report—is
how do we set our objectives and how do we measure how we are
successful in performance management. This is particularly tricky
because, unlike some of the parts of the public sector, we are
a collective effort involving many players, other donors, but
also many governments. Attributing success or failure to one part
of the system is quite difficult in that process. But we do need
to try to explain what we are doing well, what we are not doing
well, probably better than we are doing at the moment. We have
made massive strides in this direction through our public service
agreements, but we are not there yet and the NAO report was absolutely
right on that. That, I have seen, as being a major task internally.
Externally, I do not think it will surprise the Committee to hear
that the Department and the Government are quite clear that Africa
remains the number one challenge. If you look at where the Millennium
Development Goals are going, that is where we are most likely
not to make it in terms of 2015. So, all hands to the pump in
trying to think through how we can get there. Those are the two
challenges, both internal and external.
2. The departmental report, unless I have missed
it, does not explicitly set out objectives. There are a large
number of targets and, as you say, you are doing your best to
measure the achievement of those targets. Is there a list somewhere
of departmental objectives?
(Mr Chakrabarti) The best description of departmental
objectives are the two Public Service Agreements we have had.
But, as I said earlier, I do not think they have been fully translated
into all our actions as yet. The development goals in some ways
are the objectives underlying both those Public Service Agreements
and will underlie the next one too. They are, really, the driving
force behind staff's work. I think this is an issue we ought to
discuss with the Committee—whether the departmental report
might better be laid out in terms of the Public Service Agreement
objectives. From my point of view it probably should be, but I
think we need to test that out a bit.
3. To what extent is there a tension between
the country team approach that clearly DFID has to have in different
countries to which we are giving support and also the sectoral
nature of the Millennium Development Goals, such as water, public
health and so forth? Clearly in a big country like Ghana you can
have a member of your team concentrating on each of the sectoral
goals and indeed, in Ghana, we met them and they are all doing
excellent stuff. But there must be some countries where the support
we are giving is not sufficiently large for that. Is there a tension
between country development teams and sectoral goals?
(Mr Chakrabarti) There clearly can be if you do not
have a process by which you resolve that tension. What we are
trying to move towards is having that sort of process whereby
the Millennium Development Goals would be reflected in the new
Public Service Agreement. Then we would expect each of the country
directors—Africa, Asia, the rest of the world—to come
up with a strategy for achieving the PSA outcome that they are
responsible for. That will mean that they have to make choices
at country level. We are part of a collective effort; we do not
have to be in every single sector in every single country and
we should look at comparative advantage at a country level to
try and work out where we can best make the real difference. I
think in some of our medium sized programmes that sort of choice
is already being made actually by many of our country managers.
Ann Clwyd
4. I wanted to ask you about evaluation reports.
You have a section in the report on measuring and monitoring progress.
What do you mean by evaluation reports? Are they internal evaluations
or are they internal and external?
(Mr Chakrabarti) They are a sort of a mix really.
Let me go through the hierarchy of types of evaluation. I go back
to what I said about collective effort. I think the first tier
evaluation is work that is underway throughout the international
system, jointly, if you like, to try and measure whether we are
all being successful together. A lot of that is led by the OECD
or by the World Bank and we are part of that system. For example,
the work on when is aid effective and when is it not, that is
very much World Bank led. That we can all join in and it is pretty
public. Then there is the sort of evaluation of whether DFID is
a successful institution or not. That is very much the OECD/DAC
peer review process. Again that is made public and we need to
respond to that publicly. Then there is a third tier which are
the evaluations we conduct within DFID which are a mix of, say,
country teams looking at what they are doing, implementing programmes,
trying to learn lessons, evaluating on the run, if you like, and
then trying to implement those lessons. Then there is a sort of
standing back, a central evaluation function within the Department.
I would hope we could make more and more of those public ones,
the country evaluations in particular. I think it is quite important
because, again, it is part of a collective effort in any one country,
to say where the system has failed, where it has succeeded. Our
plan is to do much more of that than we have done in the last
few years. I think that would be fair to say, Mark?
(Mr Lowcock) Yes. In terms of internal evaluation
of activities we finance, we have three systems, really. For our
major projects—which amount to 85 per cent of the bilateral
portfolio—we look once a year in a snapshot at whether the
activities are achieving their objectives and we score them. We
have a PSA target, reflecting whether they are risky or not—we
break down by risk in other words—to improve the quality
of the portfolio. Then, at the end of spending on each of our
major activities we do a Project Completion Report and we analyse
the results of those and try to spread the lessons, and so on.
Thirdly, we have a category of ex-post evaluations where, some
years after spending has been completed, we go back and have a
look at what the lessons are and if we achieved the objectives
intended. All of these processes have a degree of independence
in them. Many of the evaluations of on-going activities are conducted
by people commissioned from outside the Organisation by the spending
manager. The third category are completely independent in the
sense that all that DFID does is write some terms of reference
for questions we would like to be answered and then commission
some outsiders—the Overseas Development Institute or some
other experts—to provide an independent view for us. Those
studies we publish, warts and all. The criticisms are very transparent.
It is in that particular area that we are very conscious that
we would like to have a bigger programme in the future than we
have done in recent years in particular.
(Mr Chakrabarti) And it is going to be debated by
our Development Committee two days from now, I think, as to what
the size of the programme might be in future. I think we would
all like to see a much bigger evaluation function of that sort.
Mr Khabra
5. The Public Service Agreement on access to
water appears to show an improvement. But the target has been
changed from "percentage of population with access to safe
water" to "access to an improved water source".
There would seem to be a big difference between the two things—improved
is not the same as safe. Why was the change made and how many
other PSA targets have been changed?
(Mr Manning) We have tried to design the indicators
consistently with what is happening internationally. As you appreciate
a lot of this information is put together by the UN and other
international agencies based on the country reporting. I think
I am right in saying that the indicator we have changed is the
one for which information is more readily available. I accept
there is a difference between the two. I think we will have to
write to you with a note on the numbers where changes of that
kind have taken place. There may be one or two others where there
have been changes. We have usually changed essentially because
of what is available statistically. We have been investing—Clare
Short is very keen on this—more in capacity development
in developing countries to try to improve the quality and quantity
of relevant statistics on all aspects of the Millennium Development
Goals. The UN have devised a list of some forty indicators of
the eight Millennium Development Goals and they have hired Jeffrey
Sachs and a team to lead a consciousness raising effort internationally
to try to get more understanding of the Millennium Development
Goals. We are content with the way this is being undertaken; we
accept you need to measure a lot more than eight things in order
to measure the eight themselves satisfactorily. Equally, we do
not want the number of measures to proliferate. We are keen to
find standard international measures that are collectable. I think
it is for that reason that we changed this one.
6. What difference has it made actually?
(Mr Manning) I think we will have to write to you
to give you a proper answer to that, to assess what the difference
is in coverage.[9]
Hugh Bayley
7. DFID has a presence in 145 countries which
must pose an enormous managerial burden on the Department in terms
of your relationships with the Governments of the countries concerned,
your partners in those countries, and collaborating with other
agencies. It strikes me that may be you are biting off more than
you should be chewing. What is the trend in terms of the numbers
of countries in which DFID has a presence?
(Mr Chakrabarti) The trend is to concentrate more
resources in a few countries. You are right. The general proposition
you are making is one we share, which is that there is a managerial
stretch. There are also issues about additionality; are we really
being as effective in quite so many countries compared to if we
concentrated on fewer? The Dutch have concentrated very, very
sharply so this is a live debate. It is very live at the moment
because we have started work on what should be our medium term
strategic priorities for resource allocation. It is very timely
because, as you have seen in America, they are doing pretty much
similar sort of work on a Millennium Challenge Account. Where
should they focus? The trend is in the right direction and Mark
can give you some of the concentration ratio figures.
(Mr Lowcock) Shall I just mention a couple of these
figures. In 1997-98, 57 per cent of the bilateral resources were
spent in the top 20 countries. That increased to 64 per cent in
2001. Based on our projections for future years we expect that
ratio to rise. We also have a list of countries we expect to graduate
from programmes. There are about 15 countries over the next few
years which we would hope to be able to conclude our direct government
to government work in. One of the reasons why we have that very
big number you mentioned—140 countries or so—is that
we have not taken the step of saying that we want to close down
the opportunity say for an NGO to come to us for a grant to work
in a particular country even if we are not there, or for a research
programme which is part of a broader effort to be excluded from
a particular country. So there is a very big tail of countries
in which we have a small number of small spending activities which,
in many cases, will not involve a DFID presence on the ground
but will simply involve a grant, often to an NGO actually. That
is also part of the way of managing the burdens on the Department.
Clearly there is an agenda of greater focus in the future which
we need to see.
8. When you are taking decisions about where
it would be appropriate to pull back from, you must look at the
idea of the comparative advantage that DFID can offer working
in a particular location. Can you say a little bit about how you
decide whether there is a DFID comparative advantage, particularly
in relation to the growing trend towards programme aid. If you
have a number of donors simply collaborating on contributions
to an education department spend, or something like that, how
is it possible to talk about a comparative advantage? And how
do your PSA targets require you to explain explicitly where you
provide a comparative advantage?
(Mr Chakrabarti) I will have a general stab at that
and I think Mark has East African experience and Richard can give
us more detail. I think in general we believe that we are particularly
effective in reforming environments because we are particularly
good at policy dialogue with the World Bank and others in pushing
the policy dialogue in certain countries. In low income countries
where there is reform happening through Poverty Reduction Strategy
papers and so on we have tended to push more of our resources
into those countries as a clear indication that that is where
we think we are more effective. That tends to be backed by what
the World Bank and others believe of us, believe of our own skills.
They tend to say that we are particularly effective in those environments.
So it is a reinforcement from the rest of the system. In terms
of which sectors within countries, we leave those choices pretty
much to country teams to have a first shot at and then throughout
the centre, the people in the headquarters, the people say maybe
or maybe not and they argue the toss much more with the country
teams. That is resolved through a committee which Richard chairs
which is called the Department Committee.
(Mr Manning) Let me give you an interesting example
where the situation you describe is quite active. If you look
at education in Africa and where the children are who are not
in school, one category of country where performance is rather
below average is the Francophone countries of the Sahel. If you
took an Africa-wide perspective on how to achieve that particular
Millennium goal in Africa, you might say there is a strong case
for DFID to get seriously engaged in education in the Sahel. So
far we have decided that would not be in accord with our comparative
advantage because, quite frankly, we would have a lot to learn
about the system; we are weak in having people with the language
skills. We could, of course, as you say, go in in a sort of silent
partnership mode and, let us say, give the Dutch some money to
spend in Mali, but it is not clear that we are adding much value
by doing that, so we have tended to think that we would do better
in reaching the Millennium Goals in Africa in concentrating our
bilateral aid where we can see prospects of reform—Tanzania
for example, Ethiopia, and so on—and then to raise the consciousness
internationally of the need to come seriously to grips with the
very difficult problems in the Sahel. You could take an alternative
stance and say that we could really develop significant new programs
here. Indeed, some people have suggested that is exactly what
we should do. But we have taken the view so far that the problem
is not that there are not enough donors, the problem is that the
present system is not delivering adequate results and there is
a limit to what we feel we should be doing.
9. With every programme of expenditure which
you sign off there is an opportunity cost. It is difficult to
understand—it is not intended to be provocative, it is a
very serious comment—why we are in Latin America at all,
with a relatively low level of programme, the language difficulties
and lack of expertise. There are other countries with greater
historical links with and understanding of and language affinity
to Latin America than we do. If we are focussed on poverty alleviation
surely it is worth making the effort to find ways of leaving work
in Latin America to those who have a comparative advantage over
us and to strengthening or deepening our African experience to
work in Francophone countries. One of the things that struck me
when we visited Ghana was that there was a lot of movement of
people across borders. Education provided to people in Ghana may
end up helping the economy of Côte d'Ivoire or vice versa.
Does that not make sense? Looking at the tail of small programmes,
looking through the report, I find it quite extraordinary that
we still have programmes in Brunei and in Singapore. Why do we
have a programme in Singapore which probably has a per capita
income greater than some EU member states? In South Korea, which
is a member of the OECD? You talked about having a list of 15
or so countries where we are working out with their government—I
do not think we should just pull the plug—respectable ways
of moving on to areas where we have a comparative advantage. Over
what sort of time scale will we regroup our resources into those
areas of work on the Millennium Goals which are going to achieve
most?
(Mr Chakrabarti) There are a number of questions there;
I shall try to go through each of them. Firstly, Latin America,
the points you make are the sort of argument we have internally,
and one side of the argument was very well put by you. I think
the other side of the argument is 77 million poor people are in
Latin America/Caribbean; six out of the ten most unequal countries
in the world are in Latin America. There is a base case, if you
like, for why DFID should be involved. You could argue that we
are substituting for the political resources of those governments
because they have the resources to re-distribute if they wish
to. I would argue—and I think my colleagues would argue—that
at least for a time limited approach we could show those governments
how to successfully re-distribute their resources by having minimal
engagement in some of these Latin American countries. Beyond that,
$12Ö billion worth of multilateral finance goes into Latin
American and the Caribbean; an amazing amount. How effective is
that? Through our bilateral engagement we can then engage with
the Inter-American Development Bank and get them to be much more
effective. It is interesting that they have just adopted the Millennium
Development Goals, partly through our influence; it has taken
a long time. I think that Latin American engagement has helped
that. There are, of course, one or two quite poor economies in
Latin America like Bolivia, and so on. There is an argument on
both sides here about that which I think is played out. Again
it is going to have to be addressed in our strategic look in the
coming months. On the PSA—we are in the middle of a negotiation
with the Treasury at the moment—we would like to have a
target of some 85 per cent of our bilateral resources going to
low income countries by 2005-06 which would be a massive shift
from what was 65 per cent in 1997. This is going to be quite a
hard thing to deliver given the existing commitments and so on,
but we are trying to set up the incentives in a way you want.
Brunei and Singapore I presume—I do not know for sure—these
are old commitments which are being worked on; we are not making
new commitments in these countries.
(Mr Lowcock) The Korean figures relate to humanitarian
assistance from North Korea. I would like to pursue the Singapore
question also.
10. Singapore is more serious; Brunei is a tiny,
tiny amount.
(Mr Manning) We certainly do not have a government
programme, but there may be some regional institution in Singapore
that we may be involved with. We will check that out and get back
to you.[10]
Chairman
11. One of the things that struck us about the
US Millennium Challenge Account is that it is going to have such
a high conditionality that we may well discover that the United
States are diverting a lot of that money to areas like Latin America,
Central America and very little of it going to Africa. I think
one of the things the Department may well have to consider in
the future is not necessarily having a global reach but also looking
to see where other donors are perhaps not giving as much as they
should do and hence it may well be necessary to focus even more
resources on Africa simply because others may be withdrawn.
(Mr Chakrabarti) Point taken. I think we are now the
largest bilateral donor to Africa.
(Mr Lowcock) We have been analysing exactly this recently.
According to data reported to the OECD for the year 2000, the
UK is now the biggest bilateral donor in Africa. Actually, I think
we would prefer that others were bigger than us given that they
have much bigger aid programmes. This is not a message which we
read with particular relish, but it is the case. We have doubled
our programmes in Africa over the last four or five years. The
beginning of that period was the end of a period which saw overall
aid to Africa halved and clearly Africa is very resource constrained.
We would like more aid collectively focussed on Africa, including
from us.
Mr Robathan
12. Regarding comparative advantage and historical
connections, of course we have great historic connections with
India. But it is also our biggest country programme. It seems
to me—and it has seemed to me for some time—that when
you have a country which is spending enormous amounts of money
on armaments (topically nuclear weapons) and can put an army of
half a million or whatever on the Kashmiri border, and is extremely
bellicose at the moment, I think I would not be alone in this
country in asking whether it is appropriate that we are giving
aid to the undoubtedly poor people in this country when the Government
of India sees its priorities in a different area, in a different
way. What would you say to that?
(Mr Chakrabarti) I think it is a perfectly fair question.
Our aid in India has increasingly moved to focussing on four states,
as you know, away from the federal level. In terms of budget support,
I think there is only one state, Andra Pradesh, which is receiving
budget support. This is part of our dialogue with the Indian Government.
The fungibility question is part of the dialogue; we are seeing
them again in July and it will be part of the discussion then.
I would say that within the Indian context—and Mark has
very recently been there—the systems within the Indian Government
are such that they give us much greater comfort for where our
aid is going than in many other places, I think, in terms of ensuring
that aid is spent on what we said it was going to be spent on.
You were very comforted by what you saw there, I think.
(Mr Lowcock) Yes, we were exceptionally impressed
by the accounting and audit standards which are managed by the
Indian sister organisation of the National Audit Office. We have
a high degree of confidence that where they say budget funds are
going is where they are actually going.
Mr Battle
13. Can I take you back to the comments you
made at the beginning, this relationship between budget support
and targets really. First of all, is it possible to know how much
the programmes over the years have shifted from projects to budget
support (I understand budget support as money given over to governments
to fit to their programmes). Of those 145 countries how many are
straight to budget support?
(Mr Lowcock) In 2001-02 we were providing budget support
in 17 countries, a total of about £290 million. In recent
years the proportion of the bilateral programme going in budget
support as opposed to other forms like projects has increased
from about 8 per cent to 18 per cent.
(Mr Manning) I think an important thing to bear in
mind is that even if you went back quite a long way you would
find a lot of our assistance being delivered in non-project form,
but typically being delivered through import programmes of one
kind or another. In the 1980's and early 1990's we did a lot of—as
you might say—balance of payment support which meant essentially
that we were providing money into government budgets but through
a route which was all around import documentation. Not only us,
but the World Bank and many other donors did the same. We were
providing flexible support into the budget without saying so.
When initially in Uganda we moved from that to saying "Let's
disburse straight to the budget" we then had to ask ourselves
a whole series of new questions which I think have been very constructive.
For example, we have had to ask ourselves questions about financial
accountability; we have had to ask ourselves questions about ghosts
on the public payroll; we have had to ask ourselves questions
about how funds flow from the Ministry of Finance to a locality.
We can certainly provide you with figures, but I think we want
to bring into the equation the fact that we have had a long tradition
of providing non-project support but through a route which did
not in fact face us with the kind of questions we have to face
in budget aid. I must say that I feel the disciplines that budget
aid puts on us—the requirement to look at these systems—has
been enormously productive in the kind of dialogue we have been
having locally with recipient governments.
14. When we were having conversations in Washington
around the American proposal for the Millennium Challenge Fund—which
should be a massive boost in the volume of aid money—the
one area where there was certainly most scepticism was in budget
support. They say that budget support is really risky and I even
got the impression from some of the conversations that the Americans
were looking at setting up their own NGOs to deliver particular
projects in order to spend that money rather than go down the
road of budget support. How are you ensuring that allocations
through budget support are then tied into those broader Millennium
Development Goals? Otherwise, as we heard in America, the Millennium
Development Goals become aspirations. We might like to get there
but we have no chance of doing it because we are locked into country
programme allocations that we have no control over. How do you
manage that whole process?
(Mr Chakrabarti) Shall we talk about two things? One,
the Americans and where they are moving to because I think it
is quite an important part of this debate; and then about how
budget support gives you outcomes which are around the MDGs. On
the Americans, I think they have shifted. They have always done
some budget support in various countries but they do not always
say so publicly. Interestingly now they are seeing it as part
of their array of instruments. They will do lots of projects but
they have begun to buy into the idea that projects, particularly
when you have a huge increase in aid, if you give all of those
as projects you would impose such huge transaction costs on the
system it would be mad. So they are looking at budget support
as part of their range of instruments. That is a good outcome.
Mark, do you want to say a word about outcomes and MDGs?
(Mr Lowcock) This is exactly the key question that
we ask ourselves when we are appraising a proposition to provide
budget support. What outcomes are we going to generate? We only
will go down this route in countries where we are reasonably confident
that putting money into the budget will translate into higher
spending on primary education, primary health and so on. For example,
if we take the case of Uganda, 50 per cent of the Government of
Uganda's budget comes from aid. Uganda has made tremendous progress
on the Millennium Development Goals in the last ten years. The
number of children in school has risen from 2Ö million to
6Ö million. The incidence of HIV/AIDS has fallen by about
half. The poverty head count has fallen from 56 per cent in 1992
to about 35 per cent in 2000. Most of these achievements arise
from public expenditure, largely financed by aid. So when we first
looked I think in 1999 at generalised budget support for Uganda
the context we were looking at was one in which we had confidence
that a government which, were it to have access to more resources,
would put those resources to the priorities we thought were the
right ones and would be able to deliver outcomes from them. It
is exactly that kind of process that we have tried to follow elsewhere.
15. If I could push you a bit further, would
those outcomes be tied in the country to the Millennium Development
Goals? Or would they be given a looser target so that they could
redefine education targets that are away from that crucial aim
to get to the Millennium Development Goals in 2015?
(Mr Lowcock) The general framework for most of the
countries where we are providing budget support is that they have
a poverty reduction strategy which sets out medium term goals.
In the countries we are dealing with those medium term goals are
very closely aligned with the Millennium Development Goals. For
example, Tanzania and Uganda have visions which go up to 2010,
2015, 2020, which are focussed on exactly that set of goals. That
is part of the basis on which we are ready to put money into the
budget.
(Mr Manning) At the same time we have to accept that
all the countries are not at the same point on this path. It is
quite important in our dialogue with countries that they should
have goals that they themselves recognise and think they can buy
into for a particular period which may not be up to 2015; it may
be 2020, it may be 2010 or whatever. We need to be flexible around
this and what we need to see is that they are moving in the same
direction in ways that make sense from the point of view of the
starting position of that country.
16. That flexibility could massively dilute
the capacity to reach the Millennium Development Goals in time,
could it not? Do your people in the Department try to tie what
is happening in the individual countries, ensuring that the country
teams are getting towards those goals? Do you have people monitoring
that in budget terms and in output terms?
(Mr Manning) Not only are we doing that, but we are
trying increasingly to have an international system that does
it. We do not want every donor having their own system and asking
the same questions. We want a centrally mandated system with strong
UN, World Bank and OECD leadership which will deliver these results.
If you take the area of education which in a way is the clearest
because the Millennium Development Goal is 100 per cent—so
you are either there or you are not—we worked hard and I
think, in the end, effectively to persuade UNESCO and the World
Bank to collaborate on an annual report which will produce, based
on work by the UNESCO Institute of Statistics, a reasonably robust
set of figures—I do not want to put too much weight on that;
there are always problems with them—which will enable us
to monitor this. The World Bank put to the Development Committee
in April proposals for fast-tracking a number of countries where
it could identify that there was both a big need—ie a long
way to go to the Millennium Goal—and a reasonable set of
policies. These are the kind of approaches which we think make
sense. As we have said already, it does not mean that in every
one of those countries the UK should be the people who are taking
the initiative; in some countries other people should be doing
it. But collectively—I think it is quite important to stress
the collective part—the international system needs to look
on a regular basis as to how we are progressing against each Millennium
Development Goal; there needs to be a robust international system
for collecting the data and presenting it at policy level. This
needs to have buy-in from developing countries as well as developed
countries and we need to get as much of a consensus as we can
on how to get to the Millennium Development Goals in a timely
way. Each country's path will be specific to that country but
it needs to be aligned, as far as we can, to the international
endeavour.
Hugh Bayley
17. You have been answering John's questions
with a kind of management accountant's hat on. What about the
financial accountant's hat? More and more British money for development
assistance goes in programme support. Surely we should be extending
our audit trail into the Government departments of other countries
in order to provide accountability to the people we represent.
When I go out to people in York and tell them I want them to pay
more taxes to go towards development assistance they rightly want
to know where the money is going—on immunisation programmes
for instance and not Mercedes vehicles for health ministers. Do
NAO auditors go into other government's departments? Are they
welcome? What access to records do they have?
(Mr Chakrabarti) We are developing with the NAO a
risk framework for deciding when to supply that support and when
not. They have actually approved documentation. Then we are also
working with the NAO with some other like-minded donors who are
also providing budget support. What we do not really want is four
or five different systems being imposed on the relevant country
in question by people providing support. So the NAO is leading
the way with the auditors of the other countries to make sure
there is a common audit. That would be a major prize if we could
get there. At the country level I presume NAO value for money
studies would get into where the money has gone and what it has
bought. Do you want to say anything about that?
(Mr Lowcock) Yes. One point I think it is important
to make at the outset is that part of the reason we are investing
in budget support is that we are very concerned about the quality
of financial management and other government systems in developing
countries. The way aid has been managed over recent decades has,
in too many cases, tended to erode rather than build those systems.
A crucial part of the rationale is for us to have a greater interest
in building up the standards of accounting and procurement and
the quality of civil servants and the quality of management and
the role that Parliament plays and all the systems that developed
countries have to ensure that there are incentives for good public
expenditure. The NAO have agreed systems with us for the accounting
and audit discharge for our budget support which rely on records
provided by their sister organisations essentially in partner
countries. The NAO have links with the comptroller and auditor
general in many of the countries we work, so they have a dialogue
around that. But there is absolutely no doubt that there is a
major agenda of strengthening those institutions and strengthening
not just technically but also in terms of the way in which their
findings are acted on. There is a big agenda of building up the
effectiveness and the seriousness with which the Governments take
the PAC in their own country. This is a really big agenda for
us which we and other donors have not put enough effort into in
recent decades and which we are now trying to do better on.
Mr Walter
18. I wonder if I could bring you back to the
quantum of bilateral expenditure. Our analysis—and I am
sure it is the same case for yours—is that the five largest
recipients of aid received something like 30 per cent of the total
bilateral expenditure. The top ten received nearly 50 per cent.
I wonder if you could just take us through the criteria that DFID
use in deciding the allocation of those total resources to individual
country teams. Could you give us some recent examples of what
the policy process is in deciding what the total amount of aid
would be. We do not need to know about the £5,000 to Brunei;
I think it is about the value of a first class air-ticket. Maybe
one of the low income countries that is under stress; just take
us through that process.
(Mr Chakrabarti) Why do I not try to describe the
system by which we make decisions at the moment and what our current
thinking is about that, then Mark might want to describe the Kenya
example. That is quite an interesting example because it is a
country which has moved from being a reformer to not being a reformer;
what do we do? The system as we currently do it is that we try
to set three year country budgets for all our recipients. We look
at those every year. That is based on bids coming in for each
of our country teams and what happens in the public expenditure
review. The key criteria around aid effectiveness are how many
poor people are in that country, how poor is that country? I think
the second increasingly important one—which has been increasingly
important in recent years—is to what extent has it a real
commitment to reform, to doing something about that poverty? This
can be encapsulated in what is a Poverty Reduction Strategy paper
or some other plan or document. Those are key criteria for deciding
country allocations. What is interesting is that we did a chart
quite recently which we can send the Committee which shows that
our aid is more focussed on developing countries than some other
bilateral donors. One of the jobs we have is that we have to try
to shift other people to move in that direction. Those are the
sort of criteria we are at. Then we have this little study going
on now which is looking at whether we can become even more strategic
within that. Are there some further lessons below those two broad
criteria that we can apply? Perhaps not going as far as the Americans
who might be going to more mechanistic criteria around governments,
economic reform, investing in people, but certainly thinking through
whether some of the criteria can be applied at the more general
level to come up with the right sort of allocations. It is interesting
that EDF, the World Bank and IDA allocations all use quite detailed
criteria which the Americans have been looking at. I think our
distribution and IDA's is pretty similar, I suspect. Even though
we have not been quite as mechanistic we have probably ended up
roughly in the same place. We are looking at whether we can go
further with that. I would like to take the example of Kenya because
it is a really interesting example of how it changed tack.
(Mr Lowcock) Once a year we run a resource allocation
process for the organisation and we put to ministers a series
of proposals for what the budget for the country programmes and
other bits of the budget should be for the following two or three
years. In the case of Kenya, in 1999 after many years in which
we had a lot of concerns about the commitment of the Government
there to reducing poverty and the quality of economic management
and administration generally, a reform initiative was launched.
A team of people of high integrity and technical competence was
appointed by President Moi to run a reform programme. In response
to that the leading donors made a commitment that once results
started to be delivered they would increase their programmes.
So DFID had been spending between £25 million and £30
million a year in Kenya—towards the lower end of that figure
actually—in the late 1990's. In response to Kenya instituting
this reform process and agreeing a set of measures with the IMF
and the World Bank, in 2000-01 we increased our spending to nearly
£50 million. At the beginning of 2001 the reform programme
went off track; the Government failed to take a number of measures
that it had committed itself to take, which we and the World Bank
and others thought were very important indicators of their real
commitment to reducing poverty. As a result in subsequent years
we have reduced our spending plans. That is the way in which in
practice we try to take account of changes in what is happening
in the real world of the countries we are operating in when we
put together our overall budgetary plans.
19. You mentioned other major donors to Kenya.
Have they gone through the same process? Who are the other donors?
(Mr Lowcock) The important ones really are the World
Bank, the EC and also the IMF. The IMF, not because they have
a lot of money but because other people tend to follow their policy
lead. They have done exactly the same thing we have done.
9 Ev 26. Back
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