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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 1014-v House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE Environmental Audit Committee (Trade, Development and Environment Sub-Committee)
Trade, Development and Environment: The Role of DfID
Thursday 11 May 2006 MS JOANNE ALSTON, MR JIM HARVEY, MR GARETH MARTIN and MR JOSCELINE WHEATLEY
Evidence heard in Public Questions 242 - 303
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Environmental Audit Committee (Trade, Development and Environment Sub-Committee) on Thursday 11 May 2006 Members present Colin Challen, in the Chair Ms Celia Barlow Mr Martin Caton David Howarth ________________ Memorandum submitted by the Department for International Development Examination of Witnesses Witnesses: Ms Joanne Alston, Head of Sustainable Development Group, Mr Jim Harvey, Head of Profession, Livelihoods and Environment, Policy Division, Mr Gareth Martin, Team Leader, Environment for Sustainable Development, Policy Division, and Mr Josceline Wheatley, Team Leader, Global Environmental Assets, Department for International Development, gave evidence. Q242 Chairman: Good morning. This is one of those days when the witnesses outnumber the Members. We are two Members short this morning, but I am sure we shall still have a very good session. I welcome the witnesses to the Sub-Committee. Perhaps the witnesses could briefly introduce themselves and tell us their particular roles in DfID. Ms Alston: I am Joanne Alston. I head up our Sustainable Development Group in the Policy Division. Mr Harvey: I am Jim Harvey, Head of Profession for the Livelihoods Advisers' Group and the Environment Advisers' Group and I work in Joanne's section of the Policy Division. Mr Martin: I am Gareth Martin, Leader of our Environment for Sustainable Development Team within Joanne's Sustainable Development Group. Mr Wheatley: I am Joss Wheatley, leader of the Global Environmental Assets Team in Policy Division within Joanne's group. Q243 Chairman: We have been running this inquiry for a little while. DfID has come in for some praise for its work on policy and research in the linkages between the environment and sustainability. How important do you think those linkages are? Ms Alston: We believe that the linkages between environment and poverty reduction are absolutely critical. In DfID our mandate is sustainable development and poverty reduction, which means the longer term, medium term as well as the disaster relief and response side of our work. Our fundamental aim is to reduce poverty in the medium and longer term. In order to do that the whole natural and environmental resource base is fundamental. Q244 Chairman: Has that led in recent years to a reassessment within DfID of environmental issues? Given that your statutory role is to address poverty, how do the environment and sustainability now feature in DfID's planning? Ms Alston: The way that we approach the environment is set out in the paper that we produced in February. A number of changes have taken place over recent years in the way we have sought to address aid and development in DfID. We have moved from a situation where we have been fairly project-based, primarily with the development and support of discrete projects with the agreement of national governments, and to some extent non-governmental projects too, to an understanding or belief that aid is more effective if given in the context of country-led planning, strategies and financial planning. This means that in our dialogue with governments we seek to look more strategically at what is going on and see the linkages across different sectoral departments. This has also led to a change in some of our instruments and the way that we provide aid in DfID, some of our aid now being given as budget support. I believe that 20 per cent of our bilateral aid is given as budget support. On the whole, we try to provide sectoral support where we cannot give budget support, but we use a number of aid instruments. I start with that because it sets the framework for the way that we have been trying to integrate environment throughout DfID's work. When we deal at the country level, instead of looking at discrete environmental projects across the board - in cases of particular need it is clear that that can provide value added in the particular country and context given government, other donors, et cetera - on the whole we look at how we can integrate environmental concerns into broader government planning in that country. Q245 Chairman: Do you think that approach is delivering things quickly? If you are directly funding a project presumably you can see the results almost immediately, whereas with this integrational strategy for government-led work you can see the long-term benefits, but is it delivering things very quickly, or do you have to go through a long cultural change with various governments to get them to think in this new way? Ms Alston: You are exactly right. It is a complex area which requires a medium to longer-term approach. Indeed, DfID's current strategy is to develop longer-term partnerships with a number of its priority countries across Africa and Asia generally to deliver developmental results but also environmental ones. It is not always quite so obvious that we have achieved a certain output in as short a period as when we are doing a discrete project. Q246 Chairman: When you have these outputs how would it become obvious? How do you measure the value of the money that you are putting into it? Mr Martin: Many of the countries in which we work have poverty reduction strategies or development plans and often we provide support for those strategies which have their own indicators or monitoring indicators associated with them. That is the way that we look at general progress within the country over a period of time. Those can include indicators and progress milestones for the environment. Q247 Chairman: We know from previous evidence sessions that most people believe climate change in particular and the other ways that we treat the environment will lead to loss of biodiversity, water shortages and a whole range of inappropriate uses of natural resources. How important is it now that DfID's aid is spent in a way that prevents the loss of natural resources? Ms Alston: This is fairly fundamental to our approaches, as you will have seen from recent ministerial speeches. The Secretary of State in preparation for our White Paper has made two speeches on growth and policy coherence issues, which is an indication of the where things are moving in the White Paper. The Parliamentary Under-Secretary of State, who will be speaking to you in two weeks' time, has said that in this respect we are on a journey in highlighting these areas more thoroughly within our total aid programme at both country and policy level. Mr Wheatley: The Secretary of State as well as the Prime Minister have made it quite clear that they believe climate change is one of the main challenges to development in the future. The Secretary of State has also made clear that there is a range of things that we need to do: to support publicisation of the science; to seek a global but fair solution that involves all countries; to help reduce carbon emissions in energy generation in developing countries; and to help countries adapt to the adverse effects of climate change. That will involve both integrating climate considerations into the environmental screening and strategic environmental assessments that are under way at the moment and the development of new tools to work out to what extent climate change may affect development assistance programmes, with the ultimate goal of helping developing countries to look system-wide at how climate change may impact on their work on poverty reduction. The effects that you have listed in terms of water, biodiversity and agricultural production, and ultimately effects as negative as having to move populations and economic activities, have all been discussed by the IPCC and are being considered by the DfID in the Stern review and others as we speak. Q248 Chairman: In your memorandum to us you state that international and global environment is, in the main, the responsibility of other government departments. Given what you have just said, how can that be the case? What are the real actions that flow from your new-found, if that is what it is, willingness to engage with the environmental issues? Ms Alston: Across Whitehall we are trying to feed in the development country perspective to areas that are led fundamentally by Defra. A lot of the environmental issues are led by Defra. We have the lead for the Convention to Combat Desertification and the Global Environmental Facility. In other areas such as climate change and biodiversity Defra is in the lead, but what we can feed in is our knowledge and understanding of the needs of developing countries and what matters and what actually works in terms of development in those countries. Mr Martin: There are particular international activities led by other government departments. For example, Defra leads on the Commission for Sustainable Development, but many aspects of the activities and commitments that emerged from the Johannesburg Summit are relevant to development and so we have a keen interest in that. There are some areas where we have a particular lead, for example in water and sanitation. For example, where Defra leads the UK Government's interaction with that process it is very much with our support. A CSD meeting led by Defra is to take place this week but we have DfID representation there, particularly in relation to energy which is a particular feature of the current CSD. Q249 Chairman: I would be interested to try to find out how you see yourselves across departments in Whitehall. Perhaps you see yourselves as the voice of the poor and developing world, waging departmental battles with other departments to try to get that across and to get them to understand your perspective. How do you see yourselves within Whitehall and interdepartmentally? Is that your job, or are you really still carrying out larger departmental agendas from perhaps the DTI, Treasury or wherever else? Ms Alston: I think we have moved beyond the battle mentality. As you know, within DfID we have been reorganising our policy division. There was a major reorganisation in 2002 and 2003 with the aim of trying to engage with Whitehall as constructively and substantially as we could. That is the new group structure that we now have. I think we see ourselves as trying to be there all the way along rather than coming in at the end and perhaps saying, "Well, did you take account of A, B and C and how that might affect some of the poorest of the poor?" We are in at the beginning of processes where the UK is deciding its policy on a range of different areas across the environmental spectrum. That means that we sit at meetings chaired at Number 10 or the Cabinet Office across the board. For example, we were actively involved in the run-up and preparations for the G8 at Gleneagles. We have been involved in deciding the UK's approach to EU policies. We have recently been very much involved with the Treasury in thinking about the energy investment framework being developed by the World Bank in conjunction with the other regional development banks. Depending on the issue, therefore, we engage. Q250 Chairman: You may be aware of the NEF's assessment of the benefits of trade in alleviating poverty. They say that something like 60 cents out of every $100 flows to poorer people as a result of improved trade. In one of DfID's recent publications on trade I was struck by the very good example of the rose-growing project in Ethiopia to get people out of poverty, but is that really sustainable? Is it more to do with trickle-down economics than sustainable development for Ethiopia? Mr Harvey: Essentially, the finding that $100 of additional growth translates into 60 cents is quite a troubling statistic in many ways, because it is not a lot of money. What it tells us is that one of our major approaches in this area is to ensure that poor people have increasing opportunities to benefit from growth. We think that growth is very important and is a fundamental contributor to poverty reduction. We have lots of evidence about that. But the corollary of that is that we have to ensure that poor people's participation in growth increases. A lot of the work we are doing is precisely at that end of the equation in order to increase the 60 cents to something larger. For example, we have been engaged with the World Bank and other donors in a major study called Operationalising Pro-Poor Growth. That has looked at these issues and identified various conditions that are more appropriate to poor people benefiting from the growth that may result from trade and other developments. That includes, for example, involvement in and support for agriculture because of the particularly pro-poor qualities of that activity and issues concerning the business and investment climate for poor people as well, not seeing enterprise in the private sector as limited to large-scale industry and medium enterprises but as including poor people as producers and entrepreneurs in that process. In the specific case of Ethiopia, I was in that country recently. I understand that there are about 50 farms involved in this exercise. The point here is simply that Ethiopia needs to increase its exports. We are not particularly promoting that. Some have said that DfID has a predilection to promoting horticultural exports. We do not. If one looks at the agriculture paper the DfID mentions this but it also mentions that caveats that in many cases it will not be the major driver of pro-poor growth through agriculture. In most cases increasing internal demand is by far the most important driver of agricultural demand which will then lead to poverty reduction opportunities. I cannot comment on the particular use of roses in that case, but I think that it illustrates a principle rather than to say that roses are the way forward for Ethiopia. At the other end of the spectrum in Ethiopia, we are a major supporter of what is the largest productive safety nets programme in Africa which last year reached over 5 million poor people, and this year the target is over 8 million poor people. That programme provides cash and food to the very poorest people to enable them to continue to participate in productive activities. The Ethiopian Government has been very clear that it wants to see this not just as a safety nut but as a productive safety net. The sorts of things that that programme is tackling are: helping communities to rehabilitate water catchments; helping small farmers to develop micro-catchments on their farms; reforestry; agriforestry, and so on. That is by far the biggest thing we are doing in Ethiopia, not roses, but all of them contribute and we believe that they have some role. Q251 Chairman: Let us look at how central are the environment and sustainability issues in achieving the millennium development goals. How is that reflected in the work of DfID in achieving the MDGs? Ms Alston: MDG7 contributes to and is fundamental to the achievement of a number of other MDGs. I believe that development thinkers throughout the world agree that it is quite fundamental in achieving the poverty reduction and health goals. One can look at each goal and see the interconnections between them. I do not believe that that is in question. Q252 Chairman: If we look also at the millennium ecosystem assessment, although it has some positives - I believe that agricultural crops are still on the positive side of the balance, whereas most other things seem to be in the negative - it is a very ominous document. Many would say, I think, that it threatens any chance of achieving the MDGs if that trend continues. What work are you doing within DfID as a result of the MEA, and how do you think it will affect future policy? Mr Martin: The millennium ecosystem assessment is an important piece of work in providing a very large volume of information as to the state of the ecosystems around the world. It gives a good indication of the potential threat that that poses for the achievement of poverty reduction and development. I think that it can best be used at the moment as a reference document to illustrate the impacts of ecosystem degradation around the world. At the millennium review summit last year we worked with the poverty environment partnership, which is a group of NGOs and other donors, to increase awareness of the links between poverty and the environment and raise that profile at the millennium review summit. That includes drawing on the results of the millennium ecosystem assessment. Part of the reason for that was to ensure that the importance of the environment and its management was not forgotten in the millennium review summit. The work that we did with the poverty environment partnership to produce a publication and also jointly organise a panel was instrumental in raising the profile. Q253 Chairman: Do you know whether anybody is doing any work to try to put a value on ecosystem services so we can try to see what gains, as it were, are being made from the degradation of natural resources? Ms Alston: The World Bank is quite active in that area. Mr Martin: I know that IID has done work in looking at the value of watershed management and the value that can be put on the services provided by watersheds. There is also the ecosystem market place which is a network for exchanging information on the value of ecosystems to look at the growing potential use of ecosystem services. A number of activities are taking place in those areas. In addition, IUCN - the international conservation union - has done quite a bit of work on the value of ecosystems and the services that they provide. Q254 David Howarth: I want to turn to questions about the pattern of the department's spending, its internal organisation and staffing. As to spending, the first obvious question to ask is: why is the percentage of DfID's spending on the environment - it is two percent of the total - so low? One of the commonplaces of government is that expenditure is policy and policy is expenditure; you do not have a real policy without money behind it. What explanation is there for the fact that the percentage of spending on the environment is so low? Is there perhaps some environmental spending in other sectors? Ms Alston: That is the point. I think that you have been working on the figure of £65 million which was provided in our memorandum. Calculating expenditure on particular subject areas is quite a tricky business. We have a system of markers that are focused on outputs. That is the way we calculate spend. The figure of £65 million comes from a system that is focused on the principal impacts of spending. Therefore, that amount is spent on projects that have as their principal objective an environmental impact. In our system we also have a category which is about significant impact. Therefore, if one has a programme that seeks to achieve a number of things, maybe one principal goal and a number of other matters in a significant way, that will be marked against the significant marker. We have made a calculation that has sought to estimate the amount of money that has a significant impact on the environment. The figure I have is £598.3 million, which is a good deal more, where there are significant impacts on the environment. In many ways this is what we would expect given the changes that have been taking place in the way we provide bilateral aid and the change in aid instruments that we are using. Certainly, when I joined DfID 17 years ago a good deal of its portfolio comprised discrete smaller projects, but as we have moved to country-led approach support for the poverty reduction strategies and government budgets we are doing less in the discrete project mode and, therefore, it is quite understandable that we would have a lower direct spend. In line with our policy we seek to integrate environment into our dialogue with governments to try to influence the poverty reduction strategies. In many ways, we would expect less direct attribution to environment in our aid calculations. Q255 David Howarth: The new figure, therefore, is about 18 per cent. I cannot work it out in my head. Can you provide a few examples of projects that have a significant impact on the environment? Mr Martin: Water and sanitation projects, which may be about service delivery and would have significant broader environmental dimensions, would be within that category. I do not know of any specific cases within that figure that I can deal with now, but examples would be work that we do to provide some general sector support within a country of which the environmental dimensions would be part. We may also provide some work on agricultural livelihoods which may be activities to help people's everyday livelihood activities on the ground. That would have an environmental dimension, which would include land or water management, for example. Those are the sorts of activities which would be included. Mr Harvey: One can also refer to in-country forestry. There are two particular examples, on which the Committee can probably access information. One is the multi-stakeholder forestry programme in Indonesia which is working with civil society on forest governance, but it is tackling the direct causes of forest degradation and so the outcome is an environmental benefit. The other is the forestry programme in Ghana in which we have been involved for at least a decade. Recently, the independent external evaluation of the Ghana programme cited the forestry work as a core success in the programme. Those are also matters which have a fairly direct environmental benefit. Q256 David Howarth: We would be interested to know more about these projects and their environmental aspects. In particular, I should like to put a question which you may be unable to answer now, in which case perhaps you can write to us. What is the balance as between local and global of significant environmental impacts within that list? The first matter you mentioned had a more local impact whereas the second had a slightly more global effect. It would be interesting to see how that works project by project. The department is to get a lot more money; the total budget is rising and eventually it will be about £5 billion at current prices. What kind of dialogue is going on within the department about how that money is to be allocated to different sorts of projects? Do you anticipate an increase in the £598 million - which is 18 per cent, or whatever it is - over the period when the budget of the entire department is to increase, or do you anticipate a reduction? Ms Alston: Obviously, the processes that are going on at the moment are not independent of the preparations for the comprehensive spending review that are under way. A number of zero-based reviews are being undertaken at the moment about the balance of our spend, for example between bilateral and multilateral, the different aid agencies to be used and so on. I believe that it would be premature for us to make any judgments on the outcome of those. Q257 David Howarth: Within the CSR process an important aspect is the development of the public service agreements because you are developing at the same time both the means and the ends. Is there any prospect of developing a specific climate change PSA for DfID, because at the moment it does not have one? Mr Wheatley: A specific climate change PSA is not under discussion at the moment in the review of PSAs. If one looks at climate change and the nature of the assistance that we need to give on clean energy and adaptation and thinks of it as a system-wide, economy-wide and land use-wide issue then, coming from that perspective, DfID would perhaps be looking at activities that would integrate the response to climate change rather than seek to separate it. There is a debate about the extent to which separate pushes on particular issues are effective at mainstreaming them or effective at perpetuating them as an externality or something that is done only if it is funded separately. We would need to think about mainstreaming and integration and about whether or not a separate entity would be helpful in that process, but debate has not been joined on the subject of the PSA. Ms Alston: The other element is that our work on climate change can in no way be separated out from the rest of government, and Defra has the lead on that. Therefore, should there be some discussion on the PSA presumably it would be a joint one. Q258 David Howarth: That is right. There is, however, also some discussion about the effectiveness of joint PSAs and whether that is the right way to go. Can you briefly describe how the PSAs are developed between the Treasury and the department? What sort of negotiation goes on? Who takes the lead on the sort of question that you have raised? Is it you? Ms Alston: Our Finance and Corporate Strategy Director leads on that, obviously with close support from the management board. Q259 David Howarth: What kind of input do you have in that process within the department? Ms Alston: I do not know whether Mr Harvey was involved. Mr Harvey: I had no personal involvement in the last one. Ms Alston: I have not been directly involved in that. Perhaps we can get back to you on that subject. Q260 David Howarth: I would be very interested in that, because I believe that access to decision-making is the key to all this. Within DfID is there target-setting below the level of PSAs, and does it work in a different way? For example, can one have renewable energy targets that DfID develops itself even though there is no higher level target for that particular sort of activity? Ms Alston: Certainly, Ministers make commitments to certain sorts of targets: for example, the commitment made by the Secretary of State in March of last year to expand our water expenditure in Africa. At that level targets and commitment are made. We as divisional and internal processors set our own goals and objectives and agree those at the management board, but, as you say, they tend to flow down from PSAs or ministerial commitments. Q261 David Howarth: In passing, you mentioned water. We have had a good deal of evidence about water in particular in relation to the environment agency. Can you comment on the work that is going on in water resources, catchment management and so on? Probably the kindest way to put the criticism is that this does not have a very high priority. Would you care to react to that kind of accusation? Ms Alston: I believe that DfID sees integrated water resource management as a very important issue and has been involved in it for some time. One of the difficulties here is that for some developing countries it is a more urgent matter; for others it seems to be quite a distant issue. We have been primarily involved in that through the global water partnership to which I believe the UK is the largest donor. We attend those meetings and contribute to the partnership's work. At a more local level there are a number of examples. Mr Harvey: Again, there are individual projects. For example, we have a long history of watershed work in India. This is one of those matters that tends to be more easily tackled through an area-based approach. If, therefore, one is working at a higher level in a country one is not necessarily doing those area and catchment-based projects first hand, for example in most of sub-Saharan Africa. That is why we support it through the global water partnership. Mr Martin: There are a couple of examples. As to the global water partnership, we have supported regional partnerships around the world. Of the two I am familiar with, in China we have worked with the global water partnership, but in addition we have worked with the Ministry of Water Resources to look at water scarcity across that country, which is a big problem. There is also a water partnership in central Asia where we have carried out some specific project activity in Kazakhstan on integrated water resource management. There are also a number of other individual examples. Q262 David Howarth: I want to move on to the question of staff and the internal organisation of the department. What kind of barriers within the department do you face in getting the sustainability agenda across to other policy divisions? We have already heard about mainstreaming and the difficulty of access to the process of developing PSAs. It does not sound as if you have a great deal of access to other people's thinking in the department. Is that not right? Ms Alston: That would not be correct. One should start perhaps in practical terms with this document. In the run up to the preparation and consultation for this we were engaged at senior levels across the department with the directors and deputy directors of regional divisions and international divisions. This was then taken to our development committee, which is our overarching committee responsible for policy in the department at which all directors across the board meet under the chairmanship of the director-general. Members of the management board other than the permanent secretary sit on that, so the paper was discussed there. Out of this paper was developed a plan of action. That is an internal departmental document in the preparation of which each division has been a party and has agreed to it. That was therefore agreed by the development committee. There is a good deal of exchange at that senior level on these issues. Q263 David Howarth: But it appears to be an up-down triangle. The question is whether there is any cross-cutting contact. Are there people in other divisions with responsibility for environmental sustainability matters whom you can contact without going up and down the highway? Ms Alston: Definitely; that is part of our regular work. I meet very regularly fellow deputy directors and occasionally directors as well. My director in charge of the policy division is meeting on a very regular basis with her directors and raises a number of issues. Q264 David Howarth: If I may use the trendy phrase "knowledge management", how do you make sure that what you know is diffused, which I think is the correct technical term, throughout the organisation? Ms Alston: Apart from those discussions to which we just referred, there is a range of other routes to ensure that knowledge goes out from both our policy division - the work of our teams and so forth - and across the organisation. We have a responsibility in the policy division to ensure good practice is fed around the organisation, drawing on lessons from both within DfID and without. We have a range of means of doing this. We send out a number of bulletins, guidance notes and so on to staff. These may go out to all staff on our internal intranet website. They also go out in the form of messages to heads of office. We have regular advisory meetings. One can speak to the advisers. Each particular advisory group gets together once or twice a year. Africa heads of office get together a couple of times a year, similarly with Asia. At those events we may speak or be party to some working group around those meetings. We are not short of dialogue across the organisation. Mr Harvey: Perhaps I may also give a couple of examples of where we have had dialogue on policy products that other departments have developed. The natural disasters risk reduction policy does not use the word "environment" very much, but it is clearly in there because it recognises the cause of environmental degradation, and also climate change, as a precursor of natural disaster risk. We have an engagement in that. If one looks at the agriculture paper, one sees that sustainability is addressed there. We were involved in that process. As to the advisory networks, there are three advisory groups located or pegged on the sustainable development group. The largest is the livelihoods group. Years ago it used to be called the natural resources group, then the rural livelihoods group and now we use a more generic term. Many members of that group of people have quite a strong natural resources orientation. One also has the environment group itself and the infrastructure group. Again, many of those people have an environmental interest. Therefore, the networking of those groups spreads throughout the organisation. We have professional development, conferences and networking techniques - websites or whatever - to spread the word. Q265 David Howarth: I move to a topic about which we have heard a lot: the overall number of people you have working directly in environmental areas. The criticism seems to be that there are very few people in the department who are environmental specialists and the capacity appears to be falling, if anything. Are you in a position to do all the work that you think ought to be done? Mr Harvey: I will speak first to the numbers. I believe that in our memorandum we gave some figures, and if it helps I can elaborate on them. Currently, there are 18 environment posts in the organisation. Of those, 14 - we referred to 12 in the memorandum, but it is a classification issue - are environment advisers and four are advisers from other groups, including three from livelihoods and one from infrastructure. Is it falling? In 2000 we had 12 environment advisers and 12 posts. In 2003 our record suggests that we had 20 posts. What has happened is that it sounds like a fall in the number of posts from 20 to 14, if one is considering the actual environment advisers themselves. We have another six environment advisers who are on various leaves of absence. One is working as a research manager; three are on long-term career breaks; and a couple are on secondment to the European Commission and, in one case, the Austrian presidency. The group, therefore, has not necessarily diminished but the number of environment advisers actually working in DfID has reduced from 20 to 14 but has been made up by people from other groups concerned with the environment. These are the people in the livelihoods and infrastructure groups with environmental interests, qualifications or backgrounds who are substituting if you like. The capacity has not diminished; we still have those people. Some are not working on environment; others who are working on environment would not originally have been counted. But some of those are shared posts, so in the case of livelihoods posts they are perhaps working half-time rather than full-time on environment. There has been a reduction in capacity at the country level. Very often we have conflated posts. Perhaps five years ago we would have had an infrastructure adviser, an environment adviser and a rural livelihoods adviser, whereas now in those areas we may have one or two posts rather than three. In some cases it is now reduced to one post. That is where the change has happened. Ms Alston: Perhaps I may address the question whether or not we have enough to do what we want to do. The answer is, obviously, no, in that we would say that DfID does not have sufficient staff to achieve a lot of the work that it would like to do, whether it be on the environment or across the whole range of efforts. I have been a head of office and I see how staff are spread across an amazing range of complex issues in any developing country or region. I make that as a general point without I hope appearing to be trite or trivial. If we look also across the development community, which means other bilaterals and multilaterals working in a country together, similarly there is a sense that we would like more expertise in that particular group of people who are working in that country to help the government in its planning, policy implementation and so forth. But we are where we are. Although the budget is to increase our numbers at DfID will not increase overall and so we face the challenges to which you referred earlier. We sought to take stock of that when we developed our policy paper. Some have argued that it may not be ambitious enough, but we have sought to describe in it what we are currently doing. In the process of preparing it we are also trying to refresh what we are doing across the organisation and bring it to the attention of heads of office programme managers as well as specialist environmental advisers. It is important that that range of development professionals understands environment up to a certain level. Therefore, when one is head of an office or programme manager or is responsible for a certain area one can spot to some extent the opportunities and try to bring in the environmentalists to take it forward. In many countries our whole agenda is to seek to work very closely with the rest of the donor community, and in many countries we have to look across and see who is best placed to take forward certain aspects of environmental dialogue with the country government and so forth. Sometimes it is difficult and there seems to be no environmental specialist in that crowd of donors; we may have to bring in a consultant who works with a group of us to have discussions with government to see where there are areas to which development partners need to give more attention. We have to be pragmatic given the number of specialists we have. That is how we seek to handle it. Q266 David Howarth: It sounds as if it is going to get worse. The department's spending is rising, your staffing is flat and you are boxing and coxing anyway with people from other sections. Part of the problem here is that if extra spending goes in the wrong direction it will be negative and not positive for the environment. One can imagine that if insufficient environmental contents have gone into the thinking on development projects they may well have a negative effect. Will you not be playing a policy version of catch-up for the next five or six years? Ms Alston: I think that we have two strands. One is the knowledge transfer and training effort to ensure that non-environmentalists have a good understanding of environment. The other is some of the tools, processes and procedures that we have put in place, including our environmental screening efforts. Those include not just the environmental impact assessment of discrete projects, as used to be the case, but consideration of our total effort - our programmes and country assistance programmes - and screening at a more strategic level. Q267 David Howarth: My next question is perhaps for Mr Harvey who is head of profession, livelihoods and environment. Our understanding was that the post of head of profession environment had been vacant for a long time. What has happened? Have two posts been merged, or has something else happened? Mr Harvey: The situation is that de facto they are merged for the time being while I am doing it. One of the suite of reviews associated with the CSR, zero-based reviews and so forth is the strategic workforce planning review. Its terms of reference are to look at the structure of the advisory groups and heads of profession who will lead that. Again, it is being looked at. That study will report at the end of June to our human resources committee with a range of options. How that is to be handled will be tackled in that process. Ms Alston: In addition to the head of profession being responsible for both environment and livelihoods we also have a chief scientific adviser who will appear with our Minister in two weeks' time. Although his responsibilities are very directly in the field of science and technology within the department, he has engaged with climate, agriculture and rural development issues and taken forward our work in a number of countries through speeches and dialogue there. Ministers have decided that from April 2006 environmental and climate change issues will be added to his job description. Q268 David Howarth: I want to ask about the job description of head of profession. Does it include the idea of spreading the word about sustainability and environmental issues to the rest of the department, or is it focused more on what might be called an HR role? Mr Harvey: Broadly speaking, it is fifty-fifty. There are two sets of terms of reference, one of which is about managing the group, so there are HR issues as well as issues to do with the professional competence, dynamics and development and mentoring of it. The other side is essentially engaged in the policy issues related to that theme. In terms of time spent, in my own case according to the job description it is about fifty-fifty. It varies a little across the heads of profession. Ms Alston: Mr Harvey is supported in his work by three of the teams across the policy division: the two which are headed by my colleagues here and the water, sanitation and energy team. There is also support by a number of teams in the growth group with which we work very closely. We have an agricultural team there. There is also support from the research end. There are a number of professional teams that feed into the support that is given to our advisers across the board. Mr Harvey: To cap what has just been said, it is a specific task of the heads of profession - for all of us across the division - to do the networking and spread the word. Q269 David Howarth: It has been put to us by several witnesses that DfID is somehow dominated by conventional economic thinking and that more environmentally-sensitive thinking, even environmentally-sensitive economic thinking, is not the flavour of the month and has been to some degree excluded from the main stream of the department's policymaking. Would you like to react to that? Is that your impression? If not, what is the balance in policymaking between the environment and conventional economic thinking? Ms Alston: One of the key parts of the ethos of DfID is multi-disciplinary working. This takes place very strongly both in country teams and in the centre; and it also takes place in regard to our policy work, international work and engagement with multilaterals. I confess that I am an agricultural economist by training. I worked in that field for a number of years before moving to management in DfID in 1995. My sense then as now is that to be an effective economist you need to be able to understand the range of other professional disciplines up to a point. You do not need to understand what they are saying or incorporate it into your work. Personally, I do not recognise that dichotomy. Mr Wheatley: Essentially, I believe that DfID is a multi-disciplinary, objective team. When a well-evidenced case is put it prevails. There is always the difficulty of finding time in a busy organisation to relate a particular piece of information, but, to use climate change as an example, the position has changed since the IDC in 2002 said it was a priority. It has been rising in relation to what we are doing in the DfID and that has achieved broad recognition in a relatively short space of time because effort has been devoted to looking at the evidence and relating it in objective terms to colleagues. Colleagues have responded to that new challenge. Q270 Mr Caton: I turn to environmental screening. All your projects over £1 million require environmental screening. Who is responsible for ensuring that that is done, and is it always uniformly thorough and effective? Ms Alston: Responsibility for that is in the management chain, because this is codified in our blue book 1. That sets out the obligatory rules, procedures and processes within DfID. We decided early last year that we needed to take stock and basically do an audit of where things had got to. Environmental screening was introduced in 2003 and, two years further on, we wanted to assess how uniformly this was applied, its quality and its impact. That review is now ongoing and Mr Martin is overseeing it. Q271 Mr Caton: Will the findings of that review be made public? Mr Martin: The findings will be available in the middle of this year. Q272 Mr Caton: A problem that has come across from previous witnesses is that they detect that there is almost a cultural problem within the department and that some of your colleagues regard environmental screening almost as a chore or diversion from their main function. Some of them even describe it as "environmental screaming". Is that something that is likely to come out of the review? Mr Martin: One of the matters that we will be looking at is the consistency with which environmental screening has been done over the past couple of years, the consistency of different types of activities and aid instruments, and, where there are inconsistencies, to look at the reasons behind them. That will include the understanding and awareness of those who are doing the environmental screening and also where it takes place within the project development cycle, if you like. These are the sorts of things that we are now looking at in our review. The objective is to determine whether we need to revise our environmental screening process and also the guidance that goes with it. Ms Alston: We are aware that there is some variability of cost, and we have looked at some examples. That is why the review and the recommendations flowing from it are important. Q273 Mr Caton: You mentioned earlier that the screening process involved your country offices. Can you tell us a bit more about that? Are the country offices required to engage with DfID headquarters to get advice from experts on the environmental side of things? Mr Martin: This is a decentralised process. Where we have DfID programmes managed from a country office it is the responsibility of that office and the programme manager to carry out the environmental screening process. That programme manager or those in his office will draw on the expertise that is available there. In some instances that includes a referral back to people in London. We have had input to some of the screening processes, but it is a decentralised process. It depends on the individual case. Ms Alston: We have rules on delegated authority in terms of approval, so a certain degree of approval can take place at particular levels. Heads of offices have a certain amount and they may delegate; if it becomes too big it comes to London and to Ministers. Q274 Mr Caton: Christian Aid has criticised the department for not climate-proofing how it spends taxpayers' money. It has called for all development spending to be climate-proof and climate-friendly. Are you anywhere near achieving that? Ms Alston: We fully agree with that as an ambition, but we are nowhere near it at this point. We are moving towards it. Mr Wheatley: We are fully aware that this is an issue that needs to be addressed, not just by the United Kingdom but the international community generally, including developing countries. That was why last year we made a major effort through G8 and the Millennium Summit Review to have an international agreement that this sort of work needed to be done specifically to screen overseas development assistance but with the longer-term aim of helping countries themselves to mainstream that screening into their wider economic and social activities. In DfID we have begun a process of selecting pilot countries where we will work out how best to effect screening in a way that is economically, environmentally and socially effective, accurate and replicable. We are starting in Bangladesh next month. We are in the process of identifying five other developing countries to do that. We are also working with the World Bank which has started to work in India in the agricultural sector. As the G8 invitation to it outlined, our aim is very much to have the World Bank and the multilateral development banks work in parallel and in concert with us. It is not just our bilateral spending but our multilateral spending that is climate-proofed in this sense. Q275 Mr Caton: Do you detect a greater problem with multilateral spending? Are multilateral institutions less environmentally aware than DfID? Mr Wheatley: Each has its own character and governance. In a sense, for DfID to make a decision to get on with this work is a matter for our Ministers and senior management to decide and progress will be made. In multilateral organisations clearly we also have the job of awareness raising and persuasion, but I think that will come. Awareness is rising. It is not even; it is still patchy at this time, and developing countries are very much in the process of learning to what extent climate change may be an issue and how to deal with it. I do not say that there is a resistance but that it is a more complicated matter to convince an institution which represents more than 100 countries than an institution which represents the United Kingdom in the form of the DfID. Ms Alston: This is at a relatively early stage internationally. We are not aware of others who have gone very far down this route. We sense that there is here an opportunity to do this well and share the results of this internationally. Q276 Mr Caton: You have already mentioned the shift in spending to budgetary support. Have you been able to assess the implications of that for the environment and sustainability as compared with the earlier project approach? Mr Martin: Some of our individual country programmes where budget support is linked to poverty reduction strategies have looked at those linkages and how environment is addressed within poverty reduction strategies. A good example is Tanzania where we did some work with the UNDP to help support the integration of environmental issues into the poverty reduction strategy. That included looking at poverty environmental indicators and the way that they are introduced into the poverty reduction strategy. In Tanzania donors provide poverty reduction budget support behind that poverty reduction strategy and there are indicators within that strategy. These are very early days, but it is a matter of looking at the donors as a group within that country and monitoring progress against the poverty reduction strategy in the way that budget support is used. That will include the environmental indicators that are part of the strategies. That is one example. Q277 Mr Caton: We have had evidence from other witnesses to suggest that poverty reduction strategy papers vary greatly from country to country. Clearly, there are some good examples, and you cite Tanzania. There are some, however, where the environment is nowhere near to being on the agenda. What is the department doing to try to spread the very best examples to other countries? Ms Alston: Perhaps Mr Martin could also refer to our seminar on 23 March. Mr Martin: We had a workshop earlier this year which looked at poverty reduction strategies and the environment. We brought together not just the UK but other donors as well to look at some of the experiences. Tanzania was a focal point of that workshop. That is part of the process of trying to learn from best practice what has worked well in various countries. In Tanzania we are going to do a more in-depth case study, but that will need to be in conjunction with other donors who are also doing some work in Tanzania. We also need to look at other countries where things have worked well, but perhaps not quite as well as in other instances. We have done some poverty reduction strategy work in various countries, for example in Uganda, Ghana and Pakistan. But it is not just DfID that needs to look at these experiences; we need to do it with our development partners. For example, in working with the poverty environment partnership group of donors and NGOs we would aim to take forward this work with other initiatives managed by the donors. There is a UNDP poverty environment initiative where they will also work with the United Nations environment programme. They will be gathering good experiences. We are working with other donors to draw out that best practice and encourage it to be spread. Ms Alston: There is no doubt that this is a very complex and difficult area. The capacity in a number of developing countries on environmental issues is limited and, therefore, it is often hard to feed environmental issues into the core planning and budgeting of that country. That is the nub of the problem about how we as external agents can facilitate and help processes in a sense to mainstream the environment within those developing countries. We also work very closely with a development effectiveness group in policy division. The work that it has been doing makes it clear that there is no easy fix or one aid instrument in many of these countries that will serve the purpose. Therefore, there is a role for different forms of technical assistance and other aid instruments, knowledge transfer and so on, to help countries themselves strengthen their environmental capacity and address environment in their mainstream planning and budgeting. Q278 Mr Caton: Could part of achieving that be more direct funding for environmental projects? Ms Alston: There is a definite need for strengthening capacity in a lot of different countries. We have examples of successes where if we or other donors provide strengthening of capacity in environmental departments or agencies certain links can be made. That is one element of the story. Q279 Mr Caton: The department focuses very heavily on macro-economic growth as a means of poverty reduction. What is the sustainable development group's view of this? Mr Harvey: The department focuses very heavily on growth as a route to poverty reduction, but the definition of growth in which we are particularly interested is pro-poor growth -growth that benefits and is detectable among poor people. I would question the way that that comment is phrased. I do not think that we are concerned solely about macro-economic growth. What we are concerned about is how that translates into growth among poor people. A definition of pro-poor growth has emerged from the study to which I referred earlier. That is accepted by DfID and is the one that we use operationally. That is the starting point. By the way, although I am not an economist if an economist from this group were here that is what he or she would say. In terms of the way that sustainable development is engaging with that, there is ongoing and increasing dialogue around this issue, not least in the discussion on the forthcoming White Paper. The issue of sustainability is, therefore, being increasingly talked about within the department. Q280 Mr Caton: I want to turn to something on which we have already touched: agriculture and poverty reduction. You have already made clear that you see agriculture and rural development as important in the department's poverty reduction ambitions. In the report Africa-Up in Smoke? one of the main conclusions is that there needs to be "dramatically increased small-scale agriculture, and an approach to farming based on maximum appropriate diversification". How does that fit in with the push for increasing agricultural production for export, which has already been mentioned by the department, the WTO and other bodies? Mr Harvey: First, from DfID's perspective we are not particularly pushing export agriculture. We see it as part of the solution. The agriculture policy paper pays a lot of attention to the role of the smallholder farming sector, particularly in countries at an earlier stage of development. Within that I would say that we pay equal attention to all forms of agriculture, depending on the context, but there certainly is not a particular push from DfID on export horticulture or export earnings. In the agriculture paper we even caution against reliance of countries on traditional exports. We talk about the limitations of relying on tea, coffee and cocoa because of the market limitations. We even draw attention to the fact that the non-traditional exports are often in quite small markets that could easily be flooded, so I do not think we have a predilection there. As to diversification, we also sponsor a lot of agricultural research which inter alia includes aspects of diversification and farming systems. Most of the work that we have been sponsoring over the past 10 years under the renewable natural resources research strategy has been directed at smallholders, small producers, farmers and forest users, and within that there has been considerable attention paid to diversification. In terms of what we do I think that we fully support diversification among smallholders as part of the approach. Q281 Mr Caton: I hear what you say, but I quote to you from IIED who describe the agricultural policy that the department has adopted as having a "commercial focus aimed at national economic growth", and concludes that "the problems faced by poor people in accessing environmental assets are not addressed as a priority; neither are the impacts of agribusiness gaining preferential access to such assets". How do you respond to those comments? Mr Harvey: They may be correct in saying that the policy does not specifically address those issues. But in terms of access by poor people to the necessary assets to engage in this, although we do not have a stated policy on the matter we are doing a lot of work on land tenure and property rights issues which aim to address the question of access by poor people to productive assets to take part in agriculture. As to the consequences of agribusiness, I do not think I can answer that question. I think that there is a perception on IIED's part that there is a gap and agribusiness will have some negative effect. On the other hand, we have observed in the agriculture paper that there are positive examples of agribusiness, particularly where that activity provides opportunities for smallholders to engage in markets through outgrowers' schemes, and so on. I think we are agnostic on that point and do not automatically assume that agribusiness will have negative consequences. Q282 Mr Caton: I finish off by asking you about an apparent contradiction in two of your policy statements. You have recently launched a strategy for sustainable agriculture research and have also published an agricultural policy paper which states that sustainable agriculture is "unlikely to drive productivity gains at the scale required to meet market demand and tackle poverty on a world scale". Is there a problem about the direction in which you are going? Mr Harvey: My interpretation is that this is an issue of definition. Sustainable agriculture is defined as low input, including organic, farming. The statement in the agricultural policy paper suggests that low input farming, which is often equated with sustainable agriculture in the scientific literature, will not have the capacity to deliver everything that is needed in terms of economic growth and even food production. The title "sustainable agriculture" when used in the research strategy does not mean a specific set of agricultural techniques but imports the notion of sustainability in agriculture. I think there is a difference in the way that the term is used in the two documents. It is not contradictory. Q283 Mr Caton: You are not talking about environmental sustainability but agricultural sustainability? Mr Harvey: In the agricultural policy paper there is a statement to the effect that it is sustainability across environmental, social and economic areas, so it is not just environmental sustainability. Chairman: Thank you all very much for your evidence. I am sure that it will be very useful to reflect upon it in preparation for our meeting with the Minister. Memorandum submitted by the Globalisation Institute Examination of Witness Witness: Mr Alex Singleton, Director-General, Globalisation Institute, gave evidence. Q284 Chairman: Good morning, Mr Singleton. I have read one or two of the papers published by the institute. Obviously, it has very strong views on the benefits of globalisation. I wonder whether you could summarise exactly what you mean by globalisation and what you think are its benefits. Mr Singleton: I think it is a strand of different things working together. In part, it is caused by barriers being cut down, for example tariff barriers between countries, but it is also a process in which we all communicate more coherently on a global scale through the internet, technology and cheap transport. It is a combination of things. I think that it has a great deal of potential to promote prosperity and lift people out of poverty. I refer to the opportunity of people in developing countries to trade their way out of poverty and expertise to be shared around the world. Over the past 50 years we have seen the best poverty reduction that the world has ever seen, and it has also taken place over a period when barriers have been coming down and we have become much more part of the global village. I believe that poverty reduction and increased globalisation do go together. Q285 Chairman: Earlier this morning while you were here I referred to the NEF report which suggests that as a consequence of trade only 60 cents out of every $100 filters down to the poor. What is your assessment of that view? Mr Singleton: I am not exactly sure how they have calculated the figures, but we can see that last year alone millions of people in India and China were lifted out of poverty for the first time. According to Paul Ormerod, the economist, we have seen a world which in the past 50 years inequality has reduced because the Asian tigers, which were once desperately poor, are now relatively wealthy countries. The real problem is that some countries are not benefiting from that globalisation process. We started to see a lot of progress in India and China, although it is still far too small, but there are countries in Africa that have not really been part of the process and their share of world trade over the past 25 years has declined. I think the real tragedy is not that globalisation somewhere is not working but that people are not part of that process. Q286 Chairman: Another part of the NEF assessment was that in its view the bulk of the benefits of globalisation accrued to already well developed countries. Do you agree with that? Mr Singleton: Based on the inequality figures and the genie coefficient, which is the economic model adopted over the past 50 years, I do not think that is true. The genie coefficient shows that when countries engage in globalisation they come up to the levels that we are at. I think that there is a problem, on which the institute is doing research, in treating developing countries as mere commodity exporters. I have been in contact with some coffee farmers in Peru and Costa Rica. They do not export simply coffee beans; they do all the processing: the roasting, packaging and placement of trade marks on the bagged coffee for sale around the world. I think that is a really good thing. The tragedy is that when one goes into Tesco or Sainsbury the chances are that most of the value in the coffee, apart from the stuff which goes to the distributors and the supermarkets, has gone to the packagers in Belgium, Germany or Italy. We need to do much more to help developing countries create their own brands and get more of the value themselves. One way to help that is through a kite mark or symbol which basically says that a good deal of the value of the product has gone to that developing country. It will be a kind of development product. Q287 Chairman: The evidence of our witnesses this morning is that DfID now places more emphasis on the creation of internal markets rather than markets that are export-led. Do you support that? Mr Singleton: I think there is a lot of evidence to back it up. Some of the now rich countries like the United States did not really work on a global scale when they were first developing. The United States created a continental, if you like, free trade zone within its own borders where there was a lot of trade between states. A northern state would import from and export to a southern state. One of the tragedies in Africa is that it is a spaghetti bowl of trade agreements; it is not easy to trade from Kenya to Chad. Trade is prevented not only by formal trade barriers in the form of tariffs but informal trade barriers which are often within countries-the road block which stops one person from going to the next village. A lot more work must be done to bring down the internal barriers. In many respects that is more important than looking at things at a WTO level and trying to get international trade going there. Q288 Chairman: You may be familiar with the millennium ecosystem assessment of the United Nations which shows the down side of development. Do you envisage a big collision between the ability of the planet to provide ecosystem services and the growth in globalisation? Mr Singleton: I believe that the principal responsibility for environmental protection lies with the rich countries. It is important that countries like Britain, America and Japan deal with environmental problems through research and development into cleaner technologies and make investment in solar and so forth. I think it would be wrong to try to force developing countries to put environmental issues, particularly global warming, at the top of their agenda when for them the real problem that they face is poverty. I believe that a much better approach, rather than trying to tie the giving of aid to a requirement that they must place great emphasis on environmental issues, is for us to do the R&D and do a technology transfer where we help them to obtain it very cheaply. If one is a poor person in rural China one will not be too worried about climate or smog, for example; one will be worried about not being able to afford to feed one's children, send them to school or the things to which everyone should be entitled. I believe that the evidence over the past 200 or 300 years is that as countries start to develop they damage the environments insofar as cities are dirty and there is a lot of pollution, but when they become richer there is a greater push for environmental protection. Voters, for example, start to think that the environment matters more; there is a push for environmental protection. The fact is that in London today the air is cleaner than it has been since records began in 1585. We have to recognise that when looking at developing countries. We must acknowledge that when countries start to industrialise they will pollute. One does not see an alternative to that, unless one tries to lock them into poverty. We need to try to help the process work better. We need to reduce our pollution and give them some space to do it, if you like, and also to develop the technology that allows them to use cleaner technologies. Q289 Chairman: Do you think that the prospects of climate change occurring faster than anticipated earlier, which have now been delineated very carefully by many scientists, put any limits at all on growth and development? Mr Singleton: I am not a climatologist. As far as I can see, humans have been causing a lot of climate changes, but I cannot comment on the level and the speed at which it is happening. Over the next 30 years I think we will see a lot less carbon being put out. I do not drive a car, but I do not think that if in 30 years I bought a car I would be getting one powered by petrol; it would probably be powered by hydrogen or some technology of which I am unaware. We can clean up our environments and deal with climate change in the west in a relatively cheap manner. I do not think that there is really a problem. In 50 years' time we will probably look back and think it was bizarre that we were burning all these fossil fuels. Then they will probably be extremely important for pharmaceuticals, for example. I think we will look back and think this was barbaric. Q290 Mr Caton: In your publication 2005 and Beyond you say that, "A half-century of aid has been an almost unmitigated disaster". What is your view of direct aid in development? Mr Singleton: Of course, that is the author's view rather than mine specifically. I think that aid has tended to be spent in a very top-down manner. It is a learning process for everyone. I think that DfID would be the first people to say that in the past a lot of aid had been spent badly on foreign policy objectives. If one looks at how the international development community spends aid it has changed significantly. There needs to be more emphasis on bottom-up approaches to aid. That could mean, for example, greater emphasis on micro-credit. In 2003 the Chancellor of the Exchequer spoke about the importance of micro-credit. I think it is disappointing that last year - the year to make poverty history - DfID did not really place much emphasis on this. Although it does spend a little bit of money, from talking to micro-credit institutions they find it very difficult to interact with DfID. They find that when they are applying for funding to DfID it is the big charities that succeed in getting it and the very small ones, which perhaps are doing the most innovative stuff in international development, do not get anything. I think that is part of the risk culture. The DfID will want to watch its back. If it gives money to Oxfam or Christian Aid not many people will criticise the department, but if it gives money to a smaller organisation, for example Opportunity, it could blow up in its face. There is an inherent aversion to risks which is damaging to the poverty reduction aims of DfID. Q291 Mr Caton: Of course, in recent times the big shift has been the shift to direct budgetary support. What is your view of that? Mr Singleton: There is some merit in that. Often, the project-based spending was too restrictive. I believe that the move away from conditionality has probably been a good thing. One will not get developing countries to do one's agenda if they do not want to do it. Conditionality is a very weak tool. Developing countries will agree to do certain things and then they do it badly or in a minor way, or they just do not do it and go back and say that they could not do it properly because of their political problems. Trying to impose certain solutions on developing countries is not the best way. I think there must be minimum standards when budgetary support is being given. Like the monetary policy committee, I would like to see a body that looks at each individual country to which DfID gives money and says, for example, that Ghana or Botswana is absorbing aid well and spending it well and so it can afford to give that aid just in the form of a cheque because they will use it well. In the case of some other countries where there is a high level of corruption and waste and perhaps they do not share our views on aid effectiveness, that committee would not write a cheque but spend it through NGOs and more locally, or through advice. I think that would be a good approach. Q292 Mr Caton: How would you respond to the argument put to the Sub-Committee last week that the need for budgetary support is a direct consequence of loss of income to governments in developing countries as a result of the removal of trade barriers and increased competition? Mr Singleton: People who argue that poor countries are getting poorer through trade liberalisation will often bring up specific examples of people or industries. When one looks at Ghana, the case has made that that country has suffered because its rice farmers are in competition internationally. When one looks at that country, for the 20 years before 1983 it had a fluctuating economy: some years it grew and some years it was in recession. It alternated constantly and was in a very bad state of affairs. Every year since 1983 when it took World Bank advice and began to liberalise its economy it has had positive economic growth. That is rather better than we even have in this country. I do not think it is a very convincing case that trade liberalisation has damaged economies as a whole. There is a problem. Sometimes one tends to over-emphasise the effect of the Common Agricultural Policy on African countries. I think that we should abolish the CAP and that will help African countries, but it will not be an immediate advantage. The principal beneficiaries of it would be the Brazils and others in the world rather than the African nations. Q293 Mr Caton: What about the World Bank? What do you think of its role and how effective it is? Mr Singleton: I am not a specialist on the World Bank. On certain matters I am very supportive. Studies show that most of its projects seem to fail, but I think that you would need to speak to someone who is more knowledgeable on the subject. Q294 Mr Caton: The Globalisation Institute acknowledges in some of its publications that "many governments liberalised reluctantly as part of IMF and World Bank structural adjustment". Why do you think they are reluctant? Mr Singleton: Countries face their own political pressures. If economists ran the world things would be very different but in a sense politics runs the world. There are vested interests and political pressures faced by people. When one looks at the countries that have liberalised over the past 50 years they seem to have done quite well. There are not very many examples of countries that have liberalised 100 per cent, but that is just the way the world is. Hong Kong and Singapore to some extent are examples, but most countries go through a process of liberalisation that takes time. The ones that are opened up to the world over a period of time seem to have done rather well. Q295 David Howarth: I want to talk specifically about water privatisation. We heard a lot of evidence about it and in the main it was critical of the idea that water privatisation is broadly beneficial from a public point of view. You seem to be a strong supporter of privatisation. Can you just summarise for us how you see the benefits of privatisation panning out for developing countries? Mr Singleton: In many respects it gives more control to systems. I think that when things are run by governments often the feeling within them is that they have to protect their own backs, whereas if something is run by a private contractor one is able to point the finger and say, "This is terrible." When one looks at the empirical records for water system privatisations, in the vast majority of cases it seems to have worked, in part because they have had good advice on how to privatise the system. I should stress that often we are not talking about British-style privatisation of water; we are talking more about what might be called public-private partnerships. In Britain all the assets are owned by the private sector; in Chile it is the same system, but in a majority of the countries where there has been so-called privatisation it has been a public-private partnership where the assets remain in the ownership of the state and there is either a management contract to run the operation or both a management and infrastructure contract in place. In its broadest sense, in the majority of the privatisations we have seen an increase in the number of people with access to water in their homes, and sewerage provision has gone up. In Buenos Aires an extra 3 million people got water as a result of privatisation and child mortality in the poorest areas went up by a quarter. People attack that and say that the private companies are profiteering at the expense of the poor, but the empirical record stands for itself; namely, that in the majority of cases where privatisation has occurred it has been good. But I think that there is here an important role for DfID. These are complicated issues when one is trying to contract out and get the tendering process working correctly. One has to set up regulatory bodies in countries where there is not a lot of expertise in that field. Unless one does that one will not get the end results one wants. Q296 Mr Howarth: The Environment Agency said that the problem was not privatisation or not privatisation but the regulatory structure. In some places there was a regulatory structure that worked and in others there was privatisation in a non-regulated structure and, therefore, there was a worse result. Do you agree with that analysis? What sort of examples would you give of good and bad cases? Mr Singleton: If one looks at what happened in Tanzania, the process brought a lot of investment into water, but the process was not run as effectively as it should have been. I do not think that the regulatory body was as independent as perhaps it should have been. At the end of the day, if one has not run a water system one will not know the pitfalls. The need for knowledge-sharing, therefore, is vital. Hilary Benn has had a lot of pressure put upon him to stop giving advice to developing countries on this. That would be a real tragedy because I think that privatisation with no advice being given and a poor regulatory system would simply not work; one would have a lot of problems. Q297 David Howarth: You referred earlier to the public-private partnership model with the assets remaining in the public sector. One might perhaps try to overcome the regulatory problem by maintaining ownership of the assets in the public, but does that not have the problem that there will not be any particularly good long-term incentives for infrastructure development? Therefore, one will have better management of the existing assets but not necessarily any new ones? Mr Singleton: Some of them are just management contracts and all the funding comes from the state. A lot of the privatisations are both management and investment. In that case one can have mechanisms in the regulatory system to demand a certain amount of investment. But the important point here is increasing access. If one goes to a new neighbourhood which has never had water supplied to people's homes one has to make the investment as the private contractor in order to increase access. There seems to be a lot of investment going in. Q298 David Howarth: One then needs to avoid the problem of cherry-picking. One needs to specify in the contracts where the new access will be; one does not just leave it to the private sector to decide that? Mr Singleton: The approach would be to specify percentages of populations that needed to be supplied by certain dates. What we see in the state-provided systems is the cherry-picking to which you refer; it is the wealthier neighbourhoods that get it, often at a subsidised rate. That creates its own problems, because if one is delivering water to wealthy areas at a subsidised rate one does not get enough revenue to make further investment in other neighbourhoods. Q299 David Howarth: Finally, how do you explain the various failures? You mentioned the problems in Tanzania. Why is it that sometimes companies become involved in these projects and find that they fail or are thrown out by local authorities? Is the problem that expectations are too high or they do not understand what they are getting involved in, or is it something more basic? Mr Singleton: Sometimes there are issues at a contract stage. The company is told that there are certain numbers of customers and there are not and they are not able to make accurate predictions about how it will work out, but generally it is more political than anything. In Bolivia there was success. The water systems that were run privately increased access by poor people who had not had it before, and it was working. There was a purely political decision to chuck Suez out from water supply. Q300 David Howarth: I was going to mention Suez. What was the basis of that political decision? If it is working and access is being provided surely that is popular and people will want it? Mr Singleton: It think it becomes ideological; political parties change, or there is a growing feeling that a multi-national company is coming in and running things and that is wrong. I am not necessarily a political scientist, so I cannot really comment on what causes people to do that. Why do people support Marxism? It is a strange thing, but people do. Q301 David Howarth: What I am trying to get at is that people must have perceived some failure in order for political actors to think that it would be a popular thing to get rid of them? Mr Singleton: I am told that in Bolivia a lot of people who protested against the private companies did not have water supplied by those private companies; they were people who were still receiving state-provided water. I guess there was a certain feeling that they were being left behind or they were not getting access to water. We are talking of only a small percentage of people who were part of the contract to be provided with water by the private sector. Therefore, if you do not have blanket provision across the whole country you can have problems. Q302 Chairman: What is the view of the Globalisation Institute of DfID's decision to drop conditionality from aid? Do you think it will make any practical difference? Mr Singleton: I am supportive. I believe that conditionality is a weak instrument to persuade governments to do good things. It causes a lot of resentment. One has to work in partnership with developing countries rather than try to force policies on them, even though they may be good ones. I do not believe that a forced good policy will work well in a country that does not want to do it. I support the move by DfID to say, "We will support your water privatisation if that is what you want to do. We think it is a good idea, but it is up to you. We will not try to impose it on you." I believe that that is the right approach. Q303 Chairman: Would you extend that approach to the removal of trade barriers? If the country did not wish to give up a trade barrier would you support it in that? Mr Singleton: I would say two things. I think that developing countries damage their economies by not removing trade barriers. The special and differential treatment at the World Trade Organisation actually makes a mockery of the whole idea of multilateral trade agreements, but principally I believe that countries should liberalise unilaterally. Over the past decade most of the world's liberalisation by countries like China has been unilateral; and India has also been liberalising unilaterally. I think that Europe should liberalise unilaterally. When one looks at what has happened at the Doha Round, there has been an obsessive requirement for developing countries also to liberalise at the same time as Europe. That is damaging to Europe's economy by holding back trade liberalisation in Europe, and we are not getting anywhere. I believe that the debate very much needs to move away from the requirement for other people to liberalise in order for us to do it. I support a move away from Peter Mandelson demanding liberalisation abroad. I think we should do it just because it is good for us and other countries will follow if they want to. Chairman: Thank you very much for your evidence this morning. It will be very useful in our deliberations. |