Aid Under Pressure: Support for Development Assistance in a Global Economic Downturn - International Development Committee Contents


Letter from Secretary of State Douglas Alexander to the IDC Chair—Rt 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 currencies—including 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 settlement—the 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 reserve—which 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 downturn—this 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 movements—either 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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