Uncorrected Evidence 1491

CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 1491-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

INTERNATIONAL DEVELOPMENT COMMITTEE

DFID DEPARTMENTAL REPORT 2006

Tuesday 11 July 2006

SIR SUMA CHAKRABARTI KCB, MR MARK LOWCOCK, MS NEMAT SHAFIK and MS SUE OWEN

Evidence heard in Public Questions 1 - 44

USE OF THE TRANSCRIPT

This is a corrected transcript of evidence taken in private and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the International Development Committee

on Tuesday 11 July 2006

Members present

Mr Malcolm Bruce, in the Chair

John Barrett

John Battle

Hugh Bayley

John Bercow

Mr Jeremy Hunt

Ann McKechin

Joan Ruddock

________________

Witnesses: Sir Suma Chakrabarti KCB, Permanent Secretary, Mr Mark Lowcock, Director General for Policy and International, Ms Nemat Shafik, Director General for Regional Programmes, and Ms Sue Owen, Director General for Corporate Performance and Knowledge Sharing, Department for International Development, gave evidence.

Q1 Chairman: Good afternoon, nice to see you all again. Perhaps you could introduce your team, although we all know everybody.

Sir Suma Chakrabarti: Thanks very much, Chairman. First of all, thank you for rearranging the time and date of this hearing; it helps to have everyone here on the day of the meeting. There have been a few changes so I will go through the team: Nemat Shafik, who I think many of you know, is the Director General for Country Programmes; on my far left is Mark Lowcock, who has switched jobs and is the Director General who runs Policy International now; and Sue Owen, we are delighted to have her, having been at the Treasury, she has been Director General of Corporate Performance for six weeks now, so is a great addition to our board.

Q2 Chairman: Thank you very much for that. The change of time has slightly diminished our Committee, which is partly due to the Energy Review, but you have got quality here. We will keep you busy! Perhaps if I can just start in the most general of ways. You have had a DAC review, you have produced your annual report and produced a White Paper so nobody can suggest you have been standing around waiting for things to happen, but you have, which any department must regard as a very welcome position, had a substantial increase in funds and a commitment to a substantial further increase in funds, but you are also being constrained in terms of your staffing numbers. I suppose I want to ask you how difficult a problem is that for you? What effect does delivering more aid and more money with less staff have on the Department?

Sir Suma Chakrabarti: Thank you very much. I think it is going to be a difficult management challenge, there is no doubt about that. Just to give you the background, in the current spending review period we are in, we are halfway through the three years, we had a 30 % increase in the budget, as you know, and a 10 % cut in the headcount. So we are already having to make a 40 % productivity gain. We are on course for doing that. If we, in the next spending review, next July, find we have, let us say, a straight line through to 2013, the 0.7 target date, but with the same headcount, then we are talking about another 40/50 % productivity gain. This is a big challenge, undoubtedly, but that is something we are up for. I think we will have to consider a number of things in order to, frankly, give you the quality assurance that we would like to give you as a board on the quality of the programmes. The first thing we need to consider is what is core and what is non-core; in other words, what do we want to make in-house - still do the bits it is important for the Department to do - and what sort of things should we do beyond the departmental boundary. We need to look at options for outsourcing and for off-shoring. As a principle, I think we are keener on the off-shoring idea but that would require the Treasury to play ball on our administration costs in order to take advantage of some off-shoring opportunities. So we will have to look at a number of options there. I think we are also in a better position than many other departments in that we have operations overseas; we have already off-shored, in a sense, so we can decentralise. We have big offices in India and South Africa where there are opportunities, obviously, to use Indians and South Africans to help with the programmes, as we have been doing, to grow that. We will have to, I think, also, look at use of multilaterals. At the moment, we put a little less than 40 % through the multilateral channels. There is an issue as to whether multilateral performance can improve sufficiently so that we can put more money through the multilaterals, which also helps with other objectives like harmonisation and so on. So having a reform process and other things like that is very important to us. I think we have to recognise, and we are doing a lot of this already, that we have to look at our work methods. We are known for the quality of our analysis, and I do not want that to slip - in fact, I want to improve that in some areas - but we will need to look at whether we can prioritise better and be more selective. You will not be surprised that that will require, frankly, some help from Parliament and from our Ministers to do that. A lot of the choices we make are partly driven by interests here, and quite rightly so. So those are the sorts of issues we face.

Q3 Chairman: I know that colleagues will want to explore some of the points you have made in a bit more detail, but there is one slightly simple, stark point about numbers. I cannot remember the exact figure but the difference in the costs of employing people in London versus East Kilbride seems to be very substantial. First of all, why is the difference as great as it is? I can say, as a Scottish MP, I am delighted to hear of the transition but I am not delighted to hear that people are not getting equal pay, but is that an element of the structure? Is it a real cost saving if, for example, you based people in East Kilbride instead of London because you simply reduce your administrative costs?

Sir Suma Chakrabarti: That is a very good point and I will ask Sue to talk about the cost issues, as to whether there really is a cost saving overall. For us the key issue on East Kilbride has been, perhaps, unlike the first 15, 20 years of East Kilbride, the question of making sure it really is seen as the other headquarters of DFID. We have two headquarters. We are committed to East Kilbride and keeping that office going. What is interesting is that we have, of course, a lot of people who are now mid-career who, frankly, cannot afford to live in the South East.

Chairman: We have met a few of them.

Sir Suma Chakrabarti: You have. For us, therefore, we can build up some policy capacity in East Kilbride with people who want overseas / East Kilbride careers rather than London / overseas careers. That is great news but we have to build up a minimum size of teams there for that to be viable. We are doing that, as you have probably seen. On relocation, we have done very well in terms of relocating over 80 jobs in the last couple of years. That has gone well. Sue, do you want to say a bit about costs and so on?

Ms Owen: Yes. We have saved a bit with the relocations that we have made, and that comes through the difference between the fact that people in Scotland do not get the London Weighting, but against that there is the cost of the relocation itself. So we have saved about Ł600,000 through relocating about 85 posts to East Kilbride. However, that is not the reason why it is cheaper to have people there, and the reason it is cheaper to have people there is not because of pay - people are paid the same, apart from a little bit of London allowance. So the unit costs of East Kilbride versus London will depend entirely on the grade mix of the people that you have got in the two locations. The fact that it is cheaper is largely to do with other administration costs. We pay rent in Parliament Street but in East Kilbride we own the building and so we pay a capital charge to the Treasury for that, which is considerably smaller than the rent that we pay in London. Then there are other costs which are slightly cheaper - cleaning and that kind of thing - but the driving factor is the difference in the accommodation costs.

Q4 Chairman: The point is, of course, the Treasury are asking you to reduce your headcount, not just your admin costs, there. At the moment you have got to reduce your numbers even more. I think that is the point to stick to. You have said you are up for it and you say you can do it; I think colleagues will want to press that a bit further. I just want a final question on this one: if you are taking that cut, one thing people are saying is well, maybe you were actually overstaffed or well-staffed because of historical reasons. Where will the cuts fall? Will they fall on the field offices or will they fall on the larger offices? Is there an irreducible minimum size of office?

Sir Suma Chakrabarti: I will ask Nemat to say a bit about size of offices because we have different models for different places. I do not want to pre-empt the analysis, obviously, of what is core and non-core, but I would be very surprised if the analysis did not show that our field presence was part of our core. It is what makes us more effective than most other donors because we are in the field with such a big presence. There would have to be shifts within the field between fragile states and better performing states, and we can talk about that. I think there is an issue in the spending round as to whether the Treasury focuses on headcount, which is actually a more limiting constraint, or administration costs overall. On the other point you make about whether we are, in a way, well-staffed, I ask myself: in 2011/12/13 - round that time - when actually the British aid programme will be as big as the size of World Bank programmes now, the World Bank has 10,000 people and we currently have 2,800. I think that speaks for itself.

Q5 John Battle: Just a comment: some of the national charities, when there was a debate about moving out of London and relocating in Manchester, Leeds and elsewhere, found that they then paid everybody transport costs to come back for meetings in London and actually lost the benefits of moving away. So there are tensions either way. I actually do not want to ask about home and the arrangements here, but the arrangements internationally and overseas. In terms of capacity, it strikes me, while we have been looking particularly in African countries dealing with post conflict, that some of the very good and innovative work that DFID staff are doing is trail-blazing. Are you able to get the best and the brightest into the field in the right volume in the right places, or do we end up with more staff in a country that, perhaps, has a programme that is ticking over and doing okay and you are able not to move enough staff perhaps to post-conflict situations where the real imagination and action needs to be carried forward? What are the tensions there and how are you able to manage that?

Sir Suma Chakrabarti: I am going to ask Nemat and Sue to say something about that, but that is a very germane point for us. If we are going to do more in fragile states - the DRCs, Somalias and so on - we have to make sure we have some of our best, brightest and most skilled people going into those places. Our experience at the moment is a bit that in some of these conflict situations you get people who are interested in conflict development issues and you tend to get the younger people - people who are not attached and do not have family issues to deal with - or people who are towards the end of their careers. Some of the issues like getting the mid-career people to these places is coming up. Nemat, do you want to say a bit more?

Ms Shafik: As Suma said, the headcount pressures, what we expect in coming years is actually we are hoping to put more people in fragile states because we recognise that it is a huge source of comparative advantage and there is a huge need. We expect to have less people in our well-performing, low-income countries where they do not need as much support from DFID people, and we expect fewer people in middle income countries, going forward. Having said that, Suma is absolutely right in terms of the incentives to get people to go to those places. We have recently done an exercise where we have surveyed them and asked them what is it that would be required to attract more of them into these difficult environments, and I think Sue will summarise that, but it is a complicated set of issues. Money is part of the story but it is not the whole story; it is also other things around recognition, around flexibility, around spouses and support needed at different stages in life for spouses and children. Sue, maybe you want to highlight that.

Ms Owen: Yes, it is a challenge for us. At the moment, in a lot of those countries we do have a lot of vacancies because those posts are hard to fill; in some cases because they are plain dangerous and in other places because they are unattractive places to live. We have different arrangements for staff in countries depending on the security threat, for example. So in Iraq and Afghanistan we do not allow people to travel with partners or children; in Pakistan, which you have just been to, we do allow partners but we do not allow children over eight. So there are various restrictions like that which impinge on people. We do pay higher allowances. It does cost us more as a department because in dangerous places we give people patterns of working like six weeks on and two weeks off, and we have to arrange for cover and that sort of thing - breather breaks. It is quite stressful for people in some of these places and a lot of people are put off by that. There are people who rise to the challenge and some of our best and brightest young people have been to these difficult places, risen to the challenge and proved that they have got the qualities for promotion and have actually been promoted earlier than they might otherwise have been as a result. Overall, the bottom line is that it costs us about double to put someone in a fragile state than it does in another country abroad. I have not got precise figures but that is the sort of ballpark we are talking about. So for the spending review period which Suma was talking about, yes, we can do what Nemat was saying, we can reduce numbers in well-performing, low-income countries and we can do more through multilaterals, but to the extent that we are putting more people into fragile states it is going to cost more. So going forwards into the spending review period, a flat admin budget, probably if it was flat in real terms, we could manage but a flat nominal administration budget would be a real challenge for us. Similarly, if we had some flexibility on headcount it would be a little bit easier.

Q6 John Battle: Let me, as it were, give you more arrows for your armoury, in a way, in the argument because as well as the innovative work in the fragile states, post conflict, what about somewhere like Malawi, where 20 % of the high level civil servants in the ministry of agriculture have been devastated by HIV/AIDS and wiped out? So they are saying to us can we help with technical assistance. The report from DAC recently showed a reduction in DFID's technical assistance - I think it is down to only 9 per cent in 2004 from 20 %. Have you a problem reconciling those figures as well? If we are asked for more technical assistance are you in a position to provide it? If we do not provide it does that jeopardise the programmes?

Sir Suma Chakrabarti: I think there may be an issue about how technical assistance is scored there. Taking Malawi, where you have been and which you know well, in the emergency health service programme, where we have, with VSO support, helped fill gaps and get training, all that is working well and retention in the health service has improved in Malawi in the last two years. I do not think that scored as technical assistance because I think that would be scored as a financial aid transfer, but actually what they are using the money for is technical assistance.

Ms Shafik: Exactly right, and what is going on is that we have learned over time that the best sort of technical assistance is home-grown, locally owned and locally paid. What we count as technical assistance is really external advice and external experts, whereas increasingly our budget support is helping the government to hire its own staff to do its own work, and I think that is a lot more effective.

John Battle: Thank you.

Q7 Chairman: That just raises an issue about the visits we have made. Inevitably, of course, your staff on the ground are bound to complain if they feel they are being asked to do more with less, and we would be quite sympathetic to that. However, a place like the DRC is not somewhere where we have a traditional connection. It is staff-intensive at every level, partly because of language, partly because it is new and partly because it is a conflict situation. In this kind of pressure do you not sometimes think: "Why should we be there as opposed to being in the places where we have a good track record and we know about, and where we can staff it up properly?" Is there a conflict there? Hilary Benn gave us a reason but we still ask the question: what is it that DFID has to offer the DRC that other donors do not have?

Sir Suma Chakrabarti: I have not been to the DRC but I think Nemat has.

Chairman: This is not a criticism, by the way, of DRC staff.

Sir Suma Chakrabarti: No, and to be honest, from our point of view as managers, we welcome this sort of questioning because I think that is exactly what we think about: is there a comparative advantage for us to be in DRC? There are two: one is a broad level thing, which is happening everywhere, which is that DFID is now seen second only to the World Bank, as a sort of global donor in low-income countries. Therefore, partner countries want us there. It is very difficult for us to persuade countries that we should get out of a sector, or out of a country; that is not something they want; they like DFID being there. That is a macro problem. Then, at the DRC level, I think there are probably two issues for me. One is that one of DFID's strengths, as people like Nemat and Masood Ahmed who was here with us before are always pointing out, is in the area of political economy and governance. I guess, as you are moving along that continuum in DRC from conflict through to trying to have a more effective state, DFID's skills are actually important. The other reason often given is that the donors you see in the DRC (again, I have not been there) are not perhaps the most like-minded type of donors, and perhaps do not subscribe as strongly as some others to the Paris Declaration on aid effectiveness, and so on. DFID does, and helps the government to try and bind some of those donors together.

Ms Shafik: I would add three points to what Suma said. First, in terms of our decision to go into the DRC, we use three criteria to decide which countries we are in: need, how much poverty there is, how good their policies are and then, increasingly, we are looking at whether they are over-aided or under-aided by the rest of the world. We try and compensate for the failures of the international system. DRC is a country which has historically been under-aided by all donors to an extreme degree. So that was an important and compelling reason. On the poverty numbers they clearly score - it is one of the poorest countries in the world; Jan Egeland has called it the largest humanitarian crisis in the world. So on need they qualify and their policies are dreadful but in terms of support from other donors they do terribly badly, so we felt we had a unique role, in particular because of our comparative advantage on governance as well as on the humanitarian side. I think we had quite an important contribution to make.

Q8 Mr Hunt: On the occasion of your departmental report, let me start by congratulating DFID because I think you are, without question, the nicest government department. In my year on this Committee I do not think I have met a single person from DFID that I have been able to dislike. There is, I think it is worth saying, a fair degree of cross-party consensus about international development issues. My concern is that in that rather cosy environment - cross-party consensus, nice department and popular Secretary of State - some of the big questions are not being answered, or even asked. If you look at Africa, if you look across the whole world you can see, over the last 20, 30 years, some tremendous development success stories, particularly in India and China, which feel like they have cracked the problem; even if they are not there yet, they will be in due course. However, in Africa it has been a pretty static situation, in terms of poverty, despite huge effort, huge goodwill and huge amounts of money being poured in. The comparison I make is the way the private sector in the rich world has carried on growing like crazy, and the private sector really does it by specialisation; you have one company that says: "We are just going to be doing not just IT but this bit of the IT market and we are going to be the best in the world at that." That specialisation seems to be totally missing from the international development sector, with a few honourable exceptions - perhaps Medecins sans Frontieres, or whatever. Basically, everyone tries to do everything in a way that seems to work very well for political audiences at home. If there is a terrible crisis on AIDS then every development agency can say: "We have contributed this", and if there is a terrible tsunami every agency can say: "We did that for the tsunami", but you do not have that specialisation. I want to put it to you that in an environment where we are massively going to be increasing aid we need to address the hard question of whether the global development community should be responsibly specialising; whether DFID should say: "Okay, we are just going to do health", or "We are going to do health and something else", or "We are just going to do these ten poorest-of-the-poor countries", and set an example to other donors and encourage them to specialise. I am sorry it is a long question but I am coming to the point. My concern is the big flaw in the structure, at the moment. There is no real accountability; if we miss our Millennium Development Goal on AIDS, which I happen to be interested in, the truth is that it will be no one's fault because everyone will be able to say they did something for HIV/AIDS and it will be no one's responsibility that we have failed to halt or reverse the spread of HIV/AIDS. So I just want to ask whether we should be addressing some of those big questions and, given DFID's incredibly influential role in the global development community, whether DFID should not be taking more of a lead in that area.

Sir Suma Chakrabarti: I am not sure whether "nice" is a word I would really like very much. I think we are hard-headed as well as being nice, actually. I think, if I may say so, we do ask ourselves those questions. They are not in the public debate and they ought to be, so I am really glad you have raised them. I want to answer a number of points you made. First of all, on Africa (we will no doubt come back to this later on), it is worth saying that Africa is not the basket case it is painted to be always. For the last five years - not well-known - Africa has out-performed the world economy every year. That has not happened since the 1960s. There are a number of African success stories now, but also many countries where we are really quite worried about policies and so on - Nemat mentioned one of them. India and China are quite interesting. The India renaissance, in many ways, started in the early-90s with the debt crisis. Until then, India's policies were hopeless. What is the lesson I take from that? I think policies matter, to the extent that the Committee and others can press us to push for good policies. That is really important, and that is one of the lessons for Africa as well - governance, good policies, and so on. Specialisation and trying to cover the waterfront, absolutely. I think the international system is all over the place in terms of too many donors trying to do too many things. Some countries, to be frank, are better at this than others. Some donors do have little space in their capitals to specialise more. The Dutch, Germans, Swedes and Norwegians have much more. They have debates in their parliaments and in their headquarters but their field staff are given more of a steer that it should specialise a bit more. One of the problems I alluded to earlier is that DFID, because of its success, everyone wants us in every field. We can go through all the MPs here who have raised questions in every single area, and if we pulled out of one area we would undoubtedly get questions as to why we were doing so. So the political incentives in the UK are part of the issue here as well. Therefore, what I think is leading to specialisation for us is actually at the country level. Certain countries are themselves saying: "Yes, we think DFID is great but we do not want you in every sector, thanks, because we do not want a donor in every sector. Take Zambia, where I have just been a couple of weeks ago. The government there, quite rightly, said "We will do a division of labour." In the end, DFID still ended up in five sectors; there should have been fewer but they have chosen five, and the Norwegians and Germans three and two. So the actual specialisation, I am afraid, is going on more in the field now. I think, at headquarters level, a lot of it is to do with not just the bureaucrats wanting to do this but actually having the political support for doing so.

Ms Shafik: The best thing we have for specialisation is our commitment to put 90 % of our aid in low-income countries, and that forces us and enables us to resist a lot of pressure and to spread ourselves out more thinly, particularly in middle-income countries where there are huge pressures and demands.

Sir Suma Chakrabarti: Our concentration ratio has risen in the last few years.

Ms Shafik: Which we have met for the first time this year.

Q9 Mr Hunt: Can I come back to you on this accountability issue, because if we miss all the Millennium Development Goals it is going to be no one's fault and we are all going to be able to pat ourselves on the back and say: "We increased aid to 0.7 per cent of GDP; we were good people, we did our bit". Do you not think if DFID was bold and said: "We will take responsibility for malaria", and you announced that by 2015 malaria was wiped out of Africa, let us say, your 2,700 people would damn well make sure that malaria was wiped out by 2015 because, having made that commitment, you would focus everything on making it happen and you would have that commitment to a single purpose, which is what makes Microsoft so successful in its sector, or Toyota so successful in its sector. I know you can overdo these comparisons but do you not think we need a more accountable system?

Sir Suma Chakrabarti: I fundamentally agree that the system would benefit from more specialisation, and so I would be up for that. Microsoft and Toyota do not work in a politically accountable system where a number of different stakeholders are saying: "Actually, I want out of Toyota ten different types of cars". So they are much more demand determined. We are demand determined as much as we can be but we also have supply as well, and pressure groups and interest groups here. So if I said "We will just do malaria" and if Hilary Benn agreed to that, on which I would be surprised, but if he did, then the people in Parliament who care about water, who care about HIV/AIDS, and so on, might think it is a bit of an odd choice. That is part of the pressure we are under, but from a manager's point of view I wholeheartedly agree with you.

Q10 Mr Hunt: At the end of the day, what you are really saying is that our customers actually are parliamentarians and the British public, not the poor people of the world. I am proposing a model which I think would be far more effective for tackling poverty, and I would like, if you thought it was a better model, DFID to be taking a lead in saying: "Look, if you really want to tackle poverty we need specialisation, we need to concentrate on certain sectors and become experts, not spread ourselves thinly."

Sir Suma Chakrabarti: I think we have multiple stakeholders: obviously, taxpayers here, parliamentarians here, ministers here, but we also do have poor countries and their people, and what I think I am saying, fundamentally, is we are getting more joy in terms of specialisation from the demand end of the spectrum than we are at the supply end. I am being very frank about it. I think that is what is happening. Talking about accountability, I could not agree with you more; that is what this is about. A few years ago you would not have had in here a public service agreement which actually says: "Yes, we are collectively responsible for these Millennium Development Goals (let us say in Africa)". However, if things are going wrong on primary school enrolment for girls in Africa we have to bear part of the blame, and what are we doing about it, as an organisation? That is what this is all about. You quite rightly asked us in a written question "Well, what are you doing?" We have tried to have a more accountable system. This is a system which we are trying to sell now to the other donors, not with a great deal of joy, I have to say, for some of the reasons you point out. We are quite comfortable with our collective accountability - all too comfortable.

Q11 Joan Ruddock: My question is concerning, whether you are specialised or not specialised, where does gender lie in your policies? I tackled the Department on this just a year ago, I think, and I am very keen to follow up. I am also looking at One World Action and their written submission to us, in which they tell us: "The restructuring of the Policy Division has resulted in the position of a Gender and Rights Adviser in the Exclusion, Rights and Justice Team." This amounts to just two staff members. They also comment that within the five Policy Division groups and teams, gender mainstreaming is patchy. I said a year ago you did not have a gender strategy. I wonder if you believe you have one now.

Sir Suma Chakrabarti: I will ask Mark to comment on this in detail because this morning our development and policy committee met to discuss where we were on gender, and it was not because we knew we would face a question on this; I can assure you it was programmed in before. As I said last year to you, I did think there was an issue here, I am not denying that. What had happened is that ten years ago we were seen as amongst the leaders in this area, and I think we have done an evaluation now which I think we publish this month or next, and that will show undoubtedly that we are still doing very well on the policy work, but what has gone wrong is the movement from policy into the mainstreaming of the programmes, partly because programmes have shifted - there is a lot more budget support around and so it is more difficult to identify the gender component. Nevertheless, even so, I think there is a job to do in terms of working with some of those countries on making sure gender is part of their plan, so part of their strategies, and so on. So there is an issue there. What is going to happen to follow this up? We are going to write up a gender action plan and that will be about mainstreaming and how we do better in DFID on that. That will be ready, I think, in the autumn to show to the Committee. We have got two or three good examples of country programme level where we are taking gender seriously - Zambia, again, where I have just visited, girls' education, abolishing primary school fees and so on has lifted the ratios, but we need to do better. So I am not going to pretend that we have the answer yet. Mark?

Mr Lowcock: The fundamental position is we have made a start but we have got an awfully long way to go. The evaluation will be published later this month, but the headline is that compared to a decade ago there are more people in the organisation who are better sensitised to these issues. We have got better policy and knowledge management work. The fundamental challenge is mainstreaming. So we can point to, as the evaluation itself does, a bunch of examples which are very good. In Nepal we have contributed to a halving of maternal mortality over the last ten years. In the education sector, the announcement the government has made to spend Ł8.5 billion over the next decade on education will fundamentally address the gender inequality at the primary level. In Zambia we have just had very good monitoring reports on the reduction in the gender gap there, but the problem is these examples do not add up to a big enough overall package and impact. This mainstreaming challenge is the generic challenge, actually, that all of the agencies committed to better progress on gender are trying to get to grips with, and that is one of the things the evaluation says. The problem we have is the same problem the Nordics and the other progressive donors have. So what the action plan will do is set out actions in a number of areas. One is to do with our own skills levels. It is not the case that we only have two people in one little bit of the Policy Division who work on gender. I had a meeting this morning with our education team who have a couple of people who work on the gender dimension at a meeting yesterday with our growth people, who are thinking about how women benefit from the economic growth (?), and we can tell a similar story in other country programmes. Skills are still a big issue. Another is getting into countries' own development strategies a stronger focus on the position of women and the things that would make a difference to women. Some of them are to do with public expenditure, like better maternal health services; some of them are to do with wider issues of public policy, access to land and access to credit services. Personally, I think the biggest single challenge for us in this area is to do better in helping developing countries integrate gender issues into their own development strategies. It will be a very good test for us to continue to be asked these questions: are we doing better in future than we have done in the past? That is the fundamental test.

Q12 Joan Ruddock: I am grateful and, obviously, look forward to reading the evaluation report. You mentioned Nepal, which is a bit off this Committee's agenda, but I have to say I think there is a very good example in Nepal of a failure of DFID's which is to deal with the situation, or to provide support, to the widows' organisation in Nepal. It is one of the biggest issues of all; women are completely scorned if they are widowed in Nepal. They are suffering, obviously, because of the tremendous loss of life there of the men and I think you will find there was a request for support for a shelter, which has been turned down. I would just say that there are some things that are not the obvious ones, like maternal mortality and girls' education, that need to be addressed, and I think you may find an example right under your nose there in Nepal, if I might say so. I do not expect you to respond to that. Can I move to the issue of girls in school, because, of course, one of the shocking things that we already know is the missing of the first MDG target on gender disparities in primary education in 2005. I wonder what has been the Department's reaction to that and what kind of changes do you intend to make to try to advance the achievement of the target.

Sir Suma Chakrabarti: It is, again, going back to the earlier question, this is exactly the sort of thing we ask ourselves when we see our directors around the PSA objectives. "What are we going to do, collectively with other donors?" "How are we going to push the others and how are we going to push the countries to focus more on these issues?" Nemat, do you want to say a bit about what we are doing on that target?

Ms Shafik: As Suma said, I meet regularly with each of the directors for each of our regions and probe each MDG and say: "What are you doing and why are you not delivering?" In the case of gender equality on education, what we have done is focus our efforts on areas where the disparities are most extreme. We have just launched, for example, a major programme in northern Nigeria where, as you probably know, the social outcomes statistics are dreadful, even by African standards. That is very focused, looking at a very creative mix of girls' schools, female teachers, flexible hours, and so on, to try and increase female enrolment. We have had more success in places like Uganda and Malawi where we have seen female enrolment come up quite a bit, I think, with this focus on parts of countries in the regions and countries where the problems are greatest. We have got a similar story in Asia, where, again, particularly in Bangladesh and Pakistan, we have very gender-focused primary enrolment efforts to try and increase the numbers.

Q13 Joan Ruddock: Can I ask one final question of you in terms of the evaluation that you have seen, and that is whether you would consider an accountability matrix being applied, similar to that which has been adopted by the World Bank?

Sir Suma Chakrabarti: I do not know about the accountability matrix of the World Bank, so I may have to look at it and get back to you on that. Mark, do you know?

Mr Lowcock: I think we will have something which is very explicit about what the actions are, who internally is responsible for them and how we are going to monitor progress against them. That is, essentially, the principle behind the Bank's frame. So, yes, we will have something very similar to that.

Joan Ruddock: Thank you.

Q14 Hugh Bayley: Sir Suma, I would like to push you a bit further on what you mean by productivity. I am not sure it is wise if your goal is to maximise the outputs or, better still, the outcomes of the Department to use the word productivity to describe a process where fewer staff are disbursing more money. If your function is to disburse money, of course, fewer staff disbursing more money would equal a productivity gain, but if your goal is to buy as efficiently as possible progress against Millennium Development Goals, then disbursing more money with fewer people may not lead to more efficient purchasing, pound-for-pound spent. What exactly is productivity?

Sir Suma Chakrabarti: Productivity and efficiency, basically, in the terms I was using, is simply the programme resources as your numerator and your headcount as your denominator. However, I think your point is absolutely right; if we do not do something about making sure the quality of our outputs - if you like, what we are doing - are maintained then we will not be as effective. There is an effect on this issue here that I am really concerned about and, I think, the Committee is clearly concerned about, as we go forward, and that is the issue that with a headcount of 2,800 or 2,900 and with a programme the size of whatever it will be in 2010/11/12, there is some serious work to be done to maintain our effectiveness.

Q15 Hugh Bayley: As an outsider I would expect your productivity to decline in two ways if you were reducing the staff and if you were increasing the programme. If you double the size of the programme in Africa, I would assume that the things you spend the additional 50 % of your expenditure on will buy less in terms of development gains than the things that your original budget would be spent on because you, presumably, try and spend your money as efficiently as possible, and for each additional million pounds incrementally you are likely to buy less. Secondly, if you have fewer staff supervising the programme, surely you run the risk, at least, of spending that money less well in terms of development gain per pound spent. How do you overcome that? What sort of discussions do you have with the Treasury about the difficulties that you face as a result of sharp increases in the programme and yet reducing your staffing oversight of that spending?

Sir Suma Chakrabarti: We are just beginning this conversation with the Treasury in the last couple of months - we have kicked it off - and it will be the conversation to be having with them over the next year until we get to the comprehensive spending round results. You are absolutely right; I think on portfolio quality we have a very good portfolio and Nemat has done some real work with directors to improve the portfolio in the last year or so, which we ought to talk about. One of the issues is about having enough supervisory time and effort to oversee those projects which are going off track and getting them back on track and so on. That is the thing that we need to maintain. I would obviously be worried if, as an accounting officer, I was finding that actually we did not have the supervisory staff who could do that any more, because of the headcount constraints. I think you can rest assured on this Committee that - and certainly it is something I have said to Hilary Benn and to the Treasury - for us fundamentally, as managers, all four of us, quality assurance is important. If we find that the headcount constraint is actually leading us to make choices which do not fit the country context, do not worry we will be saying so; we will be saying: "Look, we should not be doing this because it is the wrong thing to do in terms of the quality of the output we are trying to achieve."

Q16 Chairman: Your staff on the ground have been saying that, and I certainly thought "they would, wouldn't they", but some of them clearly feel that, and are slightly looking to you to fight the corner.

Sir Suma Chakrabarti: I think those staff that know us well - and there have been some cases where we have had to be very blunt that we should not be doing this or that - know that we are doing that. I think what we need to do is, clearly, try always to tailor our instruments and so on to the country context. Why is it that we did not spend as much budget support, for example, in the last year that we thought we were going to? Now, from a headcount point of view, clearly, it would have suited us to do that, but we did not because it was not the right thing to do. So we gave advice, saying: "We should not do this"; so we care more, at the end of the day, about quality. What this will lead to, though, if we find there are lots more cases like that over the coming years, is the conversation will go back to Mr Hunt's question, which is about selectivity. One way you can maintain quality with a smaller number of staff is, frankly, making some choices about sectors, about countries and those sorts of things.

Q17 Hugh Bayley: There is quite a lot of debate, of course, in the context of a rapidly growing aid budget to Africa about absorptive capacity, but there is less of a debate about - I suppose you would call it "disbursive capacity", but perhaps there needs to be a debate on disbursive capacity. I strongly support the Government's policy decision to concentrate resources on least developed countries; the implication being that middle-income countries or higher low-income countries ought to develop domestic policies to redistribute resources from their general budgets to poverty alleviation. However, in terms of buying poverty alleviation gains, you might well be able to do that more efficiently in middle-income countries because you are supported with an infrastructure and capacity which is not available in lower-income countries. How do you reassure us that you do not address the problem of disbursive capacity, or lack of dispbusive capacity, by redirecting resources to poor people in middle-income countries?

Sir Suma Chakrabarti: Fortunately the Government, in its wisdom, has a PSA target which is 90 % of our bilateral aid has to go to low-income countries. That is not there for any other reason than because the Government says exactly as you do, that the pound spent in the low-income countries has a greater impact in terms of poverty reduction than it does in middle-income countries. That is what the research evidence shows, and that is why it has that. So as long as that target is there it is actually a very useful selection criterion for us to give us some focus. As Nemat said, we have achieved that this year. Your point is right; both in terms of disbursive and absorptive capacity we have got issues. On the disbursement side we have just talked about some of the issues we have to attend to and hope to maintain quality; on the absorption side, I think we all believe there is enough headroom still in Africa for absorbing the increased state aid that we and others will be providing, but we have clearly to work at the same time on capacity building in Africa. That is partly about some of the technical assistance issues and making sure ministries function well and so on, and it is partly about donor behaviour changing so that we do not impose higher transactional costs on any of these countries. The Zambian example is a good one, where the Zambian Government says: "We do not want donor X in sector Y, thank you very much; that is imposing extra costs on us."

Ms Shafik: One additional point: probably the most important mechanism by which we manage the risk that you identify is having a diversified portfolio. So for every additional pound we try and spend in a very difficult, fragile environment, like DRC, we also intend to spend more in Tanzania, which is very stable, has reasonable policies, has lots of poor people and we know is quite effective at delivering poverty reduction. Similarly in Asia; for every additional pound we spend in Nepal we are also going to probably spend a bit more in India, which is again quite an effective state and good at reducing poverty. So we do not necessarily have to turn to middle-income countries for more safety; I think we can do that by having a diversified portfolio of low-income, fragile states but, also, low-income, good performing countries.

Sir Suma Chakrabarti: There is an agenda on middle-income countries which, I hope, we can come to in the questioning, because actually it is quite an interesting agenda for us going forward.

Q18 Chairman: There was a point raised by the budget support switch in Uganda, in the switch from Kampala to projects in the north. Our understanding was it was given to UNICEF to distribute to NGOs, which is effectively handing over the disbursive capacity to somebody else, and the feedback at the moment is that the NGOs are still waiting for their allocation. Is this an example where budget support, in staff terms - is it easier when you hand over to your overseas agencies and lose control?

Sir Suma Chakrabarti: I do not know about ----

Ms Shafik: Your concern is around whether we have lost control in the case of the UNICEF funding?

Q19 Chairman: Hilary Benn withdrew Ł15 million budget support from the Government, ironically, he said, because of the harassment of the Opposition, although some of us thought it might also have been due to the lack of transfer funds to the north. He said the money would go to the north, but we are told that the mechanism was DFID to UNICEF for them to disburse it and they have not yet done so.

Ms Shafik: I think the primary concern, though, as you say, was we did not want to give the money to the government of Uganda as a very clear signal of our dissatisfaction with their behaviour around the elections. So we had to find a non-governmental delivery mechanism because we felt that for Uganda, as a country, we should not punish poor people in northern Uganda because their state mishandled the elections. It is unfortunate that UNICEF has not been able to disburse those funds as we would like, and that is often the problem with non-governmental channels, but I still think given the choices we had we did have to find another non-governmental mechanism, and UNICEF has the best delivery capacity we could find.

Mr Hunt: Have you sent the cheque to UNICEF?

Q20 Chairman: I think the Committee's view, and I am sorry for those colleagues who work in Uganda, was that the Government of Uganda was not delivering all of the services to the people in the camps that they had reason to expect of the Government of Uganda. For example, the schooling situation was pathetic, policing was non-existent and the medical facility we saw was being provided by external NGOs. So that should have come out of the budget support, in our view, and if the British Government was transferring the money from the Ugandan Government it is a pity they did not transfer it to the services that the Ugandan Government should have been providing anyway.

Ms Shafik: And earmark it for the north. Is that what you are saying?

Chairman: That was a bit of a specific, but that is an example where we felt that DFID was not entirely in control of the situation.

Q21 Ann McKechin: If I could turn to the issue of education, I think there has been a certain amount of criticism that the Millennium Development Goals on education have concentrated on issues of quantity rather than quality, and, also, clearly the issue of capacity in government educational systems. I wonder if I could raise another issue, which has struck me when I have gone abroad with the committee, and that is whether the Millennium Development Goal is too narrowly drawn in terms of educational targets. When we visited Pakistan two weeks ago I spoke to a group of women in an isolated mountain community, and I asked them whether the girls in the village attended school. They said yes, they had attended primary school (which, in Pakistan, finishes at the age of 10); none of the girls had gone on to secondary education, and that did not really seem to be a realistic prospect at that time. To be honest with you, there did not seem to be the external environment to encourage an attitude and environment of self-teaching. By that I mean there was no access to books or reading material, and all the adults in the community, so far as I am aware, were illiterate. Jeremy Hunt has raised this afternoon the issue of specialisation. Given that we are a country which is many generations from when we suffered from mass illiteracy (I might say that my own surname was the result of a 19^th Century illiteracy attempt, a guess, at what the name is and that is why I have ended up with this surname), we do not have much experience of taking a community where there is mass illiteracy in its entire population and bringing them up to the stage of literacy, but there are other countries in this world who have had recent historical experience of actually achieving that - countries such as Cuba, Nicaragua and China have managed to do it over a remarkably short period of time. I wonder whether or not you could give me some insight about your views about adult illiteracy.

Sir Suma Chakrabarti: I will be looking to my colleagues to help me on this. You started off with a question about whether it was too narrowly drawn a target - the MDG on education, and primary education, really. I think our view would be no, it is the right thing to focus on. I will come on to why it is also important to deal with secondary and tertiary, but in terms of all the evidence on returns to education the highest returns are at the primary level. That is the research evidence over 30 or 40 years now. Having said that, the Pakistan case is worrying because what it tends to show is that girls having done the primary are not then going on to secondary, so there is a whole set of issues around whether the Pakistani policy makers and so on are focused on actually translating the gains they are making in primary into secondary. I think, in Pakistan, this has been a 25-year dialogue, frankly, between us and them about taking more of an interest, frankly, in girls' education beyond the primary stage. To continue the dialogue, they are putting in more money, actually, to this area than they did in the past - that has been one of the linkages on policy to our support in Pakistan - but it is going to take some time, frankly. On secondary and tertiary, I do think they are important. The returns overall to a society are slightly lesser than primary, but they are important, for a number of reasons, for the economy. In terms of vocational training, for example, and so on, in terms of tertiary education the capacity issues we discussed earlier, the very people who will be running ministries, private sector firms and so on, need to get through secondary and tertiary education systems. So we do not neglect them; they do not get as much money, certainly, from us as primary but we have a scholarship programme, we have the links scheme, we have the development partnerships for higher education - a new programme we have - and we have a paper (I think, Mark, you are bringing out soon) on post-primary education because of exactly the point you make. Adult literacy must be part of that, it seems to me, but it is not the only part; it has got to be linked in with some of these other things as well.

Q22 Ann McKechin: You mentioned, obviously, the question of economic growth and there seems to be a clear tendency of your Department to move towards greater emphasis on private sector development, and we all anticipate the White Paper in the next couple of days, but that seems to be a clear trend in your own thinking, in terms of policy development. Given the fact that it is utterly essential to develop a robust SME market in many developing countries, clearly the issue of technical education is utterly core to that, yet it does not seem to be core in terms of the way that the donor community is currently acting. I do not single out DFID, but I think there seems to be a really significant gap in terms of trying to develop what is an essential support for private business.

Sir Suma Chakrabarti: I think in most of the countries we are focused in the fundamental problem is primary education, but there are a number of them where your point is absolutely right. If you go to India, the first discussion you have with any chief minister now in any Indian state is not so much about primary education, not because it is solved but because there is at least a plan to solve that problem. So the Indian Government has enormous resources which it is bringing to primary education. The chief ministers of those states are meeting on the same point you are on, which is: "I've got all these private sector companies coming into, I do not know, the coast of Orissa, I have not got enough people in Orissa who have got vocational training to actually supply this, and all that will happen is that outside labour will come in. How do I solve this? Can DFID help?" And we are beginning, with some of these countries and some of these states, some of the more advanced ones in particular, to get into these questions of vocational training and tertiary education.

Mr Lowcock: It is a very timely question. On Friday we are publishing the post-primary education strategy, and, as you know, we are publishing the White Paper on Thursday, and we have got things to say on this topic in there as well. I just want to make two points, if I could, on this generic topic. The first thing is if we look back over the last 20 or 30 years on what development assistance has focused on, it is incontrovertible that there was a scandalous lack of attention in the 80s and 90s to primary education. When the Government was elected in 1997 one of the things it said is we have to do something about that, and we were, frankly, very comfortable about that because one thing you do know is that if a child does not get a basic education it does not get a secondary or tertiary education either, and doing something about that, which as Suma says has higher returns, has been a really, really important thing to do. DFID has some comparative advantage in that because most of the things you have to do to address basic education are recurrent cost financing. You need to hire teachers, you need to build some schools (that is actually a very small element of it) and you need to pay for some books and some uniforms. It is very largely recurrent cost financing, and that is one of the things we are good at. Now, though, notwithstanding the fact that we are some way off achieving the basic education MDG, we have made lots of progress, and it is a good time to start to focus on the post-basic. That has the set of dimensions that you talk about: adult illiteracy, the technical, and so on. We will have to find our niche in those areas. Actually, some donors do a lot in technical already; the Germans, for example, are strong in that area. So one thing we will have to do, as we detail how we will take forward the strategy we are publishing on Friday, is work out our particular niche.

Q23 John Bercow: Chairman, thank you very much, and I apologise to colleagues and our witnesses for being late and unavoidably detained. I entirely understand, Chairman, where Ann McKechin has just been coming from in the early part of her inquiries, and for what it is worth I do not disagree but I think it is actually possible, also, to critique in a constructive way from the opposite vantage point - the two are not mutually exclusive: narrowness and breadth. In a sense, what Ann appears to be saying, and I entirely understand and respect this point of view (and, indeed, concede the merit of it) is well, it is too narrow a target; why not look at all sorts of other elements of education which ought to be addressed as well instead of just confining oneself to primary? I think what I would like to put to you, as a panel, to Sir Suma and colleagues, is that there is a sense in which, in fact, you could argue, on the contrary, that the target is very broad and that there is a tendency - an understandable but, nevertheless, a dangerous tendency - to avoid a sufficient focus on the narrow elements that make up that broad target. So if you take, for example, universal access to primary, yes, a thoroughly good target, entirely laudable, very long overdue and greatly welcome, but it does have to be rigorously enforced, regularly reviewed, as regularly monitored, and progress, therefore, measured. In the process, does one not want to be confident that all elements of the population are getting a fair crack of the whip? I give the example: if we are concerned about general equality, presumably we are also concerned about respect for the rights, probably historically neglected on grounds not only of resources but of attitudes, of people with disabilities. Therefore, I say to you, yes, it is okay to have this great target that says "universal access to primary education" but you could perhaps benefit from having an interim target of the kind for which Jeremy has very successfully argued in respect of anti-retroviral drugs. It is all very well having a target for some years hence, with people thinking: "This is a marvellous, high-faluting declaration of good intent but there is not much evidence of its achievement", and therefore Jeremy took it back to brass tacks and said: "Wait a minute; it is all very well saying: 'It is not for us to be so presumptuous as to interfere' and all this sort of self-effacing modesty that suddenly overcomes the domestic governing politician but, actually, do we not need to know what the interim target is so we can see we are making some progress?" How are we doing with particular groups? As I understand it, and I have not got the figures in front of me, people with disabilities in the developing world are disproportionately likely to be excluded from participation in primary education. I suppose what I am saying is whilst respecting the principle, to an extent but not exhaustively or exclusively, of national sovereignty in the use of resources, we do want to press governments, whom we are assisting in their programmes with our taxpayers' money, to ensure that those people get a look in. I would not want all children with disabilities in developing countries to be left to last, so there is the attitude, implicitly or explicitly, let us deal with the relatively straight forward cases first and then see if we can say to these chaps and chapesses to consider incorporating children with disabilities. No, absolutely not, they should be dealt with contemporaneously.

Chairman: It seems to be a conservative weakness today, very long questions.

John Bercow: It was articulated in a well meaning spirit.

Sir Suma Chakrabarti: I think it is well taken and we would agree with quite a lot of where you are coming from. Let us have a frank discussion about this. On education, as a good example, we are concerned that a lot of the aid is going to go in, because government budgets do not always distinguish between primary and within primary what elements, and some of the money may go into levels or areas or sections of the population which do not necessarily need the money as much as others, so Minouche is very keen to kick off some work within DFID that is really required to get below the top level composition of the government budget and get down to where is it really going this money. If you provide support, is it really going to primary education, and within primary education going to the most needy as defined. Some countries are doing better at this than others, and you will not be surprised which ones are good at already de-composing in this way. Vietnam is putting in an education programme which is quite focused around disabled kids, because the Vietnamese government takes your approach to this. It is not shy about saying that is what it is doing, so quite publicly identifying itself with a particular section of the population. Other governments tend to be rather worried about that if they say that for the disabled, what does this mean for other castes, or what does this mean in the terms of the political economy they are working in. You get this a lot in Indian States, the unwillingness to say there will be a skewing of the budget.

Q24 John Bercow: I understand that, you have the rather good and the perhaps less good, maybe awful, maybe you are understating it. To what extent, when you encounter those forces of resistance, or dare I say a reaction to say "No, no, terrible problems in the community if we do that. It will upset the dominant group or caste," do you, to be blunt, take them on? To what extent do you feel we cannot do that and take the line of least resistance that at least if they are helping somebody, they are not helping as many disabled children as we would like, or as many children from minority tribes or castes where there is broad stability, i.e. you are providing development assistance, but where there is still fairly widespread discrimination. To what extent do you just concede, and how robust are you?

Sir Suma Chakrabarti: We are in a fortunate position with DFID in that there is robust dialogue and we do not hide behind there being an acceleration to have this dialogue. We do have a robust dialogue. In some cases that dialogue is well informed. In the Indian case, because Indians do have statistics by caste and group and so on, there is a lot of data which is in the public domain and can be used therefore as part of the debate. Of course a lot of governments at the State level want to do that, and some do not. Take the position of Dalits in India. This is part of the dialogue of DFID in India, is this money really focused on the Dalits, who have very few resources of their own. I think it does vary. It is partly data driven and knowledge driven, but it is not an unwillingness on our part or some shyness. We definitely try and do that. There is some very difficult public policy issues of understanding in some other places. Take health and anti-retroviral drugs. One of the issues with anti-retrovirals, as you run up towards universal access, is on the way there several groups are not going to get access very quickly. How does a government decide what criteria should we be using to decide who gets access first? It is a public policy choice that we face in the UK quite often, but it is a stark choice when you have limited resources. Take the Malawi government, it is having to make those awful decisions. Does it prioritise extension workers because it is important for Malawi's future prospects over people laying roads in terms of anti-retroviral treatment? That is a discussion we are getting into in a lot of these countries. Again the data is not good enough to really inform the debate in some places but we are not shy about taking this on.

Q25 John Battle: Could I ask some questions in the general area of poverty reduction budget support process because more money is going into budget support. Do you imagine that will continue, and do you want the programme to go in that direction? Let me try and focus on three points around that. As well as the questions over UNICEF and Uganda, the plan B, if we withdraw the budget support who do we go through, what about stepping up budget support, particularly in cases of emergency and crisis? Can we shift from emergency responses to gearing up development so we do not just replace what was there before in a crisis, such as Pakistan with the earthquake, but we shift up a gear in development terms? Maybe that puts the budget support in different terms and use the crisis and the emergency as an opportunity to get closer to the Millennium Development Goals and work the governments to do that. That is one example. The second is a question of governance. It is a point I put to you that I have not discussed properly with colleagues or thought through, but sometimes we think good governance is having elections. Elections are important but they are a tiny part of a massive political process, about political understanding, involvement in politics, engagement in political parties. I sometimes think we focus on the processes of politics as if we sort the people out, make sure they stand in the right place, put the right thumb print on the right paper without any corruption on the day, but no real focus on the more difficult business, that is not the executive side of the house, if you like, but the political side of the house. We have elections coming up in the DRC. They may well be verified as completely non-corrupt but it might simply reinforce the current politicians and give them an electoral mandate to continue the situation. I put that up as a question mark. Do we need to think of ways, that means us as parliamentarians, of engaging more in political processes at local government, regional government and political level across party organisations and injecting some of that into the debate rather than just insisting that governance is just a technical process? I think we are missing something there. If I could just talk about India, because a large part of the programme still goes to India. In the book, on page 166, under the Predictability of PRBS for 256 as of March 1 this year, it says "Additional funding agreed as programme making good progress." Last year some of us were in India and we looked at the programme there, the scale and size of it. Not to neglect the scale of poverty in India to suggest that, but we are into the budget support arrangement. I just wonder, on the question of human rights in governance, what scope we have for pressing the questions rather harder. We had a workshop, if I remember rightly, with some members of staff of DFID working with people who are described as Darlits, people who are part of the excluded class there. It is a massively sensitive area, and we all appreciate that, but I worry that as the world is more local as well as global, the global issues are in my neighbourhood and all our neighbourhoods now, we are all in it together. Some of the issues, according to recent reports, of the caste discrimination are now washing up here in Britain. I wonder if we are doing enough at the India end, and how that would fit with the discussions that take place around the budget support programme.

Sir Suma Chakrabarti: I will try to answer some of those questions and I will have to ask for some help. In terms of the future of budget support, you know the criteria that we have set down for budget support and that criteria will be driven by it. We came in below what we expected last year because conditions were not met in some countries, but basically budget priorities have to be in line with poverty reduction strategies and also the fiduciary and risk management side has to be attended to as part of this criteria. I need to assure myself this money is going to be spent in the way the Government says it is going to be spent. I think we will be doing more budget support. We expect in some of the countries like Tanzania which has performed very well, if we are going to scale up there, we will provide more budget support. Some of the plans are in the report. Your question was very interesting about using emergencies as a way of changing the nature of the debate. That is really what has happened. I know this because I was involved in Indonesia after the Tsunami. Partly because there was a change of government just before in Indonesia, that led to a completely different dialogue in Indonesia about how aid money was going to be used, the transparency mechanisms. The Indonesian Government designed all sorts of new things. It wanted a civil society to be part of the monitoring organism, things that were not remotely possible before the Tsunami hit because of the worries about misuse of money. In Pakistan similarly with the DFID programme, Nemat and her team have to rethink the shape of the programme completely and re-shape the dialogue with the Pakistan Government. She can say something about that. On governance it is more than politics, it is more than technical fixes; frankly it is both. You need all these things and we define governance in quite a wide sense. What we are about is trying to get more transparency and accountability into the systems, and elections are only part of it. Just getting the financial management right is only part of it. We need to work on a wide canvas. I do not want to pre-empt the White Paper because it will say quite a bit about this. This is actually the centre piece of the White Paper so you will see that on Thursday and Hilary will no doubt say more about it then. Nemat may want to say a bit about the Indian programme and the class discrimination and how we take account of it in our dialogue with the Indian Government. Just to say that on the few occasions I have been to India to look at the programme, I have also been given a line to take by DFID India when I go and see any Indian minister to hit them with these issues. Some of these are at Federal level and some are at State level so the dialogue I had with the previous chief minister of Andhra Pradesh, Chandrababu Naidu, who then lost the election, was very much around Dalits in the rural areas. He had done quite a good job in urban centres in terms of the poverty but not such a good job in agricultural rural areas. It was around that sort of dialogue and when will you roll out the programmes to the rural areas.

Q26 Chairman: Elections have a role to play because that is where the votes were and that is why he lost.

Sir Suma Chakrabarti: There is an interesting issue there because an Indian analysis would suggest if you look in Andhra Pradesh that is the case, but if you look in other places reformers did very well, so it depends on what sort of reform and whether you are reaching out to a wide enough audience.

Q27 Chairman: That is an even better recommendation.

Sir Suma Chakrabarti: I am all for reform.

Ms Shafik: I cannot resist saying something about elections in the DRC case. You are quite right that it is an incredibly expensive election. None of us could think of any alternative to that process to deal with the post-conflict situation in DRC. We know that civil war cost about four times GDP, and the devastation which you saw on your visit showed the cost of not having some kind of reasonable political process. Having said that, one of the lessons we have learned in our governance work is that we were probably too fixated on the executive, and we were probably too fixated on anti-corruption campaigns, anti-corruption commissions and drafting more laws and more regulations to respond to poor governance. In fact, there is a lot more we can do in areas of voice, accountability, freedom of the press, transparency, the legislative branch, looking at deregulation as an opportunity for reducing opportunities for corruption, accounting finance issues, the way financial markets operate. All of those we need as critical pieces of the governance story.

Q28 John Battle: Could I suggest another one? Who are the appropriate people to work on politics? I will give an example, and it is not a person working for DFID, as far as I am aware, in the DRC. The person was suggesting to me that they had taken part in elections in Britain where there was a pretty low turn out and we had burn out policies in Britain so it was not worth doing here any more, but they were encouraging people to vote in another country in Africa. Perhaps in the DRC we have encouraged everyone to vote, things seem the same, so massive disillusion builds in. Where I would be thinking about the next election the day we are elected, so we are thinking of a process all the way through. How do you engage politicians as well as civil servants in the process? Do we do more to involve, whether it is the Westminster Foundation, Hansard, the parliamentary organisations internationally? I do not think we do as a bulwark to the development work, in other words we pile it all on to the people who may not have the experience and expertise and it does lead to disillusionment sometimes. Is there any conversation taking place to build politics in as part of the process of governance?

Ms Shafik: You are quite right. The evidence shows that the risk of conflict during an election is quite low. It is after the election that the conflict risk escalates enormously, and that is the biggest risk we face.

Q29 Chairman: The one thing the election will do is end the government of national unity.

Ms Shafik: The UN is actually thinking a bit more creatively than usual on this. They are looking at ways to compensate the losers and to bring some of the potential spoilers into the process by creating a House of Lords thing, or some kind of advisory council, or something like that, to find ways to bring the potential spoilers into the process. There is some creative thinking. The biggest risk I see is the level of external support diminishes after the election and you have to watch that.

Q30 John Barrett: If I could ask two completely unconnected questions, and one is about the front loading of the international finance facility. With the commitment to doubling of aid to Africa by 2010, we have seen that some of the poorest States, those that most need the aid, have the least capacity to absorb that increased aid, with the possible exception of vaccinations where it is very clear as to why it makes sense to make the investment up front to stop the ongoing costs. The International Financial Facility, is that going to produce more problems? Do you need it like a hole in the head? Where the money would be generated are for the countries least able to accept or to make effective use of front-loaded aid. Would you see in those countries rapid and diminishing rate of returns? While considering that, on our recent visit to Pakistan we had a very lively debate about whether or not the flag should be flown on different projects and I would like some thoughts on that.

Sir Suma Chakrabarti: On IFFIM in a way I repeat the answer to an earlier question. There are capacity issues clearly in many of the countries. Front loading undoubtedly saves more lives earlier, that is a good thing, provided we can solve those capacity issues. Part of the money from IFFIM will not just go to vaccinations but to build up health systems at the same time so it is an integrated process. We, with our bilateral aid, and with others, will also be trying to improve health systems. Health systems is at the heart of why maternal mortality rates are what they are so it has a number of benefits. We need to tackle those. The good thing about the IFFIM in terms of the burdens it might put on countries compared with some other international channels, is it is very much uses the country's own channels. It does not try to have its own offices running this in the country. It is light on transaction costs compared to many others but it is something we do need to watch, and your point is correct in that sense. On the question of the flag, we have a view on this which the Government has taken since 1997, that it is bad for country ownership to put the flag on humanitarian aid, for example. It is looking at this policy again, at least in the UK, because it is important for the UK taxpayer to know how all this money is used. It is considering whether we should not have a more pro-active policy and badge some of our aid, e.g. when it leaves East Midlands airport or whatever, partly because Hilary does feel OXFAM and others badge as their aid money that has gone from DFID to them.

Chairman: In Pakistan we saw the Norwegian Refugee Council.

Q31 John Barrett: We were on the point of congratulating the Norwegians on the fine job they were doing and we then realised it was UK taxpayers' money.

Sir Suma Chakrabarti: That is the point. Hilary is trying to hit two objectives. We do not want to detract from the country ownership objective, which is really important, and countries like Pakistan say they do not like the flags. They do not like the Norwegians putting a flag on it. At the same time, Hilary does want to explain to the UK taxpayer it is their money and it has been used for this purpose.

Ms Owen: At present, as you know, there is not a sign there. The USA are one of the biggest exponents of branding but the Canadians and the Dutch do not do it either. The risks we have seen are that it can be patronising for the beneficiary. There is also the fact that we do not have much control of where the brand is placed and you do risk high profile footage of looting and rioters, disturbances and that kind of thing. For me the most serious risk you have to think about is security. In Iraq and Afghanistan, for example, I want as little badging as possible for the safety of our staff. However, as Suma said, Hilary Benn has recently agreed to some badging, and the principles that we have set out are that the branding should not obstruct or detract from the humanitarian operation; secondly that it should not increase the risk to DFID staff; and thirdly that the branding should not be undignified in any way. The sort of things that we might see now are the branding of DFID funded flights from the UK, staff in the field wearing DFID-branded clothes, and that specific large items procured by DFID, such as helicopters, and greater media coverage for teams on the ground. We will consider all these options on a case by case basis.

Q32 John Battle: I am not in favour of badging at all. They should ban badging from all agencies including NGOs. In Pakistan there are lots of posters everywhere with everybody claiming their bit. I tend to take the view that we should enable people to be able to take steps to move forward and not be giving them help and aid all the time. It is a massive devaluation of what development is about to have badges of aid with any labels anywhere. I would be encouraging our partner country donors and NGOs to pull their banners and badges and flags back so that eventually the people can say, as one famous person said, "We did it for ourselves." We should be going in that direction. That is the way our policy tends to go on the ground with our DFID practitioners and I think we should stick to it.

Chairman: We had a very lively debate about this.

Q33 John Bercow: Unfortunately I did not join in the badinage because I was not in Pakistan. I understand my honourable friend, the Member for Grantham, expressed himself eloquently in some modest length and with intensity on this matter. I can imagine he got in the right. I usually agree with him but I do not agree with him on this. It does seem to me the absence of badges is one thing, but if the effects of the absence of the United Kingdom badge is that a wholly contrary and misleading impression is given that a project which is, in fact, due to us is due to another country, that is a most unsatisfactory state of affairs. Can I say in parenthesis, and not entirely with levity, that given funds that come from this country come ultimately from the United Kingdom Treasury it does not seem unreasonable that a British flag should be installed where appropriate to mark the fact that it is our contribution, the more so given that the Chancellor of the Exchequer apparently wants to see the United Kingdom with a flag in all of our gardens.

Sir Suma Chakrabarti: As you can see, this is a lively issue. As Sue said, Hilary Benn is considering this on a case by case basis. I really agreee with Mr Bercow about the issue that if it is quite clear that this was a British project, why are we allowing someone else to take credit for it. I do find that very irritating indeed.

John Bercow: Equally I understand John's point of view. That is a serious issue although we can be light-hearted about some of it. I see his point of view that one does not want to be engaging in a flag waving exercise, certainly where there are security issues at stake. We always have to work on the basis, without being too pious about it, that we are there to serve and to do the right thing by those people and not to engage in some sort of competitive boasting. As I say, the misleading point is one we have to avoid. I do not think that should be done on a case by case basis depending on the judgment on the ground, so to speak. Where misleading is taking place as a result of the absence of the UK badge, that has to change.

Q34 Chairman: On that particular project, the Norwegian Refugee Council was 55 % funded by DFID and only 25 % funded by the Norwegian government. Interestingly enough, they also made the point that DFID, on the other hand, was much more rigorous in finding out how the money had been spent than the Norwegian Government.

Sir Suma Chakrabarti: I think we have also said we have to up the communications effort. One of the criteria Sue read out was very much trying to do more to explain what we are doing in these crises. In the Pakistan case the British public was quite well informed about what the UK Government was doing, if not on the individual projects but on the overall impact of the UK aid.

Q35 Hugh Bayley: This is a national question not a flag question. China's economic development is having an enormous impact on Africa. What is the department doing to equip Africa to rise to the challenge and the opportunities? For instance, should they with putting in resources to enable the EA to set up a China strategy unit? What are we doing in our bilateral relations with China to encourage them to think of what the consequences of their perfectly reasonable search for raw materials will have on Africa's development? Are we in any way in a position to shape their thinking?

Sir Suma Chakrabarti: I am glad we are getting into a discussion on this because this is a middle income countries issue and we need to move on to post-aid issues. China is undoubtedly a force for the good and a challenge as well in Africa. The good part of it is the demand for raw materials is one of the reasons Africa's growth rate has improved so much in the last few years. That is why for five years running it has been above the world average. A lot of these countries have done well, like Zambia, because of that demand. It has some issues in terms of driving up exchange rates and that has an impact in Zambia in terms of the non-traditional export sector. The difficult side for us is that Chinese money is often a soft loan, and therefore as the UK and others write-off multilateral and bilateral debt in Africa, our concern is some of these African countries are getting themselves in a bit of a potential debt issue some years down the line. Secondly, some of the governance and economic policy issues, the dialogue you would encourage us to have and we are having, the Chinese, who are now very big players in terms of financial flows to Africa, are not having that dialogue and not interested in that dialogue so much. In a way there is a concern that it is going to dilute the policy reform process that has been taking place in Africa. It is a balanced picture I am trying to give here. Africans themselves are very interested in this and very concerned, on one hand, but also pleased about the increased investment. It is very notable that the African Development Bank's next annual meeting is going to be in China. Why is that I wonder? We have, in the African Bank, a great president, Donald Kaberuka, who sees both the plusses and the minuses. That is one of the reasons he is keen for this. What does this mean for DFID? It means in Africa for many of our country offices, take the Zambian office, they are beginning to have a dialogue with the Chinese Embassy. The Chinese Embassy and DFID had never heard of each until quite recently and they now have to have this dialogue. What does it mean for DFID in China? As you know, we have a small resource transfer programme, about Ł30-35 million, but what we are doing is reducing the resource transfer, because we will graduate from there, and moving more into a dialogue with China about its global and regional development footprint, bad and good. The Country Assistance Plan for China looks very different from what it would have looked like two or three years ago. We would have just described our programmes and projects in China. It now talks about climate change, Africa, those sorts of issues where we need to interact with China. As it happens, I am being sent to Beijing in September to have a discussion with the Chinese on some of these issues. We are also trying to engage the OECD DAC, the Development Assistance Committee, to try and have a discussion with the Chinese and the Indians about good donorship principles. That is proving tough. It is finding it difficult to get meetings in Beijing. The Chinese have said they are not ready for dialogue yet. We think it is part of China becoming a member of various international clubs like the World Bank, the IMF, and potentially in the future the OECD. We should be using that process in the way that we might use joining the EU to try and improve standards, and that is where we are. Nemat has been trying to get Whitehall very interested in this discussion to spark a debate on this. We think our globalisation strategy in Whitehall is a bit too focused around the traditional suspects, scholarship programmes and the like, and China needs to tackle some of these other issues too.

Ms Shafik: The scale is phenomenal. Our latest estimates were that Chinese commitments to investments to Africa last year exceeded all official development assistance to Africa and exceeded all private investment in infrastructure in Africa. The scale is phenomenal and Suma is right, we have to engage. We have no choice: if we care about Africa, we have to. It seems right to point out that it is difficult. We have particularly tried to engage China in some of the transparency work, to get them to join the Extract Industries Transparency Initiative, for example, since 58 % of their investment is around oil and about 24 % around minerals. Transparency issues, revenues and contracts, are quite key. They have not signed on yet and our attempts to get them to engage in some of these international fora is hard. Sometimes they do not show up. They do not want to share much information. There is a sense that although Beijing has actually published an African Strategy recently, I do not think they are quite ready to join some of these international clubs.

Sir Suma Chakrabarti: There is a Chinese Commissioner on the Commission for Africa.

Ms Shafik: That is right. We also invited the Chinese, as part of this bringing them in, and Mark was leading on that.

Mr Lowcock: We had a Chinese observer on the review by the DAC of the UK programme, and that was about this strategy of engagement. Our view is that we have to play to what Chinese interests are. If they are going to lend money to Africa, then they become a creditor and have a similar set of interests to other creditors. We have engaged them in discussion in the Paris Club. It has to be something which plays to China's own interests otherwise it is not going to be a productive dialogue.

Q36 Mr Hunt: I had a couple of questions and the first is just a practical one. When you are dealing with small African countries, or even big African countries, but very undeveloped African countries where really the UK agenda is wholly about development, why do we have a separate Embassy and DFID infrastructure? Should not the person in charge of DFID actually be the Ambassador with a small additional staff to deal with diplomatic issues? Would it be much more sensible, from a UK taxpayer point of view, to integrate those two infrastructures?

Q37 John Bercow: We should have the Foreign Office permanent secretary here.

Sir Suma Chakrabarti: My colleagues are laughing because this is a question we have been debating, and it is part of the dialogue we are having with the Foreign Office and Treasury as part of the issues the Foreign Office face as well, given their own headcount issues. How do they maintain a global network without having to pay the overheads? You are right. Take the case of Malawi or Zambia, the UK's key interest in these countries is now in development. There is some consular work, even some minor commercial work and as economies improve British investors will want to go in, and these are Foreign Office things, but there is a dialogue going on, exactly as you say, as to a more joint operation, with DFID taking the lead in some places but perhaps not in the High Commissioner role. Perhaps there could be someone in the DFID office from the Foreign Office who would be the High Commissioner reporting to a regional hub or to London or whatever. That would possibly save the UK taxpayer some money overall and allow Britain to have a global network. That is a possibility. The cultural and systems issues Sue has been looking at and she may say something about the shared services issues underlying this. It is helpful for both this Committee and the Foreign Affairs Committee to start thinking about this. I think it is in other places like China we might want to think about the reverse, where the issues are of a global development nature, but there are other UK interests with China as well and a more joined up operation may be sensible there, with us being the smaller amount part of that. We are up for this.

Ms Owen: Already at the moment, as you know from your visit to Pakistan, we are moving towards having a co-location of the DFID office with the Embassy, but it is still very much a separate office as you will have seen in Pakistan. That helps us share some costs like security, which in some countries are very high, and some satellite communication costs, that kind of thing. One problem is that in many cases sharing services with the Foreign Office does not mean it is cheaper, sometimes it means it is more expensive so we have to be quite careful that we only share services where we are getting proper value for money for that. To date I do not think we have any examples of a country where there is only a DFID office.

Sir Suma Chakrabarti: Central America, Nicaragua, where the Foreign Office closed down, Honduras may be another one. Basically the Foreign Office closed down and we provide some consular services that are required. More could be made of this in some places, and I hope the Comprehensive Spending Review will push us on this front. This cost issue is really important if the UK taxpayer is to get a good deal out of this. DFID can purchase services locally in India and Africa much more cheaply than the Foreign Office currently does, so co-location is not the objective so much as effectiveness plus savings for the UK taxpayer.

Q38 Hugh Bayley: Can I make a few comments about what I find useful and have comments about what might be useful innovations? Having an index is very important. I think to list all your publications is very important, but I think it would be really useful for the public to see where they are available on the web site. I think it followed a conversation we had at this Committee three or years ago that you started publishing your Annual Report on the work with the World Bank, which I think is a very useful publication. When you read your report within this Annual Report on the World Bank you have a page and a half, or couple of pages, about something that is now absorbing half a billion pounds. May be that is the right amount of detail in this report given that you do a separate Annual Report on the bank, but I certainly think within your section in this report you should refer to the fact that you do an annual publication of a 40 page document about the Bank. I wonder whether you ought to publish similar reports on the other big multilateral agencies. Should you have a report on your work with UNDP: what you are putting money in for and what you are getting money out? If not, I think you ought to say more about these big programmes in the Annual Report. You should say rather more about with the EU programme. I notice this year, for the first year, the IDA is getting more money than the EU, but nevertheless the EU is getting about Ł1 billion of British taxpayers' money and it would be useful to have a clearer statement of what it is that the British taxpayer gets in return for that money. A final comment is this. After this year's spring meetings I picked up fairly quickly the Chancellor's statement on top line key decisions made at the IMF meeting which he supposedly did as chair, but there was not a similar statement from DFID. I searched for it and I assumed there would have been a written Ministerial statement since there was not an oral one. I put down a PQ and the Secretary of State wrote a really good note about what the UK had taken to the spring meeting and what had come out as a result. Could we have that sort of statement produced routinely, maybe as a written parliamentary statement after the spring meeting, certainly after the annual meeting?

Sir Suma Chakrabarti: I will ask Sue and Mark to help me out on this. I think the first point, index, list of obligations linked to web site, absolutely, we can do that in the future. That is not a problem. We will refer to the report on the work on the World Bank, that is a good idea. It would be helpful as a heads up for the Committee that we ought to have some discussion about strategic direction of the World Bank. This is something that is clearly quite important to all of us. The World Bank is the other great institution in development. Is it now fit for purpose is an issue coming up. Mark will be involved in IDA 14 Mid-term Review and 15 replenishment coming up, so heads up on that. Similar report on the multilaterals, we will have more about them in the departmental report. I think we will be definitely willing to do more of that. EU, it is worth remarking on the European Union programmes. We feel the EDF, the European Development Fund, is probably the most improved channel of assistance in the last few years. There were issues about disbursement rates which came out in one of the reports today but in terms of quality it has improved a lot. This says a lot about UK investment in Brussels in terms of people to improve the quality of the EDF. It says quite a lot about the fact the EDF on the ground is increasingly co-financing the World Bank and DFID programmes which helps the quality, because they do not necessarily have very good staff. The third thing is it does say a lot about taking a hard-nosed approach to replenishment, unlike on the EU budgetised programmes where we do not have any say because they are Treaty obligations. The EDF story is a quite interesting one and we would be willing to talk more about that in the future. Finally, on the top lines achieved at the spring meetings on the Development Committee side, we should certainly do that for the spring and annual meetings. I will have to talk to Hilary Benn about that but I am sure we are willing to do that.

Mr Lowcock: This is the longest and most expensive report we have ever given you. We have tried to make more use than in the past of this technique of cross-referencing to other documents. Clearly we have not cracked that yet but we will try to do that again next year. One of the other things that we will do is if it is enacted following the passage through the Commons, is have additional reporting obligations as a result of Mr Clarke's Private Member's Bill. We are gearing up now for how we are going to discharge those. The Bill sets us a set of additional responsibilities on reporting, including on the multilateral agencies so we are looking at that as an active issue. We are developing a new tool to provide ourselves with better information on what we think about the quality of activity and spending in the major multilaterals, and clearly that is something which speaks to your point: how do you know how effective the spending through this set of institutions is. We are looking at the issue of how we publicise the outcome of that work and we will complete it later in the year, and that is what does the tax payer get for the investment in these institutions.

Ms Owen: We do welcome this kind of feedback about what you would like to see and what you would not. We will need to discuss with you, if the Bill goes through, whether we include that reporting in the Departmental Report or as a separate report. I would also say on the cost front, any ideas you have about what we can drop from the report are also welcome.

Chairman: I would just echo it is actually a very good, well presented report and is easy to use as a working document. What one wants is a useful document rather a trumpet for the department.

Q39 John Battle: We asked questions about staff and what the department is doing. I have to say in the eight countries I visited in the last 18 months everyone that we have met, whether it has been Prime Ministers, Presidents, ordinary people on the ground, have been full of genuine praise for DFID's staff. I have never ever heard criticism, marking out DFID staff to be ahead of the game, enlightened and leading the debate and leading the action. It might not always get reported back to the systems and it should be said. In terms of the report, I know we pushed as a Committee in the past for there to be a refocusing on agriculture and the report came forward. That was welcome this year. The UN now projects that most people on the planet will live in cities by 2025 and most of the poor will live in mega-cities, so the whole debate is from agriculture to urban. I know there was a passage on page 155, Faith in the City, "Towns and cities are the primary source of the future growth of developing countries." You have a fund of about Ł10 million that goes into slum upgrading in India. I do not know if that is expended elsewhere. There was a picture of Kingston in Jamaica and challenging crime there. Are you doing more work in research, or thinking of doing more work in research, on developing urban strategies for development and collaborating with other bodies to do that?

Sir Suma Chakrabarti: First of all, thank you very much for what you say on DFID staff, which you have picked up from the countries you have been to. It is very nice to hear and we will pass it on to our staff. It is very kind to let us know that. On urbanisation, this is an up and coming issue. It is very obvious in South Asia in our programmes there and the programmes Nemat is managing in India. That is a feature of the content of the programme. In Calcutta, for example, the whole urban services debate, how Calcutta can been rejuvenated, is now taking off because of policy reform and DFID is at the leading edge of that. That may be an issue as to whether we now need to re-look at our policy of urbanisation across the board. I would not want to give up on the fact that in many African countries rural poverty and growth in the rural sector is something we need to keep attending to. We sent our chief economist and chief scientist to Malawi and they are about to come up with views on how to get agricultural development going. It may not be something DFID needs to do, I hope, but someone needs to work with the Malawi government on this. You can get eight times the output from a hectare in Zimbabwe, or at least before recent troubles, than in Malawi. That is partly managerial issues, partly technology, partly transport costs, all those things are part and parcel of this. There is a big job in agriculture to do.

Ms Shafik: We are doing on that in partnership with others. The work in India is being led by the Cities Alliance which is a consortium of all the donors concerned about urban issues and that is specifically being led by UN Habitat and the World Bank.

Q40 Chairman: Two things that might be of interest to us, one mentioned in passing, the language issue. It was mentioned both as a requirement but also we got the impression it was a constraint. In particular we have been to Mozambique and the Democratic Republic of Congo. Mozambique is a Portuguese speaking country. In both cases DFID staff had language training and were doing very well with it, but they also said they are supposed to be engaged in quite sophisticated discussions with ministers and their capacity in the language is not good enough. That is even more true in the DRC because in Mozambique there is a reasonable use of English which did not materialise in the DRC; French was absolutely the language. We were told the trouble is, of course, if they got the Foreign Office length of training then that creates more staff pressure and that creates more budgetary pressure. It raises two questions. Clearly to go into a country where English is not the language of government has significant implications for your staff and budget. On the other hand, if you are going to do it you have to do it properly. Are you going to address these issues?

Ms Owen: It is an issue, and it is an issue not only in so-called fragile states but other countries too. You have already answered the question: it is one about cost. The Foreign Office, as you know, have a Rolls-Royce service and it would be great if we could do that. It is pretty difficult when we are under the constraints that we are under. If you would like to try and help persuade the Treasury to keep our budget at least flat in real terms, if not growing, I think we could do more there. We will have to do more selectively on this in countries where we are finding it difficult to post people as well. For the Foreign Office there they talk about six months to a year before posting. The other thing, of course, they do, which we would need to do to get a return on that kind of investment, would be to encourage staff to stay in post for at least three years to make that worth it.

Q41 Chairman: The point I am making, and I think Suma you said before, we are up for this staff debate. You have decided to go into the DRC, you decided to go into Mozambique and you brought these problems on yourself. There are two arguments. You could say given the staff constraints, we cannot do that, or alternatively you do need to make a pitch to say we think it right to do that but that needs to be taken on board when you are talking about staffing levels and so forth. I think we need you to give us a bit of thought about that.

Sir Suma Chakrabarti: Sue said we do think it is a constraint on our business in some places. I would say it is more of a constraint on DRC than Mozambique. Many of the key policy makers and people we work with in Mozambique do speak some English. It is more of a problem outside of Maputo than in Maputo. In the DRC it is a fundamental problem with government all over the place. It is a constraint so we have to try to resolve this and put some money into it. We need to have a discussion with the Treasury about this, because if we are going to build this into our postings plans then we do not have, as the Foreign Office does, a margin. They have a margin at any one time where people go on language training. We do not have that. Maybe that is what we need to do for one or two of these postings.

Q42 Chairman: In these fragile state areas are issues of corruption, security, fraud and so forth. In the DRC we had problems with the roads programme and I do not know whether you have managed to resolve that or where you are. We have had debate, and I raised it in the Liaison Committee, about Afghanistan and Iraq and the extent to which you have been asked to do an aid programme in very a difficult security situation and monitoring and supervision is difficult. How are you going to keep tabs, because it is not going to help anybody if substantial aid money goes into these areas but does not reach the people.

Sir Suma Chakrabarti: I think we are coming to the end of the session but I am glad we touched on this. This is one of the biggest concerns of the four of us: quality assurance around programmes in these very difficult places like Iraq and Afghanistan. There are a number of issues. The security one in a place like Basra. In Basra two years ago you could get things done. UK staff could get out and about, monitor, supervise and do that sort of thing. That is very difficult now, in fact virtually impossible, and it makes the quality of the programme more difficult to deliver. Afghanistan is a bit better, except if you go to Helmand and then it is the same sort of issues. Beyond that, governance, policy issues, it is very difficult to get a dialogue going if you cannot get out and see what is happening and go to the ministries and have that sort of dialogue. We have lots of second best-type of solutions, and Nemat and her team have been very creative in finding these but they are second, third and fourth best solutions and they are not the solutions we would really like to have.

Ms Owen: It is not just about whether we can monitor where the money goes. Sometimes it is a real practical issue of how we get the money there. You are talking about cash certainly in Afghanistan and Iraq. There is very little electronic transfer of money available, so you have got immediately a risk of money simply being stolen.

Ms Shafik: There is an issue of effectiveness. If you look at our portfolio, our worst performing projects are in Iraq and Afghanistan.

Sir Suma Chakrabarti: Which is not surprising. All of us pay tribute to our staff who are working in those very difficult situations. The fact we have some quality programme is due to them and their courage.

Chairman: We also appreciate there is a political reason for you being there which you might not have chosen. We have to take on board that creates difficulties.

Q43 Ann McKechin: There is concern, particularly among of the NGO community, particularly in Afghanistan, this link with the military operation. I can understand the principles behind it but I think it is whether or not the ability to protect civilian workers working both for DFID and NGO projects which may be sponsored by DFID, whether we are taking into account their concerns.

Ms Shafik: By sheer coincidence I was speaking with our team in Kabul this morning. We held a meeting with all the NGOs operating in Afghanistan this week, 14 of them, to identify what their concerns are. Their major concern was they did not want to be very associated with the military operation or with the Government of Afghanistan. We have compiled a list of seven or eight key concerns they have in order to be able to operate more effectively and we are going to do the best we can to enable that.

Q44 Chairman: Their judgment was that was a better security than being protected. I do not think we should pursue that. Thank you very much. There may be one or two questions we have not got around to which we may put to you in writing. This has been a good session and I hope it benefits you. We will produce a report on this.

Sir Suma Chakrabarti: Thank you very much. We take this very seriously. It has been a good session for us too and gives a heads up on a number of the issues you want to pursue. We are always happy to answer your questions and we will send you written answers to the questions you asked.