Examination of Witnesses (Questions 40-59)
MR JIM
DRUMMOND, HON
DOMINIC ASQUITH
AND DR
ROGER HUTTON
16 NOVEMBER 2004
Q40 Mr Colman: Therefore the split of
this money that you have given us between humanitarian and reconstruction,
what would that be for the three years?
Mr Drummond: About £75 million
for humanitarian assistance. We have not in the current year,
so far as I am aware, provided humanitarian assistance. There
will be some that was allocated to UN agencies in the previous
financial year which is still being spent this year but we have
not responded to new appeals this year.
Q41 Mr Colman: Using all the money from
the contingency allowance for Iraq, does that mean that the work
in Darfur is under-funded?
Mr Drummond: No, I do not think
so. The Africa Division has its own contingency provision which
has funded the work in Darfur.
Q42 Mr Colman: I understand that your
budget going forward means that you are reducing the amount going
into Iraq over the next three years. Could you clarify which programmes
you envisage stopping in the next three years?
Mr Drummond: We made a pledge
at Madrid of £544 million which will be spent by the end
of March 2006. We have not decided on allocations for years after
that yet but our expectation is that Iraq should not need large
amounts of donor funding after that period because it should be
generating enough of its own revenues from increased oil and other
parts of the economy.
Q43 Mr Colman: What is your bottom line
in terms of the programmes you would in fact be funding? For instance,
is capacity building—which all of us are concerned about—the
area which you are going to concentrate on?
Mr Drummond: We would expect,
as I say, for Iraq not to need large amounts of donor grants for
capital programmes; it should be able, if it gets a debt reduction,
to borrow commercially to do things. It should be generating its
own revenue in oil. It will continue to require assistance from
outside on rebuilding the institutions of the state and we hope
that we will be able to contribute to that. Quite what budget
that will require I do not know. It has not been fixed yet but
we will be going through a process during the next few months
to do that.
Q44 Chairman: At the moment we are there—to
use the language of the United Nations—as occupiers. I do
not mean that in a pejorative sense.
Mr Asquith: No, the UN does not
use that word.
Q45 Chairman: I thought the reason the
Americans describe themselves as occupiers was because it had
to be in a UN resolution?
Mr Asquith: That was up until
28 June.
Q46 Chairman: So we have ceased to be
occupiers. There will come a time, January hopefully, when there
will be elections. Presumably then we will be giving assistance
by way of direct budgetary support to the then government, will
we?
Mr Drummond: What we are trying
to do at the moment is . . .
Q47 Chairman: No, what is the mechanism,
not what we are trying to do now. After January there will be
an Iraqi Government.
Mr Drummond: There is an Iraqi
Government now and what we are trying to do now is to work very
much with that Government to build up its capacity and to support
its policies, to help it develop its policies. It may be a different
Iraqi Government in January and our role will be the same, to
try to support them.
Q48 Chairman: As Parliamentarians I think
we would say there will be some democratic—hopefully democratic—authority
after January, so will the mechanism be direct budgetary support
as we understand direct budgetary support, or will DFID effectively
be saying that these are the programmes that we think are in the
best interests for the people of Iraq?
Mr Drummond: What we want to do
is work with Iraqi policies. We want to be able to debate those
policies with the Iraqi government, whether it is the current
government or the next one. The National Development Strategy
that I mentioned at the beginning is the first sign of Iraqi government
policies and setting of priorities. We think it is a pretty good
document. It was presented to the donors at the Tokyo Conference
in October and it provides a fairly broad framework for us to
work within. Whether we will be providing direct budget support
is something that we will have to discuss with the new Iraqi government.
My guess is that with the oil price where it is that may not be
a high priority.
Mr Asquith: There will still be
a developing political process. The government that is elected
in January will be termed the transitional government rather than
a full government. I know this is playing with words but it is
important in the context of the transitional administrative law
which the Iraqis wrote themselves, signed up to themselves in
March, and it is also important in the context of Security Council
Resolution 1546 which set out the political process which ends
after these elections and the drafting of a constitution and a
referendum on the constitution by the middle of October and the
constitutionally based elections at the end of next year. At the
end of that process—that is the end of the political process—we
will have the fully fledged Iraqi government, but you will still
have a transitional government for this coming year which has
yet to define for itself its powers.
Q49 Mr Davies: While we are on the funding,
since you say that Iraq is potentially a wealthy country and thinking
of the rise in the oil price, why did we not consider making some
of this money available—which was necessary to fund the
reconstruction you are describing, the £540 million that
you are talking about—by way of a loan which could be repaid
when these oil revenues come on-stream? Then maybe you could use
this money for some of the middle income countries from whom we
have withdrawn programmes in order to pay for Iraq because money
would flow back into DFID's coffers, or at least it would flow
back to the British tax payer. Why is it all given in the form
of an apparently irrevocable grant?
Mr Drummond: At this stage we
judge that Iraq needs grant aid and Iraq has large amounts of
debt. DFID does not, so far as I know, provide loans to developing
countries.
Q50 Mr Davies: That is just a sort of
procedural rule, a bureaucratic obstacle. It does not address
my point of substance as to whether or not economically there
would be a good basis for a loan because what is a loan? It is
advancing cash flow and you say that Iraq does not have a cash
flow now but they are going to have it in the future. That, all
things being equal, is a good basis for a loan, is it not?
Mr Drummond: Where Iraq is at
the moment, with $120 billion of debt which it cannot repay, that
is not a sound basis for moving to loans. I think in a few years'
time Iraq should be able to borrow commercially but all the donors
are agreed that for the moment it justifies grant assistance.
Q51 Mr Davies: How much of the £150
million that you are spending of British tax payers' money in
Iraq this year—apart from the cost of military operations—is
being spent on security and how much on insurance to protect the
deliverers of those projects and those programmes, whether those
deliverers be employees of DFID, NGOs that we are supporting or
contractors we are hiring whether expatriate or Iraqi? How much
for security for them? How much for insurance for them?
Mr Drummond: Where we are providing
bilateral projects where we are putting staff on the ground, the
costs of security adds roughly a third to what we are doing.
Q52 Mr Davies: So two thirds is the cost
of the actual programmes and one third is the cost of security.
What about insurance?
Mr Drummond: I do not have a figure
for insurance I am afraid.
Q53 Mr Davies: Why do you not have a
figure? Because it is not material?
Mr Drummond: It will be part of
contract; I am afraid I just do not know the figure.
Q54 Mr Davies: Is it material in relation
to the total cost of this exercise?
Mr Drummond: Insurance will obviously
add to the cost of what we are delivering and insurance in Iraq
will be a bit higher than elsewhere. We can provide you with an
estimate of what it is but I am afraid I do not have it in my
briefing.
Q55 Mr Davies: I have a note here from
our own advisers which estimates that the insurance premia have
reached 30% of company pay rolls and the security costs for two
travelling foreigners can amount to US $5,000 per day, for example.
If that estimate is correct it adds up to quite a large amount
of money, does it not? It does seem to me that decision takers
in DFID like yourself should be aware of what that amount of money
adds up to.
Mr Drummond: What I need to check
is whether the security includes insurance or not. What I am being
told is that the figure of £5,000 per day is for the very
short term contractors and for longer term it is significantly
less than that.
Q56 Mr Davies: Is that £5,000 or
$5,000? It makes a big difference with the present rate of exchange.
I put to you $5,000.
Mr Drummond: It is dollars.
Q57 Mr Davies: I am asking the questions,
you are supposed to know the answers.
Mr Drummond: As I said to you,
I do not know the precise costs of insurance; we can find that
for you.
Q58 Mr Davies: Would you be kind enough
to let the Committee have a note on the question I have asked?
Mr Drummond: Of course[6].
Q59 Mr Bercow: "Is" does not
equal "ought". As my colleague Mr Davies was suggesting,
the fact that it has not been policy to provide loans is just
a statement of what is; it is not in any way a judgment on what
ought to be. It does seem to me to be a perfectly legitimate line
of enquiry. Many of us are fully cognisant of the need for an
Iraq spend, Mr Drummond, and our questions must not be taken to
imply that we do not think it is necessary or a priority, but
equally quite a lot of us believe in specificity, value and accountability
for the spend. Therefore, I wonder if I could ask you, consistent
with what you said about the decreased need for substantial capital
programmes over the next couple of years as reflected in the figures,
whether at least in broad but reasonably specific terms you can
tell me—because I would like to know—what the £86
million in 2005-06 will embrace. I may be wrong, but I am very
concerned about what seems to me a lack of specificity about where
the money is going and what exactly is being provided. Do we know
that that is precisely what is needed? Will it all be reliably
spent? Who is charged with the responsibility for overseeing its
efficacy, et cetera, et cetera? These are very, very substantial
sums of money, albeit decreasing sums, on the Iraq spend over
the next couple of years and I would like to be clear that you—whom
I am sure are master of all you survey and certainly the person
giving evidence to us today—can tell us what the £86
million is delivering. What are we getting? What if my constituents
in Buckingham say to me, "Well, you're on this committee,
Mr Bercow, it's a very important committee and we are all frightfully
pleased you are representing us, but what we want you to get out
of Mr Drummond is what this £86 million is getting us?"
Mr Drummond: Can I answer that
in 2004-05 or do you want to focus on the next financial year
or both?
6 Ev 55 Back
| 
