Examination of Witnesses (1-19)
2 DECEMBER 2003
MR MASOOD
AHMED AND
MS SHARON
WHITE
Witnesses: Mr Masood Ahmed, Director
General for Policy and International, and Ms Sharon White,
Director, Policy Division, Department for International Development,
examined.
Q1 Chairman: Thank you very much for
coming this afternoon. I have just a couple of general points.
Firstly, the acoustics in this room are not brilliant, so if you
could speak up. I was wondering if, before we start to take evidence,
you could just tell us a bit about what is the role of Director
General for Policy and International. Presumably that is what
I still think of as a Deputy Secretary post, is it?
Mr Ahmed: Yes.
Q2 Chairman: And also what does the Policy
Division do. I am not quite sure that if I was on Who Wants
to be a Millionaire and I was asked this question I could
give the answer. Perhaps you can tell us a bit about what you
do in DFID and we are genuinely interested in what your division
does.
Mr Ahmed: Thank
you very much. I am happy to tell you a little bit about what
it is that this role is about and what I do. To give you a sense
of the structure of DFID, there is a Permanent Secretary and then
there are three Directors General. One of them deals with our
bilateral programmes, so that is all of the bilateral aid. Another
one deals with corporate services and knowledge, so essentially
finance, HR, IT. Then the third one, which is my job, deals with
international and policy and that essentially has two parts. One
is I oversee all the engagement of the UK as a member or a shareholder
of international agencies, whether it is the World Bank, the regional
banks, the UN, the EU and the Commonwealth and, to the extent
that DFID has a contribution, also WTO as well as the IMF. That
is one part, the international agencies. The other part of what
I look at is to think about what should be the policy that we
take on any particular development issue, whether it relates to
the policy that we promote in the international system or the
policy that applies to our own programmes. In a sense we do not
make a distinction between what we promote as good policies for
our own programmes or for international agencies, but essentially
what should be our view on specific development policy questions,
whether it is a question like user fees or whether it is a question
of migration and how we understand that. Within that structure
I have two divisions that report to me. One of them is an International
Division that brings together all the international work and the
other is the Policy Division which Sharon White heads. I also
have a number of chief advisers who act as a sort of internal
challenge function, internal expertise, looking at economics,
governance, social development, human development and sustainable
development. That is the range of issues that we look at.
Q3 Chairman: I think probably we have
not seen enough of you so we shall have to try and rectify that.
It may well be the way in which the topics are selected. The UK's
largest bilateral aid programme is to India and I just wonder
what kind of work we have done on the contribution that the NRI
community, the diaspora, have made to welfare and enterprise,
wealth creation in India? Is any work done on what the generations
of migrants who come to the UK make in terms of development contributions
to countries we are particularly supporting?
Mr Ahmed: If I
could ask Sharon to give you a sense of what we are doing. I would
just make a general point. A lot of the work that we have begun
to do on migration has (a) been relatively recent in origin because,
unlike some of the other areas, it is an area which DFID and other
agencies have come to somewhat late in the day, and (b), given
our primary focus on the poor and development, the initial focus
of a lot of this work is looking at conditions in developing countries
themselves and looking at the impact of the migrant communities
in industrial countries, the diaspora, and how they feed back
is something that we are only beginning to get into. Sharon can
give you more specific information.
Ms White: Thank
you very much. As Masood has mentioned, it is quite early days
for us on the migration front. India is one of a number of countries
in Asia where we have begun to do some more analysis of how migration
is impacting on development. We had a conference a bit earlier
this year bringing together India, Indonesia, China, Vietnam and
the Philippines as a first discussion to raise awareness of migration.
This year DFID is developing a new country assistance plan for
India and one of the groups that we consulted was the Indian diaspora
within the UK. We have begun the dialogue but there is still a
bit further for us to go. There is some work that DFID supports
within India in terms of trying to protect the human rights legal
status of seasonal migrants within India. There is some work that
we have in hand but we are hoping to do more work and to use the
networks much more effectively in the future, particularly in
thinking through our strategies.
Chairman: There is a broad
issue here and this Committee is going to try and be reasonably
disciplined in this inquiry otherwise we go off on all sorts of
tangents. There is a broad point here, firstly to what extent
is migration of benefit to the countries to which people migrate,
and it seems to me with falling birth rates in most developed
countries that is obviously an issue of some importance, but also
one of the things we need to get a handle on is the contribution
that diasporas make to the countries of which they are part of
the diaspora. Maybe one of the things that you could possibly
share with us, not now but perhaps in writing[1],
is an indication of the research work that DFID has been doing
on this and we can compare that with the work that those at Sussex
University and others have been doing and so on, so we can see
what is the totality of the information that is around us in this
area. I think we are all putting our minds to this anew.
Q4 Mr Davies: You say, Mr Ahmed, you
have done some work on migration. I was wondering if you could
tell us at least what your preliminary conclusions are? I know
it is a very broad question but, just to try and narrow it and
make it a bit more specific to our interests, can you distinguish
between the extent to which migration is driven by extreme poverty;
the extent to which it is driven by something quite different,
which is improved economic circumstances and education giving
people the feeling that they actually do even better by crossing
the frontier and changing their job; to what extent it is driven
by environmental factors; to what extent it is driven by a conflict;
to what extent by persecution, by totalitarian tyrannical regimes?
These are some of the broad categories. Is it possible to give
some indication as to the relative weighting in the data that
you have examined?
Mr Ahmed: I would
be happy to do that. First of all, there are all these phenomena
that co-exist in different parts of the world. At the same time,
we need to try to get an aggregate picture of them. The first
point, and in some ways it is quite striking when you start looking
at migration numbers from a development perspective, is how important
internal migration is within developing countries. In some ways
we tend to focus very much on migration across boundaries, national
boundaries, but in terms of simple numbers, even though the numbers
on internal migration are quite bad, if you take a couple of countries—India
and China—the numbers of people that migrate seasonally,
either from rural areas to urban areas or that have migrated on
a more permanent basis from rural to urban areas, are probably
in the neighbourhood of 200 million a piece, so those are quite
large numbers and that is just for two countries. For the poor
in developing countries, in some ways this kind of migration is
the one that is more direct, that is what most of them are engaged
in. It is also the one that for them is part of the livelihood
strategy, part of how they earn their livelihoods over their lifetime,
maybe one family member may migrate to the city and others may
be seasonal workers. As a first point I simply want to emphasise
internal migration. The second point that comes through from the
numbers is international migration. Again, a fair amount of is
south-south. In the case of Asia, for example, if you exclude
China, probably something like 80% of the migrants out of Asian
countries stay within the continent. It is not necessarily a south-north
phenomenon, so we can just put that aside. Let us talk a bit about
the numbers and structure of international migration between developing
and industrialised countries. Again, if you look at the numbers:-
a fair amount of caution is needed about how robust the numbers
are, but the one that most people use as a benchmark is about
170 million international migrants. That is about 3% of the world
population.
Q5 Mr Davies: That is the number currently
living as international migrants?
Mr Ahmed: Yes.
Q6 Mr Davies: What is the annual flow
figure?
Mr Ahmed: I will
come to the flow figures in a minute, if I might. If you look
at the structure, in industrial countries the vast majority of
people coming in from developing countries as migrants are actually
skilled workers, so you change the nature of the profile of migrants
who are coming in as skilled workers. Skilled workers coming into
industrial countries raise a different set of issues in terms
of their impact on development and it becomes a bit more difficult
to say categorically whether this is good or bad for development.
On the one hand, there are some quite positive factors, the most
visible one in some ways being the effect of remittances. They
are quite large numbers, again subject to a certain amount of
uncertainty, but probably in the neighbourhood of $70 billion
or $80 billion a year official and probably twice as much, maybe
more, unofficial remittances. You can make quite good arguments
about how remittances are counter-cyclical, so they continue even
when countries go through a bad patch and they tend to go directly
to households so there is less of a loss in the transfer, which
you worry about with development assistance in terms of whether
it actually reaches the poor. On the other hand, there are some
questions about how they are spent, whether they might promote
consumption rather than investment, some questions about them
promoting inequality, but nevertheless it is a very big factor
in terms of general equality. The second set of things that are
positive also are increasing the kinds of links that are not financial
alone but in terms of the contributions that diasporas make in
fostering technology markets, enterprise, going back to re-establish
businesses. Of course, particularly the Indian diaspora involved
in information technology has been a prime example of people who
have gone back and helped to make the connections that have helped
establish exports in that area. That is on the plus side. On the
negative side, I think it is worth mentioning that there is a
very legitimate worry about whether the recruitment of skilled
workers, particularly in shallow markets from countries where
there is a very limited number of these workers, particularly
in healthcare, say, may be exacerbating the difficulties of promoting
healthcare in those countries. When you look at the data I think
there is a certain amount of legitimate worry that in some countries
that might be exacerbating the situation. It is obvious that the
answer is not to stop the possibility of migrating which may not
be feasible because people tend to find ways around that route.
Also, the answer may be to try and strengthen the supply of skilled
workers in that country rather than to stop recruiting them. There
is a debate and discussion around the negative side of that. There
are other social negative effects as well in terms of whether
the separation of families causes problems. The last thing I should
say is if you look at the numbers that come through, we have been
talking mainly about migration as a voluntary phenomenon, much
of it is voluntary, some of it is illegal but it is still voluntary,
people moving because they feel they would be better off whether
by moving within a country or moving across boundaries, and those
numbers are quite large, but there is an involuntary dimension
to migration which is either internally displaced people, and
the numbers of internally displaced people are quite significant,
in the neighbourhood of about 20-25 million internally displaced
people who have been displaced because of conflict or environmental
problems or other reasons, sometimes associated with development
projects, problems have been associated with that. There is also
international trafficking of vulnerable people. Frequently these
are people who are genuinely very poor coming from a poor background
and obviously they are subject to all kinds of exploitation and
there is a worrying dimension of involuntary transfers associated
with that. For refugees, which is one manifestation of that involuntary
movement in some ways of people who are trying to flee, the numbers
are about 10 million or so. It is important to recognise that
refugees largely take refuge in neighbouring developing countries,
so of that number of about 10 million probably three-quarters
are in developing countries. Similarly, internally displaced people
by and large are concentrated in a few developing countries. The
manifestation of involuntary migration, the forced migration that
we see in industrial countries, either takes place in the form
of asylum seekers who make it here, who are generally better off,
better educated than the ones who stay in developing countries,
or they are people who come through in the form of trafficking,
people who are trafficked into Western Europe. I must say to you
that I was struck when I started looking at the numbers—again
the estimates are very dicey—by the fact that probably 400,000
people a year are being trafficked into Western Europe, many of
them women and children, and probably about 200,000 of them come
in from Eastern European countries. That is part of the dilemma,
how does one then manage the risks associated with the voluntary
migration and maximise the benefits and how does one control some
of the factors that affect the involuntary.
Q7 Mr Davies: Thank you. For the purposes
of making progress in the discussion, let us distinguish between
three types of migration. The first category would be the internal
voluntary migration, which is surely inescapable from economic
change if one thinks of what happened here during the Industrial
Revolution, for example, in England, the United States, Germany
and elsewhere, that is one category. The second category would
be forcible displacement either as a result of conflict or being
driven out, and that is obviously highly undesirable as a problem.
I would be grateful if you would focus on the third category,
which is voluntary movement across frontiers, voluntary and international.
You set out some of the factors which can operate on both sides
of the equation, positive and negative. A positive aspect could
be the generation of local consumption and demand as a result
of remittances, generation of investment flows as a result of
remittances, formation of human capital through the development
of new skills while the immigrants are abroad if they then come
back to their own country with that higher level of human capital.
Those are obviously plus factors. A negative factor would be the
one you have mentioned, which is the removal of human capital
which does not come back and which could have been very valuable
for development. Can we get from you, Mr Ahmed, if we can, a sense
of the balance of advantage here. It is very important. On a net
basis, do you think that this voluntary international migration
at the present time is an advantage to the human race, is positive,
is part of the solution, or do you think that on balance it is
problematic?
Mr Ahmed: I can
give you my own assessment.
Q8 Mr Davies: It is a one word answer.
Mr Ahmed: I will
give you my answer to it. My answer to it would be unambiguously
that (a) overall it is positive and (b) it is an inescapable dimension
of globalisation. The issue is not should one have it, should
one not have it, but how does one manage the risks and maximise
the benefits. Yes, it is positive and one could probably make
it more positive if one managed it more effectively.
Q9 Mr Davies: My final question on this
particular subject is in relation to women. Can you say anything
specific about female migration in this context or do the same
considerations apply equally to both halves of the human race?
Mr Ahmed: The only
thing that one might want to add in terms of female migration
is that for obvious reasons, (a), they are more likely to be subject
to exploitation during trafficking of various kinds and they figure
disproportionately in that, along with children, although numbers
are pretty weak on trafficking. I think one needs to worry about
that dimension of it. On the positive side, (b), a lot of women
migrants who are not migrating as part of families but migrating
as the primary migrants themselves in search of employment, particularly
from countries like the Philippines, have been very important
sources not only of providing income for their families but in
some ways you can see evidence in some cases where it has raised
their empowerment and their ability to make decisions and so on.
It can actually be quite a positive empowering phenomenon but,
on the other side, there is the worry about trafficking.
Q10 Chairman: The Holy Grail for this
Committee is the Millennium Development Targets. Can I just put
to you a contrary thought, and it is this: when one goes around
Africa one is continually seeing skilled people being stripped
out, nurses and doctors. I think it is said that there are more
doctors of Ghanaian origin in New York State alone than in the
whole of Ghana. When we went to Malawi I saw a nurse training
school where the whole of those who were qualified, with the exception
of one, were coming to the UK. I think there is a genuine concern
that the NHS is hoovering up qualified nurses from developing
countries. Is this something that DFID is doing work on? Is anyone
monitoring how we in the North/West are hoovering up the best
skilled from developing countries? Going back to your point, it
may not be possible to prevent that, and indeed I think the UN
Charter gives people the right to leave their own countries, if
I remember rightly, but in those countries where we are particularly
taking people—South Africa, Ghana, Nigeria and others—should
we not be seeking to help replicate those skills by providing
extra training for nurses, extra training for doctors in those
countries? It may be more cost-effective for us in terms of policy
rather than training nurses here to be training nurses in South
Africa or Ghana knowing that we are going to recruit them in the
UK as part of their development and our needs.
Ms White: I think
it is an issue of big concern to DFID. I think the impact on the
country depends, as Masood said earlier, on how shallow the skill
base is. We find in some developing countries, like Ghana as you
say, a very high proportion, 60/70%, of health professionals are
migrating to countries like the UK. In others we find that one
of the reasons why professional staff are migrating is because
they are unable to get a job in their chosen profession at home,
so the circumstances may be more grave than in others. We are
trying to do a number of things. DFID has become more active with
other government departments, particularly the Department of Health,
in drawing up an ethical recruitment list, so as not to target
those countries where the depletion of skilled professionals is
going to be particularly problematic. We are also trying to work
with other donors to make sure that the practices of recruitment
agencies more generally internationally are rather better. A lot
of our mainstream development assistance is targeted to try and
strengthen the capacity within countries: reform to civil service
pay structures, trying to improve service delivery so that there
are better jobs and people are going to have less need, in a sense,
to migrate overseas for the good employment to raise their living
standards.
Q11 Mr Colman: Are you talking, in a
sense, about compensation being paid to the developing countries
for the fact that we are taking their skilled labour and employing
it in the UK? Do you think that there is a straight aid component
in this in terms of what you should be paying, say, Ghana or the
Philippines?
Ms White: Not compensation.
What we are trying to do is make sure that the economic opportunities
for people domestically are strong enough so that the incentive
to migrate to the UK is less strong, so the wage rates of teachers,
of nurses, of doctors, are rather higher, the prospects are better,
higher education systems are able to domestically train workers.
It is not providing a wage substitute but trying, through various
forms of assistance, to improve the labour market prospects for
professional workers.
Q12 Mr Colman: Clearly the wage rates
that could be paid in Ghana, say, to a nurse or a doctor are significantly
less than could be paid under the NHS in the UK. Is there still
not a requirement that we should pay compensation to the Ghanaian
economy in some way to deal with this otherwise unbridgeable gap?
Ms White: We do
not feel that compensation is the most appropriate response because
it would be very difficult for us across all countries to try
to level up to global wage rates. Do you think about paying US
wage rates to professional workers across the world? That is why
our focus is really on trying to improve the local capacity, improve
the local prospects for people in countries in our mainstream
development assistance.
Q13 Chairman: Before we move on to remittances
I would like to ask one other question. You mentioned trafficking.
On this Committee we are not very good at Eastern Europe because
they tend not to get much UK development aid or EU development
aid, but trafficking to me suggests involuntary migration, it
suggests slavery, it suggests forcible migration. The figures
you were quoting were quite significant. I just wondered who is
compiling those statistics? Where does HMG get those figures from?
Who, within the machine of government, takes the lead on pursuing
issues in relation to trafficking? Other than occasional stories
in the newspapers one does not get a sense of this being an issue
in the UK. Is it a bigger issue elsewhere in the European Union
or in other Member States? What is your feel on trafficking?
Mr Ahmed: We rely
on a lot of sources to get data. The one that we rely on particularly
in the area of trafficking data is the International Organisation
for Migration, the IOM. They provide data. It is not an area where
DFID has a lead because lots of these issues about trafficking
into the UK are areas where the Home Office would have a lead
on it.
Q14 Chairman: We are talking about forcible
migration, almost slavery here.
Mr Ahmed: It is
forcible.
Q15 Chairman: Involuntary migration.
Mr Ahmed: It is
certainly involuntary and people who are either deceived into
believing where they are going to or in one form or another subsequently
exploited. Yes, it is involuntary. It is different from what one
would call smuggling of people, which in some sense is voluntary,
complicit, where the person being smuggled wants to come in but
to go around legal barriers. We rely on that data. I cannot say
to you how the numbers for the UK relate to numbers overall, except
to say that numbers for Western Europe as a whole are about half
a million, 400,000. Exactly what the breakdown is, of that I do
not have to hand, but I would be happy to try to find that out[2]
Mr Colman: The Home Office
has been doing major work on this in the last two years, so if
Mr Ahmed can get that note to cover the Home Office as well I
think that would be very interesting.
Q16 Hugh Bayley: How significant economically
are remittances to developing countries? Which countries in absolute
terms receive most remittances and which receive most as a proportion
of their national income? What sorts of factors determine the
levels of remittances that expatriates make to countries?
Mr Ahmed: The overall
number of remittances was something in the order of $80 billion
a year for 2002.
Q17 Hugh Bayley: Globally or from the
UK?
Mr Ahmed: These
are all global numbers. Which countries are the primary recipients
of this? Let me give you the first five: the largest numbers are
going into India and that is in the order of about $14 billion
a year, then (and I would be happy to send you a table with the
specific numbers[3])
Mexico, Philippines, Morocco and Egypt. However, these are not
the countries for which remittances are the largest share of their
economy. As you might expect, a number of small countries and
low income countries feature more prominently in that list. Just
to give you the first three: 14% of Tonga's GDP is now remittances,
Lesotho 30% and Jordan about a quarter. A couple of points about
the nature of these remittances, what drives them, what can we
say about what works? The first point is one that I mentioned
in response to an earlier question which is that they tend to
be a more stable form of flow, which is obviously good from the
recipient country's point of view because they do not tend to
mirror movements and other things—they tend to be counter-cyclical.
The second thing that is important about the remittances is that
in a number of countries they tend to reach quite a broad range
of the population, a large number of households are actually getting
it. In El Salvador it is estimated that something like three-quarters
of households get an income from remittances. Similarly, in the
Philippines it is quite broad based and in Senegal. Some studies
show they have a direct effect on reducing poverty. The World
Bank and others have done studies which have shown that if you
have a ten per cent increase in a country's share of remittances,
that is generally associated across countries with about a 1.5
per cent increase in poverty reduction. These cross-country numbers
are useful as a benchmark but I would not personally say there
is a precise relationship that applies in every case. The broad
case suggests that they will have an impact on poverty. What is
also interesting is that in terms of the migrants and who is sending
them now, their own contribution, there are some factors that
appear to affect whether or not they send more of their income
as remittances or less. One interesting point is generally women
appear to send a larger percentage of their income as remittances
than men do. Secondly, generally the low skilled migrants tend
to send a larger proportion of their income as remittances. Migrants
who are there on a temporary basis and whose families are at home
predictably send a larger share of their income in remittances.
The longer people stay the more the remittances decline. It is
interesting to watch intergenerational differences. South Asian
migrants are generally dropping off after the first generation.
For other migrants coming in from other parts of Asia it is the
second or third generation where they stop sending remittances
back. One of the problems about sending remittances has been that
the cost of transfers has been quite high. In some cases 15 or
20% is used up as the simple cost of transferring remittances
from the UK to Latin America for example. As the cost of transferring
money has come down people have started sending more remittances
through the efficient channels. What we do not know is whether
this means more remittances are being sent back or more are being
sent back through the efficient channels which were previously
sent through unofficial channels about which we have less data.
Also, on the one hand, there is this desire to make it easier
to transfer money, reduce the cost and there are things that governments
have done quite effectively in terms of making it easier to open
bank accounts and the like, but, on the other hand, there is a
worry about how this relates to concerns about money laundering
and the financing of terrorism. Governments have also been making
it harder to transfer money through informal channels and trying
to track better the money that flows through official channels.
DFID has been working on this issue of migration and along with
the World Bank we organised a conference here in October. This
was actually the first time we had brought together about 100
people from various countries and agencies to look at different
elements of the links between remittances and their impact on
migration. There is now a proposal which the World Bank will need
to follow up by setting up a website to disseminate good practice
on experiences across countries in terms of facilitating the process
of remittances and reducing their costs and making it easier for
migrants to participate.
Q18 Hugh Bayley: Are there things that
governments in developed countries, the UK Government in particular,
could do to reduce the cost of remittances by changing fiscal
rules for currency dealing? Where does the ten or 15% get absorbed?
If you go to Thomas Cook, you can normally change your money for
one or two per cent. What are the points of the system that you
would need to target to reduce the transmission costs? What more
could be done either by the financial services companies or by
the Government? Have you looked at the taxation arrangements of
remittances? We have taxation treaties with a lot of developed
countries which stops double taxation. I know you have a slightly
different issue when you give money from one person to another,
but it does seem to me that it would be beneficial, if you want
to encourage remittances, if you could either get agreement from
developed countries that they will not further tax income that
has been taxed or we would give a tax exemption for resources
which are passed into a different tax regime and taxed within
that regime. Is that something your Department has looked at?
Once the money gets there, particularly in these smaller countries,
remittances can have a big economic impact for the country concerned
that may or may not help poverty alleviation depending on how
the money is used and who it goes to. What are remittances spent
on and what, in policy terms, could we do or developing country
governments do to ensure that a greater proportion of remittances
go to help the poorest people?
Mr Ahmed: I will
tell you about some elements of it because it is a field where
people are still trying to figure out what the best solutions
are. Here are some thoughts about what countries have done. I
think one thing one could do is make it easier for migrants to
open bank accounts. If they can open bank accounts, they can use
formal channels at lower costs than they can if they go through
informal channels. Several commercial banks have made it easier
for migrants to open bank accounts and that has had a noticeable
effect on reducing the cost. A very simple thing is when they
installed cash machines linked to US banks in Mexico they found
it made it much easier for migrants from Mexico sending money
back to be able to withdraw money from their account than if they
had to go through the formal channels. The second thing is perhaps
joining up with Post Office savings banks as well as with micro-
finance institutions in developing countries because part of that
15% is used up by the fact that the reach of the financial sector
in developing countries is frequently much more concentrated in
urban areas, it does not reach the poor, but the bigger problem
is that the financial sector is not servicing the needs of the
smaller communities, which also manifests itself in terms of raising
the costs of remittances. Thirdly, there is already evidence of
greater competition. Once banks have started coming into this
business and they have recognised how big the flows are it is
beginning to have an effect and because of the increasing difficulty
using informal channels, the Hawala system, that has given banks
a greater opportunity because they see their market share increasing
because of the flow being transferred over from informal to formal
channels. Some host countries have also had tax rebate schemes
on remittances like special bonds. India, in particular, has a
special bond for non-resident Indians which provides them with
a greater break. What could be done to ensure that the money that
actually goes to developing countries is used more for investment
than for consumption? Frequently what we think of as consumption
may actually be one form of investment in the sense that, if you
are looking at people investing in healthcare or meeting a health
budget, it is actually quite a high priority from the point of
view of people who are spending it. One needs to be a little bit
careful about how one defines consumption and investment and also
how one defines priority because in one way a lot of the country-based
approaches to develop support now are to put the money in the
hands of the recipients and let them make the choices. So in some
ways with remittances that is what they are doing. Those choices
do reflect how they see the return on investment and on saving
and the environment within which those investments are being made.
So it is very difficult to set up a sustainable scheme whereby
remittance income will consistently have a higher return on savings
than the rest of the population in that same country is able to
get on its savings because what you are setting up is a mechanism
for arbitrage whereby a lot of the local people will then try
and get onto the scheme. In any event, it is obvious the best
way to deal with the problem is to fix the environment within
which those savings are being done more broadly, not only for
the remittance scheme. Your question about whether we have looked
at fiscal incentives in the UK or other industrial countries could
raise some of the same worries about arbitrage, whether in a sense
you can run sustainably a scheme for remittances which you could
contain in terms of not having other flows also taking advantage
of that tax break, but it is not something we have looked at in
our work yet, perhaps other people have but I am not aware of
it.
Q19 Hugh Bayley: Perhaps it is something
you could take back to your Department and talk about with other
branches of government because although I understand your immediate
reaction that you could create incentives for tax avoidance in
this country if one were to introduce a scheme, there are quite
a number of perfectly proper ways in which the government encourages
either personal investment decisions or personal giving decisions
in terms of tax relief for charitable donations and it might be
possible to look at those as parallels. Finally, has your Department
considered using aid monies as an incentive, perhaps matching
individual remittances with government resources? If you want
to encourage remittances, if you think it is a good way of getting
a bit of global re-distribution, if you think it gets money into
the hands of those who need it most, is that something you could
do, rather than giving a tax incentive you give a government expenditure
incentive either to the individual or to the state?
Mr Ahmed: The simple
answer is we have not considered it. It is something we can take
back and look at. There are two questions we would want to look
at in this case. One is whether and how much you think providing
that kind of incentive would lead to an increase in the flow of
remittances, a net increase not simply a re-allocation from one
channel to the other and secondly, what else you could have done
with that aid financing, in a sense would you be better off supporting
country poverty strategies, would you be better off supporting
other kinds of objectives rather than tying it to this particular
pattern? Both of those are empirical questions which it would
be worth looking at to see what the answers are.
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