Examination of Witnesses (Questions 20-39)
RT HON
HILARY BENN
MP, MR GRAHAM
STEGMANN AND
MS MELANIE
SPEIGHT
19 JULY 2005
Q20 Mr Davies: You were talking,
rightly, about governance, capacity building and so forth. You
did not use the phrase but you also had in mind, I think, the
necessity for sensible policy frameworks in these countries?
Hilary Benn: Yes.
Q21 Mr Davies: Therefore, our aid,
if it is effective at all, is going to be supportive. It is not
going to be the decisive factor. It is very important we use it
as effective leverage to make sure there is as sensible a policy
framework as possible, and as much progress as possible being
made in such areas as governance, for example, in the beneficiary
countries. You might think that since the amount of money being
made available is increasing very substantially, from 70-odd billion
to 120-billion, that actually the conditionality is going to be
even more critical; and the linkage between the additional effort
made by donors, and the additional effort made by donees, is of
even greater macroeconomic importance simply by virtue of the
increased amounts involved: but at that particular moment you
chose in March, I think, to produce a paper suggesting you are
already taking a completely new approach to conditionality. There
is an element of confusion here. Is it not the case with conditionality
that it may be possible to make it more intelligent, more effective;
but it is actually more important, not less important going forward?
Hilary Benn: With respect, I do
not think there is confusion. I think the right type of conditionality
is extremely important. What the paper published earlier this
year was about was trying to ensure that we apply conditionality
in the right ways. What has happened in the past—and we
will no longer do it in relation to our own aid, because this
is relating to privatisation (going back to the previous question
about water or trade liberalisation)—I do not think it is
appropriate for us to use our aid to require that of developing
countries. Indeed, if you look at paragraph 31 of the Gleneagles
Communiqué—
Q22 Mr Davies: We have not been doing
that?
Hilary Benn:— there was
a very important statement there on the part of the G8 about enabling
developing countries to take their own decisions about their economic
policies. Having said that, where I think the debate and conversation
ought to take place (and I will come on to governance in a moment
because that I think is indeed the important and emerging issue)—developing
countries, in relation to economic policy, are free to take their
own decisions and those responsibilities that come with that.
If you continue to put money into loss-making publicly-owned enterprises
as a government you are denying yourself the use of those resources
for other purposes. If a country is taking decisions which lead
it to be reducing its expenditure on health and education of course
it will be very hard to explain why one would, for example, be
giving direct budget support, and I would not do that in those
circumstances. When it comes to governance, however, I take a
different view; because when it comes to international obligations,
when it comes to human rights and the development of democracy
I do not believe (and I do not think anybody else does) that the
right of developing countries to take their own decisions extends
to them saying, "We don't really subscribe to those principles
and we're going to do something else". If I may give you
three examples recently where I have taken decisions which demonstrate
that I take governance very seriously: one, we have agreed some
benchmarks with the Government of Uganda; we assessed progress
against those benchmarks and I withheld some of the budget support
payment because I thought Uganda had not delivered on what it
had promised in the field of governance. A second example is Sierra
Leone, where I did the same. The third example is the decision
I took in relation to Ethiopia where, after an extraordinary election
in terms of its openness, access to the media and people feeling
free to vote, there has been the terrible trouble, people killed
and now a bitter dispute about the outcome of the election results.
In those circumstances I thought it was prudent to say that I
would not be taking a decision now on increasing budget support
for Ethiopia. I hope that those three examples demonstrate I do
take governance very seriously. You are right, Mr Davies, particularly
as the aid is going up people will want to be assured that the
money is going for the purpose for which it is intended. Therefore,
the debate about conditionality for me is about the right type
of conditionality. I hope by my answer I have demonstrated there
is not confusion. I hope there is clarity about where we think
it is appropriate and where we do not.
Q23 Mr Davies: We are totally agreed
that conditionality is vital and I support you in the decisions
you have referred to. We had been applying conditionality for
a long time, and your predecessor applied conditionality in the
case of Tanzania when they bought a wasteful air traffic control
system, if I recall. There have been sensible policies by the
British Government in this area—we acknowledge that. What
I do not understand is that you said in March in this paper that
you are changing your policy. You are saying this new paper here,
quoting from page 4, "represents, signals: a significant
change in our thinking and practice"[6]:
but I do not see a significant change in our thinking and practice.
Actually you have just explained to us that you had been adopting
what you and I regard as sensible policies of conditionality in
the past and are continuing to do so. Actually there has been
a continuum, I hope and I trust, and I believe that is the case.
You are saying, perhaps for purely propaganda or psychological
purposes, that there has been a significant change—that
is why I fail to follow the coherence between this statement here
and your description of the continuing practice.
Hilary Benn: That is a new one
to me that I am doing things for psychological purposes. I will
have to ponder on that one! The truth is, over time we have been
reducing our use of policy conditionality relating to economic
policy. What the policy statement did was to make it clear that
we would no longer use conditionality (and I gave the two examples
which are most controversial and much debated) in relation to
privatisation and trade liberalisation.
Q24 Mr Davies: But we had not used
them before?
Hilary Benn: We had in the past.
Q25 Mr Davies: When?
Hilary Benn: It was declining,
and this policy document made it clear that we would no longer
do so, not least because some people in a state of confusion were
continuing to accuse us of having done so. The second point which
is important is: arising out of that process the World Bank, at
the annual meeting last year, agreed to undertake a review of
its own policy towards conditionality. I, and some others, persuaded
them to do that; because this is a debate not just for bilateral
donors, but this is a debate for multilateral donors.
Q26 Mr Davies: Your statement in
March said that "this document signals a significant change
in our thinking and practice"—UK thinking and
practice. Now there has not been a change in our thinking and
practice in March about not making privatisation a condition because
we were not doing that already. What the World Bank may be doing
or may be changing is not relevant to our thinking and practice.
What I am really saying to you is, I think what this document
contains is something of a false antithesis. There has not actually
been a break—"a significant change" to use your
phrase. There has been a continuum in policy. For whatever reason
(and perhaps you would like to say what the reason is) you decided
in March to come out with a document with some striking phrases
about everything being changed very dramatically and actually
things are not being changed very dramatically. That is the point
I am trying to establish.
Hilary Benn: I understand that
is the point you are trying to establish, but I would not agree
with the assessment. As you will have seen, the response to the
publication of that document, which was widely welcomed by a number
of people who take a very close interest in the issue of conditionality,
I think that demonstrates that people regarded it as a change.
I would accept that people's perception of what was going on has
lagged behind reality. What that set for the very first time very
clearly was a matter of policy in a policy document that we would
no longer be doing the things we had done in the past. I accept
entirely we have been doing less and less of it over time. The
second thing it represents is a clear statement of where we stand,
which is very important in relation to what we are now trying
to persuade the World Bank, in particular, to do.
Chairman: The only thing I would say
to you, Secretary of State, is that it still remains the fact
that all of us get campaign postcards and letters saying, "It's
time the British Government stopped forcing governments to privatise
as a condition of aid". So there is some need of a statement
which says, "That's not actually what we are doing".
Q27 Ann McKechin: Following on from
Mr Davies's question, Secretary of State, can I clarify that in
effect because the World Bank and IMF are still imposing economic
conditionality for the donee countries very little has actually
changed in terms of the way in which they are able to make their
own decisions. For example, last year in Zambia (which is one
of the countries which will benefit from the 100% debt relief)
it was a condition of their PRGF that they had to have almost
a nil deficit on their budget, which resulted in about 5,000 teachers
not being employed. Are you saying, because HIPC conditionality
is still continuing as part of this current debt relief process
at present with the World Bank policies, that that type of conditionality
would still be likely to be imposed on them?
Hilary Benn: The situation in
Zambia has now changed. When I was there earlier this year I asked
what the current position was in relation to that, and that has
freed up since then. The truth is that both the World Bank and
the IMF have been reducing the amount of conditionality which
they impose. In relation to privatisation and trade liberalisation
it has declined since the 1990s. I understand that trade conditions
currently count for less than 2% of the conditions used by the
Bank, and generally they focus on reform of customs agencies,
the share of World Bank programmes, and conditions covering privatisation
have also decreased; and around half of programmes had such conditions
in 2003. I think it is worth making the point that those two institutions
themselves are in a process of change. There is less conditionality
than there was in the past; but I welcome the fact that the IMF
itself has looked at what it is doing; and I welcome the fact
that the World Bank is currently undertaking that review. We will
discuss at the autumn meetings what the outcome is when the review
itself is published.
Q28 Richard Burden: Could I take
you on to the recent report by ActionAid[7],
which made a claim that as much as two-thirds of the aid provided
by the developed world could be counted as "phantom aid"
rather than real aid. You have given a fairly robust response
to some of the claims in that report. I was just wondering if
there were any aspects of the report which you feel are valid
and, if so, what those are; and where are the ones you think are
not valid?
Hilary Benn: In truth it was a
bit of a Jekyll and Hyde report, if I may say so; because most
of it was a very interesting study of the question of effectiveness.
The trouble was that the bit relating to phantom aid, if I may
use the phrase, was spun—and I was very strong in my response
because I do not accept that debt relief is phantom aid; I do
not. When I was in Ghana last year (and they had a great debate
about whether to participate in HIPC; they did; and they now earmark
that money they no longer have to spend, as a result of having
reached HIPC completion point, and local authorities use it to
build new facilities) one of the things I saw was a new school
building. I think I may have told the Committee before, they paint
a rainbow and they write "HIPC benefit" underneath to
demonstrate this is part of the debt relief. It is not a phantom
school building; it is a real school building. I have seen it;
I took a picture of it. I do not accept it is phantom. I do not
accept that expenditure on consultancy is phantom aid. It goes
back to the question Mr Bayley was asking about capacity. Helping
countries to reform their customs administration so they collect
more revenue, and we provide technical assistance to do that,
is certainly about improving the prospects of development, because
if governments have got more money they can then choose to spend
it on health and education, or providing technical assistance
to anti-corruption commissions, as we are doing. I fundamentally
disagree with that description because I think it clouded what
the result of the report is about, which is: how can we ensure
that aid is effective? That is a debate all of us are interested
in.
Q29 Richard Burden: Perhaps you can
come on to the technical assistance issue in a second. Just on
the issue of phantom aid, I understand the point you are making
and it has some force, but would you accept there is also an issue
if debt relief is counted as aid in the situation, say, of a country
which has not actually been making any debt repayments, gets debt
relief but it does not actually produce any additional resources?
That is a point ActionAid make, and that presumably does have
some relevance, does it not?
Hilary Benn: Clearly, if debt
relief were to result in no additional resources being available
then it is clearly not a benefit to that country. As a result
of the HIPC process a lot of debt service payments countries were
making they are no longer making, and those are additional resources.
I know there has been this other debate that money for debt relief
has to be additional to money for aid. When the Comprehensive
Spending Review was agreed last summer DFID got the increase in
its budget that it is going to get between now and 2007/8; that
included money for additional work on debt relief. That is how
we funded the multilateral debt relief initiative. In the end,
if it is additional then it is additional. I know some people
appear to say, "We will be happier if you could say, `Here's
the pot for aid, and here separately is the pot for debt relief'".
If the sum total is the same, what is the difference? The fact
is, it is additional. That is the key. I have always found it
a rather theological argument, to be honest.
Q30 Chairman: How do you answer what
I would call the "Botswana point"? The argument is that
debt relief is a reward for irresponsibility, and that those countries
that actually have managed their affairs better—well, this
is part of the argument that even some of the G8 members are putting
down that it creates a bad signal. How do you square that?
Hilary Benn: I am well aware of
the moral hazard argument. Why are we doing this? Because in the
end, notwithstanding what has happened to countries in the past,
if countries are currently faced with this terrible choice between
servicing unsustainable levels of debt and not having enough money
(to go back to Mr Bayley's original question and progress towards
the MDGs in Africa) is it right to sit back and allow that to
happen? I think Nigeria (which we have not touched on) is a really
good example of that. Part of what has been agreed is, of course,
this debt cancellation agreement for Nigeria. Nigeria has a long
and very troubled history. If you had said a year ago, "What
do you think the chances are of the Paris Club reaching agreement
on a debt cancellation agreement for Nigeria?" you would
have found almost nobody was prepared to countenance that it was
possible. Why has it happened? It goes back to Mr Davies's point,
because of changes in governance that are beginning to happen
in Nigeria: the attack on corruption; the reform of public financial
management; the greater transparency; and what planners and Mr
Ngosi and the team have done. Nigeria has said it will earmark
this money in a fund. NGOs, I understand, are going to be part
of the process for overseeing how the money is spent. You could
say, "Well, it was Nigeria's past rulers who were responsible
for all of this, and acted very badly, and military dictatorships
and so on", but Nigeria is the largest country in sub-Saharan
Africa; its GDP per head is $350; there are a lot of very, very
poor people; and if Africa is to meet the MDGs Nigeria has got
to meet the MDGs; and this debt cancellation agreement is going
to help it to be in a better position to do it than would otherwise
have been the case.
Q31 Mr Hunt: Secretary of State,
one of the few very specific commitments made at the G8 was to
do with access to ARVs[8]
for HIV/AIDS sufferers. I know that everyone would welcome the
fact that there is a date, even if some people would like the
date to be sooner, by which ARVs will be made available to all
those who need it. Going to ActionAid for a moment, they estimate
the cost of that could be $18 billion. In the context of a total,
of an additional $25 billion going to Africa by 2010, if it is
going to be that much, do you have a different estimate as to
the cost of expanding the availability of ARVs; and is that included
within the sums that have been agreed?
Hilary Benn: The sums that have
been agreed are available for all of the needs that there are:
health, education and the fight against HIV/AIDS. Where are we
currently? Last month 500,000 people were on ARV treatment in
Africa—we are not quite sure where that will get to; it
is a million globally; it is 500,000 in Africa. With the 3 by
5 Initiative, which the World Health Organisation set out, we
are probably going to get about halfway by the end of 2005. The
UK is the second biggest donor in the fight against AIDS in the
world, as you will know, Mr Hunt. We have committed 1.5 billion
over the next three years. It is partly about the availability
of the drugs, and it is partly about building up the capacity
of health services to deliver this treatment. What I welcome about
what the G8 has done, clearly 3 by 5 comes to an end as a target
at the end of this year, because five has passed; and the fact
that the G8 was able to agree this new target and said it wanted
to get as close as possible to it is, I think, significant. It
is hard going. It is partly about the amount of money, but the
other part (and this is an issue for the global funds as well
as for donors) is: how do we make the money we have got currently
work as effectively as possible? It is only if we do both of those
things we are going to be able to progress. As far as the global
funds are concerned, it estimates that it needs an additional
$7 billion, as I recollect over the next couple of years; and
the replenishment conference is going to be here in London in
September.
Q32 Mr Hunt: I am sure the G8 would
not have agreed to this target if they did not think it was achievable.
We would obviously like to scrutinise the progress towards achieving
that target. Would you be willing to publish a programme which
indicated how many extra people you would hope to get onto ARVs
in Africa over the next five years, so that we can look every
year and actually see how much progress we are making towards
that target?
Hilary Benn: If you are talking
about the UK alone—and this is not obviously a responsibility
for the UK alone—I am sure that as part of that process
(and we may come on to that: the monitoring of the implementation
of these commitments through the arrangements that are going to
be put in place) part of that will indeed be monitoring the progress
that is being made against achieving that particular target. I
do not think we are yet at the stage where we can say, "If
we want to get everybody on by 2010", it depends what your
estimate is of how many people are going to need it in 2010 and
we cannot be sure because that depends on what progress we are
making in improving prevention. You might have one estimate now
on current rates of growth; it may come down if countries are
successful in preventing people from becoming HIV Positive in
the first place. Undoubtedly we will need to be able to report
on a regular basis collectively (and that is why I say it is not
just a question for one country) on the progress we are making
towards achieving that target. The target itself may move depending
on the success of other things we are trying to do.
Q33 Mr Hunt: We could perhaps have
a target based around the percentage of people who have HIV/AIDS
who have access to ARVs in Africa. I think my concern is really
that there is some mechanism by which we (and I appreciate it
is not just the UK) on behalf of the public can actually scrutinise
how much real progress is being made. It is very difficult to
do that when there is a target which is five years away.
Hilary Benn: I accept that. I
think the best figure is the figure that the World Health Organisation
is currently producing, reporting on the number of people who
are on treatment, because then we can watch as the numbers go
up. It may be difficult to forecast where we hope to be at a particular
stage in the process, but I undertake to reflect upon it[9].
Q34 Richard Burden: If we could just
return to the issue of technical assistance. I understand the
point you are making: it is easy to say technical assistance,
bad—not real; or, all consultants, bad—not real. There
is presumably still an issue that does need looking at there.
One of the points made in the ActionAid report is that we are
talking on 2003 figures of round about a quarter of total aid
going on technical assistance. The OECD themselves have said that
aid figures are sadly deficient when it comes to technical assistance.
How do you think we can better monitor technical assistance; whether
the money is being well spent, or whether we are actually paying
over the odds?
Hilary Benn: There are two issues
there: there is how much you pay for the technical assistance;
and what benefit is being derived from it. If one is talking about,
say, the use of consultancy, clearly part of what DFID's staff
do is to provide support; we also take on other people to assist
in that process. The proportion of DFID's bilateral budget which
is spent on consultancy, as I recollect, is now about 5%; a few
years ago it was 10%; so it is a falling proportion. The test
is, for the project people have been taken on to do, have they
been successful? We have a very well established system in place
in DFID for assessing the success of those programmes that consultants
and others are working on, and people can see that. The point
I simply make is that the idea in some quarters that somehow technical
assistance is not really about development and it is about something
else, is an idea we do have to challenge head-on. It arises out
of the discussions we have with our partner countries we work
with; there are things they want help and assistance with. You
will be aware particularly, Mr Burden, of some of the technical
assistance we give the Palestinian Authority through part of that
programme; the help we have given Grenada to recover from the
hurricane. It applies in lots of different ways, and the aim of
it is to help the developing countries build their capacity and
build their ability in the end to do it for themselves. If we
accept (which I think we do) that capacity is at the core of governance,
I think it is one of the strongest messages in the Commission
for Africa report, then doing things to help build capacity is
a sensible use of part of our aid money.
Q35 Richard Burden: You referred
to the Palestinians and I take your point. One of the interesting
things about that is, whilst the funding of various technical
assistants comes from the developed world, and even though some
of the technical assistants involved are no doubt educated in
the US, and so on, they are actually Palestinians. I wonder if
we are doing enough to seek out consultants in other parts of
the world, say, India, Africa and so on, so that the technical
assistance which is given is actually itself part of the capacity-building
process, rather than importing technical assistance from outside?
Hilary Benn: It is a very important
point, and of course the contracts are let above a certain threshold
through international competition. I welcome the fact that it
is still a small proportion, as I recollect, of consultancies
from the south, from the developing world; but I hope very much
over time we are going to see that proportion increase; because
there is a lot of expertise, a growing amount of expertise and
experience and we should draw on that. No longer is it tied, as
was the case in the past, to consultancies just from the UK. We
have changed that; and it is now done on the basis of international
competition. Some of the people winning contracts are indeed from
developing countries themselves. That is a good thing and I hope
it is going to grow.
Q36 Ann McKechin: Turning now to
the trade agenda, Secretary of State. There were some positive
noises from the G8 Summit about the need to reduce subsidies and
to widen market access. How do you think the G8 are going to ensure
that—should there be a successful WTO round in Hong Kong
at the end of this year—developing countries, particularly
in Africa, are not poorly equipped to benefit from market access.
The question of capacity has been raised. Also their preferential
treatment may well be eroded as a result of any final settlement.
We have seen recently the EU agreement on sugar is one example
where that has happened and which has had possible adverse effects.
How do you think the G8 can assist the poorest countries in terms
of getting a fairer deal at the new round of talks?
Hilary Benn: Dealing, first of
all, with sugar: the regime has to change; I think everybody accepts
that. The big issue is the amount of financial support that is
given to those countries which have been most adversely affected.
The truth is, as a result of this change, some developing countries
are going to do well out of it, and some are going to do very
badly; the same for bananas. The fact is developing countries
are not undifferentiated groups; they have different circumstances;
some are very heavily dependent on particular commodities. Therefore,
the immediate issue for the European Union is the degree of financial
support. The 40 million euros that is currently being made available
for adaptation arising out of the changes to the sugar regime
are, in my view, insufficient and we need to do more. That is
the first thing. I know there was disappointment about what the
G8 had to say on trade, but I do think the G8 sent a very clear
message in relation to export subsidies, for instance, that they
have to go. The European Union had agreed that a year previously
when in the Framework Agreement it said that it would set an end
date for export subsidies. The Prime Minister expressed the view
in the press conference he hoped that would be 2010. That is certainly
the position we have and which we are arguing. It will be at Hong
Kong where this progress is made. That is the first thing. The
second thing to say in answer to your question is that the UK
has, of course, been providing a lot of support to developing
countries to build their capacity to deal with the negotiations;
to understand the consequences of the proposals that are on the
table: although, as we saw in Cancùn in the end, when they
see what is before them, they are just as capable as anybody else
deciding whether it is in their interests or not. I welcome the
fact we have moved away from where the debate was in the past
both in relation to the WTO—and the people who said we did
not want it—and those who gave the impression sometimes,
rather paternalistically, that this was all too challenging for
developing countries—it is not. It is the key actually to
them improving their market access. I think the third thing we
can do is to ensure that in those negotiations, through the terrible
jargon of special and differential treatment, we recognise that
not all countries can move at the same pace. It is vital, if an
agreement is going to be reached in Hong Kong, that that is recognised
in the details of the deal, because developing countries have
different interests. I do not see that we will reach a deal unless
that is the case. We really have to get a move on.
Q37 Ann McKechin: Did the G8 at its
Summit discuss the question of dumping, because that is one issue
which of course has a direct effect on the world's poorest people?
There was no indication from the final Communiqué that
they were going to set a clear end date for dumping.
Hilary Benn: If you are talking
about the export subsidies, what was agreed was that an end date
for export subsidies must be set, and it has to be a credible
date. In the end it was not possible. Some people hoped, but it
was not possible to get agreement there. I do think the G8 has
sent a clear message. There is no doubt the focus of campaigning
and lobbying activity between now and December is going to focus
increasingly on trade, especially once we get the Millennium Review
Summit out of the way, and that will be one of the big tests because
it is indefensible. President Bush made a statement about it just
before the G8. We have the agreement in principle in Europe to
set an end date and now we have to go and agree that date.
Q38 Ann McKechin: Finally, I wonder
if you could just comment on the aid-for-trade (which is the IMF
trade) integration mechanism, about whether you consider that
will actually, in fact, add to the debt stocks of the developing
countries because of granting loans to countries to cope with
the costs of adjustment—whether that should be grants as
opposed to loans?
Hilary Benn: Well, as far as the
UK is concerned, we are giving a lot of support in the form of
grants to countries to support them in that process. I do not
know about the answer to the second part of the question about
the IMF.
Mr Stegmann: I think part of the
answer lies in the fact that the trade facilitation that will
be given will come through either lending services at pretty low
levels of loans and it forms part of the overall debt sustainability
analysis for any particular country. I think that is the safeguard.
Q39 John Bercow: Secretary of State,
is there any chance of (or, for that matter, point in) a development
round being concluded in the absence of a clear end-date for export
subsidies?
Hilary Benn: It would not be a
development round and, therefore, it could not be concluded—to
answer your question—if there was not an end date set for
export subsidies. It seems to me it is one of the most important
things that has to be achieved as part of an agreement.
6 Partnerships for poverty reduction: rethinking
conditionality, DFID, FCO and HM Treasury: http://www.dfid.gov.uk/pubs/files/conditionality.pdf Back
7
Real Aid: An agenda for making aid work, ActionAid International:
http://www.actionaid.org.uk/wps/content/documents/real-aid.pdf Back
8
Anti-retrovirals Back
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