Examination of Witnesses (Questions 1-19)
RT HON
HILARY BENN
MP, MR GRAHAM
STEGMANN AND
MS MELANIE
SPEIGHT
19 JULY 2005
Q1 Chairman: Good morning. Thank you
very much indeed for coming to give evidence to us at our first
evidence session of the new parliament. We very much appreciate
your being here and the circumstances in which you are here, after
a generally regarded successful G8 Summit. I wonder, first of
all, if you would introduce your team; and then you might want
to make a brief opening statement to set the scene on the G8 situation
and then we will move into questions.
Hilary Benn: Thank you very much
indeed. Can I introduce, on my right, Graham Stegmann, who heads
our 2005 Unit; and, on my left, Melanie Speight from the Unit.
To be honest, I would be very happy to go straight into questions,
if that is all right with the Committee. I had not come prepared
to say anything by way of introduction because I am sure we will
want to get into the issues pretty quickly. There is a lot to
talk about after what has been a very interesting and, I think,
a significant G8 process that has certainly moved us forward;
but there is a lot to do.
Q2 Chairman: If that is all right
with you, let us go straight into questions. What the statement
has said is "100% debt relief". However, this is not
quite true, is it, because it is not 100% for all countries; it
is 100% for agreed countries and then the queue is coming down
the track. First of all, could you elaborate on who is getting
100% debt relief; what is the process for that; and how the other
countries that are not yet qualifying can do so?
Hilary Benn: First of all, to
say it relates to multilateral debt owed to the World Bank, the
IMF and the African Development Bank. It is 100% debt cancellation
for those that are eligible to participate. There are 14 African
countries that will benefit immediately because they have reached
HIPC[1]
completion point, so it will flow. Subject to the IMF and the
World Bank meetings in the autumn sorting out the details, that
first group of countries benefits straight away; and then there
are others in the queue waiting to come. It flows from having
completed the HIPC process. As far as how it is going to work
technically and the funding of it is concerned: stage one is that
the new loans and grants to the eligible countries are reduced
by the equivalent amount to the debt service that they are no
longer going to be having to pay; secondly, donors then provide
additional resources (because that was the key to getting this
agreement in the G7 Finance Ministers). As you will know, Chairman,
there were really three camps: those who wanted multilateral debt
cancellation, but did not want to put any more money into it;
those who wanted it and were prepared to put more money into it—and
the UK was part of that camp, because we had started doing that
from 1 January with our multilateral debt service relief arrangement;
and then a third group of countries that were not wholly convinced
of the argument for a comprehensive approach. It was getting agreement
that we would put in additional resources to make this happen
(so we were not just taking the money out of existing aid flows)
that was the key to reaching that agreement. Therefore, in putting
in the additional resources they would then be distributed to
all World Bank, IDA and African Development Fund recipients. In
other words, poor countries that are not themselves receiving
the benefit of the debt cancellation will also benefit from the
additional resources that are made available. That is the way
it is going to work.
Q3 Chairman: It is quite complicated,
so can you explain the difference between debt relief and aid,
and what is additional within that context?
Hilary Benn: What is additional
is the commitment of countries to put in additional funding to
make sure that the money that would otherwise be available to
those multilateral institutions was not just drawn upon to fund
the debt cancellation, because then we would have been taking
out of the existing resources and we would not have put more money
in. That was the very clear position we took. That is the first
point. The second point is, obviously the agreement on aid that
has been reached really received a very significant boost when,
as EU Development Ministers, we met in May and agreed the new
ODA GNI target; and that, I think, really gave the process very
significant momentum. As a result, we have ended up through the
G8 process, according to the OECD DAC, with commitments to increase
total global aid by $50 billion by 2010, of which half is going
to go to Africa—which is $25 billion—and that is the
sum by 2010 which the Commission for Africa recommended was needed.
That money will be available for a whole raft of things which
no doubt we will come onto later.
Q4 Richard Burden: My question is
about the debt/aid relationship. I understand what is being said
there but one of the points which has been made is if debt relief
is given there, potential aid is reduced to then be put back in
via the multilateral institutions. That process of putting it
back in via the multilateral institutions may then dilute where
that aid goes. How can we ensure that it is additional in the
right place?
Hilary Benn: I would not say it
dilutes it, because it spreads it. In a sense it goes back to
the original question, Chairman, that there are certain countries
which benefit (14 African countries immediately) from the multilateral
debt cancellation agreement; 38 countries are potentially eligible
in total, depending on how they come through the HIPC process,
and 32 of those are African countries; but the way that this is
being funded means that other countries, in addition to those
that get the multilateral debt cancellation, are going to benefit
from the additional resources countries have said they will put
into it.
Q5 Chairman: Can I raise an issue
that ran over the weekend in some of the media, and you did mention
it in your response to me at the beginning—subject to the
tidying up by the institutions in the autumn. We saw an initiative
led by the Belgians basically saying that they wanted strict controls
over the 18 countries, and that the IMF should have the right
to approve key economic policies, which implied some additional
conditions. This was interpreted by some of the campaigners as
being a dilution of the agreement of the G8. Is that in fact the
case; or can you explain what this Belgium initiative is; where
it stands; and how you will deal with it?
Hilary Benn: I cannot explain
what the Belgium initiative is; the Belgians will have to answer
for that. Our view is very, very clear: the G8 have reached an
agreement. Insofar as we are talking about conditionality—and
that is, of course, one of the issues that has been raised, the
HIPC process has its own conditionalities (as we are aware) within
it—once countries have reached HIPC completion point then
they are eligible to benefit from this new multilateral debt cancellation
agreement. I am not in favour of further burdensome conditionality
being applied to countries; but everyone wants to be sure that
the debt relief and the debt cancellation that this agreement
is going to bring, is used for the purposes of poverty reduction.
The HIPC framework has within it ways of ensuring that that is
the case. I think we should stick with that. I myself and the
UK would not be in favour of any dilution of that. If, when we
get to the World Bank meetings in the autumn, others bring proposals
which run contrary to what has been agreed then we shall make
our views very clear.
Q6 Chairman: To pick up that exchange
of views that appeared in the media, some people were saying this
could be a dilution. We have an agreement; it could be undermined.
The argument that seems to run is that the G8 countries clearly,
if they are all agreed, will stand by it; but I understand it
takes 15% objections to modify it. What I am really asking you
is: is there a danger that qualification be asked? I have a comment,
this is Willy Kiekens who says, "Under my proposal if a new
type of PRGF[2]
programme goes off track the expected grants would not be made
available". He is clearly saying this 100% debt relief could
be clawed back if certain conditions were not met.
Hilary Benn: As I say, if other
countries that have not been party to the agreement that has been
reached so far bring proposals to the table at the World Bank
annual meeting then we are going to have to argue it out. I have
tried to make clear this morning what my view is about how we
should proceed on this. There having been this very strong political
commitment on the part of the G8 to make progress, it is very
important that the world together delivers what it is we have
promised.
Q7 Chairman: You are sure that the
other seven will back you up at least?
Hilary Benn: The heads of government,
the heads of state, signed the G8 Communiqué, and that
is the clear and settled view of the G8. We now have to take that
into discussions that will take place in the autumn.
Q8 Hugh Bayley: I would like the
Secretary of State to focus on the outcome on poverty reduction.
Is it the case, in your view, that a doubling of aid will double
the rate at which poverty is reduced? Is there the absorptive
capacity in Africa to use twice as much aid, as well as the existing
amount of aid? Where are the examples which show that aid is used?
If there are problems with absorptive capacity what will your
Department be doing to enable recipient countries in Africa to
develop their capacity to use aid more effectively?
Hilary Benn: As you know, Mr Bayley,
there is not a straight causal link between the quantity of aid
which is committed and the progress; but, undoubtedly, there are
countries which currently lack the means to get all of their children
into school, to buy the drugs that will treat people who have
AIDS, TB, malaria or other diseases from which they die. One has
to look at what was agreed as far as aid is concerned at Gleneagles
in the context of the overall package: because we know that without
progress on peace and security, governance, building capacity,
ability to trade, access to world markets, economic development,
debt relief and aid, without progress on all of those Africa is
not going to meet the Millennium Development Goals (MDGs). Part
of the answer to your question is: what are we going to do about
the question of capacity, including absorptive capacity? I think
there is absorptive capacity. Part of what we have to do is to
help the countries of Africa to build that capacity. That is why
I welcome so much, in the wake of the Commission for Africa report,
the debate there has been about governance and capacity. I think
it has been the most striking thing, because we have moved beyond
just talking about aid. If the quantity of aid was the solution
alone—if we could raise the money we could fix the problem;
and it is not as simple as that as we know. Does aid work? Undoubtedly
it does used in the right way. There are many examples of that:
in Kenya where aid helped to pay for the abolition of school fees
and they have got a million more children in school there: progress
has been made in Tanzania and Rwanda; there is nearly a doubling
in the number of people who attend primary health clinics in Uganda
after they abolished the user fees. It is a combination, it seems
to me, of using those resources—to support African countries
in the context of the $25 billion, and other developing countries
in the context of the rest of the money—to meet the needs
of their people but, at the same time, to help them to build their
capacity to spend their own resources and the money which the
world is making available effectively. It is going to be a big
task, because we are moving from a world in which we have $79
billion in aid to, by 2010, a world where there is $129 billion
in aid. This is a very big step up. Working together, we have
got to make sure we use the money effectively so that in the end
it does change people's lives, and we are able to make the kind
of progress towards achieving the MDGs that currently we are not
seeing, particularly in sub-Saharan Africa.
Q9 Hugh Bayley: After quite some
years of emphasis on basic social needs, on health and education,
the Commission for Africa report surprised some people and broke
with tradition by laying greater emphasis once again on investment
and infrastructure. I would be interested to know where those
ideas came from. Of course, ministers in Africa, as elsewhere,
like opening new roads, airports, ports and buildings—but
what is it that convinced the Commission that investing in infrastructure
was the key to higher growth? What does that mean for your Department's
staff? Are you going to be taking on a lot more engineers? What
will the mix of public sector donor money and private sector pilot
investment be in the 10 billion extra of aid or investment in
infrastructure each year between now and 2010, and the 20 billion
thereafter which the Commission for Africa was talking about?
Hilary Benn: In one sense I think
President Wade of Senegal deserves credit and praise because I
think he produced the original Omega Plan. We went through a period
where, to be honest, it became a little bit fashionable to say,
"Hey, the private sector will deal with all of the infrastructure".
For some parts of the infrastructure in Africa that is the case.
Mobile telephony is a really good example of that. The fact is
mobile telephony has extended across Africa pretty quickly. People
can make money. In a sense, it is a generational shift in the
technology. It is bringing access to a telephone to people in
some remote rural areas who might rent a phone for a minute and
a farmer will ring up the local market, which may be ten miles
away, to see what the prices are like today; and then he or she
can decide whether they are going to take their goods today or
wait until next week. There I think it is getting on with it.
There are other aspects of infrastructure—the road and transport
system—where the high cost of moving goods around in Africa
is undoubtedly a bar to economic activity. There are many striking
statistics in the Commission for Africa report but there are two
parts I remember in particular: one is the description that it
costs $1,500 to move a car from Japan to Abidjan, and then $5,000
to move the same car from Abidjan to Addis Ababa across the continent.
When I was in Ethiopia last year the reason why farmers in Wollo
find it very hard to improve their land is because fertiliser
is so expensive. What is one of the big reasons why fertiliser
is so expensive: because of the cost of transporting it. The other
point made in the Commission for Africa report is, if you look
at the historical legacy as far as transport infrastructure is
concerned (and it does not quite fit because they are not the
same shape), you lay a map of India over a map of Africa and the
transport connections in India connect the country; in Africa,
historically, they were built to take raw materials to the coast
and away. Which is why businessmen in West Africa (and I met a
group when I was there not long ago) complain that it is often
quicker, if you want to travel across West Africa, to get on a
plane, go to Europe, change planes and come back again. Those
are all examples of how the lack of infrastructure gets in the
way of economic activity. How is the money going to be spent?
The African Development Bank has a big responsibility here. One
of its problems, frankly, has been that it has been a bit slow
in spending the money it has got already—partly because
of its own internal procedures, capacity and procurement systems—but
also because they are trying to do projects that involve more
than one country, to reach agreement. There is a process of reform
which is taking place within the ADB that is taking steps to improve
that. I think we have some way yet to go. I think the other thing
I would say is that it is really for the countries of Africa,
through the structures they are setting up (and NEPAD[3]
is doing work on this), to identify what the priorities are. The
final point I would make is, there are yet other types of infrastructure,
the most fundamental of which is water. Since almost all of the
growth in population in Africa, as well as in the developed world,
is going to be in towns and cities over the next 25 years, the
need for water pipes, sanitation, schools and hospitals is going
to be enormous. That is why one of the things I did on World Water
Day was to say that over the next few years we are going to double
our investment in water. Frankly, developing countries (and certainly
in Africa) have been spending less on water in the last decade
or so; donors have been spending less on water. We are now in
the process of reversing that trend and I, for one, welcome that
enormously because you cannot live without it.
Q10 Hugh Bayley: In relation to water,
can you say a little more about the balance between private and
public sector funding? There has been a lot of NGO criticism of
private investment in water schemes. Are there similar considerations
in relation to, say, roads; or is there something special about
water?
Hilary Benn: Water is clearly
more politically sensitive. In the end I do not think we should
be detained for a millisecond by an ideological argument about
how you do it. In the end what I am interested in, and what I
think everybody else is interested in, is: what works? How do
we get more clean water to more people? The evidence on bringing
in the private sector is quite mixed. In some cases it has not
worked at all; in other cases it has been successful. There is
a lot of misinformation in this debate, I have to say. If you
want to talk about water in Tanzania or you want to talk about
water in Ghana, the best people to have the conversation with
are President Mkapa and President Kufuor because they will tell
you why they have taken the decisions they have. This notion that
is about, that somehow the nasty old donors are currently twisting
people's arms up behind their backs to say, "You must do
this", does not actually reflect the truth. In Ghana they
are bringing in the private sector to manage the water supply
(they are not privatising because they are retaining ownership
of the assets) because they lose a lot of water through leakage
(a problem not unknown to us here in the UK and other countries)
so they want to repair some of those, and they want to improve
the production of water at the top end of the system. As I saw
for myself in Nima when I was there last year, the people who
really pay through the nose for water are those who buy from that
bit of the private sector that sells it in plastic bags and buckets;
and last year in Nima I was told they paid five to six times as
much per litre of water if you bought it through that bit of the
private sector than if you got it through the leaky, creaky water
supply system—for those who are lucky enough to have access
to taps. It is a really big complex problem. The investment has
to come from somewhere. I do not think the private sector is going
to provide a huge amount of it because, rather like roads and
other bits of infrastructure, we went through a period in the
1990s when people said, "The private sector will do all of
this", and that is not actually the truth. What works? What
is going to be successful in doing this? That is what we should
be interested in and not, in my view, a rather sterile ideological
debate, if I may say so.
Q11 Mr Davies: First of all, can
I just ask you, Secretary of State, for the greater clarity of
everybody, to quantify what you were saying earlier about debt
relief, and the increase in resources for aid. We have agreed
at the G8 that there should be $48 billion more of aid by 2010
in relation to the 2004 figure. We have also agreed on the debt
relief programme. You have said that a large amount of that $48
billion is being budgeted to pay for the debt relief. How much
of that $48 billion is being budgeted to cover the cost of the
debt relief? How much is resources additional to that, either
for the countries that are also benefiting from the debt relief
or for those other countries which you referred to who get no
money and can expect no money from debt relief but may benefit
from the second part of the additional resources? Can we just
see how those additional resources are split between those two
areas?
Hilary Benn: There is a lot of
information contained in that question and it might be helpful
if I were to give the Committee a note[4].
Q12 Mr Davies: It is actually a very
simple question. It is a sort of A plus B equals C type of question.
Hilary Benn: Indeed. I can tell
you in relation to the UK, if that is helpful, what we think it
is going to cost in terms of additional contribution. We think
that by 2007/8 it will be between $130-$150 million dollars in
that year. In the period up to 2015 it will be between $0.7-$1
billion from the UK.
Q13 Mr Davies: That is the total
of new resources or the total of debt relief?
Hilary Benn: That is what the
cost will be to us of this debt relief. We had already made provision
in the spending review settlement last year as you will be aware—because
that is where we got the resources from for the multilateral debt
relief initiative that started in January before the summit agreed
this funding. The money will come out of what is a rising UK aid
budget so by definition that is additional.
Q14 Mr Davies: What I want to know
is: what proportion of the rising aid budget is being pre-empted
by the commitment to pay for the debt relief?
Hilary Benn: In 2007/8 you have
got $130-$150 million, which is about £80 million; and our
aid budget in 2007/8, from memory, is going to be about 5.3 billion
in total, and this year it is about 4.5 billion. I will give you
a calculation as to precisely what proportion it is, but you can
see that we have, more than enough, made additional resources
available to provide for this and the other things we are seeking
to do out of our rising aid budget.
Q15 Mr Davies: Globally, in broad
brush terms, have you any idea of the proportion of the $48 billion
incremental aid that will be taken up by the burden of paying
for the debt relief?
Hilary Benn: About just under
10% we think.
Q16 Mr Davies: The debt relief itself
will obviously relieve the benefiting countries from their present
debt service burdens to the tune, I believe, of about a billion
dollars a year. That is an additional billion dollars a year of
cash flow available to them. It will result in a corresponding
reduction in entitlements to aid programmes, as we understand.
Is there any conditionality, however, attached to that $1 billion
of the kind that would have been attached to an equivalent amount
of current aid programmes? Or is that going to be free cash flow
which, if they want to, they can spend any way they want on arms,
on prestige projects, or anything of that kind?
Hilary Benn: In order to qualify
for the multilateral debt cancellation agreement countries have
to have reached HIPC completion point. In order to reach HIPC
completion point countries have to meet the conditions relating
to governance, have a poverty reduction plan, and whatever conditions
are put in place by the IMF or the World Bank as part of that.
Q17 Mr Davies: That is to qualify
in the first place. Once they have got the money on a continuing
basis they are going to be, in aggregate, roughly $1 billion a
year better off. Are there any conditions being applied to that
$1 billion of incremental cash flow; or, effectively, can they
spend it as they will, even on policies that we would regard as
being perverse or wasteful?
Hilary Benn: The conditions that
apply to the HIPC process, and conditions of receiving facilities,
PRGFs or PRSCs[5]
from the World Bank and the IMF, continue to apply as part of
that. These are running in parallel.
Q18 Mr Davies: They will apply not just
retrospectively—to the point at which you qualify under
the HIPC rules—they will apply prospectively indefinitely
in the future, so long as those countries continue to gain incremental
cash flows as the result of having benefited from debt relief?
Hilary Benn: It is the same conditionality
that relates to what they were required to do in relation to HIPC,
which I hope will give people reassurance that we are able to
say, and people are able to see, that the resources made available
are used for the purposes of reducing poverty. That is the whole
purpose of doing the debt cancellation in the first place.
Q19 Mr Davies: Can I just ask you
a question about conditionality in general. You were saying just
now, and very rightly so, that the main effort in combating poverty
has to be made by the beneficiary countries themselves?
Hilary Benn: Yes.
1 Heavily Indebted Poor Countries Back
2
Poverty Reduction and Growth Facility Back
3
New Partnership for Africa's Development. Back
4
Ev 40 Back
5
Poverty Reduction Support Credits Back
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