Examination of witnesses (Questions 140-159)
DEPARTMENT FOR
INTERNATIONAL DEVELOPMENT
4 JUNE 2007
Q140 Mr Bacon: If you could send
us a summary and perhaps an internet link as a note, that would
be great. [9]
My second question concerns paragraph 2.21,
which relates directly to our discussion of a moment ago. It states
that the NAO: "did not see evidence that DFID raised these
issues formally with the Government of Mozambique." You have
been saying in your answers, which I wrote down, "we have
raised these issues". What evidence is there that you have
raised those issues with the Government of Mozambique?
Sir Suma Chakrabarti: In the number
of discussions that we have had with the Government of Mozambique
in multi-donor forums, and also directly. I told you about some
of the changes that have occurred.
Q141 Mr Bacon: Are there letters?
The sentence is very carefully drafted. It says: "we did
not see evidence that DFID raised these issues formally with the
Government of Mozambique." Did you raise those issues formally
with the Government of Mozambique and are there dated letters
to that effect?
Sir Suma Chakrabarti: I do not
know whether there are dated letters, but certainly we would have
raised them in all the donor group discussions with the Government
of Mozambique.
Q142 Mr Bacon: So it was spoken but
not written.
Sir Suma Chakrabarti: It might
have been. We would need to check.
Dave Fish: If donor discussions
tend to be as a group of 18 donors to Mozambique—so there
are 18 people round a table with the Government—there will
be some kind of written record of those discussions.
Q143 Mr Bacon: Perhaps you could
send us those minutes and also, if there are very specific concerns,
it is not uncommon to write a letter saying so. Any evidence that
you could send to the Committee would be helpful. [10]
Dave Fish: The best evidence is
the change of behaviour.
Q144 Mr Bacon: Send us some information
on that as well, but not instead of the minutes. That would be
very helpful.
I should like to ask you about the shifting
the political economy, Sir Suma. You said that the question is
a fundamental issue of political economy and that the most powerful
way is to shift the political economy. We are talking about the
urban bias and not reaching the rural poor. We are one of the
richest countries in the world, yet we still face an issue of
fundamental political economy. I represent a very rural constituency
in which the largest town is quite small—it has about 10,000
electors and will be smaller still after the next boundary change.
In Wales and Scotland, much more is spent per head on health care
than in England. That is undoubtedly for good reasons—I
do not know whether it is because they are more ill in Scotland
or because of the cost of delivering health care in a wide area.
There is obviously a reason for it and I am sure that Mr Davidson
would go into it if he had the chance, which he does not.
None the less, those are issues of political
economy that we have not solved— they are still there; they
are inherent. We have not solved them here, yet you are hoping
to solve them several thousand miles away in countries where we
spend relatively small sums and have a relatively small impact
on the political culture. Is that not a rather ambitious way of
trying to do things? Is it not better to try to do it directly?
Instinctively, my hackles rise over the whole question of budget
support. It makes me wonder whether it is actually about making
things easy, rather than effective, and general rather than specific,
and about having a seat at the table rather than being in the
driving seat as would be the case if one were managing a project
directly. Operating directly is more difficult, but is it not
more effective?
Sir Suma Chakrabarti: We shall
deal with the NAO review of budget support later this year, but
the multi-donor evaluation discusses the pros and cons and shows
how we have shifted what you might call political economy. We
are quite a big donor in a substantial number of the relevant
countries; particularly in Africa, where in the case of many countries
we are the biggest donor. Our seat at the table is therefore rather
larger than that of many others, and our views are taken seriously.
That is clearly much less true in relation to less aid-dependent
countries such as China, however.
Q145 Mr Bacon: Nevertheless, your
view is that you can effect a lasting shift in the attitude of
a recipient Government that has demonstrated the right track record
by increasing budget support and decreasing project support.
Sir Suma Chakrabarti: Provided
they are meeting the basic criteria.
Q146 Mr Bacon: It was interesting
that you said that the Department is not at all out of the project
business—yet. The implication was that there might come
a time when the Department would indeed be totally out of that
business.
Sir Suma Chakrabarti: Only if
all the countries where we are active followed the criteria in
paragraphs 2.9 and 2.11 of the Report, which would constitute
a pretty tough test for many of them. Some have not even developed
a poverty reduction plan of the sort that Mozambique and Vietnam
might have. The criteria have to be met first, and then there
has to be work on financial management, fiduciary risk and the
like.
Q147 Mr Bacon: Last autumn I was
in Kenya with Mrs Brooke of this Committee, and it was quite obvious
that the DFID people out there were much more trusting of the
Ministry of Education than of the Ministry of Health, and were
much more willing to engage in budget support to the Ministry
of Education. Would it characterise your general stance to say
that the Department is content to adopt a variegated approach,
whereby it might do one thing in one place but not in others.
Sir Suma Chakrabarti: Having worked
there, Dave is the expert on Kenya. I believe that the Ministry
of Education has a track record of effectiveness and our projects
and programmes with it have been quite successful, whereas that
has been much less true of the Ministry of Health. Overall, we
are not in the business of budget support to Kenya—for good
reason.
Q148 Mr Bacon: May I ask the NAO
about the chart in figure 7 on page 15? The human poverty index
referred to there is, I believe, a composite index that measures
deprivation in three dimensions—long and healthy life, knowledge,
and a decent standard of living. I think it is fairly obvious
that the budgeted transfer per capita increases as one
goes up the vertical axis of the graph. However, does the horizontal
axis indicate increasing poverty from left to right, or vice
versa?
Jim Harvey: It increases
from left to right.
Q149 Mr Bacon: So if my poverty index
is 60, I am very poor, and at 70 I am the poorest on the chart.
Is that right?
Jim Harvey: Yes.
Q150 Mr Bacon: I understand. There
is a cluster of transfers to districts around the middle of the
chart. It does not appear, however, that the budgeted transfer
per capita rises as poverty increases. In fact, the cluster
is between 35 and 50 despite one's expectation that there would
be a skew, with a line from bottom left to top right, such that
poorer people would get more money. Have I interpreted the chart
correctly in saying that that is not the case?
Jim Harvey: Yes.
Q151 Mr Bacon: Sir Suma, could you
account for that?
Sir Suma Chakrabarti: I would
have to ask that of the Uganda team. My supposition is that when
the Ugandan Government started to shift allocations to the poorer
districts it did not cut the level of allocations in other places,
with the result that the shift has been a very gradual one.
Q152 Mr Bacon: It would be good if
you could double check and send a note to the Committee.[11]
You mentioned microfinance earlier. Do you know how much the Department
spends in supporting it?
Sir Suma Chakrabarti: Overall?
We would have to add up the various elements.
Jim Harvey: It is £70 million
over the past three years.
Q153 Mr Bacon: That is out of a total
budget of what? You told Mr Khan earlier.
Sir Suma Chakrabarti: It is £6
billion.
Q154 Mr Bacon: £70 million is
only just over 1%.
Sir Suma Chakrabarti: That is
the bilateral spend. Obviously, there are multilateral contributions
through the International Finance Corporation and others.
Q155 Mr Bacon: I visited the Jami
Bora Trust in Nairobi. I do not know whether you happen to know
whether the Secretary of State has done likewise; I spent a long
time encouraging him to do so through his private office because
it was one of the most impressive things that I have ever seen.
From the available evidence, it seems that microfinance is not
only one of the most self-sustaining but effective ways of achieving
the kind of change that you want to see. That being the case,
why does it not have a higher profile? Why does it not get more
of the cake? Is it because most of the cake goes into things such
as education?
Sir Suma Chakrabarti: It has a
pretty high profile. In the past two or three years, we have been
doing a lot more.
Q156 Mr Bacon: It is £70 million
out of £6 billion.
Sir Suma Chakrabarti: That is
out of the bilateral total, which is less than the overall total.
I agree that £70 million is not a large share, but if you
look at the number of microfinance programmes and projects that
we have set up, and at the international initiatives that we have
mounted, you will see that we are attracting a lot of co-financing
from other donors. We actually have quite a good story to tell
on the matter.
Sam Sharpe: Having worked on microfinance
a lot in South Africa, I can say that getting the banking system
and commercial suppliers involved in the microfinance industry
is a key part of what we are trying to do. There is a limit to
how much subsidised finance one would want to put in.
Q157 Mr Bacon: I understand that,
but it also means that a little goes a long way. The Jami Bora
Trust started with 50 poor street beggars, some of whom were drug
addicts, some of whom were prostitutes, and now there are 130,000
members. It is like a small building society. It has tremendous
power to deliver change which, if it does not cost much, you can
do again and again.
Sir Suma Chakrabarti: We are trying
to get other donors to buy into such projects through co-financing.
We have set up the Africa Enterprise Challenge Fund, which you
know about, and the Financial Deepening Challenge Fund to attract
other donors to co-finance with us.
Q158 Mr Bacon: Is it possible for
you to send us a note that tells us the story of microfinance
in the past few years, how it has grown, how much money you have
put in, what its effects are, and where you see it going?
Sir Suma Chakrabarti: Yes.[12]
Chairman: Mr Khan has to leave now. Before
he does so, I would like to thank him very much, because he leaving
the Committee. He has been a most assiduous Member of the Committee
and his questioning has always been very robust. We are sorry
to see him go, but he has been promoted to the Government.
Q159 Mr Dunne: I have a quick follow-up
question to what Mr Davidson said about governance. Where there
is a clear allegation of wrongdoing in a donee country, what steps
do you take to investigate? Would you take a statement from an
individual who makes an allegation, in particular if that person
is an employee of the Department or one of its agencies?
Sam Sharpe: I have been DFID's
Finance Director for only two months, and I am already aware of
several cases that we are investigating, about which we would
certainly take evidence from people who wanted to blow whistles.
Obviously, there may be cases in which
we know that there may be some questions to be asked before we
can take a statement from an individual because of other things
that might be known. Clearly, the first thing to do in any case
is investigate thoroughly all of the evidence that is available.
That will involve the Department, but we will also work with our
partners.
9 Ev 25-26 Back
10
Ev 26-28 Back
11
Note by witness: Figure 7 uses data which cannot capture
the progress that has been made over time in using poverty as
a factor in district resource allocations. The government, supported
by DFID and other donors, has had a policy of increasing the influence
of poverty in district transfer allocation formulae since 1999.
This policy was strengthened in 2004 following a major review.
But a decision was made at the beginning that no district would
have its funding reduced as the policy was rolled out. This has
meant that the impact of the new formulae has been incremental. Back
12
Ev 28-29 Back
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