Examination of Witnesses (Questions 20-39)
MR SUMA
CHAKRABARTI AND
MR MARK
LOWCOCK
WEDNESDAY 24 APRIL 2002
20. Do you send anyone on short-term, six-month,
gap year type projects?
(Mr Lowcock) We do not do that directly through the
Department. We do indirectly through finance we provide to non-governmental
organisations. More of the Department's budget is given to non-governmental
organisations than to the World Bank, including obviously to VSO,
and to others as well. Many of those organisations have arrangements
of that sort, offering posts on an ad hoc basis. Very occasionally
in some of our overseas offices British people waiting to go to
university will come and help out in the office for a period of
a few months but we do not do that in a systematic way.
(Mr Chakrabarti) One exception to that is a fast stream
scheme which we have where we do send some young people for a
year sometimes just to help out. That is the APOS scheme as we
call it.
21. That is just within your own Department
as experience for them, is it?
(Mr Chakrabarti) That is right. It is a young professionals'
scheme. They may or may not stay with the Department. They may
go into other departments or organisations, so we regard this
as of wider benefit.
22. One of the reasons I am interested in this
is that it always seems to me that people tend to get a whole
lot more out of their university courses if they have had some
time abroad and therefore there may be some advantages to this
country, quite apart from the advantages which hopefully you are
going to get for the countries that the people are sent to, if
we do put some of our aid into this. As well as that it seems
to me that there is a case for saying that that sort of aid is
actually relatively easy to monitor. If you are having difficulty
working out how much good you are doing in some of the other aid
you are providing, with that sort of aid you just have to know
how many people there are and how long they are there for and
whether it has worked or not.
(Mr Chakrabarti) I do not deny that. You have described
essentially a major conundrum in the whole development aid effort.
We can of course at project or individual level monitor what they
are doing much more easily than we can at country level, but we
have a paradox, that we have had many very successful projects
over the years and yet in those same countries poverty reduction
has not progressed at the same rate, so one begins to ask whether
we are really operating at the right levels with this, which is
why we have made this shift in those countries that really do
have these poverty reduction strategies to a much more budget
support type of aid where you will see those technical assistance
inputs but as part of a whole, I think, rather than separately.
23. Do you think there is a significant difference
in your ability to deliver aid and to deliver aid successfully
in terms of the extent to which the people of this country will
support it? I am concerned that one of the difficulties about
your whole Department is that it tends to be of not much interest
to most of the people in the country. We do not see a huge number
of press people here this afternoon, unfortunately, and because
maybe it is to some extent unpopular—you know, charity begins
at home, the sort of thing that is said to any MP on the doorstep
all too often: why should we give aid to anybody?—it may
be that one of the advantages you could get from some of the sorts
of programmes that I have been talking about is an increase in
support for the whole aid effort which in turn might enable you
to deliver it better.
(Mr Chakrabarti) I do not deny that schemes like the
ODI Fellowship, which I myself and no doubt others have done—indeed,
the new Cabinet Secretary is an ODI Fellow—do help in terms
of building support generally for the Department. I do not think
that development assistance is that unpopular in this country
compared with, say, a few years ago. Firstly, we have shown that
it can be quite effective and, secondly, when we go round schools
or we do these road shows, it is amazing the number of people
who are much more interested than their predecessors would have
been in what we are doing. The status of the Department, the clarity
of our objective now, which is focused much more on poverty reduction
than trying to have other objectives, commercial or political,
has really helped that. It has made it much more attractive. We
still remain the number one department for fast-streamers entering
the Civil Service, and that has been the case for many years.
24. Do you think that that increase in support
for aid is partly because of people who have gone abroad and who
have come back? I know that you are supporting the Link Africa
organisation which sends primary school teachers to Africa and
they come back and that helps some of the civilisation programmes
that are now going on in our schools, primary schools particularly.
(Mr Chakrabarti) I am absolutely sure that is part
of the reason. I think more and more people are going not just
through programmes like that but just even on holiday to many
of the poorer countries and seeing for themselves what is happening.
This is not just happening here. I went to Japan recently and
it is quite interesting seeing the back-packing generation. Their
attitude towards developing countries is quite different from
that of their parents. They are much more interested, much more
willing to engage than their parents ever would have been. I think
the same thing is happening here but on a much greater scale because
of our historical links with many of these countries.
25. I thought for a moment you were going to
offer me help with my holiday abroad on your aid programme.
(Mr Chakrabarti) The Department has not gone that
far yet.
26. You were talking to the Chairman just now
on some questions about governance. This also ties in to this
question about support in this country for the whole aid programme.
One of the things that has traditionally made people unhappy about
aid is when they see it apparently being wasted, being spent on
dictators' palaces or whatever. Do you accept that that is a very
important reason why you need to look at governance and make sure
that such things are not going on?
(Mr Chakrabarti) Absolutely.
27. If so, what do you do when there are sudden
changes of government?
(Mr Chakrabarti) Here or abroad?
28. We tend not to have very sudden changes
of government in this country. Perhaps that is yet to come. I
was thinking more of the developing countries.
(Mr Chakrabarti) I think the first thing is to find
out what are the policies of the new government in one of these
countries, whether they are sufficiently pro-poor for us to be
supporting them and, if they are not, should we be supporting
their poor people in some other way which is through non-government
channels. We have a mix of these. Zimbabwe is a very interesting
case for us right now. Here we have a government which clearly
has policies which are not helping the poor of that country, but
should we walk away? Our Government has taken the decision not
to walk away but we will not put money through government channels
in that country. We will help to provide services, HIV/AIDS testing,
feeding the poor, but not through the government.
29. If you take the number of countries you
are providing aid for at the present, what per cent of the aid
are you giving to them through the government channel, or are
you just not giving any government aid?
(Mr Lowcock) We are giving very small amounts of aid
to quite a lot of countries. Many or most of them are not getting
any direct government to government assistance. It will be through
non-governmental organisations, but in terms of our departmental
budget a much higher proportion of the money will be going through
government to government systems.
30. Another form of aid which is often very
important in terms of those countries is what they do about energy.
Energy is so important. When I was in Africa myself as a young
man I was very aware of two things. First, the one thing that
Africa has plenty of is sun and, secondly, there is quite a lot
of growth of grass and so on which is just burnt off year by year,
which had the potential, it seemed to me, for some sort of biomass
energy source. To what extent are you involved in research into
either of those two?
(Mr Lowcock) We do have some research projects addressing
those issues. I am afraid I cannot cite examples now. We will
be happy to give you a note if that would be helpful. We also
contribute to multilateral organisations which have a strong focus
on that. For example, there is an arm of the World Bank, the Global
Environment Facility, one of whose jobs it is to reduce climate
change, for which a big issue is non-carbon based energy sources,
including solar, in the tropics in particular. They have quite
big programmes on that.[1]
31. One of the reasons I am interested in this,
in the same way that I was interested in terms of the people,
is that it is, I would have thought, a comparatively easy form
of aid to monitor. You can put in the research and you can see
that products are being produced which are of use to some of these
countries and you can monitor exactly how much of that is being
done and how many new sources of energy are being put into those
countries, and that might again be an easier way of persuading
people that it is really worthwhile aid than some of this rather
more nebulous aid.
(Mr Chakrabarti) I can see where you are coming from.
My preference would be, and the Department's preference would
be, to work much more with a British company, for example, like
BP or Shell, who are in many of these countries, to try to get
them to see that there is some commercial advantage in going down
the route you just suggested. We do that. We ought probably to
do more of that than we do currently. There is an interesting
study by the Performance and Innovation Unit which suggests that
more help in renewable energy area would be very useful. I suspect
this is going to be quite a big issue at the World Summit in Johannesburg
in September.
32. Mr Lowcock was talking just now about small
amounts of aid going to quite a large number of countries. Is
that a little bit dangerous in that we are dissipating our efforts
too much and it would make more sense perhaps to try to concentrate
it, particularly if lots of different countries in the EU and
elsewhere are all giving small amounts of money to one country,
which seems to be a rather stupid way of going about it?
(Mr Chakrabarti) I think the general point is right.
Mark might want to comment on the detail but we are trying to
shift. One of the targets is of course the shift to concentrating
much more on a smaller number of countries where we could have
a real impact. I have come back into the Department after six
years away and I notice that we have pulled out of the Pacific
pretty much because these were very small aid programmes with
very high administrative costs. The Japanese and Australians and
New Zealanders already had very large programmes in the area,
so we were not adding a great deal of value in comparison.
(Mr Lowcock) The distinction I would make is between
the countries where we are providing government to government
assistance, if you like, where we are doing exactly what Mr Chakrabarti
has described, where we are reducing the number of those countries
on the one hand, and on the other hand where money which originates
in the Department is spent in a wider group of countries because,
for example, an NGO, a charity in this country, comes to us with
a project and they win competitively funds for that, which can
be in any country. We do not think it is a good idea to have a
system which essentially bars organisations, charities in this
country, from funding in countries just because we are not running
major programmes there.
33. I assume I can take it as read that if you
are thinking of pulling out of a country or of giving a smaller
amount to that country you do make sure first of all that not
everybody else is going to do exactly the same thing next year?
(Mr Lowcock) Yes.
Mr Trickett
34. I did find this report slightly indigestible,
so it may be that I have missed some points and no doubt you will
help me if I start to ask questions which are answered somewhere
and I did not quite understand. I am troubled by what I understood,
which you would probably say was very little, in the sense that
we have a lot of PSAs which are outfits over which we have little
control, it seems to me. In some cases we are taking averages
of countries which are changing year by year and therefore the
amount of control we have is even less and in most cases no doubt
there is a range of agencies which are contributing to the achievement
and non-achievement of the targets. I am going to try to probe
that in a second or two but, first of all, there is one thing
over which you do have control and I do not find much reference
to it in here, and that is the ratio of administration to direct
assistance. Could you first tell us how much the Department spends
and what ratio of that goes on administration and what goes on
direct aid; perhaps the figures as well as the percentages?
(Mr Lowcock) The departmental budget for the current
financial year is £3.5 billion, of which £75 million,
about 2.5 per cent, is for administration costs.
35. And the rest is in direct grants to third
countries, is it?
(Mr Lowcock) It is in a mixture of things: grants
to institutions. As Mr Chakrabarti was saying earlier, almost
half the budget goes to other institutions like the World Bank,
some of it goes to charities, and then a large proportion goes
direct to countries. Some of it goes to, for example, to research
organisations which are researching poverty in developing countries.
36. I am going to ask you in a second what you
think these PSAs cost in charges because it seems to me that this
is an expensive process to produce — well, garbage in and
garbage out comes to mind. If we get time I will go on to that,
but just sticking with administration for a second or two, again
it is striking that there is no reference that I can see to the
separation of administrative costs of the recipient organisations
relative to the amount of cost which is going to allay poverty.
I wonder why not.
(Mr Chakrabarti) On the administrative costs point,
what we have learned is that the way we provided aid in the past,
project aid in essence, was extremely costly in administrative
terms, not just for us but also for the countries who were receiving
this. What we have tried to do is move much more to budget support,
as I said earlier, where the transaction costs for us and for
them are lower. That is a major benefit if we can pull it off
for both of us, and so the ratio of administrative costs to programme
has pretty much stayed stable over the years; it has not risen
very much at all.
37. I am interested in admin because my experience
of representing a fairly poor constituency is that the more money
the Government pumps in the more well paid white collar staff
and officials we have rather than making a difference to poverty.
I am sure that experience is not simply the case in Hemsworth;
it is increasingly so in the Third World. I am not sure I am understanding
why matters which are under our direct control, which surely must
be administrative and overhead costs, are not subject to PSAs
rather than some of these nebulous things which frankly we cannot
measure and we are frequently failing on delivering in any event.
Has it not occurred to you that admin costs ought to be the subject
of probably your first PSA really? The most important thing is
to stop white collar staff getting more money and increasing numbers
of white collar staff and that the money gets to the people living
in poverty, is it not?
(Mr Lowcock) Clearly the size of the administration
costs budget is a key issue for us and we are subject to separate
control by Parliament and by the Treasury on that in addition
to the control that we are subject to on the programme. It is
a key internal management discipline for us. In recent years the
administration costs as a proportion of the total budget of the
Department have not increased substantially.
38. I do not want to interrupt you but I am
thinking both of your £75 million plus the no doubt large
amounts of money which are going to administration of the recipient
organisations. I think you were referring to the former and the
latter, were you not, in your answer?
(Mr Lowcock) Yes.
39. Has it not occurred to you to try to enter
into some sort of relationship with the recipient bodies, and
how is that monitored?
(Mr Chakrabarti) We do that. In terms of, say, the
charities, the NGOs, with some of the larger ones we have these
partnership agreements, so we do not have the detailed checking
that we would have had a number of years ago and that has reduced
the administrative burden both for them and for us. We are essentially
certifying their systems as good enough for them to take on this
aid from us. Similarly, as I said earlier, in the multilateral
institutions again we are providing money directly to them. It
is not adding to their overhead costs. They do not have to do
something extra for that money. We are saying that these institutions
are good enough to use that money, particularly the World Bank,
as I said earlier. In developing countries themselves, as we move
away from projects to more budget support, it may be nebulous,
it may seem that way, but it does reduce transaction costs on
both sides.
1 Ev 22-23, Appendix 1. Back
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