Letter from Secretary of State Douglas
Alexander to the IDC ChairRt Hon Malcolm Bruc
5 May 2009
Dear Malcolm,
As part of the follow-up to our discussion at
last week's International Development Committee Hearing: "Aid
Under Pressure" Inquiry: "Support for Development Assistance
in a Global Economic Downturn", I am writing to you with
the further information the Committee requested:
The terms of the Glasgow City Council
(Bob Winters) letter please find a copy of the letter enclosed
(Appendix A). My office will be in touch with the LGA to arrange
a meeting.
A paper on DFID's management of currency
fluctuations (enclosed) (Appendix B).
A paper on DFID's Community Linking Scheme
(Appendix C).
Clarification around Japan's $100 billion
commitment to the IMF, which I can confirm was not included the
IMF's existing capacity of $250 billion, prior to the London
Summit agreement of an additional $50 billion in new resources.
Douglas Alexander
APPENDIX A
LETTER TO GLASGOW CITY COUNCIL ABOUT THE
CONCEPT OF A CITIES PROGRAMME OF INTERNATIONAL DEVELOPMENT
Councillor Bob Winter
The Rt. Hon. The Lord Provost of Glasgow
Glasgow City Council
City Chambers
Glasgow G2 1DU
April 2009
Thank you for your letter of 27 March 2009 about
the concept of a Cities Programme of international development,
linking the experiences of UK cities with those of developing
countries.
You are right in saying the world is becoming
increasingly urbanised. Globally the number of people living in
towns and cities is likely to double over the next 40 years,
with nearly all this growth taking place in developing countries.
Without adequate planning and infrastructure, overcrowding and
slum conditions may become more prevalent. More people may be
deprived of basic needs, such as clean water and sanitation, as
well as the range of social services you identified. This prospect
is not confined to large cities but includes small and medium
sized towns, where most urban residents are likely to live.
Potentially, knowledge and experience in the
UK of city planning and service delivery could help developing
countries meet their own urbanisation challenges. We will be considering
this and related matters during the development of the 4th White
paper on International Development, the consultative process for
which has been on-going for a few months. An exploratory discussion
of the possibilities could be useful.
I suggest your office makes contact with Dr.
Yusaf Samiullah, DFID's Head of Profession for Infrastructure.
He will be able to brief you on what DFID is already doing to
support this agenda. He can be contacted by telephone on 020 7023 1130 or
by email on y-samiullah@dfid.gov.uk or of course by letter to
this office.
With thanks for your interest
Douglas Alexander
APPENDIX B
OVERSEAS DEVELOPMENT ASSISTANCE IN A GLOBAL
ECONOMIC DOWNTURN: NOTE ON CURRENCY FLUCTUATIONS
Over the last year, one source of uncertainty
for developing countries has been large changes in exchange rates.
As well as changes in the value of their own currencies (for some
of them), they have also had to cope with changes in the exchange
rates between major currenciesincluding Sterling's exchange
rate against the dollar which fell sharply in 2008. Since the
low in January 2009, Sterling has appreciated by around 6%, but
it is still well below the rate of August last year.
Currency fluctuations have an impact on DFID's
budget. Although most of our commitments are denominated in Sterling,
our share of EC aid programmes are denominated in Euro, and some
local expenses of our overseas offices are paid in local currency.
The Treasury expects DFID to manage the impact of currency fluctuations
within our CSR settlementthe Treasury neither provides
additional resources to DFID when Sterling depreciates, nor reclaims
resources from DFID when Sterling appreciates. DFID has so far
managed the impact of currency fluctuations through an internal
contingency reservewhich we hold partly to provide resources
for unforeseen humanitarian emergencies or other needs, but also
to enable us to meet changes in our international obligations
arising from exchange rate movements. In 2008-09 £73 million
of this contingency reserve was used to respond to the increased
Sterling value of DFID's share of EC aid programmes.
Treasury has recently indicated that Departments
can seek their permission to ensure predictability in the Sterling
value of their foreign exchange obligations by entering into hedging
transactions. This would eliminate the risk of gains and losses
from currency movements over the period of the transaction, but
at a cost that would have to be found from DFID's CSR settlement.
DFID is considering the costs and benefits of doing this.
The value of UK aid to any particular country
depends on the use to which the aid is put, the currency in which
goods and services are purchased and the price of those goods
and services. If the aid recipient procures goods and services
in Sterling, the value of UK aid to the recipient will remain
constant. However, if the recipient uses UK aid to procure goods
and services in a currency against which Sterling has depreciated,
the value of UK aid will fall. Prices of key commodities also
impact on the overall value of developing country government resources.
Oil, food and other commodities are falling as the international
economy adjusts to the economic downturnthis will partly
offset the reduced value of Sterling aid.
The above paragraph implies that assessing the
net impact of a change in the value of Sterling on the value of
UK aid in any country is complex and depends on many factors.
DFID does not adjust aid allocations in response to exchange rate
movementseither to compensate when Sterling depreciates
or to reduce aid when Sterling appreciates.
APPENDIX C
REPLY TO IDC QUESTION ON DFID COMMUNITY LINKING
SCHEME
DFID'S COMMUNITY
LINKING SCHEME
1. In its 2006 White Paper, DFID committed
to establishing a new scheme for not-for-profit organisations,
such as faith and community groups, local government, business
and charitable organisations, to build links with developing countries.
2. In 2007 DFID conducted a public
consultation exercise to determine the scope and nature of this
new Community Linking scheme. Following this, consultants were
employed to design the project and develop Terms of Reference
for a managing organisation to run a scheme with a total value
of £3 million over three years. A competitive tender
process was then launched and we are currently assessing the bids
received. Once a managing organisation has been contracted and
has worked with DFID on early inception plans, DFID will launch
the scheme. We expect this to be later this year.
3. The Community Linking scheme will facilitate
links between diverse communities in the UK and communities in
developing countries. Its objective is to build UK public support
for development by actively engaging the public in communicating
with developing country communities, exchanging knowledge and
undertaking activities of mutual benefit. It will both enhance
existing community linking programmes and enable new programmes
to be implemented.
4. It is envisaged that grants to new links
will be in the range of £500£1,000, for the purpose
of establishing a relationship with a developing country, with
further funds being provided for implementing a link project totalling
up to £15,000 over three years. Grants to existing links
may be in the range of £5,000£15,000 over
one to three years. Foreign travel for both northern and southern
partners may be funded from the grants where such visits have
a clear objective and output.
5. The scheme will also provide non-financial
support to grant applicants in the form of assisted learning,
training and sharing of best practice.
6. The consultation and design exercises
to develop the scheme identified examples of how the personal
involvement of citizens in the UK in a link with a developing
country can increase levels of awareness and understanding of
global issues more broadly. It also identified that more evidence
on the impact of linking is needed, and the new scheme includes
a strong focus on evaluation and impact assessment.
7. During the first six months inception
phase, the managing agent will undertake a baseline analysis of
existing linking schemes and establish indicators against which
to measure the success of the DFID scheme. We will be looking
to the managing agent to evaluate shifts in awareness of development
and attitudes and of actions that can be ascribed to raised awareness,
that can be attributed to the scheme. The managing agent will
support organisations receiving grants to incorporate quality
monitoring and evaluation into their projects, providing funding
for this. An independent evaluation will also be undertaken in
year three.
IMPACT OF
SCHOOL LINKING
8. The major type of linking currently funded
by DFID is school linking. DFID has been funding this for the
last five years through the DFID Global School Partnerships (DGSP)
programme implemented by the British Council.
9. DFID has commissioned an independent,
two-year study by the Institute of Education (IOE) on the impact
of school partnerships. This has assessed 858 UK schools
with an active link (the majority of which are DGSP schools),
as well as a similar number in Africa and Asia.
10. The key findings from the quantitative
results from year one of the study show that 91% of UK Schools
and 85% of southern schools agreed or strongly agreed that the
partnership had a positive influence over students' development
of content and context knowledge.
11. Qualitative research undertaken in year
two of the study comprises a longitudinal study of 28 UK
schools during a year of their partnership. Preliminary results
indicate that students had increased their understanding, tolerance,
cultural awareness and challenging of stereotypes as a result
of their school link.
12. DFID will also shortly be commissioning
an independent randomised impact assessment of levels of development
awareness in UK schools with linking programmes compared with
levels of awareness in schools with no such links.
VALUE FOR
MONEY FROM
DFID'S BUILDING
SUPPORT FOR
DEVELOPMENT WORK
13. DFID is critically concerned to ensure
that it achieves the best possible value for money from its funding
for development awareness raising work in the UK. For this reason,
as the committee is aware, DFID has commissioned a series of reviews
to assess the impact of its work to build development support
over the last decade and make recommendations for future activities.
14. The synthesis report of the reviews
will attempt to draw conclusions on which interventions to build
development support are likely to offer the best value for money
ie which interventions are likely to have the most impact per
£ spent and why, albeit that this is an extremely difficult
assessment to make.
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