CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 569-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

INTERNATIONAL DEVELOPMENT COMMITTEE

 

 

THE AUTUMN MEETINGS OF THE IMF AND THE WORLD BANK AND THE UN WORLD SUMMIT 2005

 

 

Tuesday 18 October 2005

MR JEFF POWELL and MR SIMON COUNSELL

RT HON HILARY BENN, MP, MR STEPHEN PICKFORD, CB, MR GAVIN McGILLIVRAY and MR GRAHAM STEGMANN

Evidence heard in Public Questions 1 - 68

 

 

USE OF THE TRANSCRIPT

1.	This is a corrected transcript of evidence taken in public 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.
2.	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 18 October 2005

Members present

Malcolm Bruce, in the Chairman

John Barrett

John Battle

John Bercow

Richard Burden

Mr Jeremy Hunt

Ann McKechin

Joan Ruddock

________________

 

Examination of Witnesses

 

Witnesses: Mr Jeff Powell, Coordinator, Bretton Woods Project, and Mr Simon Counsell, Director, the Rainforest Foundation UK, examined.

Q1 Chairman: Gentlemen, good morning and thank you for coming. I wonder if you would briefly like to introduce yourselves. One of our witnesses is unwell this morning and not able to be here.

Mr Powell: Good morning. My name is Jeff Powell. I am the Coordinator of the Bretton Woods Project. The Bretton Woods Project is an independently funded NGO that monitors the activities of the World Bank and the IMF.

Mr Counsell: Good morning. My name is Simon Counsell. I am the Director of the Rainforest Foundation, which is a non-governmental organisation working with the rights of local and indigenous peoples in tropical rainforest areas of the world.

Q2 Chairman: Perhaps I could just start by saying there has been a lot of debate about issues of conditionality, which Jeff may wish to come in on first. The World Bank have done a review of conditionality and the British Government have changed their policies in saying they are lowering conditionality thresholds; but there have been some people who have said the consequence of that is people are not clear as to exactly what is expected of them; whether they are administering international or national aid projects. In the light of the World Bank view and the British Government's own policy changes, can you give us a feel for how you think the conditionality rules have changed and whether they have been helpful or not?

Mr Powell: Broadly speaking, NGOs in the development network have welcomed the new British Government position on conditionality. The argument for some time has been that conditions not only fail to do what they set out to achieve, but that they undermine the policy space of governments and the accountability of governments to their citizens; that they reinforce a vertical accountability to donors and the international community. The feeling was very much that the direction the British Government paper on conditionality took was very welcome. The World Bank review of conditionality, which largely came about because of pressure from the British Government, was disappointing to us in many respects. I suppose I should start with the strengths which are, it does invoke a series of good practice principles which we consider encouraging, these are: ownership; harmonisation; customisation; criticality of conditions; transparency and predictability. All of these are good things, but there is a real question mark around how these will be operationalised by the Bank. The other positive for us is the commitment by the Bank to review its use of conditions in one year's time in light of these good practice principles. There is a lot to be seen yet in a year's time.

Q3 Chairman: Do you have any specific examples of where conditions have undermined the objectives of the aid, the needs of the recipient countries?

Mr Powell: We could use any number of conditions. One that is commonly invoked would be trade liberalisation conditions in the past. There has been a study done recently by Christian Aid which has looked at trade liberalisation conditions either explicitly, through country support documents or implicitly, through attempts by countries to meet the standards that the Bank sets for good policy in order to have high case lending scenarios. These liberalisation requirements have been damaging countries in a number of ways. They have undermined their ability to negotiate in the WTO, so they have been set back in terms of bilateral negotiations. They have also created a situation where imports become cheaper; it creates a balance of payments deficit as they bring more imports in; and it leads to a deindustrialisation as countries look to produce more from outside rather than from inside. It has been premature trade liberalisation for many of these countries where their domestic industries are not yet ready to compete. The examples given by Christian Aid in their reports refer, for example, to the tomato canning industry in Ghana, where that industry has been overrun by cheap imports from the EU; another one they have used is the domestic poultry industry in Ghana where, I believe, it is the United States' poultry exports that have now flooded into the Ghanaian market and largely wiped out domestic producers. It is just one area where we can talk about the impact of conditionality, but you can look at similar issues around privatisation and deregulation of financial controls as well but we would probably get into quite a long discussion going through examples of all of those. Some of the critique of where the World Bank review of conditionality might be useful: first of all, we were disappointed there was a failure to prioritise the discussion of the conditionality review at the annual meetings; it was simply presented as a background paper. We think in a scenario where aid is being rapidly increased, to discuss the conditions by which aid is accompanied is absolutely vital; one cannot go without the other. Three comments: first, we think the Bank has too narrow a definition of what it considers conditions. It only considers conditions, what it calls "prior actions", things that countries are required to do before they actually receive the money. Other things which they call "benchmarks", which are essentially conditions the countries need to meet along the way to continue the flow of money, they do not count in their conditionality review. Their own survey of recipient governments said that 75 per cent of government officials could not distinguish between the impact of a prior action and a benchmark. Essentially recipient governments are seeing all of these as conditions. We very much support what the Secretary of State has said, that he wants the Bank to set out a clear statement on the circumstances where the Bank might use sensitive policy actions as benchmarks. We are pleased to hear that but we do not think that has come out yet. The second point we want to raise is the persistence of a rather perverted notion of ownership in the Bank review of conditionality. The Bank is still very much defining ownership as a country's ability to implement the policies it agrees upon with the Bank, and not the country itself taking leadership in deciding which conditions are appropriate for its economic development. Our suggestion here is that we need to turn what is recommended as "mutually agreed accountability frameworks" - which is where a country agrees to have certain conditions drawn from its plan - to "mutual accountability frameworks" - where donors agree there are certain conditions in terms of aid predictability and aid harmonisation that they must maintain as part of the contract in terms of a development plan. The final point we felt was missing from the conditionality review was a sufficient discussion of what are called "poverty and social impact assessments". This is the need to look at what is going to be the impact of any policy on the most vulnerable groups ex ante, before these policies are brought to bear. These are some of the issues we feel are still missing.

Q4 John Battle: You mentioned the poverty impact on the most vulnerable groups, but I would be keen to see poverty reduction as the focus of central aid of the World Bank. Given that the World Bank has got extra ODA resources now, what changes do you think that should make to the World Bank's portfolio to make sure that poverty reduction rather than the poverty impact is the key to its strategy, i.e. not just to make sure that the most vulnerable are not hit again but actually to eradicate poverty? What steps must be taken there?

Mr Powell: In response to your question of what do we see as the biggest change to the way the Bank is going to be working, the clear signal we have had is that there is going to be a large return to infrastructure. Everyone within the development community is once again talking about infrastructure as being central to growth and, therefore, to poverty reduction. The Vice President for Infrastructure at the Bank said that there would be an increase of approximately $1 billion a year in lending for infrastructure over the next four years, until infrastructure lending reached 40 per cent of the total Bank portfolio.

Q5 John Battle: Does that mean back to big projects?

Mr Powell: This is our concern very much. The Vice President assured us that the Bank had learned the lessons of the past but we have concerns that that is not the case. Central in terms of infrastructure should be exactly what you are asking, which is: is poverty reduction at the core of what infrastructure is trying to do? A recent review by the Operation Evaluation Department of the Bank looked at private sector development in the energy sector and they said "that the poor are often the last to benefit from increased access", and they urged a greater emphasis on the mainstreaming of poverty reduction in infrastructure lending. To ensure that poverty reduction is at the centre of infrastructure lending we would recommend three key facets to examine: first is the question of options assessments. All of these groups which you mention, the most vulnerable groups, should be involved in a comprehensive, accountable and participatory assessment of infrastructure needs. This is the only way that we can overcome a bias towards large-scale, capital-intensive and centralised infrastructure. This is the way that we can get to things like rural electrification and sustainable irrigation systems; and an emphasis on efficiency improvements over new bricks and mortar. The second facet which we think is crucial to look at is the question of safeguards for the most vulnerable. In terms of World Bank lending, safeguards are environment and social safeguards. Whereas the Bank in the past has taken a mitigating approach - after a project has largely been designed they look at what are going to be the negative impacts and how can they mitigate that - we think they very much need to move to a model where those risks are anticipated and examined in the options assessment. We are very worried by the IFC safeguard review, the Bank's private sector lending arm, because we feel that it threatens to weaken the existing safeguards that the Bank has. A couple of examples: it fails to make explicit references to international standards; it removes the requirement for third party environmental assessments; and it transfers accountability for monitoring of these safeguards from the IFC itself as an institution to the client company. The final point we think is crucial in terms of maintaining a poverty reduction focus is that the question of corruption is well examined in the question of infrastructure. Over the last two years in fact there have been US Senate hearings on corruption in the lending of the multilateral development banks, and they have found that corruption is pervasive in large infrastructure projects. Unless we get to the root of that problem we will not solve it; and that requires a step changed in the Bank's transparency of documents for infrastructure projects, and a willingness on the part of the Bank to sanction those companies who are involved in any corrupt processes.

Q6 Joan Ruddock: There is a lot of talk about accountability and good governance where aid and development is concerned, but there have been criticisms that parliamentary accountability does not feature very large in terms of the performance of international financial institutions. In evidence last year we heard from DFID that they did not obstruct parliaments, and the Secretary of State said he was keen that DFID promoted parliaments. I wonder what your view is of the international financial institutions and what kind of progress, if any, they are making on parliamentary scrutiny?

Mr Powell: We feel that the Bank in fact have recognised this as a problem and they have invested considerable resources into what they call parliamentary capacity-building. We have some concerns about that. To put it in a glib way, it is a bit like the fox guarding the henhouse. We feel that parliamentarians themselves should be in the lead in deciding what they want to learn more about, and who should provide that capacity-building; rather than the IMF arriving with a mission to teach parliamentarians about good economic management for example. The emphasis should be placed, first and foremost, on national capacity-building and on self-learning between recipient countries. We felt very recently there was a step backwards. There was an attempt by southern parliamentarians to present the issues raised by the international parliamentarians' petition, which has been supported I think by many of you around the table and many British MPs, to the G24 meeting at the annual meetings of the World Bank and IMF. That presentation was blocked by the IMF Parliamentary Liaison Officer who demanded that they produce written evidence of their invitation to that meeting. We just saw that as an example of the cautious and very defensive attitude of the institutions towards critical parliamentary involvement. In the coalition that works to support the international parliamentarians' petition, we have a number of suggestions we think still need to be taken to move this forward. For the Bank and Fund we think they need to develop guidelines for staff in how they deal with parliamentarians. There are very sensitive issues of sovereignty that are involved here. They also need to improve transparency throughout the project cycle and come up with ways for parliamentarians to be involved in that process. We understand there are sensitive issues, particularly around IMF lending, but there are creative ways to get around that. Some research done by Ngaire Woods at the Centre for Global Governance at Oxford University has recommended a cross-party parliamentary group which would work in a certain degree of secrecy, but would have some oversight of IMF lending to countries. For DFID's part, we believe DFID should develop a strategy for improved parliamentary participation in its bilateral lending; this could then act as a guideline for its support through multilateral lending. We believe there is more that could be done to improve parliamentary involvement in poverty reduction strategies, both in their development and in their implementation. This came out of a study done by World Vision on poverty reduction strategies in Bolivia and Zambia, which found that parliamentary participation was still sadly lacking. On the part of the IDSC, I would encourage you very much to work more closely with southern MPs, particularly on this issue of accountability of the IMF and World Bank to parliaments. I think there are a number of southern MPs who would be eager to work on that with you. Finally, one suggestion we would like to see implemented would be to involve more parliamentarians in the World Bank/IMF annual meetings themselves. We think this would go a long way to opening up the atmosphere of secrecy that still cloaks these meetings.

Q7 Joan Ruddock: Simon, I wondered if you had anything you wanted to add in terms of prescription for change?

Mr Counsell: I do not have very much to add to what Jeff has already said. Hopefully one of the issues in the evidence we submitted, in the specific case of the Democratic Republic of Congo, does raise some very serious questions about the accountability of the Bank to parliaments and, indeed, to the populous in more general terms in post-conflict situations where, through Bank intervention, some major policy changes are being effected through, for example, interim, non-elected governments that may (as they do in the case of the Democratic Republic of Congo) actually consist of very little more than a conglomeration of warlords and very corrupt vested interests. I think there is a great deal more thinking to be done about the role of the Bank and how it can exercise some degree of accountability in such circumstances.

Chairman: It is a very difficult situation from the Bank's point of view having to deal with what is there rather than what they would like to see.

Q8 John Barrett: In March this year DFID produced the first ever report on the UK's relationship with the World Bank and how we expect the Bank to increase aid and provide greater debt relief and open up markets to poor countries. A lot of people thought it was a disappointing report. What was your impression of this report?

Mr Powell: First of all, I think some credit is due to the Committee for putting pressure on DFID to produce this report. I think it is a useful report as an activity. We were disappointed with the report. We felt, first of all, that it lacked substance. There was no discussion of some of the key policy developments during the period covered: for example, the infrastructure action plan; developments in terms of environmental and social safeguards; it had nothing to say on the key, large investment projects over that period, save for one. In terms of accountability and continuity, there was no assessment of whether UK objectives for spring and annual meetings had been met, or why. There was no follow-up on questions that had been raised by the International Development Committee. There was no reference to the work of the Operations Evaluation Department of the World Bank or the Inspection Panel, the official bodies which are set up to scrutinise these institutions. There was also no mention of what I have just mentioned, the US Senate hearings on corruption and multilateral development banks, which is a major event in terms of how we view these institutions. Finally, we felt it was incomplete; there were some things it would have been useful to include for monitors of the UK Government's relationship with the IFIs, such as a detailed account of its financial support for the World Bank, including the many trust funds which the British Government supports at the World Bank; and the objective notes for the spring and annual meetings, and the institutional strategy paper which DFID has drawn up for its work with the World Bank. Having said that, we are optimistic that DFID consulted us on the next version and we made some suggestions on how to improve; and they seemed very receptive to improving next year's version of the report. They have significantly improved their institutional strategy paper for the World Bank by sharpening the objectives and adding indicators by which they can measure the progress of the institution. I would like to take this opportunity to say that we urge Treasury to take the same steps. We think now Treasury has fallen behind to some extent in terms of being more specific about how it intends to develop its relationship with the IMF. We continue to think it is an important role of the International Development Committee to scrutinise such reports.

Q9 John Barrett: It is also important for DFID to put pressure on the World Bank to be more transparent in their operations?

Mr Powell: I think DFID has been very good about continuing to push for transparency of the institutions. This is perhaps an area where the multilateral nature of the institution is what is holding up progress. They continue to push for greater transparency, for example, of board transcripts, which are absolutely vital to address the question of parliamentary scrutiny for example, so that parliamentarians can know what their representatives in the institutions are actually saying. In that case we very much continue to support their efforts.

Q10 Richard Burden: Following on from what you were saying, in addition to questions of parliamentary scrutiny and transparency generally, how do you feel progress has been made by the IFIs on trying to give developing countries greater participation and democratising those institutions? How is that going?

Mr Powell: It is not going very well, would be the short answer. We started this year with the announcement of Paul Wolfowitz as candidate for the President of the World Bank; and I think I can speak quite unanimously for British civil society groups that monitor these institutions that they felt this was an inappropriate candidate for a number of reasons, which we do not need to get into here; but that moreover the process, whereby it is in the gift of the United States to make this appointment, is completely unsatisfactory for such a key institution. On the question of the voice of developing countries, the democratisation of the structures of the World Bank, it is apparent that the road map which was designed to be led by Trevor Manuel has failed. It has gotten nowhere; it has made no progress in terms of gaining consensus around what changes are needed. It appears that the torch has now been passed to the IMF's 13^th quota review. This does offer an opportunity to make some progress, although there are some limitations in terms of what opportunities we can get in terms of World Bank reform through an IMF-led process. I think it is worth quoting Lorenzo Bini Smaghi, the former Head of the Sub-Committee of the IMF at the European Union. He said that unless the governance of the IMF is solved the IMF will be replaced by other fora. It would not be an understatement to stress right now that the IMF is in a crisis of confidence and legitimacy. In terms of what we recommend - internal processes have failed. We need an independent review process to try and build a certain moral critical mass about the changes that are needed. We need to de-link reform of the IMF from the World Bank; and even within the World Bank it would be very useful to de-link the reform of the International Development Association, the lending arm for low income countries, from that of the IBRD, the lending arm for middle income countries. Reform must focus on the effectiveness of the institutions, and not on political horse trading as we have seen in the past. We need to de-link the different functions of these institutions so financial contributions, access to resources and oversight can all be handled in terms of different formulae for how countries participate. Urgently we think the leadership and senior management selection question must be reformed. Everyone agrees it is simply a question of high level political will to get that changed. Of course, we continue to advocate for improved transparency at the institutions. We would like to see the World Bank embrace the principle of disclosure, rather than continue with the current system whereby it agrees for certain documents to be disclosed one by one. Very concretely we think there is a UK role to spearhead a multi-stakeholder discussion at the sub-committee of the IMF - a Treasury official has just taken over as head of that sub-committee - to look at the rationalisation of European representatives at the IMF, and also to bring together a European consensus on how the leadership selection issue can be solved.

Q11 John Bercow: I wonder if I could ask Mr Powell whether you share the view of the Jubilee Debt Campaign that the various 64 countries now require full debt relief in order to achieve a realistic prospect to achieving the MDGs?

Mr Powell: I do not want to go into too much detail on this issue. The Bretton Woods Project is able to avoid the minutiae of debt questions because we have the expertise of the Jubilee Debt Campaign on some of the issues. We would simply support their call that debt relief needs to be extended to a much larger array of countries than is currently the case. Similarly, while we applaud the debt relief that has been given at the last annual meetings, it is by no means 100 per cent. We have not looked at the other financial institutions that are involved or private creditor debts that are involved, for example the Paris Club of lenders. I think there is still much more to be done for, as you say, a number of countries if they are going to make progress towards the MDGs.

Q12 John Bercow: I am afraid that will not quite do. To be fair, I have listened, as other colleagues have, with great interest to your comprehensive and candid answers to other questions but I feel it is not a question of getting into the minutiae, as you put it; it is a question really of having a view about conditions, about performance, about legitimate expectations of recipient countries. Leaving aside the evaluative term "minutiae", can I just ask you whether you think that access to that debt relief for those very poor countries should, as far as you can tell, be immediate, and unconditional on grounds of the severity of their plight, or whether you think that it ought to be conditional?

Mr Powell: Certainly in terms of the debt you have already agreed I think it should be immediate and it should be without further conditions.

Q13 John Bercow: But if we are talking about the extended provision of debt relief, which is really the subject matter of the parliamentary investigations, from the existing countries that have been agreed should benefit from it to the 60-plus that many of the NGOs think should receive it, what conditions do you envisage?

Mr Powell: I think there is general agreement that fiduciary conditions - conditions around transparency, of how these funds would be used - are agreed across the board. I also think there is agreement across the board that economic policy conditions - particularly in the sensitive areas we have already discussed, of liberalisation and privatisation - should not be included. There is perhaps some disagreement of whether or not there should be any conditions around what are broadly called governance reforms; and for that I think there are differing opinions from different civil society organisations which need to be discussed in more detail, and that is where I defer to others. Perhaps "minutiae" was a poor term to use but that is where I defer, to those who have done more work on this specific area.

Q14 John Bercow: Let me give you a very specific example of what I am driving at and then you might feel inclined to give a view on it. If we were to take a very poor country such as Burma, which is also practising horrific human rights violations and failing to spend any significant sum of money on health and education on its own people, would you accept that there the fiduciary issue and the governance issue come together? In other words, is a country which, through its brutal government, is spending 19p per person a year on health and education and half of its national budget on the military a proper beneficiary of extended debt relief?

Mr Powell: I have to confess first that I simply do not know the debit situation of Burma as a country. It has been such a pariah for so long I am not even sure the debt is much of a question in the Burmese case, so I have to confess my ignorance of those details. I think what most NGOs as a principle would suggest in cases where there are questions of human rights violations is that there should be what is called a multi-stakeholder process, where various organisations, donors and civil society groups can make a joint evaluation of whether or not violations are so serious as to not validate debt relief for that particular country. I cannot get into the particulars of a particular country without knowing more about the circumstances on the ground.

Mr Counsell: I could perhaps just add to that, if there are conditions that are to be attached in the case of certain countries, perhaps those conditions might relate to the strengthening of Bank governance rather than the strengthening of governance in countries, although the two might well be interrelated. It is absolutely clear from the example we have presented in our evidence, and others I am aware of, of the countries that are scheduled for debt relief in the coming year or so that there have in the past at least been serious failures of Bank oversight of the programmes and projects in which they have been involved, and which have clearly failed to promote the stated objectives of the Bank in terms of the Millennium Development Goals. To a certain extent it comes back to the question Mr Battle asked earlier on: is there a linkage between Bank activities and poverty alleviation and reduction at the outset? In the case of the Congo, for example, and many others I could cite (Cameroon in Africa perhaps being one of them) it is absolutely unclear, to us at least, that there has been any thorough-going analysis on the part of the Bank to define whether its interventions in the various economic sectors there are actually going to achieve any impacts in terms of achievement of the Millennium Development Goals. Perhaps to answer your question, this analysis, in our view, at least needs to apply in order for debt forgiveness or reduction to truly have effect in terms of reducing poverty.

Chairman: Is not the nub of the difficulty, Bob Geldof says, "Just give them the effing money", that is one of the extreme views; just write off the debt. It is a very popular slogan, but you have just articulated a situation where governance and the people in governments have stolen the money. We do need to ensure that if we are going to write off this debt and then establish new aid programmes that we are doing it in circumstances that do not get us back to exactly this situation in ten years' time, because if that happens nobody will want to write off any debt, good or bad. There has to be some conditionality - I take it you accept that.

Q15 Ann McKechin: Following on from your criticisms of the Bank's approach, in the Congo in particular, can I ask if you were in the Bank's position would you lend at all and, if so, what kind of criteria would you apply to answer the criticisms you have referred to by African civil society organisations?

Mr Counsell: It is a difficult situation, clearly, but if I were in the Bank probably what I would do would be to attempt in such a delicate and important situation to comply absolutely rigorously, firstly, with my own internal safeguard policies and, secondly, with the good work that the Bank has done in terms of addressing the extra difficulties of working in post-conflict countries. For example, the whole development approach and rationale in countries such as the Democratic Republic of Congo should be bottom-up, community driven, rather than the kind of top-down approach we have actually seen the Bank pursuing over the last three years. Also that long-term resource rights should not be given out to private sector concessions in such circumstances, but that the private sector should be encouraged to play a more service provision role in those circumstances. Those are very clear descriptions of the Bank's own post-conflict work which is not what we have seen the Bank doing to date.

Q16 Ann McKechin: You would appreciate in the DRC, which has no local government whatsoever, that the definition of what civic society communities are can be very difficult, particularly in remote areas where minerals and logging activity occurs. I suppose it is a balance of trying to a) propose a more rigid form of conditionality, on the one hand, but at the same time actually trying to start a post-conflict reform of industry and business in an area which has totally lacked any controls for many years?

Mr Counsell: Clearly in circumstances such as this a two track approach is needed, and the first of those might involve emergency assistance, a certain amount of conflict resolution work, the democratisation process and a certain amount of infrastructure for health, education and so on. These are all things that to a certain extent the Bank has been supporting along with DFID as well. On the other hand, for the longer term developmental options for that country, the Bank should be engaging much more widely with civil society organisations, faith-based groups, trade unions and so on for the development of policies such as those affecting the forestry sector and the mining sector that will have a major effect on the country's long-term development as well as on the vast majority of the population. That is a process, particularly in the kind of circumstances DRC finds itself in, that is long-term, but it has to be begun at some point. What we are seeing at the moment is, despite three years of major interventions by the Bank and something in the order of $2 billion worth of programming and credits in that three years, the process of engagement of civil society across these major policy areas has not even begun. That is something we would see as a major flaw in the Bank's approach in that one example of a country.

Q17 Chairman: Does the Bank have the capacity to do that? What you have just described is a huge bureaucratic process and it is all about getting the government to deal with this but I take your point about having to start it.

Mr Counsell: In many cases you appreciate that the DRC is an important test case for the way that the Bank operates, certainly in Africa but perhaps more widely. Does the Bank want to get it right or does it want to get it wrong, as it has done evidently in so many cases in the past. If it wants to get it right then, yes, it does have to begin the long-term process of engagement of civil society and other actors of course in a process of dialogue that may in itself run over a period of years in order to draw up these policies affecting strategically important economic sectors. That is not saying anything extreme whatsoever; in fact it is what the World Bank's own policies say, such as the Forest Policy which prescribes exactly this kind of approach; that is quite a simple prescription.

Q18 Chairman: Jeff, you mentioned infrastructure coming back up the priorities again and your concern about that leading to big projects. DFID have effectively opted out of infrastructure and they acknowledge it should rise up the agenda but they are going to leave it to other people. Is that a matter of concern, or do you think DFID should take that view because, by definition, they reduce their influence in ensuring projects go in the direction they actually want them to go?

Mr Powell: I think there are two answers to that. I suppose one is that, regardless of what intentions are in bilateral programmes, there is a responsibility for what is done through multilateral contributions, both through the contributions to the International Development Association and also through considerable contributions to a number of trust funds which do not necessarily fund the project itself but usually fund the studies which come up with the recipe for what kind of infrastructure should be implemented. There is a responsibility on that level. The second part would be that I would encourage DFID's voice, and here we had the UK objectives for the annual meeting stressing the poverty reduction impact of infrastructure which we were very encouraged to see; but then we did not see it in the UK outcome note from the annual meetings; and we did not see it in the Bank's infrastructure action plan. We would not want DFID to sit silently. We would want DFID and its representative at the World Bank to be vocal about what shape infrastructure lending should take by the World Bank.

Q19 Chairman: They do not all have to be big projects. If you took the reports on the situation of Niger, there was a very practical problem that you could not even find the people, because communications were so poor, to define what the scale of the problem was, and people could not get to where the food could be provided. Those are not necessarily huge projects it is just providing basic roads that are driveable and that does not have to get into that huge infrastructure problem.

Mr Powell: I absolutely agree. Often the real infrastructure needs are a large number of very small projects which respond to people's local transportation needs; needs to get their goods to local markets; needs to get water for families; needs to get basic electricity in a sustainable way. These are the real infrastructure questions that concern poor people. Very often unfortunately the lion's share of the lending goes towards these large centralised projects. We recognise there is a grey area, but that is the balance we would like to see shift from the way the Bank approached infrastructure two decades ago.

Chairman: Thank you both very much. That has helped us to question our own departments and some of the other agencies more effectively. Thank you for your time.

 

Examination of Witnesses

 

Witnesses: Rt Hon Hilary Benn, a Member of the House, Secretary of State for International Development, Mr Stephen Pickford, CB, Director of International Finance, HM Treasury, Mr Gavin McGillivray, Head, International Financial Institutions Department, DFID and Mr Graham Stegmann, Director, 2005 Unit, DFID, examined.

Q20 Chairman: Good morning, Secretary of State. Thank you for coming once again before the Committee; we will be meeting a few more times in the next few weeks. Perhaps you could introduce your team.

Hilary Benn: On my left is Stephen Pickford, who is Director of International Finance at the Treasury; on my immediate right Gavin McGillivray, who is Head of International Financial Institutions Department at DFID; and next to him Graham Stegmann, Director of the 2005 Unit in DFID.

Q21 Chairman: Thank you very much. Before you came in we were questioning a couple of NGOs on issues relating specifically to the World Bank and on one particular area we had a discussion about conditionality, about which clearly you have views. Just to put you in the picture, I think the general view is that conditions are necessary but there is a difference of view as to exactly what the conditions are and how they should apply. Perhaps, firstly, you could give us a view on how you feel the debate has moved on conditionality, particularly from the British Government's point of view?

Hilary Benn: Thank you very much indeed. Yes, I have always felt the debate is about what is the right type of conditionality; because, depending on who you talk to, you get very different views about what is thought to be appropriate. I think it is very important in the change of policy that I put in place in March this year, which I have been seeking to persuade the World Bank to follow, that people do not draw the conclusion from that that we do not think there are responsibilities on those who are receiving financial assistance. In the area of particular policy choices, and it is focussed especially on privatisation, trade liberalisation, the experience in the first instance is the effectiveness of those policies has been pretty mixed; secondly, to what extent can you really oblige people to do things that they do not want to do? It is not to say that developing countries do not have choices to make about are they going to pursue good policies when it comes to managing the economy. What I think we should be interested in is, first of all, what is the consequence of the choices they make about individual polices for the reduction of poverty? Because that is the basis on which as a department and an aid organisation we want to have the relationship. Therefore, for me, there are things like: are the education and health budgets increasing; is that then feeding through in improved health for children - fewer children dying before their fifth birthday - more children in school and all of those kinds of things? There are, on the other hand, certain areas where I think it is right and proper to say if we are going to have an aid relationship, a partnership relationship, these things really matter. The first is: is the country demonstrating its commitment to poverty reduction? I have given an example of how one can test that. Secondly, is it upholding human rights and international obligations? Thirdly, is it committed to good use of the money? Is it tackling corruption? The question that people will rightly and legitimately ask is: how can we be sure the money is going for the purpose for which it is intended? I think you will find there is a very different conversation around those issues from the one where you have about trying to force countries to take specific policy decisions. That is why I changed the policy in March, to say no longer would we tie our aid to specific economic policy choices in essence, in particular privatisation and trade liberalisation.

Q22 Chairman: You will be aware of an article in The Guardian[1] which says that your change of policy has caused confusion amongst some of the aid agencies and inconsistency; for example, that people are not actually sure what the conditions are. I am not saying I agree with this by the way, but one example was quoted that in Sierra Leone the British Government is providing support to water privatisation, and one of the NGOs has said, "We don't want conditions and we shouldn't support programmes which have only been brought about by the conditions".

Hilary Benn: Water is a particularly hot topic as my postbag demonstrates, and the World Development Movement's postcard campaign is responsible for a large part of that. It might be helpful if I just point out that about 95 per cent of the money we spend on water bilaterally goes to support public or community-led provision of water - just to get a slight sense of balance into the debate. I suppose the issue is: if a developing country decides (and for me that is the key - is this a decision that has come from within the country) that private sector participation, for example, in the provision of water is a road down which they want to go and they ask for our assistance, would it be right for us to say, "No, actually we know better and we're not going to help you do this".

Q23 Chairman: You would satisfy yourself that that was freely arrived at, that decision?

Hilary Benn: Yes. We have changed our policy; there is the question of the World Bank and its conditionality review which you may want to come on to, but that is where I come from. In the case of Sierra Leone they are looking at a range of options and have actually taken no decisions at all; they have asked for some help and we are giving that. In the case of Ghana, which is another example that people sometimes draw attention to, it is quite clear to me that the government there wants to look at some private sector participation, not privatisation, because they retain control of the assets; but what they are looking at is, "Could we have a private management contract which would help to fix the leaks in the system?" because getting on for half the water drains away as it gets to the pipes and the taps. If you could reduce the loss rate and add more connections a lot more people in Ghana could buy their water at the lower price you get through the leaking, creaking pipe supply system than the price you pay from the private water sellers which, when I was there two years ago, I was told was five to six times more expensive than if you had access to the leaky, creaky pipes. It seems to me if governments are taking those decisions and they ask for our support, then it is not unreasonable that we should give it, but the bulk of what we do actually is support public and community-led provision.

Q24 Mr Hunt: Could I understand your thinking on conditionality? Your change in policy has been widely welcomed principally for reasons that the pressure to privatise and liberalise trade has been mixed; but there are countries in the developing world, Vietnam, Thailand and China, which are pursuing very successful economic policies. Is DFID withdrawing from the debate about a country's economic policies and saying, "That's up to you"? Is it saying, "We don't want to use the leverage of our aid to promote better economic policies?" or is there a different way you want to promote a sound economic policy?

Hilary Benn: We are not at all withdrawing from any debate about the importance of good economic policies in running a country; because collecting all your revenues, making sure you have got proper public financial management, publishing what you are spending, all of those things matter because it means you have then as much revenue available to use to good effect dealing with making sure that inflation does not let rip, because inflation hits poor people more than anybody else. I think what we are saying is if we believe in country ownership on that, it is for developing countries themselves to take those decisions. What we are just as interested in is the consequence of that for the fight against poverty; and it is on that basis that we make a judgment about the nature of our aid relationship. In order to have an aid relationship with the government the three tests in the policy are: commitment to poverty reduction: upholding human rights, international obligations: good governance, good financial management and tackling corruption. That is the basis upon which we make the judgment. At one end of the spectrum there are countries which are very badly governed and we do not provide aid through the government - Zimbabwe being a very good example - but we do have an AIDS programme and we do help to feed the population. At the other end of the spectrum, looking at Tanzania for instance, making real progress in reducing poverty; and we have a good, strong relationship based on large part on budget support.

Q25 Chairman: Can I draw you back to the World Bank. I led you down that path, but you set these conditions. How satisfied are you that the World Bank's review will lead to a change because there have been some concerns about conditions and change to benchmarks, which most people regard as conditions?

Hilary Benn: Just to answer the second part of your original question, Chairman, we are just in the process of finalising draft guidelines for staff in DFID about implementation of the new policy we published in March. We are going to consult on that, and we will send a copy to you and I would be very grateful for views and comments from the select committee because it is important that we get this right, given that the policy has changed[2]. As far as the World Bank is concerned, last year I and one or two others encouraged the World Bank to undertake a review and they have done that during the course of the year. You will have seen what the outcome of that was. I welcome what it says. It expresses a commitment to country ownership. Indeed, I think it actually says that programmes should be fully owned by governments so it seems to me that that principle is being supported. They have, however, said that they will only use conditionality on privatisation and trade liberalisation in exceptional circumstances[3]. It is not entirely clear to me what those exceptional circumstances are; I would have preferred it if they had said they would not use it, but we are seeking clarification. The key - and that is what I got agreement on with others this year at the meeting - was to get a report subsequently on how it was implemented because that is how we are going to be able to answer the question what difference does it make. However, as you will have seen, the average number of World Bank conditions has been reducing from, I think, in the late 1980s an average of 35 to 12 now, and there has been a shift towards governance and social sector indicators away from short term economic ones. For me the difference between a condition and a benchmark is that a condition is a condition and the release of aid will depend on that. A benchmark is how you measure the progress that a country is making.

Q26 John Battle: Secretary of State, that is an encouraging answer but I wonder if I could press you a little bit on the view of DFID that the World Bank should greatly increase its use of Poverty and Social Impact Assessments (PSIAs). I want to know a little bit more about that. Do you think that the World Bank's use of the Poverty and Social Impact Assessment should be extended, for example, to macro-economic policy conditions, and should it range beyond the present policies?

Hilary Benn: The use of PSIA is very important. It is about trying to answer the question: what is going to be the impact of what the Bank is proposing to do on poverty and people in the country? The more wide-ranging it is and the more information that is taken into account in forming a judgment about how conditions are going to be used is helpful. It is obviously an important consideration as far as investment lending is concerned. I also think it is important we understand what the consequences are, including by working with developing countries themselves, so that the decision can then be taken in the light of understanding fully what the impact is going to be, in essence.

Mr McGillivray: PSIA is less relevant for development policy lending. Development policy lending is based on the country's PRS, which is about how whole government spending, macro-economic policy, will impact on poverty reduction, so as a tool PSIA would be less relevant in that area.

Q27 John Battle: So what did DFID mean by saying it should increase its use of the assessment? I am at a loss now as to why DFID said that.

Hilary Benn: Because we would like to see it used more. PSIA relates to a particular part of the World Bank's operations. We think it is a good tool to use but it is one of a number of tools and therefore we welcome it being used more extensively, for the reasons I have tried to set out.

Q28 John Battle: Who would assess its better use? When you say "we" would you just put in a team of people at the World Bank to look at the implementation of it? Who would do it?

Hilary Benn: We form a view about how well we think it is being used in relation to the World Bank. Have they got a team? I do not know, is the short answer.

Mr McGillivray: We will have to come back to you on that.[4]

Q29 John Barrett: Some NGOs in the past have expressed concern that donors distort the systems of accountability and obstruct the role of parliamentarians in other countries. In an evidence session last year you said that DFID did not do this. Could you give us some examples of what DFID and the World Bank have done in the last year to promote active involvement in parliaments in developing countries and what does DFID intend to do in the coming year to promote the dialogue between parliamentarians and to promote that system?

Hilary Benn: The first thing one would say is that it is for parliaments in countries themselves to determine how they are going to be involved in decisions which their governments take. We can only debate that conditionality. I do not think it is for us to seek to impose by conditions particular forms of parliamentary participation. I think it is for parliamentarians themselves to determine what it is they want to do. There is no obstacle in any country. If parliamentarians want to be involved more than the existing system allows them to be in decisions about negotiations with the Bank and the Fund and donors there is nothing to stop them doing that. I think it is a very important point. Secondly, we are certainly committed to getting parliamentarians more involved in the poverty reduction strategy process and we have been working on that in Tanzania and Malawi over the last year in supporting that. We are also about to commit £300,000 to help the Parliamentary Network on the World Bank, which I think is a very important organisation, to extend their network to west and southern Africa because that does bring together parliamentarians to share experience, to talk about how they are doing and to learn from each other. Those are two things we have done in relation to Malawi and Tanzania and one thing we are about to do is form a network to bring parliamentarians together to talk about how they can be better involved.

Q30 Joan Ruddock: I think you have just begun to answer the question that I was about to pose. I was about to challenge you when you were saying they were okay, they could do it themselves, because there is a real capacity problem, is there not, in most parliaments, in terms of parliamentarians beginning to address these complex issues? Many of us here have difficulty understanding what the World Bank is up to most of the time, and if you are on the receiving end and you do not have resources that western parliamentarians have it is very difficult to make an assessment of what is going on and to try to influence and shape your part.

Hilary Benn: I do accept that. I think there is a very clear distinction between trying to tell them what to do and supporting their capacity to be able to do it. That is what the work in Tanzania and Malawi is about. That is why we have been giving them money. That is why the World Bank Institute has over the last ten years trained 5,000 parliamentarians and parliamentary staff so that they can perform their function better. It is currently running, the committee might be interested to know, capacity building programmes in Ghana, Nigeria, Sri Lanka and Thailand and it is planning programmes in Kenya, Bangladesh, Mexico and Pakistan, so that is another practical example of what it is doing, but I take your point entirely.

Q31 Chairman: Our own Parliament did indicate that it wished to have a debate on the World Bank. Do you have any plans to do so? You have produced your own first report and we understand you are working on a subsequent one.

Hilary Benn: Yes, we are, to publish in December.

Q32 Chairman: So would it be appropriate to have a debate on that report?

Hilary Benn: I will reflect upon it.

Q33 Chairman: You did indicate that you wanted to?

Hilary Benn: Yes. I always welcome the opportunity to have a debate. I will go back and look at that.

Q34 John Bercow: Secretary of State, you will be very conscious, I am sure, of the statements of President Wolfowitz at the autumn meetings of the World Bank and specifically his interesting observation that he felt that one could not talk intelligently about development if one excluded everything and anything that sounded political. In view both of the past track record of the World Bank focusing on economic issues and tending, understandably, to be dominated by economists on the one hand and the past record of Paul Wolfowitz and his tendency to like the idea of the imposition of "democracy" on the other these are, it seems to me, interesting observations. I just wonder what you think engaging with the politics of development might mean for the role of donors and multilateral organisations. Will engagement, to be credible, be in the form of withholding aid from governments or be in the form of seeking to encourage the emergence of democracy, or a beneficent combination of the two perhaps?

Hilary Benn: In the end it is a combination. I welcome what Paul Wolfowitz had to say because, to be honest, the longer I have been in this job the more I have come to understand the importance of good governance, the climate that it has created for private sector investment, the extent to which civil society and people are able to participate in decisions about the future of a country on tackling poverty and dealing with conflict, which is the worst expression of a failure of governance. We have to be interested in this because a lot of poor people live in countries where those things do not apply, states that have failed and are failing. In so far as what he had to say will represent a greater interest on the part of the Bank in this, I do welcome that. To answer directly your question, in the end it is a matter of judgment and in constructing the new framework for conditionality that I put in place in DFID we are trying to balance predictability, because this is really important if countries are going to be able to rely on resources to train doctors and probably teachers and buy drugs, with an element of variability which can then be linked to particular conditions of the right sort, going back to our original discussion. In the end you have to make a judgment about whether a country is moving in the right direction. If there has been a breach of human rights is this a one-off, is this a consistent pattern, because if you turn the tap off immediately when something goes wrong that might not be the right thing to do. I think we need to design a system that both combines clarity so that the donee country knows what the rules of the game are but also gives us the opportunity to respond to failures of governance, problems with corruption and so on, in the way in which we give our support and the form in which we give it, or whether we give it at all to the government.

Q35 John Bercow: I understand the significance of the change in policy and your emphasis on benchmarks perhaps as opposed to crude and explicit conditions. I can see the logic of that. Can I put to you what in a sense is, for me at least, at least as interesting a question and that is what you do in a situation, Secretary of State, in which there is advancement, whether in the form of following conditions or improving benchmarks, in terms of economic policy, but there is no marked improvement in terms of respect for human rights? If, for example, a developing country is pursuing on the whole fiduciary duties, broadly sound economic policies but is showing a fairly persistent disregard for human rights, how, to come back to your question, do you make the balance of judgment?

Hilary Benn: I think in the end it is going to be a political judgment and that rests with the person who occupies the job that I am currently doing and others will tell me whether they think I have reached the right decision or not. I think each case is going to be different. I genuinely think it is very difficult to set hard and fast rules. That is why I have tried to set out a reasonably clear framework which gives us the opportunity in the end to make a judgment and then to be held to account for it. As I have already indicated in relation to Zimbabwe, such are the failures of governance in that country that we do not provide development assistance direct to the government. We have made a judgment in that case but we have found another way of supporting the AIDS programme.

Q36 Chairman: On that particular point, what you did in Ethiopia seems to be slightly inconsistent with what you have said to the committee because you actually did stop aid programmes there.

Hilary Benn: I did not actually stop programmes. What I said was that we carry on with the existing level of support in Ethiopia. The aid framework for the forthcoming year was looking at an increase and what I said in Ethiopia was, given the current difficulties - at the time 26 people had been shot dead on the streets of Addis, there was turmoil and dispute over the elections - that I was holding on a decision about putting that into operation until I saw how things developed. We did not cut any of the existing programmes. I just said I was holding on a decision about increasing our support this year until I could see the outcome of the discussions that are still taking place between the government and the opposition parties. In the end that was my judgment and people may agree or disagree with it but that is what I did and that is why I did it.

Q37 John Bercow: In the statement of objectives of DFID for the autumn meetings of the World Bank it was explicitly said that DFID wanted to see specific action on macro-economic dialogue. What does that mean?

Hilary Benn: Is this in the statement that has been put out?

Q38 John Bercow: Yes, it was, before the first of the autumn meetings. In its objectives for the meetings the government said, "The UK will also use the annual meetings to press the Bank and the Fund to explain how they plan to develop their programmes in the light of the 2005 Review of the Poverty Reduction Strategy Approach. We will be looking for specific action on macro-economic dialogue." I wondered what the specificity of the action might be, Secretary of State.

Hilary Benn: A very good question, as you can tell, and I am hoping that I shall receive assistance on that particular point because it is not something we specifically discussed when we got to the annual meetings. It looks as I am going to have to come back to you on that. My apologies.

John Bercow: That is fine.

Hilary Benn: Ah - Stephen is going to say something.

Chairman: The Treasury intervenes!

Hilary Benn: The Treasury comes to our rescue!

Mr Pickford: Thank you, Chairman. This is in the section on aid effectiveness. This I think is a reference to how the poverty reduction strategy process can be improved. One of the elements of the dialogue that takes place in the country which we felt could be usefully enhanced was that on macro-economics, which comes back to the earlier question on PSIAs on macro policies. It was really just saying that this is an area where dialogue could be improved in-country in terms of developing the poverty reduction strategies for countries.

Q39 John Battle: But do you have a framework of macro-economic policy that you think is more suitable than others?

Mr Pickford: I think, as the Secretary of State said earlier, it is essentially up to the country itself to design and devise its own economic policies. I think that includes macro-economic policies but, just as we, the UK, would have views about the effectiveness of certain economic policies in terms of structural reforms or whatever, so we would also have views on whether macro-economic policies were good or not so good.

Q40 John Bercow: Forgive me, Mr Pickford. I do find this discussion really interesting but it does seem to me that this part of the debate is a bit circular. On the one hand there is the conventional view that you have fairly tough conditions, failing the achievement of which you do not give aid because you think that these countries are not behaving properly and they are not pursuing sound economic policies - "It does not add up, it is not credible, we are not going to support it". What now seems to be being said in an extremely polite and, in humour terms, engaging manner is, "Well, it is a matter for them. Of course we cannot tell them exactly what to do. These are judgments that they must make, it is our policy base and so on, but by the way if they get it wrong we will have views about that". Am I right in taking you as meaning, "Yes, they can do what they like", as the Secretary of State implied earlier, "because, of course, that is not for us to prescribe, but if they pursue unsound policies then we are not going to recommend to the Bank that money should be handed over on a substantial scale", because they are, to be blunt, mucking it up?

Mr Pickford: As far as the UK's position is concerned, I think the Secretary of State has made it quite clear what the three conditions are.

Hilary Benn: Yes. It is the implications of the decisions that they have taken for the reduction of poverty. That is where we do have very strong views and if as a consequence of, as you put it, a country mucking it up, that impacts upon how much money they put into health and education and their ability to reduce poverty, then we do have strong views and consequences will flow from that. I am trying to separate out trying to say, "You must take that particular policy decision and that one and that one" on this side from saying that of course we are interested in the consequences of that, and all countries have an obligation as governments to do the best that they can to make sure they manage the economy effectively.

Q41 John Bercow: Sure, but overall, Secretary of State, you yourself would take a pretty robust and discerning view of all this if, in other words, a developing country which has got historically a rather poor record in terms of commitment to health and education starts spending very slightly more on the health and education of its own citizens but meanwhile is ratcheting up substantial expenditure on the military, and then you would not regard that as a very suitable country?

Hilary Benn: No, I would not, and people would very legitimately ask the question, "Why are you giving them support in those circumstances when it is clear that their priority is more to increase defence spending" - and it depends on the circumstances - "rather than health and education?". That is the basis on which we will make a judgment about what support we give and how we give it.

Q42 Ann McKechin: Can I follow on from what John Bercow has been saying? You have mentioned the principle of predictability as one of your cornerstones, but yet, for perhaps understandable political reasons, you are saying you have to make a judgment when it comes to human rights abuses or fiduciary controls or whether macro-economic policy is actually achieving poverty reduction. If you are saying that, and if you are in a donee country and you are also hearing the same from the Minister of International Development for Sweden, the Minister of International Development for Germany, the Minister of International Development for France, always different and to some extent subjective judgments on when those benchmark criteria are met, is there not first of all an overriding need to have harmonisation so that donee countries understand when they have reached a benchmark on human rights or democracy or on economic reforms to eliminate poverty, and does there not need to be a greater transparency about when you hit those benchmarks rather than somebody calling on the individual judgment of an individual minister in an individual donor country?

Hilary Benn: You have really put your finger on the problem. How are we trying to deal with it? One, by in the new policy saying we are going to have a core element to our support which will not be varied or turned off in the course of a year unless one of the three fundamental conditions is breached. For example, a country decides it is going to invade its neighbour. That is a pretty fundamental breach of the second of the three broad conditions that we attach, and in those circumstances it would be very strange then to be offering financial support and in effect would be financing an assault on the country that was next door. However, as long as those three are not breached the core support in a year will not be changed. We are also looking, varying from country to country, at a variable element and then you can take into account in the subsequent year what decision you make about the variable element when you have looked at how countries have progressed on the things that you do care about as far as conditions are concerned. Can I give you a very practical example? If there is a problem with medicines that are being bought by the central medicines purchasing agency being nicked before they get to the district or the regional hospitals, and a country is trying to make progress in reducing the rate of theft, that might be something that in the variable element of our support we would want to put in and say, "You want to make progress. We would like to see that progress", but it is separating those two things out. The core will not be touched in the year in question unless the fundamentals are breached and the variable element will be on the basis that countries know that that is linked to certain things that we have talked about. We talk about these things all the time. That is the other thing we have not really touched on in this important discussion. This is a matter of dialogue and discussion. In the end we are going to aim to reach agreement about what are the shared objectives, what are we trying to do, and that will then measure the progress. Within that there will be benchmarks which are not going to determine what aid is given, it just measures the progress, but then there are conditions which may determine it. That is how we are going to deal with it. There is then, of course, the whole other question about other countries. One step that other countries could take is to follow the example we have given because we have three-year budgeting. We are able to say as the UK, "This is what we are going to give you this year and this is what we are pretty sure you are going to get next year and the year after" because I know what my budget is up until 2007/2008, and that provides an element of predictability that is missing from other countries which only deal on a yearly basis.

Q43 Chairman: That raises a point that was raised with us last week when we had your officials in. We were having a discussion about the increase of a billion in aid that is going to come over the next few years. It is going to come from new donors. It is also going to go through different multilateral agencies. It was a very important discussion we were having but how are we going to ensure that with all this upsurge that we actually maintain a framework that delivers results? If I were in your position or in the World Bank position I would be worried that public opinion has sought and got a big increase in their budget and then it is misspent in ways that kick back and undermine the public support for what is being done.

Hilary Benn: I agree with that completely. Indeed, what was most striking when the Commission for Africa report came out was indeed the extent to which the public debate here focused on governance and corruption. I think you are absolutely right, that as aid increases people will increasingly take an interest in what is changing as a result, how we can be sure it is being spent for the purpose for which it is intended, and that is why it is absolutely right and proper that we should be having that debate. The first challenge is indeed to get all of these commitments honoured. The second challenge is to bring them together so that if you are the finance or health minister in a developing country you have reasonable confidence about the resources that are going to be coming from debt relief, which provides resources, increased aid, so that you can then match that to commitments that you are entering into. I think the third big issue, which we do not have a mechanism for addressing in the international system currently, is the imbalance there is. When you add up all of the bilateral decisions, going back to your point about aid, what comes from the multilateral system, and then you look at the table that shows aid per head of population - and it ranges from, I think, the small Caribbean states that are at the top of the list via Gaza and the West Bank right the way down to countries where the aid per head is very low and when you get to China and India you have got a huge population - you have got this great imbalance and nowhere in the international system does anybody look at that and say, "Have we got the balance right?". There is no balancing mechanism. My view is that it would be very hard to use bilateral donors as a balancing mechanism because if someone came and said, "Actually, Tanzania has got enough. Would you get up and go?", no, we will not, for all sorts of reasons in terms of the relationship, history and so on, but the multilateral system could provide a balance and that is an issue that I am very keen to pursue.

Q44 Chairman: How successful have you been so far?

Hilary Benn: In my view the debate is only just beginning. In a sense it parallels the debate on the humanitarian front. Some humanitarian crises are very well funded and some get almost no money at all, and what the humanitarian fund is about is trying to find the means both to enable the UN system and NGOs to respond more quickly to crises and to even out the funding of the darling crisis as opposed to the orphan crisis.

Q45 Richard Burden: Secretary of State, I would like to press you a little bit further on how successful you feel you are being, not personally but institutionally, as regards the World Bank, not so much on issues of balancing mechanisms but when you were referring to the review on conditionality, for instance, which sounded a bit like a qualified yes but they seem to be saying good things on ownership of programmes but on the other hand you needed a bit more information about what they meant about only applying conditionality in exceptional circumstances. Obviously, you publish your own report on UK/World Bank relations but how well do you think DFID's institutional objectives are doing that so far?

Hilary Benn: In relation to conditionality, I genuinely think that the proof will be in the way in which the new guidelines and the new policies which the World Bank has drawn up are implemented and that is why I was keen to get agreement at the meeting to a report on implementation which we will get next year. To be very frank, this is not an issue which occupies the concern and attention of some of the other members of the World Bank or in the same way that it occupies the attention of this committee and of me. In other words, there are not a lot of people who are having the debate we are having this morning. In the end it is for you to judge but in that sense I think we are not doing too badly given that we have been rowing the boat rather vigorously with a little bit of assistance from one or two others.

Q46 Richard Burden: Looking ahead to next year, they will be producing their report. What are you going to be looking for in that report? What are the key points you are going to be thinking about in that?

Hilary Benn: I suppose to judge what the World Bank then does against the principles that they have set out. Can we see evidence of country ownership? Are they customising the approach they take to the circumstances of an individual country? Are they providing predictability? Is there transparency? Are they supporting harmonisation and, if they are attaching conditions relating to sensitive policy issues like privatisation and trade liberalisation, why and what were the exceptional circumstances[5] that led them to do it? That in essence will be the test that I will apply.

Q47 Richard Burden: Will you be looking for a closer definition of, say, "country ownership", about what that actually means?

Hilary Benn: Yes.

Q48 Richard Burden: Because it could mean all sorts of things.

Hilary Benn: Indeed it could. We will be doing that.

Mr McGillivray: They have moved quite a long way on that because earlier in the year in the first draft of their conditionality review they said that country ownership is just taken as when a country implements a particular policy. If you look at what they came up with at the annual meetings it is much more nuanced and it recognises that country ownership is very difficult to pin down because within a country you will have different views on policy. I think there is a recognition by the Bank that country ownership is important and that it is not straightforward and they and we are working hard to define better how we recognise it.

Q49 Joan Ruddock: One of the things that has always concerned me about development and aid policy is the lack of a real environmental focus and I want to ask the Secretary of State now to consider climate change. At Gleneagles there was a recommendation that the new investment framework for clean energy and sustainable development should be developed and indeed, as we understand it, that is going ahead, I think not before time, given that 96 per cent of the lending by the World Bank was to support non-renewable energy at the present time. Is there not an inconsistency between the lending policies of the international financial institutions and the UK's own commitment to climate change policies?

Hilary Benn: I am not sure about the last point. Just going back a stage, before the World Bank meeting, obviously there was discussion at the G8, the efforts that the Prime Minister has made to get discussion on this, recognition of the nature of the problem, and there will be the meetings taking place, I think, at the beginning of November to follow that up. I did attend a side meeting that took place at the annual meetings to launch consultation on the energy investment programme, and Paul Wolfowitz came to that himself, and there was a very strong commitment from around the table. I know you know this is about levering more private sector investment into clean energy and the Bank is going to report back to the Spring meeting, so that is under way. Secondly, the Bank has a commitment to invest more in renewable energies and I for one welcome that. The bigger policy issue is the one that we are all aware of. We have Kyoto. That involves the big emitters minus the biggest one currently but any agreement in the long term is going to have to include all of the countries in the world, including one country, China, that is rapidly becoming a major emitter in its own right. The challenge everybody faces is how one moves from where we are now with not everybody signed up to Kyoto to an agreement with all the countries of the world, and what we were trying to do through the G8 process was to edge closer towards that but the politics of this, as you know better than anybody else, are very complex and very difficult.

Q50 Joan Ruddock: Notwithstanding that, there is enormous scope, and there has been enormous scope for a decade, for financing renewable energy contracts in developing countries to enable them to bypass the process that we have all gone through in the bigger fossil fuel scenario. The scope has been there but there is still only six per cent of finance on renewables. Is the World Bank really well placed to lead such a strategy given its track record?

Mr McGillivray: Its investment on renewables is to double over five years.

Q51 Joan Ruddock: From six per cent.

Hilary Benn: That is a step in the right direction. I think we would all like them to do more but I think it demonstrates that the argument is beginning to be heard. Clearly it would be good if there could be faster progress. I agree with you completely about the opportunity to skip the generation of power generation in particular that is very polluting, and when one looks at China and the number of coal-fired plants that they are planning to build to fuel, literally, the extraordinary economic development that is taking place there - I think they are using a third of the world's steel and half the world's concrete because of the building and economic development boom that is taking place there - yes, we do have an opportunity - and what the Energy Investment Framework is all about is finding a way of getting investment in the most energy efficient and least polluting forms of energy production - to skip that generation.

Q52 Mr Hunt: Could I ask a very quick question, Secretary of State, not relating to the discussion on the World Bank but something you said last time we met, which is to do with the target for universal availability of antiretroviral drugs by 2010? Last time we met you said that you would reflect on my request to publish some milestones between now and 2010 as to what we might have achieved. Have you been able to reflect on it and would you be able to publish something before World AIDS Day on 1 December?

Hilary Benn: I certainly have reflected on it in the sense that --- I do not know when we last met. Was that in the summer?

Mr Hunt: Yes.

Hilary Benn: Of course, since then there has been support from the Millennium Summit for that goal. UNAIDS is now leading the work to produce a plan which will try and demonstrate how as a world community we hope to get from where we are now. We are not going to meet the 'three by five' target. The WHO think that we might get there at the end of 2006. There are now 500,000 people on antiretroviral treatment in sub-Saharan Africa. That is treble the figure 12 months ago, so it shows that progress is being made but it is not fast enough, but whether we will be in a position for that to be available by World AIDS Day I do not know and I will undertake to check and come back to you on that if that is all right[6], because we will need a plan that sets out all of the things that need to happen. The other thing that has occurred since we last met, of course, is the replenishment of the global fund that took place at the beginning of September and we raised $3.7 billion for AIDS and obviously TB and malaria over the next two-year period, which funds all the existing commitments and allows a bit of room to do more, and there were one or two countries that because of their own budget processes were not able to commit at that time, and we are waiting for them to decide what they are going to put in over those two years. We need a plan and it has got to cover the full spectrum: prevention, tackling stigma, building health services, availability and price of drugs, testing and care for orphans if we are going to make progress. As antiretrovirals become available that does encourage people to come forward for testing and we are seeing that in a number of countries as we speak.

Q53 John Bercow: On trade liberalisation, Secretary of State, given the difference between UK government policy not to use conditions to force liberalisation on poor countries and that of the IMF on conditionality, what steps are you taking between now and the Hong Kong Ministerial to seek to influence the approach taken by both the Bank and the IMF to this matter?

Hilary Benn: In the run-up to Hong Kong this is less a question of the Bank and the Fund and more a question of what is going to happen in the negotiations and how the World Trade Organisation is going to approach the question of liberalisation because that is in the end where the decisions are going to be made. We have always taken the view that we are very strong advocates as the UK of, in the jargon, special and differential treatment, because in order for a deal to be done in Hong Kong it is going to have to recognise the different starting position that different developing countries come from, and therefore a deal that does not do that, that does not allow us time and space for developing countries to open up their markets and does not provide the ability for countries that need to to provide special protection to particular agricultural industries that they are heavily dependent upon, means that we will not be successful in achieving a deal. The Americans have made an offer and the EU has made some proposals. We are now very short on time but those are the things that we are pursuing. The other thing I would just mention is that what is described as aid for trade will be a very important part of the package that is delivered. I have said that it has got to be clear. Aid for trade cannot be a substitute for a bad deal. Aid for trade has to accompany a good deal for developing countries, and that is not just about helping them to build capacity. It is also about things like infrastructure investment. Different people in the negotiations take different views but that is the argument that is currently being had.

Q54 John Bercow: How will the trade adjustment mechanism work? Who will be responsible for administering it? Who will decide which countries are eligible to join it, how much they will get from it and over what period?

Hilary Benn: When you say "the trade adjustment mechanism" are you talking about the aid for trade package or the nature of any special and differential treatment?

Q55 John Bercow: I think more the nature of any special and differential treatment.

Hilary Benn: The short answer is that that is for the negotiations to determine. That is where this will be played out and agreement is reached. What we are seeking to do in support of that is try and identify, together of course with developing countries who have the greatest interest in this, what the particular issues are. A current example would, of course, be sugar. The change to the sugar regime means that some developing countries will actually do quite well out of this; some are going to be very badly hit. The ones that are going to be very badly hit are looking at the nature of the support they get to cope with the adjustment. What is on the table from Europe, which currently, I think, is €40 million, is in my view not enough and when countries look at that it might make them slightly more reluctant to sign up to something else. That is, if you like, the first big test and therefore the credibility of the process is about demonstrating that there will be support for adjustment and that the different circumstances that developing countries find themselves in will be accommodated, but the answer is that the negotiation is the place where that is going to be sorted out.

Q56 John Bercow: In so far as DFID goes along with those who object to forced liberalisation in trade can I ask you, Secretary of State, whether your objection is to the liberalisation itself, that is to say, to the opportunity for developed countries to export to developing countries per se, or is it to the fact that that access is for heavily subsided produce?

Hilary Benn: Clearly the heavily subsidised produce makes it very unfair on developing countries and that is why getting rid of export subsidies is a really important part of the negotiations. We have made our position clear as the UK in saying that we would like an end date of 2010. What comes out of the negotiations remains to be seen. I am clear in my mind that a more open and a fairer trading system is in the long term in everybody's interests but not all countries start from the same position; that is the point, and therefore to force at a pace which does not suit the particular circumstances of a country, does not have regard to their special needs, as I say, particularly when it comes to certain agricultural products, first, is the wrong thing to do, so we need to differentiate, we need to provide special treatment, and, secondly, if you do not do that I do not think you are going to get a deal.

Q57 Chairman: How optimistic are you that you are going to get a deal? You do not sound very optimistic.

Hilary Benn: Well, until relatively recently things looked a bit grim, frankly, because there was not a lot of movement. Now we have seen some movement. I saw Pascal Lamy when I was in Washington and I think the challenge now is to turn the high level political commitment into action. Everybody makes speeches saying, "We have got to get a deal". It is very important for the credibility of 2005 as a year of development. If you like, the trade talks have a full stop at the end of the year after all of the things that have been achieved, and they are real and substantial. We have seen some movement in the last couple of weeks which I greatly welcome, but we have got a long way to go to secure a deal in Hong Kong. We have got to make sure that all of that political commitment to achieve a deal is turned into one that can be negotiated.

Q58 Chairman: I wonder if we could turn to the debt relief programme. I do not want a Treasury official here and not talk about the debt relief programme. In particular our government has committed to cover debt relief until 2015. The question arises, how can we do this, when this is two elections away, effectively? How are you going to put that programme forward in a way that will enable that guarantee to be met?

Hilary Benn: This was indeed the crucial point in the discussions, as you know, at the World Bank, not just in relation to the UK but all of the other countries. The G8 and the Finance Ministers, having signed up to dollar-for-dollar compensation for the flows that are foregone as a result of debt cancellation agreements, entered into a whole series of commitments. In the end this is a political commitment that we are entering into. There are in the debate about additionality real difficulties in demonstrating additional to what? If you ask the question, how can we know exactly what contributions to IDA are going to be in 35 years' time from all the countries that contribute currently, let us be honest, it is a rather difficult thing to commit. However, with the Finance Ministers' letter, with the agreement of the World Bank board that, separately identified, will be contributions to IDA and dollar-for-dollar, pound-for-pound recompense for the flows that are foregone, we will be in a pretty good position to measure the contribution that each country is making but it is a long term commitment in order to achieve this real gain of debt cancellation immediately for the 18 countries that have got to HIPC completion point, and it goes back to the earlier question about predictability, because the great advantage of debt cancellation is that it provides predictable resources. You know what they are having to spend on the debt and can then spend on other things. I do not know whether Stephen would like to add anything further about the nature of that long term commitment.

Mr Pickford: Just a few words, Secretary of State. The G8 countries all signed up to individual commitments in a letter which was sent to the World Bank and in the UK's case it was that we would make these binding commitments through parliamentary processes. We are still trying to work out the exact modality but something like an instrument of commitment or the equivalent parliamentary process, which is subject, of course, to parliamentary approval, strikes us as one way forward to demonstrate the strength of the commitment.

Q59 Chairman: That is an interesting idea of development because traditionally governments say we cannot bind successive parliaments and you are looking for an instrument that effectively tries to do that. You could bind political parties, I suppose, into an agreement but Parliament will be different by definition the other side of an election, so should thought not be given to what kind of instrument and indeed when it might be presented?

Hilary Benn: As you said, you are still looking at it. As I understand it there have been similar processes used for the replenishment of the World Bank and the regional development banks.

Mr Pickford: Over a three-year period, yes, for the replenishments of the institutions.

Hilary Benn: Which may or may not, depending on the timing, cut across elections.

Mr Pickford: The UK's contribution for this debt proposal will in fact be relatively small compared to DFID general funding so, although Parliament will have to approve DFID's budget for the next ten years, this element will be a pretty small proportion of it.

Hilary Benn: For us it is about £700 million over ten years, just to put it in context.

Q60 Chairman: Thank you, Secretary of State. May I say that this debate started with the government's campaign for debt relief and it has proceeded not to a conclusion but a satisfactory stage. Are you able to add anything to what you have said to us in the past about the queue of countries that are applying debt relief but have not met the relevant conditions? Are you able to give us any update information on that?

Hilary Benn: There are obviously the 18 countries that have reached completion point. There are the ten that have reached decision point. There are other countries that are in the queue - the Central African Republic, Comoros, the Republic of Congo, Côte d'Ivoire, Lao PDR, Liberia, Somalia, Sudan and Togo. In some of those, as we know, conflict is the obstacle to making progress. There are the potential new HIPCs and that is a long list which I will be very happy to read out but I will let you have a note[7]. That is going to be finalised in early 2006. There are also then the four countries that are currently getting the Multilateral Debt Relief Initiative from Britain, where we are paying ten per cent of the cost. That is Armenia, Mongolia, Vietnam and Sri Lanka. Nepal would qualify if it were not for the government's problems, and there are other countries that potentially could join the Multilateral Debt Relief Initiative but that is subject to them demonstrating that they have got good management and the things that we have said a country needs to demonstrate in order to qualify for the Multilateral Debt Relief Initiative. The finalisation of the list, and somebody will correct me if I have got this wrong, for those who could potentially become part of HIPC, is to do with the sunset clause that countries might join. Is that correct?

Mr Pickford: There will be a review, based I think on end-2004 data, of the eligible list of HIPCs but at the moment there are 42 that have been declared as eligible. There are certain conditions, such as income per capita levels and debt ratios, which determine whether they are eligible, so there will be a review of other potentially eligible countries to decide whether they meet the criteria of HIPC status.

Q61 Chairman: I wonder if I could turn to the UN Summit. We are aware of all these multinational agencies but it is to bring them all together which is essential to delivering results. We are not on track for the Millennium Development Goals. I know that the Chancellor has said that we could still live up to that, to meet them, but the prospects do not look very good at the moment. What do you think the World Bank can do both to track how well we are doing and obviously therefore inform the debate as to what we need to do to bring achievement of the Millennium Development Goals back on track? One of the arguments is that we do not even know exactly what is happening with them.

Hilary Benn: The principal responsibility for measuring and recording and reporting to us the progress towards the MDGs rests with the UN and a number of reports have been produced that give us very good information about what is happening and the lack of progress that has been made, and I think that is where it rightly rests. The key now, particularly in relation to Africa, is how we are going to bring together all of the commitments that have been made, both by the donor partners and from within Africa, and then make sure that people do the things that they have promised. 2005 has been the year of real progress on commitments, and the new AIDS target is one example, the increase in aid is another, debt cancellation is another, but are people going to follow it through? We had the recent meeting of the Africa Partnership Forum in London and following the G8, where the G8 and the African heads of state and heads of government agreed that there should now be a joint plan, the African Partnership Forum agreed that they were going to take that forward. We will have a first draft of a joint plan when we meet next April. The Africa Partnership Forum I think represents the one body that does bring together all of the partners from Africa and the rest of the world and then collectively hold everybody to account for what they have done. The Archbishop of Capetown has also put forward a proposal for what I think is called an African monitor, which is bringing civil society together in Africa to hold donors and African governments to account for what they have done. I welcome both of these things because we need to sustain the political momentum and support that enabled 2005 to achieve what it did and carry that forward to make sure that people do what they promise on both sides of the partnership.

Q62 Chairman: But some of the charities and NGOs have actually said that the World Bank and IMF targets are undermining all the achievements of the Millennium Development Goals. How satisfied are you that the Bank that now says it is achieving those goals is going to put in place the mechanisms to ensure that the policies which will be implemented are not working against that?

Hilary Benn: For example, that is why the decision that the Bank and the Fund to support the debt cancellation agreement was so important, because on its own that releases resources of what could be between one billion dollars and $1.7 billion per year, which will no longer then have to be paid in debt and can be used for the purposes of enabling countries to make faster progress towards the MDGs. That is one very practical consequence. The second, with the larger IDA, is to increase the support that has been given. The World Bank has set up this Africa Catalytic Fund. The first country to contribute to that was the UK. That then links to voice, which we have not talked about, but voice and conditionality are very closely linked. Indeed, I think the changes we have made on conditionality have probably done more to advance voice than a lot of discussions about structural changes on the World Bank board where, frankly, things are stuck and that is why no progress has been made. The Africa Catalytic Fund, in support of the World Bank's new policy for Africa, which we agreed and which I greatly welcome, is saying that it will be informed in its decisions by priorities identified by Africa and the African Partnership Forum. If we can link the priorities that individual countries are setting, what Africa collectively is saying on infrastructure, for example - and one other thing that has happened is that we convened a couple of weeks ago the first meeting of the Infrastructure Consortium, which brings together the Bank, the EC, the Japanese and the African Development Bank (Donald Kaberuka has just taken over there) - we can say, "Look: all of us are working on infrastructure. It is clearly a hugely important issue. We are going to have more resources available. How can we make sure what we have got currently shifts out effectively so that infrastructure gets built?" - and that has been an issue for the African Development Bank - "and how can we harness this to make sure that it meets the priorities which have been identified in this case in relation to Africa?" Those are a number of things that have been done that include the Bank but also others to try and make sure that we build on the opportunity we have got to make faster progress. It is a big challenge and in countries where there is conflict, until you sort the conflict out there is not going to be progress towards the MDGs as we know.

Q63 Chairman: You have mentioned infrastructure. In the previous discussions there was agreement that the infrastructure budget was going to increase generally and that everybody recognised that, but we have been told that DFID were only going through other agencies rather than its own programmes. Are you satisfied that you can control what you have just said without having programmes of your own, in other words through the agencies you are dealing with?

Hilary Benn: I think that is the right route because the multilateral bodies can shift large amounts of money to support infrastructure investment. It is a very good example of where we can harmonise, and if we can be effective in bringing together all of this commitment to meet the priorities that have been identified by the countries and the regions - it is not just about countries; it is also about regional economic development, again particularly in Africa because there is big potential there, going back to your earlier question, - to improve the capacity of Africa to participate more effectively in the global economy, then yes, I think it is the right route and I think what we have put in place through the Infrastructure Consortium will help. We are also doing a lot of work on technical assistance to help make that happen.

Q64 Joan Ruddock: Specifically on MDG3, on gender equality, one of the key targets there is to eliminate the differentials between gender in primary and secondary education, preferably, the wording said, by 2005. At the UN Summit 2005 it was not mentioned and we know that many developing countries have failed to reach that 2005 target. What measures do you think are now necessary and what can DFID do to ensure that the 2015 target is met?

Hilary Benn: That is the first target and we are going to miss it because we know that the majority of the 104 million children who are not in schools yet in developing countries are girls. A number of things need to happen. What are we doing? The investment we are putting into education in supporting primary education programmes in developing countries that are partners of ours do focus very particularly on investment in girls' education. I can think of one example, the programme that we are now developing with UNICEF in Nigeria, and northern Nigeria in particular as I recollect, that is focusing particularly on girls, including practical things like buying uniforms so that they can go, including getting people to come and knock on the door in the morning and say, "Come on: we are off to school". The second issue is that of fees because school fees prevent poor families from sending their children to school and if they have got a bit of money the sad truth is they might send the son to school before they send the daughter, and therefore getting rid of fees would be a big step forward. The very current practical result of that is in Burundi where you see the connection between some political stability - they have just had a successful election and one of the manifesto commitments of the President who won was to abolish school fees, and I think 500,000 additional people turned up to go to school in Burundi. They have got the same number of teachers, the same number of classrooms. A couple of weeks ago we gave them - they have a modest programme there - an additional two million pounds to try and support them in building their capacity so that the class sizes do not rise. I would say the third thing is water because we know that providing clean water enables more girls to go to school. One of the great mysteries is why have donors in the last decade done less on water and why have a number of developing countries done less on water? I am very keen that we should change that because it is the key not just to getting more girls into school; it is also the key to fewer children dying needlessly of diarrhoeal diseases before the age of five. I suppose the fourth thing is to try and integrate this very important perspective into the plans that developing countries themselves are drawing up, so how aware are they of gender inequality in their country, how much political pressure is there to do something about it, are the voices of women being heard sufficiently, because if you can get it into their politics or their decisions that is when you are really going to see progress made.

Chairman: That is a classic comment. The observation on teaching Africa is that the role women play economically is of vital importance and yet that political influence is much reduced and yet have we the right to tell them what to do? That is the cultural implication. It seems to me that encapsulates in itself the exact dilemma of getting aid and yet respecting the culture of the country you are aiming it at. I know Joan will return to this.

Joan Ruddock: I think we could have a great debate on what respect for culture means and what giving women what they want means.

Chairman: I said I was sure that Joan would return to this on every possible occasion and I think it is quite right that she should.

Q65 John Bercow: Secretary of State, I have one final, I think, crucial theme and that is the theme of security in development and specifically the agreement of the UN Summit to the creation of an international Peacebuilding Commission and to the recognition of the responsibility to protect. What I suppose I would like to know from you, Secretary of State, is how the government intends to ensure that the Peacebuilding Commission is mandated, structured and resourced in such a way as to play an effective role in post-conflict peacebuilding.

Hilary Benn: I think those were two really important decisions. When people looked to the Millennium Review Summit and said, "What did development get out of it?", I would say two things. One is that if it had not been for the prospect of a summit I do not think there would have been the same political pressure to achieve what was achieved earlier in the year, so it is part of the constellation of 2005 which has helped us to make progress. Secondly, since we know a lot of poor people live in countries which are failed and failing states where there is insecurity, if we cannot tackle the insecurity we are not going to make progress in those countries towards the MDGs and that is why I hugely welcome those two decisions. With regard to the Peacebuilding Commission, the as yet unresolved issue is to which bit of the UN will it work, will it be the UN Security Council or will it be the General Assembly, and that has got to be taken forward. There is now going to be work done to try and answer the second question you have asked, which is about how will the Commission work, will it have a fund to support its activities? We are keen to contribute to that because I see this as hugely important. On the responsibility to protect, I welcome what the UN has done but the issue remains: taking the decision in relation to individual cases and then crucially, if you take the decision, who is going to do the work? We are discussing the Sudan in the not too distant future and that is one country where this is a very live issue, not least in view of the developments in the last month and a bit.

Q66 John Bercow: Secretary of State, I am sure that structure and resources are very important but it does seem to me that mandate is absolutely the overriding issue. What some of us who are enthusiasts for the creation of a Peacebuilding Commission are concerned about is that at the moment it looks as though the UN is at best lukewarm about and at worst hostile to the idea that the Peacebuilding Commission should be able to intervene and prevent conflict. It is all very well picking up the pieces afterwards but would it not be better to be able to prevent conflict? Otherwise, in a very literal sense - and I am not being just a semantic pedant; I am being explicit and specific - that responsibility to protect is, to put it brutally, a responsibility to protect those who are left after the oppressors have done their ill work and that ain't good enough, is it?

Hilary Benn: I agree with you entirely. I think that by agreeing both of those things the UN has potentially given itself the means both to try and prevent the crisis happening in the first place and to help pick up the pieces if the crisis occurs. I think decisions on intervention properly fall within the responsibility to protect bit of the UN system but, just based on my experience, it seems to me that the obstacles up until now have been clarity about whose job it is and, assuming a decision is taken, who is going to do the work. The world has traditionally looked to a relatively small number of countries for particular forms of intervention when things are really bad and that is why I think we need to increase the capacity of the world to respond and that is why we have strongly supported the African Union force in Darfur, but if you ask the question how successful have we been there, the answer is that a lot of people have died. Look at Rwanda. The question is, have we learned the lessons? Is there the will but is there also the means? I think building the means to do something about it is going to be a very important part of answering the question you properly ask.

Q67 John Bercow: Secretary of State, I entirely agree that there is an issue about who should act but in a sense a prior question which is at least as important is whether action can take place at all and that, of course, comes down to the issue of the use of the veto or self-restraint in not exercising it. Would you agree with me, or would you be prepared at least to consider the issue and concepts that Jack Straw put, that retention of the right to veto in cases of genocide is, frankly, not on?

Hilary Benn: We are strong supporters of the veto power, including for ourselves, but the veto power should not be there to stop people being saved in those circumstances and in the end it falls to each individual country to exercise its veto in a responsible way to ensure that people are protected.

Q68 John Bercow: But you will seek to put the issue on the agenda, will you not?

Hilary Benn: And I am sure you will too.

Chairman: Thank you, Secretary of State, and your colleagues for coming here and answering our questions. We look forward to seeing you again.

---

[1] "Developing world confused by UK aid guidelines: Officials complain of new policy's lack of clarity: Free-marker rules still imposed in some countries", The Guardian, 24 September 2005

[2] Ev

[3] Note by witness: This is incorrect. DFID had pressed the World Bank to give this commitment, including in the Secretary of State's statement on the Bank's review of conditionality, but the Bank has so far not agreed. The World Bank has accepted that some areas of policy are "sensitive" and has reaffirmed the importance of ensuring ownership of the reform agenda and including only conditions that are "critical" for achieving results. However, it has not given this specific commitment. DFID will continue to press the World Bank to provide guidance to their own staff on the circumstances when such conditions might be appropriate. DFID is also seeking more detailed guidance on how Bank staff can better assess and promote government ownership of policy choices.

[4] Ev

[5] See footnote 2

[6] Ev

[7] Ev