House of Commons - Public Accounts

Select Committee on Public Accounts First Report

1 THE IMPORTANCE OF REDUCING RURAL POVERTY

1. DFID's overarching objective is to contribute to the internationally agreed United Nations' Millennium Development Goals which aim to halve the number of those living in poverty by 2015. Some 75% of the world's poor live in rural areas and the Department cannot therefore achieve its objectives without significantly reducing rural poverty.[2] DFID also aims to help the poorest and most marginalised groups. These include the rural poor, as they are isolated from good transport links and their livelihoods are particularly vulnerable.

2. The Department is strongly focused on tackling poverty but does not have a specific strategy for dealing with the rural poor. Instead it concentrates on sectors such as health and education, aligned with the Millennium Development Goal priorities.[3] DFID plays a key role in developing the Global Donor Platform for rural development, which established a common vision of development among 25 donor signatories.[4] But this work addresses high level policy and is not supported by a practical strategy for DFID.

3. There is a tension between DFID's aims of helping the poorest, who are often in remote rural areas, and of making the quickest and most cost-effective progress against poverty reduction goals, which is often easiest in more densely populated locations.[5] DFID does not analyse the results of its assistance to types of beneficiary such as the rural poor, and does not have targets to prevent some people from getting left behind. Rural areas have remained on average significantly poorer than non-rural areas, and in some countries this gap is increasing.[6] DFID is currently off track for achieving its Public Service Agreement targets for poverty indicators such as child mortality rates, where rural areas have on average 28 more deaths per thousand than urban areas.

THE PRIORITY GIVEN TO TACKLING RURAL POVERTY

4. DFID's bilateral country programmes, its research programme and its multilateral assistance all benefit the rural poor to some degree. But DFID's management information classifies expenditure by country and by sector, so it cannot assess what proportion of this expenditure is tackling rural poverty.[7] It does not therefore know whether it is increasing or decreasing its assistance to the rural poor.[8]

5. The NAO estimated that between 2000 and 2005 the Department spent two thirds of its bilateral expenditure on assistance to the rural poor.[9] But three quarters of the poor live in rural areas, which means that DFID is currently providing less bilateral funding per head to the world's rural poor than to the rest of the poor,[10] a difference which is accentuated by the higher unit costs of reaching rural areas.[11] The needs of the rural poor are often not a major influence in DFID's country planning for its bilateral assistance. Country plans vary in the extent to which they address rural poverty and this variation does not reflect the extent of rural poverty in-country.[12]

6. Agriculture is vital to rural economies and to supporting urban populations. DFID has increased its assistance to social sectors and governance and decreased its assistance to agriculture, even though the productive sectors can be particularly effective in reducing poverty.[13] The sectors DFID chooses for its bilateral assistance often do not prioritise the rural poor and less than a third of country plans cited rural livelihoods as a priority sector.[14]

7. Many developing countries are becoming more urbanised—a process often associated with economic development. But urbanisation can bring its own problems: often those who migrate to urban areas are economically active, and the more vulnerable groups such as children and the elderly are left behind.[15] Promoting agricultural growth enables wide economic transformation which can create new opportunities in both rural and urban areas. DFID recognises the links between rural and urban populations but it has not evaluated the impact of assistance on patterns of economic migration.[16]

WORKING THROUGH MULTILATERAL AGENCIES

8. DFID paid nearly £1.7 billion (some 40% of its total expenditure), to multilateral agencies in 2005-06.[17] But it has not assessed how much of multilateral organisations' budgets reach the rural poor. In 2003 the World Bank, a leading multilateral, estimated that it spent only 25% of its funds in rural areas. DFID does not know whether other multilaterals have given a similarly low priority to rural areas.[18]

9. In 2006-07 DFID channelled £936 million (20% of its total funding), through the European Commission.[19] DFID has little influence over how much of these funds are spent.[20] DFID believes that it has played a role in improving the effectiveness of the European Commission's use of aid funds in recent years.[21] But the richest 68% of beneficiary countries still receive 72% of the budget, indicating that aid is not specifically directed to the poorest countries.[22]

10. DFID aims to improve the effectiveness of multilaterals and then to increase its funding to them.[23] It is encouraging other donors to help the rural poor: for example, it is encouraging the World Bank to increase its agricultural expertise and the African Development Bank to help farmers get their goods to markets through improving rural roads.[24] DFID is also trying to strengthen the capacity of some multilaterals with particular specialisms. For example, the Food and Agriculture Organisation has expertise in early warning systems for droughts and specialises in animal diseases and pest containment but DFID considers it needs to improve its internal planning, knowledge management and monitoring systems.[25] DFID has helped sponsor a joint donor evaluation of the organisation which will form the basis of an improvement plan.[26]

ADVOCATING POLICY AND TRADE REFORM

11. DFID also encourages policy reforms by governments in both developed and developing countries in areas such as climate change and trade which would benefit the rural poor. Trade reform, particularly reforming the Common Agricultural Policy, would have considerable impacts on developing countries. DFID has argued for a reduction in subsidies for agricultural production in the developed world to help developing countries to compete, but so far without success.[27]

12. DFID also supports the development of trade through aid.[28] It has not, however, always secured maximum benefit from funding. An evaluation of a trade-related capacity building project in Kenya, for example, found that capacity-building activities did not involve stakeholders outside of Nairobi, and the project did not have the impact that it could have had on trade policy-making in Kenya, with the Ministry of Planning not seeing trade as a tool for growth and poverty reduction. Despite securing good research on links between trade in rurally-produced commodities and poverty reduction, the project missed the opportunity to develop sector-specific policies to maximise the benefits of trade, and mitigate negative impacts, for the poor.[29]

2 C&AG's Report, executive summary, para 1 Back

3 Q 10 Back

4 Q 25 Back

5 Q 26 Back

6 C&AG's Report, executive summary, paras 2, 1.7 Back

7 Qq 10, 27 Back

8 Q 109 Back

9 Q 3; C&AG's Report, executive summary, para 4 Back

10 Qq 2-4, Q 17; C&AG's Report, executive summary, para 4 Back

11 Qq 33-34 Back

12 C&AG's Report, para 4.3 Back

13 Qq 15, 19; C&AG's report, Appendix three, p 32 Back