Examination of Witnesses (Questions 80-94)
22 JUNE 2004
MR SUMA
CHAKRABARTI, MR
MASOOD AHMED,
MR MARK
LOWCOCK AND
DR NICOLA
BREWER CMG
Q80 Tony Worthington: There are a number
of things there. The third point I can understand, because in
Ethiopia I did not feel that the team was fully equipped with
an understanding of the latest developments in AIDS policy and
so on, and there could have been more from DFID, but on the second
point you were talking about, which was where you could not say
how much was being spent on AIDS because it was also covered by
sexual and reproductive health expenditure, surely you would want
to resist the National Audit Office on that, because you would
be going back to your silos?
Mr Chakrabarti: Exactly so. That
is going to be our answer.
Mr Lowcock: That is exactly right,
Mr Worthington, and to give one example, we supplied the year
before last 500 million condoms to developing countries. That
contributes to an objective on HIV/AIDS but also contributes to
our other key objective on sexual and reproductive health, and
the point that we would like to make sure we communicate effectively
is that some expenditure contributes to more than one objective.
We try with our systems to present data in a way which is consistent
with that.
Q81 Tony Worthington: I think there is
another aspect to that as well, that they say you did not know
how effective you were. That is how I interpreted some of it,
but there are some bits which are very easy to measure, like,
for example, what percentage of the population are on anti-retrovirals.
Surely, the priority still has to be preventive work. How are
you going to measure that, because of your activities, people
did not become infected? You have to do that.
Mr Chakrabarti: Absolutely. It
is very difficult. What they were saying in terms of us not measuring
our effectiveness was not measuring the effectiveness of the 2001
strategy on our country teams as opposed to on HIV/AIDS sufferers.
So, in terms of the new strategy, which will come out next month,
we will be trying to get a good balance between prevention, which
is key, as well as treatment. Treatment is also very important,
because, going back to my Malawi example, if we do not treat many
of those people in the 15-45 age category, those are the workers,
and if we let them die very quickly, the economy will just collapse.
It is already operating at way below potential. So the need to
involve treatment as part of the plan is quite important.
Q82 Tony Worthington: Another thing you
referred to was about working with other people, about working
with multilateral agencies or other bilaterals. How are you finding
that? My perception is that these people are not very malleable,
and I am particularly talking about the United States, which you
do not mention anywhere in the document. Everywhere I go this
is the big issue in HIV/AIDS work: how can you work with this
country in a co-operative way?
Mr Chakrabarti: I will ask Masood
to say a bit about the United States, and I will talk about the
Global Fund, which is our other big partner. On both, progress
is being made. We had a very good meeting with the Americans in
Johannesburg the other day, at a joint task force meeting on AIDS.
Masood can tell you about that. On the Global Fund, I have become
personally involved in this with Richard Feachem, in the sense
that I now supply him with country teams' reaction to how the
Global Fund is working on the ground. He then uses that evidence,
because he does not have a big organisation, to go and try and
change the way they operate in each of the countries. So we are
almost acting for him as well as for ourselves in this. One of
the problems we have had, as you know, with the Global Fund in
the country was separate co-ordinating mechanisms, and procurement
systems which looked very out of date in terms of how other organisations
were operating. If anything, it had transaction costs early on.
That was very early on in the Fund. In the last six to nine months
a lot of change has taken place in the way the Fund is operating,
which has made us happy in the sense that this organisation has
moved on, and it is important that that organisation does have
a bigger impact. So I think the trend with the Global Fund is
actually in the right direction.
Mr Ahmed: Could I just say a word
about the US/UK collaboration on this and also one point on treatment?
I think on the US/UK collaboration on AIDS, we set up when President
Bush was here last November a joint task force to try and see
if we could find practical ways of moving forward, recognising
that the US does work within a lot of self-imposed constraints.
We decided to focus on five countries, and we decided that we
would put the focus on the country teams to see if they could
come up with ways to work together. We had the first meeting of
that group of country teams in South Africa about three weeks
ago. The upshot of it is that actually, the country teams, both
on the US and the UK side, had been very creative in trying to
find ways around the constraints, and come up with things that
actually moved the agenda forward. Often field staff from the
USA or from CDC that are in the field from the US side are proactive
in coming up with those solutions. That said, it is the case that
if you look at the legislation governing the US HIV funding under
the Emergency Plan, it is extraordinarily prescriptive and detailed,
and it does indeed introduce a whole degree of rigidity in the
way in which countries and others have had to adapt around it.
While people are finding creative solutions to it, it would be
better if you did not have to find solutions in the first place.
So I think it is a pragmatic response, and what I see is people
attempting to make good progress and actually beginning to show
some results on it.
Q83 Tony Worthington: One of the areas
that just puzzled me is again, if you talk to UNFPA or locally
to Marie Stopes, they are constantly talking about the shortfall
in provision of, particularly, condoms, but HIV testing facilities,
a whole set of problems. If you are going to tackle both reproductive
health needs and HIV/AIDS needs, one of the things you can measure
is whether you have adequate supplies. In your report all you
say is "technical and financial assistance to provide access
to a range of contraceptive methods." This must be a very
big problem, where you can measure progress towards solving that
problem, and where you could be more frank in the report about
what progress is being made. Again, the United States has withdrawn
all assistance to UNFPA. What is happening?
Mr Ahmed: Two things. One is,
I think you are right that we can probably be more explicit and
direct and fuller in terms of actually saying where we are on
ensuring security of the sexual and reproductive health commodity
supply chain to countries. There are a number of things that we
are doing in that regard, and I think it would be useful to add
a box in there which actually details that. I can give you some
examples, and I am happy to follow up with more specifics, but,
for example, just to stay with the actual provision of projects
for the supply chain, as we mentioned last year through the bilateral
programmes we have had we have been supplying a total of 490 million
condoms. That is one dimension of the problem. Secondly, in the
dialogue that we have with countries, we are trying to ensure
that these commodities in the supply chain for sexual and reproductive
health are part of the government's own priority list, so that
they are not dealt with as something outside of the government
system. That is a bit of an issue that I have about ring fencing,
because I think ring fencing for funding for these may be appropriate
in some cases, but you want to make sure that it does not lead
to them being taken off the priority list of governments, because
it needs to be part of their own priorities. The third thing is
to then work with multilateral agencies, and in that we particularly
look at UNFPA to be the front line in terms of identifying, doing
the assessment, ensuring that there is procurement distribution
and monitoring network in place, and on our side there is no doubt
in our minds that we are continuing to support them and recognising
in particular that there are others who are pulling back, but
also the Global Fund side, where a number of the programmes in
the Global Fund on HIV/AIDS do have a dimension; I think about
80% of their programmes actually have, for example, a condom financing
component. So it is about introducing the linkages between sexual
and reproductive health and HIV/AIDS on the one hand, but also
recognising that there is a distinct agenda on sexual and reproductive
health which we need to pursue and not let the HIV agenda speak
for it entirely. These two are connected but separate agendas
which we have to push forward. Clearly, what we should do more
of is to come forward with clarity on it. We are actually going
to be putting out soon, next month, a strategy paper on sexual
and reproductive health which will lay out in much more detail
exactly what we are doing and planning to do.
Q84 Tony Worthington: In conclusion,
could I say, having seen your Department at work recently in Montreux
and in New York, I am delighted with the progress that is being
made on the linkages between reproductive health and HIV/AIDS.
Mr Chakrabarti: Thank you very
much, and I hope you let the PAC know that as well.
Q85 Mr Davies: I want to take up if I
might, some of the administrative costs that you set out in your
annual report and accounts. You were saying at the beginning,
Mr Chakrabarti, that you were in the market for suggestions as
to how you might present these accounts better. Let me come up
with one. Let me tell you that if I sat on the board of a public
company—actually, I do sit on the board of a public company—and
I saw your table 6 on page 175 as part of the management accounts,
I would send them right back. They fail to do the first thing
which a table of costs should do, which should be to distinguish
between that increase in costs which represents purchasing new
inputs, and that increase in costs which represents paying more
for existing inputs. Your note—not a very detailed note—suggests
that it is just a new definition of administration costs which
was introduced which largely accounts for the substantial increase.
That implies that there has been no increase in costs at all.
But in actual fact, if you look at table 7, you find that your
total employees have gone up from 1,640 in 2002/03 to 1,925, which
is an increase of nearly 20%. There must have been some real increase
in costs. You leave the reader of these accounts, frankly, completely
in the dark, not understanding at all how much of this increase
in costs is really a re-categorisation of costs (where overheads
were previously carried by projects they have now been separately
itemised), and how much—because we need to know that—represents
a genuine increase in costs. Perhaps you can now tell us what
the real position is.
Mr Chakrabarti: I will ask Mark
to give you the detail. I take your point and I think we will
try and do better on this next year. As I understand it, about
14% of the increase is an increase in administration costs. The
rest is explained by the re-categorisation.
Mr Lowcock: That is right. The
other point I would make is that these are not the accounts. The
accounts are audited separately by the National Audit Office.
For 2003/04 we have presented draft accounts to them which they
are auditing at the moment. I will take your point and make sure
that in the presentation we have given them we are making the
right comparator for this bit of the accounts.
Q86 Mr Davies: Mr Lowcock, even Members
of Parliament have limited amounts of time, but our constituents,
who ultimately pay your bills, have even less time, and if they
are asked to read a long document, nearly 200 pages, to understand
what is going on in just one department of state, to be told,
"If you can't understand that table, that is too bad because
you should be looking at another document, and if you compare
it with this document you might understand what is going on,"
surely that is not good enough in terms of accounting to the public.
It is very important that when we read this document it is self-sufficient
in its own terms, and that where it purports to state the administration
costs, we can really understand what is going on in administration
costs. I will not labour the point. Can I just ask one final question?
Can you give us some idea of the likely impact on DFID of the
Gershon and the Lyons studies of administration costs, as far
as your department is concerned?
Mr Chakrabarti: We are obviously
working through the implications right now. In line with all departments—I
am taking the Gershon efficiency side first—we can expect
our administration costs to be capped in cash terms at the 2005/06
level, and what we are going to have to do is make significant
further reductions in our back office costs, in HR, finance and
IT. We are already working on the HR side of that. On the Lyons
front, as you know, we have our headquarters in Abercrombie House
in Scotland and we will be moving a further 85 posts up there,
a mixture of policy and back office up. Those are the two main
impacts. There will be some impacts for some of our front line
programmes as well. Some of the programmes in south Asia may also
have to be reduced in terms of the numbers of people working on
them, but we need to work that through once we have seen our Spending
Review outcome.
Q87 Mr Davies: So the good news, good
news for the taxpayer but good news from your point of view presumably,
is that you feel that you are going to be able to increase your
productivity sufficiently that you can cap your administration
costs in cash terms so that they will fall in real terms as each
year goes by, and you will be able to increase in real terms your
total budget, the value of the services you deliver, while keeping
your administration costs capped. So there will be a significant
increase in productivity which will be quite measurable on the
basis which I have described, for the foreseeable future. Is that
the position?
Mr Chakrabarti: That is right.
We will need to come forward and show how those efficiencies have
been achieved and where the efficiency improvements are, and we
have discussed some of the ideas today. For example, if you move
further down the budget support route, there should be some scope
for some staff savings. If you harmonise with other donors more,
there should be scope for some savings.
Q88 Mr Davies: So you are happy to deliver
that programme of productivity improvements?
Mr Chakrabarti: I think it is
very much in line with the way we are thinking about how we should
run the programme anyway.
Q89 Chairman: I have a couple of final
questions. We have not talked about the European Community. If
one looks at page 98, about a quarter of DFID spending is spent
through the EC programme, and then you say at paragraph 5.29:
"In conjunction with HM Treasury, DFID continues to lobby
the EC to promote the poverty focus of the 2004 budget so that
more funds go to low-income countries." This is a refrain
that we have all heard on many occasions. Then I look at page
196, which is an organogram of DFID staff, and the only person
I can see who looks as though he is trying to sort out the European
Union is Nick Dyer. There are thousands of people, in Tajikistan,
every bit of the world has someone, and somewhere down there in
International Division tucked away between Conflict and Humanitarian
Affairs and International Finance—I am sure it is not like
that but are you confident that enough resource is being spent
on ensuring we get the best value out of the EC allocation?
Mr Chakrabarti: Nick Dyer is a
wonderful person, worth his weight in gold, but he is not the
only one working on this. That is absolutely right. We have people
in Brussels as well, in the UK delegation there. Nick obviously
has a team underneath him, working on this and above him are Peter
Grant and Masood and myself. We all spend time on this because
it is one of the biggest worry areas for us, frankly, in terms
of the quality of the programme and so on. It is a wider set of
people than just Nick.
Q90 Chairman: Do you see any prospect
for the new Commission? There will be a Commission before the
constitution, so there will presumably be an increase in commissioners—no,
not this time. Do you see any prospect in the immediate future
of making an improvement on this? It is very disappointing. We
have made seemingly little progress collectively on this over
the last few years.
Mr Chakrabarti: I think where
we have made progress actually is more in making sure the EU has
policies and so on which are more development-friendly. For example,
if you believe in budget support, the European Community is actually
doing rather well on that front. Where we worry is the allocation
of aid, and it is not just about commissioners; it is about member
states. The member states frankly are not going to see development
as a high priority amongst their EU objectives; and at the moment
they do not. That is one issue. The other issue, it seems to me,
is who makes decisions about allocating EU aid. They are made
essentially by foreign ministers, not by development ministers,
and therefore the allocation of EU budgetised support in particular
reflects those preferences, hence the allocation you have in front
of you. Where development ministers have a big say is round the
EDF, and that is allocated pretty largely to poor countries. There
is a whole set of issues around the incentives in the system being
geared away from poor countries at the moment. Masood, Nick and
others have been devising a strategy and running with it to try
and change the incentives, whether we can split the development
budget from foreign policy concerns, for example, a bit like we
have in the UK, those sorts of issues. Within the UK Government
we have made quite a lot of headway and have reached agreement
on that. It is a question really of persuading others now.
Q91 Mr Davies: Mr Chakrabarti, the European
Union—I am not talking about the member states' individual
aid programmes, but the European Union's own expenditure on this
falls into two categories, does it not: the external relations
part of the budget and the EDF part of the budget? So far as external
relations is concerned, they are not committed to a pure poverty
reduction programme. They are simply spending the money in accordance
with the foreign policy objectives of the European Union. We have
discovered this afternoon that that is what actually happens here
in practice, and so what the European Union is doing is spending
money on stability in the near abroad, the Balkans, north Africa,
the former Soviet Union, spending money on things like security
and all the rest of it, perhaps helping central banks. In terms
of the EDF part, which is the majority of their spending, there
is a rigorous poverty reduction agenda, is there not? It is directed
at the signatories to the Cotonou Agreement, who are, I think,
all poor countries, are they not? So there you have a degree of
purity, and that is actually quite autonomous, to come back to
a word I used in another context this afternoon. So far as the
external relations part of the budget is concerned, what they
are doing seems to be quite sensible in terms of the foreign policy
objectives of the Union, just as I think that where we are spending
money on foreign policy objectives, building stability in difficult
parts of the world, that is also a reasonable expenditure of taxpayers'
money.
Mr Chakrabarti: I of course disagree
with your characterisation of what we are doing in the UK budget,
but I agree with your characterisation of the way the EU budget
is divided up. That is essentially what I was saying. I think
member states have to decide that, if the budgetised programmes
are really about foreign policy, then we should say so.
Q92 Mr Davies: I think you are saying
about the European Union what I am saying about you. What do you
think about the budgetisation controversy? Do you believe that
the EDF part of the EU's spending should be budgetised?
Mr Chakrabarti: I would fear that
if it were budgetised, it would go the same way as other budgetised
programmes. Some of the things you mention on the benefits whereby
the way it is allocated and run would go.
Q93 Mr Davies: What would happen if we
withdrew from the European Union's overseas aid programme, either
from the external relations part or from our contribution to the
Cotonou Agreement and to the EDF?
Mr Chakrabarti: I do not think
we have a choice over whether we can withdraw from the budgetised
programmes, so far as I know. It is part of the Treaty obligations.
Q94 Mr Davies: If we withdrew from the
EDF—that we can do, because it is inter-governmental and
voluntary—what would be the consequence for, for example,
the implementation of the Cotonou Agreement?
Mr Chakrabarti: There would clearly
be a huge drop in whatever our share is of the EDF and the impact
that we have on the policies of the EDF. EDF, as I say, has moved
in the right direction on policy, largely, I would say, due to
DFID pressure and help with some of the policy work, in country
and in Brussels.
Chairman: I think we should leave it
there. Thank you very much. I thought it was a very good exercise
having everyone present this afternoon. Thank you very much for
taking part. I hope you all felt it was helpful. The Clerk wants
to know in response to your reductions of administrative costs
whether you are going to be reducing back office jobs in India,
as we have a Select Committee visit to India. I would also like
to say thank you very much to all your team for looking after
the Select Committee on various of our visits around the world.
We are grateful to them for doing that, and we have always been
looked after very well wherever we have gone. That is genuinely
much appreciated, because I think having a Select Committee turn
up mob-handed cannot be the easiest of things, so we are grateful
for that. We are also grateful for the cooperation of officials
who give us reports and briefings and so forth.
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