House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

INTERNATIONAL DEVELOPMENT COMMITTEE

 

 

DFID'S BILATERAL PROGRAMME OF ASSISTANCE TO INDIA

 

 

Tuesday 7 December 2004

RT HON HILARY BENN and DR CHARLOTTE SEYMOUR-SMITH

Evidence heard in Public Questions 142 - 180

 

 

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Oral Evidence

Taken before the International Development Committee

on Tuesday 7 December 2004

Members present

Tony Baldry, in the Chair

John Barrett

Mr John Battle

Hugh Bayley

Mr Tony Colman

________________

Memorandum submitted by DFID

 

Examination of Witnesses

 

Witnesses: Rt Hon Hilary Benn, a Member of the House, Secretary of State for International Development, and Dr Charlotte Seymour-Smith, Head, Department for International Development India, examined.

Q142 Chairman: Secretary of State, thank you very much for coming and giving evidence on India. Thank you, Charlotte and your team, for organising an amazingly comprehensive trip. There was a lot of work in that and we are genuinely grateful.

Hilary Benn: An epic, I think.

Q143 Chairman: It was very well structured. We saw a lot and, notwithstanding there was not any down time, everything we saw and did colleagues found worthwhile. I was struck yesterday that Oxfam came out with a report which had a fair amount of coverage in The FT and elsewhere. It had a rather stark figure for 2002. A third of the increased aid from rich to poor countries came from allocations to Afghanistan and Pakistan and their general thrust was that those countries that were involved in the war on terror were getting lots of extra aid whereas Africa was not. The development campaign is a contrast to the progress in reaching agreement on the Paris Club countries to write off up to 80 per cent of Iraq's debt and the slow progress on the debt of poor African countries. I wondered what you thought of that.

Hilary Benn: I saw the Oxfam report. It makes reference to figures in particular relating to the United States of America in addition to those you have just quoted. As far as the UK's aid budget is concerned, that is not the case. We are moving, as you will know, next year to 90 per cent of the bilateral programme going to low income countries. We are in the process of very significantly increasing our aid to Africa. A debt deal has been done in relation to Iraq but the UK, from 1 January next year, will implement the proposal that the Chancellor has made to meet ten per cent of the cost of servicing multilateral debt owed to the World Bank and the African Development Bank, not only for HIPC completion point countries but other IDA only low income countries receiving poverty reduction support credit. Those are some practical examples of the ways in which, if you look at how the UK's development programme is growing and developing, we are very clearly focused on poverty reduction. That is not to say that countries in particular like Afghanistan, which is suffering enormously - we have a development programme there - do not need assistance because the human indicators there have been pretty bad. My view is very clearly that it is important that we keep our eye on poverty reduction while also recognising that for development of work you have to be interested in security, because without security you cannot have development.

Q144 Chairman: You have recently been to India. The Parliamentary Under Secretary has recently been to India and we have recently been to India, so it is fresh in all our minds. We all went away with a lot of questions. One of the questions I went away with was: does the Government of India want to be a partner for development? We had a very pleasant meeting with the Minister for Finance, a very impressive man, a lawyer, but I think we all went away slightly with the impression that he was saying, "Look, thank you very much for the cheque. We greatly appreciate the money that has been given for the national AIDS control programme, the money that has been given to the education programme. Please keep sending the cheques in the post but we need very much more." Taking it to one level, one thought one could almost reduce the DFID team in India to three people: one to write the cheque, one to put it in an envelope and one to carry it round to the Ministry of Finance. When you were there you doubtless had a longer time than we did with the Minister for Finance and other key, senior ministers in the Cabinet. What was your impression about whether India wanted to be a partner for development or whether their agenda was much more concerned about how does India become a member of the Security Council; how does India get to be seen as a key player in the world in the war against terror, a key player in trade, a much broader agenda? What was your impression?

Hilary Benn: It is a very important question because I, like you, came back with a lot of thoughts and ideas in my head. The inquiry has been a very good opportunity, not just for the select committee but for me, as we work towards the next country assistance plan, to try and resolve some of those questions. Do I think a great deal would be lost if we reduced ourselves to three people?

Q145 Chairman: I was more interested in your views about India.

Hilary Benn: A great deal would be lost. I agree with you that the Finance Minister is a very impressive individual. He is focused, as finance ministers are, on the particular responsibilities he has, which are to manage the finances, to try and address the question of fiscal stress and difficulty in the states. I came away very clearly convinced that the programme that we have, what will be a rising aid programme in India, is making a difference and producing benefit. Certainly the partners that we have at many different levels in the centrally run federal level schemes and in the four states where we are working - I went to Andhra Pradesh and saw some examples of really outstanding work - in that sense, India as a whole is interested. I was very struck by what one person said to me, so much so that I wrote it down. They said, "We really value DFID for its ideas and its flexibility." It is more about that, frankly, than the resources. At one level you could say, looking at the need in India, there would be a case for more resources but in the end we have to strike a balance in these things. My view is I think we have the balance right. The Government of India is interested. The change of policy under the new government, the previous administration having said, "We want a number of smaller donors to go", demonstrates that the new government is interested in that partnership and it is up to us, working with the government, to make sure that that partnership is used to best effect.

Q146 Mr Colman: Can I press you on the rationale for our assistance to India? What is DFID's analysis of the principal factors which have driven development in India over the past 15-20 years? Have ODA and DFID contributed to these drivers of development? Clearly, the amount of aid we give is tiny compared to the total amount of India's GDP and even external aid is only 0.35 per cent of India's GDP, so tiny amounts. Why has development happened and has ODA/DFID helped towards this development in the last 15-20 years?

Hilary Benn: Why has progress happened? Why is India on track to meet the income, poverty, TB and safe water MDGs? At the same time, it is not on track to meet the maternal health, malnutrition and sanitation MDGs. Above all, it has been a result of in part the economic development of the country, the very striking growth rates that India has had, the success that this has brought them in terms of reducing poverty. That is why they are on track for that particularly important MDG. I have a very strong sense that India is a country that is making real progress and, in development terms, we ought to see it as doing that. Having said that, there remain, despite the progress, over 300 million people still living on less than a dollar a day. The development challenge in India remains substantial. There are problems of governance; there are problems of fiscal stress, particularly at state level; there are issues of growing inequality; there are issues about the extent to which the very poorest people are able to participate in that economic growth and development that India has been very successful in developing. For all of those reasons, notwithstanding the fact that it is a different development challenge and a different type of development relationship precisely because our aid and aid overall is such a small proportion of the country's GDP, I am quite clear in my mind that it is right that we should be there, but we have to work in ways which take account of that set of circumstances which may be very different from a country where 50 per cent of the government revenue is dependent on overseas aid.

Q147 Mr Colman: Why should DFID be giving India the largest amount of money of any aid that we give to developing countries, and it is growing? Why should India be getting what appears to be more than its fair share or perhaps more than other more deserving cases?

Hilary Benn: I would not agree with the argument that it was more than its fair share. If you look at income poverty and population and the operating environment in which we work, those are the broad indicators that we use to determine aid allocation. You could in some respects argue that, given those, India has been under-aided. That is why I say that in the end you have to strike a balance. Our programme in India tries to reflect that balance but I would not accept the argument if it were put that somehow India was receiving more than its fair share, given the large number of people still living below the poverty line.

Q148 Hugh Bayley: We were told to expect that India would become a middle income country in ten years or so, in 2013 to 2015. Given that your Department is focused quite correctly on poverty alleviation, it would be difficult to maintain the argument that development assistance should be given on any large scale at all to central government when India has become a middle income country, but could a case be made to maintain development programmes with states that have large numbers of people below the MDG poverty level? Is that how you would see the programme going?

Hilary Benn: Ten years is some way off. Nobody knows for sure when India will achieve middle income status but it is one of the issues that all of us have to have in the backs of our minds as we plan the programme and think about the future, although rightly our programme in India is above all concentrating on the here and now and the next two, three or four years rather than what is going to happen in ten years' time. If one looks at our programmes in other middle income countries, where there remains the case for involvement, that is one of the issues we would have to address at that time. I see the argument that you put, Mr Bayley, about the balance between activity working at national level and at state level. We would have to reflect upon that. It would depend on what the remaining challenges were, what was happening in the particular states. In that sense, it would have to draw on the process that we are grappling with at the moment, which is what should be the balance of our activity among the different states that there are in India. In a sense, what has happened in India certainly at state level has reflected what has happened to development assistance globally, which is in general we find it easier to work in places where there is a good policy environment, large numbers of poor people, a commitment to reform, because we know the support and the assistance properly used can really make a difference. It is more difficult to work in more difficult environments, whether they are countries or states like Bihar. We recognise that we would like to do more and we may come on to that in further questions but it is a question of finding the right way to work in circumstances such as this.

Q149 Hugh Bayley: The FT correspondent, Mr Luce, spoke to us and he described India as the most callous society he had ever lived in, by which he meant it was a country of contrasts with a rich population, a growing middle class, which we saw, co-existing with some of the poorest people in the world. The implication of that surely is that effective development would mean that India needs to address those inequalities itself and to effect some redistribution. Is that something that our bilateral relationship with India and your Departments particularly will seek to encourage?

Hilary Benn: I agree with you. In the end, it is for sovereign countries to determine how they distribute the fruits of economic growth and success. All countries face a choice and the political process is the means by which those choices are made and those outcomes determined. Part of what we are seeking to do through our programme is to improve the delivery of services. During your visit, you will have seen a number of examples of that. The other part of what we are seeking to do is to try and increase demand for those services, to raise people's expectations so that they can participate better in the process of answering the very important question that you have just put.

Q150 Hugh Bayley: If you look at India's position in the world, it is an emerging super power. Its importance globally in the global economy and trade, from a strategic perspective and quite possibly through and within the United Nations, is going to change enormously. It is strategically enormously important as a global player and will become more so over time. To what extent therefore is the maintenance of your department's development assistance programme driven by foreign policy considerations rather than poverty alleviation considerations and should such considerations form part of our government's judgment about whether we should have a large development assistance programme in India?

Hilary Benn: To be absolutely clear about it, our development programme in India is driven clearly and wholly as far as the Department for International Development is concerned by the case for reducing poverty and the large number of poor people there are in India have become a challenge. It is also the case that India is beginning to consider its role as a donor. Part of the dialogue that we would seek to have is on those issues, as India indeed becomes a very important power in the world. We are there for one very clear, very particular reason which is to do the things that I have just described. The government as a whole of course has an interest in maintaining relations with countries large and not so large, for reasons of foreign policy, their influence and so on. That relationship between India and the United Kingdom is extremely important but our development programme is very clearly focused on trying to tackle poverty

Q151 John Barrett: You and Mr Bailey mentioned how India's position in the world is changing. What is also changing is the Indian government's attitude towards aid and how the aid flows in the future. You mentioned that India itself is becoming a donor and it is becoming an increasingly large investor in the UK. Jobs are moving from the UK call centres and so on. How do you see DFID's role developing in the light of India's evolving self-image?

Hilary Benn: We have to deal with the policies and circumstances that the Indian political process itself throws up. We have seen the change with the new government reversing the previous policy of asking all but a very significant number of donors to leave. That is a process I welcome. On the other hand, the new government has come along and said, "We do not want bilateral donors to engage in direct budget support." What we were doing in Andhra Pradesh we will not be doing in future, although separate budget support, as far as the new government is concerned, is fine. We are doing that through some of the national programmes and we are looking to see whether we could do some sectoral budget support, for example, in health in some of the states in which we are working. We have to adapt to the framework that the Government of India as its policy evolves and changes sets and respond accordingly but continue to bring what we can, which is money - very small in relation to the overall wealth of the country - ideas, capacity to innovate and capacity to influence. We have seen that in the way in which our programme has worked to date and I am sure we will see the same in the future.

Q152 John Barrett: There is clearly a lot of work to be done in India. Are there any examples of areas where DFID has suggested that we work separately to technical advisers and they have said, "No, we would rather you did not do that"? How would we approach that if they were saying effectively, "Back off"?

Hilary Benn: In the end, it has to be a partnership. It would not be right for us to say, "We are going to do it, come what may." To have a partnership, you have to have two partners and the partners have to agree on what they are going to do together.

Q153 John Barrett: There is a potential conflict of tackling the poorest of the poor and the people who are just above the poverty line. If you focus on the people immediately below the poverty line, it is easier to shift people up above that line rather than tackling the very poorest of the poor, where a lot more effort and a lot more money has gone in but they still remain below the poverty line. How does DFID deal with that dilemma about being most effective and putting resources into the poorest of the poor or maybe having a push to get more people just above the poverty line so they are moving towards the MDGs?

Hilary Benn: In terms of our development programmes, these are not tools that are so finely calibrated that one could say, "If we put a bit more in here, we are going to have to shift more people over that boundary from one level to another." The fact that India is making real progress in lifting people out of poverty is a function of much bigger forces at work but part of what we contribute is focusing on the poorest of the poor, seeking to include them in the programmes that we run. I know you have visited one of our rural livelihoods projects. The one I went to see in Bongya was very clear about the way in which it was involving not just changes to the physical infrastructure. That was water management, very impressive and very practical; very much in tune with one of the other new priorities of the government which is a focus on rural development. Our programme there was combining those physical improvements to increase the supply of water with community based development that got the community to think about the very poorest in their communities, how they could be helped to find better ways of earning a living, ways of supplementing their income and so on. In time, that will feed its way through to the statistics but that is where we are trying to put our effort to make a difference. I do not think it is the case that we are focusing on those that are easiest to shift although, yes, if you look at where our programme has been prioritising certainly money in the past, we have worked particularly with states where we think there is capacity for change. We need to balance that with working in the states where it is more difficult but where there remains a considerable need.

Q154 Mr Battle: Can I start by adding a personal word of thanks to Charlotte and her team for the visit. I have travelled to a few places in my time and I thought DFID's team in India, in terms of the calibre and quality of the people, the mix, was the best in the world. My initial response might have been following Hugh's line: get them spread across Africa as quickly as possible and we will see some real action, but I want to suggest something else. It is the first visit I have made to India and I was incredibly overwhelmed by the scale of the wonderful mess that the place is. I was also overwhelmed by the fact that an individual state had more people in it and more poor people in it than some of the countries that I visited in Latin America. If you were to say to me, "Treat India like a continent and break it down into states" that might make more sense in terms of the numbers, poverty alleviation and where we address our attention. That brings me to that issue of focus on the states because India is very different to everywhere else. There is some focus already on the states. What sense do you make of that and where do you see that going?

Hilary Benn: First of all, can I thank you for what you have said about our colleagues in DFID India. I very much share your view. It is in my experience characteristic of the people who work for DFID's organisation but it is very impressive to see it in operation. Secondly, I too share your view about the scale of the place. Let us take an example that is very close to home to us as individual Members of Parliament, the size of constituencies. You have constituencies that might have a population of 2.5 million people. Can you imagine any of us trying to represent a constituency of that size? It creates a really big challenge.

Q155 Chairman: Let us just say that India does not have a Child Support Agency.

Hilary Benn: Absolutely. I hate to think what our secretarial and office cost allowance requirement would be if we were serving constituencies of that size or indeed the size of bureaucracy that would be required to answer the letters that we would then send on behalf of our constituents. I honestly believe that the answer lies in trying to strike a balance. I have come away more convinced that we need to find the right balance in India between doing things centrally - and you will be aware of the programmes that we are involved in - and we can work at a deeper level and help to bring about more change by also working in the states. We focused on four. There are issues of human capacity which we may come on to later, particularly with the reduction in head count that DFID India as an organisation and government departments are going through as we speak. The challenge is how do we use that very valuable resource and expertise to best effect as we try and see whether we can do more in some of the states where we know the development challenge remains very large but the circumstances in which we can operate are more difficult than the states in which we have been working up until now.

Q156 Mr Battle: On what basis can you make the decisions between the states? Where DFID does not have a programme, literacy rates are 93 per cent for lots of historical reasons. The engagement of the people in people's development planning is the highest world probably compared perhaps with Bangladesh. There is great work going on there and DFID is not directly engaged there. DFID is engaged in Andhra Pradesh and West Bengal but is going to be tapering those programmes down in 2007/10. If we look to the engagement in Orissa and Madhya Pradesh, you see that as long term. If I were to say to you, "What about the plans for places like Uttar Pradesh and Bihar?" they are the poorest of the poor and going nowhere. Dysfunctionality is a word that comes to mind. How do you see yourselves engaging with them or do you not? How do you choose which country state to choose and which not to?

Hilary Benn: The process that we have been through to determine the selection of focus states is very much like the process that we have been through in determining the size of the overall aid programme in India: population size, poverty, policy environment, performance. That is what has determined those choices. In Andhra Pradesh, one can see the real progress that has been made in reducing poverty, more so in urban areas than in rural areas, and obviously that has been an issue in that particular state. Let us be frank. If UP and Bihar were countries in their own right, we would be in there but everybody acknowledges that the operating environment there is much more difficult. What we are currently looking at is: can we increase our presence there, first, through some of the central schemes that we are supporting and, second, looking at Bihar and UNICEF which is working there; thirdly, through our PACS programme which is working with civil society and fourthly to see whether there are areas in which we might be able to discuss questions of governance and reform with those two state governments. I must be very honest and say that there are difficulties involved in trying to do more in those states. I want to be very straight with the select committee about that. We are trying to see what we can do more of within the constraints that we face, including human resource constraints that DFID India as a whole has.

Q157 Chairman: I am not sure we know very much about how you intend to deal with Gershon in the Department. Are the cuts going to fall disproportionately on larger offices like India and Bangladesh? When they fall, is it going to be more locally engaged staff upon which they are going to fall or contracts from London and so on? Perhaps you might comment on how you see Gershon impacting on the Department generally?

Hilary Benn: There are both head count targets that we have to achieve for UK based staff and also for staff appointed in country. The way the Treasury has set up those arrangements and the targets, it applies to both. We are in the process in particular of discussing the directors' delivery plans for next year and I am in the middle of talking to directors about what those plans are going to look like. In allocating out those head count reductions to different parts of the organisation, it is having an impact on DFID India. It is a difficult process to go through. Let us be very frank. It has taken a little time for staff in the office. Charlotte has lived and breathed this together with her colleagues. It is difficult to come to terms with. As clarity comes about the number of reductions there are going to have to be and who is going to move on, people can then think about what else they are going to do with their lives. We will work through it. It has had a bit of an impact. I would not be telling the truth if I did not say it has an impact, but I have a sense that the office is moving through that process. The broader question is that we are looking at the competing priorities we have. In some countries, because of the nature of the work that we are doing and the way we do it, we require more human capacity to do it; in others, we may not require so much. For example, if more of what we are doing is through direct budget support. In the end, we are trying to balance all of these things out and allocate those reductions as fairly as we can, consistent with the things that we are trying to achieve and consistent with the fact that we have a rising aid budget to deliver with fewer people. Therefore, we will have to be more efficient and more smart about how we do that.

Chairman: And growing demand such as the Commission for Africa and so on.

Q158 Hugh Bayley: Your contributions towards centrally sponsored schemes absorb large amounts of money but DFID and everybody else seems to acknowledge that the impact on central government policy is minimal because, although they are large sums of money in our terms, in terms of the Government of India budget, they are small sums of money. We have looked for evidence that UK involvement in the centrally sponsored schemes has a real, demonstrable impact and, with the possible exception of the education world, we have really failed to come up with evidence that that is the case. Is there such evidence or is it unrealistic to expect such evidence?

Hilary Benn: If you are talking about evidence in terms of the capacity of DFID by supporting those programmes to influence what happens, I acknowledge what you say about education, but if one takes reproductive and child health, certainly as that national programme has evolved, we would feel that we have played a part in shifting federal government thinking in particular so that there is greater involvement of the states in that process, more involvement from the bottom up, designing the scheme in a way that improves the livelihood so that the resources it provides can be spent. I think I am right in saying in relation to the previous version of this that in some cases that money was not getting spent. We would argue certainly that we have had an impact in relation to reproductive and child health by being involved in that programme and changing the way it has been delivered to make it more effective. That is an example of ideas contributing to what is more effective development. That is the case for being involved, in part, in national central schemes as well as being involved with particular states.

Q159 Hugh Bayley: Do you think there is sufficient evidence of impact to shift more resources into centrally sponsored schemes, the implication being relatively less for state schemes, either in the four states where we have large programmes already or possibly in other areas?

Hilary Benn: We have already been through a process where there has been a bit of a shift. That arose out of our reflection, as you know, on what we were doing previously. We are looking in the end to about half and half, roughly. That is what we are aiming for. Previously it was slightly more at the state level, as I recollect it. We have to rebalance that and we think half and half strikes the kind of balance that I was talking about earlier.

Dr Seymour-Smith: Some of these schemes are extremely large and therefore a small policy change leverages quite a lot of increased effectiveness. That needs to be factored into the thinking.

Q160 Mr Colman: My colleague, Hugh Bayley, was saying other than education. Perhaps I can press you a bit further on education, something dear to my heart. I was very impressed by the Bridge School work on getting children back into full time education which we saw in Andhra Pradesh, the very impressive National Union Minister for Elementary Education and Adult Literacy we met in Delhi and her strong commitment to a centrally sponsored scheme for dealing with the abolition of child labour so that all children should be able to access full time education. To me, that was a brilliant concept and one DFID should get behind as an example of a centrally sponsored scheme that would have a major impact on the future of DFID, particularly poor children, and therefore change the nature of society in India. Would you be able to say, Charlotte, whether this is something that you, particularly with a team in India, have committed to supporting? Are you seeing the Bridge concept, one which started as a state scheme but is moving up potentially to being a centrally sponsored scheme?

Hilary Benn: I was not able to visit the school but we did have an event with the Chief Minister and a representative of the ILO, myself and others, to mark the launch of the second phase of the child labour project in Andhra Pradesh. Looking at the results from the pilot there, where in a very practical way that project has had an impact on reducing the number of children involved in child labour, indeed we heard testimony from some of the children themselves in those circumstances on how it had changed their lives and so on. We have done two things. One is to try and take account of this in the influence we have in the national education programme but secondly it is an issue for the Indian government itself to reflect upon. If there are good models operating at state level which show that it is possible to make progress in tackling the problem of child labour, I am sure that is something that the Government of India would want to think about to see whether it wishes to do anything on a national basis to build on the good practice that states have developed.

Q161 Mr Colman: The Union Minister was very keen on taking over on that and very keen that we should introduce the concepts of the supply chain work we have done with ethical trading in many parts of Africa should also be adopted in India so we have a combination not just of DFID money and central Indian government money, if you like, but also the cooperation of UK retailers and Indian manufacturers to stamp out this. It would be a great way to go forward for DFID in India to perhaps press that this should be a major scheme. That is my own hobby horse so thank you for allowing me to carry that through, Chair. It is an example potentially of a centrally sponsored scheme which could change the face of India. If I could go on to DFID's relationship with the World Bank, a number of people have said to us they felt that DFID's relationship with the World Bank in India was too close, too much hand in glove together and perhaps they were too influential on what DFID was doing and vice versa. Would you like to comment on that?

Hilary Benn: That is a new accusation or a new observation. No. In an age in which we are trying very hard to make sure that we work together as effectively as possible, I would not say that we were too close. Was the charge given any substance in terms of the adverse effect this close relationship was said to have had?

Q162 Mr Colman: I think this was triggered by NGOs who felt that perhaps we were working to the World Bank agenda rather than one which was more pro-poor and pro-India in general.

Hilary Benn: I would not accept that charge if it is made because certainly, from what I saw of the programmes that we are supporting, they are very focused on poverty and they are making a difference.

Q163 Mr Colman: Professor James Manor who has given us evidence said that although the World Bank was well resourced, DFID was less economistic, less narrow in its perceptions and more sophisticated and more creative than the World Bank.

Hilary Benn: I take that as a compliment to DFID.

Q164 Mr Colman: Do you wish to comment on it?

Hilary Benn: It is nice that people say nice things about DFID and the approach it takes. Seriously, we have an important partnership with the World Bank. We work closely with them. We have particular knowledge and particular expertise that we give effect to in the programmes that we run, but where we can find opportunities to work effectively in partnership with the World Bank in the cause of poverty reduction we will continue to seek to do so. Each organisation has different approaches, but I am not going to argue with the nicer things that have been said about DFID and our capacity to work in the way that we do.

Q165 Hugh Bayley: Orissa is a state with a very serious budget problem, a fiscal deficit, caused in part because of the cost of servicing existing loans. They are applying, through the Government of India, for help from the World Bank to do a public service restructuring exercise which is badly needed. I think the World Bank will come forward with money, but it will be loan finance. If Orissa was a stand alone country like Sri Lanka, with a similar average income in Africa, it would be receiving grant finance, would it not, because it would be accepted that increasing its loan book would make its problems harder, not easier, to deal with. Should the World Bank have a way of distinguishing between very poor states in India and the federal government? In other words, should they have a separate policy for lending to non-sovereign states? I understand that this loan which Orissa is about to receive will come as a mixture of World Bank, EBRD lending and IDA lending with an aggregate interest rate of something like 1.5 per cent, but the Government of India, when it lends to a state, lends always at 3.5 per cent. You have a bizarre situation where a highly indebted state is borrowing more money to try and escape from a debt spiral. It is paying at two or three times the rate of interest that the Government of India is required to pay the World Bank. You are looking puzzled. I felt there was something wrong there.

Hilary Benn: I was concentrating on the picture you were painting. I happily undertake to reflect on the detail of some of the points that you have raised and to drop a note to you about this. As you rightly say, Orissa has those problems -- the World Bank has been planning this for quite some time -- and it has a very high percentage of people living below the poverty line and it needs more money for assistance. In a sense, the conundrum that you have highlighted goes back to Mr Battle's point about big states being as big as countries in their own right. There are two issues that affect the terms on which World Bank assistance is made available: the terms on which the Bank lends to the Government of India and the terms on which central government passes on loans to the states themselves. Of course, India's access to concessional IDA loans is constrained due to the country's size and, frankly, the attitude of Bank shareholders. It might be helpful if I were to reflect on the point you make and drop you a note. It reflects the function of the size of the country and the nature of the problems that Orissa has. It does need the support to enable it to do more on health and education. That is what it is looking for the assistance for.

Q166 John Barrett: If I can turn to livelihood projects, one of the most heartening things we saw was the lives of individuals and villages completely transformed, harnessing the water, improving food production, marketing, sanitation, health and how village life had been turned round, often in conjunction with other donors from other countries. Is DFID ensuring that their successes in certain projects, in certain areas, are being spread more widely through both the states they are working in and between states, because there did seem to be a lack of communication between what was happening in different states. It was almost like visiting different countries, so it is how to spread success, because we saw the successes on the ground. If that could be repeated elsewhere, it could transform other lives.

Hilary Benn: In all honesty, it is more difficult to transfer it from one state to another, apart obviously from the states in which we are working. One of the questions I asked when I was there was to what extent do states, chief ministers and others look at how other states are doing and compare themselves? We know in our own lives as constituency Members of Parliament representing areas with local authorities the extent to which comparison can have an impact on behaviour. Undoubtedly, we feel that the lessons learned within states and the fact that we are working with those who are responsible for rural livelihoods - certainly the official who came with me on the visit to the rural livelihoods project in Bongya was himself reflecting on the lessons they had learned from the work they had been doing together and that has been reflected in the state-wide water management approach. It is very clear to me that it has had an impact. I share entirely what you say about the tangible benefit that this very practical approach to addressing a real problem in Andhra Pradesh in particular, which has been the lack of rainfall, has had on people's lives. A very satisfied farmer I met was growing a new variety of castor seed. We were on a little path and on one side was the old variety of castor seed, rather weedy looking, and on the other side was the new castor seed that was clearly going to produce a much better crop. That was part of what we were doing there. Within states, yes; across states, more difficult.

Dr Seymour-Smith: We are trying to strengthen our links with the Planning Commission which is the important body that has a role to play in that lesson learning.

Q167 John Barrett: Is there also a shift away from these very successful projects to more centrally sponsored schemes because of the issue that we were raising earlier on about the independence and change of where India sits in the world and the attitude of the Indian government? There is a temptation to say, "Let us deal with central schemes and the Indian government will decide" whereas what we saw first hand were excellent projects. Are we drifting away from these?

Hilary Benn: No, I would not say we were drifting away. There has been a rebalancing that I referred to in answer to an earlier question that is already underway to do a bit more through the centrally sponsored schemes. In the end, we are looking at the 50/50 split that I referred to. That is a reasonable balance so that we maintain the benefit you have described in asking the question about the rural livelihoods scheme, while at the same time having a wider impact through centrally sponsored schemes that we are also supporting.

Q168 Mr Battle: Can I ask a question about the purpose of technical assistance and the work that technical assistance from western consultants which DFID funds? What do you see as their purpose? Could you clarify for me how they help developing countries to analyse policies that we might be discussing with them?

Hilary Benn: We use consultants in India and across our development programme, although consultancy expenditure is a declining share of our overall aid programme. From memory, it was 16 per cent in 1997; it is now down to ten per cent. Why do we use consultants? Because they bring in expertise that we may not necessarily have in-house or in sufficient amount to do the activities that we and our partners together want to engage in. Technical assistance only really works if the partner wants to receive it, if together an issue has been identified where it is felt that technical assistance would help and that technical assistance will enable the government or the state in the end to be able to do it for itself. In other words, to make use of the advice that could be given by the consultants during the period of the contract, to change the way they deal with an issue, and then to embed that in their own systems and structures, to learn from that and take it forward in the future. That, in essence, is what we use consultancy for, but it has to be a shared endeavour because it is very hard to impose technical assistance on somebody who does not really want it.

Q169 Mr Battle: That is encouraging. Could you reassure me that the focus for technical consultants, given that they may work in a different country, is to work on the agenda of tackling poverty? Are they given that brief as well or are they not as clear about that as perhaps we might want them to be?

Hilary Benn: That is the raison d'etre for everything that we do but let us take an example. If you are working and giving technical advice on more effective forms of revenue collection, somebody might say, "Interesting, but what has that to do with poverty reduction?" We know the answer. More revenue collected, more money in the pot, which can then be spent on health and education. There is a very clear link. We are improving public sector financial management, capacity to spend money and monitor public expenditure. All of those are examples of working to support government's capacity to do the job that we want the government to do, which is to run an effectively functioning state, because all the evidence suggests that effectively functioning states are going to be better at tackling these problems, improving health and education and reducing poverty than states that are ineffective and do not function.

Q170 Mr Colman: Can I turn to the efficient and effective running of DFID in India? I believe an external evaluation of the implementation of the DFID India Country Strategy Paper which was commissioned by yourselves in 1999 was highly critical of the CSP's implementation, particularly of the management and monitoring of DFID's India programme. Can you give us any specific examples of what has changed since 1999 in terms of the management and monitoring of DFID's India programme in response to that criticism?

Dr Seymour-Smith: We have already provided the Committee with some examples of recent ways in which we are monitoring and measuring impact. In common with the rest of DFID, with other donors and across government and other Whitehall departments, we realise that we need to improve our performance and we very much responded to the comments that were made in the external evaluation. That pack that we provided you with, which gave you recent examples of how we are reporting against the directors' delivery plan and how we are reporting on progress against the country assistance plan, contained the evidence of the improvements.

Q171 Mr Colman: We will come back to you if we have further queries but we were very impressed by your team in India, so clearly by 2004 there have been improvements. Can you give us a clear sense of where you see the focus of DFID's programme in India? Which programmes do you see as priorities? If the India budget had to be cut by half, which programmes would be preserved?

Hilary Benn: I am glad to say that is not a problem that I or the select committee are going to have to grapple with. If you look at where we are putting our resources, focusing on education, health, rural livelihoods, HIV and AIDS, TB, reproductive and child health and primary education, those are the priorities. They remain the priorities. We are trying to strike that balance between pursuing those through the federal level schemes as well as the programme that we have in states. The resources that we have put into those different schemes reflect the importance that we attach to them and all the opportunities that there are to make progress working with the Government of India and with the states. All of those are important. What we are doing currently reflects what we see as the priorities, but as I said to the select committee one of the things we have to reflect upon as far as the state level activity is concerned is how can we do more in those states where we know there are still big problems and how can we do it in a way which deals with the real problems of governance that there are. That is the big issue that we are going to have to address as we take forward the new country assistance plan, but on the balance between the centre and the state the 50/50 split that we have is, in my view, the right one. There is no perfect answer to the questions that I have asked myself and you are asking as a Committee about how we strike a balance. Broadly speaking, I think we have it right. No doubt the select committee will have a view and you will let us know when you produce your report.

Mr Colman: Does the head of DFID India wish to say anything different?

Q172 Hugh Bayley: Like John Battle, it was my first visit to India and it is an overwhelming experience. You are knocked back by the country's history, culture, religion and built environment and landscape in so many ways. One of the impressions that is deeply rooted in my mind is this question of inequality. It is such an unequal society. It is an unequal society with the added dimension of scheduled castes and tribes and, despite the government's efforts ever since independence to address the problem through job quotas and other schemes, the inequality remains. In our discussions with Indian MPs, we were struck by the degree to which Indian MPs were, while saying the right things, prepared to tolerate that. They said, "We are doing the right things. What more can we do?" How does your Department ensure that its programmes effectively deal with social exclusion when you are working with government departments that do not put as much emphasis on tackling the problems faced by scheduled castes and tribes as you and I would believe necessary if we are going to achieve the Millennium Development Goals? What examples could you give of work you have done with government departments, either at federal or state level, that have ensured that social exclusion becomes an issue that is tackled firmly and rigorously by government bodies?

Hilary Benn: This is a fundamentally important issue in India. In addition to castes and tribes, Muslim communities have lower social indicators than other groups. Within these categories women find themselves in a less favourable position, although it was very striking at the two meetings I did, looking at the urban services project in Hyderabad and the visit to rural livelihoods, the extent to which the whole of the community and the village got together and the sense in which women were the ones who did the talking. It was very striking and I just reflect on that because I am sure it has not been the select committee's experience. It has not been my experience in other countries I have visited and where we have had that conversation. One practical example would be phase two of the reproductive and child health programme when we are trying to ensure that the criterion for measuring and monitoring progress is exclusively focused on vulnerable groups so that we can provide information and see ourselves the extent to which people have benefited. Another example would be the special programme we have in Orissa where the number of tribes is a very large proportion of the population and we have a tribal empowerment project, where there is a real effort to try and understand the particular requirements those tribal groups have and the extent to which they differ from others in the population. I think more broadly what I would say is this is a longstanding issue for the country, and it is a country which is in the process of trying to come to terms with that. I think the solution in the long term is like all solutions, a question of those who are on the receiving end of discrimination to acquire a louder voice and to demand a fairer share of their rights in society, their place in society and opportunities for economic advancement. We seek to build that into the programmes we undertake. Do we have a long way to go? Does the country have a long way to go? Certainly from talking to people on my visit to India, that is undoubtedly the case.

Q173 Hugh Bayley: When our group, one of two groups, visited Uttar Pradesh we saw work being funded by your Department through UNICEF and others to eliminate polio which is work I am very, very pleased the British Government is funding and doing. Hopefully within a short period of time, within India, polio will be eradicated. Globally the one place in the world where there is still a substantial number of cases of polio is Nigeria. They are facing some of the same problems that were being faced in Uttar Pradesh. There was ethnic and religious rumour-mongering which was in Utter Pradesh but I think this problem has been overcome, of discouraging some Muslims from having their children immunised. It strikes me if India wants to become a donor, and it wants to become a donor in an area where there is some business or some trade opportunities, this might be an area saying to India, "If you are able to eliminate the polio in India, why don't you take on the mantle as a south-south project in Nigeria? You could doubtless get some opportunities for Indian pharmaceuticals with the production of vaccine, but you also have the experience of Muslims working in Muslim communities to reassure people that this is something which is beneficial". It just might be an idea that DFID and India should discuss with the growing Indian donor programmes as an area where they could add greater value than the West?

Hilary Benn: I am grateful for the suggestion. Can I say, when I was in Nigeria in September I did go to Kano and discuss with the Governor precisely the problem you refer to. It was quite striking how he had tried to deal with the political problem that he had had. As a result, as you know, polio immunisation has now restarted in Kano. That particular problem has been dealt with. I will certainly reflect upon your suggestion.

Q174 Mr Battle: Could I just go back to the paradoxes of India. What struck me was, even though theoretically within the constitution everyone is included, in reality groups of people are structurally excluded, scheduled castes and scheduled tribes. I do not actually believe the Heineken theory of economics that wealth will trickle down and reach the parts that no-one else reaches at the very bottom levels. If the people at the bottom are structurally excluded it will never get there. Rather than simply say it is the job of development to tackle the whole lot and the work you are doing, to move from individual projects to structural justice through the systems where there is development as a whole for everyone, are there conversations between yourselves and the Foreign Office, as there are with human rights, to raise these questions in a larger ambit? We do know there are meetings in Geneva that say to countries, "Perhaps if there is a structural flaw it's not so helpful to have development, not only if there are crises and violence and we need security, but if there is structural exclusion", and that does need to be addressed and perhaps more international pressure needs to be brought to bear. Would it be DFID who does that?

Hilary Benn: We have conversations with the Foreign Office on a large range of issues and the Foreign Office, with its overall responsibility for human rights, is very concerned about these issues, including where people's human rights are affected because of structural discrimination, which is really implicit in the question you are asking. I think both things are required. I think a process of development will itself help to create conditions in which it becomes easier to deal with those problems. I have no doubt in my mind about that whatsoever. As people acquire better lives, improve their income, their children get educated, this begins to change a society. In that sense I do not see a conflict between the two.

Q175 Mr Battle: I think you are right. The evidence we took from the people we met - to hear the testimonies from people who were structurally excluded - contrasted starkly with the politicians who denied there was even a problem. It is denial of the issue that seems to be rather more difficult to address than the structural injustices?

Hilary Benn: In my experience the best way to deal with politicians who are in denial is to confront them with the issue. That is why I made the point in answer to the earlier question - it is about the political process, bringing these questions to the fore and people saying, "Why is it like this? What are you going to do about it?" That is how change happens.

Q176 Mr Colman: We confronted the Union Health Minister as to what was happening in terms of people with disabilities, particularly the limbless. This is an area that we looked at in Hyderabad and elsewhere. I think you were there during World Disability Day?

Hilary Benn: Yes.

Q177 Mr Colman: This is an area where DFID has led in terms of advocacy work and getting the Limbless Association in Putney to work with people in Hyderabad and Delhi in terms of taking this forward. For the record, could you mention about the work you are doing. Clearly women with disabilities, or scheduled castes, or tribes with disabilities, particularly lacking limbs, are the very poorest of the poor.

Hilary Benn: The very last meeting I had in India was organised by VSO, and VSO brought together a very wide range of representatives of disability organisations in Delhi. I have to say, it was the best hour and twenty minutes I have ever spent just listening to the different aspects. People talking about the different aspects of disability, the extent to which this was disability which was hidden in their communities, and the work they were doing to try and bring it to the fore; and people talking about the gap between the legislation there is on the statute book in India. As is often the case, it is one thing to have legislation and another thing to access the rights which it confers or to get people to change their practice. What I would say about DFID as an organisation is that we have our programme partnership agreement with Action on Disability and Development, ADD, which does outstanding work; we have got projects we fund through the Civil Society Challenge Fund; but I think if I were honest I would say that we are still coming to terms with how we can take that understanding of what it is to be a disabled person - and they too are an excluded group like the scheduled castes and scheduled tribes - and reflect that better in the programmes and the work they do so they do not continue to be hidden in the societies in which they live, of which they are part, but are often unseen, in particular because their disability makes it more difficult for their voice to be heard in lots of different respects.

Q178 John Barrett: One issue which cropped up repeatedly during our visit was the issue of corruption and how we could move forward to help tackle that. What we did see in Orissa was a very impressive presentation by Vigilance Department officials who detailed how, if a civil servant had asked for a bribe, the person would phone a hot line and be given the money for the bribe and they would be wired up, so when the bribe was being passed over the police would spill into the room and arrest the culprit. Assuming that is not what DFID are doing, I wanted to ask how does DFID actually move forward to tackle that issue which, as I say, cropped up time and time again and left us with the feeling that not only were we seeing in some areas the poorest of the poor but they had possibly the worst of all worlds, because those who were supposed to be representing them and tackling these matters of life and death seemed to be having one eye on their own back pocket?

Hilary Benn: The first thing we do is to make sure the resources we are putting in do not go the way of that process, with the fiduciary risk assessment that we undertake, the rigorous monitoring, and the joint review; because our principal obligation is to make sure that does not happen with our fund. I think more generally, on corruption and governance, from state to state the picture varies. India is a functioning democracy; there are a lot of checks and balances; there is a lively civil society; but there is also a problem. I think people would recognise that. In the end, states and governments have to want to be willing to address that. The work we do in other countries on corruption has to have as its starting point recognition that there is a problem and people want to do something about it. In the end it is going to come from within the political system when people say, "We don't want to accept any more having to pay this bit extra to get our permit, our certificate or whatever it is", at the level of petty corruption, and address the more structural problems there are as far as corruption is concerned on a grander scale. We are very clear about protecting our own money.

Dr Seymour-Smith: We are, and governance is obviously one of the issues we mainstream across all our programmes. We look for improvements in governance. The structures and systems are in place. The audit system looks quite good in India. If falls down sometimes in the implementation. I think India is 90^th in the transparency international index, which is not particularly good. It means we do need to be vigilant about our own programmes and constantly look for opportunities for improving governance more broadly, which is what we do.

Q179 Mr Battle: We did a report on migration and remittances and I was struck that a lot of the wealth comes from Indians who work abroad. I remember some years ago across the bridge in the South Bank complex there was a photographic exhibition by Sebastian Salgado and there were these brilliant photographs of Indian women maintaining the oil pipeline across the desert in the Gulf. So many of the Indian people working elsewhere get money to send back home. What is DFID doing, if anything, to promote the benefits of migration and remittances? Do you work with Indian groups in the UK? Do you look at whether there are blockages when the money is sent back so it can actually lead to development locally in villages or even in cities where people's families live? Do you address that at all?

Hilary Benn: Yes, we do. I think in the development world we have come to recognise much more in recent years the value of remittances and the importance of remittances. I myself chaired earlier this year a meeting with representatives of a number of financial institutions looking at exactly the question you have identified: how can we reduce the cost of remittances? There are some banks which are providing schemes where you can send money back at no cost, and in other cases you spend a lot of your hard-earned money (what you and I would regard as a high proportion of your hard-earned money) just to pay for the transaction from where you are working back home. By encouraging competition amongst the financial institutions that will help to lower the cost and that will assist development in the process. I would need to reflect on and, if I may, drop you a note about the specific Indian connections in that regard. Yes, we have a team working on remittances and we are trying to do what we can to support the process of making the financial institutions more aware, because it also has a potential impact - as far as dealing with the problem of financial exclusion is concerned - at the receiving end. Of course, it is the poorest people who have the least access to financial services. Maybe we can gain both from the sending end and then provide more access to financial services for people who are receiving the result of remittances.

Q180 Chairman: Secretary of State, going back to a comment in made right at the beginning of this that you saw one of the real values of DFID's working was ideas. Many of the members of the IAS whom we met welcomed the input of ideas. I got the sense politicians spend most of their time sorting out new coalitions both at a state and national level. When we were in India the national papers were full of who was going to be Chief Minister of Maharashtra. The reality is for the next few years we have the four partner states and I do not think any of us have any criticism of any of the work we saw in the partner states that DFID was doing, and you are tied into it. At some stage though in the next five or ten years India is going to start to move to a middle income status but still there will be huge numbers of very poor people in that country. One wonders whether there might not be some scope for DFID helping set up an Indian equivalent of ODI and that kind of interface between policy, research and academia; an institute which can actually help promote programmes and so on and so forth, a sort of continuing stimulus to the IAS. What is the legacy we leave? Because clearly you are not going to have partner states again with this government. They are going to say you are not going to be allowed to pick winners, if you like. When these programmes of partner states finishes it looks as though it is either going to be centrally donated funds to aids or education programmes or that is it. I just wondered if you had given any thought to alternatives?

Hilary Benn: Well, undoubtedly at the back of our minds is the prospect of India becoming a middle-income country and how the programme is going to evolve over time. I would just say about ideas that it is our ideas and our flexibility, but it is the combination of those with money that does enhance the conversation - if I may describe it in that way - in that there are think-tanks and organisations that come up with ideas, but you have a slightly different conversation and a different opportunity for partnership if we can bring resources to the table. It is the combination of the two, and although it is small in proportion of the total, it does enable us to bring our ideas to bear in support of things that the states and the Indian Government itself is seeking to do. Whether that might be partly the legacy, in all honestly I do not know. What I have come away with from my visit to India very clearly in my own mind is the sheer scale of the challenge, which I believe justifies what we are doing. The balance of the programme, with the caveats, which I have described today, and the fact that we are going to increase that support out of the rising aid budget in my view is the right thing to do. Then dealing with the very important questions that you and others of the Committee have raised about what is going to happen in the long-term, as somebody once said, "the problems of success", and I look forward to having that success so we can then grapple with the problems of it.

Chairman: Minister, thank you very much indeed. We will try and finish our report by the early part of next year and hopefully it can help to make an input into the work you are doing on the Country Assistance Development Programme and then hopefully we will be able to get a reply and response for a debate before Easter before in Westminster Hall.