Q40 Chairman: Perhaps we can now
address what we always have to do, that is, doing more with less.
It is very difficult to engage with your Department without the
topic coming up usually much earlier in the discussion than it
has done today. As background, the budget has risen from £3.8
billion in 2003/04 to £5.3 billion in 2007/08. Presumably,
it will increase at a significant rate to meet the Government's
target of 0.7% of GN1 by 2013. As I understand it, your staffing
levels have reduced from 1,907 in March 2004 to 1,719 in March
2006 and further reductions planned to 1,610, and in country it
has gone from 1,162 to 865. That figure is increasing slightly
to 950. Wherever we go in country the team will say very quickly
that it is difficult to do more with less and they seriously question
whether they can deliver the quality. They do not say that they
are not trying to implement the policy but they feel there are
serious constraints. When we were doing our sanitation and water
inquiry—Suma said that he did not want to be monitored by
inputs but by outcomes—your response was that you were putting
substantial additional sums into those activities in Africa. I
think it was in response to a question by Ann McKechin. You said
that you did not have very many advisers and did not plan to have
any more. The first question to arise is: if expertise in development
is what DFID is good at how will it deliver the increased budget
with the experts at its disposal?
Sir Suma Chakrabarti: I am glad
that we have got to this question. We are working very hard on
this question with the Secretary of State and Ministers. There
are three points I should make, one of which is about the operating
model. If DFID is regarded as being relatively effective—we
are lucky to have the OECD review and the capability review and
so on which say some good things about us, while recognising that
we have to face up to some challenges—the operating model
is cited in every single review as being key to this. One part
of that is our big country network with decentralised and delegated
operations and so on; another is the way we tackle policy work,
as John Battle picked up, and also multilateral work. The operating
model is core to our effectiveness. We could deliver the big budget
with a completely different operating model and a very small number
of staff, but we do not believe that that would make this organisation
as effective. We want to hang onto the operating model. I am not
saying that we cannot make some changes to it here and there,
but by and large it is core to what makes us effective. The second
factor is the MDGs. If that is what we are here for in terms of
outcomes, where can we make the biggest impact? As far as the
MDGs are concerned, as an organisation what is core business becomes
crucial for us. If those are not important constraints on how
we should look at this question, the third factor is: can we do
more to move people, the experts, from the lower priority areas
to the higher priority areas? In development every region and
every issue is important, but some are more important than others.
The dialogue that we need to have with this Committee, Parliament,
ministers and also internally is how to define the higher priorities
and to shift staffing to those. Undoubtedly, the CSR will have
an impact in terms of administrative budget. I do not think we
shall be immune from what is happening throughout Whitehall. I
would be surprised if we were allowed a dispensation to have a
different administrative budget approach.
Q41 Chairman: That was not the answer
you gave before. I think you said that you were comfortable with
the constraints which were external and to an extent arbitrarily
driven, and certainly not driven by massive over-staffing in DFID.
If there is a problem it is not in DFID but elsewhere. The Committee
has discussed this informally on a number of occasions and has
not come to a definitive conclusion, but it is not unprepared
to take the view that if it seriously compromised DFID's delivery
it would suggest that that constraint should at least be eased.
For example, every country that we have been to has told us how
difficult it is. For a different reason, Richard Burden and I
were in Sweden. I understand that Sweden is reducing the number
of countries in which it operates by half. Is that the sort of
decision you may have to make?
Sir Suma Chakrabarti: We have
not really discussed this with our new ministers at all, but it
will be in our corporate plan that we shall be developing over
the next few months. Those are exactly the sorts of choices that
we shall face. Should we reduce the number of countries or sectors
in countries as some other donors have done? Can we stay global
but perhaps do some programmes through other channels rather than
directly ourselves? Some of the very difficult decisions relate
to the multilaterals. How much do we want to influence every multilateral?
Should we try to influence the really important ones and do our
best with the others? Those are exactly the sorts of choices that
we shall put to ministers.
Q42 Chairman: My next question is
probably one for ministers to answer. It seems that those possible
options should perhaps be presented to Cabinet rather than just
decided internally in the sense that the Prime Minister and other
ministers should be faced with what the options are and be able
to make a judgment as to whether that would or would not compromise
the objective, not just to reach the 0.7% target but maintain
quality. We are about to undertake an inquiry into the World Bank
that is more detailed than the annual report. In principle we
do not object to the fact that DFID gives money to the World Bank,
but we would worry if you gave more money to the Bank simply because
you did not have the capacity to spend it in ways that might be
more effective. Do you agree that there is a case for at least
presenting the options externally to ministers?
Sir Suma Chakrabarti: We will
certainly present the options to our ministers and the Secretary
of State will then have to consider how he takes that forward
to colleagues. I am sure that he would want to consult certain
colleagues. Whether inside or outside Cabinet, there will be a
process for doing that. Just to allay your concerns about whether
we would make certain spending decisions simply because of headcount
constraints, some people said that we would do more on budget
support because of headcount constraints. I put it to you that
we do not seem to have done that.
Q43 Chairman: Hilary Benn told us
why that was so. You found out in reality that it was more people-intensive
than you envisaged.
Sir Suma Chakrabarti: It is not
just that. On each of the individual decisions set out in the
Departmental Report where we have interrupted budget support and
so on we have taken quite a hard-nosed development view. Is this
working in terms of the outcomes and what has been achieved? If
not, we will do the right thing irrespective of the issue of headcount.
We care fundamentally about effectiveness and outcomes. That is
our guiding principle, but we have to face up to these choices.
I am comfortable about where we might be going with the administrative
budget this year only if we face up to the choices and make some
tough decisions about them.
Q44 John Battle: Looking at where
we are now, in the report there are some good pictures, charts
and maps. I look at the map headed "DFID in Europe, Central
Asia, Latin America, the Caribbean, the Middle East and North
Africa" on page 94 and get the impression that you have a
presence in more than half of Latin America by land mass because
you are in Brazil, but in terms of investment in the programme
it is very little. There is a good spread on Nicaragua. You have
a couple of pages which refer to Latin America. Latin America
is still one of the most unequal regions in the whole world, as
you acknowledge, and has great poverty. On page 95 of the report
is the caption "No one will be left behind." I want
to ask you about Latin America in particular in the context of
these invidious choices. Have you already withdrawn from Latin
America effectively? If your contribution is the expertise in
development strategies of the staff then the very quality of the
presence of DFID staff in places who take part in multilateral
and bilateral negotiations could influence the quality of development
for very little money. The strategy for Latin America has not
yet been signed off. A question was put in Parliament about it
the other day and it has been deferred until September. But even
outside that bigger review of more for less where do you see yourselves
being in relation to the countries of Latin and Central America?
Ms Shafik: You are quite right
to note that there is widespread poverty in parts of Latin America.
To be completely frank, the predicament we face is that many of
these countries are middle-income countries and the justification
for UK taxpayers to be reducing poverty in those countries when
taxpayers in their own countries are not doing it is difficult.
Brazil could solve its problems of poverty; it is a rich country.
Q45 John Battle: Why do we not apply
that to India where we spend most of our aid programme?
Ms Shafik: Because the poverty
in India is greater and that country is not yet a middle-income
country. I think we will face that challenge in India in future,
but we are not quite there yet. In answer to your specific question,
we have not closed our presence yet in Latin America; we have
a presence in Brazil, Bolivia and Nicaragua, and we cover the
rest of Latin America through a regional programme that we do
with the World Bank and IDB where we try to leverage the impact
of those organisations' operations in Latin America with a very
specific focus on governance and exclusion and the whole income
and equality issue. One tries to shape World Bank and IDB lending
in Latin America to address the inequities in those societies.
Q46 John Battle: In your report you
refer to small business development. Perhaps cross-referencing
some of the experience of Bangladesh into Brazil, dare I say,
might be helpful. Such cross-referencing by DFID staff could help
so that a qualitative shift could take place. I am challenging
your response that we start sorting out the world into middle-income
and poor countries, not least because I suspect that in 50 years'
time DFID will be working in the major cities of the north western
world; it will be in California, Chicago and Manchester. The fracture
of poverty and wealth will arise in major cities. I am not quite
sure that you should simply be concerned with middle-income countries.
If you applied that to Vietnam your programme in that country
would be finished in two years, and I hope that you are not withdrawing
from Vietnam.
Sir Suma Chakrabarti: When the
Committee came to visit there was a bit of a discussion about
low-and middle-income issues. There is no cliff edge approach.
When Vietnam hits middle-income status we will not say that we
shall go; that is not what we do. For example, that is not what
we have done in China. There will come a day when there will be
an end to financial transfer to some of these countries, but until
then there will be a graduated approach and, in the case of China,
a change of approach. Therefore, we work with China on Africa
and global development issues more generally. In the case of Vietnam,
we signed a 10-year development partnership agreement and that
will not finish in 2012.
Q47 John Battle: The detailed question
would then be: why can you not sign off the Latin America strategy?
Obviously, if you push that into the long grass by default it
will fall behind and the problem will just dry up. I refer to
the people as well as the programme.
Sir Suma Chakrabarti: That is
right. The questions that we need to consider, whether it is Latin
America or anywhere else, are the following: first, what is the
impact on the MDGs and are our staff making the biggest impact
they can? Second, are there higher priorities elsewhere given
the constraints we face? That is not to say there are not big
problems of development in Latin America; clearly there are. It
is quite interesting that Brazil is still the most unequal country
in the world, but in the past two years the GINI coefficient in
Brazil has moved in the right direction. I would like to think
that DFID had something to do with that. We did work on social
exclusion and so on that fed into Brazilian government policy.
Q48 Chairman: I think the point being
made about the constraints on numbers of people is that, taking
Vietnam as an example, it may very well be that the government
of that country takes the view it would like the DFID team to
stay there even if the money was diminished; in other words, it
would be Vietnamese taxpayers who funded the programme but DFID's
expertise would be of value. It seems to me that for us arbitrarily
to say that we must cut the programme, not because we do not have
the money but because we have a Treasury-driven headcount constraint,
is counter-productive.
Sir Suma Chakrabarti: To be fair
to the Treasury, that is not quite what the debate is about. I
think that as far as Vietnam is concerned the issue is more to
do with the 90/10 rule and how we handle that, which again is
evidence-based; it is built on the Collier and Dollar work that
Mark mentioned earlier, but we are not closing up in Vietnam.
There will be a Vietnam team even after that country reaches middle-income
status. We shall still be working with the Vietnamese Government
on poverty issues. The best example of this is what has happened
in the China programme. The Beijing office was quite a large one
because it was still delivering a financial transfer programme
in a number of MDGs. The Chinese are quite content that it shifts
to a much smaller set of senior experts essentially who work with
them on certain issues on global development, including climate
change. We shall be in China because that country is important
for development around the world, but it will not be a classical
aid programme any more.
Q49 Ann McKechin: Given that we are
giving more money to the World Bank, do you consider that we have
sufficient influence over the Bank's policy in the light of our
contribution? Are we considering whether or not we should have
a full-time director for the World Bank rather than one that has
previously been shared with the IMF[24]?
Sir Suma Chakrabarti: I will ask
Mark to answer that question. He was with Douglas Alexander on
Thursday and was involved in a very good conversation with Bob
Zoellick[25]
about the future direction of the World Bank.
Mr Lowcock: What Bob Zoellick
said to Douglas Alexander was that DFID and the UK Government
more widely—we have a very powerful mixed team in the UK
delegation comprising Treasury and DFID staff—were very
influential, and some of the other shareholders would also say
that. For them "very" is not just a term of approbation.
The quid pro quo of becoming essentially the equal largest shareholder
in the World Bank at the US is that it is legitimate for us to
expect the Bank to be more responsive to the policy concerns that
the British Government expresses. We have seen a rise in the influence
that we have over them. We have benefited at the country programme
level as well as the policy development level from interactive
work with them. I do not think this is a zero sum game; there
are some win-wins from collaboration between institutions which
have wider beneficial impacts round the whole of the international
development system. As to the organisational arrangements for
the British office at the World Bank and IMF, that topic comes
up from time to time. Maybe we will have to look at it again over
the next few months. The current arrangements have worked very
well over a long period of time. I am not sure that the biggest
question is whether we have a single Executive Director across
both institutions; maybe that is something that we need to look
at, but I do not think it is the litmus test of whether or not
we have the right set of relationships with the World Bank. In
a way, it is much more important to have a continuing dialogue
between the president of the World Bank and the Secretary of State
and the dialogue that we have with senior officials in the World
Bank, especially the country level dialogue, to which we attach
a lot of importance. One of the things we have been saying to
the World Bank consistently, on which Paul Wolfowitz made some
progress, is that there should be greater delegation of staff
and decision-making to country level. We keep pushing them on
that because that will make them more responsive to their clients
and also facilitate strong working between us.
Q50 Chairman: Is that a legitimate
way round some of the issues? I do not mean that it is a way of
avoiding the pressure. We talked about that in the context of
water and sanitation. You can use the money from the rising budget
to train people within the countries receiving aid so that effectively
you are exporting expertise with which you can work with your
slimmed-down staff. The impression I get is that you say there
are real constraints and challenges and at the moment you do not
feel that they are compromising your delivery, but you could arrive
at a situation where you might have to do things differently.
Sir Suma Chakrabarti: What I am
saying on behalf of all of us is that, with a further increase
in the budget, if the headcount shrinks further we shall have
to make some choices. We need help from all parties in making
those choices.
Q51 Chairman: But one way forward
would be to train people in country.
Sir Suma Chakrabarti: Yes; it
would be one option.
Q52 Chairman: That is a development
decision?
Sir Suma Chakrabarti: There is
quite a lot of that going on. Obviously, there is a transfer of
knowledge and experience whenever we work with people, but many
of our development country nationals work within DFID and they
move on to other organisations as well and they take that knowledge
and experience with them.
Q53 Sir Robert Smith: Obviously,
every taxpayer wants things to be cost-effective and efficient,
but in the Treasury-driven model if you reduce your headcount
of directly employed civil servants, and the side effect is that
you spend more on consultants and agents to deliver the programmes,
does the Treasury measure that cost?
Sir Suma Chakrabarti: I believe
that increasingly the Government is aware of that, because this
happened in the 1980s when there was a big reduction in civil
service manpower and a rise in consultancy budgets, not just in
DFID but across the piece. People are aware of that and are worried
about the issue. Interestingly, in the past two and a half years
our headcount has been dropping but our use of consultancies has
not gone up; it has stabilised.
Ms Owen: The use of consultants
goes onto the administration budget.
Q54 Sir Robert Smith: But it is not
the administration budget that is being constrained by this.
Ms Owen: But in future we probably
will not have a headcount constraint. What is the point of having
an administration cost constraint and a headcount constraint?
If your budget is constrained then effectively you are constrained
certainly in terms of the number of UK-based staff you can employ.
In the past our headcount constraint has not applied to staff
appointed in countries; it has applied to our UK-based staff.
Therefore, I believe that going forward the headcount is a bit
of a red herring; it is the administration budget that will constrain
us most. It is also important to remember that even if we were
not constrained we would still need to look in some cases at scaling
down the size of offices in order to scale up others. Therefore,
in terms of general efficiency in the Tanzanias of this world
we would probably want to cut down the size of that kind of office
anyway in order to be able to scale up in DRC,[26]
for example.
Sir Suma Chakrabarti: Sue might
also want to give the comparative figures for the expense of placing
someone in a fragile state like DRC—clearly, it is very
important for the MDGs—and putting together a team in Tanzania.
Ms Owen: It is double the cost
in a fragile state relative to a non-fragile state. If one is
in a country like Iraq or Afghanistan the cost is about four times
as much.
Q55 Chairman: Are these primarily
security costs?
Ms Owen: Yes. Obviously, in those
kinds of countries one of the major drivers for co-locating with
the Foreign Office is that one can save on security costs if one's
building is located within an FCO compound.
Q56 Hugh Bayley: I will move on to
policy coherence. The new chapter in the Annual Report concerned
with policies beyond aid is a good and useful response to Tom
Clarke's Bill, but it seems to me to be very broad brush. You
talk about reforming developed country agricultural policies to
provide a good dividend for development but it will not be the
same dividend for Dominica as for Brazil. How do you plan to develop
the way you reflect on departmental cost issues in your report?
Could you feed more of the micro-level impact country by country
perhaps to other parts of the report or extend the policy coherence
chapter?
Sir Suma Chakrabarti: I think
we would like some feedback from the Committee on this aspect
of the Report. For us this is a new area on which to report, so
it would be helpful to have feedback on that afterwards. As to
taking forward policy coherence more broadly, we need to revisit
how we present this in the light of the new work on joint PSAs,
because the Government is moving towards the 30 cross-cutting
PSAs which straddle Departments. We shall be the lead Department
for international poverty reduction, but we shall be a delivery
partner for three others. There is now an interesting issue for
government as a whole with Parliament to work out how the Departmental
Report should be presented. There are three areas where we shall
try to push for greater policy coherence: climate change is the
obvious one, where Defra will be the lead Department and DFID
a delivery partner; another is conflict where FCO takes the lead
and we will be the delivery partner; the other is terrorism where
within the confines of our Act we shall be a delivery partner
with the Home Office taking the lead. Trade, about which Douglas
Alexander has talked a lot in terms of getting greater coherence,
will be one of the topics of our international poverty reduction
targets. I think that it will be in our Departmental Strategic
Objectives. The whole issue about presentation of this effort,
if you like, across Departments needs to be thought through. As
to the joint PSAs, one idea we have put to the Treasury is that
certainly for international poverty reduction perhaps I should
chair a committee that brings together the Permanent Secretaries
or Directors General from the relevant Departments to try to work
out the joint strategy to achieve the PSA. If one takes that further
then maybe for climate change my opposite number in Defra should
do the same and so on. We have put forward that idea as a way
to try to get greater shared ownership of the PSAs. If that flies
we want to say something to you about how we can take it forward.
Mr Lowcock: The Report is not
the slimmest volume we have ever offered you. We could have said
a lot more about policy coherence at the micro level. Obviously,
we must discharge the obligations set out in the legislation,
but we must then ensure we respond to the issues in which you
are most interested in any particular year. I agree with you that
we need more light and shade between the macro and country level
on some topics. Maybe next year we can find a way to pick one
or two topics and things that we know are of interest to you and
try to do a more detailed job on them.
Ms Shafik: If you would like a
few examples of how policy coherence has played out in country
programmes I can give them very quickly. Zambia led the G77 on
international trade negotiations through our support, and now
Lesotho has been given that responsibility. We have been supporting
them in order to represent the poorest countries more effectively
in the global trade round. Another example is the recent prosecution
of a former Zambian president for corruption. We supported that
in the UK through our anti-corruption work. Probably one of the
best examples last year was the work we did on cluster munitions
following the Lebanon war. We worked very closely with the MoD
and FCO to help facilitate an international agreement to ban the
use of certain cluster munitions and potentially that will have
a huge impact in many countries.
Hugh Bayley: That is a very useful series
of responses and perhaps we need to reflect on how we can feed
in a consumer view. The appointment of Gareth Thomas with a trade
brief is something that has been welcomed by the development community,
but I am not quite sure of what he will be in charge. When a Minister
speaks to the European Council of Trade Ministers who goes? When
a Minister speaks for Britain at WTO who goes? What precisely
is the remit within your Department? What are your responsibilities
for trade policy?
Q57 Chairman: We intend to ask the
Minister that question after the Recess.
Mr Lowcock: The arrangements are
that our Secretary of State chairs the interdepartmental committee.
As a practical matter, on issues related to Doha, for example,
like the Prime Minister he has had a number of conversations with
the main players in those negotiations.
Q58 Hugh Bayley: The main players
being our officials?
Mr Lowcock: No; these are the
international players.
Q59 Hugh Bayley: Would they be senior
staff in WTO?
Mr Lowcock: They would be representatives
of the other main countries. For example, when Douglas Alexander
was in Washington last week he went to see Sue Schwab, the US
trade representative. There is work going on to translate that
set of ministerial responsibilities into arrangements at official
level to ensure that Ministers get a coherent service. Obviously,
that will involve stronger co-operation between the teams in DBERR[27]
and DFID. That is being worked on very actively at the moment.
I am sure that Ministers will want to explain to you how those
arrangements are working out in practice when you pose that further
set of questions.
24 International Monetary Fund Back
25
President of the World Bank Back
26
Democratic Republic of Congo Back
27
Department for Business, Enterprise and Regulatory Reform Back
| 
