1—Memorandum
submitted by the Department for International Development: Responses
to questions from the International Development Select Committee
1. Can you confirm that excluding debt relief
and payments to Iraq, UK's aid contribution fell in real terms
last year?
Figures published by the OECD show that UK official
development assistance (ODA) is estimated to have been £5,916
million, or 0.48% ODA/GNI, in 2005, compared to £4,301 million,
or 0.36% ODA/GNI, in 2004. The increase reflects both the implementation
of the plans set out in Spending Review 2004 and a significant
short-term increase due to the debt deal agreed with Nigeria.
UK ODA excluding debt relief fell slightly in
real terms between calendar years 2004 and 2005. However DFID's
budget rose by over £600 million between fiscal years 2004-05
and 2005-06. There are three main reasons which explain this divergence:
(i) The OECD ODA figures are on a
calendar year basis. Because substantial payments to international
institutions such as the World Bank fell due at the end of calendar
year 2004 and at the beginning of calendar year 2006, the increase
in DFID's budget of over £600 million between fiscal year
2004-05 and fiscal year 2005-06 translates into an increase of
only £350 million between calendar year 2004 and calendar
year 2005. This still represents a 6.8% real terms rise.
(i) The OECD figures include ODA spending
by other Government Departments. Excluding the contribution of
CDC, the increase in ODA spending from calendar year 2004 to 2005
was £406 million. This represents a real terms increase of
8.6%.
(iii) CDC contributed around £210
million to UK ODA in 2004, but in 2005 CDC received more from
loan receipts and equity sales than it invested in equity purchases.
This resulted in a negative contribution to ODA of around £200
million. The net effect of this means that from calendar year
2004 to 2005, the OECD figures for UK ODA excluding debt relief
are flat in nominal terms or show a 2% real terms decrease.
2. Many organisations criticise the inclusion
of debt relief in aid figures. Why do you do this? Do you think
it is worth monitoring aid flows, excluding debt relief?
Debt relief means that countries pay less or
no debt service, and can use the savings for poverty reducing
investments, such as education and health, instead. This is why
the international community represented at the OECD's Development
Assistance Committee (DAC) has agreed that debt relief should
be counted as Official Development Assistance (ODA) where appropriate.
The UK abides by the OECD DAC decision, scoring debt relief as
ODA where appropriate and clearly identifying debt relief within
our ODA statistics.
We agree that is appropriate to break down ODA
figures so that the different kinds of financial support, including
debt relief, are clear. There is already monitoring by the DAC
of aid flows, both including and excluding debt relief. The UK
also monitors and reports our aid flows both including and excluding
debt relief. We are also pressing for independent monitoring of
each donor's aid commitments and delivery to ensure that promises
on increased aid are met.
3. How are you measuring the effectiveness
of PRBS in each country?
When any PRBS programme is designed, we set
out in advance what we expect the programme to achieve in both
the short and the medium term. The indicators that we use to monitor
progress are set out in a performance measurement framework, either
in our own documents, or using shared documents as part of a harmonised
approach involving partners and other donors. We measure effectiveness
of the programme through regular monitoring of these indicators.
We normally use data produced and used by government and other
donors for monitoring such as the Annual Progress Review of the
PRSP and individual sector reviews.
4. Does DFID have a list of criteria that
the country or Government has to meet before the decision to fund
aid via PRBS is made?
Yes. Our 2004 policy states that we consider
providing PRBS if the following criteria are met:
— the partner government's planned
budget priorities support poverty reduction;
— there is commitment to strengthening
administrative, financial and technical systems so that funds
help to reduce poverty effectively; and
— delivering aid through this instrument
will produce benefits including sustainable poverty reduction
that we would be unlikely to achieve through other forms of aid
delivery.
In addition, before a decision is made to provide
PRBS, DFID carries out a Fiduciary Risk Assessment. This assesses
national public financial management systems and the risk of corruption.
Partner governments must have a credible programme to address
fiduciary risks. Where risks are high, additional short term safeguards,
such as independent audits, may be used.
The 2006 White Paper sets out a new framework
within which we will choose financial aid instruments. In particular
it introduces good and improving governance as a criterion for
providing general budget support, and says that we may provide
budget support when governance is weaker, but only alongside safeguards
such as earmarking or additional financial management procedures.
We will update our PRBS policy and set out how we will apply the
White Paper framework to PRBS.
5. Is there a risk that aid via PRBS is being
wasted because PRBS is being delivered before a full assessment
of its effectiveness is known?
There is evidence that, where circumstances
are right, PRBS is an effective way of delivering aid. The recent
evaluation of General Budget Support in seven countries found
that:
— Budget support delivers significant
benefits in recipient countries.
— Budget support has increased expenditure
on the poor, including on health and education services.
— Budget support has improved predictability
of funding so that countries can better plan to deliver services
for the long term.
— Budget support strengthens government
systems, including public financial management.
— Budget management is more transparent
and Ministries of Finance have more control over expenditure decisions.
— Flexible budget support funding has
increased the efficiency of all resources (including other forms
of aid).
6. (i) How was the decision to withhold direct
budget support to the Government of Ethiopia made? (ii) Does the
Department think that the decision to withhold direct budget support
will create incentives for the Government of Ethiopia to improve
their governance and human rights record?
(i) The decision was taken by the Secretary
of State for International Development following the election-related
disturbances and human rights abuses.
(ii) The human rights abuses were a violation
of one of our fundamental principles for providing aid. We are
withholding direct budget support because we believe that the
conditions in Ethiopia no longer provide us with the necessary
assurances required for such a flexible form of aid. We are, however,
engaged in ongoing dialogue with the Government on governance
and human rights as we believe that improvements are most likely
to come through constructive engagement.
7. How important will the assessment of a
country's public financial management be in deciding whether or
not to give budgetary support?
Very important. A standardised assessment of
fiduciary risk—ie the risk that funds are not used for their
intended purposes, do not achieve value for money or are not properly
accounted for—is mandatory before any PRBS decision is made.
The Fiduciary Risk Assessment involves:
— a consideration of the current performance
of the national public financial management (PFM) system against
a set of benchmarks in order to identify areas of weak performance
that give rise to risk;
— an assessment of ongoing PFM and
anti-corruption reform programmes focusing on whether they cover
all key risk areas and are credible (ie the planned reforms are
realistic and achievable); and
— consideration of whether any additional
safeguards are required for risks which are not adequately addressed
by ongoing reform programmes.
All Fiduciary Risk Assessments are subject to
a Central Support and Scrutiny process led by Finance and Corporate
Performance Division to ensure that DFID guidance has been followed
and judgements made by Country Office teams are consistent with
the evidence provided.
8. Will the increase in the proportion of
aid via budgetary support mean that new skills are required by
DFID staff?
Yes. Our approach to recruiting, supporting
and developing staff is based on a number of external and internal
drivers of change. These include changes in the way we deliver
aid, including moves to budget support and closer working with
other donors.
9. Has the staff relocation to East Kilbride
had any impact on staff retention, recruitment and general morale?
The relocations have gone well. The variety
of posts in the East Kilbride has increased. Excellent video-conferencing
facilities have enabled good communication with the London office.
Staff who have relocated have given positive feedback on their
experience.
10. What changes are DFID envisaging in the
composition of its staff in the balance between staff based in
the UK and staff based overseas; and in terms of skills?
Overseas, we are likely to:
— recruit more local staff in fragile
states;
— move some UK civil servants from
"good performing" countries that receive poverty reduction
budget support to fragile states.
In the UK, we are likely to:
— prioritise staffing around core White
Paper 3 priorities;
— maximise headcount savings from ongoing
efficiency programmes, particularly in corporate services; and
— examine the case for moving more
staff abroad.
In terms of skills, we will need to develop
and recruit individuals to:
— work in fragile states (project and
programme management skills will be particularly important); and
— influence the international development
system.
11. DFID anticipate that the targets relating
to girls and boys enrolled in primary school, increase in the
proportion of births assisted by skilled birth attendant and reduction
of under-five mortality rates are not going to be met (DFID Departmental
Report 2006, page 23). What remedial action are you undertaking
to ensure that the above targets will be met?
Examples of the action we are taken are given
below.
PRIMARY SCHOOL
ENROLMENT
General
DFID is increasing its financial commitment
to education and plans to spend at least £8.5 billion on
education over the next 10 years. This will include entering into
ten year agreements with poor countries to finance ten year education
plans.
Africa
We are increasing our financial support to education
and are encouraging partner governments to improve girls' participation
at primary level.
DFID continues to encourage removal of school
fees—such as recently in Burundi—enabling children
from poor families, especially girls, to attend school. The new
White Paper commits us to supporting the removal of user fees
for primary education in all our partner countries.
Following the publication of our strategy on
"Girls Education: Towards a better future" (January
2005) we have redoubled our efforts to encourage partner Governments
in Africa to improve girls' participation at primary level. Progress
has been made in Nigeria, Rwanda, and Zambia amongst others. In
Nigeria we are providing £26 million to support a UNICEF
programme to address barriers to girls' enrolment in six northern
Nigerian states.
DFID is also working with UNICEF to strengthen
their capacity to implement the UN Girls' Education Initiative
(UNGEI) which coordinates efforts to promote girls' participation
in education (www.ungei.org).
Asia
In Bangladesh DFID is supporting a sector-wide
Primary Education Development Programme (£100 million). This
aims to improve the quality and completion rates in primary education.
In Nepal, DFID is supporting the Education for All Programme,
with support of £20 million over five years. In India, DFID
is supporting the Government of India's Sarva Shiksha Abhiyan
(SSA) universal elementary education programme with a commitment
of £210 million over five years (2003-08). The aim is to
ensure that by 2015 all children in India are receiving eight
years of basic education of acceptable quality, regardless of
sex, caste, creed, family income or location.
MATERNAL AND
CHILD HEALTH: INCREASE
IN THE
PROPORTION OF
BIRTHS ATTENDED
BY SKILLED
BIRTH ATTENDANTS
AND UNDER-FIVE
MORTALITY
DFID is prioritising the scaling up of basic
health services to improve maternal and child health including
strengthening national health systems and delivery of key interventions
such as vaccinations and malaria bednets.
Globally, DFID is working with the World Bank,
WHO, The Global Fund on AIDS, TB and Malaria and other bilateral
agencies to deliver better financing and technical assistance
to countries. DFID is continuing to engage and support global
efforts such as the International Partnership for Maternal, Newborn
and Child Health and the Global Health Workforce Alliance.
Africa
In Mozambique, maternal and child health are
now priorities for the Sector Wide Approach in health. In Malawi,
the Emergency Human Resource Programme aims to increase the number
of health professionals. In Sudan, we are supporting the provision
of emergency obstetric care through NGOs such as Medecins Sans
Frontieres and Merlin. In Sierra Leone, we are developing a new
programme of support with the World Bank and other partners focusing
on the achievement of maternal and child health related MDGs and
specifically scaling up the number of skilled health professionals.
In Zambia, we are supporting the National Strategic
Health Plan. This focuses on improving child health through expanded
immunisation services, curative care and increasing access to
basic health services. In Tanzania, DFID is supporting the social
marketing of bednets, as part of the National Insecticide Treated
Net Programme, which aims to ensure that most of the 31 million
people at risk from malaria, including children, will be protected
by 2007.
Asia
In Cambodia we are supporting the development
and implementation of a national plan to reduce unsafe abortions,
as part of our work aimed at reducing maternal mortality. In Nepal
we are supporting the national Safe Motherhood Programme. This
has increased skilled attendance from 3% to nearly 18% in districts
supported by the project.
In India we are supporting the national Reproductive
and Child Health programme with financial and technical assistance.
The programme aims to reduce the Maternal Mortality Rate from
407 in 1998 to 100 per 100,000 live births in 2015, and the Infant
Mortality Rate from 70 to 30 per 100,000 live births. If the programme
achieves all its targets, over one million lives will be saved
each year.
In Pakistan, DFID is planning to make a contribution
of £90 million from 2006 to 2011 to implement the Government
of Pakistan's national Maternal, Newborn and Child Health policy
and strategic framework. It is estimated that this support,
combined with government and other development partner inputs,
will save the lives overall of at least 30,000 women and 100,000
babies, and prevent serious ill health and disability for 3.5
million women.
12. (i) As your targets are typically outcome
targets and influenced by a large number of factors, how can you
assess DFID's contribution to performance of the targets? (ii)
Also what mechanisms are in place to hold DFID accountable to
the taxpayer, given that targets are heavily influenced by external
factors?
(i) We agree that attributing DFID's contribution
to overall progress towards the MDGs is difficult. But we think
that it is right that we use progress towards the MDGs in the
countries in which we work to assess overall progress. DFID identifies
key actions it can take to support achievement of the PSAs and
includes these in Directors Delivery Plans. These actions are
then reviewed on an annual basis by DFID's Management Board. In
addition, Country Assistance Plans identify the particular contribution
of DFID and progress is reviewed annually. DFID also has a comprehensive
system of assessing the performance of its own bilateral projects
and programmes over £1 million on an annual basis. The assessment
looks at the effectiveness of programmes in meeting their objectives
and is therefore able to clearly demonstrate the effectiveness
of the Department's contribution. The aggregate performance scores
are reported publicly as part of our PSA reporting.
(ii) The key mechanisms in place are: the
Autumn Performance Report, the Departmental Report, Select Committee
enquiries, Parliamentary Questions and Parliamentary debates.
From 2007, we will report annually to Parliament on the effectiveness
of UK policy and expenditure in helping to reduce poverty and
support sustainable development, in line with the International
Development (Reporting and Transparency) Act.
13. "The United Kingdom (2006) DAC Peer
Review: Main Findings and Recommendations" found that
"in keeping with the Paris Declaration, DFID is encouraged
to avoid setting additional aggregate sector and thematic spending
targets, so as not to undermine partner country ownership and
aid effectiveness". How is DFID intending to implement this
recommendation?
DFID remains committed to a country-led approach
to development and to supporting priorities identified by partner
countries as far as possible. However, at the same time we consider
that there are key sectors where long term investment is critical
for poverty reduction and to promote growth.
The White Paper sets out a commitment by DFID
to ensure that 50% of its spending will be targeted on public
services that we consider to be critical to the sustainable alleviation
of poverty and sets some specific targets for our global spending
on education and water and sanitation. However, these commitments
do not translate to hard spending targets within country programmes.
Our investments in social sectors, growth and governance at country
levels are and will continue to be determined by the priority
given to these sectors by our partners and by a sensible division
of labour among donors.
14. Your targets for reducing poverty in
sub-Saharan Africa and Asia are based on the performance of 16
key sub-Saharan countries and seven key Asian countries. Is there
a risk that this creates incentives for you to overlook the plight
of non-key countries?
We have chosen a limited number of PSA countries
because we think that it is right that we focus our bilateral
efforts on a limited number of poor countries. This creates incentives
for us to prioritise our financial and human resources effectively.
We contribute, of course, to a much wider range of countries through
our multilateral and other contributions.
15. The target for the increase in the index
of DFID's bilateral projects evaluated as successful is on course.
You have informed us previously that "For larger projects/programmes,
it [the evaluation] is likely to involve a range of stakeholders
beyond the DFID team, including partner governments, any other
donors also involved in the project/programme and external reviewers".
Do you have any criteria for when and how often you use external
reviewers for review of your projects?
Recent analysis suggests that around 56% of
projects are reviewed by a team that includes stakeholders beyond
the DFID team and/or externally commissioned reviewers. We are
currently undertaking a piece of work to look in more detail at
current practice and determine what the ideal level of external
scrutiny might be. Criteria will then be proposed and the relevant
guidance will be updated.
16. The proportion of DFID's high risk projects
evaluated as successful by commitment value has fallen from 51%
in Q4 2004-05 to 30% in Q4 2005-06 (see Departmental Report 2006,
page 261). What is the reason for this?
There are notable differences in the composition
of the high risk portfolio at these two periods. When it was at
its peak of 51% in Q4 2004-05 it contained 38 projects/programmes
with a total commitment value of £334 million. At the end
of Q4 2005-06, it contained 62 projects with a commitment value
of £639 million.
At both time periods this was a relatively small
portfolio in terms of the number of projects. Under DFID's present
methodology for calculating our "value for money" score,
small portfolios can be subject to fluctuating portfolio quality
if there is a significant movement in a number of high value projects/programmes.
Movement can be into or out of the portfolio (as new projects
start or old ones are completed), due to a change in performance
score, or due to a change in risk rating which means something
that was high risk becomes medium risk or vice versa. Among the
new projects joining the portfolio between Q4 2004-05 and Q4 2005-06
were six projects of over £20 million that scored outside
the "successful" value for money category. In addition,
two completed projects of over £50 million that were previously
evaluated as "successful" graduated from the portfolio.
This will also have impacted on the score.
Changes to the methodology for calculating value
for money between the 2003-06 and 2005-08 PSAs mean that the problem
of small portfolios has been reduced (although not eliminated).
17. (i) What is the process by which you
are drafting targets for the next Spending Round? (ii) What consultation
process are you undertaking to set up new targets? (iii) Will
you provide the Committee with copies of draft targets for comment?
The current Comprehensive Spending Review process
provides the opportunity for Departments to review and reassess
their current PSA (2005 to 2008) targets and consider the target
regime for the period 2008 to 2011. The process will be taken
forward by Departments drawing on guidance provided by the Chief
Secretary to the Treasury.
The policies and priorities outlined in the
White Paper together with the ongoing work on the Comprehensive
Spending Review will form the background to our review of the
Department's existing PSA targets and our discussions over the
best way of framing our targets for the period 2008 to 2011. We
are awaiting guidance from the Treasury on the detailed process
for revising PSA targets, including on consultation.
18. It is unclear why some of the targets
for 2003-06 Spending Review in the Departmental Report 2005 have
changed in the 2004-06 Spending Review in the Departmental Report
2006. Please could you provide an explanation for the changes?
Changes in the targets were undertaken to address
a measurement issue. There were problems in the 2003-06 PSA where
targets gave specific baselines, since the international datasets
used to provide the data were subject to regular updating which
included alterations to the baseline position. In response to
this, the 2005-08 PSA targets have been adapted so they are based
largely on percentage gains which are therefore immune to changes
in baselines. For each of the PSA sub-targets based on the MDGs,
DFID attempted to set stretching but realistic targets.
With regard to target 1, sub target 4 on under-five
mortality, it was clear at the time we set the 2005-08 target
that we had been over-ambitious with the 2003-06 target and thus
we scaled down our anticipated improvement for the next period.
This target is very difficult to predict as the data come from
modelled series, so it was a case of estimating what might be
realistic.
For sub target 5 on births assisted by skilled
birth attendants, the lack of progress over the 2003-06 period
caused us to revise downwards the anticipated rate of progress
for 2005-08, although this target still remains ambitious and
is off-track at present.
For sub target 6 on HIV/AIDS, the baseline position
is not stated for the 2005-08 PSA period, due to the issue raised
above about changing baselines in the international data series
used to monitor progress against these targets.
|
Departmental Report 2005 |
Departmental Report 2006 |
|
| Target 1 Sub target 4 |
A reduction in under-five
mortality rates for
girls and boys from 158
per 1,000 live births to
139 per 1,000 [reduction
in 19 per 1,000 live
births]
Anticipated progress by
2006—Off track |
A reduction in under-five
mortality rates for
girls and boys by eight
per 1,000 live births
Anticipated progress by
2008—Met |
Why is the target less
ambitious for 2004-06
Spending Review? |
| Target 1 Sub target 5 |
An increase in the
proportion of births
assisted by skilled birth
attendants from 49% to
67% [this is an increase
of 18 percentage points] |
An increase in the
proportion of births
assisted by skilled birth
attendants by 11
percentage points
| Why is the target less
ambitious for 2004-06
Spending Review? |
| Target 1 Sub target 6 | A reduction in the
proportion of 15-24 year
old pregnant women
with HIV from 16% |
A reduction in the
proportion of 15-24 year
old pregnant women
with HIV |
Why is the target less
specific for the 2004-06
Spending Review? |
19. Capital spending is set to reduce 60% from £31.9
million in 2005-06 to £20 million in 2006-07 (see Table 1,
page 221 in DFID Departmental Report). What is the reason for
this reduction?
DFID's capital budget is a net figure including both expenditure
on administrative capital projects (eg new IT systems and office
accommodation) and financial capital items within the programme
(eg subscriptions to the EBRD and some capital receipts). The
change between 2005-06 and 2006-07 reflects current forecasts
for timing of capital payments and receipts, particularly for
financial capital; there are no changes in plans for investment
in administrative capital.
20. Expenditure on Southern African Regional reduced from
£32.9 million in 2004-05 to £24.7 million in 2005-06
(see Table 4, page 224 in DFID Departmental Report). What is the
reason for this reduction, given the huge incidence of HIV/AIDS
in that area?
The 2004-05 framework was inflated due to year-end accounting
adjustments that were made to the regional framework that year.
This gives a false impression of a declining aid spend in 2005-06.
Spending on HIV/AIDS programmes in Southern Africa has not in
fact declined in 2005-06 and remains a priority for the Southern
Africa office which is reflected in our current programmes. We
are providing £18 million over the next three years to UNICEF
to manage a regional programme aimed at supporting children affected
by AIDS across six countries in the region. In addition, the Secretary
of State recently approved the design of a new regional programme
on infectious diseases. This programme, worth £40 million
over the next five years, will work with a range of partners to
tackle HIV/AIDS, tuberculosis and malaria in Southern Africa.
21. If scaling up involves writing off unpaid debt then
absorptive capacity is not really an issue. How much of the scaling-up
of DFID's doubling of aid will be in the form of debt relief?
Most of the UK's bilateral debt relief is provided on debts
held by the Export Credits Guarantee Department (ECGD), and does
not incur costs to DFID's budget. Bilateral debt relief that goes
beyond what is required by international agreements is funded
by DFID, as are costs stemming from the Multilateral Debt Relief
Initiative agreed last year under the UK Presidency of the G8.
Debt relief constitutes a form of ODA and therefore contributes
towards progress against the target to achieve an ODA/GNI ratio
of 0.7%. The proportion of DFID's budget that will be applied
towards debt reduction efforts will depend on the progress made
by countries through the internationally-agreed debt relief initiatives
such as HIPC, as well as eligibility for our unilateral efforts
such as our support of debt relief for non-HIPC low-income countries.
22. Those states in most need of aid will also be the
ones with limited absorptive capacity. When is too much aid a
bad thing? How is DFID designing its development interventions
to take absorptive capacity constraints into account?
Many of the states needing aid have limits to their absorptive
capacity. There is evidence to suggest that capacity to absorb
aid can diminish at very high levels of aid dependency (eg when
aid flows begin to exceed about 20-30% of GDP), and that the impacts
of aid are greater when recipient policies and institutions are
strongest. Too much aid may hurt these economies if it skews incentives
to raise taxes, increases inflation, appreciates the real exchange
rate (which can make exports uncompetitive) or compromises macroeconomic
stability. To minimise the risks, aid will need to be balanced
between expenditures to meet social objectives and those needed
to improve productive capacity. In addition, increasing aid spending
on imports relative to spending on domestic goods and services
can help manage inflation and minimise any risks to export competitiveness.
Capacity to absorb aid can also be enhanced by following appropriate
policies, which support institution building and good economic
management. This will increase aid effectiveness, which is why
alignment behind national strategies is an important part of our
work together with harmonisation between donors, the World Bank
and the IMF.
In developing Country Assistance Plans and deciding how to
deliver our assistance, DFID takes account of absorptive capacity
constraints and ensures that collectively the donor community
is addressing these constraints. Many plans include a focus on
improving public financial management and the effectiveness of
sector institutions. We believe that technical assistance can
contribute to capacity development and that it works well when
institutions themselves want to change and are ready to lead reform.
We believe that technical assistance should be provided through
government systems so that developing countries can design and
manage it to meet their needs.
DFID uses a Resource Allocation Model to inform decisions
about the allocation of its bilateral resources among low income
countries. The model takes account (among other things) of the
volume of aid flows provided though multilateral channels and
by other donors.
23. Are the problems with absorptive capacity to do with
the macro-economic impact of large aid volumes, or with the capacity
of the recipient country's institutions to make use of the aid.
If it is the latter, should DFID reassess its attitude to providing
technical assistance?
The macroeconomic impact of large aid inflows will partly
depend on how the aid is spent and partly on the recipient country's
economic policies. Potential problems associated with large aid
inflows and absorptive capacity can be due to either or both of
these issues. As part of the country planning process, DFID assesses
constraints to absorptive capacity and decides what mix of aid
instruments will be appropriate according to country circumstances.
DFID is also working with countries, donors, the World Bank and
the IMF to highlight the importance of macroeconomic stability
and the need for appropriate economic policy responses to large
aid inflows.
Where institutional weaknesses hinder implementation of poverty
reduction programmes, we will take actions, together with the
donor community, to address those constraints. We believe that
technical assistance works well when institutions themselves want
to change and are ready to lead reform. We believe that technical
assistance should be provided through government systems so that
developing countries can design and manage it to meet their needs.
24. The basis for the IFF is that Africa's development
needs are so large that aid needs to be frontloaded. How does
this policy sit with concerns which are emerging about the ability
of some of the poorest states to absorb large volumes of aid?
The IMF and World Bank have reported that additional aid
can be absorbed effectively and actually encourages private sector
investment. Studies show high rates of return even in countries
with aid/GDP ratios above 30%. The World Bank has estimated that
countries in Asia and Sub-Saharan Africa could effectively manage
at least a 60-100% increase in aid flows in the short term. The
Bank has also estimated that of the 65 countries unlikely to meet
the poverty goal without further external assistance and/or policy
changes, 43 could effectively absorb more aid today.
The UN Millennium Project estimated that global assistance
will need to rise to $135 billion in 2006, and $195 billion by
2015 to achieve the MDGs. In 2004, total DAC ODA was $79 billion.
At the 2005 G8 Summit, donors agreed to increase ODA by $50 billion
by 2010 compared to 2004 levels. The IFF can have a major role
both in providing additional resources, and in helping countries
that may have difficulty in meeting their 2005 commitments by
providing an alternative route. In any event we will not meet
the MDGs just by scaling up the current policies and practices
of the global aid system. The IFF could significantly improve
the quality of global aid if it spends money in a way that reinforces
the principles of aid effectiveness set out at the Paris High-Level
Forum: in particular by financing long-term, predictable aid through
governments' own systems. Based on donors' legally binding long-term
commitments, the IFF will be able to frontload aid to generate
economies of scale, the benefits of early intervention, and provide
aid in predictable multi-year programmes. In addition the IFF
could:
(a) Improve the allocation of aid among poor countries.
Some might argue that this means using an allocation formula focusing
on good performers. We would prefer the IFF to balance the aid
allocations of other donors, by allocating resources disproportionately
to under-funded "orphans".
(b) Strengthen country-led development by maximising
the resources available to countries for spending on their own
national plans for meeting the MDGs—routed either through
their own budgets, or through agencies which they have chosen.
(c) Strengthen funding of the multilaterals—the
implication of recent increased aid pledges by donor countries
is that the share of multilateral funding in total aid will go
down. Given that multilateral aid can bring benefits in comparison
with many donors' bilateral programmes, there is a case for disbursing
the IFF through multilateral channels.
(d) Finance particular sectoral outcomes, eg on
education and health.
25. The provision of vaccinations is perhaps the most
obvious example of an area where front-loaded investment is likely
to reduce later costs, in terms of health care provision. Will
it really be possible to learn any wider lessons from the experience
of the IFFIm, about the potential value of front-loading in areas
where this connection is less clear?
The success of the financing structure for IFFIm will prove
the concept of the main IFF, in particular that donor countries
can make binding long-term commitments and that these assets can
be efficiently securitised by the financial markets.
26. Do you have any concerns about conflicts between economic
growth in middle income countries, the associated energy use and
carbon emissions, and the implications of these for climate change?
What can DFID do to address these issues?
Energy and development are critically linked—both within
poor countries, where access to reliable and affordable energy
services is essential for development and lasting poverty reduction,
and at a global level, where rising carbon-based energy use is
increasing the threat of climate change to all countries, especially
the poorest and most vulnerable.
We recognise that countries like China, India, Brazil and
Mexico will have significant emissions in the future (though their
emissions will still be low per person compared to developed countries
for the foreseeable future). All countries need to work together
to address global emissions. For this reason, the new White Paper
includes a chapter on Working Internationally to Tackle Climate
Change. The White Paper commits the UK Government to:
— Work for international agreement on a long term
stabilisation goal to avoid dangerous climate change, and for
a way of reaching the stabilisation goal which enables developing
countries to grow, helps to fund the investment needed for clean
energy and helps developing countries to adapt.
— Support the World Bank's Energy Investment Framework
to increase private sector investment in low carbon energy and
energy efficiency in developing countries.
— Work through the UN to develop mechanisms linked
to international agreements on cutting emissions that maximise
investment in clean energy in developing countries.
— Work with the G8 and EU to develop and use clean
energy technology in developing countries.
27. What is the main problem here, the cut in DFID staff,
or the size of the increase in the aid budget? Will DFID hit bottlenecks
as it starts to scale up?
We recognise that increasing our aid budget with a constrained
headcount represents a tough management challenge. DFID's Zero
Based Reviews are looking at options to manage the expanding agenda
and budget by delegating its bilateral aid management where appropriate,
re-focusing its policy function and reducing staff in corporate
services to re-deploy staff to front line delivery. We need to
push harder on the harmonisation agenda, focus on core business,
consider off-shoring and outsourcing options, get better at assessing
and improving multilateral effectiveness, and improve the way
we prioritise.
28. Is DFID relatively expensive because of its leading
role in policy formulation? Will DFID have to contract out more
of its thinking to the ODI and others, and, if so, how would this
affect the type of staff DFID can attract?
Overall, DFID is not relatively expensive in terms of administration
costs as a proportion of programme costs. According to the OECD
DAC Peer Review of DFID (2006), DFID's Policy Division has proven
effective in focusing national and international attention to
issues of policy debate and in developing policy guidance that
is used across government, within DFID headquarters, and in country
offices to achieve development policy coherence. It also indicated
that this policy function is instrumental in supporting DFID's
leadership at home and abroad.
317 staff (11% of total staff) currently deliver this policy
support. This represents 13.5% of DFID's administration costs
(£31.4 million) and 0.72% of total programme spend. Like
other areas of the business, the policy group has to contribute
to DFID's current and likely future efficiency targets. There
is a continuing review of whether and which work can most efficiently
and effectively be done in HQ, in the field, or by outside groups. Any
major shifts in the sourcing of policy work would be for decision
during and after the CSR. Staff come to DFID expecting to work
at different times on both policy and operations; we would not
expect changes in the amount of work done in-house to affect the
staff wanting to work for us.
29. What estimate have you made of the cost and impact
on staff numbers which will result from the requirements placed
on DFID by the provisions of the International Development Reporting
and Transparency Bill?
We are currently considering the implications of the new
Act. We have not yet made an estimate of the financial costs or
of the impact on staff numbers. But we expect these to be relatively
small as we will adapt current reporting systems to respond to
the requirements of the Act.
30. DFID has a resource allocation model to inform its
allocation of bilateral programme spending among the Low Income
Countries and maximise DFID's impact on poverty reduction. How
does the "resource allocation model" (whose criteria
include the likely effectiveness of aid in reducing poverty) fit
with the higher risks involved in operating in an increasing number
of fragile states?
We aim to allocate our bilateral aid among countries in such
a way as to maximise its impact on poverty reduction. The model
takes account of relative country need and performance and as
part of the CSR Zero-Based Reviews has been expanded to cover
both LICs and MICs, take account of aid flows from other donors
and take into account DFID's multilateral as well as bilateral
aid. The resource allocation model informs decision-making but
is only a starting point in allocating resources. Other factors
are taken into account including poverty and the MDGs, governance
(including political governance), risk (including fragile and
post-conflict countries) and country footprint (looking across
political, economic, environmental and social factors).
We recognise that there are risks in working in fragile states
and think that the challenge is to manage these risks effectively.
This includes managing risks within countries (eg by having a
mix of aid instruments) and managing risks across our bilateral
programme (eg by balancing the allocations to fragile states with
allocations to more stable policy environments).
31. The DAR (5.19) states that European Community aid
is becoming gradually more effective. Nevertheless, in terms of
spending in LICs, there remains a long way to go. DFID tracks
the results of the multilateral institutions through a Multilateral
Effectiveness Framework (MEFF), what is this tool telling DFID?
Is DFID intending to push more of its funding through the multilaterals
and, if so, which ones?
Evidence provided by the EC and from independent studies
shows that Community assistance has become more effective following
the implementation of reforms since 2000. For example, disbursement
ratios have improved and independent project evaluations show
improved performance.
DFID has used the MEFF to provide an initial assessment of
the organisational effectiveness of multilateral organisations,
including the EC. The MEFF identified the relative strengths and
weaknesses of each institution's management processes in addition
to other criteria and is helping to inform DFID's Public Service
Agreement monitoring and Institutional Strategies. Overall, the
EC scored above the average for the institutions reviewed. It
is intended to repeat the exercise in full every three to four
years and to track three focus areas relevant to each institution
on an annual basis.
No decisions have yet been taken on whether to channel more
resources through the multilaterals. This will be determined as
part of the Comprehensive Spending Review.
32. Which multilaterals are best at delivering aid? Has
DFID reviewed its portfolio of funding to multilateral development
institutions and considered the breadth of organisations funded
in light of the transaction costs arising from each additional
partner, as recommended in the NAO report?
Different multilateral organisations demonstrate different
attributes in the delivery of aid. This is often dependent upon
the context or service in question. DFID is reviewing its portfolio
of multilateral development expenditure, and what is done also
through its bilateral programme, global funds, the private sector
and civil society as part of the Comprehensive Spending Review.
Multilateral expenditure in the future will continue to be informed
not only by what we know about the effectiveness of individual
multilaterals, about which a lot of information is already within
the public domain, but also a range of other considerations. These
considerations include how we can promote an even more effective
international system, for example through the reform of the UN.
33. Does DFID have an indicative percentage for the proportion
of its budget which will be spent as budget support in three years'
time?
No we do not have a view on how much of our aid will be spent
through budget support in three years' time. We aim to increase
the proportion of country programmes channelled through Programme-Based
Approaches to 53% in 2007-08. (Note: Programme-Based Approaches
include, but are not limited to, general and sector budget support.)
34. The DFID written statement of 8 June on UK assistance
to Ethiopia provides for a Protection of Basic Services Grant
in place of the now suspended PRBS. The statement talks about
"the project providing for regular financial monitoring and
reporting to ensure that funds are being allocated fairly and
are being used for the agreed purposes. For the first time detailed
budgetary information will be provided to citizens to increase
local accountability. Shouldn't these requirements be fundamental
to any budget support given by DFID?
Budget support programmes are always associated with financial
monitoring and reporting so that we understand where governments
are spending their resources. We normally use the reports that
governments produce according to their own financial management
legislation and regulations. We also support them to improve their
financial information and analysis, for example through supporting
annual public expenditure reviews.
The Ethiopia Protection of Basic Services Grant requires
the government to provide additional financial management information
about the flow of funds to the local level. When providing budget
support we do not always require financial management information
that is additional to the information already generated by the
country. In each country case we need to decide whether additional
information is required to address a particularly high risk area,
or whether to focus on strengthening the government's own monitoring
and reporting processes.
As part of our support for greater domestic accountability
in countries where we provide budget support, we often encourage
improved access to detailed budgetary information by citizens.
For example, in Tanzania we have supported transparent annual
public expenditure reviews and citizens' access to Parliamentary
debates. In some country programmes where we provide budget support,
we also promote greater transparency of local level expenditure
as part of our support to decentralisation processes. The Ethiopia
programme focuses on local level information, because the programme
delivers resources directly to the local government level and
because there is a particular focus on promoting local accountability.
35. Are DFID country teams in selected "risky"
countries being asked to prepare "Plan Bs" in case budget
support is removed? If they are, can these Plan Bs, by providing
an alternative way of delivering the same benefits (to the poor),
become a tool for measuring the added benefits that PRBS is intended
to bring?
Risk assessments are undertaken in the preparation of County
Assistance Plans. Decisions are then taken on what level of risk
is acceptable and what contingency plans are needed so that DFID
can respond effectively should risks be realised.
36. In Ethiopia the aid which will now flow as a Protection
of Basic Services Grant is still fungible. Is this a concern to
you?
We have minimised fungibility by restricting the use of the
funds to four sectors (health, education, water and sanitation
and agriculture) at the local level and by agreeing with the Government
that it will increase its funding for these services, and that
our funds will be additional. We will be receiving regular expenditure
data, which will enable us to monitor this commitment.
37. Ethiopia has been one of DFID's most important focus
countries. Where does Ethiopia now figure in the scaling-up of
DFID aid?
Ethiopia remains one of our most important focus countries.
We are planning to increase annual expenditure to £130 million
in 2007-08. This would make the Ethiopia programme the largest
DFID programme in Africa.
38. At a time when global ODA sums are rising, the proportion
of aid spent through the multilaterals is falling. In DFID there
has been a gradual shift to a greater proportion of bilateral
spending. What is the future for multilateral and bilateral aid?
The UK is strongly committed to working through the international
system to reduce poverty in developing countries. Increasing aid
will mean that donors will need to rely more on multilateral channels
to distribute it but at the same time some parts of the international
system have either become too complicated and inefficient or simply
don't work at all. DFID will use its resources and influence to
strengthen the international system and will decide how to allocate
resources in the future based on success rather than history.
39. How will DFID seek to ensure that the European Consensus
on Development, which makes poverty reduction a priority, does
not become marginalised compared to other strategic objectives
such as the European Neighbourhood Policy?
The European Consensus, signed by the Prime Minister and
the Presidents of the European Commission and European Parliament
in 2005, states that, "The EU shall take account of the objectives
of development cooperation in all policies that it implements
which are likely to affect developing countries". We will
continue to ensure that the Consensus and this commitment are
reflected in all relevant policy frameworks, regulations, instruments
and management documents. We will do this by working closely with
other Government Departments, the Commission, European Parliament
and other Member States. The near finalised draft EU Regulation
establishing a European Neighbourhood and Partnership Instrument
for 2007-13 states that support provided within the framework
established by the European Neighbourhood Policy should be coherent
with the objectives and principles of the European Consensus.
40. In terms of the areas essential for attaining the
MDGs (peace and security and good governance) how will the EU
work with the AU to enhance the AU's Peacebuilding and conflict
prevention capacity? How does the EU's Africa Strategy link with
existing African initiatives to promote peace and security? Is
the EU limited in such activities by a lack of coherent approach
between member states?
The EU's Africa Strategy includes commitments to work with
the AU, sub-regional organisations and African countries to predict,
prevent and mediate conflict, including by addressing its root
causes. The Strategy supports existing African plans and initiatives,
particularly the African Peace and Security Architecture (APSA). Earlier
this year the EU agreed to provide a further €300 million
between 2008 and 2010 to the Africa Peace Facility (APF). Created
in 2004, the APF has helped the AU to deploy troops in Darfur
and build its longer term capacity. EU officers are deployed with
the AU in Darfur to support aspects of the mission, including
the civilian policing component. The EC also provides financial
and practical support, in co-operation with other partners including
the UK, to develop the AU's African Standby Force (ASF) which
aims to provide enhanced African capacity to deploy observer and
peace missions on the continent. The EC Delegation in Addis Ababa
plays an active role in ensuring coherent Member State support
for the AU mission in Darfur and for longer term capacity building.
41. How coherent is the UK position on promoting the use
of trade to reduce poverty with that of its EU partners? How will
the Department work to ensure that the objectives it has for securing
a reduction in EU and world trade barriers are shared by other
Whitehall Departments and by EU partners?
DFID's PSA target on reducing barriers to EU and other markets
is formally shared with DTI. Although not formally shared with
DEFRA, it does repeat some of DEFRA's own language in their PSA
targets for reducing the costs of the CAP. But we recognise also
that since trade is a Community, not a Member State competence,
our impact on EU trade policies depends on our ability to influence.
Therefore we must rely on other Government Departments also to
deliver the target, including in particular the FCO and the network
of overseas posts. We work very closely with all interested Government
departments in both developing and monitoring the PSA target.
We also work closely with other EU Member States to try to share
the evidence base on the need for and benefits of trade liberalisation,
and seek their support for the most liberal outcome possible to
discussions on both multilateral and EU trade policies.
42. What role does DFID intend to play in the EU's 2006
Review of the EPA negotiations; and what is the strategy after
the Review, if development concerns have not been addressed? (for
example, how will DFID seek to influence the Commission and other
member states to come on board with a poverty reduction agenda)
We intend to support a comprehensive and effective Review
that genuinely includes participation from ACP countries and regions.
The terms of reference for the Review, broadly outlining
the process and content, have been drafted by both the EU and
ACP, taking into account ACP concerns raised at the Joint Ministerial
Trade Committee on 28 June. These are to be finalised shortly.
DFID's role to date in the Review has been to help support
the drafting of the terms of reference. We will stand ready to
assist with research or technical support required to feed evidence
into the policy dialogue during the Review. We will also ensure
that the recommendations and conclusions of the Review will be
taken into account in the negotiations.
The UK position is that EPAs should be genuine tools for
development and poverty reduction. Following the outcome of the
Review, this will continue to be the position we will take in
discussion with all our partners in the EPA negotiations, including
the European Commission and other Member States.
43. What mechanisms does the Government have to ensure
that "analysis of poverty impacts and Sustainability Impact
Assessments feed into policies on the EPAs" as set out in
the Government response to the IDC report on EPAs? Are there any
examples of how this is working so far?
The Government believes that analysis of the impact of EPAs
is critical for checking whether EPAs bring benefits to countries
in the African, Caribbean and Pacific (ACP) countries. However,
we do not currently have formal mechanisms in place to feed analysis
of poverty impacts and Sustainability Impact Assessments (SIAs)
into the ongoing negotiations.
The reasons for this are that the European Commission has
already supported studies on SIAs, which have been undertaken
in the regions and countries of the ACP. However, most studies
are confidential to the ACP governments as they potentially contain
information relevant to their own negotiation positions. Unfortunately,
a number of stakeholders have expressed concern over the quality
of these studies, including leading experts in the field. The
weakness of these studies is partly due to the fact that the assessment
of the poverty impact of trade policies requires very specific
knowledge, for example exactly what products and tariffs will
be liberalised, and in what timeframe.
In addition, since June 2005 when the Government last responded
to the IDC on EPAs, the negotiations have not progressed into
greater detail. As these details become clearer and a picture
emerges of what EPAs will look like in different regions in the
ACP, stakeholders can begin to analyse the likely trade, growth
and poverty impacts. This is why we continue to support the conclusions
of the EU Council in April, which called for SIAs to be conducted
at an appropriate time.
44. DFID went through a difficult restructuring process
in 2003. (i) How are you monitoring whether the anticipated benefits
from the process were realised? (ii) Has the restructuring worked
as intended? What documentation exists to support improvements
in costs, effectiveness and systems?
(i) Policy Division (PD) has a Performance Framework
designed to help PD decide what its key divisional priorities
should be; track and report on delivery of these priorities; and
explain what PD does to its key stakeholders.
(ii) PD has been better set up into a Group structure
(Development Effectiveness, Governance & Social Development,
Growth & Investment, Human Development and Sustainable Development)
to be responsive, as it is able to move people within Groups and
around the Division more easily than when they were separate Departments.
Like other DFID divisions, PD's priority-setting has benefited
from the establishment of a system of Director's Delivery Plans,
reviewed by the Management Board. All PD teams are set up for
multi-disciplinary working, whereas the previous departments were
broadly from one discipline or sector. Staff in other donor agencies
(bilateral and multilateral) frequently say that they regard DFID's
policy products (many generated in PD) as making a leading contribution
to forward thinking on development issues.
PD's Performance Framework is divided into two areas, the
performance framework, which looks at what PD is delivering to/with
key clients, and the management framework, which looks at how
PD goes about its business covering issues such as management
(HR and financial resources). The Management Board reviews annual
performance and approves forward plans for PD on an annual basis.
45. Currently none of DFID's PSA targets incorporate environmental
or climate issues. (i) How can DFID incorporate climate change
into its thinking/policy? (ii) What environmental assessments
of projects do you carry out?
(i) Chapter seven of the new White Paper outlines our
approach to climate change; and this will also inform our approach
to the current Comprehensive Spending Review;
(ii) All DFID projects over £1 million are screened
for environmental risks and opportunities before they are approved.
In addition, the White Paper commits us to helping partner countries
identify and respond to environmental opportunities and risks,
for example by helping them to undertake strategic environmental
assessments.
46. Do you use PSA Targets at all for internal management
purposes? (If YES), how do you use them, eg supply them to the
Board on a monthly basis? (If NO), how do you ensure that remedial
action is undertaken in response to targets slipping?
Yes. Updates on the PSA are included in the Quarterly Management
Report that is reviewed by the Management Board on a quarterly
basis and on an annual basis the Board review the overall performance
of divisions in directly addressing the targets.
47. Do you think there is a sense in which DFID has lost
contact with the lower ends of the development spectrum, particularly
in light of the other comment in the DAC review that DFID in country
staff need to get out more?
No. DFID remains focused on our goal to eliminate poverty
and, as the DAC review noted, DFID staff are highly-motivated.
We agree that it is important that staff visit the field so as
to understand the realities of poor people's lives.
48. Much of the concern about the future of SSA is to
do with economic growth and job creation. How does a policy that
prioritises education to primary level conform to this approach—does
it mean schools turning out students who are literate but not
employable?
Greater investment is needed at all levels of education if
we are to reach the MDGs. A key focus on primary education is
appropriate as the education Millennium Development Goal to achieve
Universal Primary Education is centred on ensuring that by 2015
children everywhere, boys and girls alike, will be able to complete
a full course of primary schooling. DFID gives priority to supporting
primary education for all children, especially girls, in countries
that are off track for reaching the education goal. Education
is a right and our priority is to get the 100 million children
of primary school age who are not currently attending school into
a classroom with a teacher.
However DFID's support is not restricted to the primary sector.
While universal primary education remains our priority, there
is also a growing need to invest in secondary and higher education
and vocational skills training. DFID fully recognises that investment
is needed in secondary, tertiary and vocational education, lifelong
learning and skills in order to increase the ability of governments
and the private sector to deliver basic services and to promote
sustainable growth. This is best done through a sector-wide approach,
which means supporting the whole education system.
The UK commitment to provide some £8.5 billion to education
in developing countries over the next ten years will focus on
supporting our partner governments' plans to distribute funding
in a balanced way across all levels of their education systems
in order to meet the MDGs.
DFID funds will also support a number of innovative post-primary
programmes. The recently launched £15 million programme,
Development Partnerships in Higher Education, will support a variety
of partnerships between Higher Education institutions, enabling
them to collaborate in activities linked to sustainable development,
poverty reduction and science and technology in DFID's 25 priority
focus countries across Africa and Asia.
49. The submission from One World Action refers to DFID's
2005 evaluation of DFID's gender policies. What is the preliminary
feedback on this evaluation? One World Action state that gender
equality and gender mainstreaming are usually marginalised to
"social" dimensions of development cooperation. How
can you ensure that gender mainstreaming can go beyond the social
development cluster and enter the "hard areas" of climate
change, trade, security and migration?
The evaluation concluded that DFID demonstrated strengths
in policy-making and knowledge development but that the mainstreaming
of gender equality in our programmes was uneven.
We recognise that eliminating gender inequality and promoting
women's empowerment are essential to the achievement of all the
Millennium Development Goals (MDGs) and we are working to ensure
that gender issues are made a priority across our work, and that
developing country partners integrate gender into their own national
plans. DFID also supports specific activities to promote the rights
of women and girls, including in the areas of girls' education,
maternal mortality and reproductive health.
But we acknowledge that there is scope to strengthen our
work in this area, to ensure that we are having maximum impact.
The White Paper commits DFID to giving more priority to our work
in support of gender equality and women's rights. We are currently
in the process of developing a Gender Action Plan (target completion
date November 2006) which will set out steps to be taken across
DFID to strengthen our gender mainstreaming commitments.
Areas to be looked at include: (i) reinforcing the links
between gender equality and other development objectives, including
poverty reduction; (ii) the role of management information systems
and performance management in supporting gender mainstreaming;
(iii) supporting better integration of gender in national policy
and results frameworks, consistent with DFID's emphasis on country-led
approaches; (iv) identifying the appropriate level of skills and
expertise to support gender mainstreaming, and (v) opportunities
for strengthened engagement on gender issues at an international
level.
50. A final thought—just how many issues can be
"mainstreamed" at any one time? Would DFID consider,
mainstreaming other issues across DFID, such as private sector
development or climate change?
Many issues in development cut across a number of areas and
therefore need to be considered when decisions are taken. Gender,
climate change and the private sector are all examples of such
issues.
Our plans to address climate change are outlined in chapter
seven of the White Paper.
We believe that the private sector is key to generating economic
growth and giving poor people better access to markets. We have
made a number of commitments in chapter five of the White Paper
to promote private sector development. The White Paper also recognises
the need for improved governance and transparency in the private
sector and the benefits that these can bring for stability, democratic
change and development. Our forthcoming response to the IDC Enquiry
on Private Sector Development provides an opportunity to more
fully respond to the Committee's question in so far as it relates
to the private sector.
August 2006
| 
