Examination of Witnesses (Questions 40-59)
DR CHARLOTTE SEYMOUR-SMITH, MRS ARUNA BAGCHEE AND
MR JEREMY CLARKE
5 JULY 2004
Q40 Chairman: I
am sorry to interrupt you but could you speak up a little as some
of us are a little deaf.
Mr Clarke: I was
simply saying that there is already a cap in the formula that
we use which is an adjustment for population which ensures that
the needs of other poorer countries and regions are taken into
account and I think that the application of this allocation model
has been also effective in ensuring that resources go to poorer
countries in Asia. The only other point I would make is that of
course economic growth and the achievement of the income poverty
target is only one aspect of achieving the Millennium Development
Goals (MDGs) and clearly, aside from the fact that there are very
large numbers of poor people in India, it is also true that India
does not perform as well against some of the other MDGs due to
factors like inequality and social exclusion which no doubt we
will come on to talk about a little more.
Q41 Chairman: Could
I just ask a follow up to that? It strikes me that one of the
conundrums is this: we are selling Hawk trainer jets to India,
the cost of which is roughly equivalent to ten years' worth
of UK bilateral development aid and one could argue - and indeed
my constituents and anyone else's constituents could argue - "Look,
all we are doing collectively as taxpayers is subsidising over
the next decade the ability for India to have free Hawk trainer
jets which it is getting from the UK", not necessarily to
stabilise peace in the region but that is another argument. There
is a bit of one that says, "Is what we are doing by way of
development aid really being appreciated or is it just being taken
as a given by the Government of India which can then actually
use that money as a subsidy to spend on other things such as defence
that it might like otherwise to spend?"
Dr Seymour-Smith: That
is a very valid question and one side of that, I suppose, is to
say, "Is defence expenditure in India very high?" It
is not. I think it is lower than the developing country average
and India, like any other country, has a right to a defence budget
and a programme for its own defence. Another side to that is to
say, "How do we know that we are not just substituting Government
expenditure in important areas like health and education?"
This is something that we are very concerned about and, in all
our interactions with State Governments and with the Central Government,
we are looking at the overall pattern of expenditures and the
level of expenditures on basic services such as health and education
and the trends and whether they are going up or remaining stable.
In that respect of course, we very much welcome the commitment
that is there in the common minimum programme to increase substantially
the levels of expenditure on health and education. If I could
give just an example of the Indian programme for elementary education
which we, alongside other donors, are supporting. A great deal
of time has been spent in designing that programme and in obtaining
assurances on exactly the point you have raised that the money
that is put in by donors will be additional to the money that
is put in by the Government of India and a great deal of lengthy
discussion has taken place on exactly that issue. While expenditures
on health and education are being protected in difficult times
of economic reform or we see them increasing, then we feel that
we have enough comfort and that is a satisfactory picture. Another
point that I would raise in reply to your question is that often
what we are seeking when we provide assistance is not just to
fill a financing gap, it is also to enable change to take place.
We believe that a number of the programmes we support are different
because of our intervention. They are different because of the
inputs of good practice that we are able to bring, because of
some of the technical assistance that can come alongside the programmes
and, because of some of the additional scrutiny, we are getting
improvements in the governance of these programmes overall. So,
on all of those counts, we of course ask ourselves the same question
that you have asked and we will seek assurances that we are genuinely
adding value through our inputs.
Q42 Chris McCafferty: I
would like to ask about DFID's priorities in spending plans. Having
looked at some of the written evidence, I am a little confused,
so perhaps you could explain. In the written evidence, you made
it clear that, in the last three years, over 60% of resources
have been spent on state programmes and the written evidence states
that spending was £198 million in 2003/04, that it will be
£250 million in 2004/05 right up to £280 million
in 2005/06. It also says that there will be enhanced off-track
spending including £250 million for sexual and reproductive
health, £190 million for primary education and £123 million
for HIV/AIDS. My first question is, is that new money or is that
money being top-sliced from somebody else? I hope it is new money
because it is very innovative if it is. The wider question is,
can you clarify for me where DFID will be spending this money
in India during the Country Assistance Programme rising to 2008
and perhaps explain what the current balance of funding is between
support to sector-wide national programmes, direct budget supporting
and funding to civil societies?
Dr Seymour-Smith: The
commitments on health, education and HIV/AIDS which you mentioned
and your specific question was as to whether those were new money:
those are new allocations. Of course, each of those will stretch
over several years. So, a bit of that spending will come in this
financial year, bits will come next financial year and in the
two or three years ---
Q43 Chris McCafferty: But
it is money that is over and above the spending commitments that
are also specified? That is what I am trying to get at. Is it
separate money?
Dr Seymour-Smith: No,
that would be included. For example, when we talk about £190
million on education, let us say that this financial year we spend
£50 million on that, then that would go to make up part of
this financial year's total of £250 million expenditure.
So, the £250 million spend that we are projecting this year
includes commitments on sexual and reproductive health, it includes
commitments on education, commitments on HIV/AIDS and commitments
to our state programmes and it is our best estimate at this point
of how much we will spend on all of those programmes to give us
a total outturn.
Q44 Chris McCafferty: Would
it be possible to let the Committee know exactly what those figures
are for each year, what the percentages are? I am particularly
interested in the section on reproductive health obviously but
primary education and HIV/AIDS are quite important as well. I
do not expect you to answer those questions now but I think it
would be useful for the Committee to have that information[1].
Dr Seymour-Smith: It
would be possible to provide the Committee with a breakdown of
the components of the £250 million expenditure that we aim
at this year and how much of that is for health, education and
HIV/AIDS and how much of it is through civil society, but I can
answer now that the proportion to civil society is quite small.
I think that, by their very nature, many civil society interventions
do not require a large amount of money, so that percentage is
pretty low. Budget support sometimes makes these expenditure patterns
a little lumpy because budget support tends to come in large tranches
and not necessarily every year. They can be every one or two years.
We tend to treat budget support somewhat separately. Leaving aside
budget support and just going to the other part of your question,
how do we plan to spend our money, we think that a more or less
equal distribution between the national programme on the one hand
and the four state programmes on the other hand, in other words
about half of our annual spending going to the national programme
and about half going to the four state programmes, is about right.
However, budget support in any one might throw out that equation.
For instance, last year we had one large tranche of budget support
to Andhra Pradesh which somewhat distorts that in principle allocation.
Q45 Chris McCafferty: Just
to push that point a little further, do you plan to continue to
spend about 60% on state programmes in the future or are you looking
to shift the balance of resources, maybe more support for the
Government of India in their centrally supported schemes or even
more for civil society because you have just said that that is
a very small proportion? Are you considering enhancing that?
Dr Seymour-Smith: Yes.
As I have said, leaving aside budget support which tends to be
rather lumpy, our view at the moment is that we should aim to
spend about half of our funding on the national programme and
about half in our four partner states. Looking forward to the
future, as some of our partner states fulfil the promise and the
expectations of the partnership that we have had with them and
begin to perform better - and this is a question looking beyond
our current Country Assistance Plan and perhaps forward to our
next one - we do need to ask ourselves - and I know that the Committee,
in its deliberations, has already looked at this question - should
we be taking on new focus states and in particular where are we
in relation to the states like Uttar Pradesh (UP) and Bihar which
have large populations, very great need and very severe levels
of poverty but where it is extremely difficult for donors to work
and indeed extremely difficult for Government of India centrally
sponsored schemes to obtain some purchase and actually make a
difference to those poverty areas? This is one of the questions
that is occupying us at the moment and perhaps I could invite
Aruna to add a few words on that question. Before I do that, could
I just address you on issue of the civil society. We do indeed
plan to enhance our engagement on civil society as is set out
in our Country Assistance Plan. We recognise that there is a role
for donors in supporting civil society in nurturing civil society
initiatives in strengthening the voice of the poor, in helping
to increase demand for services and helping poor people realise
their rights and we have a number of innovative and interesting
programmes such as the Poorest Area Civil Society programme which
works in the 100 poorest districts of India which are piloting
interesting innovative approaches and we do see scope for expanding
that engagement in civil society. Perhaps I should, if I may,
just pass on to Aruna to touch on this issue of where we go in
the future in terms of state and centrally sponsored schemes.
Mrs Bagchee: All
I would add to what has been said is that this is an area which
DFID is thinking very closely about. In India, there are no simple
questions about where and how DFID should spend its money. As
the Chairman has pointed out, the amount is so small that it is
not a question of major resource transfers that is going to make
a difference. When we look at the picture, it is not a very easy
thing to say that these are the successful states and we need
not work there at all and these are the difficult ones where we
should be working because there is the question of, do you work
only in those states which are difficult and there the money may
not be as effective versus working with those states where there
is reform and you want to commend further reforms and so on? On
the need itself, if you look at India, 70% of India's poor are
in six states: UP, Bihar, Madhya Pradesh, Maharashtra, West Bengal
and Orissa. Today, DFID is already working in three of them and,
of the other three, UP and Bihar we can understand but there is
also Maharashtra, which is normally considered as a well-performing
state but it does have high levels of poverty. Similarly, when
we look at the hunger MDG, the states with higher than 60% caloric
deficiency happen to be Kerala, Gujarat, Andra Pradesh and the
north-eastern states. Again in this, Kerala and Gujarat are normally
considered as quite well-performing states. So, we look at all
these questions of need with reference to the particular MDGs
and we cannot be all over. In balance, we have to consider whether
to stick to these four focus states as the main focus of our work
and then to see to what extent we can go into the difficult environments
as Charlotte has said. For this, we have a Task Team that is looking
more closely into the more difficult environment states to see
if DFID chooses to work there, what will be the appropriate strategy
in order that money is not wasted, and through which means, whether
through other partners or through the civil society or by whatever
means we could be more effective. These are the kind of discussions
we are having internally, and we will have our decision ready
by the Fall as to whether we go to other states or not.
Chairman: You mentioned
Andhra Pradesh and Piara would like to come in at this point.
Q46 Mr Khabra: I
would like to draw your attention to country assistance planning
as far as Andhra Pradesh is concerned. If you look at the expenditure
profile, you will find that one third of DFID's spending in India
in 2001-02 was in the form of direct budgetary support particularly
for economic and public sector reforms in Andhra Pradesh. Even
in 2002-03, Andhra Pradesh received about a quarter of UK spending
in India, not so much as direct budgetary support. There is a
rumour that DFID might pull out of Andhra Pradesh in 2008. Is
the bias to Andhra Pradesh likely to continue as it has been in
the past? Is Andhra Pradesh not one of the states in India most
likely to meet its on and off-track MDGs without DFID support?
Dr Seymour-Smith: First,
I should say that the figures for last year are in fact heavily
affected by one large tranche of budget support to Andhra Pradesh.
As I mentioned earlier, this does tend to produce a lumpy expenditure
profile. It is true that, even without budget support, Andhra
Pradesh has received a significant proportion of DFID assistance.
It has also received a significant proportion of total donor assistance.
Andhra Pradesh has been very heavily supported not just by DFID
but by the donor community as a whole because it was perceived
as a state with significant numbers of people in poverty and with
significant opportunities to make progress. Whether Andhra Pradesh
will continue to receive such large amounts of aid I think is
unlikely. I believe that some of the significant improvements
that have been achieved in the poverty indicators in Andhra Pradesh
will be sustainable and certainly the new Government in Andhra
Pradesh is very firmly giving the message that they intend to
build on the successes of the previous Government and that they
do not intend to reverse the reforms that have taken place. I
have to say that this is a slightly sensitive subject because
we have not yet had discussions with the Government of Andhra
Pradesh itself and we would not like them to hear from anyone
else, we would like them to hear from us first what the long-term
plan is, so I am going to be a little cautious in saying what
the future might be. Certainly, we did not enter into state partnerships
with the idea that they would be permanent arrangements. We entered
into them with the idea that here were opportunities which we
should take, that we should maximise those opportunities and get
the most benefit for poverty reduction and then be prepared to
move on because there are significant other challenges in India.
Q47 Mr Davies: I
wonder if it might be possible for you to let us have a list of
the policies which you just mentioned where you think you have
had some influence as a direct result of the relationship you
have had with the direct budgetary support[2].
I am not sure whether you had in mind the national government
polices or the policies of the state government. If you want to
let us have that in confidence, it will be equally helpful for
the Committee to see, for example, how the system works. I was
wondering whether I could explore a little further the way in
which you conduct your relationship with the recipients of DFID
support. You clearly have a dialogue with them which results in
a plan which you put together and you make it very clear that
you would like that to be a bilateral effort but do you coordinate
with other donors at the same time, in which case do you discuss
with them, with USAID or the World Bank or the EU, what you should
be doing and then, in the light of that, open discussions with
the recipient, whether it is the Government of India or the State
Governments concerned? Do you start off with the State Governments
coming to some draft agreement and then tell the other donors
what you are doing? How does the procedure work?
Dr Seymour-Smith: Perhaps
I can answer the second question first and maybe ask Aruna who
has kindly gathered some information about policy influencing
and attribution of our own activities to answer your first point.
On how we conduct the relationship and how we conduct the dialogue,
it is an iterative process. You asked if we coordinate with the
other donors: we do so constantly because we believe it is very
important to minimise transaction costs for the Government of
India both centrally and at State Government level. So, it would
be unproductive for our Government interlocutors to have to have
separate discussions with ourselves, with the World Bank and with
the EC that bear no relationship to one another. Albeit the Government
of India, both centrally and at state level, has different expectations
from the different donors and expects perhaps slightly different
things from each of them, they should add together to a coherent
whole that supports the planning process and the objectives that
have been set out by the Government. We have just finished over
the course of 2003, the Country Assistance Plan which involved
extensive stakeholder consultation. Our main consultations were
with our main interlocutor which is the Department of Economic
Affairs and the Ministry of Finance. They have the responsibility
for coordinating all the donor inputs, so they have to be our
main point of contact and we have to ensure that they are comfortable
with the discussions we are having at other levels and that they
have all the information that they require to keep an overview
of the whole picture. We have also had discussions with our partner
state governments and, following the launch of our new Country
Assistance Plan, we are now developing State Assistance Plans
which go into detail for each of those focus states. We then go
back and talk again to the other donors in the course of implementation.
So, it is a constant process of discussion where our main partner
is the DEA and the Ministry of Finance but we have to keep the
state governments, civil society interlocutors, private sector
and the other donors all in the loop in order that we are not
making unnecessary confusion and unnecessary transaction costs.
Q48 Mr Davies: So,
you do not have single multilateral meetings with several different
donors present and the Ministry of Economic Affairs or the Ministry
of Finance all agreeing a programme and then you say, "We'll
contribute this bit, America this bit and the EU this bit"?
It does not happen like that?
Dr Seymour-Smith: Not
as formally as that, there is not a roundtable or a consultative
group.
Q49 Mr Davies: "Roundtable"
is a good word for describing what I had in mind. Do you see merit
in moving in that direction?
Dr Seymour-Smith: I
think I have alluded to perhaps one reason why it might not happen
which is that Government of India does have different expectations
from the different donors. The World Bank, for example, has a
particular kind of loan programme, the Japanese have a particular
kind of loan programme, the Asian Development Bank (ADB) has a
different one and we have our programme and the EC has theirs.
So, in sense, they are segmented and the Government of India has
not chosen to bring all the donors together into a coordinated
and general meeting.
Q50 Mr Davies: The
donors could themselves take action in this case as the creditors
did in the Paris Club, for example. My question is really, would
you see merit, irrespective of the practicalities or whether it
is acceptable? Let us talk first about whether there would be
merit in such a model if it could be implemented; what do you
think?
Dr Seymour-Smith: Yes,
I agree. It is very important for us all to coordinate behind
the Government of India's 10th plan and its objectives and UNDP
has shown a great deal of leadership in taking a coordination
role for all of the donor community. So, it does happen and it
is a good idea. Greater donor harmonisation is something that
we are fully committed to.
Q51 Mr Davies: You
are implying that the Government of India would have hesitations
in dealing with all of their donors en bloc. That was not
the phrase you used but the impression I got was that perhaps
the Government of India liked to play one off against the other
to some extent; is that right?
Dr Seymour-Smith: I
cannot speak for the Government of India.
Q52 Mr Davies: You
must have an impression of how the Government of India works or
at least I hope you do.
Dr Seymour-Smith: My
impression is that they have a different expectation and set of
requirements from each of the donors and that they do not see
the need to bring all the donors together into one room and have
a roundtable discussion.
Q53 Mr Davies: You
put it very tactfully to avoid disagreeing with what I thought
I put to you. Can I just ask about the political change which
has come about in India. Is the new Congress Government going
to have a different approach to donors and to their role or indeed
to lead on the policy where it would affect our inclination to
support projects and programmes in India?
Dr Seymour-Smith: We
have not had the opportunity to have those discussions at a political
level as yet with the Government of India about their approach
to donor assistance, though I very much hope that high-level visits
from DFID senior officials and, we hope, our Secretary of State
later in the year will give us that opportunity. As to whether
there have been changes in broader Government of India policies
which will affect our willingness to provide donor assistance,
I think the Common Minimum Programme is the most that we have
at the moment as a guide to the intentions of the new Government
and the emphasis there on the rural areas, on social inclusion
and on reaching the poorest is, I think, very welcome as are the
commitments that I mentioned earlier to increase expenditures
on health and education. I am conscious that we have not yet answered
your first question about where we have had policy influence and
may we come back to that?
Q54 Mr Davies: Yes,
of course.
Mrs Bagchee: First
to just complete this discussion, I think it is fair to say, as
Charlotte has said, that the Government of India has not brought
all the donors together because it sees that it has different
expectations from each of them. For instance, it will look to
the World Bank for structural adjustment loans but is not so sure
that it wants DFID's Direct Budgetary Support (DBS) to go alongside
of that. It sees some donors as better on infrastructure works
and other more in the social sector. It is the case that, in particular
sectors, this kind of donor ---
Q55 Mr Davies: What
does it see us as then? What do they like to think of us as?
Mrs Bagchee: In
the social sector, and poverty-focused social sector work. It
is the case that in particular sectors such as in health, the
Government of India, the Central Ministry of Health and Family
Welfare has brought all the donors together and would like to
see a convergence of all of the individual approaches that we
have had so far - all move, both within the Government of India,
as well as on the donor side, to not have their own separate programmes
for reducing the Infant Mortality Rate (IMR), reducing the Maternal
Mortality Rate (MMR) and so on. DFID is a leading party in this
to bring about donor harmonisation, to have one large reproductive
and child health programme. So, exactly as you said, we do have
a development partners' meeting where all the donors first discuss
together what the approach should be, and what the priorities
should be and so on and we have periodic meetings with the union,
Health ministry, as well as the state level departments to see
how that convergence should take place. There is a fair amount
of that work going on as well.
Q56 Mr Davies: Who
is driving the coordination? Is it the donors who are saying,
"We should have greater coordination" or is it the Indian
Government?
Mrs Bagchee: I
think it is recognition on both sides that, unless there is that
convergence, we are not going to reach the targets at all.
Q57 Mr Davies: There
is genuine recognition?
Mrs Bagchee: There
is genuine recognition on both sides.
Q58 Mr Davies: I
think a number of us were struck by a decision of the last government
of India to not only sack a whole range of smaller donors, which
is a rather unusual thing to do, to turn money away, and I was
wondering to what extent that was almost a kind of warning shot
to donors that the Government of India does not really want too
much interference in its own policy making. For the people giving
large amounts of money, they will have a wider measure of tolerance
no doubt; the ones who are giving less, they will be fired together
and dispensed with. That would be a problem insofar as we do hope
to have some influence on policy and, even if we do not call it
shareholders or something like that, we hope that is justification
for spending British taxpayers' money in many cases in India as
well as elsewhere, which will have a beneficial impact on the
whole of the area which we are trying to contribute to. So, if
there is resistance of that kind from the Government of India,
it would be quite problematic for our aid effort in the amount
of influence you can exercise over time. So, could you tell me
if my fears in that respect are justified or partially justified
or are totally unjustified.
Mrs Bagchee: I
think at the moment DFID is seen as a very significant player
because it is seen as a donor that has been engaged with the country
for a long time and it is focused on genuinely doing something
about the MDGs and helping India to reach the MDGs faster. I think
it is also quite influential in donor harmonisation itself and
this role is also recognised by the Government of India. In several
of the programmes in which DFID has taken a lead role for many
years such as the District Primary Education Programme (DPEP),
we now see that the work DFID did along with the European Commission
and the World Bank has led to the Government of India itself now
taking a large national programme which is known as Sarva Shiksha
Abhiyaan, SSA, to see that all of the children who are out of
school now get into school and complete eight years of elementary
education. It is now an education guarantee; an act has been passed,
so it is sort of a rights-based approach to education. I think
this had a lot to do with the kind of work and influence that
DFID had, over a long time in the education sector. There should
not be the fear that it is considered as one of the smaller donors
and that it is not significant.
Q59 Mr Davies: So
we can continue to exercise an influence commensurate with the
development that we are making?
Mrs Bagchee: I
think so.
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