UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE

UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 322-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

EUROPEAN SCRUTINY COMMITTEE

IMPLEMENTATION OF EC EXTERNAL ASSISTANCE IN PREPARATION FOR ENLARGEMENT

Wednesday 4 February 2004

RT HON HILARY BENN, MP, MR STEPHEN MUERS and MS CAMILLA OTTO

Evidence heard in Public Questions 1 - 28

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the European Scrutiny Committee

on Wednesday 4 February 2004

Members present

Mr Jimmy Hood, in the Chair

Mr Richard Bacon

Mr Wayne David

Jim Dobbin

Angus Robertson

John Robertson

Mr Anthony Steen

Mr Bill Tynan

________________

Witnesses: RT HON HILARY BENN, a Member of the House, Secretary of State, MR STEPHEN MUERS, Team Leader, EU and Corporate Section, Europe and Central Asia Department and MS CAMILLA OTTO, Head of Development Policy Section, European Union Department, Department for International Development, examined.

Q1 Chairman: Minister, welcome to this your first visit to the European Scrutiny Committee. Indeed it is the first time the Secretary of State has been, so it is a rather important occasion for us. We have some colleagues with us from the British Chamber of Commerce and we will be meeting with them after your meeting. Welcome to everybody who is here, anyway. Minister, I wonder if I could ask the first question and ask you how capable are the accession states of making effective use of the substantial Structural Funds to which they will have access in May?

Hilary Benn: The first thing I would say is that the process of accession for the countries that will be joining the EU is indeed a process, and it is a process in which the countries are having to learn and adapt, to build their knowledge and change the way in which they do things. The support which the European Union has given them in the run-up to this has all been about trying to improve their capacity to do that, take advantage of the opportunities that are going to be open to them and to make the changes within their own internal structure, civil service and so on. We will come on to the PHARE programme, but that has been the principal aim of that programme. I think the honest truth is it is going to take time for countries to adapt and to learn, because it is very much a process. This is not about any country coming to the point of actually joining and being 100 per cent ready to deal with all the consequences of that; people are going to have to learn, frankly, in the same way as we here in the UK did when we initially joined. It has been a process of learning. The second thing I would say in answer to your question is I think the accession countries have come a very long way, historically speaking, in an extremely short time. That is certainly due to the PHARE programme which, as you know, has worked hard to try and support them in coming to that point. For a number of those countries which were part of the former Soviet system, with a very different way of working and a very different type of government, to make the transition in, as I say, a relatively short space of time, historically, to get to the point where they are ready to join the European Union and take advantage of the opportunities that open up - including using the Structural Funds - is, I think, really quite an achievement, despite all the difficulties, and the fact that some of the programmes that the EU used were not necessarily terribly effective to start with, but got better over time. So I think that we ought to look back at what has happened with a sense of satisfaction, while recognising that those countries, as they themselves will admit and recognise, have got some way yet to go.

Q2 Mr David: Following on that point, Minister, I agree with your assessment; a lot has been achieved in a relatively short period of time but still the accession countries have a long way to go. I do not think that we can simply apply the Structural Funds as they have operated in the current Member States to the Accession countries without modifications and adaptations, and so on. Have you any views about how that might happen and how a review might take place fairly early on so that we do not replicate any initial mistakes or lack of focus that might be initially introduced?

Hilary Benn: I think the lessons of the process as it has been undertaken so far teach us all that it is important to evaluate the progress that is being made. One of the reasons that the programmes that have been put in place to support the process of getting to the point of accession have improved over time is precisely because that is what the Commission has done, with support and encouragement from us and other Member States. That is why I emphasise the word "process"; this is a process in which people need to learn. I think the European Union needs to respond to that, to look at how things are going and to get the views of the accession states themselves. I think that is very important. If you are prepared to see what is happening, to reflect on it, to listen to those who are trying to make the system work and then to see where it is appropriate and relevant that adjustments need to be made, that is the right approach to adopt in order to meet the need that your question rightly identifies. I think that is the principle that the European Union should use, and I think it will stand us in good stead in a lot of things that we are doing. One of the things, of course, that the accession states are going to have to adjust to, which is my particular responsibility, obviously, rather than the broader Structural Funds, is making that transition from having been recipient countries as far as development assistance is concerned in the broader sense, to being partners in taking decisions about the development policy of the European Union. That is a complete mind-shift, because the first question is: "What is your view on project-based assistance as opposed to sector support or budget support in deciding where the European Union's development programme ought best be applied?" "What kind of programme are you going to have yourselves?" "What view do you take about the structure of the new Commission, in the way in which it is going to have responsibility for development?" "Do you share our view that the proportion of EU development funding going on the poorest countries in the world is too low?" (That is the very clear view of the UK Government.) That is a very, very big change that is going to have to take place, because they have to come to think as donors and not just as recipients. That is a conversation that is beginning; the Commission is doing some work and will be producing a further report on this later on in the month. My colleague, Gareth Thomas, is making a visit later on in the year to a couple of the countries, Poland and the Czech Republic, and one of the things he will be discussing with them is precisely this question: "What emerging thoughts have you got about EU development policy?" That is the thing that I am particularly interested in because it affects my responsibility as Secretary of State.

Q3 Angus Robertson: Before moving on, and my colleagues will be keen to explore that a little bit more, Secretary of State, can I ask you more specifically about what lessons have been learned from the transitional programmes in accession countries and, also, what the conclusions are from the recent evaluation of the PHARE programme? You mentioned that yourself.

Hilary Benn: I think the most fundamental lesson from the evaluation that is taking place - and we pressed for this so we were very pleased that the Commission undertook that work - is that for these countries civil service reform was, really, the most important thing to have done early, because, if you like, that was the building block that needed to be put in place to then enable the other things that needed to happen with a view to accession taking place successfully. Secondly, that the decentralisation of the PHARE programme in particular certainly helped considerably. That was a realisation that dawned on people during the history of the PHARE programme because it took decision-making, disbursement of the money and the dialogue about what was needed closer to the countries concerned. So that was very important. Thirdly, it showed that as far as the efficiency of the programme was concerned it was better in some sectors than others: justice, home affairs and public admin reform, and perhaps less effective in economic and regional development. There were problems with staff turnover, procedures were slow; in the beginning there was less ownership by the recipients than there was later on, and the de-centralisation process helped along with better long-term programming. So, if I were to sum-up what the lessons have been, the intention was absolutely right because to build institutional capacity is fundamental to any form of development and particularly important to enabling countries to join the EU and to take all of the acquis that is involved in that. The focus, as you know, has been about 30 per cent institution building and 70 per cent going into what, in the jargon, is described as acquis-related investment, covering both economic and social cohesion and the specific regulatory changes you need to make to implement new food safety standards and so on. There was a lot of very detailed technical work which the twinning part of this programme has supported. So, to begin with, not as successful as it should have been and, towards the end of the programme, as a result of the evaluation, it has become more successful and efficient. Taking the whole thing in the round, those countries have moved in the space of a very short time from being in one completely different system to the point where they are able to join the European Union. That is a big achievement and the PHARE programmes certainly support that.

Q4 John Robertson: Taking the lessons you have been talking about, which ones are particularly relevant to other EC assistance programmes elsewhere? What steps are being taken to apply and disseminate the knowledge gained?

Hilary Benn: In relation to the broader EC development programmes, this was a very specific exercise which was about supporting those accession countries to come to the point where they could join the European Union, participate in the work that it does, adopt its processes, procedures and laws and so on. That is very specific. It is rather different from the broader development work which the European Union does through its development aid programme, which is about, for certainly the poorest countries with which it works, more fundamental things like enabling more kids to reach their fifth birthday without dying of diseases that we know we can treat if we had the medical care available there; enabling the 113 million children around the world of primary school age who do not have a classroom, a teacher and a desk (because they do not go to school) to get into school; tackling HIV AIDS - all of the things which are really quite fundamental to improving the lives of poor people in poor countries. That work is covered by, if you like, a different set of objectives which are the Millennium Development Goals, which the international community has agreed will be the measure we will use to determine whether we are making progress and improving the lives of people in that way. That is the part of the EU's development programme which, frankly, I have a particular interest in because, at the moment, the EU spends a lower proportion of its development assistance on the poorest countries in the world than I would like. There are other parts of the development programme - MEDA and Latin America and so on - where the challenge is slightly different. I think they are lessons in terms of process but not, if you like, of approach because this is a quite unique set of circumstances - ie, accession as opposed to broader development.

Q5 Mr Bacon: Secretary of State, I was very struck when Suma Chakrabarti appeared before the other Committee I sit on, the Public Accounts Committee, when he said that 55 per cent of multilateral aid spent through the EU was inherently spent less effectively, efficiently and economically than that which is spent by DFID directly, and that, in fact (in his phrase) "This was the price of doing business". My question is really about the institutional capacity of the EU itself to deliver these programmes, and your predecessor was quite voluble on this. Is it adequate to say to the taxpayers in this country that is the price of doing business when actually it is claimed that your department, if it were doing it itself, would do it better?

Hilary Benn: We have indeed been critical of the proportion that goes to the poorest countries of the world. I make no apology for that because in our bilateral programme, as you will know, we are moving to the point, in 2005/06, where 90 per cent of the UK's bilateral programme will be going to the poorest countries of the world. Why are we doing that? Because we think that is where the biggest challenge is. If you go back 10 or 15 years and look at the total amount of development assistance available in the world it was more than it is now, so it has declined in terms of overall size and the proportion going to the poorest countries of the world has also reduced, so it is a smaller share of a smaller account. What we are doing, as far as UK development is concerned, is a contribution to try and redress that balance. I think in the last couple of years the overall amount of overseas development assistance has begun to turn up again. We had a decline, as you know, in the UK over a period in the 1980s and up to the mid-1990s, but the Americans are putting more money into the system - President Bush has announced that in Monterey, and money for HIV AIDS. So that is the first point. Secondly, we have indeed been critical about the effectiveness with which the EU has spent its development money, and a reform process is now under way. I think it has made some progress but, in all honesty, it has some way yet to go. In what way has it made progress? The devolution of responsibility to EU country programmes has been very significant (in the jargon "de-concentration"). It is an approach we have adopted, as we have devolved responsibility to DFID country offices. Frankly, if you are in the country you are better informed, you are nearer to the ground and you are in a stronger position to take decisions about what works, what does not, how to use the money effectively and to advise the organisation accordingly. De-concentration has really helped on that front. Now 48 (I think I am right in saying) of the 78 programmes have now been fully de-concentrated. I think, secondly, steps have been taken to reduce some of the bureaucracy involved which led to slow disbursal of the money, but again there is further progress yet to be made.

Q6 Mr Bacon: If I may say so, Secretary of State, this is what concerns people, I think - "further progress yet to be made". This sounds very much like Neil Kinnock three years after he was appointed to sort out fraud. My question was, it is accepted that they do it less efficiently, less effectively and economically and they do it more poorly than your department does. Surely the case is for going to Council Ministers and saying "Sorry, until you get this sorted we are going to do this ourselves. We are going to keep the money and we are going to disburse it ourselves"?

Hilary Benn: I would not agree with that analysis because the case for multilateral activity (supporting bilateral activity by individual donors) is very strong. The reason for that is this: if we can get it right and if we can get it as efficient and effective as it ought to be then the benefit that flows within developing countries through effective multilateral assistance is potentially very considerable. The reason I say that is that one of the problems that is facing development is that if we all turn up, however well-intentioned, in developing countries and knock on the door and say "Hello, I am the United Kingdom and we have got a development aid budget and we want to come and assist you; here's our plan, here's our programme, here are our reporting arrangements and so on", and we have that conversation and then the Dutch come and then the French come and then the Norwegians, and then the Japanese, then the EU, and then various UN agencies - you very quickly see that that is not actually the most efficient way of doing business. We have an obligation on all of us, both as bilateral donors and working with the multilaterals, to make sure that we operate in a way which maximises the chances that the support we are able to give works with country governments in taking their decisions about the future of their own country. My own view, very strongly, is that if we can we should support countries taking their own decisions about their own future, provided they have got the effective assistance and systems for doing it. That is the reason why we work with different countries in different ways, because, frankly, Zimbabwe is very different from Uganda or Tanzania, and there has to be a spectrum of relationship because the circumstances are different. There is a big, big prize in terms of development to be gained through effective co-operation. That is why I do not accept the argument that we should then take it all back and, presumably, other people might argue in other countries that they should take it back from the EU. If we can get EU spending effective and, in particular, we get the proportion going to the poorest countries in the world up, then there are big gains to be made in terms of development. That is our view.

Q7 Mr David: If I can go back to pre-accession, one of the things that the European Court of Auditors said (in particular in the report of April last year) was that the pre-accession countries were finding it very difficult to spend effectively on environmental infrastructure projects and there was inadequate support being provided for that from the European Commission. I was wondering if you had any views on that and how the Commission might be encouraged to be more effective in giving that support?

Hilary Benn: Presumably you are referring to the ISPA programme?

Q8 Mr David: Yes.

Hilary Benn: What the Court of Auditors found was that there was an issue about, again in the jargon, absorption capacity and ability actually to use this assistance and that is a question that does arise from time to time in broader development: to what extent is there the capacity to use the assistance that is available? Across the whole of the international system, there is actually quite a lot of absorption capacity still there and the problem at the moment is the shortage of money. I think the second big lesson was that the assistance needed to be targeted more effectively. I think those are really the two main results of the Court of Auditors' work. As to how that has been responded to, I will ask Mr Muers if there is anything that he would like to add on the ISPA programme. I should have introduced at the beginning Mr Muers and Ms Otto from the Department.

Mr Muers: The Commission has responded to the Court Auditors' reports and they have offered to change procedures very substantially particularly on the targeting of funding and bringing in new ways of identifying those projects. So, we will have to wait and see if it works. So, they have certainly rose to the criticisms and they are going to do something and clearly the Department will keep a close eye on whether that works and whether, in the future, we will need to address all three and we will do if they are necessary.

Q9 Jim Dobbin: Minister, you commented on the 2002 annual report on EC development assistance that it was "testimony to the EC's continued lack of focus and fragmented development profile." Is this situation due to differing views amongst the Member States on the objectives of external assistance?

Hilary Benn: Yes. To be absolutely straight, there is a tension at the heart of decision- making within the EU about development because, when the General Affairs Council meet, there is a range of issues that the ministers are taking into account and, frankly, different Member States have different objectives that they are trying to achieve. For some of the Member States, their principal concern from a development point of view is to develop the near abroad - the countries the other side of the boarder that are just inside the EU - because they see that as important from the point of view of stability security and, if those countries develop more successfully, there may be less inclination of people to want to try and move to countries just the other side of the border within the European Union for their economic betterment and for a better way of life. That is a perfectly legitimate concern for those countries to have but it is rather different from a clear focus on poverty reduction within the millennium development goals: getting more people to wake up in the morning with access to clean drinking water, getting those kids into primary school, tackling HIV-Aids and reducing absolute poverty. That is, if you like, in a sense a different set of tasks in relation to countries that are much, much poorer and then, more recently, obviously quite legitimate issues have been raised in terms of the broader concerns that there are about security. At the moment, there is, frankly, one pot out of which all of these concerns are met and funded and there are these pressures. The point about the Accession States arriving is that they are going to bring with them their whole new near abroad. So, if you think of Spain, Portugal, Italy and Greece who have looked to the south and, in the case of Spain, for historic reasons, over to Latin America, that is where the focus of their particular attention is. We have different focus, partly because of historical reasons and partly because we have a very clear development policy based on poverty reduction in the millennium development goals, and what we have seen in terms of the share of the EU broad development budget that is going to the poorest countries of the world is that it has declined. If you go back 10 or 15 years, at one point it was at about 80 per cent, but it has gone down under the pressures that I have just tried to describe. In the last two years, it reached a low point of 38 per cent going on the poorest countries of the world, but then it went up to 44 and, though I am not sure if it has been finalised yet, the last available figure is 52 per cent. Afghanistan had a part to play in that because of the money that the EU has put into the work that is going on there. The question is, is that improvement going to be sustained or not in the face of these pressures? I think that is the really big issue for the EU to address. We ought to be honest about the different interests that there are but we need to find a solution as far as the structure of the budget is concerned and the structure of the new commission which makes sure that there is a bit that clearly focuses on poverty reduction because that it what I am principally interested in.

Q10 Mr Tynan: Minister, you have mentioned the multilateral opportunities and best way, not on a unilateral basis but multilateral, and the Commission has undertaken a wide-ranging reform of the delivery and monitoring of development aid. I have mentioned decentralisation and you have mentioned deconcentration and there is also another point of decentralised cooperation. Are you confident that the reforms for the delivery and monitoring of development assistance have proven to be efficient and are having a gradual effect?

Hilary Benn: As I indicated in answer to an earlier question, I do think that progress has been made. I think there is no doubt about that whatsoever because the case for the reform was overwhelming, but it does genuinely have some way yet to go. So, we are in the middle of a process of reform. What really matters in all of this in the end is, what difference do the programmes and the activity of the new development budget make to people's lives? This is the big challenge because there is a lot of public money and rightly we are devoting it to development because - and you would expect me to say this, would you not, but also to believe it passionately - if we do not tackle injustice, inequality and poverty around the world, we are never going to have a safe and secure planet in any sense to share with a growing number of people in a world that is shrinking because of the impact of globalisation, travel, trade, television, technology and those things that are driving this process, and we cannot any more hope that we can pull up the drawbridge on our country and say, "Will the rest of the world please go away" because, every day, we learn more forcefully how events in one country impact upon those of us who live in another country. That is why this process matters. The second thing I would say is that it is only relatively recently that the Commission has begun to try and make an assessment of the effectiveness of the programmes and the first report following the reform programme was published - and I think we have now had the second - and Paul Nielson himself will acknowledge that this is a first shot, that it needs to be developed and we need to get better answers to the question, what difference is it making? That is a challenge for all development organisations, it is not unique to the Commission, but it is very, very important that this process continues because we really do owe it to the people we are trying to assist and whose lives we are trying to help make better in support of their own country governments that we use that money as effectively as possible. So, yes, it is moving in the right direction but it needs to go further.

Q11 Mr Tynan: It is recognised that the UK produce the best practice as regards aid. What improvements do you see as necessary or are there any improvements that we could suggest in order to improve the situation as it is at the present time?

Hilary Benn: I think the steps that have been taken in terms of dispersing the money more effectively, so more efficient administration, because there is no doubt that there were, frankly, extensive bureaucracies in terms of getting approval for things and that means that money has been dispersed slowly in the past and that is not in anybody's interests. I believe very strongly in the devolution because that is the way in which we are working and I know that we have a better development policy as a result. It is not a very profound observation but, if you think about it, it is clearly very sensible. There is the world of difference between trying to run a programme from Brussels or from London as opposed to having people on the ground who know the partners, talk to the Government NGOs and other parts of society on a regular basis and get out, see things, absorb lessons ... You are going to be in a much better position to take a view if you talk to other donors about what they are doing. This question of coordination and harmonisation is absolutely fundamental to making effective progress and one of the other things that the EU needs to do is to work more effectively alongside other donors and, frankly, other donors need to work more effectively alongside the EU. If you meet with development colleagues and talk about harmonisation and coordination, everybody nods their heads because nobody is going to argue with it. The question is, what do people do on the ground? All of us have some way to go on that front. So, it is not just the EU. Donors in general need to make sure that we use that effort in a way that maximises the impact it is going to have.

Q12 Chairman: The Commission concludes in its recent communication on the relationship between good governance and development assistance that the EC and its Member States could do more to complement each other's approaches. What more do you think should be done?

Hilary Benn: The point I was just making in answer to Mr Tynan's question is, I think, fundamental to that, which is effective coordination harmonisation on the ground, which sometimes will involve saying, "Look, you might lead on that particular sector" because, as individual donors, we cannot do everything in every country and we may have particular strengths or expertise. So, if you meet together, you talk about what the development challenge is and decide how we are going to work together in the most effective way to support that process. That is one thing that I think we can do. Good governance, as we have all come to learn, is at the heart of this. To take the most clear example of that: during the time that General Abacha was in charge of Nigeria, the international community gave Nigeria one billion US dollars in aid. It is estimated, nobody knows for sure, that, during the same period, he and his family stole from the people of Nigeria four or five billion US dollars. So, there is an absence of good governance. What benefit did the development assistance given them during that time have? Big question. So, it comes back to the point I was making in answer to the very first question about building capacity. Any state, in order to look after its citizens, takes difficult decisions about how money is spent and have a plan in place not only for building primary schools but making sure that there is enough money in the budget to staff them and to repair them. All of these things that we take for granted but which you need a system to make work are really quite fundamental and, therefore, if you look at the programme that we undertake and indeed the work that the Commission undertakes, capacity building, strengthening the civil service and supporting the process of reform with governance is a fundamental part of enabling them to do a better job on behalf of their citizens and is fundamental to them making better of use of development assistance available because, if you have an effective plan for getting the kids in your country who are not in primary school into school and you know how you would spend the money and you could maintain the buildings and so on but what you are short of is the cash to make it happen, then, in those circumstances, providing you have that building block in place, the best thing that we can do as donors is say, "Great, we won't come along and say, 'You'll have a school here and we'll build you a school over there.'" Let us give the money to Government and say, "Right, you use that to get more of your kids into school." We have seen some very good examples of that where countries, for example, have dropped their (?) charges and seen very substantial increase in enrolment or where we are supporting - I was in Pakistan recently - the employment of a larger number of what are known as lady health workers who work in the community with women on contraception and maternal health and looking after their young children and that has led to a real improvement in the health indicators in that country which, frankly, has done very badly. These are practical steps that we can take but, without the foundation of effective governance, it is quite hard for the other development objectives to be met.

Q13 Mr Bacon: You said that we have particular strengths and that others do too. What would you say are our greatest strengths?

Hilary Benn: We do a lot of work on health and education and those two areas figure very prominently. It depends on the circumstances in an individual country. So, that is not to say that other things ... Infrastructure, though we have tended to move away from infrastructure as an approach to development although effective road systems are very important to economic development in countries. We do work on water and sanitation. I think another strength is the Chairman's question, which is about institutional capacity building and working with governments to reform their civil service structures. For example, helping to train customs officers to collect the dues that are owed. You may at first sight think, what does that have to do with development? Actually, if you do collect all the dues that are owed, you have more money in the government budget to then spend on health and education and roads and improving water and sanitation. So, in general, you will see a big investment in health and education if you look at the way in which we have been spending our money, a big investment in capacity building and public administration reform, but we also do a number of other things and one of the pleasures of doing this job is the sheer diversity of the programmes, and we also work to support civil society because communities can do a great deal for themselves and that is another part of building capacity because it is not just about what central government does, it is also about what communities can do for themselves and building the confidence of communities to say to their government, "Hey, we have this problem. We do not have a clean water supply in our village; what are you going to do about it?" Actually, that is how progress is made.

Q14 Angus Robertson: Minister, you have talked devolving of power and responsibility which I also very strongly support. The European Court of Auditors has stressed the need for donors to have confidence in the capacity of beneficiary countries to manage sector-wide programmes and to account for the costs and the results. How confident are you that the Commission is able to monitor these programmes effectively?

Hilary Benn: That is in part what the performance assessment report is intended to do. I think in any development programmes, it is essential that you have in place processes for managing the disbursement of money, dealing with fiduciary risk and taking a view on the wisdom of the approach that you are going to take. Having said that, in all honesty, development is not a risk-free process and, if we were completely at risk, both as bilateral donors or through the EU, then a lot of things would not happen. The question is, have you assessed the risk, whether you are the EU or ourselves? Do you have a plan in that for managing it? There are times, to take a kind of current example, where it is important that the international community comes in to support a real possibility of change in the country. Take the DRC at the moment: 3.5 million people have lost their lives in the conflict that has taken place there over the last seven or eight years. There is a transitional national government in place. This is a huge opportunity for the people of the DRC who have suffered terribly. In those circumstances, it is fragile. You have people who are fighting each other now in government trying to learn to live alongside each other to improve the prospects for people in that country where there, frankly, has not been a state. It is not about rebuilding the state of the DRC, there has not really been one. It is not about restoring people's faith in government, it is about trying to persuade people that there might be something called "government" that had something to do with improving their lives. That is a really big challenge. I think that we have an obligation not to be fooled, absolutely not, and that is why you have to have the processes and the structures, but you also at the same time have to recognise that, if you said, "Well, there is a slight risk and therefore we won't do anything", you might miss the opportunities that are there. We need to balance it is the answer to your question and the Commission has the same responsibility as we do in relation to the EU programmes to make sure that that is in place. The other thing I would say is that donors all talk to each other a great deal. This is not something that we do in isolation. That is why, with good coordination, we will say, "How do you think things are going in the country?" and "Is the Finance Minister really going to grip the finances?" and "Do we think that it's moving in the right direction?" It may sound like a very, if you like, non-technical kind of assessment but one of the things you are saying to yourself is, "Is this country moving in the right direction?" because we only have to think about our own process of development. All the mistakes we have made, the wars, the conflict over 1,000-plus years of British history, and we did not get it right. There was fraud, corruption, all of those things. We have been through it and these countries are going through the same process. We took rather longer than we hope that they will!

Q15 Angus Robertson: Just to pick up on the second part of the question because I do not think you had time to answer that. How confident are you that the Commission is able to monitor these programmes effectively?

Hilary Benn: I think it is improving its capacity to do so. I would say that it is part of its day-to-day obligation. Clearly, with deconcentration, you have a different sent of management challenges and part of the success of the deconcentration process will be judging the effectiveness with which the Commission is able to manage that and manage fiduciary risk. Clearly, we have experience; we have our own particular approach. I think the Commission is very conscious of that, but we need to be able to see the way in which that is done and that is why I am very keen that the reporting mechanisms, the annual report that is produced, should cover not just the performance in the sense of what difference it makes to people's lives, but that it should also cover, in answer to the very important question you have put.

Q16 John Robertson: Minister, the next set of questions are on representation of overseas development issues in Council and use of overseas development assistance funds. Has the creation of the combined General Affairs and External Relations Council in the place of the former General Affairs and Development Councils resulted in a loss of influence for those concerned with development issues?

Hilary Benn: I do not think it has resulted in a loss of influence. As you know, we had particular GAERC sessions during the course of the year that have a clear focus on develop and that was a very important part of the deal that was done in reforming the Council structures. In one sense, it assists in, if you like, bringing out into the open the tension that I was describing in answer to an earlier question between, if you like, the foreign policy interests in doing things and the development interests. My own view is that, when it comes to the new financial perspective, which is in the process of being discussed, we need to find a way of better separating out those different interests. We acknowledge that they exist because they do exist, but I think we need to find a better system for them saying, "Well, this is new development spending which is about development and this is EU development" or whatever title you would give it "spending which is dealing with these other objectives." Frankly, in the same way as here in the UK in passing the International Development Act, we made it very clear that our development spending is for a purpose, which is poverty reduction. I do not think that a change in the institutional structure has led to less focus because I think that people are more aware of this argument, but it does not mean that the fact that different Member States have different interests has gone way because it has not.

Q17 John Robertson: Does that mean that there is not a loss and we are actually on the same playing field as we were before? Are there any advantages?

Hilary Benn: The advantage clearly is, from an organisational point of view as far as the Council structure is concerned, it is a more streamlined structure than it was before and there are clear opportunities for development ministers to come to those GAERC meetings which focus specifically on development to make sure that their voice is heard effectively. It is also about the dialogue we have within our own countries as to what the shared objectives of any government are. So, I think that the structure is just as capable of being used to make sure that the interests of development are taken account of, but there are some rather fundamental problems that we need to resolve as far as the structure of the budget is concerned.

Q18 Mr David: Following on that theme, one of the big developments in the European Union is the development of a common foreign security policy and that is absolutely central to the emerging agenda. A concern that many people have is that, in that process, the whole moderate, admittedly, emphasis that the EU has put on development issues would be further squeezed/further marginalized, if you look at Category 4 expenditure, for example, as far as that is concerned. Obviously, if the British Government are going to pursue the perspective which you clearly outlined, they are going to have to have a clear set of alliances with other Member States. I wonder if you could indicate which Member States share the kind of views which you have so clearly expressed this morning.

Hilary Benn: There are the states we refer to as the like minded!

Q19 Mr David: Who are they?

Hilary Benn: A number of Scandinavians of course, with whom we have very, very regular dialogue because they have a different perspective and because they do not face the same pressures that some of the countries I referred to earlier face in looking to their near abroad and their historic relationship and we just need to acknowledge that. The foreign policy interests are entirely legitimate. The strong argument I am making is that we should be straight about that and find a mechanism for saying, "That spending is to achieve that particular objective and this is spending to achieve the development objective" because I think that will enable us to make some progress. As far as the new, as yet unagreed, treaty is concerned, I think it very clearly sets out there in terms of the language the place of development within the new arrangements. So, I think that would be important, whenever that is eventually agreed, and I think that the third way of dealing with this is to be clear that there will be a Development Commissioner with specific responsibility. I would hope that whoever that person is, they will have not just policy but control of the implementation because DFID is both a policy and an implementation organisation and I think that the same approach would be sensible, although recently, in separating out Europe aid, the EU has moved in a different direction. So, I think those are the fundamental things we would need to have. We have to make the argument; this is a political argument about where we should be putting resources, time, effort and energy and I am unashamed in saying that reducing poverty in the poorest countries of the world is, in the end, not only in the interests of humanity but also in the interests of foreign policy in its broader sense and safety and security. It seems to me that that is a really, really strong argument.

Q20 Jim Dobbin: I think you have just answered my question, but I will ask it anyway! Some NGOs have concerns about development assistance which, as you said, should be targeted to eradicating poverty but instead possibly going into reconstruction in areas post-conflict and also to those countries which are prepared to be partners in the war against terror. I think you just said that you do share those concerns.

Hilary Benn: Yes. I think that reconstructing a country after conflict is absolutely fundamental to development and fundamental to improving people's health and getting more kids into school and one only has to look at the whole host of examples where that is the case because conflict does not just kill people, it kills development. Why has Sub-Saharan Africa had a pretty difficult time? Because it is a country that has been scarred by conflict. As we meet today, the number of conflicts in Africa is now significantly lower than it was a decade ago. It goes back to the point I was making to you, Mr Robertson, in answer to your earlier question about seizing opportunities as they arise: Ethiopia; the DRC where there is a transitional government in place; Sudan, where we all firmly hope that they are going to finally deal with the two remaining issues in the peace negotiations which will bring to an end Africa's longest running civil war; Iraq, more controversially in some people's eyes, is currently classified as a low income country, yet it had a GDP per head 30 years ago the same as, say, Portugal, and that shows how that country has been impoverished in a whole range of ways; and Afghanistan also. In that sense, I do not see a conflict because reconstruction is helping to put in place the things that are needed to then allow development to take place and, as a development organisation, we should be interested in conflict prevention of course above all, bringing conflict to an end, and then post-conflict reconstruction because it is the building block and, if there had been fewer conflicts in Africa, then we would have been able to make more progress and Africa would be more likely to meet the millennium development goals than it currently is because that is really where we are failing. In that sense, I do not see a conflict because it is, in the end, also about improving people's lives.

Q21 Mr Tynan: I understand that funds from Category 4 have been a source of disagreement between Member States for some time. What would be the effect of the general budget, which was adopted in December, on the external actions budget lines under Category 4 other than those for the common foreign and security policy and the rehabilitation of Iraq?

Hilary Benn: The process of the way in which the budget is made up every year is that the place in which the different pressures on Category 4 and the external budget are played out and these different interests. That is the process that takes place every year. What really matters to me, as you will understand from what I said earlier, is, when that money comes to be spent and we look back at the percentage of it which has gone on the poorest countries of the world, what will it demonstrate? To me, the most important impact is that the proportion going on the poorest countries of the world should continue to increase. Clearly, circumstances arise which mean that particular decisions have to be taken and you have highlighted Iraq as part of the budget. Clearly, the EU is making a contribution and I think it is right and proper, in view of what I said to the previous question from Mr Dobbin, that the EU should be making a contribution to the reconstruction of Iraq because there is a great opportunity there, after 30 years of trauma and nightmare, for the people of Iraq to have a better life. Category 4 is the place where these tensions and arguments are played out and the test for me is how much goes on the poorest countries in the world. So, it is yet to be seen what the outcome will be.

Q22 Mr Tynan: I think the argument used by the previous Secretary of State was the likes of Morocco. That was a middle-income country and very different from Category 4. Surely the question is, do you see that as still a conflict as regards middle-income countries receiving money from Category 4?

Hilary Benn: There is clearly a place for support for middle-income countries. We have programmes in middle-income countries, although it is now a smaller share of our bilateral programme as we move towards 90 per cent of our bilateral programme going to the poorest countries of the world, as a matter of policy, for reasons I explained. There is a place for that and my argument is - and it was my predecessor and my predecessor but one, the Right Honourable Member for Birmingham Ladywood's argument - that a bigger proportion should go on the poorest countries of the world. That is our view and that remains our position. There is another question which has been raised which is, to what extent might it be possible in relation to some of the better-off middle-income countries to change some of the grants to loans? I think that is a debate that is yet to be had because we need to find a way of getting the percentage up for the poorest countries because all of us have signed up, the EU Member States/the world community has signed up to the millennium development goals and that is what we are going to be tested against in 11 years' time and we are not making enough progress and, if we want to make more progress, we have to do more in the poorest countries of the world. That is why this debate matters not just for the world community and us in our rising aid budget, which I am the happy inheritor of and that is an expression of our commitment, but it matters for the EU because we have to make progress and the reason why we have to make progress is that, if we do, then we build support for doing more and we make it more difficult for those who would like to argue, "Ah, well, it doesn't work, so what's the point?" I think that would be really dangerous, very corrosive and cynicism, frankly, is the biggest risk that we face as politicians generally, whatever it is you are trying to do.

Q23 Chairman: What progress do you expect on the issues which were unresolved at Cancun, and when? I kept the easy question until the last!

Hilary Benn: Yes, you did! I discussed this with Commissioner Lamy for an hour yesterday in Brussels and, as I recollect, I asked him the very same question when our meeting began. I think there is no doubt that everybody was disappointed, which is to understate it, at the outcome of Cancun, although I would just say in passing that one good thing did come out of it and that was that the voice of developing countries was heard more clearly and more loudly than ever before and I, for one, welcome that unreservedly. He is hoping to make progress during the course of 2004, although there are certain things happening which mean that it might be more difficult, (1) because the Commission is coming to an end and a new one is going to take up office and that is bound to mean that there is an interregnum where things cannot progress in the way that people might like and (2) there is a presidential election in America which is going to increasingly occupy the attention of those who turn out to be fighting it. However, I think that people came away from Cancun, because of the disappointment, with a renewed determination that this has to happen and has to work and, like any negotiation, in the end people are going to reach a different view. That is the truth. Now, the obligation on the EU is to make sure that the steps it takes, in addition to those it has already taken, maximise the chance that a deal will be done and the reform of the CAP and the decoupling agreed back last summer was a very, very important first step in that direction. There is the whole question of the so-called Singapore issues yet to be resolved. I just think it desperately important that we do. So, I think that, with sufficient determination, we can make progress, but I think that 2004 is likely to be a year where we are building towards being able to see that progress happen and 2005 will be a particularly important year. That is my honest assessment of where I think thing are going currently. It really matters because, if we open up agricultural trade, then the benefit that will flow to poor people in poor countries will be worth, on some estimates, three times the value of all the aid which the rich world currently gives. So, if you are weighing up what we can actually do to improve people's lives, making progress in Cancun would be really significant.

Q24 Chairman: Is there some evidence that the EU is going to do more in respect of agricultural subsidies? Have they learned any lessons?

Hilary Benn: Commissioner Lamy said to me yesterday that he feels he has sufficient flexibility in his mandate. I think the problem, looking back on Cancun, is that people never really got to sit down and do the discussion on agriculture because of the way the process happened. That is not to blame anybody but the fact that the negations came to an end and there was a lot of focus on the Singapore issues and behind it was agriculture that people really needed to have, with hindsight, more of an opportunity to sit down and discuss. I do think that we can make progress and I think that the failure of Cancun has applied a shock to the system because people have looked and seen and we all realise how important this is. There is a great expectation out there that this process is going to produce an outcome, in other words an agreement. What that agreement is going to be depends on the negotiation itself because this is a process where parties have to give and take. I sense that there is a determination to make this happen but it is going to take time to get to that point and it is important that we use the time we have at the moment to build the foundation to do all the work and, as a department, what we are focusing on is working with the developing countries in particular for them to develop their own understanding of what the impact of different possible deals might be on their own countries, so to develop their own negotiating mandate although I have to say that, in my experience, developing countries' trade ministers I have spoken to are pretty clear about things that they want but they need support in terms of the capacity and we have put a lot of money into providing practical assistance, both in terms of the negotiations but also building capacity within trade ministries in those countries themselves because it seems to me that that is of real impact to the contribution we can make to achieve a more successful outcome eventually.

Q25 Mr Bacon: A cynic might say that the EU has shared a remarkable capacity over the years to recover from troughs in the system without necessarily achieving fundamental transformation - the resignation of the Commission a few years ago, I suppose. I am not a cynic!

Hilary Benn: Well, I am glad to hear that!

Q26 Mr Bacon: I would like to return to this question of the ability of the Commission to monitor programmes effectively because that seems to be at the heart of whether these things are going to be effective or not. You said that they are making progress. On a scale of course of zero to 100, if they are at 10 and went to 20, they would have doubled but no one would necessarily say that that was satisfactory. Once all this deconcentration is through, how long do you think that is doing to take? How far down the line do you think you will be able to point at a moment when you can say, "The Commission's function here is fit for purpose"?

Hilary Benn: That is a very difficult question. I could say, "We'll know when we get there", but that probably would not satisfy you.

Q27 Mr Bacon: You agree that it is not fit for purpose at the moment?

Hilary Benn: No and I think everybody recognises that, not least the Commission and that is why there has been the strong commitment to the reform process and that does constitute progress because, if you acknowledge that there is a problem and then start to take the steps that are going to do something about it, that is progress. So, it means that the criticisms that were made, not just by us and others, of what there was before have been accepted. My assessment is that we are making progress along the way but we have not got there yet. That is probably, from your point of view, not a terribly satisfactory answer and I am going to avoid the temptation to make a prediction that, in all honestly, at X point in time, we will be able to say, "Yes, it has all worked" because it is a process and it comes back to the very first answer that I gave about the Accession States - for them too it is a process. As long as we watch what happens, we monitor it effectively and we look at what the outcome is, because that in the end is what this is all for - you could have the processes right but, if the outcome is not making a difference to people's lives, what is it all for? - that in the end to me is the real measure which is where the millennium development goals matter because there we do have a date and we do have a set of objectives to achieve and we will know very clearly where we have or have not, as a world community, when we get to 2015.

Q28 Chairman: Secretary of State, thank you very much. It has been a very, very interesting morning.

Hilary Benn: I hope that has been helpful.

Chairman: It has been a quick hour but certainly a qualitative hour and we really appreciate that. I would like to thank you very much for coming along and we look forward to having you back in the not too distant future when you can then tell us how well you have been doing since we last met. We really appreciate you and your colleagues coming along this morning.