Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 100-119)



  100. You are still convinced—I know what your answer will be but I will ask it anyway—that setting targets in terms of GDP growth in countries is actually a valuable way to drive your work?
  (Mr Chakrabarti) No. The GDP growth target and the share of GDP going to the poorest are not helpful targets. What we really want to focus on is the number of poor people who are living on less than a dollar a day so we want to move those two targets on to what we call a poverty head count target.

  101. That neatly brings me on to the multilateral aid point. You have accepted quite honestly and candidly that the European Union is making a complete hash of its aid projects in that less is going to poorer countries than used to be the case. Maybe I am straying into policy here but is it a policy decision that 55 per cent of your multilateral aid goes to the EU?
  (Mr Chakrabarti) I will let Mr Lowcock explain the exact budget mechanism but we do not actually have much control over that. Some proportion of the EC money is negotiated, European Development Fund, and there we do have some control. The rest is just budgetised, in other words it is our share and as a member of the EU we have to pay our proportion.
  (Mr Lowcock) Yes. This is a charge to the Department over which we have no control.

  102. If you had a free hand you would like to take all that money out and administer it yourself, give it to the World Bank?
  (Mr Chakrabarti) Yes, a range of possibilities exist. I would like to improve it clearly to make it more effective. If that was not possible over time then I would like to use it on more effective channels.

  103. As a Conservative Member of this Committee I am acutely aware of the Pergau Dam problems. Is it the case that there are still aid projects, British funded aid projects, which are linked in some way to trade promotion?
  (Mr Chakrabarti) No, no longer.

  104. What about that dam in Turkey, the Ililu Dam?
  (Mr Chakrabarti) That is not supported by us.
  (Mr Lowcock) That is not funded by DFID.

  105. How much of your money do you give straight to NGOs and charities?
  (Mr Lowcock) It is about £200 million a year in recent years.

  106. Which is very small, it is less than ten per cent of your current budget?
  (Mr Lowcock) Yes.

  107. Why have you decided that is not an effective way of spending taxpayer's money: funded aid?
  (Mr Chakrabarti) I do not think we have decided that. I think it is a question of absorpative capacity in the NGOs as well, how much money can they take on and spend effectively because they are quite lean and mean, that is one channel. Then there are many other effective channels which we want to support as well. The £200 million is by no means a small sum, it seems to me.

  108. Sure. I could not find this in the report but it is in the summary of the report produced for Members of the Committee. It says in that summary "In a poor country, there are likely to be over 30 developed countries offering aid, and a similar number of multilateral agencies, as well as a number of international charities." If you are a very poor country, you have this wealth of international goodwill, it must be tremendously difficult for the Government to cope with maybe 100 different organisations properly. Is it not more effective, instead of DFID having its own people on the ground, to work through perhaps Oxfam or whatever?
  (Mr Chakrabarti) I think the problem still remains for the Government there are hundreds of NGOs to deal with instead. They have both actually to deal with, loads of NGOs and loads of governments. What we need to do clearly on the Government side is reduce the pressure on these governments. As you say, the capacity for dealing with so many different donors is very small in those governments and we are imposing very high costs on them. What we are doing increasingly is trying to see if we can have common frameworks between donors, to use the same audit systems maybe so we might try and use the same sort of pooled mechanisms of putting our money in, again trying to reduce the pressure on recipient governments.

  109. Why do you take a decision in a country to have your own operation there? What would be influencing that decision as opposed to working through an NGO—
  (Mr Chakrabarti) Or a multilateral agency?

  110. Yes?
  (Mr Chakrabarti) I think in many countries of the world, of course, we do not have our own operation, we do make exactly that judgment, that we will do it through an NGO or through multilateral agencies. Where we have our larger programmes, we have essentially taken the decision that we can have quite a bit of influence and shape things for the good. Even there I think increasingly our programme managers are looking to see whether we can share resources. "Do you need ten different education advisers sitting in Dar es Salaam advising the Government and different donors? Can you get down to two or three?" Those are the sorts of questions our programme managers are facing day in day out and actually making a real push amongst the donor community to try and get some economies of scale really.

  111. Can I just return to the targets. I forgot to mention this when I was questioning you earlier. One of the problems this report highlights, and indeed Members and yourself highlight, is that these Public Service Agreements are very short term, in a relative sense, they apply over three years, whereas the time line for a typical DFID project may be many, many years, and indeed be long term, whether you are having an effect on the ground may be visible over a generation I suppose. Is that not another problem with these PSAs, the way they are set up in relation to your Department?
  (Mr Chakrabarti) Yes, I think that is right. Development is a long term business. The PSA horizon is three years which is why we are trying to negotiate with the Treasury the idea that we will move to a five year reporting cycle for the PSAs. If all goes well I would like very much to use the current PSA and just simply roll it over in the three years rather than inventing a new one so we carry on with this PSA over many, many years.

  112. How much of your time as the Permanent Secretary has been spent in formulating and negotiating these PSAs?
  (Mr Chakrabarti) Since I took over as Permanent Secretary—this is a guess, which is as much as I can do—probably two or three days in discussion overall with staff, senior staff like Mr Lowcock and others.

  113. Two or three days?
  (Mr Chakrabarti) Yes, overall.

  114. If these are so important, if these are driving your Department, you spend two or three days on them?
  (Mr Chakrabarti) If I can just finish. Before I became Permanent Secretary I spent quite a bit of time helping design the PSA. I took the lead on the negotiations with the Treasury team about how we might reshape the PSA in fact to answer many of the questions posed by the NAO report. I put quite a lot of time in before I became Permanent Secretary on this.

  115. The senior grades of your secretaries, your deputy secretaries and so on, how much of their time? The senior management of the Department, how much of their time has been spent on this?
  (Mr Chakrabarti) The very senior management have spent quite a lot of time. Obviously Mr Lowcock has been leading the negotiations and discussions with all our staff and several of the team behind have been doing that also over the last two or three months.

  116. Time well spent, Mr Lowcock?
  (Mr Lowcock) We think that the PSA system provides a number of advantages. It gives us clarity of purpose, it gives us some benchmarks against which to measure the progress and it enables us to bring other bits of Government in, which can influence what we are trying to achieve, through the joint targets so we do think this is a good system.

  117. Can I ask one final question. My time is up. Would it help your Department or hinder it in the good work it does if our report suggested to the Treasury that actually the PSA model that is applied, for example, to the Department of Health is not ideal for your Department and actually you should have a great deal more flexibility in the kind of targets you set and the time line over which they apply? Would it help your Department if we lent our weight to that argument?
  (Mr Chakrabarti) I do not want the argument to run that the Treasury has not been helpful. Actually the Treasury has been immensely helpful in our discussions so far about changing the nature of the PSA, how it should map on to the organisation rather than as it did previously and also in terms of discussions about the time line. They have been very open to suggestions. I do not think they are just facing these issues just from us actually. I think the PSA system has been evolving and the Treasury has been in the forefront of trying to improve it.

  Mr Osborne: That should guarantee you money next time.

Mr Steinberg

  118. Like Mr Trickett I found this report—he used the word indigestible—very difficult to read. One of the things that did bounce up and smack me in the mouth was on page 26, paragraph 2.13 under the heading "But difficulties remain in measuring DFID's contribution to global poverty reduction." It goes on to say "... with the majority of measures it is not possible to determine the extent to which any achievement is a result of DFID's efforts ...". To me that was very fundamental and a very worrying statement for the report to make. Here we are spending, what is it, £3.6 or £3.2 billion a year and we are not sure whether it is making any effect or not. Can you explain that more fully so you can assure me that it is not going down the drain?
  (Mr Chakrabarti) I can assure you it is not going down the drain. I think it is having an enormous impact. We are recognised internationally as being possibly the lead bilateral donor. There has been an OECD review last year which again gave us plaudits which I think is quoted in the NAO report. I think we are pretty well regarded as being at the cutting edge of grant organisations. The issue is more, it seems to me, about how we can attribute all of the success to us or some of it to us and that is difficult. There is no doubt attribution is difficult when you are in a collective effort. If you take a defence analogy, to what extent can you attribute the effort in a particular war to one part of the alliance as opposed to another, they are all actually a part of a whole. It is very similar in the development field.

  119. A very basic question, the sort of question that a constituent might ask me is do you know what this money is being spent on? Do you know whether it is being spent effectively?
  (Mr Chakrabarti) Yes, we do. At project level we have indicators for whether we are succeeding. At more macro economic level we can point to the successes we have had in influencing countries or multilateral institutions to do better and what impact that has had on a country. What we have not got yet, and this is something we need to move on to I think in the next phase, is better country evaluations. In the past we have been focusing on projects, we have got lots of project evaluation information which shows successful projects but we have not got the measure at the country level of how we are doing overall. I think, because at the country level so many donors are involved, and the Government's own policies matter so much, we do need joint country evaluations, which again the NAO report quite rightly recommends, to try and see what the overall impact is and that is what we need to do next.

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