Examination of Witnesses (Questions 1
- 19)
TUESDAY 2 DECEMBER 2003
MR MASOOD
AHMED AND
MS SHARON
WHITE
Q1 Chairman: Thank you very much
for coming this afternoon. I have just a couple of general points.
Firstly, the acoustics in this room are not brilliant, so if you
could speak up. I was wondering if, before we start to take evidence,
you could just tell us a bit about what is the role of Director
General for Policy and International. Presumably that is what
I still think of as a Deputy Secretary post, is it?
Mr Ahmed: Yes.
Q2 Chairman: And also what does the
Policy Division do. I am not quite sure that if I was on Who
Wants to be a Millionaire and I was asked this question I
could give the answer. Perhaps you can tell us a bit about what
you do in DFID and we are genuinely interested in what your division
does.
Mr Ahmed: Thank you very much.
I am happy to tell you a little bit about what this role is about
and what I do. To give you a sense of the structure of DFID, there
is a Permanent Secretary and then there are three Directors General.
One of them deals with our bilateral programmes, so that is all
of the bilateral aid. Another one deals with corporate services
and knowledge, so essentially finance, HR, IT. Then the third
one, which is my job, deals with international and policy and
that essentially has two parts. One is I oversee all the engagement
of the UK as a member or a shareholder of international agencies,
whether it is the World Bank, the regional banks, the UN, the
EU and the Commonwealth and, to the extent that DFID has a contribution,
also WTO as well as the IMF. That is one part, the international
agencies. The other part of what I look at is to think about what
should be the policy that we take on any particular development
issue, whether it relates to the policy that we promote in the
international system or the policy that applies to our own programmes.
In a sense we do not make a distinction between what we promote
as good policies for our own programmes or for international agencies,
but essentially what should be our view on specific development
policy questions, whether it is a question like user fees or whether
it is a question of migration and how we understand that. Within
that structure I have two divisions that report to me. One of
them is an International Division that brings together all the
international work and the other is the Policy Division which
Sharon White heads. I also have a number of chief advisers who
act as a sort of internal challenge function, internal expertise,
looking at economics, governance, social development, human development
and sustainable development. That is the range of issues that
we look at.
Q3 Chairman: I think probably we
have not seen enough of you so we shall have to try and rectify
that. It may well be the way in which the topics are selected.
The UK's largest bilateral aid programme is to India and I just
wonder what kind of work we have done on the contribution that
the NRI community, the diaspora, have made to welfare and enterprise,
wealth creation in India? Is any work done on what the generations
of migrants who come to the UK make in terms of development contributions
to countries we are particularly supporting?
Mr Ahmed: If I could ask Sharon
to give you a sense of what we are doing. I would just make a
general point. A lot of the work that we have begun to do on migration
has (a) been relatively recent in origin because, unlike some
of the other areas, it is an area which DFID and other agencies
have come to somewhat late in the day, and (b), given our primary
focus on the poor and development, the initial focus of a lot
of this work is looking at conditions in developing countries
themselves and looking at the impact of the migrant communities
in industrial countries, the diaspora, and how they feed back
is something that we are only beginning to get into. Sharon can
give you more specific information.
Ms White: Thank you very much.
As Masood has mentioned, it is quite early days for us on the
migration front. India is one of a number of countries in Asia
where we have begun to do some more analysis of how migration
is impacting on development. We had a conference a bit earlier
this year bringing together India, Indonesia, China, Vietnam and
the Philippines as a first discussion to raise awareness of migration.
This year DFID is developing a new country assistance plan for
India and one of the groups that we consulted was the Indian diaspora
within the UK. We have begun the dialogue but there is still a
bit further for us to go. There is some work that DFID supports
within India in terms of trying to protect the human rights legal
status of seasonal migrants within India. There is some work that
we have in hand but we are hoping to do more work and to use the
networks much more effectively in the future, particularly in
thinking through our strategies.
Chairman: There is a broad
issue here and this Committee is going to try and be reasonably
disciplined in this inquiry otherwise we go off on all sorts of
tangents. There is a broad point here, firstly to what extent
is migration of benefit to the countries to which people migrate,
and it seems to me with falling birth rates in most developed
countries that is obviously an issue of some importance, but also
one of the things we need to get a handle on is the contribution
that diasporas make to the countries of which they are part of
the diaspora. Maybe one of the things that you could possibly
share with us, not now but perhaps in writing[1],
is an indication of the research work that DFID has been doing
on this and we can compare that with the work that those at Sussex
University and others have been doing and so on, so we can see
what is the totality of the information that is around us in this
area. I think we are all putting our minds to this anew.
Q4 Mr Davies: You say, Mr Ahmed,
you have done some work on migration. I was wondering if you could
tell us at least what your preliminary conclusions are? I know
it is a very broad question but, just to try and narrow it and
make it a bit more specific to our interests, can you distinguish
between the extent to which migration is driven by extreme poverty;
the extent to which it is driven by something quite different,
which is improved economic circumstances and education giving
people the feeling that they actually do even better by crossing
the frontier and changing their job; to what extent it is driven
by environmental factors; to what extent it is driven by a conflict;
to what extent by persecution, by totalitarian tyrannical regimes?
These are some of the broad categories. Is it possible to give
some indication as to the relative weighting in the data that
you have examined?
Mr Ahmed: I would be happy to
do that. First of all, there are all these phenomena that co-exist
in different parts of the world. At the same time, we need to
try to get an aggregate picture of them. The first point, and
in some ways it is quite striking when you start looking at migration
numbers from a development perspective, is how important internal
migration is within developing countries. In some ways we tend
to focus very much on migration across boundaries, national boundaries,
but in terms of simple numbers, even though the numbers on internal
migration are quite bad, if you take a couple of countries—India
and China—the numbers of people that migrate seasonally,
either from rural areas to urban areas or that have migrated on
a more permanent basis from rural to urban areas, are probably
in the neighbourhood of 200 million a piece, so those are quite
large numbers and that is just for two countries. For the poor
in developing countries, in some ways this kind of migration is
the one that is more direct, that is what most of them are engaged
in. It is also the one that for them is part of the livelihood
strategy, part of how they earn their livelihoods over their lifetime,
maybe one family member may migrate to the city and others may
be seasonal workers. As a first point I simply want to emphasise
internal migration. The second point that comes through from the
numbers is international migration. Again, a fair amount of is
south-south. In the case of Asia, for example, if you exclude
China, probably something like 80% of the migrants out of Asian
countries stay within the continent. It is not necessarily a south-north
phenomenon, so we can just put that aside. Let us talk a bit about
the numbers and structure of international migration between developing
and industrialised countries. Again, if you look at the numbers:-
a fair amount of caution is needed about how robust the numbers
are, but the one that most people use as a benchmark is about
170 million international migrants. That is about 3% of the world
population.
Q5 Mr Davies: That is the number
currently living as international migrants?
Mr Ahmed: Yes.
Q6 Mr Davies: What is the annual
flow figure[2]?
Mr Ahmed: I will come to the flow
figures in a minute, if I might. If you look at the structure,
in industrial countries the vast majority of people coming in
from developing countries as migrants are actually skilled workers,
so you change the nature of the profile of migrants who are coming
in as skilled workers. Skilled workers coming into industrial
countries raise a different set of issues in terms of their impact
on development and it becomes a bit more difficult to say categorically
whether this is good or bad for development. On the one hand,
there are some quite positive factors, the most visible one in
some ways being the effect of remittances. They are quite large
numbers, again subject to a certain amount of uncertainty, but
probably in the neighbourhood of $70 billion or $80 billion a
year official and probably twice as much, maybe more, unofficial
remittances. You can make quite good arguments about how remittances
are counter-cyclical, so they continue even when countries go
through a bad patch and they tend to go directly to households
so there is less of a loss in the transfer, which you worry about
with development assistance in terms of whether it actually reaches
the poor. On the other hand, there are some questions about how
they are spent, whether they might promote consumption rather
than investment, some questions about them promoting inequality,
but nevertheless it is a very big factor in terms of general equality.
The second set of things that are positive also are increasing
the kinds of links that are not financial alone but in terms of
the contributions that diasporas make in fostering technology
markets, enterprise, going back to re-establish businesses. Of
course, particularly the Indian diaspora involved in information
technology has been a prime example of people who have gone back
and helped to make the connections that have helped establish
exports in that area. That is on the plus side. On the negative
side, I think it is worth mentioning that there is a very legitimate
worry about whether the recruitment of skilled workers, particularly
in shallow markets from countries where there is a very limited
number of these workers, particularly in healthcare, say, may
be exacerbating the difficulties of promoting healthcare in those
countries. When you look at the data I think there is a certain
amount of legitimate worry that in some countries that might be
exacerbating the situation. It is obvious that the answer is not
to stop the possibility of migrating which may not be feasible
because people tend to find ways around that route. Also, the
answer may be to try and strengthen the supply of skilled workers
in that country rather than to stop recruiting them. There is
a debate and discussion around the negative side of that. There
are other social negative effects as well in terms of whether
the separation of families causes problems. The last thing I should
say is if you look at the numbers that come through, we have been
talking mainly about migration as a voluntary phenomenon, much
of it is voluntary, some of it is illegal but it is still voluntary,
people moving because they feel they would be better off whether
by moving within a country or moving across boundaries, and those
numbers are quite large, but there is an involuntary dimension
to migration which is either internally displaced people, and
the numbers of internally displaced people are quite significant,
in the neighbourhood of about 20-25 million internally displaced
people who have been displaced because of conflict or environmental
problems or other reasons, sometimes associated with development
projects, problems have been associated with that. There is also
international trafficking of vulnerable people. Frequently these
are people who are genuinely very poor coming from a poor background
and obviously they are subject to all kinds of exploitation and
there is a worrying dimension of involuntary transfers associated
with that. For refugees, which is one manifestation of that involuntary
movement in some ways of people who are trying to flee, the numbers
are about 10 million or so. It is important to recognise that
refugees largely take refuge in neighbouring developing countries,
so of that number of about 10 million probably three-quarters
are in developing countries. Similarly, internally displaced people
by and large are concentrated in a few developing countries. The
manifestation of involuntary migration, the forced migration that
we see in industrial countries, either takes place in the form
of asylum seekers who make it here, who are generally better off,
better educated than the ones who stay in developing countries,
or they are people who come through in the form of trafficking,
people who are trafficked into Western Europe. I must say to you
that I was struck when I started looking at the numbers—again
the estimates are very dicey—by the fact that probably 400,000
people a year are being trafficked into Western Europe, many of
them women and children, and probably about 200,000 of them come
in from Eastern European countries. That is part of the dilemma,
how does one then manage the risks associated with the voluntary
migration and maximise the benefits and how does one control some
of the factors that affect the involuntary.
Q7 Mr Davies: Thank you. For the
purposes of making progress in the discussion, let us distinguish
between three types of migration. The first category would be
the internal voluntary migration, which is surely inescapable
from economic change if one thinks of what happened here during
the Industrial Revolution, for example, in England, the United
States, Germany and elsewhere, that is one category. The second
category would be forcible displacement either as a result of
conflict or being driven out, and that is obviously highly undesirable
as a problem. I would be grateful if you would focus on the third
category, which is voluntary movement across frontiers, voluntary
and international. You set out some of the factors which can operate
on both sides of the equation, positive and negative. A positive
aspect could be the generation of local consumption and demand
as a result of remittances, generation of investment flows as
a result of remittances, formation of human capital through the
development of new skills while the immigrants are abroad if they
then come back to their own country with that higher level of
human capital. Those are obviously plus factors. A negative factor
would be the one you have mentioned, which is the removal of human
capital which does not come back and which could have been very
valuable for development. Can we get from you, Mr Ahmed, if we
can, a sense of the balance of advantage here. It is very important.
On a net basis, do you think that this voluntary international
migration at the present time is an advantage to the human race,
is positive, is part of the solution, or do you think that on
balance it is problematic?
Mr Ahmed: I can give you my own
assessment.
Q8 Mr Davies: It is a one word answer.
Mr Ahmed: I will give you my answer
to it. My answer to it would be unambiguously that (a) overall
it is positive and (b) it is an inescapable dimension of globalisation.
The issue is not should one have it, should one not have it, but
how does one manage the risks and maximise the benefits. Yes,
it is positive and one could probably make it more positive if
one managed it more effectively.
Q9 Mr Davies: My final question on
this particular subject is in relation to women. Can you say anything
specific about female migration in this context or do the same
considerations apply equally to both halves of the human race?
Mr Ahmed: The only thing that
one might want to add in terms of female migration is that for
obvious reasons, (a), they are more likely to be subject to exploitation
during trafficking of various kinds and they figure disproportionately
in that, along with children, although numbers are pretty weak
on trafficking. I think one needs to worry about that dimension
of it. On the positive side, (b), a lot of women migrants who
are not migrating as part of families but migrating as the primary
migrants themselves in search of employment, particularly from
countries like the Philippines, have been very important sources
not only of providing income for their families but in some ways
you can see evidence in some cases where it has raised their empowerment
and their ability to make decisions and so on. It can actually
be quite a positive empowering phenomenon but, on the other side,
there is the worry about trafficking.
Q10 Chairman: The Holy Grail for
this Committee is the Millennium Development Goals. Can I just
put to you a contrary thought, and it is this: when one goes around
Africa one is continually seeing skilled people being stripped
out, nurses and doctors. I think it is said that there are more
doctors of Ghanaian origin in New York State alone than in the
whole of Ghana. When we went to Malawi I saw a nurse training
school where the whole of those who were qualified, with the exception
of one, were coming to the UK. I think there is a genuine concern
that the NHS is hoovering up qualified nurses from developing
countries. Is this something that DFID is doing work on? Is anyone
monitoring how we in the North/West are hoovering up the best
skilled from developing countries? Going back to your point, it
may not be possible to prevent that, and indeed I think the UN
Charter gives people the right to leave their own countries, if
I remember rightly, but in those countries where we are particularly
taking people—South Africa, Ghana, Nigeria and others—should
we not be seeking to help replicate those skills by providing
extra training for nurses, extra training for doctors in those
countries? It may be more cost-effective for us in terms of policy
rather than training nurses here to be training nurses in South
Africa or Ghana knowing that we are going to recruit them in the
UK as part of their development and our needs.
Ms White: I think it is an issue
of big concern to DFID. I think the impact on the country depends,
as Masood said earlier, on how shallow the skill base is. We find
in some developing countries, like Ghana as you say, a very high
proportion, 60-70%, of health professionals are migrating to countries
like the UK. In others we find that one of the reasons why professional
staff are migrating is because they are unable to get a job in
their chosen profession at home, so the circumstances may be more
grave than in others. We are trying to do a number of things.
DFID has become more active with other government departments,
particularly the Department of Health, in drawing up an ethical
recruitment list, so as not to target those countries where the
depletion of skilled professionals is going to be particularly
problematic. We are also trying to work with other donors to make
sure that the practices of recruitment agencies more generally
internationally are rather better. A lot of our mainstream development
assistance is targeted to try and strengthen the capacity within
countries: reform to civil service pay structures, trying to improve
service delivery so that there are better jobs and people are
going to have less need, in a sense, to migrate overseas for the
good employment to raise their living standards.
Q11 Mr Colman: Are you talking, in
a sense, about compensation being paid to the developing countries
for the fact that we are taking their skilled labour and employing
it in the UK? Do you think that there is a straight aid component
in this in terms of what you should be paying, say, Ghana or the
Philippines?
Ms White: Not compensation. What
we are trying to do is make sure that the economic opportunities
for people domestically are strong enough so that the incentive
to migrate to the UK is less strong, so the wage rates of teachers,
of nurses, of doctors, are rather higher, the prospects are better,
higher education systems are able to domestically train workers.
It is not providing a wage substitute but trying, through various
forms of assistance, to improve the labour market prospects for
professional workers.
Q12 Mr Colman: Clearly the wage rates
that could be paid in Ghana, say, to a nurse or a doctor are significantly
less than could be paid under the NHS in the UK. Is there still
not a requirement that we should pay compensation to the Ghanaian
economy in some way to deal with this otherwise unbridgeable gap?
Ms White: We do not feel that
compensation is the most appropriate response because it would
be very difficult for us across all countries to try to level
up to global wage rates. Do you think about paying US wage rates
to professional workers across the world? That is why our focus
is really on trying to improve the local capacity, improve the
local prospects for people in countries in our mainstream development
assistance.
Q13 Chairman: Before we move on to
remittances I would like to ask one other question. You mentioned
trafficking. On this Committee we are not very good at Eastern
Europe because they tend not to get much UK development aid or
EU development aid, but trafficking to me suggests involuntary
migration, it suggests slavery, it suggests forcible migration.
The figures you were quoting were quite significant. I just wondered
who is compiling those statistics? Where does HMG get those figures
from? Who, within the machine of government, takes the lead on
pursuing issues in relation to trafficking? Other than occasional
stories in the newspapers one does not get a sense of this being
an issue in the UK. Is it a bigger issue elsewhere in the European
Union or in other Member States? What is your feel on trafficking?
Mr Ahmed: We rely on a lot of
sources to get data. The one that we rely on particularly in the
area of trafficking data is the International Organisation for
Migration, the IOM. They provide data. It is not an area where
DFID has a lead because lots of these issues about trafficking
into the UK are areas where the Home Office would have a lead
on it.
Q14 Chairman: We are talking about
forcible migration, almost slavery here.
Mr Ahmed: It is forcible.
Q15 Chairman: Involuntary migration.
Mr Ahmed: It is certainly involuntary
and people who are either deceived into believing where they are
going to or in one form or another subsequently exploited. Yes,
it is involuntary. It is different from what one would call smuggling
of people, which in some sense is voluntary, complicit, where
the person being smuggled wants to come in but to go around legal
barriers. We rely on that data. I cannot say to you how the numbers
for the UK relate to numbers overall, except to say that numbers
for Western Europe as a whole are about half a million, 400,000.
Exactly what the breakdown is, of that I do not have to hand,
but I would be happy to try to find that out[3].
Chairman: I think we would
be very interested to have further information that you have on
that. It is not a topic that we have covered.
Mr Colman: The Home Office
has been doing major work on this in the last two years, so if
Mr Ahmed can get that note to cover the Home Office as well I
think that would be very interesting.
Q16 Hugh Bayley: How significant
economically are remittances to developing countries? Which countries
in absolute terms receive most remittances and which receive most
as a proportion of their national income? What sorts of factors
determine the levels of remittances that expatriates make to countries?
Mr Ahmed: The overall number of
remittances was something in the order of $80 billion a year for
2002.
Q17 Hugh Bayley: Globally or from
the UK?
Mr Ahmed: These are all global
numbers. Which countries are the primary recipients of this? Let
me give you the first five: the largest numbers are going into
India and that is in the order of about $14 billion a year, then
(and I would be happy to send you a table with the specific numbers[4])
Mexico, Philippines, Morocco and Egypt. However, these are not
the countries for which remittances are the largest share of their
economy. As you might expect, a number of small countries and
low income countries feature more prominently in that list. Just
to give you the first three: 40% of Tonga's GDP is now remittances,
Lesotho 30% and Jordan about a quarter. A couple of points about
the nature of these remittances, what drives them, what can we
say about what works? The first point is one that I mentioned
in response to an earlier question which is that they tend to
be a more stable form of flow, which is obviously good from the
recipient country's point of view because they do not tend to
mirror movements and other things—they tend to be counter-cyclical.
The second thing that is important about the remittances is that
in a number of countries they tend to reach quite a broad range
of the population, a large number of households are actually getting
it. In El Salvador it is estimated that something like three-quarters
of households get an income from remittances. Similarly, in the
Philippines it is quite broad based and in Senegal. Some studies
show they have a direct effect on reducing poverty. The World
Bank and others have done studies which have shown that if you
have a 10% increase in a country's share of remittances, that
is generally associated across countries with about a 1.5% increase
in poverty reduction. These cross-country numbers are useful as
a benchmark, but I would not personally say there is a precise
relationship that applies in every case. The broad case suggests
that they will have an impact on poverty. What is also interesting
is that in terms of the migrants and who is sending them now,
their own contribution, there are some factors that appear to
affect whether or not they send more of their income as remittances
or less. One interesting point is generally women appear to send
a larger percentage of their income as remittances than men do.
Secondly, generally the low skilled migrants tend to send a larger
proportion of their income as remittances. Migrants who are there
on a temporary basis and whose families are at home predictably
send a larger share of their income in remittances. The longer
people stay the more the remittances decline. It is interesting
to watch intergenerational differences. South Asian migrants are
generally dropping off after the first generation. For other migrants
coming in from other parts of Asia it is the second or third generation
where they stop sending remittances back. One of the problems
about sending remittances has been that the cost of transfers
has been quite high. In some cases 15 or 20% is used up as the
simple cost of transferring remittances from the UK to Latin America
for example. As the cost of transferring money has come down people
have started sending more remittances through the efficient channels.
What we do not know is whether this means more remittances are
being sent back or more are being sent back through the efficient
channels which were previously sent through unofficial channels
about which we have less data. Also, on the one hand, there is
this desire to make it easier to transfer money, reduce the cost
and there are things that governments have done quite effectively
in terms of making it easier to open bank accounts and the like,
but, on the other hand, there is a worry about how this relates
to concerns about money laundering and the financing of terrorism.
Governments have also been making it harder to transfer money
through informal channels and trying to track better the money
that flows through official channels. DFID has been working on
this issue of migration and along with the World Bank we organised
a conference here in October. This was actually the first time
we had brought together about 100 people from various countries
and agencies to look at different elements of the links between
remittances and their impact on migration. There is now a proposal
which the World Bank will need to follow up by setting up a website
to disseminate good practice on experiences across countries in
terms of facilitating the process of remittances and reducing
their costs and making it easier for migrants to participate.
Q18 Hugh Bayley: Are there things
that governments in developed countries, the UK Government in
particular, could do to reduce the cost of remittances by changing
fiscal rules for currency dealing? Where does the 10% or 15% get
absorbed? If you go to Thomas Cook, you can normally change your
money for 1 or 2%. What are the points of the system that you
would need to target to reduce the transmission costs? What more
could be done either by the financial services companies or by
the Government? Have you looked at the taxation arrangements of
remittances? We have taxation treaties with a lot of developed
countries which stops double taxation. I know you have a slightly
different issue when you give money from one person to another,
but it does seem to me that it would be beneficial, if you want
to encourage remittances, if you could either get agreement from
developed countries that they will not further tax income that
has been taxed or we would give a tax exemption for resources
which are passed into a different tax regime and taxed within
that regime. Is that something your Department has looked at?
Once the money gets there, particularly in these smaller countries,
remittances can have a big economic impact for the country concerned
that may or may not help poverty alleviation depending on how
the money is used and who it goes to. What are remittances spent
on and what, in policy terms, could we do or developing country
governments do to ensure that a greater proportion of remittances
go to help the poorest people?
Mr Ahmed: I will tell you about
some elements of it because it is a field where people are still
trying to figure out what the best solutions are. Here are some
thoughts about what countries have done. I think one thing one
could do is make it easier for migrants to open bank accounts.
If they can open bank accounts, they can use formal channels at
lower costs than they can if they go through informal channels.
Several commercial banks have made it easier for migrants to open
bank accounts and that has had a noticeable effect on reducing
the cost. A very simple thing is when they installed cash machines
linked to US banks in Mexico they found it made it much easier
for migrants from Mexico sending money back to be able to withdraw
money from their account than if they had to go through the formal
channels. The second thing is perhaps joining up with Post Office
savings banks as well as with micro-finance institutions in developing
countries because part of that 15% is used up by the fact that
the reach of the financial sector in developing countries is frequently
much more concentrated in urban areas, it does not reach the poor,
but the bigger problem is that the financial sector is not servicing
the needs of the smaller communities, which also manifests itself
in terms of raising the costs of remittances. Thirdly, there is
already evidence of greater competition. Once banks have started
coming into this business and they have recognised how big the
flows are it is beginning to have an effect and because of the
increasing difficulty using informal channels, the Hawala system,
that has given banks a greater opportunity because they see their
market share increasing because of the flow being transferred
over from informal to formal channels. Some host countries have
also had tax rebate schemes on remittances like special bonds.
India, in particular, has a special bond for non-resident Indians
which provides them with a greater break. What could be done to
ensure that the money that actually goes to developing countries
is used more for investment than for consumption? Frequently what
we think of as consumption may actually be one form of investment
in the sense that, if you are looking at people investing in healthcare
or meeting a health budget, it is actually quite a high priority
from the point of view of people who are spending it. One needs
to be a little bit careful about how one defines consumption and
investment and also how one defines priority because in one way
a lot of the country-based approaches to develop support now are
to put the money in the hands of the recipients and let them make
the choices. So in some ways with remittances that is what they
are doing. Those choices do reflect how they see the return on
investment and on saving and the environment within which those
investments are being made. So it is very difficult to set up
a sustainable scheme whereby remittance income will consistently
have a higher return on savings than the rest of the population
in that same country is able to get on its savings because what
you are setting up is a mechanism for arbitrage whereby a lot
of the local people will then try and get onto the scheme. In
any event, it is obvious the best way to deal with the problem
is to fix the environment within which those savings are being
done more broadly, not only for the remittance scheme. Your question
about whether we have looked at fiscal incentives in the UK or
other industrial countries could raise some of the same worries
about arbitrage, whether in a sense you can run sustainably a
scheme for remittances which you could contain in terms of not
having other flows also taking advantage of that tax break, but
it is not something we have looked at in our work yet, perhaps
other people have but I am not aware of it.
Q19 Hugh Bayley: Perhaps it is something
you could take back to your Department and talk about with other
branches of government because although I understand your immediate
reaction that you could create incentives for tax avoidance in
this country if one were to introduce a scheme, there are quite
a number of perfectly proper ways in which the government encourages
either personal investment decisions or personal giving decisions
in terms of tax relief for charitable donations and it might be
possible to look at those as parallels. Finally, has your Department
considered using aid monies as an incentive, perhaps matching
individual remittances with government resources? If you want
to encourage remittances, if you think it is a good way of getting
a bit of global re-distribution, if you think it gets money into
the hands of those who need it most, is that something you could
do, rather than giving a tax incentive you give a government expenditure
incentive either to the individual or to the state?
Mr Ahmed: The simple answer is
we have not considered it. It is something we can take back and
look at. There are two questions we would want to look at in this
case. One is whether and how much you think providing that kind
of incentive would lead to an increase in the flow of remittances,
a net increase not simply a re-allocation from one channel to
the other and secondly, what else you could have done with that
aid financing, in a sense would you be better off supporting country
poverty strategies, would you be better off supporting other kinds
of objectives rather than tying it to this particular pattern?
Both of those are empirical questions which it would be worth
looking at to see what the answers are.
1 Ev 132 Back
2
Ev 132 Back
3
Ev 134 Back
4
Ev 133-134 Back
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