First supplementary memorandum submitted
by the Department for International Development, replying to additional
questions submitted by the International Development Committee
RESOURCES AND
FINANCIAL TABLES
Q1. In Table 2 of the annual report planned
expenditure on Conflict Prevention is £45 million compared
to £38 million in the Main Supply Estimate. Which is the
correct figure?
1. The difference between the Tables is
that Table 2 includes a £7 million balance from the Africa
Pool that has not yet been allocated and has therefore not yet
been voted. When it is allocated, it will be added to the vote
of the responsible Department through a Supplementary Estimate.
Q2. In Table 4, do the amounts spent by country
include expenditure on humanitarian assistance? In particular
how does the outturn expenditure on Ethiopia for 2002-03 break
down and how does this compare to 2003-04 and 2004-05?
2. Short term emergency assistance is financed
through Conflict and Humanitarian Assistance Department; this
is shown in the Humanitarian Response line under the Conflict
Prevention and Humanitarian section of Table 4 and is not broken
down by country. Longer term emergencies are financed through
country programmes and are included in overall country programme
figures. By its nature humanitarian assistance can be difficult
to budget for in advance and is often financed through additional
allocations from our Unallocated, or Contingency, Reserve. This
explains why future budgets for the Humanitarian Response line
are significantly lower than past spending.
3. The figure for Ethiopia in 2002-03 includes
£24.8 million for humanitarian aid. Future allocations are
not formally divided between different forms of aid but we expect
that £10m of the current allocation for 2003-04, and £5m
in 2004-05 will be spent on humanitarian assistance. The case
for any additional allocation from divisional or central unallocated
funds will be considered in due course.
Q3. Can a reconciliation be provided between
the country totals on Table 4 to Table 2?
4. Table 2 provides a breakdown of DFID's
total resource budget, by objective, based on the settlement figure
for the years 2003-04 to 2005-06 and outturn figures for earlier
years. Table 2 includes both programme resource and administration
resource.
5. The country allocations for 2003-04 onwards
in Table 4 are based upon an estimate of the total resources available
for allocation to country programmes within a given year. This
estimate is exclusive of administration costs but does include
some capital costs and anticipated in-year budgetary adjustments.
The figures also incorporate an element of over-budgeting (an
"estimating adjustment") to compensate for potential
slippage. The outturn figures for the years 2000-01 and 2001-02
in Table 4 represent the cash figures.
6. The relationship between the totals for
country allocations shown in Table 4 and Table 2 will vary slightly
from year to year and exact reconciliation is difficult. However,
taking 2003-04 as an example Tables 4 and 2 would be reconciled
as follows:
2003-04
Country Programmes
|
Table 4 in DR |
Table 2 in DR
|
| Sub-Saharan Africa | 683 |
664 |
| Asia | 545 | 551
|
| Rest of the World: | | 195
|
| Europe/Central Asia | 69 |
|
| Americas/Overseas Territories | 70
| |
| Middle East/North Africa | 46
| |
| Other Regional Programmes | 16
| |
| Sub-total (A) | 1,429
| 1,410 |
| Plus: | |
|
| Administration | 93 | Included in Table 2
|
| Sub-total (B) | 1,522
| 1,410 |
| Minus: | |
|
| Estimating Adjustment (approx 7% of Sub-total A)
| 99 | |
| Capital | 16 |
|
| Country receipts | 5 |
|
| Total | 1,410 | 1,410
|
| | |
7. For 2000-01 and 2001-02, total outturn as shown in
Table 4 (programme) and Table 5 (administration) are within the
total resource figure in Table 2. The estimating adjustment for
in each of these years has wound down and the overall outturn
shows a net slippage.
Q4. On Table 4 why are no contributions being made to
the UN Development Programme and UNICEF beyond 2003-04?
8. No contributions are shown for UNDP and UNICEF after
2003-4 because there is no formal commitment. Funding for subsequent
contributions will be drawn from the Unallocated Multilateral
Contributions line, as explained in footnote 36. Future commitments
to International Finance Institutions are similarly treated (see
footnote 31).
Q5. In Table 2 spending on "Innovative Approaches
to Development" is budgeted at £228 million against
prior year outturns of £333 million in 2001-02 and £456
million in 2002-03. Can a breakdown of planned spending under
this objective be provided?
9. A breakdown of planned spending can be found under
"Policy Programmes" in Table 4 in the Departmental Report.
There has been a major restructuring of the way our advisory
programmes were to be handled in 2003-04 onwards. A number of
programmes previously falling under "Innovative Approaches
to Development" from 2000-01 to 2002-03 were transferred
to "Improving the Effectiveness of Multilateral Aid".
In addition, part of the DFID Capital Charge, recorded under "Innovative
Approaches to Development"up to 2002-03, will fall under
"Programmes Contributing to Multiple Objectives" from
2003-04 onwards. This accounts for about £57 million in 2003-04
and £56 million in both 2004-05 and 2005-06. The outturn
figure for "Innovative Approaches to Development" In
2002-03 also included a £50 million AME provision for possible
CDC losses.
Q6. How will the performance of the £1 billion funding
to the International Development Association announced in the
2002 Spending Review be measured? And why does the budget for
IDA 13 in Table 4 only amount to £700 million?
10. IDA performance is monitored through the UK's representation
on the Board and through IDA's reporting systems, which cover
a range of performance measures. The figures for IDA 13 in Table
4 add to only £700m because of a change in accounting rules
at the start of 2003-04. From that date we score spending against
DEL when the promissory notes through which we discharge our commitments
to IDA are deposited; before that date we scored them when they
were cashed. £300m was deposited through a promissory note
during 2002-03 and was charged to AME, but there was no encashment.
Q7. Table 4 (top of page 128) includes £15 million
in each of 2002-03 and 2004-05 described as "EDF—Capital"
Can you explain why this is Resource Spend and not balance sheet
investments?
11. Table 4 shows the allocation of funds to programme
managers, including items that are classified as capital. The
amounts included in the line EDF (capital) represent part of the
EDF which is managed by the European Investment Bank (EIB) as
special loans to ACP countries: loan recoveries are passed back
to members states and are credited against the asset on DFID's
balance sheet.
Q8. Can a note be provided on how the "Performance
Funds/DG Reserves" work and how DFID will be measuring the
effectiveness of these additional funds?
12. The Director General Programmes will manage DG Reserves;
individual Geographical Division Directors will manage other reserves.
These resources will, subject to Ministerial approval, be progressively
allocated to individual programmes as the year in question approaches
and in-year, in the light of changing needs and priorities. Firm
allocations already made by the time of the annual budget will
be reflected in future Departmental Reports. Allocations from
reserves will be subject to the same quality assurance, approval
and impact assessment procedures as other geographical allocations.
The effectiveness of holding reserves in this way will be assessed
in the annual Resource Allocation Round.
Q9. Can details be provided giving the rationale for the
change in the presentation of Administration Costs within the
budget, and further details of the exact nature of this change?
Are there figures showing the outturn for previous years using
the new methodology in order to review trends? The Department's
budget for 2005-06 represents an increase of some 20% over 2004-05,
yet there is not a corresponding increase in administration costs:
what efficiency savings are you planning?
13. In the past, some of the costs of overseas offices
and of consultancies that supported the work of DFID, as distinct
from directly benefiting partner governments and organisations,
were, by agreement with the Treasury, charged to the programme
budget. The change to Administration Costs brings all DFID operating
costs under a single budget, enhancing transparency and facilitating
more effective management and use of resources. There are no consistent
historical data because some of the costs now to be charged to
Administration were previously an integral part of budget lines
under the programme with other costs that will remain there. The
2003-04 Administration budget was developed from a forecast of
likely spending under the new definitions. A validation exercise
is now going on to review the accuracy of these forecasts in the
light of the 2002-03 outturn. The ceiling for future years' Administration
Costs will depend on the results of this exercise.
14. The fact that Administration Costs are projected
to grow more slowly than Administration Costs in the SR2002 period
is deliberate DFID policy. Among the reasons for this are:
— The growth of the programme will not lead to a
pro rata increase in the number of activities; in some areas we
shall increase the scale of our support to programmes and projects
rather than financing more of them.
— We intend to continue efforts to ensure that our
efforts are focused on strategic priorities and avoid a multiplicity
of small interventions with limited impact and high administrative
costs.
— We will maintain pressure for efficiency in our
overhead support costs within the framework of Service Level Agreements
that set out performance and efficiency standards.
Q10. The Resource Estimate for Superannuation for 2001-02
was £118 million, and for 2003-04 this has fallen to £60
million. The estimate explains that this is a consequence of adopting
FRS 17. We read in the newspapers that the adoption of FRS 17
usually exposes a deficiency in pensions funding, which is the
reverse of what is occurring here. Can you explain this dichotomy
please? Also, as the total resources for the Department have not
been amended from the 2002 spending review, how has the £38
million saving been utilised in the main budget?
15. DFID's Overseas Superannuation vote cannot be compared
to most other pension schemes. It provides pensions to former
expatriate colonial civil and public servants and their dependants.
With the passage of time the number of beneficiaries inevitably
falls and there are neither new entrants nor any accumulation
of additional benefits. Payments made out of the vote are therefore
slowly falling. The scheme is unfunded so there are no assets
to vary in value compared with future liabilities. Under cash
accounting we had an annual vote that financed the cash payments
to beneficiaries. Under resource accounting the net cash requirement
in the Estimate effectively reveals something akin to the old
measure and this is £114 million in 2003-04, down from £118
million last year.
16. Under FRS 17, the resource budget now shows the movement
in the unfunded liability rather than the annual cost. The Balance
Sheet will show the whole discounted expected future cost of pension
payments as a provision. The annual resource cost then becomes
the change in the required provision other than that which offsets
the cash payments made during the year. Changes will result from
reduced discounting, as expected future payments draw nearer,
and from any actuarial revaluation that may have taken place,
for example as a result of revised forecasts of life expectancy.
The sums shown in the DR for future years result only from the
first of these, as the impact of any future revaluations cannot
be predicted.
17. Overseas Superannuation comes under a separate vote
to International Development and voted resources cannot be switched
between them. Even were this not so, pensions expenditure such
as this scores in Annually Managed Expenditure (AME) and cannot
be used to supplement Departmental Expenditure Limits (DEL) set
in Spending Reviews. For both these reasons, changes in the resource
cost of Overseas Superannuation do not affect the main International
Development budget.
POVERTY REDUCTION
STRATEGIES, MEMORANDUM
OF UNDERSTANDING
AND BUDGET
SUPPORT
Q11. Can you update last year's information on budget
support spending by providing the figures by country for 2002-03,
and estimates by country for 2003-04 and subsequent years.
18. The table below relates to 2002-03. We do not have
estimates for 2003-04 and subsequent years.
Estimated Budget Support Expenditure in 2002-03
|
| Country | £m
|
|
| Afghanistan | 13 |
| Bolivia | 1 |
| East Timor | 4 |
| Ghana | 12 |
| Montserrat | 8 |
| Mozambique | 10 |
| Pakistan | 11 |
| Rwanda | 22 |
| Sierra Leone | 10 |
| St Helena | 6 |
| Tanzania | 45 |
| Uganda | 24 |
| Vietnam | 7 |
| Zambia | 8 |
|
| Total | 180 |
|
| |
2001-04 PSA
Q12. On the targets where the annual report reports underperformance
can a note be provided detailing what steps DFID is taking to
bring performance back "on track"? [Targets: 1e), 1f),
2a), 4a), 5a)]
(1e) An increase in the per cent of EC Development
Assistance going to poor countries from 50% in 1998 to 70% in
2006.
19. The UK lobbies other member states, the Commission
and the European Parliament, particularly throughout the annual
negotiating process to agree each Commission budget, to increase
the level of commitments to low income countries in Asia. In parallel,
we have supported the Commission's management reforms, in particular
their efforts to improve levels of spend through the regular budget
and the European Development Fund. The latter's concentration
on the African, Caribbean and Pacific countries gives it a built-in
poverty focus. But spending levels have been uneven. Deconcentration
of responsibilities and staff resources from Brussels to in-country
delegations, enhanced efforts to reduce and eventually eliminate
the backlog of unspent funds (including cancellation) and simplification
of internal procedures illustrate the areas identified by the
Commission where progress has been made. The share of assistance
from the Commission to low income countries rose to 43.5% in 2001.Once
we have the 2002 figures we will have a better idea if the decline
of recent years has been arrested.
20. Taken together, these reforms have started to address
many of the systemic constraints facing the Commission's external
development assistance efforts. But we want the Commission to
deepen the process by accelerating these reforms, reducing budget
line numbers and a more consistent use of new development instruments.
We want to further encourage the development of a quality and
performance based culture and through the Convention process have
argued for an institutional arrangement for managing the Commission's
external actions budget which reflects its primary objective.
21. DFID and HM Treasury launched an action plan in May
2003 to support the reform of the Commission's external assistance
drawing together these and other elements to improve the poverty
focus, but also emphasising the importance of improved aid quality
in achieving positive outcomes. The plan points out that the forthcoming
negotiation of the next financial perspectives from 2007 offers
opportunities to continue the reform process. The aim is long
term sustainable improvements.
22. These measures are being taken to get the Commission's
performance back on track. But as one of 15 (soon to be 25) member
states our influence is limited, especially when some of these
do not necessarily share our view of the purpose of the Commission's
development assistance.
(1f) Adoption and implementation of effective Poverty
Reduction Strategies by 2004 in all countries accessing International
(IDA) high impact or adjustment lending.
23. Of the 77 countries currently borrowing from IDA,
26 now have full PRSPs and a further 24 have interim PRSPs. However,
of the countries without PRSPs or interim PRSPs, only India has
received adjustment lending in the last two fiscal years. In all
countries where DFID has programmes, we are supporting national
efforts to develop and implement national strategies to reduce
poverty. However, it is important to note that this target is
largely outside of DFID's control.
24. It has taken longer than expected for countries to
move from I-PRSP to full PRSP, because donors had underestimated
the complexity of preparing PRSPs in a participatory manner and
the capacity constraints faced by countries. Moreover, there is
a trade-off between speed and quality in preparing full PRSPs.
DFID generally believes that it is better for countries to take
time to develop strong strategies to which they are committed,
and that the use of interim PRSPs as a trigger of debt relief
and PRGF assistance enables countries to do this without delaying
their financial assistance.
25. Conflict has also been a major cause of delay in
countries preparing both I-PRSPs and full PRSPs. It is also worth
noting that eight of the IDA borrowers that have not prepared
an I-PRSP are small island economies with GDP per capita above
the normal IDA threshold.
26. The 27 active IDA borrowers who have not yet produced
an I-PRSP are: Angola*, Burundi,* Comoros*, Congo Republic*, Eritrea*,
Nigeria‡, Kiribati†, Papua New Guinea, Samoa†,
Solomon Islands, Timor-Leste, Tonga†, Vanuatu†, Afghanistan,
Bangladesh, Bhutan, India‡, Maldives†, Nepal, Uzbekistan,
Haiti, Dominica†, Grenada†, St Lucia†, and St Vincent†.
27. Countries marked with * are affected by conflict.
Countries marked with † do not in fact qualify for IDA on
income (GDP per capita) grounds, and are classified as small island
economy exceptions. Countries marked with ‡ are currently
preparing PRSPs at a regional rather than national level.
(2a) Relief of unsustainable debt by 2004 for all
Heavily-Indebted Poor Countries committed to poverty reduction
building on the internationally agreed target that three-quarters
of eligible HIPCs reach Decision Point by end 2000.
28. So far, 29 HIPC countries have demonstrated their
commitment to poverty reduction by preparing at least an interim
Poverty Reduction Strategy. However, three of these countries—DR
Congo, Cote d'Ivoire and Central African Republic—are affected
by conflict and have not therefore qualified for debt relief.
Of the remaining 26 countries, all are receiving interim debt
relief, and eight have so far received full irrevocable relief.
29. We expect that at least 20 of these 26 countries
will have reached Completion Point by the end of 2004. However,
as noted in the response on target 1(f), DFID generally believes
that it is better for countries to take time to develop strong
poverty reduction strategies to which they are committed, rather
than rushing to Completion Point, and that the use of I-PRSPs
as a trigger of debt relief and PRGF assistance enables countries
to do this without delaying their financial assistance.
(4a) An average increase in primary school enrolment
from a baseline established in 2000 of 75% to 81% on the basis
of data available in 2004.
30. Please see p135 of Departmental Report. The latest
primary school enrolment data gives an average for DFID's top
ten development partners of 76%. The apparent lack of progress
since both the baseline and the last report (which gave the latest
figure as 86%) can mainly be explained by better data availability
and more accurate reporting.
31. Several countries, including China and South Africa,
have previously had unrealistic enrolment rates of over 100%;
these statements have now been revised downwards to more realistic
figures. Ghana has a particularly low enrolment rate (51%) and
is included in the latest data but was not in the previous figures.
32. A figure based on latest data which is more directly
comparable to the baseline can be calculated by excluding Ghana
and assuming no change in the enrolment rates in China and South
Africa. This produces a figure of 82%, which suggests that problems
with the data could explain the failure to meet the target, although
there are still some concerns over the quality of the current
data.
33. Despite this within our top ten countries there are
still some that are "off track". Ghana has a very low
enrolment rate, Zambia's has actually fallen and Tanzania's has
stagnated. We are addressing these in the following ways:
ZAMBIA
34. Zambia faces a background of overall decline in education
indicators through the 1990s, as Zambia's overall economic status
severely declined.
35. In 2002, the new government introduced a Free Primary
Education policy along with increased budgetary allocations to
education.
36. DFID has played a key role in supporting the development
of both the Education chapter of the PRSP and the SWAp (£20
million over five years).
TANZANIA
37. The Government of Tanzania has now introduced a programme
that is already dramatically improving the numbers enrolled. There
are plans to deals with quality issues, however these reforms
are more involved and have taken longer to implement than those
to expand enrolment.
38. Education sector spending will be part of the argument
for financing the PRSP. From our most up to date records this
is likely to be £45 million pa of which education spend is
estimated as 20% (ie £9 million pa for the next five years).
GHANA
39. There are problems with change forecasting because
of weaknesses in the PRSP and the lack of appropriate indicators.
ODI consultants are currently assisting the Government of Ghana
(GoG) with the latter and the CAP was completed in October 2002.
In addition, a DFID funded consultant has been supporting the
ministry with revision of the Education Strategic Plan (ESP).
40. Assuming that the proposed multi-donor budget support
takes off—given that 20% is notionally allocated to education—we
expect to spend at least £60 million on education between
2002 and 2007.
(5a) A decrease in the average under-five mortality
rate from 132 in 1997 to 103 on the basis of data available in
2004.
41. Each year there are 11 million deaths in children
under the age of five years. The vast majority occur in developing
countries. Four diseases (acute respiratory tract infections,
diarrhoea, measles and malaria) are responsible for nearly half
of all child deaths, and malnutrition is an underlying cause in
about 54% Most could be prevented through relatively simple, cost
effective preventive and curative interventions. The greatest
progress in reducing child mortality takes place in a climate
of economic growth and sound governance, and where there is public
sector investment in health and other areas.
42. A recent analysis by the Commission on Macroeconomics
and Health concluded that expansion of available health care interventions
would reduce child mortality substantially, but not enough to
meet the MDG. Investment in appropriate public health and social
services is vital to ensure that economic gains are translated
into human development. Analysis of past successes emphasises
both sound health sector management and a multi-sectoral approach.
The following five key strategies appear the most promising for
reaching the child mortality MDG and DFID will focus resources
on these:
— Expanding existing child programmes within the
health sector;
— Expanding maternal and reproductive health interventions;
— Developing pro-poor health systems;
— Improving family and community practices;
— Maximising the benefits to child health from interventions
in other sectors, including education.
43. Also, child health services must be delivered through
systems that ensure access for the poorest. Uptake of child and
maternal health services is particularly sensitive to increases
in cost, and demand is unlikely to increase unless services are
recognised as being of good quality. Maternal health services
are particularly reliant on a functioning health system with good
referral arrangements for obstetric emergencies.
44. Other important factors impacting on child mortality
include HIV/AIDS (which now accounts directly for 4% of all child
deaths, and contributes indirectly to a much larger proportion),
and the need for improved access to good quality education, and
water and sanitation.
45. DFID is therefore investing in these key areas. Bilaterally,
we have invested over £1.5 billion since 1997 in health system
development in developing countries. We have committed over £700
million on basic education since 1997 and intend to spend a further
£1.3 billion in 2002-07. We have also invested over £60
million in malaria programmes since 1998. Maternal, reproductive
and child health are also key priorities in our bilateral health
programmes. Multilaterally, we have committed US$280 million to
the Global Fund to Fight AIDS, TB and Malaria, and £35 million
to Global Alliance for Vaccines and Immunisation (GAVI), which
is in addition to our significant contributions to multilateral
agencies concerned with child health (eg WHO and UNICEF).
THE NEW
PSA
Q13. Can you explain more about how the high level PSA
targets are integrated into the day to day performance management
of the department? What has been the impact upon how DFID is run
of the new PSA and modified performance management system? What
information do senior management receive to tell them whether
performance is on track or not, and how often? What is the implication
for the skills required by country teams in moving from the "old"
PSA to the "new"?
46. Each of the Public Service Agreement targets is "owned"
by a director who is individually responsible for delivery. Directors
set out how they will achieve their target in their Delivery Plan.
Director's Delivery Plans are underpinned by departmental work
plans, and these in turn are underpinned by individual work plans.
The Department's new PSA targets therefore feed through to teams
and individuals. Also, because of the joint targets the PSA promotes
a more corporate, Whitehall-wide, approach to development with
joint targets.
47. The new PSA and modified performance management system
has provided the Department with clarity about what it is aiming
to achieve, and what it will do to get there. As mentioned above
the new PSA fits onto the Department's organisational structure.
This makes it very clear who is responsible for what. Directors
have, for the first time, written Delivery Plans which provide
their departments with details of: The Challenge, The Strategy,
Risks and Assumptions, Proposed Interventions, Responsibility
for Delivery and The Implications for Human Resources.
48. DFID's Management Board will receive an update of
progress towards all DFID's PSA targets twice a year, in advance
of the publication of the Autumn Performance Report and the Departmental
Report. To report progress we use internationally available data
published annually (eg the World Bank Publication, World Development
Indicators). The Management Board also receive the Quarterly Management
Report that has information on DFID's project portfolio, financial
data, and a summary report on risk management. In addition divisions
have their own complementary reporting mechanisms for their own
individual targets. These are reported on at least annually—to
feed into the annual update of the Director's Delivery Plan.
49. Country teams will not require any new skills to
deliver DFID's new PSA. DFID will be doing the same work—we
are continuing to work towards the MDGs. However, the new PSA
allows us to do this in a better and more focused way.
20 June 2003
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