Examination of witnesses (Questions 80-99)
DEPARTMENT FOR
INTERNATIONAL DEVELOPMENT
4 JUNE 2007
Q80 Mr Davidson: Would it make sense
to have it out of your budget so that it is under the "bribes
to the EU" section of national accounting rather than under
the "what we are trying to do" section?
Sir Suma Chakrabarti: It scores
as overseas development assistance and therefore has to be part
of our budget.
Q81 Mr Davidson: But we do not have
any real control over that?
Sir Suma Chakrabarti: Not as much
control as I would like, no.
Q82 Mr Davidson: What does that mean?
Do we have any control over it?
Sir Suma Chakrabarti: Very slight.
In the working groups in Brussels we can argue the case about
individual projects and so on. In the development council, we
argued that money should be directed more towards the poorest
countries.
Q83 Mr Davidson: But it is unfair
to judge you in any way whatsoever on the lack of success of EU
spending in this field, because you have no control over it? Therefore
the figures that I have reeled off in relation to the scandalous
allocation are not your fault and I should raise it with the Minister
for Europe, as it is his fault.
Sir Suma Chakrabarti: We do not
have enough leverage to make a difference on that. What the Government
have at least managed to do is to lift the proportion that went
to the poorest countries from about 38% just a few years ago to
55% now. That is not good enough for us, and we think that it
should be much higher, but that is as much as we have been able
to do. The European Development Fund, over which the Government
and the Department have more say, has improved a lot.
Q84 Mr Davidson: Poverty in Malawi
has been greatly helped by the bumper harvests over the last couple
of years and I think that you touched on that at the beginning.
That confirms my own view that better agricultural industries
in poorer countries would cut into poverty rates enormously. Am
I correct in thinking that our complete failure to reform the
common agricultural policy has kept many people in poverty? Rather
than spending lots of money on aid, reform of the CAP would do
more for people in the third world than any other single thing.
Sir Suma Chakrabarti: Undoubtedly
international trade reform would make a major difference to poverty
generally.
Q85 Mr Davidson: Our support of bloated
British farmers has effectively kept poor Africans poor.
Sir Suma Chakrabarti: Successive
administrations have been in favour of CAP reform.
Q86 Mr Davidson: Good. There are
some on this Committee and elsewhere who support bloated British
farmers. As you may have guessed, I am not one of them.
May I ask about targeting support to people
in the countryside? One of the headings refers to a transfer of
budgets away from agriculture and towards education. However,
support of education is not necessarily mutually incompatible
with supporting agriculture. I am not clear from the information
that we have here about the extent to which education spending
is focused on those in the greatest need. Does that entirely depend
on the will of the Government involved? I am conscious of the
Vietnamese example.
Sir Suma Chakrabarti: Because
Governments' budgets are involved, the targeting obviously depends
on the extent to which they wish to spend the money in rural and
urban areas, but we have shown that we can shift their thinking
and move more resources to rural areas. Vietnam is a very good
example.
Q87 Mr Davidson: Perhaps the Government
of Vietnam is a bad example, as they wanted to do that anyway.
We were keen to support their budget, because they were already
on the side of good. For those who are not, to what extent does
Government financial support come with ties? Do we say, "We
will give you x amount of money in budget support provided that
you do x, y and z", rather than just giving them a lump of
money to steal?
Sir Suma Chakrabarti: Our policy
is not to impose that old-style conditionality, because it did
not work. Governments simply rejected our aid or would not comply.
We have tried to persuade them that if they are serious about
reducing poverty—only then would we want to help them—they
really need to think about their resource allocation and skew
it in favour of the rural areas.
Q88 Mr Davidson: But if they do not
accept what you are saying to them, do you just give them the
money anyway?
Sir Suma Chakrabarti: No. Paragraphs
2.9 and 2.11 clearly state the conditions for budget support.
When we give budget support, which is, in essence, what you are
getting at, the Governments we give the money to have to show
us that they have serious poverty reduction plans and not just
say so. Part of the poverty reduction planning process would be
the extent to which they are impacting on rural and non-rural
poverty.
Q89 Mr Davidson: So there is conditionality
then?
Sir Suma Chakrabarti: That is
not conditionality. It is a sort of starting point.
Q90 Mr Davidson: It is conditionality
if you say to the Governments that if they do not do things that
we agree with, we will not automatically give them money, but
if they do things that we agree with, we will give them money.
If that is not conditionality, I do not know what is.
Sir Suma Chakrabarti: They are
the criteria for budget support. In the case of some Governments—for
example, I mentioned the DRC, which, frankly, does not have the
capacity even to set a proper plan—we would work more directly
in the rural areas ourselves.
Q91 Mr Davidson: Right. What happens
in those circumstances? Who measures how successful that has been?
Do you? To what extent does your moving in to do the work free
the Government from needing to bother about doing such work at
all? Do they say, "We will spend our money on a new steel
plant, or a new airline, or another palace, because the British
will take care of education in the rural areas."?
Sir Suma Chakrabarti: That is
a fundamental issue when giving money to any Government, whether
through budget support or project support. I hope that the issue
will come out in the NAO study later this year. Fungibility is
there however money is put in. There is an issue about whether
support releases money for bad expenditure. Therefore, it is important
that big donors such as this country and the World Bank sit at
a table with the Governments to examine how they are allocating
their expenditure and whether all we are doing is simply releasing
money to go elsewhere for bad uses. As the NAO Report rightly
says, the good thing about budget support is that it gives us
a seat at the table, in a way that project support does not, to
argue the toss about such things.
Q92 Mr Davidson: May I go back to
the example of grow bags, and the corruption that it embodies?
Presumably you gave support to the Malawi Government not imagining
that that would be the result. As I understand it, the Malawi
Government have been better recently, but clearly that was a failure.
What happens in circumstances where there has been a degree of
failure?
Sir Suma Chakrabarti: We need
to check the facts of the Malawi case to determine whether DFID
money was actually misused. I shall come back with a note on that.
I will ask Sam to tell you what happens—what steps we go
through—if we think that money has been misused.[5]
Sam Sharpe: First, we have an
internal audit department that can investigate carefully. On the
very rare occasions when we find that something has gone wrong
with a project that we have been supporting, we try to get the
money back from the institution that received it. We certainly
do not continue to provide funding if things are going wrong.
It is important to emphasise one of the key things that we are
doing: one of the reasons why we are investing so much in governance
these days is because of the critical importance of getting systems
in place to prevent corruption in developing countries.
Q93 Mr Davidson: I understand all
that, and I note that you referred to the rare occasions when
examples such as this are brought to our attention. However, that
cuts both ways, does it not? Had Mr Wyatt not recently been in
Malawi, it might not have been brought to your attention.
I am not sure what mechanism exists for
identifying things such as the grow bags situation. There is always
potential for the misuse of any system, but I have no idea of
the scale of this. I am not convinced that you have mechanisms
that would pick that up, and I am not sure how you got into that
situation.
Dave Fish: May I give you an example
of a major programme that we have in Ethiopia—the basic
services grant, provided through local administrations, for health,
education and water? When Hilary Benn and I were in Ethiopia about
a year ago, people told us that this programme faced the grave
risk of money being diverted to supporters of the Government,
so we put in place monitoring mechanisms to ensure that if that
should happen, we would spot it straight away. We have links to
258 different local authorities specifically to examine the potential
for misuse. In most of these sorts of areas, I hope that our monitoring
arrangements would pick up major elements of corruption.
Q94 Mr Davidson: Perhaps you could
tell us whether or not you picked this up. I know that in my area—I
am sure that this is the same for my colleagues' areas—people
are supportive of aid to the third world, but they often want
to be reassured that it is not being wasted or stolen.
Sir Suma Chakrabarti: I shall
be very happy, in the note to the Committee, again to set out
our various mechanisms, from project monitoring to audit and evaluation—the
lot. [6]
Mr Davidson: Fine.
Chairman: I have to remind everyone
that under an agreement with the Treasury notes must be delivered
to this Committee within two weeks.
Q95 Mr Khan: In 2005-06, £4.4
billion was spent by DFID. We know from the National Audit Office
Report that 57% was in the form of bilateral aid and 38% went
through international bodies. In the past 10 years, since DFID
became a mainstream Department rather than a subsection of the
Foreign Office, what has the expenditure been?
Sir Suma Chakrabarti: It has grown
rapidly, as you know. It has been the fastest growing—
Q96 Mr Khan: What is the figure for
the past 10 years? It was £4.4 billion in 2005-06—
Sir Suma Chakrabarti: It is now
roughly £6 billion.
Q97 Mr Khan: If each of the past
10 years is added up—you spent £4.4 billion—
Sam Sharpe: It started at about
£2 billion; I am sorry but I would have to add it up.
Q98 Mr Khan: What is the ball-park
figure?
Sir Suma Chakrabarti: We have
moved from about £2 billion to £6 billion.
Q99 Mr Khan: From £2 billion
a year to £6 billion a year? So how many years are we talking
about?
Sam Sharpe: Well, you said 10.
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