Oral evidence

Taken before the International Development Committee on Tuesday 17 June 2003

Members present:

Mr John Battle
Hugh Bayley
Alastair Burt
Chris McCafferty

Mr Robert Walter
Tony Worthington

In the absence of the Chairman, Tony Worthington was called to the Chair.

__________

Witnesses: MR SUMA CHAKRABARTI, Permanent Secretary, Mr Mark Lowcock, Director General for Corporate Performance and Knowledge Sharing and MS SUSANNA MOOREHEAD, Deputy Director, Policy Division, Department for International Development, examined.

Q1  Tony Worthington: Permanent Secretary, welcome to you and your colleagues. As I explained earlier, I regret that the Chairman cannot be with us today which is why I am sitting here. We are very much looking forward to going through your annual report with you. Can I just explain the parameters we are working within. There is going to be a vote in the House at four o'clock and there may well be a second vote as well. We are aiming to finish by four o'clock. Some of the questions that we might in other circumstances put to you orally we may ask you in writing. Can I start with what is the most basic question, that is that the Department is dedicated to the Millennium Development Goals, that is what its raison d'être is, halving poverty and fulfilling these goals. Could you start us off by telling us about the Public Service Agreement and the challenge of how you came to that Public Service Agreement whilst wishing to demonstrate that it was the Millennium Development Goals that you were seeking to achieve.

Mr Chakrabarti: I will start by introducing my colleagues. Mark Lowcock, on my left, is known to the Committee and is the Director General in charge of Corporate Performance and Knowledge Sharing. On my right is Susanna Moorehead who is Deputy Director in our Policy Division. The PSA is all about delivering the Millennium Development Goals. Right at the top of the PSA is the sentence that we are trying to eliminate world poverty by achieving Millennium Development Goals. It is right the way through, and we see it also in a number of the targets, for example, a number of indicators. They are the same sort of indicators that are reflected in the Millennium Development Goals. It is trying to infuse the whole of the system within DfID through the PSA. Why the new PSA? Largely because we felt the two previous PSA's did not have currency within DfID to a large extent, they did not drive our performance, they did not activate accountability; it was not clear who was accountable for any of the objectives and so it was not really driving our performance. We wanted to keep the Millennium Development Goals but translate them through a PSA which would actually drive the performance of the Department, hence the change. We now have a PSA which is structured around our departmental structure so there is a PSA objective for each of our directors and they are each accountable for that PSA and have to produce a delivery plan to say how they will deliver that PSA. That then gets translated all the way down to individual responsibility plans. So if you are the receptionist in our office in Malawi we want you to know how you are going to achieve the PSA and through that the Millennium Development Goals. That has been the process we are working with. I think there is quite a helpful diagram on page 113 in the Report which tries to map that out. Essentially what we are trying to get to is a situation that Richard Manning, one of my ex-colleagues, told me of which is the NASA example where you go into NASA and you ask the janitor what he is here for and he or she says, "I am here to put a man on the moon." This is obviously 30 years ago, but that is the sort of idea that everyone in the Department should feel that through the PSA, through their individual objectives, they are trying to deliver the MDG's.

Q2  Tony Worthington: But why are you putting a man on the moon? That is a simple answer for a relatively simple function; we even say it is not rocket science these days. What you are trying to do is much more complicated than that, is it not?

Mr Chakrabarti: Undoubtedly development is a very complicated subject. We are not trying to say that everyone in the organisation has to do everything to try to achieve the Millennium Development Goals; we each have different roles clearly. However, we try through the PSA to set out which role is apportioned to whom. So the African director is clearly in charge of delivering the African PSA objective and his team produce a set of country plans which try to help him achieve the PSA objective and so on through their teams. It should be quite clear to individuals what their individual tasks are, if you like, in what is clearly a complex business.

Q3  Hugh Bayley: One of the things I welcome in the Departmental Report is the clarity with which you show your performance against the Public Service Agreement indicating the areas where you are hitting targets and the areas where you are not hitting targets. I think that is very useful in terms of accountability. However, what I would like to see more of in the report is an explanation of what you are doing to correct your achievements where you are failing to hit the targets, especially when it is a shared target. I think in terms of scrutiny, say the target of getting countries to reach a decision point on debt relief is shared between your Department and the Treasury, but in terms of accountability I do not know what your Department is accountable for achieving - perhaps negotiating Poverty Reduction Strategies - and what the Treasury is responsible for. How could you improve the report in future?

Mr Chakrabarti: I think that is a very fair point. What we would like to do - and this is obviously something we need to discuss with Valerie Amos and the ministerial team - is have a Departmental Report next year structured around the PSA. So it would have in each chapter each PSA objective rather than saying where we are and how we got there and then, if we are off course, explaining what the strategies are to get us back on course. In the existing PSA we were off track on six out of the 26 targets. If we had done that this year, if we had not closed down that PSA, that is what you would have got, I think, a strategy trying to explain how we were going to approach that. In the case of the joint PSA targets - you are quite right, there are quite a few of them now, which is a good thing as it is a sign of a joined up Government - what we are trying to do is to have joint delivery plans. We have been working on joint delivery plans with these other departments who, jointly, are responsible for trying to deliver that. I think next year we will be able to say more clearly if we are off track in a certain area, who is responsible for doing what in trying to get it back on track on that PSA.

Mr Lowcock: Can I add a point on the specific example you give, the debt relief point? In terms of responsibility for debt relief the Treasury lead on the IMF so it is Treasury officials who co-ordinate the HNG process on that. There is a joint team of DfID and Treasury officials in the UK's office in the World Bank and IMF in Washington. On the DfID side we lead on the World Bank. The HIPC process requires decisions by the boards of both institutions and then at the country level where countries have to set out credible plans to justify debt relief, the dialogue is mostly between the DfID team and the other donors there - including the Bank and the Fund - and the country. That is the bit of HNG that is available at country level. As Suma says, we do have a joint delivery plan with the Treasury for how we are going to pursue these objectives and we very much feel that it would be better to have more of that in the public domain and to make the accountability clearer. From our point of view this is very helpful.

Q4  Hugh Bayley: I welcome what you say. I think it would be helpful to spell out what the improvement or correction strategy is if the original approach is not delivered. One of the things I note, again using debt relief as an example, you say in the Report that despite not hitting the target "We do expect a further 14 eligible countries to receive full debt relief by 2004" which in a sense is to set yourself a goal to hit to correct the performance and that I think is very welcome and we will look forward to next year's report. The other question I have is this, yours is a Department which is particularly prone to be hit by events which are not under your control, for instance humanitarian crises, and it is not always the case - as with Iraq - that the Chancellor says that this is a contingency which was so unplanned for that he will provide some extra resources. Often you have to re-direct resources within your programme which presumably has an effect on your ability to hit the targets. If you are shifting money away from education and into a health crisis, then one would expect your education performance to suffer. How do you judge the consequences of shifting resources and does that influence the shape of the decision you take, the areas which you choose to move resources from?

Mr Chakrabarti: Yes, it does. Flexibility is absolutely key, you are right. We have tried to put more flexibility into our framework than we had in the past for those situations where the Chancellor is not able to be generous to us. What we have done is to increase the unallocated portion to give us that greater flexibility. When we try to allocate money or move money around from one area to another we have to look at the opportunity costs of doing so. What Mark, in his old role of Director of Finance, used to do quite often was to put to ministers that you can take money from the following areas but these are the costs if you do so. There was an explicit process going on. That is in the short term. If there is a longer on-set crisis and we have to put more money into it next year, what we would use is our normal resource allocation process involving the directors' delivery plans. Instead of saying to directors that we would have to put more money into area X next year, Mark would be saying to directors this autumn that they would have to take it from some areas so could they look at a scenario which may reduce your spending in this area and what would be the consequences. Then ministers are faced with an explicit choice: Do they want to make cuts in this area in order to do more in another area. That is the sort of situation we are in.

Q5  Tony Worthington: Could I just put in a question about meeting your targets and your objectives? In the past British development money has received pretty high praise from other people - from other agencies - assessing us for its quality. We are now switching to a sector-wide approach rather than funding particular projects. Is there not a considerable risk that having tightened up your system here in terms of fitting in with the Millennium Development Goals that the mechanism by which you are going to enact it is much less under your control and under the control of departments which your are hoping will grow and become sustainable themselves and we may have to face up to criticisms because we cannot demonstrate what we have done in the future because it was not under our control?

Mr Chakrabarti: I think there is certainly that risk and it is best to be explicit about it. As we move from aid which we could control - project aid, for example, is very tightly controlled - to this more budget support type of control, towards essentially financing Poverty Reduction Strategies, we do see some control. Why have we done that? In part because, despite having all that control over projects, we have very successful projects but unsuccessful countries. One of the reasons why we thought that was happening was essentially that we were imposing our own choices much more than buying into the choices of other countries. So there is a shift in the political economy here in the way we think about aid. The whole Poverty Reduction Strategy process is to say that we will buy into other people's choices provided they go through a decent process. That cedes control undoubtedly, but it also makes us work much more at the policy institution end of the whole process of development aid. That is where DfID has had a long standing strength recognised internationally so I do not think our reputation is going to suffer because of that so much, unless we end up financing a lot of very bad Poverty Reduction Strategies. That is the real risk. I think in terms of playing to our strength, it still plays to our strengths around the policy institutional change kind of work that we do.

Q6  Mr Battle: You mentioned the question of flexibility. I just wondered how that worked at the local level and to what extent the method of actually allocating resources can actually be targeted on particular programmes and countries in line with an assessment of the most effective use of that aid once you decide it might not be, after a little bit of trial and error, and what you can do to switch it? At the local level are their incentives for unused funds to be used on those programmes or can they be switched anywhere else? Once the programme is set is it followed through with no change?

Mr Lowcock: Our basic approach is to allocate a budget to our programme in a particular country ideally over a three year period. The country team therefore has a set of resources they know are going to be available to them. They have a strategy set out in the country assistance plan which says the things they are going to focus on, the main bits of the recipient country government and NGO sector and other donors they are going to work with. Inevitably we find that there are some investments that we approve that go better than others and we find that sometimes we have to add resources maybe because the investment is going so well that we think we can generate far greater gains if we put more money into that. A good example of that is in Kenya in the primary education sector when the new government came in at the end of last year. They are very committed to universal primary education and we put more money into that programme. We have also had examples of where we have offered money for something, not been able to agree all the fine print of how the programme should work and have had to conclude sometimes that in the circumstances this may not be one for us. Those decisions we tend to give to the DfID team in the country. They are accountable to headquarters and to ministers for the overall strategy and for the big decisions; we try not to micro-manage them, but let them make a case by case judgment themselves.

Q7  Mr Battle: I am not campaigning for one particular form of investment, let me make that clear from the outset; it is just one micro-example that comes to my mind. The Committee visited Malawi and there was a question of food security. One of the programmes that had been started the previous year before we went was the seed packs programme. That went very well but it seemed that others were not doing it and that our Department was filling the real gap. I am simply asking the question, would there have been flexibility to go behind that if both in the country and here at the head office you felt that was an area you ought to move into? Do you have the flexibility through the system to do that if you felt it was appropriate?

Mr Lowcock: I think the answer is yes.

Mr Chakrabarti: In Malawi the answer is yes. They have the flexibility to do that and provided there are spare resources around we can move very quickly. I can give you another very good example, a bit like the Malawi one. In Bangladesh very recently the government, not reforming in large areas of its policy, but in the area of jute mills suddenly decided on a massive reform programme very surprisingly. Our team there moved very rapidly to support that process and they were able to have the flexibility to do that. They did not have to come back to headquarters and argue the toss with the senior staff at all; they could do that in a very quick and opportunistic way but in a very effective way as well.

Q8  Mr Battle: In terms of budgets for countries programmes can I say that very encouragingly in our report to see Tanzania will actually have the biggest bi-lateral programme. It is often quite jokingly said of the British - and indeed other countries - programmes that most of the aid goes to Egypt, Turkey and Israel. When we see it going to an African country it is a very clear sign of commitment. What led to Tanzania being selected as being the right policy environment for that quite substantial increase in programme?

Mr Chakrabarti: Tanzania is one of the major reformers in the development field at the moment. Along with Uganda and Mozambique I would see it as a third real great reformer in the last few years. I think the reasons are partly the political transformation that is taking place in Tanzania with a government that is very heavily committed to poverty reduction, very heavily committed also to taking charge of the whole process of donor country relationships. Mark can tell you more about this because he covered Tanzania from Nairobi. Essentially what the government did was write an excellent Poverty Reduction Strategy paper and so we have much more confidence in this new political economy of aid. The government is committed to it, it actually has a consensus amongst its population for the policies it is pursuing and it has obviously got many poor people. It is obviously worth backing for that reason. It is not surprising that President Mkapa is now seen by many of us as one of the leading practitioners of this new approach.

Mr Lowcock: Just to give a couple of specific examples, one of the things we look at is what, on the ground level, is changing to give us confidence that the policies being espoused are having an impact and in Tanzania we have been impressed by a couple of things. Firstly, the average growth rate which, for 25 years - from about 1970 - was at a desperate level in Tanzania. It has increased a lot since the mid-90's and that reflects much better economic policies. Secondly, we are seeing that as the government is being able to have a bigger budget - partly because of debt relief and partly through aid - they are focussing those resources on what seem to us to be some of the priorities. That is having an impact, for example, on the proportion of children who are in primary school. I was looking at some numbers the other day and there is a significant increase in the number of Tanzanian children now in primary school. We can perhaps send you more information about this, but one of the things we look for is evidence that policies are being translated into outcomes, delivering the Millennium Development Goals.

Q9  Mr Battle: I had the privilege of serving in the Foreign Office for some years and I think that what that taught me was that reasons for engaging with other countries can be complex, putting it at its most neutral. I just wondered, did the decision of the government of Tanzania to actually purchase the much-criticised $40 million air traffic control system cause you any doubts about the kind of policy environment that Tanzania offers? You have described it in very positive developmental terms and that is most welcome and we may get an opportunity to explore what you do if the Committee visits next year. But that particular decision was much criticised.

Mr Chakrabarti: It certainly caused us to pause and think again. It is one of the countries where we actually cut budget support because of that decision. What it showed us was that Tanzania, despite its great reform programme, its public expenditure management, its procurement systems, are still quite weak. In a sense, to let an investment like that go through almost unchallenged really showed that we needed to work hard with the Tanzanians to fill those gaps. That is what Clare Short did. She went out and negotiated an agreement with the president essentially to restart the budget support provided there were reforms in the procurement systems in the public expenditure framework. You are absolutely right, even in the greatest reforming countries like Tanzania you can have that kind of situation.

Q10  Mr Battle: I may well have jeopardised my chance of getting through the airport by asking the question, but can we say that is behind us now, our relationship with Tanzania?

Mr Chakrabarti: That episode is behind us, yes. The relationship is very good. President Mkapa was here recently. He saw the Prime Minister and Valerie Amos. He also chaired the Rome Harmonisation Meeting in February which I attended. It is well behind us.

Q11  Alastair Burt: I want to turn to Ethiopia now. If you look at the budget predictions over the next few years, firstly we find the estimated outturn for Ethiopia this year is over £40 million compared with £11 million in the last financial year. We are interested in how you explain such a dramatic increase, bearing in mind that humanitarian expenditure is covered in a different budget line. Why does the planned budget for Ethiopia for the next few years fluctuate as much as it does? And what were the key factors influencing the decision for the rapid move to budget support in the case of Ethiopia?

Mr Chakrabarti: The reasons for moving to budget support are the same reasons as why we have increased our commitment to Ethiopia. Essentially there is a very strong developmental case. I think over 44 per cent of 67 million people in Ethiopia live on less than a dollar a day. The average income per head is $100 in a year. It is a really poor country but with extraordinary good potential. It has always had a rather good bureaucracy compared with many African countries and it has a very reformist government at the moment led by President Meles and they have been putting in place a policy framework which in a sense is a bit like where Tanzania and Uganda were some years back where they are actually about to make, we feel, a big jump ahead. That is why we have invested so heavily in it. We are aware that the short term situation, the humanitarian situation which you referred to, which is not reflected in the figures, could actually derail some of the process of change there because clearly they are having to find resources with our help to feed people rather than trying to implement other reforms. Nevertheless that government has shown a great commitment so the usual test for budget support is one, does the country have a lot of poor people in it? Met. Two, is it a government that is showing that it wants a reform in order to reduce poverty? Yes. Third, are the risks that we run in giving budget support worth running because the developmental benefits would be higher? Again, we feel that is the case. It is a big jump, I agree, but I think it is a worthwhile risk to take.

Q12  Alastair Burt: So at this stage you are not identifying particularly where the money might go?

Mr Chakrabarti: There is a country assistance plan which was published I think in March which identifies the sections, but I do not have it to hand. There was a public consultation involving the Ethiopian government as well.

Q13  Alastair Burt: Human rights. Ethiopia takes a fair wack from Amnesty in its 2003 report. When the rubber hits the road with human rights and development policy what do you do? The charges against Ethiopia are fairly stark: political trials, detention without charge or trial, torture, extrajudicial executions. How do you cope with it in practice when you are dealing day to day with government and they are looking for support for those who are the victims of that sort of background?

Mr Chakrabarti: First of all we would be looking at the government situation generally in the country in designing our country assistance plan. We would want a dialogue with the government around human rights charges like Amnesty have laid against the Ethiopian government. I do not know the details; I would have to get back to you on that. Our general policy is always to take account of that sort of thing in our dialogue. For example, similar sort of charges have been laid at China's door. That is always taken up by our ministers with the Chinese government to discuss whether these are brakes on the development process and what they are doing about addressing some of these concerns. In the case of Ethiopia I presume the same has taken place, but I would have to get back to you on the details.

Q14  Alastair Burt: But it is practically difficult is it not, because if you actually withdraw support and withdraw programmes it is the people at the bottom who suffer.

Mr Chakrabarti: Exactly. This is a classic case not so much in Ethiopia but more generally with the whole issue of poor performers - as we call them, or failed states as some people might call them - where standards of governance are so poor that in the past - and many donors have done this - people have walked away from those states. Nigeria is a classic example of this, where there are very few donors left. I think this Government is taking the view that that is the wrong approach, that you have to stay in there and try to persuade and influence change. You may not run a very good programme in those situations, but you have to keep trying to make the change with the governments of those countries.

Q15  Alastair Burt: If we turn next to Zimbabwe we find ourselves in a not dissimilar situation. Funding in Zimbabwe has almost doubled this year but will more than halve again by 2006. Zimbabwe has a human rights situation that we know well, but could you just talk us through the ups and downs of that money but also in terms of support could you answer this: there is growing concern about the influence of Libya in Zimbabwe. Libya appears to be filling a gap that others have left in the manner you have just described. Does the Government have a view about the intentions of Libya towards Zimbabwe and how are our current policies towards Zimbabwe being affected by having Libya knocking at the door and extracting what would appear to be quite a high price for its support in the current international situation?

Mr Chakrabarti: Just on the figures, in the case of Zimbabwe, any increase in the amount shown is purely humanitarian. Our regular programme in Zimbabwe has been cut quite drastically.

Q16  Alastair Burt: Why?

Mr Chakrabarti: Because in this case it is such a failed state and the policies are so bad that it is very difficult to do decent development work. It is not a case like Nigeria where there are some good policies as well as quite a lot of bad. In the case of Zimbabwe you know the situation. You just cannot get the aid to the people who need it. Violence repression inability to move around, fuel, food, foreign exchange shortages, inflation at nearly 250 per cent, rising 10 per cent a month. This is a country in freefall.

Q17  Alastair Burt: At what stage does the government go to the UN and say that enough is enough, we cannot work here, people are starving, people are dying, we cannot intervene on our own? At what stage does the UN get involved and start the process that could at some stage lead to some serious intervention to change the regime?

Mr Chakrabarti: I think this is question which would be better directed at the Foreign Offices rather than mine, but certainly the government has been talking to the Secretary General of the UN, has been talking to leaders of the neighbouring countries about what can be done about the situation. At the end of the day it is the poor people in Zimbabwe who are suffering very, very badly. This is what is such a disaster about this country and I feel quite strongly about this because I used to work on it. This is a country which should not be in this situation. It is quite a resource rich country, both human resources and natural resources. This has been a disaster and we have had to reduce our regular programme essentially to the feeding situation and also HIVAIDS work. That is all we can do in a sensible way at the moment. On the Libya point - again I think that is a Foreign Office question - if Libya is there in a big way and is influencing Zimbabwe policy, I doubt that the economic policy of Zimbabwe will improve. It does need a completely radical overhaul of its economic and social policies in its approach to the opposition in politics general.

Q18  Mr Walter: I want to ask another question on Zimbabwe and I think I can remember either you or your former secretary of state saying that Zimbabwe used to be the solution to southern Africa's problem rather than the problem itself. Reading your report it says that the amount of humanitarian assistance is largely caused by gross mismanagement and vulnerability is heightened by 35 per cent of adults suffering from HIV. If we go back a few years a lot of our aid to Zimbabwe was focussed around the land resettlement programme and so on which totally broke down as a result of Robert Mugabe. Is there a scenario that you have in the Department as to how you can pick up on that again or have you just written that off?

Mr Chakrabarti: I do not know any detail, but I know there has been some work done with the World Bank and ourselves together in Harare on scenario planning for different Zimbabwes, if you like. I have not seen the fruit of that work, but that will pick up on what sort of policies are required to enable the donors to engage again properly; what sort of land resettlement programme should be put in place that we can all finance and feel happy with. Those sort of questions are being asked by the donors trying to get ready for the day when there is some change and we can actually engage again properly. You are right, this is an economy which should be helping to drive southern Africa, certainly.

Ms Moorehead: We were having just this discussion with Baroness Amos yesterday about how we could get better at predicting countries that are doing quite well but then suddenly go very badly. The new policy division will be doing a lot more work on trying to spot the future Zimbabwe so that we can better prepare our response and prevent conflict and governance breakdown.

Q19  Alastair Burt: I would like to move to poverty reduction and Poverty Reduction Strategies. Can we deal with the difficult issue of striking the balance between donor countries coming in with their own ideas about how something should be done and yet being relaxed enough to allow the local ownership and the driving of the policies even if occasionally you might have to bite your lip because it might not be the best thing? How do you handle that complex interplay?

Mr Chakrabarti: In general what we are trying to do is, exactly as you put it, to let the process run in those countries, offer our views at various points, finance quite often civil society participation in those processes - again offering a wider set of views on what is going on - but if the government, after going through and excellent process, decides on a set of choices which we do not necessarily agree with a hundred per cent but we agree with it to a large extent, then we should be willing to finance the choices they have made. At the margin there may be some completely mad investments which we would not want to be financing, but that is the approach. Again, as you said, it is trying to say it is their choice and not ours which should drive the actual development effort here.

Mr Lowcock: Just to encapsulate it, the more confidence we have in the genuine commitment of the country concerned to move forward under the Poverty Reduction programmes, the more relaxed we are likely to be about micro-level issues. Conversely, the less confidence we have, the more control we will want to have over resources that we are accountable for.

Q20  Alastair Burt: Do you find the same degree of confidence exercised by NGO's and are there any conflicts there? You might be relaxed, but you might find an NGO working very regularly in an area and feeling absolutely determined to pursue a particular policy that it really believes is right and there might be a conflict between your approach and local ownership and what an NGO would like to do if it is being driven from outside the country. Does this arise in practice or are NGO's as relaxed and mature about it as you are setting forward this afternoon?

Mr Chakrabarti: I think this does arise and there is no point in saying that it does not. The same NGO's who have been strong supporters of this shift sometimes also would argue for a particular sector, a particular vested interest and so on. Quite understandably so, to some extent. In some cases this is what they are experts in and they may well feel that that area has not been financed well enough, that policies are not quite sorted out in that area and it is part of their role I think to raise a flag and say, Come on, you have to look at this again. I think what I would like NGO's to do more of is actually raise those issues with the countries concerned. That is also buying into the way that we are now trying to do development systems. There is not much point always lobbying us. What I keep saying to many of our NGO colleagues is that they should lobby the government if they do not like that PRSP. It is their PRSP and that is what we are trying to finance. They should also try to persuade them that they are a very effective delivery channel. There is the whole argument about whether NGO's get squeezed out by budget support also, and I think if more NGO's actually persuaded the governments that they were an effective delivery channel then they would end up receiving the funds anyway. I think NGO's need to embrace that a bit more than they have done.

Q21  Alastair Burt: Could you say a little about your confidence in the accuracy of statistics and evaluating Poverty Reduction Strategies, both your own sense of what it is like and could you also say a little bit about the World Bank's independent review of overall progress in Poverty Reduction Strategies and its own sense of independent evaluation.

Mr Chakrabarti: You can see that six out of 26 of our PSA targets in the last PSA were missed and quite a few were due to data problems. They were not necessarily missed, but in the case of one, primary school enrolment, a classic, where the base line was calculated to be 75 per cent and was actually much lower. We had assumed from the data we had from China and South Africa that there was a hundred per cent enrolment but it turns out, when the data was checked, that there were 93 and 95 per cent. Data problems do bedevil the Department's effort. Why is that? Because poor data is characteristic of poor countries generally. Their systems are not as good as ours yet and so we are working very hard, as you know, through our bilateral efforts to strengthen data collection in a number of countries. Uganda, Tanzania, Malawi, Bangladesh and Nepal are five big programmes where we are trying to improve that. Also, internationally we have joined in with what is called Paris 21 which is a statistical capacity building initiative. I think this has been an area we have neglected as donors over 30 or 40 years, and only recent years - because of the MDG's in many ways - we have been forced to rethink our support on statistics.

Mr Lowcock: Let me mention a few positives and a few continuing challenges. On the positives, what the staff assessment of PRS experience to date shows is growing sense of ownership amongst the governments concerned, stronger dialogue with civil society, a bit of progress on data collection, although frankly, as Suma was just saying, there is rather further to go on that. Challenges we are really concerned about include joining the donors up better and more realistic forecasts of future economic growth. Too many Poverty Reduction Strategies have been over-ambitious about their growth forecasts. There is another major study which has been published in the last month which has taken a longer term perspective of these sorts of issues going back to the pre-PRS period which we were involved in financing for the World Bank and others and we are just digesting the results of that. That corroborates these sorts of messages and adds a few more that we think are probably important. One is to re-emphasise the importance of supporting developing countries' own systems, especially working through the budget process and building the key institutions of the public sector. We are still digesting all of this, but it is important that there is a growing volume of evidence and experience which we can learn from and take account of as we plan for the future.

Q22  Tony Worthington: Can I just ask about a tension we found between the World Bank and the World Trade Organisation. You listen to the World Trade Organisation and it is all about the voluntary putting forward of offers for trade and services, but then for the Poverty Reduction Strategy there has been the expectation of fairly intense liberalisation of their services. Do you sense that tension as well? Is there a role that DfID plays in that?

Mr Chakrabarti: I am not sure I am equipped to answer that question as to whether we feel that tension. I certainly have not felt it myself whenever I have discussed this issue.

Mr Lowcock: I do not remember it being a major issue for Poverty Reduction Strategies. I was very struck when I was in east Africa in the late 90's and up to 2001 by the impact on trade growth in the region covered by the Common Market for Eastern and Southern Africa - 14 countries in eastern and southern Africa - which had some internal reduction of barriers within that group. Trade growth reached double digits in that group of countries and grew much faster than the country's trade with others outside that group. I think that because COMESA is an institution which attracts quite a lot of attention at high levels of government in that group - the heads of state all go to the annual meetings and so on - that was actually quite a powerful experience in terms of addressing reservations about trade openness because people began to see that as small markets joined up the benefits really were quite significant.

Mr Chakrabarti: That is why in the Africa Action Plan in the G8 context the UK have put such a lot of emphasis on intra-regional trade in reducing barriers within regions as well as, of course, CAP reform and WTL as well.

Q23  Tony Worthington: We are getting a lot of attention as MP's at the moment from the Trade Justice Movement. We point out to them in our responses coming from the Department of Trade and Industry that it is up to them, it is voluntary what service they put forward for liberalisation under the GATS process. In going round myself and in talking to NGO's they say that is all very well but you will only get your Poverty Reduction Strategy approved if you have liberalised.

Mr Chakrabarti: I would not have said if you have liberalised.

Q24  Tony Worthington: Or if you are intending to liberalise.

Mr Chakrabarti: If you are intending to or have a commitment to.

Q25  Tony Worthington: Perhaps it could be looked at.

Mr Chakrabarti: We will send you a note on that. We need to research it.

Q26  Mr Walter: Following on from that, there is only a limited amount of money to go round, limited resources, therefore the Department has to have certain criteria for its choice of partners. The World Bank published Assessing Aid: What works what doesn't and why - in 1998 - and the predominant view is that aid only works when government policies generally are good and therefore a more selective allocation of aid to good policy/high poverty countries is where you get the best results. A couple of months ago the Committee were in Washington and had a lot of discussions on the Millennium Challenge Account which does seem to be very selective in the way in which it allocates aid on the basis of liberal democracies and liberal economies, but I wonder if you could give us some steer in the way in which DfID looks at poor performers. Obviously your humanitarian assistance budget - I am just looking at the figures here - has increased from £2.5 million to £33.8 million, rising to £40 million in 2005-6. Inevitably that is going to the poorest performers because all the other policies have failed, but how did performance and poverty levels factor in the identification of the 16 key countries that you brought into the PSA?

Mr Chakrabarti: Very strongly so. The evidence you cite is the same sort of evidence that we have used. Since that publication things have moved on a bit further and now the evidence shows that the most important thing is that the country is poor. That is your guide to allocation. It is a great bonus if it is also reforming. It is a sort of step criteria, if you like. That is why, in our resource allocation framework you will see this target which is to get to 90 per cent of our bilateral programme focussed on the poorest countries by 2005-6. We are at 78 per cent now so we need to move 12 percentage points to do so, that is why we are also encouraging the EU to do similarly. That is a key principle in the way we do resource allocation of our bilateral programme. The Americans have taken their Millennium Challenge Account - not all of it, part of it - and have gone for a performance bonus pool. The very best performers would get this extra money. It is an interesting idea as long as it does not impart higher transaction costs on the whole system obviously. Where does that leave us with poor performers, countries which are still poor but which do not have good policies? That has been the sort of situation that we have tried to address in a place like Nigeria. It is a very good example. One in five Africans is a Nigerian therefore what happens in Nigeria matters for the achievement of the Millennium Development Goals in Africa. If you do not get Nigeria right then Africa is not going to hit the MDG's. The next few years, between now and 2015, donors and the Nigerian government and civil society have really got to transform Nigeria's performance. Does that mean we should stand back and just say that when they have their act together we will go and help them? Or does that mean we try to influence and engage? The Government has gone for the latter strategy, but we do not put huge sums of money into Nigeria compared with programmes in, for example, Malawi. We do not have a very good toolkit, in my view and the view of the Department, on how to work with poor performers. When you go to a performing state you are sent out with the usual toolkit which has been developed in the World Bank, in the OECD and it is the same old arguments that we have had for years, do more with civil society, do more with non-traditional providers and so on. The problems are essentially to do with the malfunction of the state and so one can certainly address some basic needs through those routes. We have set up a new team in our policy division to look at this, the whole question of poor performers and how should we and other donors engage with them in a far more forensic and a far better way than we have in the past.

Ms Moorehead: I think the first thing to say is that all countries are poor performers in some respects, this is a spectrum, not an end point. We are quite cautious about categorising countries like this and we would prefer to look for opportunities in poor performing countries. Suma made the point about arriving with the normal package. We are doing a lot of work on drivers of change in poor performing environments, so for example looking at how elites in those countries benefit from poor performers, are there ways in which we and other donors could engage with elites to try to change their minds? Are there other levers of power that we would not normally work with? In Bangladesh which is a long-standing poor performer but a country which I do not think we would ever pull out of, we have supported for years very large effective national NGO's and increasingly what we are doing is joining them up with bits of government so that what they have learned from providing primary education can inform government policy. There are cases - and you mentioned Zimbabwe - where we do have to take a decision that there is nothing we can actually do right now, but even in cases like that we need to have a much more imaginative re-entry point when the time comes. I think it is worth saying that in our portfolio of investment in poor countries we need a balance between the really, really difficult ones where it is very hard to see what we can do and the success stories, and also within the Department to get much, much better at lesson learning between them. That is something we are putting a lot of effort into so that if we know that something has worked in post-conflict reconstruction in Sierra Leone, are there useful tools coming from that which can help us in other contexts. But it is a struggle, to be honest.

Q27  Mr Walter: I mentioned the Millennium Challenge Account because it was something that I certainly found interesting but not necessarily something I would advocated, but it is very much a carrot approach rather than a stick approach. In some of the poorest countries - you mentioned the elites in those countries - the carrot is really of no interest. How can you start to persuade and cajole those people into better governance, into better organisation of their economy? If you simply say that you are not going to support them because they are poorly governed, then it is the poorest people who suffer. Somehow you have to strike that balance, and I just wonder how pro-active you feel that you as a Department can be in that.

Ms Moorehead: We have done a lot of work recently on trying to understand better longer-term political change. One of the things that we found is that even in countries that appear to have no agents of change, to have no reformers, an elite would be very diversified. There will be the elite that are really benefiting from the current situation and those who do want to work either with other bits of civil society or with us. We are looking at ways of making all our overseas staff much better equipped to make those political economy assessments and to work much better with other donors as well. I think this is an area where DfID does have a comparative advantage. We are very fortunate in the quality of advisory staff that we have and we should try to move donors away from making snap decisions about what they see as a carrot or a stick. There are some countries where there are no carrots for the poor.

Q28  Hugh Bayley: I hope it is helpful if we make comments to you about how we feel the process of accountability could be improved, as well as you making your comments to us. I was struck by your response to Alastair Burt's question about data. I agree with you that data are extremely important; they are a way to measure performance. However, data are a means to an end to measuring performance; they do not contribute to the performance. You used the example of the difficulty you have in measuring primary school enrolment because of data problems, but I felt that when you gave your explanation of why you are below target on meeting that part of the Public Service Agreement, you commented solely on the data problems and not on what is actually happening. What matters is bums on seats or slates on knees or however you describe it in Africa. Although you obviously need to explain what it is that the figures record - otherwise we do not know - in cases where it is difficult to tell what the figures record because of inconsistency and the way they are collected then I would have thought that either as a footnote or perhaps as a main report with the comments on the data as a footnote, you need to say what you are doing - for example in Nigeria we have expanded our primary education programme from four states to eight states or whatever it might be - so that we can see where progress is being made. How do you measure the impact of funds spent through budget support?

Mr Chakrabarti: To answer the data point, I fully agree with you. I am not using the data problems to mask performance; we are off course on those six targets. The fundamental reasons are not to do with data, they are to do with performance generally, and we will hopefully next year have a better presentation of what we are doing in trying to address those problems. As to the impact of budget support, the sort of work that Mark mentioned earlier, the joint review work that the World Bank and IMF have been doing, then within each of the major countries there is obviously evaluation work to be done now - because this is quite a new phenomenon - to see what the impact has been. But the general picture in countries with Poverty Reduction Strategies is that there has been a much faster reduction in poverty levels than in countries without that approach.

Mr Lowcock: We have tried to say a little bit in the Report on page 108. We have basically summarised some findings from an evaluation study that we have been doing over the past two years. It has just been published. It is an independent study so it has warts and all, if you like. This is the first stage of a longer study so these are preliminary lessons and in future we would hope to be able to share with you more detailed lessons. The other thing I would just mention is that the National Audit Office have looked at this issue for themselves and for us over the last year. They have produced a study for us to basically offer advice on whether they think we are getting to grips with these things effectively and what more we need to do. That has been an extremely helpful contribution. In another report they did, also this year, on the water sector - which Suma and I went to talk to the PAC about two or three months ago - they basically endorsed the idea that in the right circumstances budget support can be the most effective means of providing assistance. They looked specifically at the Uganda case. Uganda has massively increased its expenditure through public funds on primary education, water, things to increase the growth rate, things to reduce the instances of HIVAIDS. That has been financed largely by three sources: firstly, growth in the economy; secondly, debt relief (which is a form of budget support, actually); thirdly, budget support of a direct sort from people like us. The early evidence we have is on the whole encouraging and reassuring, but the number of countries in which we are providing budget support is actually still relatively small - 15 or so - and in many of those cases it is still too early to draw a lot of substantive conclusions. We are continuing to invest in learning the lessons and in particular tracking the impact as funds go into the budget of things that we are trying to finance the achievement of appearing at the other end, whether it is children in primary schools or drugs in clinics or more roads being rehabilitated or more wells being dug or whatever it is.

Mr Chakrabarti: What we have from this early evidence is good evidence from a few countries; it is good but we should not overstate it. What we probably have a bit more on is process. Has the process been improved in the relationship between donors and countries? I would say that the glass is half-full. Some of the things we had hoped for have not yet transpired. We had hoped that transaction costs in many of these countries would be reduced very quickly. However, because donors have not yet ceded power to each other - they are all engaging with these countries in a particular sector instead of one taking the lead - that reduction in transaction costs has not always happened unless the country itself takes charge. Tanzania and Uganda are good examples of countries which have achieved some of that. Predictability of aid flows: we had hoped this whole process would make it much more predictable, but still some donors are attaching too many conditions which means that their financing goes up and down. They react quite often to blips in behaviour as fundamentals, but where things have really improved, it seems to me, is the allocation efficiency of government budgets. Governments in these countries now are able to allocate their funds much more in line with their Poverty Reduction Strategies and donors are much less into trying to push them into a bit of a sector and so on than they used to be in the past. Their domestic accountability has gone up significantly in this. I think the process is half full in terms of where we have got to.

Q29  Hugh Bayley: There are two policies which interest me. The PAC, the Comptroller and Auditor Generals' Report gives a green light for this as a policy response in reforming countries, but the gap - from my perspective - is that I cannot see what it is buying state by state. I think it would be useful and I think the Department ought to be checking on what, in terms of children in primary school or reduction in maternal mortality or whatever, is being bought. That must require some better form of donor co-ordination. I guess in the case of Ghana and Uganda for example there must be half a dozen budget supporting donors.

Mr Chakrabarti: I agree with you. I would not want to come to this Committee and argue that we have been accountable to you if we simply tell you the processes have improved. That is not much of an answer. Both sides of the table want development outcomes. We want children in school, better health care and so on. We are wanting to know, if you put money into a budget, what is it that you are buying and what are the outcomes. We have done some early work on that. The work is quite fragile so far but we want to go exactly down that route.

Mr Lowcock: Maybe we could write to you with some of the things we have on this. It is work in progress but there are some quite interesting things starting to emerge.

Q30  Hugh Bayley: In how many cases has your Department either withdrawn or substantially cut budget support? You mentioned the case of Tanzania. In those cases what consultations or negotiations did you have with other donors? How do the recipient governments respond to try to restrict donor exit from budget support?

Mr Chakrabarti: The five that come to mind off the top of my head are the Tanzania example you mentioned, Ghana, Uganda, Malawi and Kenya. Mark can talk about the Kenya example because he was instrumental in budget support there. Tanzania, you know about. In the others it is very much when they went off track with the IMF and World Bank on their public expenditure plans. Their whole PRSP process, the whole public expenditure process has been predicated on that agreement with the banks. There was a fundamental shifting of policy. In doing so, we would of course have consulted with the other donors on the ground, the local consultative donors would have got together and discussed this with IMF and World Bank representative, with the government ministers and officials. Undoubtedly the government ministers in those countries would have tried to prevent exit because this would have impacted on their spending powers. In the case of Ghana when I went out there I was obviously lobbied very heavily to turn the tap back on and we made it clear that we would only do so if agreement were reached with the IMF which it thankfully now has so we have been able to re-start our programme. There are a number of cases. We do not just do this without checking to make sure things are still on track. It is still quite a small part of our overall programme because, as you say, it is focussed on good performers, really. It is only about 15 per cent of our bilateral programme.

Mr Lowcock: The Kenya case illustrates those principles, really. Firstly we acted in concert with the other donors, in particular the World Bank, the EC and the IMF; there was a collective view. Secondly, there was a very transparent process of dialogue between the donors and government. It was reported with tremendous accuracy in the Kenyan press. It was very clear what the concerns that the donors had were and the circumstances in which it would be possible for us to continue providing support and those in which we could not. The Kenyan government at that time made the judgment that they were unwilling to follow through on some earlier commitments that they had made and it was not that the donors introduced new hurdles, it is that the basis on which we - in that group collectively - had signed up to budget support was not followed through. The new Kenyan government, since it was selected at the end of last year, has started to get back into this dialogue and we are hopeful that before too long the conditions will re-emerge for us to get back to where we were. In the meantime, the grant that we approved in late 1999 of £30 million, £15 million was spent and £15 million was not and that has now expired. We have to go back into a fresh negotiation - as the IMF, the EC and the World Bank do - with Kenya when we can get to that point.

Q31  Hugh Bayley: Last year you told us about a process of selection of four states of Nigeria as ones in which you felt more confident that development funding would achieve Poverty Reduction goals. You had some kind of competition or trawl through states to find those partners. Afterwards you sent us a note about an exercise you had undertaken in Russia to select a number of provinces to fund on that basis. What assessment has been made about the effectiveness and impact, possibly even of the added value you have achieved by this approach.

Mr Chakrabarti: There has not been a formal evaluation yet of the Russia process. It has only happened very recently and the new programme has just started. The Nigeria process, in effect, is being evaluated because we are just redesigning our country plan for Nigeria. One of the key questions is: Has this four state approach worked? When I talked about this last year, I talked about the two Oblasts in Russia in this competition. I was keen on it because it was another way of showing ownership of a reform programme. It is a bit like the MCA in some ways. What it is saying is that if you think so well of your reform programme, market yourself and we are happy to try to finance it. How far this can be extended is an issue, I think. In Russia what it had going for it is a federal government which is willing to let go. It is essentially going to say, okay you Oblasts, you compete. We are not going to guide the donor to which Oblast it should go. What it also has - at least in some Oblasts - is sufficient human capacity to compete, to actually put together a plan, to command credibility and implement that. In the case of India, we are also doing a country plan this year. We have a four state approach there too. One of the questions we will be asking ourselves is: Can we go down this route in India? I think it will be more difficult because the federal government in India prefers a much more guided approach. It wants donors in certain places; it does not want all the donors in Andra Pradesh - which is a great reforming state - it wants to spread it round. In India most of the states do have the capacity - like the Russian ones - to compete if we went down that route, if the Indian government allowed it. In Nigeria, I suspect the central government would allow some sort of competition. I am doubtful, given my experience, whether the state government would have the capacity to perform in the competition. That is one of the reasons why we are taking another look at this. There is a sort of matrix here of issues that we need to resolve. I would like to look at it more in some of the more federal places that we are operating in. China is another one, I think.

Q32  Hugh Bayley: Would you accept that there is a policy contradiction between what you were saying earlier about your relationship with non-reforming states. You said, Do we just wait until they reform and then help them, or do we try to help them on the reform process? In other words, you put in some capacity building aid, some support for states where you are not going to get very good value for development assistance money. There is some policy incoherence between that on the one hand and picking those areas in which you are finding partners who can deliver and get good value for development money. If you try to do a bit of both, you do not provide for the recipient of aid the clarity that their side of the bargain is to do certain things. How do you resolve that contradiction?

Ms Moorehead: I think India is an interesting case in point there because we have Andra Pradesh which is the reforming state that many donors like to work with. Orissa is the opposite; it is a very, very difficult environment but again we have identified some of these leaders of change. What we have found in India is that precisely to stop sending these confusing messages is that we probably de-centralised a little bit too far and we need to build up our national programme more. We put a lot of energy in the last three years into building up the state level work and in the new country assistance plan that we are working on at the moment, we want to devote more resources - in particular staff resources for influencing - to try to broker some of these difficult choices with the government of India. So where should DfID's focus be? How should we balance the work between the states that are reforming and going places and the hard to reach or the really poor performers?

Hugh Bayley: I think we need to be clearer about whether we want help for everybody, a bit of equity; or whether we want best value for money in terms of reducing a Millennium Development Goal. It seems that that carrot is not there.

Q33  Mr Walter: I want to go onto the question of technical assistance. Technical assistance seems to have gone out of fashion. I think there is a perception that it has gone out of fashion amongst the donor countries rather than the recipient countries. Some of the Committee were in Malawi last year and certainly felt there was a paucity of expertise and a lack of capacity within government ministries. I wonder whether, in terms of the way DfID looks at this, there is a case for putting capacity back into government, into ministries and agencies in those countries, particularly the ones where middle-ranking civil servants are being claimed by AIDS and other problems. Should we be giving much more priority to technical assistance than we seem to be doing at the moment? We seem to have shifted away from that.

Mr Chakrabarti: I think it is a really interesting issue at the moment. We are debating this internally quite a lot ourselves. The Malawi case is, if you like, an extreme example where, when I last looked at this, there was a 50 per cent vacancy rate in central government either through AIDS or people were migrating to South Africa for higher salaries. What do you do in a case like Malawi, then? Do you simply say, Carry on and try to implement those policies, despite having huge numbers of vacancies? I think in a case like Malawi you can say to their government, Here is our budget support (provided they are back on track) and you can use part of that to purchase your technical assistance. One of the reasons why the previous approach to technical assistance did not work very well was because it was essentially donor imposed technical assistance, quite often built around the projects that were donor financed and the skills were not transferred. I think a new approach, which we need to explore, is much more saying to governments like Malawi, Here is a sum of money and you are free to purchase technical assistance on the international market and manage it. The question of managing it when you already have thin resources is also an issue, I think. That is the way we are thinking about some of these examples. There are very few examples of good technical assistance over the years. There are examples I can give from our own personal experience in Botswana and others where things have worked pretty well, partly because the governments in those cases actually took charge of the assistance rather than having it donor determined. I think you are on to something we also feel is a missing area.

Q34  Mr Walter: Are you suggesting that either you transport a bunch of consultants and sit them in the nurseries in Malawi, or are you suggesting - I am just clutching the name of a company out of the hat who run congestion charging - that Capita suddenly go into Malawi and start running ministries? What sort of solution would you be looking at?

Mr Chakrabarti: My strong preference would be for the Malawi government to choose - it is obviously for them - people with experience of development country context not people who are inexperienced in that situation. There are people around who have had experience and who are willing to make a career of living abroad as well. I do not think it is a question of going to Capita. It is much more a market with experience that you need to focus and home in on.

Mr Lowcock: One thing we found is that untying aid and being able to access the world market for technical assistance has had substantial benefits in terms of broadening the range of options we have and developing countries have really welcomed that. That is a step towards what Suma was talking about. When we talk to them about technical assistance they no longer think what we are talking to them about is only suppliers from the UK. As it happens, suppliers from the UK win a lot of our competitions, but others win a small proportion of them as well. That has had an effect on helping us get better value for money because there is more competition, but also broadening the range of sources of expertise is a good thing.

Ms Moorehead: I do not think we should underestimate the role of our own staff in this either, even though it is not technical assistance in the old sense of the term. Effective budget support needs more not fewer people, certainly in the early days. Our own staff work very, very closely with their counterparts in government and part of that process is not just to influence them but to transfer knowledge and to support them.

Q35  Chris McCafferty: I know that you are aware that a number of members of this Committee were very concerned about the abolition of the specialist desk for Sexual and Reproductive Health in your Department restructure. I was very pleased yesterday to receive a letter from the minister indicating that the Millennium Development Goals Team will now be called Millennium Development Goals and Reproductive Health Team and that you are preparing a public policy statement on reproductive health. I wonder if you could tell the Committee a little bit more about DfID's position on reproductive health and the Millennium Development Goals.

Mr Chakrabarti: We are absolutely committed to reproductive health as a key element of a successful Poverty Reduction Strategy. As you know - and I think the Committee knows - we wanted an MDG which was specific to that area. As you also know, we were unable to get international agreement to that, much to our disappointment. However, there are thee MDG's - the health ones, HIVAIDS, infant mortality and maternal health - which cannot be achieved without doing better on reproductive health. We focus around those MDG's and interestingly our expenditure has shot up in the last few years in this area. A couple of years ago it was around £220 million a year and I think it was under £50 million in the mid-90's. So it has shot up quite a bit. That really shows our commitment to it. In terms of the reorganisation we will reflect our interest in reproductive health in three policy teams. There is the one you mentioned. Those three MDG's that I mentioned are the hardest MDG's to hit and that is why we are focussing on that. Also the service delivery team and the HIVAIDS team cannot succeed in their work without taking reproductive health into account. To tell you a little of our work internationally to try to influence the debate, like you we have been worried about conservative states arguing for a change in what was an internationally agreed position. We are actually pulling out all the stops at ministerial level, at senior official level, to try to influence others to hold firm. I co-chaired a meeting in Ottawa quite recently with the Canadians and the World Bank on health MDG's and this whole issue continues to play into that. We managed to keep to the agreed wording so far. We are, as a Department, heavily committed to this area. That is why we also feel we should put a public note out to make our position clear, if you like.

Ms Moorehead: I obviously reiterate what Suma said. It is much more than a name change. Our intention in policy division is actually that we do more work ensuring that reproductive health issues are part of everyone's agenda than they have been hitherto. It is this perennial trade-off; it has been asked in the context of gender as well, should we have a gender unit or should we mainstream it? Our view is that we have a well-developed and very clear and focussed policy on reproductive health and the time has now come to make sure, for example, that the poor performers team looks at reproductive health in poor performing countries. The work that we do centrally is constantly reinforced and informs what is happening in countries. We are still spending over £200 million a year bilaterally on reproductive health and HIVAIDS. Even though there is a distinct reproductive health agenda from the HIVAIDS one, the work that we are doing is mutually reinforcing in that sense. We did a lot of work last year on maternal mortality reduction because we were so concerned that this was one of the most off-target MDG's. Interestingly, what we found there in a cross-departmental assessment of this was that the contributions from people like engineers on this issue was vital. Communication matters if you are in labour. What we are hoping, even though it is a change, is that reproductive health will be on everybody's radar now and not simply in the traditional domain of the health and population people.

Q36  Chris McCafferty: You have mentioned the very large increase in the sexual and reproductive health budget. Does that include spending on HIVAIDS?

Mr Chakrabarti: Yes, it does.

Q37  Chris McCafferty: Given the very difficult environment that you yourself have acknowledged, how will you ensure that HIV prevention projects are not restricted by the climate which seems to be getting tighter and more difficult all the time?

Mr Chakrabarti: By that do you mean the international climate?

Q38  Chris McCafferty: Yes.

Mr Chakrabarti: I think we and other like-minded donors feel the same way about this. None of us have any intention of clawing back our effort in the HIVAIDS area despite the pressures, so we will continue. I think there are some signs that the United States has increased the amount it wants to spend on HIVAIDS. That is greatly welcome, but there are one or two messages that go with it that are not so welcome about abstinence and so on which we know is not the way to approach this. I spend quite a lot of my time going to Washington to argue the case. We only get so far. This Committee has done the same. I think we must do that together, really.

Q39  Chris McCafferty: I thought that I understood from statements made by the former secretary of state that funding to UNFPA was to increase substantially, but having a look on page 128 in the Departmental Report, it rather appears that the core grant has been halved since 2000-01. Can you explain that?

Mr Chakrabarti: Yes, I think there is a misunderstanding going on here. What has happened is that the core grant has increased. The UNFPA core grant was £15 million in 2000-01 and it has risen to £18 million since. What the figures in there show are that there was a one-off payment which was not part of the core grant to UNFPA for a supply of condoms; secondly, in one year, for our own financial management reasons, we actually paid £9 million at the end of the previous financial year. So it looks like a much higher figure went to UNFPA that year then a sudden drop, when in fact it was still £18 million for the two years.

Mr Lowcock: For their financial years there has been this 20 per cent increase from £15million to £18 million. As Suma says, for our internal financial management reasons we had to phase the payment for the 2001-02 year. This is something we do, to pick up Mr Bailey's point earlier, to juggle how we manage pressures during the course of the year. If there is a particular crisis that we need to respond to and it does not make a difference for a UN agency if we pay them in March or in April, as a practical matter we will take advantage of that.

Q40  Chris McCafferty: Creative accounting.

Mr Lowcock: I would not quite want to have it described in that way. It is flexible financial management.

Q41  Chris McCafferty: Given the increasing proportion of funds that are channelled to the big agencies, for instance Global Fund for AIDS, what is the Department doing to ensure that the smaller NGO's dealing with sexual and reproductive health do get grant funding and can make a contribution to nationally developed strategies?

Mr Chakrabarti: I presume they can compete for the Civil Society Challenge Fund. Many of them do so. The figures that I have in front of me suggest that funding from that source for these NGO's has been increasing over the last few years from 0.38 million in 2001 to 1.67 million in 2002-03. There are signs there that they are doing quite well in that competition.

Q42  Chris McCafferty: Some NGO's have made the point to us that they are not invited to negotiate for programme partnership agreements. Is that the case and, if so, why?

Mr Lowcock: We are just going through the third round of applications for programme and partnership agreements. At the moment we have these agreements with about eight or ten agencies and we have said that this year we will negotiate them with another four or five. We have 39 applications for those four or five grants so I am afraid that it is the case that most people were disappointed. The thing I would draw attention to is that between the current financial year and the financial year after next our total funding available for centrally funded civil society schemes like the Civil Society Challenge Fund and the PPA is due to increase by about 30 per cent. I am afraid it is also the case that we will still be unable to fund a lot of requests we get, but the overall funding is nevertheless increasing substantially.

Q43  Chris McCafferty: The UK Gender and Development Network have raised the issue of how can you ensure that gender related development goals are interpreted more broadly than perhaps the programme suggests. They are concerned that programmes for women's reproductive health and education are just being used as proxies for gender equality. Is there a way that you can ensure that those things are not the case?

Mr Chakrabarti: I think we buy into the basic analysis in that report which we got last week. That is not surprising. This Committee will remember last year saying that we should do more evaluation and this is one of the evaluations that fed into this report. They have actually used our own analysis and data which is fine. We buy into that. The overall direct expenditure on gender equality not proxy has actually increased remarkably from 57 million in 1999-00 to 167 million in 2001-02. However, as our own evaluation shows, I think there is some worry that we have that some of our country strategies and some of our delivery plans are not reflecting gender equality issues. I can name two very good examples, the China Country Strategy and the Asian one are excellent models of what others should be doing. We do need to go back and look at that. What we agreed when we found our evaluation came up with these results was that we would firstly complete the evaluation and see how bad this issue is. We do not think it is terrible, but there is clearly some loss of ground. Secondly, we would hire a gender human rights advisor who would have this specific task of trying to ensure that we are mainstreaming properly. It is something we are committed to as an organisation for the way we work, it is certainly something we believe in in the Department as well. What I plan to do is copy the IDC, the reply we will send to the Gender and Development Network. It will be an open process and you will se what our response is.

Ms Moorehead: I think this is a case for the need for constant vigilance. It has been very useful to have it highlighted that we did not take our eye off the ball, but thought we had made rather more progress in gender than perhaps we have. That said, we are very aware in the Department that these rather unsatisfactory indicators are just that. They are the least awful ones we can find and we are fortunate in having one of the largest groups of gender analysts in our social development advisors of any bilateral organisation. More and more, what they are doing is not what might have been seen in the past as standard social development work, they are engaging in PRSP processes - that is an area where we are concerned that gender tends to become rather invisible - they are doing a lot of work in developing mechanisms for poverty and social impact analysis. How do you tell, before you do a macro-economic change, what the likely impact of that on women is going to be? As Suma said, we will have this cross-cutting advisor based at the centre in policy division whose job will be to make sure that country programme experience is feeding into central policy work and that all our teams, the team on agriculture, the team on trade, the team on poor performers, are taking adequate account of this issue. I think it feeds back to your early question on reproductive health. This is the key to good mainstreaming. It is not to think it is in the bloodstream and to forget about it, but to come back and evaluate regularly and if you are a little bit off track then correct it.

Q44  Alastair Burt: Paragraph 3.44 of the Report states that, "Research has shown that investing in education for girls is one of the most effective ways of reducing poverty" and an argument is, Okay, if that is the case why do you not do more of it? And why do you not put many more resources into tackling education for women and girls as the answer?

Ms Moorehead: I think the short answer is that we should. The slightly longer answer is that if you are a girl, particularly in South Asia in a very poor household, there are so many barriers to your accessing that education. Even if there is a place there, their labour will be required to do other things. Our view is that we need to work on several fronts. We could put more money into education but we also need to put more money into issues of child labour, of removing non-income barriers to poverty, of supporting inter-generational transfers so that in due course educated mothers are much more likely to send their daughters to school. It is not just about money and education.

Q45  Alastair Burt: Could this be done under the overall umbrella of ensuring that more women and girls are going into education? In dealing with the particular barriers and facts you mentioned, could it be explicitly stated and tied to targets and goals of achieving more girls and women into education?

Mr Chakrabarti: Absolutely. I think we agree with you. Looking at our Public Service Agreement, for example the PSA objective for reducing poverty in Asia actually has in the indicator target if you like, "An increase in gross primary school enrolment from 95 per cent to 100 per cent, an increase in the ration of girls to boys enrolled in primary schools from 87 per cent to 94 per cent". This is going to drive the Asia director's delivery plan and one of the things he is going to have to try to deliver is exactly that and he will have to gear up his country programme to do so. That is probably the best way to look at it. Yes, we should be doing more in this area. Clearly we, the international community, countries generally, but in the context of the MDG's and the PSA as a whole rather than setting off a separate sector fund or something like that, which would have been the old approach in trying to deal with this.

Q46  Alastair Burt: Do you take a view on the efficacy of mass primary education as against fast-tracking certain women through to secondary, further and higher education in order to improve the ratio of women in senior positions in developing countries?

Ms Moorehead: Our position so far has been to focus on primary education, but we are looking at the longer term implications of that. I think we need to get back to you on the details, but we certainly realise that universal primary education is really a first step.

Q47  Alastair Burt: It just takes a long time and if you are to meet the points Christine was making about equality issues as opposed to raising the levels of the population as a whole, then fast-tracking in certain circumstances might be seen to be a potential answer.

Mr Chakrabarti: It could be. We will be looking at this as part of our look generally at tertiary levels. I think from memory most of the research analysis tends to suggest that, for example, impact on the number of children women have, the major change can come through at least achieving primary education and getting into secondary. The additional tertiary education does not give you the same returns to the same extent. Primary and secondary education is really what we should be focussing on.

Q48  Tony Worthington: Can I turn now to an issue which has concerned the Committee during the year. It came to a head in our southern Africa report and our visit to Malawi, and that is the issue of agriculture. I think there is a general feeling that a lot of emphasis has been put on areas like health and education - and absolutely legitimately so - but we seem to go to country after country with poor or almost non-existent ministries of agriculture, with no sense of an overall land strategy, with inadequate marketing of any goods that might go to export or to wider markets. All we seem to have is something called livelihoods. Do you not share that sense of concern? If we are going to end poverty, in almost all these countries income is raised off the land. Malawi is the most extreme; 85 per cent of people working off the land are needing to live off the land and they do not have a land policy. All that there seems to be is maize. Diversification has not worked. Do you see the point I am getting at? There seems to be a gap in what DfID is doing.

Mr Chakrabarti: We have to keep reminding ourselves that development is a collective effort so DfID should not be trying to do everything in every country. Notwithstanding that, what you say about agriculture I think we could ascribe to; agriculture is vital. Most poor people live in rural areas. Unless one improves agricultural economy one is not going to get the reductions in poverty that we are all seeking. In the last 20 years agricultural productivity - particularly in Africa - has been dropping whereas in the 60's and 70's at least in south Asia, it was rising. I gather that the numbers of hungry people in Africa have increased in the last 20 years. Some of that is due to conflict; some of that is due to adverse weather conditions; some it is also due to the very failed policies in agriculture that we, as donors, supported: state marketing boards and the like. Donors' involvement in agriculture has been both a boon and a bane; very good on boon revolution, not so good on supporting the state involvement more generally, partly because most states in the past were getting into agriculture to subsidise the urban sector to get cheap food for the urban sector and that ruined agriculture in many of those countries. So what are we doing? I know the livelihoods jargon is off-putting but actually I think there is something there in it. The essential idea is to look at poor people in the round in terms of their needs in the rural sector. We obviously need to increase agricultural production where we can, where there is a comparative advantage in doing so. We also need to put in the inputs for other things like access to health and education in the rural sector; rural roads to make sure that agricultural goods get to market, which is often part of the problem. We need to do all of that and it is a much more holistic package. In the last year DfID has produced two documents which were essentially trying to influence the rest of the international community to do better than this, one for the World Food Summit - Tony Colman is not here today, but he was involved in that - and one for the WSSD event. Again, we are trying to say that actually we have to do something about agriculture - we, collectively - have to do something about agriculture in order to improve the rural livelihoods of these people. At the moment I think what we are trying to do is focus on trying to up the profile of agriculture in PRSP's. There has been some success. The latest return suggests that agriculture is getting more of a profile than it used to in the past. We are supporting some sensible investments in the rural setup like rural roads. We have been supporting agricultural research globally. We have also been pursuing this debate internationally. Fundamentally we have to remove agricultural subsidies. One of the reasons these agricultural ministries are empty and these sectors are not performing so well, is the subsidies that are going into agriculture in the west in the OECD countries which make it unprofitable.

Q49  Tony Worthington: I accept that. We say abolish the CAP and I agree. But there seems to be an assumption that if you abolish the CAP then the people in southern Africa will get wealthy. That is not true. They still have to grow the food, export the food, deal with the problems of land depletion, deal with the dependence upon agri-business from elsewhere. That is the gap. What we are saying about livelihoods and so on we agree upon, but there is a dimension above that which is just not being adequately tackled.

Mr Chakrabarti: If it is to do with the policies and institutions in countries, then yes, as part of the PRSP process what we are trying to do is to get the governments concerned to focus much more on sorting out - for the great day when the CAP is reformed - how they would get their agricultural sectors to perform better. That is partly to do with the inputs that go into the agricultural centre, marketing, land reform, all those sorts of things. The good PRSP would pick up on a lot of those angles; not all of them have done so, clearly. Our role is much more that sort of policy end, trying to influence governments to do that. It is much less to do with the approach we used to have 20 years ago which would be financing extensions and those sorts of things.

Ms Moorehead: As Suma says, the main thrust is to try to work at changing government policy, but we are still doing a lot for small farmers. In Malawi the starter pack programme is reaching two million small holders with fertiliser seeds and we are getting to the stage now where we can actually measure the impact that that is having on their income. In this, let us not forget Asia. Two hundred and thirty million of the 819 million hungry in the world live in India, others in Bangladesh. We have new programme in the areas of Bangladesh which are half under water for half the year. We are investing 50 million over seven years that will help eight million farmers. That is old style agricultural extension but in areas which were never touched before because they were so marginal. I think the difference now is that instead of those being freestanding successes - which is what we used to have - we all have the mechanisms to feed those in to a wider policy dialogue. There is this iteration between the macro and the micro level. Inevitably there is a long way to go. As Suma said earlier about the PRSP process, the glass is still only half full. One of the challenges over the next few years is to join up what is happening to poor people on the ground and the macro environment.

Q50  Tony Worthington: I think what I am seeking from you is an assurance that you recognise that there is a considerable gap there. I went to see the High Commissioner of Malawi the other week about our report and he said that we had got it absolutely right on agricultural.

Mr Chakrabarti: We fundamentally agree with your observation to such an extent that we have just created a new agricultural team which we have not had for years in our policy division. One of their first tasks is to follow up this approach to see if we can do better.

Mr Lowcock: The organisation has had a historical strength in agriculture and we continue to have a large number of really excellent people working on these issues. In the financial year 2001-02 we spent more on agriculture and related areas than we did on education, so we are very alive to the importance of this sector. A lot of the things we are doing are not through ministries of agriculture, often because the constraints of agricultural development are not ones best addressed by ministries of agriculture. They are the ones you have talked about, rural finance or regulation or infrastructure.

Q51  Mr Walter: I wonder if I can just focus on water for a moment. We have had the G8 summit recently in Evian - a very appropriate place to talk about water - which reaffirmed that the G8 action plan and the commitment are on improved sanitation and access to potable water. However, if you look at our own ODA budget the amount spent on water and sanitation has been going down and is currently about two per cent. It has been falling since 1998. How are you at DfID looking to address this in light of the commitments to prioritise water and sanitation which the UK Government has made at various summits?

Mr Chakrabarti: Water is clearly crucial to poverty reduction. Our bilateral expenditure has been around the £90 million mark over the last few years; I do not think it has actually been falling that much. That does not include what we contribute multi-laterally as well. There was a very good NAO report on this some months back and I gave evidence to the PAC on this. It said essentially that DfID was doing excellent work in the water sector, largely at the policy end. We no longer work at the infrastructure end; that is left to some of the donors who are better at that and it is a comparative advantage. We are respected much more at the policy end which does not require a lot of spending but does require trying to change policies of governments to take water more seriously, both demand and supply, and to involve the private sector much more than they have done in the past. We have now concentrated our water efforts in a few countries only. The key thing again is to try to get many more of these PRSP's to take water more seriously. It is not surprising, perhaps, in one or two cases that they have not given priority to water, which then gets reflected in donor priorities. This is partly because they have seen health and education as an earlier priority, if you like. It is quite interesting that in India and Uganda - two countries where we have worked in the water sector - they have given water a much higher priority. In a sense they feel they have made sufficient progress with some of their more basic requirements. Water is a fundamental input into achieving health outcomes. We cannot achieve some of the outcomes we have talked about without achieving good access to water and sanitation. That is the way we have now pitched this in our new PSA, so you will see this in delivery plans for Africa or Asia, that doing work in the water sector is a way of achieving some of the health outcomes that we talked about. That is the way we are going to try to work at it.

Q52  Mr Walter: This may be the question that you were not looking for, but I have looked at your annual Report and I see the foreword is by Baroness Amos but signed by Clare Short. If you look at the flow chart at the back - the organisational chart - the name Sally Keeble appears but not Hilary Benn. It is alleged that you spent about £30,000 pulping one version of the report and then reproducing another one. Is that true? Do you have an explanation for it?

Mr Chakrabarti: We spent £29,300 precisely.

Q53  Mr Walter: Did Clare write it and Valerie head it or was it the other way round?

Mr Chakrabarti: No, this is a different foreword from the one that Clare Short had. The argument that we put - and Valerie accepted - was the following: firstly that this was a forward looking document as much as a backward looking document. Not as forward looking as Mr Benn quite rightly says, but it should be. We were trying to set out a strategy here as well. It is our flagship document. It is not as if a permanent secretary had resigned so you could have an erratum slip. It is clearly an important thing when your secretary of state goes before you have presented it to Parliament. Fundamentally, I think the crucial argument for why Valerie had to write the foreword and sign it before we put it to Parliament is the noise that had been around about Clare's resignation, internally and externally. Internally staff were very concerned about the mission, about whether the clarity of the mission since 1997 would be eroded, whether we would start taking political and commercial benefits into account. Similarly, externally whether there were other donors or NGO's with similar concerns. In a sense people were worried about DfID's reputation. Valerie felt very strongly that she wanted to say on page two that she was sticking to the policies, she was sticking to the clarity of mission and that is what she says. She says the two White Papers still guide her approach. It was quite important from that point of view as well.

Q54  Mr Walter: But she did not manage to sign it.

Mr Chakrabarti: She did.

Q55  Mr Walter: My copy says Clare Short.

Mr Chakrabarti: Mine says Valerie Amos

Q56  Chris McCafferty: Some copies say Clare Short and some copies say Valerie Amos.

Mr Chakrabarti: How strange.

Q57  Mr Walter: Foreword by Valerie Amos, signed by Clare Short.

Mr Chakrabarti: I am sorry about that.

Q58  Tony Worthington: Can I thank you and your team very, very much for answering our questions. I hope you find the questions that we ask valuable to you because we do spend a lot of time looking at the work of the Department. Can I, on behalf of the Committee, thank you and your Department for the co-operation, assistance and guidance which we get throughout the year. This is the time when we can express those thanks.

Mr Chakrabarti: Thank you very much. We also benefit from appearing here.