CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 749-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

INTERNATIONAL DEVELOPMENT COMMITTEE

 

 

DFID's Departmental Report 2004

(http://www.dfid.gov.uk/Pubs/files/departmentalreport.htm)

 

 

Tuesday 22 June 2004

MR S CHAKRABARTI, MR M AHMED, MR M LOWCOCK and DR N BREWER

Evidence heard in Public Questions 1-101

 

 

USE OF THE TRANSCRIPT

 

1. This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

 

2. The transcript is an approved formal record of these proceedings. It will be printed in due course.

 

 

Oral Evidence

Taken before the International Development Committee

on Tuesday 22 June 2004

Members present

Tony Baldry, in the chair

Hugh Bayley

Ann Clwyd

Mr Tony Colman

Mr Quentin Davies

Mr Andrew Robathan

Tony Worthington

________________

Witnesses: Mr Suma Chakrabarti, Permanent Secretary, Mr Masood Ahmed, Director General - Policy and International, Mr Mark Lowcock, Director General - Corporate Performance and Knowledge Sharing and Dr Nicola Brewer, Director General - Regional Programmes, Department for International Development examined.

Q1 Chairman: Permanent Secretary, I understand that you wanted to say something so, please, go ahead.

Mr Chakrabarti: I will try and be very brief. I will just introduce my colleagues, on my right is Mark Lowcock, Director General, Corporate Performance and Knowledge Sharing, who I think is well known to the Committee. On my immediate left is Nicola Brewer, Director General, Regional Programmes and Masood Ahmed on my far left, Director General, Policy and International. Just a brief word really to explain why we have turned up mob-handed, as it might appear. You have got in front of you the four most senior officials from DFID, we comprise the executive members of the Management Board. We are here really for two reasons as a group. One is to improve the accountability, frankly, to Parliament through this Committee for our Public Service Agreement, and also I think to have a deeper dialogue than we have managed perhaps in previous years around the programmes. On the accountability point, Ministers and the Management Board are jointly responsible for the Public Service Agreement, and this is the first year when we have written the Departmental Report[1] in a way that actually reflects the PSA as such, and so we thought it only right that since we are jointly responsible we should come forward together and share responsibility for that accountability to you. This is a first, as I understand it, in terms of a departmental management board appearing together in front of a Parliamentary Committee, which is why I wrote to you, Chairman; it may be of interest to other committees, in particular the Public Administration Select Committee and the Public Accounts Committee. On the question of deeper dialogue, I should be clear that I remain the accounting officer so, in a sense, any of the issues that anyone wishes to raise I will obviously make an attempt to answer, but what I want also to do is really get a richer dialogue going with the Committee by allowing my colleagues to come up with examples from their own areas of responsibility and not pretend that the Permanent Secretary is omniscient in any way. Hopefully, that should lead to a better dialogue with the Committee. We might want to reflect afterwards whether this has worked for both parties.

Q2 Chairman: From our point of view I am sure DFID works as much as - perhaps more than - most departments in a collegiate kind of way because you have a large number of very specialist fields to which people have to contribute, so we are delighted to see the whole team here. It always does strike me as daft to see the Permanent Secretary up for a couple of hours batting solidly, because it gets him into defensive cricket rather than collaborative dialogue. I think the rules are fairly clear where the lines are and where you can say what the Minister might say, but we are not in the business of trying to trap you into saying things that Ministers are not wanting to say. You have obviously got copies of the report in front of you; when one looks at the report on page 11, I suspect that DFID probably has the most straightforward mission statement of any Whitehall department. You could chisel it on the wall: "DFID aims to eliminate poverty in poorer countries, in particular through achievement by 2015 of the Millennium Development Goals." Then you say: "Our Public Service Agreement contains objectives and targets by which we measure our progress." Then one goes to page 21, and there you have the objectives set out, and I just take one of those which is to reduce poverty in sub-Saharan Africa. I then go to page 25 which is headed "Poverty Reduction in Africa". We all come to this meeting with a different brief, and when I was reading this I was thinking if I was Chief Secretary to the Treasury who, to be honest, we see as the main enemy in life, how would I read this? Or if I was reading this with a view to briefing the Prime Minister, how would I read this? It struck me that the difficulty with having poverty reduction in Africa as a Public Service Agreement objective is that it is far too easy for officials to say - I am not being pejorative, just factual - "We have not met this because of circumstances beyond our control." Tony in a minute is going to talk about HIV/AIDS; I am not sure what prompted the NAO to start that inquiry[2], whether it was some people who produce anti-retroviral drugs who said that you were not doing enough on that, I do not know what it was, but actually if one looks at page 28 you have got an amber light against that one, "Too early to say" and "UNAIDS will publish global HIV/AIDS figures in July 2004". On the opposite page under "Maternal Mortality": "The main constraints are weak and under-resourced health systems; ie lack of money and lack of staff. The latter is exacerbated by economic migration and HIV/AIDS related deaths." On page 31 "Conflict: Only two on-going conflicts in Africa do not have a peace agreement (Somalia, northern Uganda), down from 19 in 2000." Of course, a certain amount of intervention by DFID in Sierra Leone led to that, but not entirely, and I think the point I am really making is this, it is quite difficult with a PSA like that, with so many conditions, to be able to put one's hand on heart and say here at one end of the process is a chunk of money that we can put in through DFID, and here at the other end are some outcomes; how will we relate the money which has gone in at this end to those outcomes, with all these other factors in the middle over which DFID has absolutely no control whatsoever? I just wonder whether these are such huge targets on poverty reduction in Africa that, in a sense, whether you succeed or fail is beyond you, so you are setting yourselves up to fail and whether some other PSA targets, wholly coherent targets, might not be more helpful both for you and for others.

Mr Chakrabarti: I think this goes back to something we discussed before about attribution, to a large extent, whether we can attribute outcomes to our actions. I would not say there was a one-for-one match between what we put in and what comes out at the other end. We operate by collective effort, and what we are trying to do with the Public Service Agreement here is describe the collective effort and then, after the Public Service Agreement, through our delivery plans drive down into actions which are more concrete, more discrete actions, if you like, at direct country level. It is that sort of process that really needs looking at as a whole, as opposed to the overall Public Service Agreement on its own. I do not think DFID would claim that the fact that the number of conflicts has reduced from 19 to two or four (depending on one's definitions) is all due to DFID, but I think one could claim that DFID has played a part through energising the international system and engaging with the UN, in particular, to try and do something about reducing those conflicts, but I would not claim that it is a one-for-one reduction, certainly not. What this system does very much throw up, with red lights, amber lights, green lights is where we need to put our efforts, so the fact that some of these have red lights means that we can immediately say to our relevant director, the African director, "What are we doing in those red light areas in terms of our own actions and our own programme, but also to galvanise the international system to do better on those two areas?" That is what we are trying to do with this system, I do not think we are trying to pretend that all of Africa's progress is down to DFID, of course not. So I think it is a more nuanced description than the more traditional Public Service Agreement that we might see for the health service, which could ascribe most of the health outcomes in the UK to the health service.

Q3 Chairman: There are two things there, are there not? There is what DFID may need to be doing more on in terms of galvanising the international community, I can see that the red lights, green lights, amber lights will help with that, but there is a bit about whether one can demonstrate that DFID spending has made a difference.

Mr Chakrabarti: Sure.

Q4 Chairman: The truth of the matter is I suspect that if the NAO had put themselves in most policy areas they could for some of them say you can go and talk to DFID officials in the field, you are going to get DFID officials because they are by nature rather more open and discursive than most other officials in other departments, most of them are ---

Mr Chakrabarti: You know us well!

Q5 Chairman: So they are going to have lots of views because you are a rather different department to the other departments. One could have written that NAO report on any topic of DFID's work, I suspect, and my concern is that in not explaining more clearly the money that DFID has put into each of these headings, you are setting yourselves up for failure in that everyone will come and say you are not actually sorting this out, whereas in fact you are doing a lot. You go on, from page 35 onwards, to specific countries. We know, because we have visited them, that DFID has done a fantastic amount in each of these countries, whether it be Malawi, where I think one of the other Select Committees was quite critical to some extent on this, or Sierra Leone or whatever. If we take Sierra Leone, £120 million in three years, a phenomenal amount. I am just wondering whether DFID should not be trying to claim greater credit for the money that you are putting in, where it goes and its outputs and making clear what DFID is doing or HMG is doing with that, and in other parts what we are hoping the international community as a whole is doing.

Mr Chakrabarti: I think that is quite a good piece of advice. I thought that was what we were trying to do, but clearly we have not succeeded. In the description of our country programmes, what we are trying to do there is show more discrete benefits against the more macro targets that are set out in the PSA. We have got a whole host of examples that we can discuss where, without DFID at the country level, certain things would not necessarily have happened, whether it is government policy or whether it is actually a concrete outcome such as the primary enrolment or whatever. Perhaps we have not got the balance right, and we will look at that for next year.

Q6 Chairman: Hugh Bayley's committee[3] has just done a brilliant report on HIV and its impacts, and I have not dissected, as I am sure you have not yet had the opportunity to dissect, paragraph by paragraph the NAO report, but it seemed to me that they were making some not entirely fair criticisms all the way through, but with the way in which DFID is set up it seems there is a danger that one could almost take any DFID policy and just change some of the words and it would be liable to the same sort of criticism.

Mr Chakrabarti: Possibly. I read the draft of the NAO report and I think some of the criticisms are fair. I think there is a lack of connection at times between our strategies and our country programmes, and as a general point the criticisms are fair, although I personally think that the criticism of the 2001 strategy was a bit strong in the report. As a general point I think there has been a problem sometimes in translating those strategies, so we need to do better in that area.

Q7 Chairman: The next bit is almost shorthand, the 0.7 % and the IFF, but if you go to paragraph 2.4 on page 26 you say "... in real terms aid per capita to Africa has fallen over the last decade ... aid flows must increase significantly." There is no actual mention there of the IFF, although later on there is a discrete item. We all know by heart, because both the Chancellor and the Secretary of State have reiterated on a number of occasions, the line to be taken on 0.7 %, but what is DFID's line on the IFF? Is your view really that the only way we are going to get this up is by the IFF, in which case should we not make it clearer? Where are you expecting these extra resources to come from?

Mr Chakrabarti: We are hoping, obviously, the IFF will be one mechanism by which we leverage extra resources, which means private sector resources, for aid, but at the same time we have not given up on the idea that aid budgets generally should increase. It is quite clear that oda as measured by the OECD does need to increase and our own effort needs to keep moving upwards. There is an interesting issue as to whether some donors such as the Scandinavians and the Dutch, who all reach 0.7 %, and those who are hoping to set timetables - the French, the Belgians, the Irish and the Spanish - whether some of them see the IFF as an alternative, and we worry about that and that, therefore, they would like double the commitment, both the IFF and 0.7 %. They are quite important in gathering opinion in favour of the IFF, so there is an issue about whether we should endorse that as a timetable in order partly also to capture their support.

Q8 Chairman: Our special advisers who draft questions for us, in case we run out of bright ideas, have suggested as a question on this that given the at-best patchy progress towards meeting the MDGs, which of the following possible outcomes would the UK like to see and what is the Government doing to achieve them: the establishment of mechanisms to achieve policy coherence for development such that countries' policies on, for instance, trade, migration and military spending are made more coherent and supportive of development objectives; aid increases such that donors meet their commitments; a shifting of the MDG goalposts so that they are seen as aspirations rather than achievable targets? I think we all start off on the basis that the MDG targets must not become aspirations. I think we all agree on that one.

Mr Chakrabarti: Absolutely.

Q9 Chairman: I think everyone is agreed that we just need more money if we are going to meet those targets by 2015, because otherwise it is just not going to happen. I think my own observation therefore in relation to that is that if that is the case, then somewhere in this report there needs to be a much more coherent explanation of how HMG sees those funds coming forward, otherwise we need to be much clearer as to what we have been doing, both qualitatively and quantitatively, and what we are expecting others to do.

Mr Chakrabarti: That is a fair point. We will attend to that for next year.

Q10 Chairman: It is not a criticism, I am just trying to ---

Mr Chakrabarti: No, it is helpful.

Q11 Chairman: The last G8 meeting I thought was pretty good news on debt relief, peace-keeping, AIDS and all the rest of it. On debt relief, what do you see HMG doing to ensure that the progress with debt relief for HIPC countries, which seemed to be the likely outcome of the Sea Island meeting is going to be achieved by the next G8 meeting at Gleneagles?

Mr Chakrabarti: Can I ask Masood both to answer the question about what is going to happen post Sea Island on debt relief but also to tell you some of the thinking that we have had internally about how to move this debate forward more radically.

Mr Ahmed: Thank you very much. If I can really say a word first on where I think we came out of Sea Island and how to take that forward, and then go into what the options might be, thinking a bit more radically. In terms of Sea Island, essentially what we have got out of there is a reaffirmation of a progressive version of the existing status quo. So we essentially got a two year extension of the HIPC initiative, we have got an agreement to do topping up where appropriate and we have got an agreement to finance the initiative. These are all useful things, but they are all restating what many people felt we had more or less got to, although some people were trying to stray away from it. So it was good to get that restatement and put it down so that it is now clear. We have also got though - and this I think is the bit that leads on to what might be done beyond - an agreement to explore ways to deal with unsustainable debt beyond the amount that is being dealt with through the HIPC initiative. In a sense that really boils down to two kinds of issues. One is that for a number of HIPC countries, which have actually gone through the initiative, the analysis now being done shows that they still have a debt level that is too high for them to carry, so the first question is we cannot let these countries carry on with unsustainable debts, having just taken them through a process which was supposed to deal with that problem. The solution that has been suggested so far, which is simply to say let us move them completely onto grant financing, will do the job, but it will do the job on average in about 12 or 15 years, and 12 or 15 years is not a credible time span during which you leave countries vulnerable to debt shocks while you slowly deal with the problem through growth and grants. So what we are now doing some internal work on is what more can be done proactively to deal with this 10 or 12 year period in a way that makes these countries more robust to shocks and deals with their unsustainable debts faster. One way to do that, of course, would be to simply have another round of debt stock reduction, which could bring their debt levels down, another way to do that would be to provide them with some kind of option to do a debt servicing facility so at least during that period the extra costs of the unsustainable debt were being dealt with. But however we do it, the important issue that I think we have to deal with is that we do not put incentives into the system which penalise other countries that are equally poor but who do not have quite the same debt problem, although they may have an equally pressing need because of their HIV/AIDS spending or other kinds of spending. What we are trying to do is to shift the discussion away from saying how we will fill this particular kind of need for debt to say what is the total amount of financing countries need to meet the MDGs? Included in that financing is not only expenditure for new programmes but also debt service relief, which up to now has not been explicitly included in the calculation, and then to say if you need this total amount of financing, you mobilise as much of it as you possibly can, which comes back to an earlier point, and then you give countries a choice of whether they prefer to have some of that financing in the form of upfront debt reduction or they prefer to take it in the form of projects or in the form of budget support. By giving them that choice, some countries will prefer to go for debt reduction if they have got a particular problem in the next few years, others may actually say even though we have a relatively high debt, it does not become due for 15 or 20 years - because a lot of multilateral debt in fact has a maturity of between 30 and 40 years. So they might very well decide that it is better for them to use the money for more urgent programmes and move away from a uniform approach which says every country must have a certain amount of debt reduction, to say every country must have the financing it needs to meet the MDGs and then, if you have a choice, to get it in the form of debt reduction or new money. We are exploring how to take that idea forward because it would mean introducing an element into the financing toolkit, debt relief, which up to now multilateral institutions have been quite reluctant to do, so we would have to take that forward with them as well. So it is fairly early days in terms of our thinking, but I think the idea then is basically to shift it back to focus on the MDGs and how we meet them.

Q12 Chairman: The last question before I pass over to Mr Robathan, some considered that Sea Island was the easy bit and you are going to have the harder bit at Gleneagles, are you not, and there are going to be quite a lot of expectations about Gleneagles, is that not fair?

Mr Chakrabarti: Yes.

Chairman: And joining together the Commission for Africa. The more debate that can be prompted on those sorts of issues, I think that somehow people feel debt is just very easy to tick a box, or write off the overdraft or do something like that, and it may be that we all need to ensure that there is a broader debate in the next few months on debt and some of these other issues. Andrew?

Q13 Mr Robathan: Thank you. Mr Chakrabarti, we previously had a discussion around the table about Direct Budgetary Support and I remember - I am paraphrasing - that you said something to the effect that everybody agrees that Direct Budgetary Support is the way forward and nobody is really interested in project funding any more. That was the essence of what you were saying on that.

Mr Chakrabarti: I think that was quite a paraphrase if I may say so.

Q14 Mr Robathan: I and many others have quite a lot of concern about Direct Budget Support, although I do think these things come round in circles. People say Direct Budget Support is fantastic, we get our fingers burnt and we go round to project funding and we come back again ten years later to Direct Budget Support. You have probably got more experience of that than I have, to be honest. I note that you are giving Ethiopia, Ghana, Malawi, Mozambique, Rwanda, Sierra Leone, Tanzania and Uganda DBS at the moment and that that currently accounts for about half the DFID funding to those countries, with an aim to raise it by 2006 to two-thirds. My first question is what proportion of total UK aid is currently delivered through DBS, and what do you expect it to be in three years time, if things go according to plan?

Mr Chakrabarti: I do not have the three year projection in front of me, but at the moment, if we take the average of the last three years - which is probably the best way to do it because it has gone up and down - it is about 15 %. We expect the amount of budget support to rise in both Africa and Asia in the next three years, but I do not have the exact figures in front of me; I can send you a table on that[4]. A lot of that is of course in Asia, where the biggest rise is projected, and is dependent on what the new Indian government wants. The previous Indian government was quite keen on budget support, but we do not know for sure what the new government will want. Nicola has just recently been to India and at official levels there is some suggestion that they are less keen on Direct Budget Support within the states for various physical economy reasons, I suspect, so I would not put them as hard and fast numbers as yet.

Q15 Mr Robathan: A particular question that we want to get on the record is about the mix of skills you have in Ethiopia. We went to Ethiopia recently, as you may recall.

Mr Chakrabarti: Yes.

Q16 Mr Robathan: If we take that as an example, do you feel that the mix of skills you have got in an office such as Ethiopia is the right sort of mix if you are going to have a shift to DBS, and at what levels is the policy-dialogue expected to take place and what does it mean for staffing of DFID teams such as Ethiopia's?

Mr Chakrabarti: I think that is a really interesting question. One of our traditional strengths that becomes even more important actually than technical expertise is professional knowledge, whether that is health, economics or whatever it is. You cannot really have policy dialogue with government at a serious level unless you have that professional knowledge. So the premium on that knowledge becomes even higher it seems to me. There are a couple of new areas, it seems to me, which we need to introduce in Ethiopia as well as other places: one is the ability to influence governments at the macro level much more than perhaps we have done before, before we look at the project level if you like, and here we need as part of the Direct Budget Support process to talk to them about a wide set of policies at a much more macro level - about financial management systems, for example. That requires training, it requires a different mindset sometimes within our own staff and, of course, learning on the job as well. That is one new set of skills that we need.

Q17 Mr Robathan: Building capacity with ministries.

Mr Chakrabarti: Absolutely, and I would like to come back to that because that is quite a big issue at the moment. The second area, as you get into discussion of budgets, public systems, accountability - all those sorts of issues that underlie budget support - is actually understanding more about the physical economy in these countries. I think in the past aid donors have tended to shy away from getting too involved in understanding the business of development for fear of engaging in politics, and of course we should not do that, but at the same time we need to understand how the society works, what motivates people in their society to make the decisions they do? Who are the people in those societies who are going to try and change their societies for the better, what we call "drivers of change" in jargon. All of those things are new areas of development for many of our country officers, and the skills vary, quite clearly, among the country officers and some of them will develop faster than others. That is the real staff development area, if you like. On the capacity issue, I think this is a really interesting question. When I go around Africa I do wonder in some African countries - say in Malawi where capacity building is uppermost - whether the balance between the skills on the donor side of the line and the lack of skills on the government side of the line should not make us pause about whether actually many more people working in the donor organisation should not actually be working in the governments, whether there is really a sensible dialogue otherwise. That varies from country to country, I would not say that about India or Vietnam necessarily, but in a place like Malawi it is very striking and that is something that we do need to think through; it is a current issue today.

Q18 Mr Robathan: Can I take you to some specific places? Rwanda and Uganda, you talk about drivers for change and I think it is fair to say that Kagame and Museveni were both depicted as drivers for change in the past and both of them I have a lot of time for, though I think you will agree that they did not have an entirely unblemished record in the recent past - indeed, there is talk of Rwandan troops going back to the Congo as it were.

Mr Chakrabarti: Yes.

Q19 Mr Robathan: We have just visited Ethiopia, where the Foreign Office says - and again I paraphrase - that there torture is common amongst detainees and there is a bit of democratic deficit and a serious question about the human rights record. I therefore have a problem with supporting regimes which may not be entirely democratic - indeed, are not entirely democratic - and with bad human rights records with British taxpayers' money. Through Direct Budget Support, and without getting involved in party politics, how do you see that we improve the governments in these countries?

Mr Chakrabarti: I will ask Nicola to talk a bit about country examples, but let me just give an umbrella approach. Generally what really should motivate and does motivate our Ministers and the organisation is whether the government in question is fundamentally committed to poverty reduction. That is the most important thing. Obviously, there comes a point when, if a government's human rights record is so terrible and it is doing absolutely nothing about it, there will be an issue as to whether we have an aid programme there at all, not whether it is budget support or project aid. In the case of Ethiopia I know that Prime Minister Meles recognises that he has had a human rights problem, the question is whether he is doing enough about it, whether we are pursuing him about it. Hilary Benn was there of course as well, recently, and he discussed some of these issues with him. In the case of Uganda, another area where we have had concerns, as you know, about the defence spending, aid donors with the UK in the lead - and I think there is a good attribution here to UK efforts - have tried very hard to cap defence spending as a condition of the budget support being provided to Uganda. The advantage of budget support is that it has allowed us to get into some of those debates that, in fact, at project level would have been much more difficult to get into. Nicola?

Dr Brewer: On the three countries you mention, Rwanda, Uganda and Ethiopia, there are just two points that I would add. One is that for two of the countries, Rwanda and Ethiopia, you have also agreed with the government a long-term Memorandum of Understanding setting out the rights and responsibilities on both sides, and we have close dialogue with them about the obligations on both sides. So that framework which is for a long term, usually a 10 year period, allows us to have a much more intense dialogue about specific commitments that the government has made and they will cover both political and economic governance points. On Uganda, there is just one other aspect I would mention which is that there are circumstances in which we either need to delay or to withhold particular tranches of budget support for reasons that have been clearly set out, and that has happened, for example, with Uganda at least four times since 1999.

Q20 Chairman: Before we move on to ask Quentin to ask questions about multilateral aid and then Tony to ask questions about the WTO, just two quick questions about not just budget support, but general support. If we go back to Sierra Leone, "The Memorandum of Understanding contains commitments by Sierra Leone to reforms - in return for UK support. These include action on corruption, reform of central and local government, public expenditure management, media reforms, effective regulation of the diamond industry, security sector reform, sound macro-economic management and the development of a poverty reduction strategy." When one goes to Freetown there are two people there, there is President Kabbah and Solomon Berewa, and that is it. Most government ministers are commuting between London and Freetown and the level of management at the top level of the civil service is tiny. I have two thoughts on that: one, could we not be doing more to help the lower policy-makers, the people who write the policies, work up the policies. In your department when you need someone to work up a policy you have huge numbers to fast track it through. Secondly - and you may tell me you already do this - when we go out there, there are a lot of general advisers and then specialist advisers. You and DFID must still have what we used to call G7s or Principals. To what extent do they get seconded in their career to the private offices or to ministries overseas to see it from that end of the capacity challenges of how you can actually implement, if you are Vice President of Sierra Leone, actually doing some of this stuff from that end. I have two questions really, what more can we do to encourage and build the capacity of receiving countries for policy formation and, secondly, what more can we do to ensure that your people actually have an understanding of the policy difficulties of receiving countries?

Mr Chakrabarti: I fundamentally agree with you, I think we need to do more of this, not just DFID but departments generally need to provide more support for policy formulation in countries. That is what I was trying to get at in answer to the earlier question from Mr Robathan. We used of course to do a lot of that in the past. If you go back to the Sixties and Seventies, many of us began our careers actually - I did in Botswana with the Botswana Government.

Mr Robathan: A great success.

Mr Chakrabarti: Not due to me though, more due to the Botswana contingent. In the last 20 years, however, that all went away because of the feeling that those people were not necessarily driven by the incentives and the objectives of the governments they were working for, they were more driven by the donors. If we were to go back down that route in Malawi or Sierra Leone, we would have to devise a scheme with the relevant countries that they were much more in the driving seat and these people were not working for the donors. That is the thing we need to focus on. In terms of how many of our people, the youngsters coming through, have that sort of experience, ODI fellowships clearly help to do that and there are several other secondment schemes. Mark?

Mr Lowcock: I think you are exactly right and I am just going to give two examples of people who are now quite senior in the department who have done exactly that. One of our directors for information came to us originally from the Treasury and spent two years working for the South African Ministry of Finance, doing exactly what you are talking about. One impact of that was to make him much more effective in working for us because he had a much better insight. The other example is in Uganda where somebody who is now the deputy director for us for Asia spent four or five years working with the Permanent Secretary as a behind the scenes adviser. The key thing about that is that he was not visible to anybody, he was behind the scenes, he was talking just to the Ugandan government, working just for them, and therefore he was dealing with the problems Suma was talking about, who are my loyalties to. We need to do more of that, both because it is good for them and because it is good for the countries which are having support.

Mr Chakrabarti: Can I just follow up on that to try and draw the two points together? What I would like to do in, say, a case like Malawi when we next provide budget support is think about whether some of that budget support should be reserved, essentially, for technical capacity building of this sort, where the Malawians would be quality controlling the people they get, the people who would be working for them, they would be paying their salaries and not us, but they could pay it out of the budget support we give them. That is something that donors are still grappling with.

Q21 Mr Colman: Can I say that I thought that the report was a bit light in terms of the emphasis on the importance of looking at trade and investment - we have pages 90 to 92 and we have paragraph 1.7 but it is a bit light given, if you like, the tremendous view if you like, which I support, that was made in terms of world poverty making globalisation work for the poor in terms of the White Paper when we set out on this road. Perhaps you could restate how you see the way forward, because I saw in Cancún where I was sent as part of the UK delegation, nominated by this Committee, a situation where still many of the developing countries who were full members of the WTO were getting their briefings very often from NGOs who were very anti the views expressed by DFID and, might I say, even the reports of this Committee. Do you see a situation where, frankly, DFID should be much more proactive in putting money into funds, not appointing I suggest the consultants, that should be done by the countries themselves, but who could perhaps provide a more balanced range of advice than perhaps some countries who had been given theirs by the NGOs who, frankly, were rejoicing in the breakdown of negotiations, and you felt in a sense that they were not necessarily feeling in any sense that globalisation could work for the poor. What lessons are we learning from Cancún that DFID should be more proactive in providing the resources for developing country members of the WTO to fight their corner - and they are now, thank God - but to do it if you like on the basis of knowledge, not on the basis if you like of the almost overriding views of UK-based NGOs?

Mr Chakrabarti: I will let Masood give you a detailed answer; I think you are spot on myself. I do think we need to build up the capacity of developing countries to analyse this issue to work out their own positions for themselves and give them voice, if you like, in these negotiations in a way that is not happening at the moment, and the voice of many NGOs in receiving countries is much stronger than the voice of the poor countries involved. We have put quite a bit of money into capacity building ourselves and the full fruits of that have not yet come through in some of these countries, and it may be the case that we need more of it really. Masood, do you want to come back on some of this?

Mr Ahmed: If I can just amplify a bit what Suma said, my concerns at Cancún were that there was a good dimension to that and a negative one. The good dimension was that developing countries were much more vocal and organised in putting forward their perspective, and I think there was actually almost a step change in the way they participated compared to Doha, so in that sense that was a good outcome, and part of that was due to the fact that they felt more confident by getting this analysis or the support that they were getting from a whole range of people but mostly NGOs. The bad dimension is the one you have outlined which is that it is not clear that the analysis and advice they were getting was balanced and indeed in their own best interest, because some of the advice was essentially saying walk away from the thing rather than try to get a deal that works.

Mr Colman: That is right.

Mr Ahmed: In yesterday's FT you might have read - and other papers carried it - about a recent study which has just come out and in a sense also says it is better to walk away than to try and agree a deal. I think there are always going to be people who will have had such a high demand for the kind of agreement that they think is acceptable, and whose views about the benefits of liberalisation are so nuanced or negative, that they will be advising much more often that it is better to walk away than to conclude. What I think we do need to do much more now is to provide developing countries with access to a much broader range of views, but in a way that they drive the agenda. That is something that, as Suma says, we have stepped up on, the funding for capacity building, and it is one of the three areas of priority that we are attaching importance to.

Q22 Mr Colman: If the Chair will allow me two supplementaries, one is the General Agreement on Trade Services (GATS). We are inundated by the World Development Movement, a very good organisation, but in terms of saying that GATS is an appalling way forward for developing countries to see the delivery of a range of services, and I notice in your water and sanitation section you do not mention GATS at all. You will know that Baroness Symons has rebutted a number of the things that have been put forward by the World Development Movement; there you have an example of a situation where developing countries have two very different views put to them. You have not addressed this in your report; what advice do you have for us as a Committee in terms of dealing with the myths and the facts of the General Agreement on Trade and Services and do you believe on balance that you would in fact be supporting developing countries to use, in some circumstances, the General Agreement on Trade and Services - particularly water and sanitation?

Mr Ahmed: I think our advice to them would be that it is a useful balance for them to be moving towards organisation of services, but we need to make sure that in the discussions the services that are of interest to developing countries ought to feature in that debate. What I will say is that the second part of the priorities that we have set out is to try and pull together and disseminate more accurately some more evidence which can serve as a basis for the next round of negotiations. We have commissioned a fair amount of work which will try and pull together some of this evidence, and we will try putting it out in different ways. We also for the first time in December last year brought together quite a large number of people to have a trade and poverty conference here in London, which brought together the multilaterals, developing countries and a number of analysts. What was interesting for me there was that in some ways a number of the developing country people who were there were searching for ways forward, but a number of the so-called heirs apparent who were outside the framework were much more interested in still dissecting the past. A lot of developing country representatives, at least at that conference, were quite keen to say we have had this problem, we recognise it is a failure for all, but we now want to move forward and identify which are the red lines from our point of view that we do not want to cross, but where are the other areas where we can make constructive gains ---

Q23 Mr Colman: Is GATS a red line, as the World Development Movement thinks it is?

Mr Ahmed: I do not think that it is for many, because I do not think many developing country people have focused enough on it, so part of it is lack of understanding. It is not a red line so much as a blurred line for them; I do not think they have yet fully figured out which side of the analysis to come out on, so it is a good reason to put out more evidence and analysis in that area.

Mr Chakrabarti: And a good reason also as many would see it to have capacity building, so to do that analysis as well. One other point on this, I do think we ought to look for supporting PRSPs to take account of trade much more than they have in the past. If you ask me, there has been a bit too much about the donor aid relationship with those countries and not enough about the wider policy environment.

Q24 Mr Colman: Can I then as my second supplementary ask you about what has happened to the TRIPS (Trade Related Intellectual Property Rights) agreement of 30 August last year, as it seems to have vanished into the undergrowth? We clearly could simply put down a whole series of questions saying when is the legislation coming forward? You are sitting in front of us, what on earth is happening? We are nearly up to the first anniversary, the world is waiting and the pharmaceutical companies tell me, "Well, you know, this is stuck somewhere in the parliamentary logjam." Can you assure us that it is going to be fished out and will be before us before we break and we get to the anniversary date? It seems extraordinary that this was celebrated, yet the UK Parliament has not done a thing.

Mr Ahmed: My understanding of it is that the log jam that exists is actually not here but in Brussels, because we are waiting for the EC to issue Community-wide regulations, after which we can issue secondary legislation in the UK to implement it. We are quite advanced in the preparation of the secondary legislation to ensure that as soon as the Community-wide legislation is issued we can bring it forward without delay. We are now pushing quite hard, making exactly the point you have just made, in Brussels, that it is a bit embarrassing that a year after ---

Mr Colman: Ten months on already.

Mr Ahmed: We do not yet have the Community-wide legislation. Canada at least has that ---Mr Colman: No, they have withdrawn it.

Mr Ahmed: You are better informed than I am then; I thought the Canadians already had that in place. We basically want to be in a position that as soon as the Community-wide legislation is there we are the first to put forward our secondary legislation, but we have to keep pushing in Brussels.

Q25 Mr Davies: Thank you. I wonder if I could ask you about Iraq, which is obviously the greatest variance in your expenditure and budgetary tables at page 170 and 171. I think at the Donors' Conference last November we promised some £540 million if I recall.

Mr Chakrabarti: Yes.

Q26 Mr Davies: The bulk of which is under your budget and some of it FCO and MOD. My first question is can you tell us just how you reach that figure and, secondly, how you split it up with the FCO and the MOD?

Mr Chakrabarti: The overall total figure is in a sense derived from the UN and World Bank calculations on what the financing gap for Iraq was going to be over the next few years, and then various donors indicated what they were going to provide, with the UK, US and Japan obviously trying to galvanise other donors to provide quite a bit. In a sense the sum was partly to gain leverage with other donors, to call them in to do more than they were planning to do, being absolutely frank about it.

Q27 Mr Davies: But it was all top-down.

Mr Chakrabarti: It was very much top-down but it was of course related to the best analysis that people could do, given the situation in Iraq, of what the needs would be in Iraq over the next few years. So there is a sort of financing gap of the traditional sort we would see. Then as to how it is split up, trying to remember exactly, it is £544 million over three years from April 03 to March 06; most of that is from DFID, as you know, I think it is £30 million from the Global Conflict Pool, £30 million from MOD's Quick Impact Projects, about £60 million from the FCO and the rest from DFID.

Q28 Mr Davies: What I am interested in is how you actually came to that position. Did you sit down with officials from the other departments and did you decide that some of those tasks more naturally fell under their budgets?

Mr Chakrabarti: Yes.

Q29 Mr Davies: Just take us through that process.

Mr Chakrabarti: Essentially we were already embarked on some spending under different sub-heads before last October and this is a figure that goes back to the previous March, the beginning of the financial year. MOD already had a budget, for example, for Quick Impact Projects, which they have started spending on already, so that budget was just scored as part of this, the FCO was doing work, for example, around communications and issues like that, setting up a TV channel and things like that in Iraq. That was also scored because that was already on-going, so the bulk of the new expenditure if you like is DFID, but some of the old expenditure, because we were going back to the previous April, was scored as well to get to the figure of £544 million.

Q30 Mr Davies: What were the main items of expenditure? It is not really broken down; you have got a page in here in section 4 (page 82) but it does not really tell us an enormous amount. The International Reconstruction Fund for Iraq, that is a large one, what sort of things does that do? To the UN consolidated appeal, £72 million, that is a large amount. The other reconstruction work £59 million. What sort of things does that include?

Mr Chakrabarti: The box on the next page actually gives you some examples, but we probably ought to attribute some of those things to each of these channels if you like. The International Reconstruction Fund for Iraq is a trust fund, essentially, which the World Bank and the UN manage, and it helps to finance the Iraqi budget as a whole. So it finances a wide set of outcomes, it is budget support essentially as we understand it elsewhere. So we have made an allocation of £70 million to that trust fund which will be allocated by the bank, the fund and the Iraqis to a variety of poverty-relieving programmes in Iraq.

Q31 Mr Davies: I read the table on the other side as achievements of the Iraqi administration, or achievements of the Coalition plus the Iraqi administration. Things like getting the oil flowing and the Central Bank of Iraq are nothing to do with DFID - as far as I know you were not involved with getting the oil flowing and so you are not taking credit for that, those are the figures in this other table.

Mr Chakrabarti: Yes. Some of our staff have obviously been involved in some of the discussions there, but we are not taking credit for all those. There are things here also in this table which DFID would take credit for, for example the Essential Infrastructure Project - the third bullet point down in Box 4f - that would not have happened without DFID.

Q32 Mr Davies: This conversation has revealed a possible confusion which could be in the mind of a reader of this annual report, because if in fact what you are saying is that if you want to understand Box 4e you have to do that by looking at Box 4f which supplies examples of what Box 4e has been spent on, then I think you are going to have to relate it to it directly because, as you have already pointed out, there are some things in Box 4f that do not relate to Box 4e at all. In fact, it is quite an ambiguous report because there are no explicit connections made and some people might draw an implicit connection which, as you say, would be right in certain cases but not in others, so there is an excellent chance for misunderstanding.

Mr Chakrabarti: I am sure we could do better with the presentation of things that DFID is directly providing and things that DFID is providing collectively, if we go back to the beginning of the conversation. In a number of these things, DFID has been involved - for example, the power sector, reconstruction in the centre of Baghdad. Andy Bearpark, who is DFID's secondment into the CPA, has been fundamental to bringing that about.

Q33 Mr Davies: What about the police, for example? There are now more than 45,000 Iraqi police, do you contribute to that?

Mr Chakrabarti: We have been involved but so have many other countries; again, I would not take full credit for just that, I think a number of countries have been involved in police training, but the UK has been one of the organisations.

Q34 Mr Davies: It really raises two points. One is that insofar as you have not been involved in a substantial amount of that achievement, why use this annual report to list a lot of achievements in the administration of Iraq, which is not strictly relevant? The second thing is that insofar as you have been involved, that is spending on security and it is not spending on poverty reduction or anything to do with the DFID budget, is it, it is to do with other issues?

Mr Chakrabarti: I accept the first point, I think it is perfectly fair to say that this box describes a whole series of achievements, some of which DFID has been directly involved in and some of which it has not. But I think that where it has been directly involved and spending the DFID budget, clearly that has passed the test of the International Development Act and therefore has to be spent on things that are trying to alleviate poverty, such as the example I gave you, the Essential Infrastructure Project, trying to get these public utilities up and running. Clearly that is having an impact in Iraq.

Q35 Mr Davies: I suppose you can say that. I suppose you could stretch it to say that the Central Bank of Iraq now being independent and a new set of bank notes to replace the former Iraqi currency is something to do with reducing poverty, but I find it more difficult to relate your remit under the Act to the strengthening of the Iraqi police, and I was slightly concerned that you were creating a precedent there for spending DFID money in other projects, for instance on improving the policing in a country, which certainly is a very, very wide interpretation indeed of poverty reduction or achieving the Millennium Development Goals.

Mr Chakrabarti: We could have a discussion about policing. I think policing generally, in certain situations, is fairly fundamental to poverty reduction. The poor tend to suffer most from insecurity and having a decent police force, being defined in terms of good standards and not being arbitrary in meting out justice and so on, is quite fundamental to many poor countries. So I would not draw the line quite where you have drawn it.

Q36 Mr Davies: I am not drawing it, Mr Chakrabarti, I am just here as the voice of the public asking questions. This has been a fascinating dialogue because it is quite clear that poverty reduction has a vastly more elastic meaning than I think most of our constituents imagine, so I am not making any normative comment on what you have told me at all, I am simply establishing the very interesting revelation that has emerged this afternoon. Can I go to the other side for a moment, getting away from the spending side if you like to the income side, so looking to see how you raise this money for the reconstruction of Iraq, because there has been a substantial increase, as the government made clear at the time, within the existing DFID budget and therefore it follows that there will be other budgets which will be cut correspondingly, and I think this has been mainly in Latin America, Peru, Honduras, China, middle-income countries. That is right, is it?

Mr Chakrabarti: That is right.

Q37 Mr Davies: So what has happened is that we have diverted the sources of aid from projects very directly related to alleviating poverty in Honduras, for example, where I think we were backing up Oxfam, so very directly related to poverty reduction, and putting it into Iraq where it was spent, among other things, on supervising the Central Bank and improving the policing. That is again a shift along the spectrum away from a purist, poverty reduction agenda, is it not, by quite a dramatic amount?

Mr Chakrabarti: I really do not think so. There are two questions there, let me try and take them in turn. One is why did the Government choose to reallocate money from other middle-income country projects to Iraq? The Government decided Iraq was a very high priority for it, both in development and reconstruction terms as well as in other fiscal terms. It has a target of spending 10 % of its bilateral funds in middle-income countries; that target is not just plucked out of thin air, it is based on evidence, research evidence which shows aid is most effective in low-income countries. So when it decided that Iraq was going to be a development programme it had to finance it out of that 10 %. It could have made another choice, it could have said we will renege on our 90/10 Public Service Agreement target (for which we are accountable to Parliament) and take it out of low-income countries. That would have flown in the face of evidence that aid in low-income countries actually has a higher return, and so it decided to make the choice it did, but it obviously was not an easy choice for the Government to reduce aid in many of those countries in Latin America, China and elsewhere. That is why it made those choices and it has had impacts, difficult impacts, which we can discuss if you wish. I do not think this concept of poverty reduction has suddenly been changed by Iraq. Many of the things that we are doing, whether in Iraq or elsewhere, would in our view fall perfectly well under the ambit of poverty reduction. To get public utilities up and running, to even get a central bank up and running, is fairly fundamental to getting most economies up and running, economies which hopefully will get a good economic policy which will help the poor, whether it is in Iraq or Uganda.

Q38 Mr Davies: In Peru, for example, you were committed to funding small projects through Oxfam Peru, a grassroots organisation in rural Andean parts. Those are very poor areas in the Andes, are they not? There are pockets of extreme poverty in middle-income countries, rather like you have spent a lot of money on addressing pockets of extreme poverty in India which is a highly successful middle-income country. So you took money away from that to put it into Iraq, which is certainly a middle-income country, potentially a rich country, and where there was an immediate political imperative to make sure that the post-conflict period was as short as possible and that the reconstruction was as successful as possible. I think the importance of this conversation is this, there are some people who might imagine, reading perhaps rather superficially the 1998 Act and hearing some of the political rhetoric of the last few years about overseas aid, that your budget is now entirely autonomously directed to poverty alleviation, poverty reduction, and that is all; it cannot be diverted for political reasons at all into something that is not purely poverty reduction, and so you make an objective assessment of where there is poverty and how your budget can best be spent on alleviating that poverty. There are obviously arbitrages to be made in different countries, projects that call for Direct Budget Support or otherwise, but there is only one criterion. Then you find that because there is a political crisis and a major political imperative - I happen to support the Government on Iraq, I am not causing trouble for the Government on Iraq, I supported the military action last year and I am still happy to say that I did. I totally understand the political imperative and indeed share it, we have to make a success of military actions wherever they are and we have to raise money. The Government decided it was not going to make a further appropriation and therefore you were told "Find some money elsewhere and divert it in double-quick time to Iraq." You did what you were told and I am sure in a very efficient fashion; nevertheless, that is not a pure poverty reduction agenda, it is not purely an autonomous ministry whose job is simply to spend some money which the taxpayer has given you for poverty alleviation purposes, it is a budget which can, where necessary, be diverted for higher political criteria elsewhere.

Mr Chakrabarti: I can only say that I think that would not stand up. If you look at the reasons why we have put money into Iraq and what we are putting it into, I would be perfectly happy to continue defending it as ---

Q39 Mr Davies: But you would not have decided it yourself, Mr Chakrabarti, you have told me this was a top-down decision.

Mr Chakrabarti: Absolutely.

Q40 Mr Davies: And that you were instructed to find this money for Iraq, it was not even your decision how much money to appropriate for this purpose, you simply had to find what the Government decided to put into this particular pot from elsewhere in your budget. That is what you told us.

Mr Chakrabarti: Decisions about which countries we are involved in obviously do involve political input, they must do, otherwise why are we not in francophone countries: for historical reasons and also for political reasons, we do not know much about them. The reason we are obviously having this reconstruction of Iraq programme ---

Q41 Mr Davies: If I may say so, not knowing something about it might be a functional reason why you might say I cannot spend money sufficiently in a place where we do not have a structure and we do not know much about it. That is another argument. You are in Zimbabwe because you said we have got to maintain some poverty reduction effort and there is a real poverty problem that needs some money, but in this particular case you did not decide that there was a greater need in Iraq than in Honduras or Peru or China or elsewhere. You did not decide that. You did not decide how much money could be better and more efficiently spent in Iraq than elsewhere, you were told to find the money for Iraq; that is the position, is it not?

Mr Chakrabarti: The Act does not determine which countries we are in, that is not what the Act does, the Act determines, when we are in a country, what we are using the money for. You use a number of countries there, and in Zimbabwe we actually do not have a development programme, we have a humanitarian assistance programme. India is not a middle-income country as you say, it is a low-income country actually. Pockets of India clearly are middle-income ones, but it is a low-income country overall which is why we have the size of programme we have in India. Those judgements are made and ministers did make those judgements, quite clearly, about getting involved in Iraq with the reconstruction and development programme.

Q42 Mr Davies: The point is, first of all, that the decision to reallocate substantial resources from middle-income countries - Honduras and Peru for example - to Iraq was not made by you and was not made on poverty criteria. That is correct, is it not?

Mr Chakrabarti: The decision was finally made by Ministers, of course, but they did take advice from us as officials that if we had to reallocate money within the middle-income country pot, where would we reallocate from.

Q43 Mr Davies: Exactly, so the decision had already been taken in Iraq, so there was no question at all of you having said you can spend a pound of British taxpayers' money more efficiently on poverty reduction in Iraq than in Honduras, let us switch from Honduras to Iraq. That was not the process at all; the decision was taken from on high, "top-down" to use the expression you have already agreed with, to spend a given amount of money on Iraq and, irrespective of other things, you were told that you had to find that money elsewhere and you found that money in other programmes for middle-income countries. You did not take any decisions about the target in Iraq; you took decisions just about where you would take this money from.

Mr Chakrabarti: At the end of the day, Ministers take all of the decisions on the allocations. What Ministers decided on - you are absolutely right - is they wanted to make a particular contribution to Iraq, and that was based, as I said, partly on UN and World Bank assessment of needs in Iraq and partly on wishing to galvanise the international system generally. That is absolutely correct. Then we had to find the money, and we were asked, as officials, quite rightly, for advice on where the money should come from, given that Ministers wished to stick to the 90-10 target, which they believed in.

Q44 Mr Davies: I understand the point. This is not an autonomous, purely poverty reduction orientated process. It is a process which is open to political control, which is open to political decisions, top-down, to allocate money and then your job is merely to re-allocate. So it is not an autonomous poverty reduction process, is it?

Mr Chakrabarti: The decision about which countries the UK has an aid programme in is quite clearly a political decision, but it is also based, of course, on judgments about poverty....

Q45 Mr Davies: To some extent it may be, and other criteria.

Mr Chakrabarti: ....where aid is effective, otherwise we would not have a 90-10 target. The reason we have a 90-10 target is because of research evidence, not DFID's evidence, suggesting.....

Mr Davies: You did not disagree with me, but let me give you one final chance at this. This is not an autonomous, exclusively poverty reduction orientated process, is it?

Q46 Chairman: I think you have had your answer, Quentin.

Mr Chakrabarti: I disagree. That is all I can say.

Q47 Hugh Bayley: My question is about the IMF, which is there to create conditions for global macroeconomic stability, so, of course, it sets macroeconomic frameworks for countries where it is working. I am not arguing against there being frameworks, but I have concerns about what the rules are. I have come across two examples this week of rules which seem to work against development goals. In Brazil, the Brazilian government wants to borrow money to buy land from land owners to redistribute to landless peasants. The IMF says if it does so, that must be regarded as expenditure, even though it is a money in/money out process, and they have the collateral of the land which they have distributed to the peasants, which is there as government land, should the peasants default on paying their mortgages on the land. The second example came to the All-Party Africa Group when we were doing our work on AIDS. We were told by Dr Peter Piot of UNAIDS that the Ugandan government was not able to take up all the money that was made available by the Global Fund and others for prevention and treatment of AIDS, because it would have pushed up against their financial expenditure ceilings. Yesterday, at a meeting with Peter Heller, Deputy Director of the IMF's Fiscal Affairs Department, he may have disputed some of the individual examples but he accepted that at the extreme, macroeconomic pressures could limit expenditure on AIDS, because there could be untoward macroeconomic pressures creating inflation if health expenditure increased rapidly. Surely, from a development perspective, the answer must be to find ways of avoiding those macroeconomic pressures, for instance, by training large numbers of nurses or barefoot doctors so that you do not have inflationary pressures if you increase expenditure on the delivery of drugs. Today, Joseph Stiglitz came and talked to a small group of us, and when asked why the Fund has the rules that it does, he said that the US Treasury, at the end of the day, as the majority shareholder, sets the rules. So the way to unpick this process, if the UK Government thinks it does need changing, surely is through the G8. This is a difficult thing to change in the G8 because if you say to world leaders, "Let's talk about the IMF's accounting rules," their eyes will glaze over, but since you have the Africa Commission writing detailed papers for next year's G8, should there not be a detailed paper that looks at the development consequences of the IMF's current macroeconomic approach and to look for change? Then you could get the leaders to sign off the process and the Sherpa economists could continue the process of reform. I do not see how else you will get the IMF reform that you need. Can you reassure me that that process, the Africa Commission and the building of the agenda for the UK G8 will include a serious economic analysis of the work of these institutions?

Mr Chakrabarti: I will ask Masood to reply in a bit more detail, but I think, actually, there are two strands of work which are happening anyway which bring this issue out and will bring it out in glorious technicolor next year. One is the pressure generally coming from the UN Millennium project, the Sachs project, which looks much more at financing needs. In other words, when you do a PRSP, should you base the financing simply on the budget that is available and the likely flow of aid that is going to come in, or should you also have another scenario which says, if you want to make a dent and progress towards MDGs on schedule, how much would you really need and what are the consequences of that? We currently have two scenarios in PRSPs and that whole push is coming in from that piece of work. We are already engaged with the IMF and World Bank in talking about those things. The second area, it seems to me, where there is a push for this is the question of what you spend the money on does determine the sort of capacity - you mentioned trainers and so on. Is it imported? Is it domestic production? That will make a difference to the macroeconomic framework. I think that is another area we have engaged with the IMF on as well.

Mr Ahmed: Maybe I might start by declaring an interest, which is that I have been responsible for designing much of the macro framework for poor countries for the Fund for the last four years before I came to DFID. I would perhaps just say a couple of things on the substance and on the process. I think on the substance, the Fund's macro programming has now changed from saying that the objective of the programme was to ensure macroeconomic stability to actually saying that the purpose of the programme is to help countries meet the MDGs, but they want to do it in a way that is macro-sustainable. That is actually quite a significant shift, because it is not macro-stability for its own sake; macro-instability is what you want to avoid. Everybody wants to avoid macro-instability because clearly it would derail the process of growth to get to the MDG. The second substantive shift is that the Fund has now moved to accepting the notion of having these two scenarios in their programmes, so you would actually have a scenario which was based on what the current availability of financing is but then a scenario which is based on what is the financing that would be needed. That is where the work that Jeff Sachs's project and the Fund itself with the World Bank are doing will have to look at that. Where they are still falling short - and this is the conversation that you had with Peter - is that the policy framework is there but if you look at individual country programmes, it is not yet being systematically applied. It depends a lot on the individuals who are working on those programmes. Where we are now actively engaged in a dialogue with the Fund is to say, "We don't want to spend more time refining your policy framework, but we want to make sure that what is now best practice becomes standard practice across the low-income countries in which you are working." That is where we are using our country offices, which are engaged with the foundations on the ground to feed back into our executive director's office in Washington, to make that move back to change Fund application of policy which I think will be the priority to get the thing changed. Personally, I do not think that this is a US Treasury issue and, certainly in the time that I was working for the Fund, I never had the US Treasury talk to me on this issue, although they certainly talked to me on many other issues. For that reason, I do not think this is a particular issue for the G8, but I do think that the Africa Commission can make a very important contribution by highlighting the nature of the problem that remains to be resolved. The final thing I would say is that in this area, the one issue is the one you have raised on macro, which is how much money you can spend without having macro problems, but there are much more complicated macro issues which the Fund has not yet begun to grapple with, such as how do you ask countries to take on commitments which are 20-year commitments? If you commit to provide treatment for HIV/AIDS, you are actually taking on a 10-20 year commitment, but donors are providing financing for a maximum of one to three years, and many finance ministers are legitimately concerned about taking on a commitment without long-term financing, and the Fund's programming framework is quite short-term. I think there is a set of issues about predictability, about the link between performance and stability, about how to deal with shocks, which the Fund needs to be more proactive in dealing with, and next week in fact, following on from the discussion you had yesterday, the Fund has organised a seminar in Washington on these macro issues to deal with HIV/AIDS, and I will pursue some of these points there.

Dr Brewer: Can I just give two examples? Masood mentioned that we use our country offices whenever these sorts of problems arise. Two have come to me fairly recently where our country offices are talking to the IMF representative or visiting mission: Malawi, where there have been problems about meeting IMF targets, and Guyana as well, and that sort of flexibility driven by discussion at country level helps to supplement the Washington-based discussion.

Chairman: We are now going to move to look at some specific countries that are in the spotlight for various reasons. Ann is going to ask questions about Iraq and Afghanistan, Quentin about Zimbabwe and Andrew about Sudan.

Q48 Ann Clwyd: As you say in your report, the major challenge to reconstruction in Iraq is the continuing instability, and I know - I have been there several times myself - the difficulties for DFID staff working there. Have you been able to make any estimate of what proportion of your funds is having to be spent on protecting the staff in reconstruction work?

Mr Chakrabarti: It is about five per cent of the total programme in the last year that has been spent on that, so it is quite sizeable compared with other places. You have seen it on the ground more often than any of us, and three of us have visited, and I am frankly quite gob-smacked with admiration for the staff who are out there, who simply cannot do their jobs unless they go out of the controlled zones. You cannot be a development person unless you go to ministries and talk to Iraqis and so on, and in that they need supporting.

Q49 Ann Clwyd: I have seen some of your projects in the Institute for War and Peace report, which I thought was excellent, and various other programmes I have been able to see for myself but I do see it as a major problem, because there are some things that I have been talking to your staff recently about looking at, because I think they are worth supporting, but I have not been able to go out to visit the project so I have asked the project people to come in and see them. It does make for major difficulties because it must be frustrating for the staff, who are used to going out to the field and seeing and evaluating for themselves, and it is not quite the same having them come and see you. Obviously, I have seen some of the security work that has been done. You have specific security people protecting DFID staff, and I wondered how those people are selected, because, as you know, recently there has been a spotlight turned on the work of the security forces themselves. Those are mainly private contractors. I wondered how you actually put your seal of approval or otherwise on those people.

Mr Chakrabarti: I will ask Mark to talk a bit more about this. Our general principle, of course, is to vet the standing of organisations that we contract rather than their own staff, and they are meant, obviously, to vouch for the bona fides of their staff. In the overall assessment, if we did learn of something, issues around particular staff, we would take that up before awarding the contract. Those would be our general principles, and we apply those in Iraq too.

Mr Lowcock: Can I just make a general point about this, which is that the change in the security environment for people who work in development has been a very big change for lots of organisations, including ours. For 40 years it was politically incorrect for anybody to make targets of aid agencies, although there were one or two renegades who would kick up a Red Cross person or something - I know some of you have had direct experience of some specific incidents - but following on the bombing of the UN and the Red Cross and what has happened in Afghanistan, what used to be unthinkable is now a real problem we have to deal with all the time. That affects the security of our premises overseas, and our people in certain places. It affects the corporate governance of the organisation because we have to worry about how secure our staff are in places, and we have had to take a series of steps to deal with that. I think it is fair to say that during this process we have been learning as we have gone along. One of the things that is perhaps in the back of your minds is a contract we had with a particular company in Iraq for about nine months or so up to March this year, and the fact of the matter is that we let to a particular contractor, a company who was in there providing certain services, and we needed those services straight away because otherwise we could not put staff in to do the job that they had been asked to do. As it happens, we were satisfied with the performance on that contract. It came to an end not for reasons of performance of the contract, but because it became more rational for us to buy our security services in a more wholesale way, in other words using a fewer number of companies. It is the case that for the first contract we let to one particular company and, for reasons of time, we were not able to go through our normal procedures, but our standard practice is to do legal and financial checks, to run competitions, and to do what we consider to be an appropriate degree of due diligence.

Q50 Ann Clwyd: Looking at the assistance you have given, looking at the UN in particular, given that the UN has not actually been operating inside Iraq, does that mean you have reduced the money that you have given to them or have you increased it, or is it the same? Has that been taken into account?

Mr Chakrabarti: Yes, it is as set out in the paper we published earlier this year. One of the key things that will have to happen after 1 July is at the international level to try to get the UN and the IFIs more closely engaged in Iraq than they have been. Partly for security reasons, as you know, they have not been operating inside Iraq, but that has big consequences, because they do not therefore know enough about what is going on. The UN is in a better position because the UN has had lots of Iraqi staff, and therefore they have had systems on the ground which allow them to at least have some knowledge, but without their involvement and without the World Bank and IMF involvement, this is going to be a retarded process, and we do need those other players engaged. So after 1 July that is going to be a massive effort for us all.

Q51 Ann Clwyd: What about the Red Cross? You gave the Red Cross £32 million. What has the Red Cross been doing in Iraq?

Mr Chakrabarti: I do not have the detail with me. I am afraid I will have to send you a note.[5] It is the same problem. I think generally, the normal donors that you would expect in this situation have not been there, and that is a phased transition issue for us, I think.

Q52 Ann Clwyd: What impact do you expect the transfer of sovereignty to have on DFID's work?

Mr Chakrabarti: The basic strategy will not change, but some elements are going to change. One of the first things that we need to do at the international level is to try and get that trust fund which I mentioned before working. At the moment, my worry is that the money is going into the trust fund but, because the Bank and the UN have not been operating on the ground, we are not getting the development outcomes out of the trust fund, so getting it spent in Iraq is the first thing. Secondly, at national level, I see us - and we have been working towards this - pushing harder to get public administration working properly in Iraq, so working even more closely with some of the ministers and ministries, getting private offices working properly, getting policies written up. Basically, it is an Iraqi administration, not CPA-led as it has been up to now. That is at the national level. As you know, down in the south, where we have concentrated quite a lot of our effort, continuing with some of that, but not CPA south, of course; making the governments in the south stand up, getting public administration support to them, and making sure some of the huge US money that is still floating about the system, which could be used for ensuring public utilities stand up and become more effective, are put to work on that as well. So there is a shift in the engagement to a greater Iraqi-controlled process than there has been.

Q53 Ann Clwyd: What numbers of staff do you have presently in Iraq, and what will happen after the transfer of sovereignty?

Mr Chakrabarti: At the moment we have 35 people altogether in Iraq, four of whom are DFID staff and 31 contractors. That is a reduction from when you were there.

Mr Lowcock: We had about 90 six weeks ago. What is happening is that people who were working for the CPA are leaving, and we are gearing up our newer programmes to support the new Iraqi government, so we are in a transition phase. I think the numbers will come up again somewhat, subject to the security environment permitting it, as we move forward further post 30 June. But today, as Suma says, there are 35.

Q54 Ann Clwyd: When you say contractors, you mean people on contract for X amount of time?

Mr Chakrabarti: Yes, to whom we have a duty of care as well. For example, they might be working on public administration, consultants we have hired, and so on. They have to get out of the green zone to do their work, so we owe a duty of care to them. There are 31 of those, and then there are four direct DFID staff, two in Basra, two in Baghdad.

Q55 Mr Robathan: Who employs the security people? Do you employ the security people as well?

Mr Lowcock: Security staff are employees of the company with whom we have a contract. We and the Foreign Office have a joint contract now to provide most of the personnel security, and then we have another contract to provide some of the premises security. This is an area where we and the Foreign Office basically have a joint approach.

Q56 Ann Clwyd: Finally, working with women in Iraq. There seem to be a number of government departments which have been doing that. What kind of ideas have you for long-term involvement in encouraging women's progress?

Mr Chakrabarti: This is an area where we frankly need to take some of the lessons we have learned in places like Afghanistan and Pakistan, where we have made some progress, and fit them to Iraqi circumstances, but apply them to Iraq. We have not made as much progress as we would have liked. The new government in Iraq looks slightly better in terms of women's representation and so on, but whether that is going to filter through to the way the ministries work and so on, that will be something we will be quite concerned about, and we want to make sure they do take gender issues into consideration when they sign a policy, for example. That will be part of our public administration effort.

Q57 Ann Clwyd: Since there is some intention that 25 % of the new Iraqi government when it is elected will be women, I would imagine quite a lot of work needs to be done.

Mr Chakrabarti: Yes. We have done similar sorts of work in Pakistan, where women's representation is part of the constitution there now, and that has made a massive change to the way women are regarded in the parliament. There are some lessons we can draw from elsewhere, from Afghanistan as well.

Q58 Chairman: Before we move on to Afghanistan, can I just make an observation? The last time we had an oral statement from the Secretary of State on Iraq was last November. We have had numerous statements from the Secretary of State for Defence. I know the Secretary of State has made a number of written statements. They just do not have the same effect. They are not capable of supplementaries or being probed or whatever. I would have thought that it is in everyone's interests, not least DFID's, some time after 1 July and before the rise of the House, for the Secretary of State to come and make a statement to the House as to what DFID is doing. You heard from Quentin's question, Iraq is absorbing more and more of DFID's resource, it is a high priority, and I am not sure DFID's work has had the profile that it perhaps merits. I just make that observation.

Mr Chakrabarti: I have discussed it with him and he and I agreed last week that we should try and get a statement around the changeover in early July. He is obviously going to try and agree that with the Prime Minister and the Foreign Secretary, to make sure we have time for that, but that is the intention.

Q59 Ann Clwyd: How much was spent on short-term humanitarian relief and how much was allocated to longer term developmental spending?

Dr Brewer: For 2003/04 about 10 % of what we spent in Afghanistan, which was about £6-7 million, went on humanitarian work. On security, there are a couple of different component parts of this. You will know, I think, about the Provincial Reconstruction Teams. We have allocated about £5 million for that, but only a small proportion of it has been spent so far. We are leading one Provincial Reconstruction Team at the moment, but DFID also has staff in three others. There is also money on security coming from the Global Conflict Prevention Pool, I think about £16 million, and £12 million of that was spent in the last financial year on that element of security work. Then of course there is the money that the MoD allocated, which again in the same year, 2003/04, was £55 million. I do not know whether you are asking questions about provision of personnel security, which varies from year to year.

Q60 Ann Clwyd: It is the same situation in Afghanistan as well.

Dr Brewer: We spent in the previous year a certain amount on some of the necessary hardware support. We spent less last year for staff security, and we have in the pipeline some spending coming up in the next financial year. It will be a rolling contract which we will take forward to provide additional personnel security for our staff there, because, as Mark outlined, the security context in which our staff are operating in Afghanistan is also more difficult.

Q61 Ann Clwyd: How much are your staff able to travel outside Kabul?

Dr Brewer: It is difficult. We rely on a range of things to get a picture of life outside Kabul. We have a development adviser in the Provincial Reconstruction Team up in Mazar-e-Sharif. We have, as I say, DFID staff in three others in the centre, in the south and in the south-east. We also rely on contacts with our implementing agencies and with relationships we have built up more informally with a range of organisations that operate throughout Afghanistan. But it is harder to travel outside Kabul.

Q62 Ann Clwyd: There have been a lot of recent examples of the murders of aid and construction workers in Afghanistan. A number of aid agencies would blame this on the blurring of the distinction between development work and military security work. How would you respond to such criticisms?

Dr Brewer: When I went to Afghanistan with Gareth Thomas early last December, we went up to Mazar-e-Sharif to visit the PRT there, and that was one of the particular questions we had in mind that we wanted to explore a little bit. In particular, we had heard earlier some criticism coming from some of the UN agencies precisely on the point you raise, and we went to see some of them, and they said, "Having seen the way that the UK PRT is operating, we are now much more reassured that this is a sensible way forward, that you maintain the focus of the PRT on essentially helping to create a more secure environment, but do not blur the necessary distinction between that work and humanitarian work which needs to be kept separate." There was still some criticism coming from other aid agencies such as MSF, but the UN had changed its view having seen the way that the UK PRT was operating. It is an important distinction and one that we keep a very close watch on, but we were reassured by the actions of the UN and also by the way that the team in the UK PRT was operating.

Q63 Ann Clwyd: A major concern, of course, was the position of women in Afghanistan. I read bits and pieces and I do wonder whether things are improved sufficiently for women. I know they have been able to return to professions, but what about education and other opportunities for women?

Dr Brewer: In terms of getting girl children into school, very positive progress has been made there. In terms of representation at the Loya Jirga, that was also quite encouraging. There is a long way to go and I would not for a moment suggest it is anywhere near satisfactory, but there has been good progress there. On a purely anecdotal level - this is something I have talked about with two of our staff in the country, who happen to be women, working in the DFID office there, and their comments were extremely positive - only anecdotal, and you cannot put too much on that, but I think the trends in education of girl children and representation in the Loya Jirga were in the right direction.

Q64 Ann Clwyd: What about security for women walking around?

Dr Brewer: Again, it is something that I was looking at. I do not have any quantitative evidence there, but the women working in the DFID office said that this is not an easy environment to walk around in. It certainly was not for western women, any more than for western aid workers of either sex. It is still a concern. Perhaps going back to the earlier question about the links between development and security, that is why providing a secure environment and helping to create that is absolutely essential before you can get development off the ground.

Q65 Ann Clwyd: On our last visit there, complaints were being made by the people responsible for offering alternatives to the farmers. There was criticism that not enough money had been made available. What is the progress on that?

Dr Brewer: We have been working very closely with the Foreign Office and with MoD and others. We have put a lot of effort into the alternative livelihoods component of our programme, and significantly increased resources to go to that, but we very much wanted to see it as part of the whole programme to help build an effective state, of which providing licit economic livelihoods is part. We have over the last 12 months significantly increased the proportion of spending on alternative livelihoods.

Q66 Mr Davies: If I can just say, before I ask a question about Zimbabwe, that I want to make it clear I am not against spending money on security, or indeed helping central banks or any of these other good causes. What I think has come out very clearly this afternoon is that, despite all the propaganda and rhetoric, the 1998 Act has not changed anything at all. Ministers can still decide, as they could before, to take money away from poverty reduction programmes and spend it on security or helping central banks. This is actually the issue we fought in 1998. This is a good expenditure of taxpayers' money - I am not against it - it was merely in the interests of transparency that I asked my question this afternoon. On Zimbabwe, Mr Chakrabarti, I think we are all conscious of the dilemma we face when we have a tyrannical regime, as we have here, and not merely a tyrannical regime but a regime that is pursuing economically suicidal policies. On the one hand, if you say if you put any money into that country at all, even under the rubric, as you are doing at the moment, of humanitarian aid and HIV/AIDS relief, which apparently has nothing to do with politics or the government, it actually provides some relief for the government, and the government will take whatever credit it can from the existence of these programmes. These programmes reduce some of the difficult internal pressure on them, and you may be putting off the day when that regime will be overthrown. It is, if you like, the mirror image of the dilemma we had over sanctions in South Africa. In the short term, if you impose economic sanctions, you might make the position of the poorest people even more uncomfortable, but it was felt by many people that it was worth doing that because it would in the long term be in their interests to get rid of the regime sooner rather than later. It is the same sort of difficult dilemma and difficult trade-off. Against that background, can I say to you that one thing struck me is that you came to the Committee last year - I was not on it - and I gather you said a number of things about Zimbabwe, which I quite agree with, about it being a failing state, with policies so bad it is very difficult to do decent development work, and so forth, and you had at that time an intention of spending £12 million this financial year and next financial year. We notice in the latest annual report that your projections for this year and next year have actually more than doubled to £27 million. That is striking because surely there has not been any political improvement in Zimbabwe. The dilemma that I have just described is as acute as ever it was. I imagine your judgment is still valid, yet you have more than doubled the amount of money being spent in the country. Can you explain that?

Mr Chakrabarti: It is to prevent more deaths. This is all about humanitarian assistance.

Q67 Mr Davies: More than you anticipated last year?

Mr Chakrabarti: The humanitarian situation in Zimbabwe has worsened significantly over the last few years, hence the plans have been changed to spend more, but it is still a humanitarian assistance programme. You are right about the dilemmas we obviously face. The policies in Zimbabwe are no better in terms of running a development programme; it is not possible, but this is about feeding people, keeping people alive. DFID alone was feeding 1 million Zimbabweans each day during the worst periods. Without us doing this, these Zimbabweans would be dead. That is why we are doing it and that is why we have increased the allocation.

Mr Davies: At least your motives seem to be of the purest humanitarian kind, so I will leave that there.

Q68 Mr Robathan: It has been said, I think by Hilary Benn, that Darfur is the worst humanitarian crisis facing the world today. I applaud DFID being the second donor of humanitarian assistance in Darfur, but that does not mean it is going away. Alan Goulty, as I recall, used to report to DFID. He is the Government's Special Representative for Sudan, and was instrumental in the laudable attempts to achieve peace in the south, Machakos and Naivasha. We now have this peace agreement, but unfortunately - and it may be part of the peace agreement - there is now this ghastly crisis in Darfur, where you have rebel groups and you have the response of the government in exactly the same way, the authoritarian and devastating response of the government, in Darfur. Do you think in some way we had our eye off the ball in the west through Mr Goulty, and the conflict sprung up in the west of Sudan whilst we were looking at the conflict in the south? Do you think we should have appreciated that in any way?

Mr Chakrabarti: I do not think that would be fair. I think Alan Goulty and DFID and UK Government generally were pointing out the problem in Darfur before the peace agreement was agreed in Naivasha. This conflict has been going on since February 2003 in Darfur, with government-backed militia attacking the ethnic population, and we have highlighted it a number of times. The situation has now reached absolute crisis point, as you know, and that is why it has suddenly got a very high profile. It is not because it was being neglected while people were sitting in Naivasha discussing the south. Hilary Benn has described it, as you say, as the worst humanitarian disaster facing us. The UN projections for the number of deaths are that it could be up to a million who could die if we do not intervene. The Sudanese government are behaving quite badly it seems to me, in terms of letting aid through, in terms of giving visas for aid workers.

Q69 Mr Robathan: What is the current situation?

Mr Chakrabarti: That has improved in the last couple of weeks, I think, but it was really difficult and until the Secretary of State went to Darfur and pressed and pressed, and the UN also put pressure on Kofi Annan, making calls to Khartoum, things were not moving. The situation is not great. The UN has now got its act together but we also need other NGOs to really get involved in Darfur. It is quite an unusual humanitarian crisis. Not quite so many NGOs have got involved yet as you might have seen in some other places around the world, and we are trying to galvanise them to get involved.

Q70 Mr Robathan: You may have met last week, as I did, the foreign minister from Sudan when he was over, and indeed, one of the finance ministers, both of whom were not in any way telling the truth - whether they knew the truth I do not know but they were not telling the truth. With such a government, which has no legitimate presence, as far as I am concerned, and has an appalling track record since 1998, do you think we can achieve anything more? Do you think there is anything more we can do with it? Whilst we have been assisting - and I pay tribute to that - to peace in the south, they are still doing exactly the same thing in the west and indeed in the upper Nile, and it seems to me they do not learn very much. Do you think there is anything more we can do? Should the African Union do more?

Dr Brewer: Picking up Suma's earlier point about access, one of the things we do have to continue to push on, and we can do more in quite a concrete way, is to get the full team of African Union observers in. There is an advance party but we need to build it up to the full strength of 120 people, and also the eight human rights observers, because I think access and transparency and improving that is going to be vital.

Q71 Mr Robathan: Is the government of Sudan now showing signs of co-operating?

Dr Brewer: Yes. They are not in place yet, but they have agreed that these people must be given access. They are not yet on the ground, so it would be premature of me to say it is all OK now. It is not, and we have to go on pressing.

Q72 Mr Robathan: Do you think that there is sufficient aid promised and coming to stop the very large suggestion - I think some of these things get rather wild - of 300,000, perhaps a million people dying in the west?

Dr Brewer: There is not enough yet.

Q73 Mr Robathan: Is it coming?

Dr Brewer: We are lobbying hard and there are signs, I think, that there will be increased contributions, but it is not there yet, and Hilary Benn has been very active in speaking to people.

Q74 Chairman: Before I ask Tony to ask you about the reorganisation of DFID's policy division, can I ask a question: one of your PSA objectives, Objective 4, is working with key multilateral agencies in reducing poverty, but of course, one of the tasks you have is also working with other Whitehall departments on reducing poverty. There is quite a lot, whether it is Zimbabwe, Sudan, Afghanistan or Iraq, of conflict resolution and there is quite a lot of work on conflict resolution. We have across Whitehall these conflict resolution teams and there is fairly extensive mention of them on page 107, and this is a shared objective that you have with the FCO and the Minister of Defence. One of the mysteries about Whitehall is the way in which the Cabinet Office is growing from being just a co-ordinator of Cabinet sub-committees to a major policy department. Whether it is Iraq, Zimbabwe, Sudan or Afghanistan, these are failing states, and this is an area where we all have an interest. There is no mention of failed or failing states in here, but the Cabinet Office I understand is doing quite a lot of work on failing states. One would never know it from here, and one is never quite sure who has ownership of this policy work in Whitehall, whether it is policy work that has just been worked up for the Prime Minister or whether it is worked up for your Secretary of State or where it is done, or whether this is going to be part of the work for the Commission for Africa. There are whole chunks of work being done now in Whitehall that seem almost to fall off the radar screen, and I would have thought that for DFID, the work on failed and failing states would be rather crucial to your work, particularly in relation to conflict resolution in other areas.

Mr Chakrabarti: As for the work that is being done by the Strategy Unit, as you have just mentioned, in the Cabinet Office, there are DFID secondees in that team, and we are in close touch with the team. There is also a team in Policy Division working on the same set of issues. It is more joined-up than it looks. That work in the Strategy Unit will be for the whole of government, in particular, obviously, for departments like ourselves, the Foreign Office, MoD, Treasury and so on, but it is meant to be useful for the whole of government, and it will feed into the Africa Commission as well.

Q75 Tony Worthington: Can I first of all talk about the reorganisation of your Department? You have had a year of it being reorganised, and there was a supplementary reorganisation in 2004. In retrospect, how do you think it went?

Mr Chakrabarti: There was an evaluation, as you know, of the organisation process, and in retrospect, quite clearly, we could have done some things better in the process of the reorganisation itself.

Q76 Tony Worthington: "There was a wide concern about failures in the reorganisation process used to achieve the changes." What does that mean?

Mr Chakrabarti: There is a perception on the part of some people that it was too long drawn out, and that it started off without being very clear about where we wanted to end up, and therefore a lot of staff felt that their views, even though they were being consulted, were not being taken into account. The evaluation says there was no blueprint that we were hiding. We obviously did not know and perhaps we could have managed that a lot better. There was an issue about the number of teams that we created, whether that really was refining the priorities down sufficiently. There was an issue about the balance between standing capacity and new policy capacity, and there was a further issue, which the latest reorganisation finally settled, on structures, whereby an office of chief advisers was floating freely, offering advice, but the teams were also there being managed by administrators and what was the relationship between the two. We reorganised the last bit of that to make it a more integrated approach. So there were a number of issues that came out of the reorganisation process. The evaluation also, to be fair, pointed out a number of benefits, which staff recognised, even if they did not think the process was brilliantly handled. The major benefit that came through, even as early as late summer/early autumn, was greater inter-disciplinarity - a terrible term, but what it means is basically people from different professions working together across professional boundaries. What we have in our country programmes, which works very well, are economists, sociologists, anthropologists working in teams together. In London we grouped them in silos and the whole purpose was to bring them together around issues of interest, like HIV/AIDS.

Q77 Tony Worthington: You had silos? Have you got them now?

Mr Chakrabarti: We have now reorganised them in various subject groups. You know about the HIV/AIDS team because that produced the Call for Action, and there is a strategy that works. That is a set of people who are not just health specialists, whereas in the past it was a health team, whereas we know HIV/AIDS is not just a health issue.

Q78 Tony Worthington: Can I turn to HIV/AIDS and reproductive health? How are you going to cope with an emerging problem, which is the high rates of incidence of HIV now in some middle-income countries? You have an overall target of reducing poverty and focusing your attention on the poorest people in the poorest countries, but in Europe and central Asia, unfortunately, it looks as if there is a growing epidemic, and there are other areas. How can you cope with that?

Mr Chakrabarti: I will ask Nicola to give you some country detail, but in those countries it is not really a transfer of resources that is the issue. I went to South Africa recently to discuss this with them. They are not looking for massive UK resources to deal with HIV/AIDS; they have resources to deal with it. It is much more an issue for them of supporting innovative new ideas. For example, in South Africa we have been working on education around HIV/AIDS. There is a programme called Soul City, which we have supported, essentially to educate the South African public through TV and other media about the dangers of AIDS and how to cope with as well, the social consequences thereof. That is the sort of thing they have found very useful, and they have then been able to sell this programme to a number of other, much poorer countries, and it has proved very useful. In Russia, when I was there two years ago, the issue there was not, again, transfer of resources, but how you co-ordinate an AIDS effort across the whole of government. The Russian approach had been that it was a health problem, a young man's problem, a drug problem, "nothing to do with the rest of us, thank you very much," but really to be dealt with in various provinces by health teams, until we got the World Bank to do the analysis which showed that if the prevalence rates kept going the way they were, it would have a massive impact on the Russian economy, and perhaps have economic consequences for the Russian government. They then set up a government-wide advisory council. It is that sort of thing that we can do in middle-income countries to galvanise effort.

Dr Brewer: A couple of other examples. All of the teams working on middle-income countries are really conscious, because they know about the constraints on financing, that HIV and AIDS needs to be a focus of the programmes there, whether bilateral or regional ones or whether it is working through the multilaterals. It is something that they say to us quite a lot. Suma has already mentioned South Africa and the work through Soul City which we are supporting, but we also have a £30 million multi sectoral commitment on HIV and AIDS with South Africa. We do not have any bilateral programmes on HIV/AIDS with the other three middle-income countries in southern Africa - Botswana, Swaziland and Namibia - but we do support Soul City, which is operating there as well, and we also support SADC, the South Africa Development Cooperation Programme, which operates in those countries, and some others as well. So regionally and multilaterally, we are supporting HIV/AIDS in those middle-income countries in southern Africa, not bilaterally. In a number of other middle-income countries we are also designing some regional programmes that will impact on HIV and AIDS. Two examples are Serbia and Montenegro, where we are at the design phase for a £1.5 million programme, which will be regional, but will be focused on prevention in vulnerable populations, and we have some similar things in Latin and Central America as well. The last point I would mention is that we are also supporting some work which involves south-south cooperation, so some really interesting contacts between the Brazilians and the Russians, passing on best practice from Brazil that Russia is interested in applying. We have supported and facilitated some meetings between them.

Q79 Tony Worthington: At the weekend I became conscious of the news that the National Audit Office came out with this report about your AIDS work, and I have been trying to understand what they said. Can you tell me what what they said means? It is not very clearly expressed. How do you react to what was reported in a very simplistic way in the media? What do you think they were saying to you?

Mr Chakrabarti: I have read the draft, and the final report has arrived on my desk in time for me to appear before PAC next Monday. Basically, there are three strands or conclusions. They start off by saying that DFID has done very well in this area compared with other donors, but there are three criticisms or three areas to explore. One would be around how much have we spent on HIV/AIDS, and Mark can explain a bit more about our scoring system. We score HIV/AIDS as direct expenditure but also our sexual and reproductive health is part of this. We are transparent about that. We do not hide it. They say that if you take out sexual and reproductive health expenditure, you have obviously spent less on HIV/AIDS. That is one area to explore, how much you are spending on this problem. The second area is something I mentioned earlier on: to what extent is the strategy that we had in 2001 on HIV/AIDS helping to inform country programme managers on what they do and how they do it? The third area is in engaging with multilateral institutions: to what extent are our strategy papers pushing this big development challenge and getting these multilaterals to take it seriously?

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 DIFD, 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 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, on 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. Alistair wants to know in response to your reductions of administrative costs whether you are going to be reducing back office jobs to 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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[1] DFID: Departmental Report 2004., available at http://www.dfid.gov.uk/Pubs/files/departmentalreport.htm. This report is referred to throughout this session.

[2] The National Audit Office published a report, Department for International Development: responding to HIV/AIDS, on 18 June 2004, HC 664

 

 

[3] Hugh Bayley MP chairs the Africa All-Party Parliamentary Group, who published a report, Averting Catastrophe: AIDS in 21^st Century Africa, June 2004

[4] Further information to follow

[5] Note required